1. From Telecom Policies to e- Economy Professor William H. Melody Managing Director, LIRNE.NET melody@lirne.netmelody@lirne.net, www.lirne.netwww.lirne.net Presentation to Seventh Conference on Technology Policy and Innovation: Connecting People, Ideas, and Resources across Communities Monterrey, Mexico, 10 -13 June 2003

2. Characteristics of 21 st Century Economies Driven by the services sectors Founded on information/communication networks – next generation Internet Dependent on effective reforms in the telecom sector – information infrastructure Strengthening links among local, national, regional, internatonal networks and markets

3. Stages of Telecom/Information Sector Reform Telecom Liberalization (Participation, Univ. Access) Expanding Network Capacity (Broadband) Preparing the Network Foundation for New Services Developing New Services - “killer applications!” Applying Services Productively in Different Societies Telecom Reform & Regulation – Key Driver for Implementing Policy Reforms for the e-economy

4. INFORMATION INFRASTRUCTURE Regional Development Finance/ Banking Disaster Management Travel & Tourism Manufacturing Media & Cultural Sectors Health/Medical Government Services Education/Training Applications Electronic Services (Pay TV, VAS, Internet) Multimedia, etc. (Public, User group, Private) Content Broadcast Media Film Libraries Software etc Interactivity (Instant & Delayed) Voice Data Sound Graphics Video Telecommunication Facilities Network (Information Superhighway) Computing / Information Technology Telecommunication Equipment Manufacturing

5. Equipment Supply Telecom Infrastructure Service Development Competitive Markets Monopoly/duopoly/oligopolyCompetitive Markets Internet VAS Databases Network Management Telecom Equipment Computer Hardware Software Consumer Electronics PTOs The telecom sector value chain

6. Significance of Network Unbundling Industry Sectors - Equipment, Operator Networks, Services Fixed and Mobile Basic Network Layers *Content *Communication Services *Network OSS & Management *Raw Facility Capacity

8. Convergence Sectors Drivers of Convergence Technology Industry-Supply Market-Demand Policies/Regulation Industry Specific Convergent Applications Finance Commerce Education Health Publishing Manufacturing etc. Content Telecom Computing The Dimensions of Convergence on the Information Infrastructure

9. Criteria for Economic Growth Technologies Policies Markets ApplicationsServices Regulations Regulation: Catalyst for, or Constraint upon Growth?

10. Progress with Telecom Reform Now 120+ Countries with Separate Telecom Regulatory Authorities WTO Commitments to Liberalization Industry Specific Focus of Reforms Successes, Failures, Unanticipated Difficulties, Continuing Delays Regulatory Reform is Proceeding at a Slower Pace than Technology Development or Market and Service Potential

11. Progress with Telecom Reform Regulation is the limiting factor constraining growth It is not a simple matter of removing regulations or eliminating regulators. It is enhancing their competence and credibility. Sound regulatory foundations are needed to attract investment, foster applications of new technologies and development of new services. The speed of regulatory reforms must increase and they must be directed to providing a foundation for network-based e- Economies.

12. Information Infrastructure: Investment 1990s Mobile - licenses - operating; spectrum - network development Privatising telecom incumbents - licenses – operating; IPO - network development obligations Competitive network operators - fibre transmission - city / business LANs Software, services and content (e.g., Internet)

13. Information Infrastructure: Investment Deficiencies 21st C Local - basic services access - broadband access Universal access - fixed - broadband Internet - local services and content Applications - e-economy; e-society

14. Policy, Regulation and Network Investment Licensing - paying for the privilege Annual Fees and charges Restrictions on investment opportunities Price and/or profit regulation Policy & regulatory risk

15. Assessing the Mixed Results of Market Liberalization Successes, failures and frustrations Learning and adjustment? Naivite and market failure? Government failure in establishing the policy/legislative frameworks? Regulatory failure – bottleneck, rather than facilitator? Inevitable market failure?

16. Unresolved Network Market Issues Public Resource Infrastructures for Telecom Networks - Rights of Way, Spectrum, Numbers, Names Interconnection Termination Number Monopolies Access Limitations in the Face of Positive Externalities Leverage Opportunities for Monopoly Nodes in the Network

17. Elements of Policy and Regulatory Risk in Information Infrastructure Development Credibility – regulatory independence from political intervention on substantive issues Credibility – Regulatory independence from incumbent monopoly power Transparent processes Accountability for performance Competence and skills Commitment to implement policy objectives Evident fairness

18. Can Policy/Regulatory Structure Reduce Investment Risk? Morocco - licensing for mobile rollout Chile - making rural areas financially viable Denmark - minimizing barriers to participation Korea - multi-faceted programme promoting broadband rollout Canada – innovative applications, wide participation, universal access Botswana – world model for credible regulation

19. Are Policy/Regulatory Structures Increasing Investment Risk? Mexico – Telmex/SBC monopoly power South Africa – Telkom/SBC monopoly power US - tied up in administrative legal knots Bangladesh - political nightmare Ireland –”Celtic Tiger” of Europe in IT; slugs in Telecom

20. Shifting Policy/Regulatory Priorities to Stimulate Investment From supply of network facilities to stimulation of demand to justify investment From physical capital to human capital - awareness, skill, capabilities - applications by individuals & organisations Diverse sources of private and public investment - operators, service providers, - intermediaries (e.g., Telecentres), user applications

21. Regulatory Relations Affecting Sector Investment

22. NGI - High Speed Access Role of the Market Digital Divide Role of Government *Promote Competition *Direct Regulation *Public Sector Applications *Public Investment - eg., Broadband At What Level Should Gov’t Intervene?

23. Moving to Convergence Regulation Security, Privacy Intellectual Property Rights Digital Signatures & Contracts Micro payments and Funds Transfer Network Quality - eg., e-commerce standards Consumer Protection More

24. Paths to Universal Access Voice - prepaid mobile Internet, e-economy, e-society - fixed & wireless network extensions - new operators – energy, transport - radio and TV distribution networks - retail service suppliers, ISPs, VANS - greater role for intermediaries

25. Internet Governance For the next Generation Internet-based e-Economy In 2002 ICANN president Stuart Lynn proposed that government representatives be appointed to Board positions. ”ICANN, which was created to save the Internet from governments, is now turning to governments to save ICANN.” Michael Froomkin

26. Internet Governance Direct Internet-specific issues, eg., ICANN ICT sector convergence and information infrastructure development issues, e.g., national telecom regulators-mach 2 Trade- related issues in the e-economy, e.g., WTO, WIPO Challenge: Making regulatory institutions credible at both national and international levels.

27. Capacity – building: Actions Build institutional networks for mutual development – local to international Strategic management in a dynamic ICT environment Experiment – the core of innovation Stimulate demand for skills

28. Capacity – building Requires Investment in Human Capital Policies – to direct, enable & support Institutions – to train & sustain Programmes for the development & dissemination of skills Programmes for the application & maintenance of skills

29. Capacity – building for Information Societies Policy analysis & regulation Strategic analysis & management Innovation, experimentation & flexibility Demand-led diffusion of core skills Network linkages

30. Infrastructure For Digital Economies Higher Capacity Facilities - Broadband? Access to High Speed Networks? Access to Minimal Level of Universal Services? Access to Minimal Levels of Information?

31. Characteristics of Information Networks High fixed costs and economies of scale Specialized monopolies and destructive competition Extreme forms of price discrimination Failure to serve segments of the polulation Failures of coordination across networks Positive network externalities – efficiency benefits go far beyond the limits of private markets

32. The Foundation for Efficient Markets Market theory – all parties are fully informed, and information is available at minimum cost Is publicy requiring universal access to substantial levels of information necessary for markets in all sectors to function efficiently? Will market failures in information markets cause failures in services and product markets? If so, network access to information will be a new critical infrastructure for network economies

33. Proactive Policy & Regulation Create a favourable investment environment for physical & human capital Minimize barriers to participation Facilitate demand as well as supply Apply skills and strategic management to achieve the spirit of the policy objectives Can only be done if regulatory structure is transparent and credible

34. World Dialogue on Regulation for Network Economies Mission: to facilitate an international dialogue that generates and disseminates new knowledge on frontier issues in regulation and governance to support the development of network economies

35. World Dialogue on Regulation for Network Economies Activities: Research on the annual theme Dialogue – www. Regulateonline.org - e-Brief Expert Forum Report

36. World Dialogue on Regulation for Network Economies (WDR) Dialogue Theme 2002: The Next Step in Telecom Reform: ICT Convergence Regulation or Multi- sector Utility Regulation ?

37. World Dialogue on Regulation for Network Economies (WDR) Dialogue Theme 2003: Stimulating Investment in Network Development: Roles for Regulators

38. World Dialoge Theme 2002 ICT Convergence Digitalization of the network Mobility Next generation Internet E-commerce Media integration Restructuring of industries

39. World Dialogue Theme 2002 ICT Convergence Regulation Access to communication channels and access to content New issues of competition and monopoly Privacy, security, IPR Reducing digital divides? Can content regulation be avoided? The most effective role for national telecom regulators?

40. World Dialogue on Regulation for Network Economies 2003: Research Partners Centre for Tele-Information, TU Denmark Economics of Infrastructures, TU Delft, NL LINK Centre, Wits University, S.A. Media@lse, London School of Economics

41. World Dialogue on Regulation for Network Economies 2003: Institutional Partners infoDev, World Bank ITU, BDT IDRC Canada LIRNE.NET Research Partner Universities

42. World Dialogue Theme 2003 Stimulating Investment in Network Development: Roles for Regulators Defining and Implementing Regulation to Facilitate Sector Investment in Network Development The Challenge: Creating regulation that leads rather than lags technology and market developments, providing a catalyst for investment and growth in network e-economies?

43. World Dialogue on Regulation for Network Economies Participate in the Dialogue; review and comment on the research, www.regulateonline.orgwww.regulateonline.org For more information contact Merete Henriksen, WDR Coordinator, henriksen@lirne.net Tel. + 45 4525 5178; Fax + 45 4596 3171henriksen@lirne.net LIRNE.NET, www.lirne.net www.lirne.net A Strategic Collaboration for applied research, training, policy and regulation support, relating to information infrastructure and new network economy development Center for Tele-Information (CTI), TU Denmark Economics of Infrastructures, TU Delft, Netherlands LINK Centre, Wits University, South Africa Media@lse, London School of Economics, UK