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From Telecom Policies to e- Economy
Professor William H. MelodyManaging Director, LIRNE.NET
[email protected], www.lirne.net
Presentation to
Seventh Conference on Technology Policy and Innovation:
Connecting People, Ideas, and Resources across Communities
Monterrey, Mexico, 10 -13 June 2003
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Characteristics of 21st Century Economies
• Driven by the services sectors• Founded on information/communication
networks – next generation Internet• Dependent on effective reforms in the
telecom sector – information infrastructure• Strengthening links among local, national,
regional, internatonal networks and markets
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Stages of Telecom/Information Sector Reform
• Telecom Liberalization (Participation, Univ. Access)
• Expanding Network Capacity (Broadband)
• Preparing the Network Foundation for New Services
• Developing New Services - “killer applications!”
• Applying Services Productively in Different Societies
• Telecom Reform & Regulation – Key Driver for
Implementing Policy Reforms for the e-economy
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INFORMATION INFRASTRUCTURE
Regional Development
Finance/ Banking
Disaster Management
Travel & Tourism ManufacturingMedia & Cultural Sectors
Health/Medical Government Services Education/Training
Applications
Electronic Services(Pay TV, VAS, Internet)
Multimedia, etc.(Public, User group, Private)
ContentBroadcast
MediaFilm
LibrariesSoftware
etc
Interactivity(Instant & Delayed)
VoiceData
SoundGraphics
VideoTelecommunication
Facilities Network(Information Superhighway)
Computing / Information Technology
Telecommunication Equipment Manufacturing
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Equipment Supply
TelecomInfrastructure
ServiceDevelopment
Competitive Markets
Monopoly/duopoly/oligopoly Competitive Markets
Internet
VAS
Databases
NetworkManagement
TelecomEquipment
ComputerHardware
Software
ConsumerElectronics
PTOs
The telecom sector value chain
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Significance of Network Unbundling
• Industry Sectors - Equipment, Operator Networks, Services
• Fixed and Mobile• Basic Network Layers• *Content
*Communication Services *Network OSS & Management *Raw Facility Capacity
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Convergence Sectors Drivers of Convergence
•Technology
• Industry-Supply
• Market-Demand
• Policies/Regulation
•Industry Specific
•Convergent
Applications
• Finance
• Commerce
• Education
• Health
• Publishing
• Manufacturing
• etc.
Content
Telecom
Computing
The Dimensions of Convergence on the Information Infrastructure
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Criteria for Economic Growth
Technologies
Policies
Markets
Applications Services
Regulations
Regulation: Catalyst for, or Constraint upon Growth?
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Progress with Telecom Reform
• Now 120+ Countries with Separate Telecom Regulatory Authorities
• WTO Commitments to Liberalization• Industry Specific Focus of Reforms• Successes, Failures, Unanticipated
Difficulties, Continuing Delays• Regulatory Reform is Proceeding at a Slower
Pace than Technology Development or Market and Service Potential
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Progress with Telecom Reform
• Regulation is the limiting factor constraining growth• It is not a simple matter of removing regulations or
eliminating regulators. It is enhancing their competence and credibility.
• Sound regulatory foundations are needed to attract investment, foster applications of new technologies and development of new services.
• The speed of regulatory reforms must increase and they must be directed to providing a foundation for network-based e- Economies.
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Information Infrastructure: Investment 1990s
• Mobile - licenses - operating; spectrum
- network development• Privatising telecom incumbents
- licenses – operating; IPO
- network development obligations• Competitive network operators
- fibre transmission
- city / business LANs
• Software, services and content (e.g., Internet)
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Information Infrastructure: Investment Deficiencies 21st C
• Local - basic services access
- broadband access• Universal access - fixed
- broadband• Internet - local services and content• Applications - e-economy; e-society
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Policy, Regulation and Network Investment
• Licensing - paying for the privilege
• Annual Fees and charges
• Restrictions on investment opportunities
• Price and/or profit regulation
• Policy & regulatory risk
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Assessing the Mixed Results of Market Liberalization
• Successes, failures and frustrations• Learning and adjustment?• Naivite and market failure?• Government failure in establishing the
policy/legislative frameworks?• Regulatory failure – bottleneck, rather than
facilitator?• Inevitable market failure?
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Unresolved Network Market Issues
• Public Resource Infrastructures for Telecom Networks - Rights of Way, Spectrum, Numbers, Names
• Interconnection• Termination Number Monopolies• Access Limitations in the Face of Positive
Externalities• Leverage Opportunities for Monopoly Nodes
in the Network
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Elements of Policy and Regulatory Risk in Information Infrastructure
Development
• Credibility – regulatory independence from political intervention on substantive issues
• Credibility – Regulatory independence from incumbent monopoly power
• Transparent processes• Accountability for performance• Competence and skills• Commitment to implement policy objectives• Evident fairness
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Can Policy/Regulatory Structure Reduce Investment
Risk?• Morocco - licensing for mobile rollout• Chile - making rural areas financially viable• Denmark - minimizing barriers to participation• Korea - multi-faceted programme promoting
broadband rollout• Canada – innovative applications, wide
participation, universal access• Botswana – world model for credible regulation
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Are Policy/Regulatory Structures Increasing Investment Risk?
• Mexico – Telmex/SBC monopoly power• South Africa – Telkom/SBC monopoly
power• US - tied up in administrative legal knots• Bangladesh - political nightmare• Ireland –”Celtic Tiger” of Europe in IT;
slugs in Telecom
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Shifting Policy/Regulatory Priorities to Stimulate Investment
• From supply of network facilities to stimulation of demand to justify investment
• From physical capital to human capital
- awareness, skill, capabilities
- applications by individuals & organisations• Diverse sources of private and public investment
- operators, service providers,
- intermediaries (e.g., Telecentres), user applications
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Regulatory Relations Regulatory Relations Affecting Sector Affecting Sector
InvestmentInvestmentDemand/Need
Regulation
Policy
End Users
Services
Facilities
Supply Telecom/ICTSector
Intermediaries
Public Resources Applications
Demand/Need
Regulation
Policy
End Users
Services
Facilities
Supply Telecom/ICTSector
IntermediariesIntermediaries
Public Resources Applications
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NGI - High Speed Access
• Role of the Market• Digital Divide• Role of Government
*Promote Competition *Direct Regulation *Public Sector Applications *Public Investment - eg., Broadband
• At What Level Should Gov’t Intervene?
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Moving to Convergence Regulation
• Security, Privacy• Intellectual Property Rights• Digital Signatures & Contracts• Micro payments and Funds Transfer• Network Quality - eg., e-commerce standards• Consumer Protection• More
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Paths to Universal Access
• Voice - prepaid mobile• Internet, e-economy, e-society - fixed & wireless network extensions - new operators – energy, transport - radio and TV distribution networks - retail service suppliers, ISPs, VANS - greater role for intermediaries
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Internet Governance
For the next Generation Internet-based e-Economy• In 2002 ICANN president Stuart Lynn
proposed that government representatives be appointed to Board positions.
• ”ICANN, which was created to save the Internet from governments, is now turning to governments to save ICANN.”
Michael Froomkin
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Internet Governance
• Direct Internet-specific issues, eg., ICANN• ICT sector convergence and information
infrastructure development issues, e.g., national telecom regulators-mach 2
• Trade- related issues in the e-economy, e.g., WTO, WIPO
• Challenge: Making regulatory institutions credible at both national and international levels.
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Capacity – building: Actions
• Build institutional networks for mutual development – local to international
• Strategic management in a dynamic ICT environment
• Experiment – the core of innovation
• Stimulate demand for skills
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Capacity – building Requires Investment in Human Capital
• Policies – to direct, enable & support
• Institutions – to train & sustain
• Programmes for the development & dissemination of skills
• Programmes for the application & maintenance of skills
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Capacity – building for Information Societies
• Policy analysis & regulation
• Strategic analysis & management
• Innovation, experimentation & flexibility
• Demand-led diffusion of core skills
• Network linkages
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Infrastructure For Digital Economies
• Higher Capacity Facilities - Broadband?• Access to High Speed Networks?• Access to Minimal Level of Universal
Services? • Access to Minimal Levels of Information?
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Characteristics of Information Networks
• High fixed costs and economies of scale• Specialized monopolies and destructive
competition• Extreme forms of price discrimination• Failure to serve segments of the polulation• Failures of coordination across networks• Positive network externalities – efficiency
benefits go far beyond the limits of private markets
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The Foundation for Efficient Markets
• Market theory – all parties are fully informed, and information is available at minimum cost
• Is publicy requiring universal access to substantial levels of information necessary for markets in all sectors to function efficiently?
• Will market failures in information markets cause failures in services and product markets?
• If so, network access to information will be a new critical infrastructure for network economies
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Proactive Policy & Regulation
• Create a favourable investment environment for physical & human capital
• Minimize barriers to participation• Facilitate demand as well as supply• Apply skills and strategic management to
achieve the spirit of the policy objectives• Can only be done if regulatory structure is
transparent and credible
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World Dialogue on Regulation for Network Economies
Mission: • to facilitate an international dialogue that
generates and disseminates new knowledge• on frontier issues in regulation and
governance• to support the development of network
economies
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World Dialogue on Regulation for Network Economies
Activities:
• Research on the annual theme
• Dialogue – www. Regulateonline.org
- e-Brief
• Expert Forum
• Report
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World Dialogue on Regulation for Network Economies (WDR)
Dialogue Theme 2002:
• The Next Step in Telecom Reform:
• ICT Convergence Regulation or Multi-sector Utility Regulation ?
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World Dialogue on Regulation for Network Economies (WDR)
Dialogue Theme 2003:
Stimulating Investment in Network Development: Roles for Regulators
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World Dialoge Theme 2002
ICT Convergence
• Digitalization of the network
• Mobility
• Next generation Internet
• E-commerce
• Media integration
• Restructuring of industries
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World Dialogue Theme 2002
ICT Convergence Regulation• Access to communication channels and
access to content• New issues of competition and monopoly• Privacy, security, IPR• Reducing digital divides?• Can content regulation be avoided?• The most effective role for national telecom
regulators?
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World Dialogue on Regulation for Network Economies 2003:
Research Partners
• Centre for Tele-Information, TU Denmark
• Economics of Infrastructures, TU Delft, NL
• LINK Centre, Wits University, S.A.
• Media@lse, London School of Economics
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World Dialogue on Regulation for Network Economies 2003:
Institutional Partners
• infoDev, World Bank• ITU, BDT• IDRC Canada• LIRNE.NET• Research Partner Universities
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World Dialogue Theme 2003
Stimulating Investment in Network Development: Roles for Regulators
• Defining and Implementing Regulation to Facilitate Sector Investment in Network Development
• The Challenge: Creating regulation that leads rather than lags technology and market developments, providing a catalyst for investment and growth in network e-economies?
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World Dialogue on Regulation for Network Economies
• Participate in the Dialogue; review and comment on the research, www.regulateonline.org
• For more information contact Merete Henriksen, WDR Coordinator, [email protected] Tel. + 45 4525 5178; Fax + 45 4596 3171
LIRNE.NET, www.lirne.net • A Strategic Collaboration for applied research, training, policy and
regulation support, relating to information infrastructure and new network economy development
• Center for Tele-Information (CTI), TU Denmark• Economics of Infrastructures, TU Delft, Netherlands• LINK Centre, Wits University, South Africa• Media@lse, London School of Economics, UK