1. Internet Policy Day 3 - Workshop Session No. 5 The impact of telecomms regulation Prepared for CTO by Link Centre, Witwatersrand University, South Africa

2. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Sessions Summary F Day 1 –Session 1History and technical background –Session 2Market structure F Day 2 –Session 3Interconnection, IXPs and voice over IP –Session 4Governance and domain names F Day 3 –Session 5The impact of telecommunications regulation –Session 6Internet specific policy issues F Day 4 –Session 7Content on the Internet –Session 8E-commerce issues F Day 5 –Session 9Internet tools for regulators –Session 10Conclusion, review and evaluation

3. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Topics of discussion F Telecomms regulation –Why regulate? –Policy, law and regulation –Best practices F Impact of telecomms regulation on the Internet F Regulatory issues –Universal access/service –Competition –Licensing –Interconnection and facilities leasing –Consumer protection –Price regulation

4. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Why regulate at all? F Resource allocation –Frequency spectrum F Public utility –High costs to set-up infrastructure required protection and some guarantee of a return on the investment F Social objectives –Ensuring that prices are reasonable for all sectors of the population

5. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Why regulate at all? F Efficiency –Monopolies are not efficient, no incentive to improve service levels or lower costs –Lack of proper cost allocation and accounting F Globalisation –Rapid increase in global trade and the flow of money –External pressures on countries –Multi-nationals playing an expand role u Aside: Who does the longest term planning?

6. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Policy, law and regulation F Policy –Set by government –Sector specific needs –National objectives F Law –Usually a result of certain policies F Regulation –Application of the law to the sector –Defining the relationship between market and regulator

7. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Regulatory best practices F Transparency –Policies and procedures accessible to all and simple to use –Public hearings and the provision of reasons for decisions F Fairness –Impartial, equitable, lawful, unbiased and just –Fairness produces trust, credibility and legitimacy F Accountability –To government, courts, industry and consumers –Regulatory decisions should be accorded full recognition F Independence –Exercise of powers without interference or pressure –All stakeholders treated equally and with respect

8. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Impact of regulation on the Internet F Charging models –Local calls flat rate or time based? F Access technologies –Restrictions on international connections impact price and quality of service –Huge impact on local loop; restrictions in access technologies impact the roll-out of content delivery capability F Restrictions on voice –Slow down the natural integration of voice/data services –Erodes country’s competitive skills based

9. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Universal Access / Service  Universal service means access to each household  Universal access means access within a reasonable distance  The goal of universal services is to bridge geographic disparities  Service must be affordable as well as available  But the value of the service may actually be higher!  Changing definitions – from POTS to PANS (Public Access Network Services)

10. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Competition F Competition increases efficiency and improves choice F Ideal world: totally open market means no need for regulation F Real world: imperfect competition, resources allocated unfairly or inefficiently F How governments intervene –Behavioural: Modify the behaviour of company u Example: regulating prices. –Structural: Directly affect the market structure u Example: blocking a merger of two network operators

11. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Competition F Advantages of incumbents –control essential facilities –economies of national networks –vertical integration –control over network standards and development –cross subsidies F Accounting separation –to prevent unfair cross-subsidisation –to determine the real costs of interconnection

12. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Licensing F Three main approaches –No licensing at all –General authorisations –Government/regulator issues a licence F Snap survey: Should ISPs be licensed?

13. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Interconnection and facilities leasing F Interconnection and facilities leasing –Enables communications – public interest, right to communications, etc. –Enables competitive entry – fair competition “Interconnection is key to the development of a competitive telecommunications arena…”. Introduction to The European Interconnection Manual by Interconnect Communications http://www.icc-uk.com/pubs71.html

14. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Consumer protection F Quality of service regulation –Price vs. quality F Consumer complaints and dispute resolution F Standards setting F Informed choice: educating the consume –Publishing comparable QoS indicators

15. CTO / DFID Internet Policy workshop, Jamaica, 22-26 April 2002 Summary F Why regulate? Initially to ensure service, now to ensure efficient services F Impact of telecoms regulation on the Internet F Universal service/access F Competition F Licensing F Interconnection/facilities leasing F Consumer protection