Contents of module
- Regulation
- eLearning main Index
Introduction
The scope of telecoms regulation differs from country to country. In many countries there is no telecoms-specific Regulator at all, usually because the issue has not yet been considered.
However, in one or two countries there is no Regulator not as a failure to address the problem but the consequence of a deliberate decision that none is needed.
Such countries are very much in the minority, and normally when the matter is considered the conclusion is that a telecoms Regulator is essential.
The areas of regulation can be classified under three broad (albeit overlapping) headings:- market issues, industry issues and technical issues.
Market Issues
The main areas of interest under the heading ‘market issues’ are:
- Protecting User Interests
User interests were of little concern in most countries in the past. A shortage of lines, difficulty of making connections, high call failure rates, lack of service innovation, poor response to complaints and high prices are just some of the issues that customers faced. These issues are characteristic of any monopoly situation where the customer has little alternative but to accept what is available.
The introduction of competition is designed to provide a basis on which the situation can change. In theory, if users are not satisfied with the service provided by one operator, they can change to another.
Unfortunately, the theory does not always apply in practice. Operators can conspire to fix prices, in which case there is no effective competition on tariffs. Universal service is not available in certain places, or special features such as emergency services are poorly provided. Furthermore there are innumerable places where the individual users can be seriously disadvantaged but have no means of putting the matter right on their own.
Thus, in keeping with the fact that the Regulator’s role is primarily concerned with customer welfare, protecting user interests is an important area for regulation.
- Investigating User Complaints
Associated with the need to protect user interests, the Regulator also needs to set up and manage a mechanism whereby users can make known their complaints and, if such complaints are valid, to obtain redress.
- Serving the Disabled and Elderly
Telecoms is an industry that has widespread effects of a social nature. For example, a simple telephone line can often also be a crucial lifeline for some sectors of the community. The need to call help in times of emergency must not be ignored.
Regulators have a social responsibility to identify areas of special need and ensure that such need is adequately met.
- Customer Service Levels
The terms of an operator’s contract often include clauses that specify minimum levels of service that the company needs to provide. If the specified levels are not achieved, the operator is in breach of its licence and is at risk of having the licence revoked.
The areas where the quality of service is specified are commonly:
- line quality;
- the geographical coverage of mobile networks;
- the time taken to connect new services;
- the time taken to repair faults and other service problems; and
- the time taken to attend appointments with customers.
- Managing Community Resources
Telecoms operators frequently use the community’s resources in order to provide the services they offer. The most obvious example is the radio spectrum by which mobile operators transmit telecoms traffic to their customers. But this is not the only example: laying cable beneath the road network and through public premises is another.
Such uses of the public’s resources need to be managed carefully, especially since they tend to be limited. There is only a set amount of spectrum available, and it needs to be allocated fairly. Also, road works cannot be allowed to occur in a random and uncontrolled manner or the impact on the environment would be intolerable.
Thus the need to regulate public resources is an important component of a Regulator’s job.
Industry Issues
The main areas of interest under the heading ‘industry issues’ are:
- Licensing
The best known aspect of a Regulator’s job is licensing, which involves the drawing up of the terms of the various licences to be issued and then awarding those licences to the appropriate applicants. It is the second part of this two-stage process that attracts the most publicity.
The activities that need to be licensed vary from country to country. Providing basic services such as the wireline or wireless networks is licensed virtually everywhere, but the extent and manner of licensing for those companies that provide services over these networks varies considerably.
- Ensuring Compliance with Licence Terms
Licences invariably include various terms and conditions that the licensee must meet. The Regulator therefore needs to monitor the licensees’ performances on occasion to ensure that the terms and conditions are being met. If they are not, then some form of sanction must be taken. Initially, this may be just a warning. If the licensee still fails to meet the requirements, stronger action may be needed.
Clearly it is not possible (or wise) for Regulators to monitor all licensees’ performances on an ongoing basis. In practice, the monitoring is only undertaken when a complaint has been made or the Regulator has some other reason for believing that licence conditions are being violated.
- Ensuring Fair Competition
It goes without saying that, since a Regulator’s responsibility is to introduce and foster competition, this carries with it the responsibility to ensure that such competition is conducted in a fair and equitable manner.
There are numerous areas in which unfair competition may be introduced, from using a dominant position in the market to misleading advertising.
- Establishing Codes of Conduct
While regulatory bodies are set up to control the development of the telecoms industry, the preference is for this to be done in as light-handed a manner as possible. The hope is that the industry should, as far as possible, regulate itself.
To facilitate this self-regulation, the Regulator often produces codes of practice for specific areas where guidance is necessary. If a licensee does not abide by such codes where they apply, it is liable to having sanctions taken against it.
Typical codes include:
- consumer codes – codes regulating the relationship between service providers and consumers;
- operations codes – codes regulating relationships among service providers; and
- network codes – codes regulating technical operations of networks
to ensure end to end connectivity.
Sometimes such codes of practice are already available, produced by international bodies or industry groups. Where they are not available or are seen to fail, the regulatory body may need to intervene and produce its own.
- Stimulating Investment
The role of a telecom Regulator frequently includes having the responsibility for the orderly and effective development of the industry. No other body is in a position to do this, so it usually falls to the Regulator.
In an industry like telecoms with its rapid rate of change - change that requires continual heavy investments - the responsibility to develop the industry implies the need, inter alia, to stimulate investment in it. This is done by regulating the industry in such a manner that companies find it an attractive market in which to invest and introduce new products and services.
- Setting Prices
Determining the prices that companies charge their customers is an issue that Regulators are generally loath to touch. Moreover, in a well functioning market there should not be any need to do so. Where competition exists and is performing properly, companies that over-charge for the service provided will lose their customers to their competitors.
Unfortunately, such an ideal situation does not yet exist anywhere. Some countries are nearer the ideal than others but, even there, distortions exist and still have to be addressed. A number of Regulators take the view that they should control prices until they are sure the industry is truly competitive.
- Rate Rebalancing
Under a monopoly situation, a telecom operator was free to subsidise one part of its business by profits from another. For example, it could use revenue from lucrative international calls to keep local charges down.
In a competitive situation, this is unacceptable because it distorts the market. A new operator in the local market must be able to compete against the incumbent on an equal basis, and not have to face a situation where the competition’s charges are uneconomic on their own.
There is thus a need to rebalance the rates, but the extent of the rebalancing and the speed with which it is done must be carefully managed. The Regulator must not lose sight of the fact that large and rapid change could affect some customers quite badly.
- Investigating Complaints from Licensees
While user complaints are important, they are not the only type of complaint that needs to be handled. Since the Regulator issues licences with terms and conditions attached, any abuse of such terms by a licensee is a matter for the Regulator’s concern. In a competitive situation, one of the most likely objector’s where abuse occurs is another licensee.
Therefore, the Regulator must set up a complaints mechanism where licensees themselves may express their disquiet over improper practices.
Technical Issues
The main areas of interest under the heading ‘technical issues’ are:
- Interconnection Issues
Probably the most difficult, and certainly the most common, issue that Regulators have to face is in ensuring that new licensees are allowed to interconnect their networks with the dominant carrier on fair terms and in a realistic time-scale.
- Use of the Radio Spectrum
The radio spectrum is used by operators to provide wireless services to their customers. However, the spectrum is limited and is therefore not freely available to all the operators that want to use it. The problem is especially acute because of the popularity of wireless services and the demands being made on the spectrum.
The Regulator’s role is thus to decide how many operators can use the spectrum and how much each should have.
The matter is not just one of dividing up a scarce resource as fairly as possible. Technical problems exist because of the nature of the spectrum. For example, buildings and a country’s geography may affect the way it can be used. Also, while operators may have distinct ranges of spectrum, there is a need to avoid interference caused by the traffic from one operator affecting that of others.
- Technical Standards
The need to have technical standards arises in a number of ways, such as to ensure the feasibility of interconnection between networks, to avoid undue fragmentation of the market and to ensure safety standards are upheld.
Such standards relate to:
- customer equipment standards;
- cable standards;
- network standards; and
- radio standards
Frequently it is the Regulator’s task to approve equipment that is connected to a network. This ‘type approval’ is intended to ensure the integrity of the network and the safety of those who use it.
Further Reading
The Regulator in Japan is the Telecommunications Bureau of the Ministry of Posts and Telecommunications. The Ministry publishes the Telecommunications Bureau's Map which shows the areas regulated in Japan and the work that is undertaken on each.
Interconnection is one of the most important and difficult areas to regulate in the telecoms industry. It is a common problem in virtually every country where competition is introduced. The UK regulator, Oftel, has produced one of the most comprehensive sets of guidelines on this subject.