Monopoly Pros –Easier to effect social policy (universal service for example) –Economies of scale and scope Cons –Lack of incentive for innovation –Inefficiencies in pricing –Averaging of rates and services—often leading to bypass

Competition Pros –Pricing efficiencies –Encouragement of innovation –Customer orientation Cons –Possible degradation of service –Possibility of un-served areas –Potential for excess capacity

Market Structures Monopoly Duopoly Oligopoly Total competition

Market segmentation Terminal equipment International long distance Domestic long distance Basic local services Leased lines Wireless Value-added services or networks (data for example)—now termed “broadband” AND WHAT DO WE DO WITH NEW SERVICES LIKE VoIP?

Is there a need to draw regulatory boundaries? By service? –Local versus long distance By provider? –Duopoly provision By industry segment? –Cable versus telephony; wireline versus wireless Not at all?

Why regulation? In a monopoly structure: control the actions of the monopolist In a totally competitive structure: probably not necessary??? In an imperfectly competitive structure: control dominant carriers, etc.

Purpose of regulation Economic: encourage efficient use of important resource Social policy: fair and equitable access to services Industrial policy: building of infrastructure; global trading position

Regulatory Approaches Type approval (CPE) Certification or licensing: market entry and exit Resale: encourage use of excess capacity Interconnection: control of connection and the terms of interconnection Spectrum allocation: wireless

What to regulate? Price Quality of service Conduct Standards Interconnection Social policy attainment

QoS Regulation or monitoring Canada, UK and Australia—remedies required; Portugal fines Monitoring in most other OECD countries –Emphasis on providing comparative information for users

Pricing trends Reduction in distance and time sensitivity –Scandinavian countries and Belgium for example now charge same rate for local and domestic long distance calls –New Zealand call capped at $2 once exceeds 20 minutes; Bell Canada allows unlimited calls within Canada for $17 per month Bundling of services

More pricing trends Rebalancing—local rates increase as long distance rates decrease Metered local service in virtually all countries except US, NZ, Australia, Canada In OECD, fixed voice rates stable or a bit higher from

Broadband In OECD from –Prices declined by average 2% per year (DSL) and 5% per year (cable) –Speeds increased 15%--20%

Wireless Tends to be calling party pays (CPP) –Has led to issue of termination charges Roaming has been an issue In OECD , mobile rates have declined 6% for low usage and over 20% for medium and high usage