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| WDR e-Brief No. 03 |
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| Wednesday, 13 March 2002 | |
In this e-Brief
The WDR  No. 03, 13 March 2002 Welcome to the third issue of the WDR e-Brief, a bi-weekly bulletin from the World Dialogue on Regulation for Network Economies (WDR). The WDR e-Brief is designed to help you keep informed of new documents and ongoing discussions on our website at http://www.regulateonline.org/ and of other WDR activities. For more information on any of the items discussed here, go to the web addresses provided. Interaction HighlightsThe discussion on WDR's online forum during the last two weeks generated questions and comments on the topic of regulation -- the role of regulation in a digital world, the organizational structure of regulatory agencies and the desirability of achieving regulatory independence. Malcolm Matson, providing a perspective from the private sector, argues that regulation and public policy are the "greatest inhibitors" to the advancement of a converged digital world. According to Matson, when "technologies of discontinuity", like optical fibre and the personal computer, are thrown up by the market they should be "allowed to 'destroy' today's vested interests". In his view, regulation is often fashioned by vested interests to "make tomorrow as close as possible to yesterday". Matson expands on his views in an attached article based on a paper he delivered at the 1995 ITU Technology Summit in Geneva. Read his intervention and the paper under the subject “Regional regulation adds new element to debate“ in the Framework forum: http://www.comunica.org/w-agora/index.php?bn=wdr_framework Continuing on the topic of regulation, Charles Roocroft, a frequent contributor to the forum, asks the Multisector Utility Regulation team whether the actual organization of multisector regulatory agencies show any evidence of economies of regulation. You can read Rohan Samarajiva's response to that question on the forum at: http://www.comunica.org/w-agora/index.php?bn=wdr_multisector "To what extent should regulators behave independently?", asks Saskia Lavrijssen to the Multisector Utility Regulation team, also posing the question of the week. Lavrijssen agrees with the multisector regulation paper when it states that multisectoral regulators can act more independently from the line ministries than sectoral regulators can. However, according Lavrijssen, "utility regulators are not only confronted with economic and technical questions. Their decisions might have social or environmental implications... A multisector regulator should be accountable to the responsible ministries (or directly accountable to parliament)." Rohan Samarajiva addresses the issues of accountability and independence raised by the question later in the e-Brief. Follow the debate in the Question of the Week below or online in the Multisector Utility Regulation Forum at: http://www.comunica.org/w-agora/index.php?bn=wdr_multisector Question of the WeekIn each WDR e-Brief we feature a question or comment posted to the Online Dialogue at http://www.regulateonline.org/dialogue/ and ask our research teams to comment. The featured question in this e-Brief was posted in the forum on Mutisector Utility Regulation by Saskia Lavrijssen of Tilburg University in the Netherlands. http://www.comunica.org/w-agora/index.php?bn=wdr_multisector Question: In the paper on multisector regulation it is stated that by creating a multisectoral regulator the regulatory agency will be taken out of control of one line ministry (because there will be more than one) and will give it a reporting relationship to either a ministry devoted to economic reforms or the overall subject of finance , or the president, or the prime minister, or the legislature. An alternative solution to the problem of line ministries is to abolish them altogether, as Senegal has done (p. 28). Since multisector regulators will be accountable to more than one ministry, I agree with the fact that multisectoral regulators can act more independently from the line ministries than sectoral regulators can do. One should, however, ask oneself to what extent should regulators behave independently? I think regulators should be insulated from political (and of course private) influences in case they have to implement legislation by making difficult economic and technical assessments in concrete cases concerningaccess to essential infrastructures. For instance I think that isssues of access pricing should be left to independent regulators. However, utility regulators are not only confronted with economic and technical questions. Their decisions might have social or environmental implications. This is for instance the case when a regulator should guarantee that universal service obligations are met and when it has to control the performances of the universal service providers to that end. I am of the opinion that a multisector regulator should be accountable to the responsible ministries (or directly accountable to parliament) in case the agency has to deal with social and environmental matters. In addition, although there should be no political influence in individual decision-making, the general performance of a regulator should be supervised by the responsible ministries by making for instance a cost benefit analysis of the activities that are performed by the regulator (regulating the regulators). I am interested in the opinion of the authors of the paper on the accountability of the multisectoral regulators and how this accountability should be institutionalised. Saskia Lavrijssen Tilburg University Answer: The intervention contains a number of interesting and important questions. It merits a detailed answer that for purposes of convenience is divided into sections. Independence It makes eminent sense that a regulator should be independent from those it regulates. Many countries recognize the value of this safeguard as a pre-condition of fair treatment for competitors, but not all have succeeded in building it into their regulatory practices. This principle has now received international imprimatur with its inclusion in the WTO Regulatory Reference Paper: The regulatory body is separate from, and not accountable to, any supplier of basic telecommunications services. The decisions of and the procedures used by regulators shall be impartial with respect to all market participants.(1) The WTO definition does not require independence or even separation from government. For example, Japan, which has not yet created a separate telecommunication regulatory agency and regulates through the Ministry, is in compliance with Article 5 of the Regulatory Reference Paper. In approaching the more problematic aspects of independence, namely the regulatory agency’s relation with government, it is useful to begin by asking whether the desirability of insulation from political pressures is unique to regulatory agencies. Efficient and unbiased public administration requires a degree of protection from day-to-day political pressures. The civil-service protections written into many constitutions and laws around the world testify to this. Clear separation of the policy-setting function and the implementation function, with political accountability for the former, and administrative/legal accountability for the latter, is a basic element of sound public administration. Additional insulation from political pressure is provided in certain exceptional cases such as investigative bodies dealing with corruption, attorneys general and central banks. In this light, the more appropriate question is whether the functions of telecommunication regulatory agencies warrant such additional protections. There is no single answer for all countries. In countries with well functioning governments such as Chile, telecom sectors have performed exceptionally well even with regulatory agencies that are no different from government departments. The case study of the Singapore Infocomm Development Authority at http://www.itu.int/ITU-D/treg/Case_Studies/Index.html shows that it has little independence from the political authorities. Therefore it is not possible to say that good sector performance requires additional protections for regulatory agencies in all cases. Added insulation from political pressure for telecommunication regulatory agencies in the form of independence from political interference is critical where overall governance is weak, namely in most developing countries. In effect, the independence that is called for serves as a dike to protect the island of good governance that the NRA is intended to be, from the surrounding ocean of bad governance. So, for example, a firm investing in the telecom sector in the Nordic countries or in Singapore does not demand the creation of an independent NRA because there is adequate trust that governance is effective and that administrative expropriation is unlikely to take place. By contrast, the independence of the NRA was considerably strengthened in Sri Lanka in 1996, at the same time that two Wireless Local Loop operators made major new investments in the telecommunication sector. Accountability The other side of independence, as the intervenor clearly shows, is accountability. The most basic form of accountability is transparency of regulatory decision-making. The decisions must gain legitimacy directly from the process by which they were arrived at. In addition, there must be structural accountability. Depending on the political system (e.g., parliamentary/Westminster, separation of power/US-type), its form will differ. This has to be to the legislature through annual reports and other means; through responsiveness to questions by committees and so on. Generally, in environments of poor governance, it is not a good idea to leave this solely to one ministry within the executive. The more public the accountability, the better it is. Some scholars argue for a clear demarcation between economic regulation that is amenable to “technical” approaches and socio-political forms that require political judgement. (2) In reality, this demarcation is difficult to achieve. (3) Socio-political objectives tend to involve redistribution of resources. It may be more appropriate that they be set through political processes than through the expertise-based processes generally associated with regulatory agencies. A middle ground would leave the policy function of setting of socio-political objectives to government and the associated political processes but mandate the regulatory agency to devise the optimal ways of achieving the stated policy objectives. Rohan Samarajiva LIRNE.NET Notes: 1. World Trade Organization (1997), Fourth Protocol to the General Agreement on Trade in Services (Geneva: WTO), Reference Paper, article 5. At: http://www.lanka.net/trcsl/wtodocs.html 2. Foster, Christopher D. (1992). Privatization, public ownership, and the regulation of natural monopoly (Oxford UK: Blackwell), chapter 9. 3. Prosser, Tony (1997). Law and the regulators. Oxford UK: Clarendon Press. Follow the dialogue post a question or make a comment at http://www.regulateonline.org/dialogue/ . Regional regulation adds a new element to the debateAt the LIRNE.NET training course on Designing Effective Telecom Regulation for Small Countries (Grenada, West Indies, 24 Feb.-1 March), issues relating to next generation regulation were discussed with regulators, policymakers and operators from the region. A major new element introduced to the debate was the implications of regional regulation. The recent establishment of the Eastern Caribbean Telecommunications Regulatory Authority (ECTEL) is introducing a new role for regional regulation intended to support national regulators in the member countries. As an essentially advisory body to the national regulators, it may be possible for the regional body to explore the possibilities for next generation regulation outside the political pressures normally associated with possible changes to law and policy at the national level. But this will depend on how the relations between the national and regional authorities evolves. This issue will be taken up by the WDR research teams in the near future. Ford Foundation and SSRC join WDR as research partners The Ford Foundation and the Social Science Research Council (SSRC) have become WDR’s newest research partners. The two organisations have teamed up to support research on the regulatory and policy conditions conducive to increased connectivity. The study, which will involve colleagues in the Caribbean and South Africa, will examine the contributions made to enhanced connectivity by different policy and regulatory approaches. The research will be coordinated by Rohan Samarajiva, head of WDR’s multisector utility research team, and will look both at connectivity to the telephone network and the Internet. The Ford Foundation works mainly by making grants or loans that build knowledge and strengthen organisations and networks to further democratic values, reduce poverty and promote international cooperation. SSRC is a non-profit organisation with an international reputation for fostering cutting-edge social science research. For more information: http://www.regulateonline.org/news/ford_ssrc.htm Ford Foundation: http://www.fordfound.org Social Science Research Council: http://www.ssrc.org Other NewsWDR in Mexico WDR managing director William Melody discussed next generation regulation issues with the Mexican telecom community at a sector Conference at CIDE (Centro de Investigación y Docencia Economica – Centre for Economic Research and Instruction) in Mexico City on March 6, and with Mexican legislators on March 7 and 8. Mexico is preparing new legislation designed to strengthen telecom regulation and prepare the ground for the next stage of information infrastructure development. Mexican legislators hope to to prepare a law and develop an associated policy that will encompass telecom-IT convergence issues, but clearly exclude issues of media content. The new law is expected to be passed within the next two months. Mobile and Internet convergence to be explored at CTI conference The 7th International Conference of the Centre for Tele Information (CTI), titled Internet & Mobility: Technologies and Implications for Work and Leisure will be held at the Technical University of Denmark on May 29, 2002. The conference will focus on the convergence of Internet and mobile networks and explore the technological options: networks, applications and services, and their implications for work and leisure. For further information see the conference website. http://www.cti.dtu.dk/activities/conference.view.php?id=16944 Questions and supportIf you have questions about WDR, send them to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it For technical matters, contact us at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or see the Frequently Asked Questions section in the Online Dialogue. http://www.regulateonline.org/dialogue/ Subscribing and unsubscribingThe WDR e-Brief is a bi-weekly bulletin from the World Dialogue on Regulation for Network Economies <http://www.regulateonline.org>. Subscribe from the site or by sending a message to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it with the subject wdr e-brief list . To unsubscribe, send a message to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Bruce Girard - This e-mail address is being protected from spam bots, you need JavaScript enabled to view it - edits the e-Brief with assistance from Divakar Goswami. Archives: http://www.comunica.org/w-agora/index.php?bn=wdr_ebrief |
