Regulation and Competition in the ICT Market - Essay Example

? Essay on Regulatory Theory By of 2003 Words Introduction The last three decades have realised quite remarkable reforms in the telecommunication sector, more so concerning the quality and variety of services offered by telecommunication service providers. In fact, before these far-reaching reforms, telecommunication service provision remained a monopoly of state corporations or in rare cases, was monopolized by private entities. Due to the fact that the provider of telecommunication services in most cases was the government, the regulation of this sector was never quite independent since, all the policy-making and regulatory powers lay with the government and its agencies (Welfens, 2010). Therefore, the management of telecommunication frequencies and the responsibility of operating networks were a preserve of the government of the day (Davidson et al., 1986). For many developed countries, this classical approach to ICT management was quite profitable for some time, given that the increased international tariffs for telecommunication services covered for the subsidized local tariffs. In addition, with the decreased telecommunication cost that resulted from technological advances, the classical approach to ICT operations did well for most developed countries (Welfens, 2010). Unfortunately for the developing and the underdeveloped countries and regions, the classical approach to ICT operation did not work well. The reason for this scenario being that these countries’ networks were somehow restricted to major cities and towns, implying that only the middle and high socioeconomic status citizens could access and utilise ICT services in these countries. While the low socioeconomic status citizen had to make do with poor quality telecommunication services and long waiting lists, the high-income end of the population were advantaged by the cross-subsidisation of ICT prices (Welfens, 2010). Regrettably, the classical approach to ICT regulation did not generate investment income for the developed and the developing countries alike. During the 1980s and the 1990s, the role of telecommunication in the economic growth of countries and the entire world became rather apparent, leading to the development of a number of regulatory and competition polices, even though to a limited extent, in many countries (Koops et al., 2006). Besides, regulating competition, the regulatory and competition policies were expected to instill dynamism, innovativeness, augment availability, accessibility and increase ICT choices and lower tariffs for customers. The first effect of the wave of ICT reforms that peaked in the 1990s was the privatisation of telecommunication service operators. The second effect of the ICT regulatory policies was the introduction of new varieties of services such as mobile telephony and value-added services (Koops et al., 2006). This paper thus explores the need for the regulation of ICT, whether regulation works in the interests of the public and the implications of convergence and innovation on ICT regulation. The Importance of Regulation That the core role of regulation in any industry is to enable sustainability, growth and development is quite apparent and cannot be overemphasized. Therefore, the information and communication technology sector, like the other sectors of an economy, requires a strong legal framework and regulatory mechanisms to function for the betterment of the public. A number of reasons have since been identified to underlie the need for the regulation of information communication and technology. Generally, ICT the need for ICT regulation arises from the recently observed structural changes in the communication industry. The transformation of the industry from a monopoly to a competitive one in many a country has particularly necessitated its stronger regulation (Baldwin et al., 2012). Therefore, the regulation of the ICT sector has been particularly important in the creation of an effective environment for fair competition that supports both short-and long-term development in the ICT industry. Regulation and Competition in the ICT Market With the introduction of competition in the telecommunication sector in most countries, there was fear that it would become difficult or impossible to regulate the industry. However, it soon became apparent that regulation was equally necessary in the liberalized and competitive ICT market. In fact, with governments authorising competition and the stakeholders in the telecommunication sector embracing this effective competition, the need for regulation was at its peak. The main purpose of a strong regulatory framework during these transitioning times was therefore to assist in the resolution of disputes among telecommunication operators and to address any issues that arose out of anti-competition abuses or malpractices (Baldwin & Cave, 1999). Importantly, ICT regulation helped address customer protection issues and the need to attain national/universal accessibility and utilisation of telecommunication services. Furthermore, the need for industrial competitiveness and economic productivity, growth, development and sustainability also played a significant role in the establishment and the implementation of strong regulatory frameworks and mechanisms. The above reasons for regulating the ICT sectors are enough indications that ICT regulation is not an end but a mechanism by which telecommunication access, utilisation, customer protection and effective competition in ICT is obtained. Nevertheless, to attain the current liberalisation and healthy competition in the ICT sector, there is need not only for regulations but also strategic and effective policies and regulator agencies to oversee the implementation and reformation of these policies (Markova, 2010). In addition, any barriers to the implementation of these policies should be removed. There are two major types of barriers to the entry of other operators to the ICT sector that require removal, namely explicit and implicit barriers. An example of explicit barrier is the inability or difficulties of new operators to interconnect with incumbent providers while an example of implicit barrier is the likelihood that an incumbent operator may influence the actions and policies of ICT regulators (Markova, 2010). Consequent to the above barriers among others, ICT regulation reforms are in order. Specifically, these regulatory reforms must have objectives such as the establishment of independent entities that would oversee that fair competition reigns in the ICT market. Importantly, these entities must ensure balance in ICT interconnection, tariff rebalancing and operator licensing. These regulatory entities should also establish policies and strategies that prepare the hitherto unopposed or unchallenged incumbent providers to face stiff competition from new players and timetable or deadlines for exclusivity terminations (Markova, 2010). The other objective of these regulatory policies should be the expansion and enhancement of telecommunication/ICT networks and services accessibility accompanied by fair allocation and effective management of telecommunication resources. Finally, regulatory policies should prevent market failure and protect and promote consumer interests such as privacy (Markova, 2010). Among the benefits accumulated so far from ICT regulation includes greater economic growth, increased investment, quality services, increased network penetration and rapid ICT advances. As a matter of fact, the mobile telephony market has been shown to have higher penetration rates in the more liberalized ICT markets. The consequences of this higher penetration by mobile telephony include lower international call and broadband prices. In general terms, ICT regulation serves to intervene to tackle anti-competition malpractices while promoting effective and positive competition. These goals are often attained by practices such as the regulation interconnection charges that prompt incumbent service providers to eliminate restrictions and foster the entry of other ICT operators (Croley, 2007). Impacts of Innovation and Convergence on ICT Regulation Among the challenges to ICT regulation includes the innovation and convergence that are the hallmark of the ICT sector. Convergence refers to the possibility and the ability of ICT service providers to offer same type of services to the public. Among the services that are shared among many ICT operators include voice over Internet Protocol (IP) or over circuit switched networks, video over cable television or Asynchronous Digital Subscriber Line (ADSL). In other terms, convergence could imply that a single ICT provider or network could be in a position to offer a wide range of services to its clients. Convergence has resulted in a number of issues that ICT regulators should take into consideration. First, ICT regulators must ensure that they establish frameworks and policies that cover the different categories of services offered by operators, an approach referred to as technology neutrality (Baldwin & Cave, 1999). The regulatory framework must therefore support competition in the full range of the services offered by operators. Convergence thus requires regulators to ensure that the regulatory framework has provisions for the multiple services offered by operators. Importantly, convergence implies that regulatory authorities must establish policies targeting new technologies and ICT products in relation to interconnection, service universality and variety. Convergence also requires ICT regulators to ensure that their policies provide for the creation of legislations that create a favourable ICT environment that addresses. These legislations should specifically relate to data privacy and security, electronic transactions, computer crime and intellectual property among other legal aspects of ICT (Baldwin et al., 2010). The main challenge poised by convergence is thus the fact that it accelerates the modification of existing ICT networks to venture into new business areas. For instance, telephone networks have been modified to provide ADSL, broadband and interactive services. It thus becomes more difficult to regulate such an ICT operator using a single set of laws or standards, necessitating the involvement of multiple regulatory policies and agencies. Luckily, ICT regulators and policy-makers have been equal to the task, to some extent. For an illustration, there has been a shift towards a policy of technology-neutral regulation that equally targets all communication and information structures (Fransman, 2010). For example, the United Kingdom, Singapore and Malaysia are among the countries that have empowered their ICT regulators to equally regulate the broadcasting, the information technology and telecommunications sectors. The countries have also established new legislations, not only to regulate competition but also to support the available legal framework regulating and supporting ICT. Similar to convergence, new technologies also have implications for ICT regulation. The globalisation that new technologies have brought about has resulted in many cross-boarder regulation issues, necessitating international regulatory schemes, agencies, laws and standards (Fransman, 2010). There is currently a lot of cross-boarder transfer of data in sectors such as international financial services, e-commerce and IT-enabled services, a scenario that results in a number of privacy issues. There are thus a lot of risks related to secondary data users and information security breaches. The recent increase in the number of high profile security breaches such as the Wikileaks, travel and credit ploys, fraudulent lottery schemes, modem and web page hijacking and identity theft have poised serious regulatory challenges to ICT regulatory authorities. Although regulatory policies and strategies always purport to serve the interest of the public, in most cases, it is the interests of the private stakeholders and governments that are observed to prevail (Croley, 2007). The first reason for this scenario is that there is no appropriate level of decentralization and differentiation in the manner in which regulatory policies and rules are made. Second, the administration of regulation is never delegated to the right individuals or institutions (Train, 1991). The ineffectiveness of regulatory policies to address public interests also stems from the fact that the appropriate systems of accountability are not yet established in many countries and sectors of economy. Furthermore, in most instances, many of the regulatory policies and strategies are not economically or non-economically justified (Train, 1991). This lack of justification implies that both market and private regulatory legislations fail to attain the desired goals besides not being cost-effective and well-targeted. Conclusion Emerging from a period marred with a lot of monopoly or duopoly in certain cases, the ICT sector has recently realized a lot of improvements as far as competition and regulation are concerned. The main force driving this competition is the increased regulation and monitoring of telecommunication. However, competition is not the only benefit accruing from regulatory policies and strategies targeting the ICT sector. Public/consumer interests and rights protection have also been central to the regulatory policies and strategies. However, the failures of these regulatory policies to amicably address the interests of the public have been explained by lack of economic and non-economic justification of some of these policies/strategies and lack of accountability systems in the implementation of these strategies. The other major challenges to the effective implementation of ICT regulation are innovation and convergence, which have forced regulatory entities to grapple with many cross-boarder and cross-industry regulatory complications. References Baldwin, R., and Cave, M. (1999) Understanding regulation. Oxford University Press. Baldwin, R., Cave, M., and Lodge, M. (2010) The Oxford handbook of regulation (oxford handbooks). Oxford University Press. Baldwin, R., Cave, M., and Lodge, M. (2012) Understanding regulation: theory, strategy, and practice, second edition. Oxford University Press. Croley, S. P. (2007) Regulation and public interests: the possibility of good regulatory government. Princeton University Press. Davidson, R. J., Schwartz, G. E., and Shapiro, D. (1986) Consciousness and self-regulation, advances in research and theory, first edition, volume four. Plenum Press. Fransman, M. (2010) The new ICT ecosystem: implications for policy and regulation, first revised edition. Cambridge University Press. Koops, B., Prins, C., Schellekens, M., and Lips, M. (2006) Starting points for ICT regulation: deconstructing prevalent policy one-liners (information technology and law series), first edition. T.M.C. Asser Press. Markova, E. (2010) Liberalization and regulation of the telecommunications sector in transition countries: the case of Russia (contributions to economics). Physica-Verlag HD. Train, K. (1991) Optimal regulation: the economic theory of natural monopoly. The MIT Press. Welfens, P. J.J. (2010) Digital integration, growth and rational regulation. Springer. Read More