Information and Communication Technology - Research Paper Example

Information and Communication Technology Introduction Information and Communication technology has rapidly developed over the past few years to the effect of affecting every aspect of human life. Split-second transfer of information or data has become the hallmark of the modern ICT system. In spite of the numerous benefits brought about by the rapid developments in ICT, several challenges remain to haunt users and developers of these reliable and highly sophisticated communication systems. Some of the questions that arise concerning whether or not ICT should be regulated at national and international levels, what instruments of regulations should be focused on, who should assume the role of regulator, and what issues must be addressed without interfering with the sovereignty of every nation that is involved. This paper tries to explain from a multidisciplinary approach the theory of regulation in relation to Information and Communication Technology (ICT). The paper will also seek to discuss the advantages and disadvantages of relying on competition in the marketplace to regulate the ICT sector and the circumstances under which markets fail to provide desired outcomes. Rapid Innovation in ICT and its Effects It is known that each moment, new technological advancements are made in ICT. This effectively results in relatively new systems fast getting outdated. These rapid changes have necessitated the working staff to continuously seek more knowledge in order to keep pace with the times. Those who cannot adapt to new ways as a result lose their jobs. The financial sector is one such sector that must continuously adapt to new ways in order to prevent and fight frauds that could easily be executed online. Developments in ICT have seen the introduction and successful use of credit and debit cards, automated teller machines, security equipment and advanced surveillance equipment all of which rely on computer technology. Traditional regulatory frameworks have become increasingly inadequate for the rapid challenges such as convergence witnessed in ICT sectors in the world. This has been become a great challenge to regulatory bodies which have to adopt technology-neutral or equal regulatory treatment of the different communication and information infrastructure as a way of controlling the sector (ITU et al., 2009). Regulation of ICT Sector According to Baldwin, “Regulation as an activity can be described as a discrete and identifiable, focused and sustained exercise aimed at controlling activities that are valuable to a community by public agency or government” (Baldwin and Cave, 1999). Regulation may also be described as a deliberate set of commands, which are specific and take all forms of influence or social control, by a governing agency to control items that are valuable to the public (Baldwin and Cave, 1999). Baldwin and Cave argue that regulation is one of the most controversial issues cutting across a host of disciplines including economics, law, political science, history, sociology, geography, psychology, social administration and management. Due to the apparent complexity of the issue of regulation, a multidisciplinary approach of the theories that exist must be taken (Baldwin and Cave, 1999). The above fact can more easily be expressed by considering a simple example: if economists devised technically sound regulatory schemes they would prove to be of infinitesimal significance if warnings or challenges brought forward by sociologists and political scientists, pointing out reasons such schemes would not work as anticipated by the economists, are taken for granted. In similar way, lawyers’ advices concerning limitations of certain enforcement processes and rules should be considered for the effective implementation of the scheme. Regulations have existed in various forms to deal with a host of issues. The importance of regulation can be clearly seen in areas relating to industrial relations, monopolies, workplace safety and health, gaming, civil aviation, and discrimination. Before setting up regulatory systems, issues such as fairness, accountability, and efficiency of the process, procedure and regulating authority must be questioned (Baldwin and Cave, 1999). At this stage it must be clarified that technical justifications and motives behind regulations are two distinct entities. The government may regulate for several reasons: it may regulate an industry, for example, as a direct result of the influence of personalities who are economically powerful or use the stance as means of achieving re-election. Most of the rationales behind regulation can however be as a result of “market failure”. In such cases, regulation is justified owing to the fact that an uncontrolled market will fail to produce results or behaviour that is aligned with public interest, for some reason. “Market absence” or lack of an effective market in some cases may lead the government to establish regulations. This can happen for example if the public cannot purchase clean air, peace or quietness in their particular localities. Competing Access Infrastructures Since mid 1990, the UK regulatory policy focused on promoting competition founded on alternative access infrastructure. Several aspects of this policy came into recognition. Positive discrimination came into play favouring cable networks as the main competitor in fixed telephony. This was in form of business restrictions on incumbent cable-based service providers. Competing access infrastructures allows an operator to control access infrastructure in offering service to the customer. Benefits of this kind of structure are: 1. It gives room for innovation outside the incumbent’s control 2. Competitors can guarantee quality services 3. Competitors have the opportunity to give different services at different pricing packages. 4. It permits the regulatory environment and market to be more dynamic as compared to basic entitlement to interconnection. On the other hand, the structure has disadvantages based on the following points: 1. It could easily lead to inefficiencies since economies of scale are under-exploited and costs are duplicated. 2. Certain of its virtues may be less compared with other intervention structures. 3. If a policy is focused alone on competition would possible lead lack of competition in the market if the policy failed to achieve its objectives. Market failure Market failure is a situation which occurs when a particular market is either unable to or some reason prevented from reaching equilibrium (ITU et al., 2009). While market failure takes several forms, two of these are most common; monopoly and externalities. Market failure is the main reason behind the introduction of regulatory intervention in the market. A natural monopoly market exists when the market structure permits the market demand to be served at an average cost which is lower by a single organization rather than by more firms. This also means that the single organization is capable of meeting the market demand at a cost lower than what other competing firms could sustain economically (ITU et al., 2009). An externality is a benefit or cost that is not visibly reflected in market prices, and often falls without intervention such as actions of unwitting parties. The net effect of an externality may be experienced when the whole society produces too much products that results in a negative externality, or too little that produces a positive externality (ITU et al., 2009). Common Regulatory Strategies The state may use several strategies and techniques to achieve its intended objectives for purposes of regulation. However, choosing a regulatory strategy that is effective and wholly justifiable can be a daunting task. In choosing such a strategy for the ICT sector, the government could start by considering the resources or capacities in its possession that can be utilised to influence economic, social and industrial activity. Some of these include: 1. Command – In this case legal authority and the rule of law is implied to achieve policy goals. 2. Deployment of wealth – This involves use of grants, contracts, subsidies, loans, or other incentives to influence conduct. 3. Harnessing of markets – the government may direct competitive forces towards particular ends such as through auctions. 4. Provision of information – The government in this case strategically provides information to empower the consumer. 5. Direct action – The government takes action to contain a nuisance or hazard. 6. Conferment of protected rights – liabilities rules and rights are structured and distributed to create constraints and incentives. Regulating Bodies and Institutions In effect each nation has its system of regulating its ICT sector. Regulation of the ICT sector can be accomplished through the effective action of various regulating institutions which apply different strategies and styles. The main regulators include: local authorities, self- regulators, parliament, courts and tribunals, regulatory agencies, central government departments and director generals (Baldwin and Cave, 1999). A notable difference exists between self regulation and other forms of regulation in the ICT sector. Self regulation involves the ICT sector regulating its members’ standards of behaviour. The controls implement may be quite informal, entirely voluntary or subject to varying degrees of government supervision and legislation. Good Regulation Economists would assert that good regulation is achieved when it is efficient and purposefully maximises wealth creation. This definition of good governance is however challengeable considering the fact that it does not take into consideration moral and ethical views and that it cannot justify specific distribution of rights among members of the society. Further, this description cannot be the basis for measuring regulatory decisions that affect rights. Regulation is hence positively applied to strike and maintain balance between service consumers and providers. Competition in Information and Communication Sector During the late 1900s, several commentators and governments started stressing out the problems of regulation and the potential effects of deregulating the economy. These are outlined in the sections that follow. Advantages of Competition in ICT Robinson states that, “the enshrinement into U.S. statute law of Sherman’s Act in 1890 to allow competition in certain sectors of the economy, was a two-fold prescription to counteract certain existing trade constraints” (Robinson, 2003). First, it was aimed at prohibiting conspiracies that might restrain trade, and secondly, it effectively banned abusive practices that might be aimed at establishing or maintaining monopoly. In view of the above facts, it is noted that the maintenance of competition in the ICT sector has several advantages which can be stated as follows (Robinson, 2003): i. It eliminates possibility of collusion between business people to fix prices and hence guarantees that the consumer will only be paying for products that reflect only costs of production and a reasonable return on the invested capital used for their production. ii. Competing businesses will as a result of pressure strive to use the most efficient possible means of production. iii. Vigorous competition maximises the rate at which new technologies is introduced into the market. iv. A competitive environment also provides a basis upon which mergers can be judged in public interest; such an environment makes it easier for the public to know which mergers are bent on reducing competition unduly. v. It is a fact that effective competition makes regulation unnecessary and has proven to be far more effective than regulation in the distribution of scarce resources. vi. The competitive market also helps in diffusing economic power, while maximizing social and economic mobility. Gillett in his study noted that, “Contentious competition issues that have been noted in the past include bundling in software competition, online, anticompetitive behaviour and combination bidding during auctioning of spectrum.” (Gillett, 1999). It is also noted that Public Provision and Privatisation helps in sharing of risks that a private company will not on its own dare assume. It also enables government develop monumental infrastructural projects that would be impossible to establish otherwise. Disadvantages of the Competitive Market The main disadvantage is that there is possibility of advantaged business entities engaging in unfair competition/ business practices which could lead to the collapse of their competitors. But also without undue competition, well established organisations will tend to capture the bigger segment of the market which could easily lead to closure of smaller or less stable competitors. It is also a fact that price changes do not take effect immediately as a result of differences between demand and supply. Also Public Provision and Privatisation may not guarantee renovations will mean improvement of the public sector and infrastructure. It is however realised that the advantages of the competitive market far outweigh its disadvantages. Conclusion The entire ICT sector should aspire for a future mature market that is supported by a regulatory environment that enables users to enjoy benefits of both new and old services. Both competition and regulation have their positive sides depending on the particular prevailing environment. It must also be noted that these two also have their cons – for example, regulation of ICT is important for data protection, but also restricts flow of data over the World Wide Web. Harmonization of national and international policies should be encouraged for easier implementation of convergence strategies and further developments in the ICT sector. References Baldwin R and Cave M 1999 Understanding Regulation - theory strategy and practice Oxford UP Gillett S 1999 Competition, Regulation and Convergence- current trends in telecommunication policy research Lawrence Erlbaum Associates Robinson C 2003 Competition and Regulation in Utility Markets Edward Elgar Publishing International Telecommunication Union (ITU) and InforDev 2009 Forms of market failure http://www.ictregulationtoolkit.org/en/PracticeNote.2609.html retrieved on 4th March, 2009 International Telecommunication Union and InforDev 2009 What is convergence www.ictregulationtoolkit.org/en/Section.2084.html retrieved on 4th March, 2009 Zysman J. and Weber S 2001 Governance and politics of the internet economy: historical transformation or ordinary politics with a new vocabulary University of California Berkeley Read More