Competition in Telecommunications Networks:
Antitrust and Sector-Specific Solutions and
Challenges for Developing Countries
Malathy Knight-John
Research Fellow
Institute of Policy Studies
Sri Lanka
Road map
• The importance of connectivity in the development
process
• Necessary and sufficient conditions for improved
industry (telecommunications) performance
• Parameters of regulation in network industries
(telecommunications)
• Regulatory options for introducing and managing
competition in telecommunications (competition law,
telecommunications sector law, blurring of lines)
• Challenges for developing countries
Caveats
• Competition wherever
where necessary
possible;
regulation
• Regulation FOR competition
• Bottom line: Improved industry performance
(Increased investment flows, improved access,
affordable tariffs, better quality of service)
Why connectivity is key
• Telecom infrastructure foundational stage in ICT value
chains
• ICTs vital driver of technological change in infrastructure,
financial, manufacturing, retail, media industries etc –
and even in government services (e-government)
• Econometric studies indicate that telecom investment
leads to economic growth (Parker et al 1995, Hardy 1980,
Cronin et al 1991, 1992, 1993 etc.)
• ICTs
key
component
of
knowledge
economies/information societies
• Bridging the digital divide – key to economic and political
power
Necessary and sufficient conditions for good
telecommunications industry performance
• Clear policy guidelines backed by political will
(policy predictability)
• Reforms to enhance industry performance
 Ownership issues (from SOEs to liberalization & privatization)
 Sequencing of reforms (competition before privatization, established
regulation before privatization etc.)
 Trifurcation of policy, operations, regulation
 Unbundling of networks (e.g. long distance services from local loop:
the classic AT & T/ MCI story)
• Pro-competitive regulation to parallel reforms
Parameters of regulation in a network industry
(telecommunications)
• Incumbent advantages (control over essential facilities, vertical
economies, control over network standards)
 Challenge for regulators:
a) differentiate “natural” advantages of economies of scale and scope from
anti-competitive practices
b) implement asymmetric regulation without unfairly handicapping
incumbents
• Non-contestable segments of the network (LL?)
• Social “legacies” (cross-subsidization: rural/urban; USOs)
• International commitments (e.g. commitments to the GATS
Reference Paper)
Competition law vs. sector-specific regulation:
issues and challenges
• Competition law: (e.g. New Zealand:
Zealand/Clear Communications case)
the
Telecom
New
 Replicability of this model in developing countries?
 “General purpose” nature vs. the need for sector-specific technical expertise (e.g.
interconnection issues, allocation of frequency spectrum etc.)
• Telecommunications law: (e.g. Hong Kong)
 Regulatory capture
 Technical “tunnel vision”
efficiency/social welfare
could
preclude
impacts
on
broader
allocative
• Concurrent jurisdiction {e.g. UK, South Africa, Japan, Sri Lanka}
 “Passing the buck” (Sri Lanka)
 Forum shopping (merge appellate powers - UK)
 Duplication of regulation (clear demarcation of role of competition authority and
sector regulator – South Africa)
Challenges for developing countries
•
•
•
•
•
Policy consistency and predictability (backed by demonstrated political will) –
vital for attracting FDI (WDR, 2005); coherent directives for regulation and
competition
Political economy of reforms – privatisation bundled with exclusivity provisions
and weak regulation is a source of continued rent extraction; huge rents in the
telecom industry produce significant resistance to reform and competition
Policy legacies imposed on regulators – (contradict objectives of facilitating
competition) – exclusivity provisions, cross subsidies (without transparent accounting
separation).
Regulatory governance –workable independence (operational independence),
financial independence (funds from diverse sources), transparency (annual
reports/bulletins), professionalism (salaries at mark-up over regular government
scales), revolving door provisions, performance accountability (procedures for
removal if performance below par), legitimacy in the eyes of key stakeholders
Managing interface between competition authority and sector-specific
regulator – (turf issues, duplication and over-regulation, passing the buck – all
hazardous to FDI)
•
•
Technical issues – LLU, vertical separation, interconnection regime/charges
Convergence regulation {e.g. UK, Malaysia, Australia, SL (?)} – Economies
of scope and scale, scarcity in regulatory expertise, regulatory capture