1. Self-learning material: Regulation Rohan Samarajiva samarajiva@lirne.net

2. Why independent regulation?  To assure investors in countries thought likely to engage in administrative expropriation  Especially important in infrastructure industries where investors can be held captive to sunk investments

3. Ingredients of effective design of independent regulatory framework?  Proper market design at point of reform Second or third best solutions cannot be ruled out  Preset regulatory framework, reducing discretion as much as possible  Provide for competent and adequately endowed regulatory agency  Get proper leadership and staff Confident, competent, courageous, communicative, committed

4. What are the elements of proper market design at point of reform?  Remove/reduce entry/exit barriers as much as possible  Remedy problems caused by essential facilities and nodes of market power  Safeguard consumer through use of market forces  Pre-condition is unbundling policy (Ministry), regulatory (NRA) and operational (multiple operators) functions

5. Give examples of presetting regulatory framework and rationale  Interconnection rules to be promulgated, along with default termination rates and points of interconnection  Forget about price cap/revenue cap regulation of tariffs that involves esoterica such as calculating cost of capital and productivity factors, at least for first few years  In the most controversial cases, regulator should be able to say, I cannot do what you ask me to do, rather than I will not do

6. Can we do without ex-ante specialized regulatory agencies in ICTs?  While it may be possible to do without ex- ante specialized regulatory agencies and minimize even ex ante roles in industries such as port services, that is not the case with ICT infrastructure  Not possible to write concession contracts that would address all contingencies Pace of technological and market changes does not allow too much fixity Complexity and interleaving of ICT networks require some bespoke solutions  Competent, independent regulatory agency

7. Examples of necessary conditions for effective regulatory agencies?  Own fund; financed through regulatory levies  Accountability to Parliament through annual report  Staggered appointments of members by Prime Minister with concurrence of Constitutional Council  Removal only for cause by Parliament  Insulation from “line” ministry, which tends to represent the partially reformed incumbent

8. What are the sufficient conditions?  Organizational structure, recruitment and training that Realizes economies of regulation Emphasizes commitment to “new” regulation  How to enable, not restrict Breaks from command and control mindset Does not create easy path from incumbent to regulatory agency  Adequate compensation packages to attract persons with skills and potential  And leadership

9. Can regulation work in developing countries?  Common responses Ineffective government will create ineffective regulatory agencies Government/politicians will inevitably interfere in regulatory agencies, even if they start well The people with the confidence, competence, courage, communicativeness & commitment do not exist  Are inappropriate because the alternatives of continuing with the status quo or allowing private unregulated monopolies are unacceptable