World Dialogue on Regulation

ICT Convergence Regulation or Multisector Utility regulation

The first phase of telecom reform in all countries involves the clear separation of the primary functions of network operation, policymaking and regulation. Incumbent operations are commercialized, often privatized, competition is introduced and network development objectives are established. Industry specific regulators are expected to drive the process of policy implementation, a far more difficult task than initially envisioned that has achieved only limited success so far.

This discussion paper critically examines the rationales that may be used to support the creation of multisector regulatory agencies. The paper begins with definitions of industries, sectors and multisectors that rest on degrees of substitution possibilities in production or consumption. The possibility that increased reliance on common use of rights of way and conduits may have in fact caused hitherto distinct infrastructure sectors such as telecom, electricity and transportation to converge is examined by means of a description of the state of the art regarding common use of rights of way and conduits. The increased tendency of firms to cross sectoral boundaries is examined both as a possible indicator of underlying convergence and as corporate strategy that may be driven by pecuniary factors such as advantages in taxation, regulatory flexibility, etc. This discussion is supplemented by an appendix that describes the multisector activities of selected firms. The claims for multisector regulation based on common use of regulatory skill sets and potential economies of regulation are critically examined. Here, it is shown that the core problem of scarcity of regulatory resources is caused by government restrictions on the effective functioning of markets in regulatory skills. In the short term, it is possible to realize economies of regulation by means short of merger or agencies such as sharing of facilities. It is also shown that effective multisector agencies that would save costs are unlikely to result from after-the-fact consolidations, but would have to be embedded in the original design. The pragmatics of sector reform, especially when conducted by “line” ministries, are shown as likely to result in sector-specific agencies that would be susceptible to a degree of government influence. In the final section, a list of discussion questions are presented.

The foundation for information societies and network economies will be their new information infrastructures, the transformed and upgraded telecom networks. The point of entry to participation is through local communication networks, which determine the boundaries of opportunity for individuals, organizations and countries. Infrastructure industries always have been treated differently than industry in general for two reasons – market failure and public interest. High transactions costs, economies of scale, positive feedback and network externalities all contribute to market failure. Yet experience with telecom “natural monopolies” has demonstrated a failure of monopoly and prompted the reform movement of recent times, the implementation of which is expected to be driven by national telecom regulators.