Competition and Regulation in the Telecommunications Industry in ...

Competition and Regulation in TelecommunicationsIn the three phases of liberalisation, there are different challenges for the regulator. Inphase 1, classical regulation challenges are to be dealt with, i.e. achievingproductive, allocative and dynamic efficiency. Once competition is introduced inphase 2, the regulator has to deal more with the behaviour of incumbents andentrants toward each other and the abuse of market power by incumbents, and theprovision of “fair” access prices for entrants to non-competitive parts of the network.In phase 3, regulation becomes more light-handed and revolves around the fairdistribution of universal access obligations and the adherence to fair tradingpractises, since competition takes care of the other aspects of regulating price andentry.2.4 Convergence in TelecommunicationsOver the past decade, telecommunication has been subjected to a technologicalrevolution, decreasing natural monopoly characteristics of the industry and creatingnew markets in mobile telephony, the use of the Internet and wireless local looptechnologies.Whereas in the past, the market to be regulated was clearly defined and regulation ofplayers revolved more around technical regulation, today the market boundarieshave become blurred. Competition has the potential to decrease the need forregulation in some of the more competitive markets, but has increased the potentialfor asymmetric regulation. Whereas in the past the emphasis was laid on efficiencyand principal-agent problems of inducing the correct behaviour in regulated utilities,nowadays the problems lie more in the area of dominance of incumbents, a lack ofmarket boundaries, the pace of technological change influencing cost and uncertaintyabout future technologies.In the past, the more concentrated regulation of single sectors was by nature definingthe rules of play and creating competitive environments. In the present context,however, competition agencies have gained greater importance, observing themarkets and acting ex-post only if there is evidence of anti-competitive behaviour.An example of classic sectoral regulation is that of OFTEL, the UK office fortelecommunications regulation. In Malaysia, on the other hand, regulation of theentire broadcasting industry has been attributed a single agency, dealing with alltelecommunications and broadcast issues.25