Telecom's ever-present regulators

05 May 2008
00:00

Why do we still have telecom regulators‾

When telecoms ministries began deregulating 20 years ago, conventional wisdom was that industry-specific regulation was a stopgap to compensate for the lack of competition.
Some regulators even predicted their job was so marginal that they would 'wither away' as competition emerged.

Well, that was the 80s, the high tide of deregulationist fervor. We don't think quite the same way about telecom policy today, but we should be surprised at the breadth and intensity of regulation.

Government oversight

Surely no other industry requires the same level of bureaucratic oversight (though recent events suggest the finance sector could do with some adult leadership).

Take a look at recent announcements by respected telco regulators. For example, the Australian Competition and Consumer Commission has created a cost model for bandwidth transmission; Singapore's IDA will introduce full mobile number portability; and Ofcom in the UK is working on telephone number availability.

These are all competition-related, which suggests that either competition is not working adequately or that regulators have worked themselves into a permanent job.

To take a good example, the lack of competition surely lies at the heart of the US 'net neutrality' issue.

If the broadband access and backbone markets were genuinely competitive, there could be no fear from operators offering differentiated quality of service; consumers could just switch a rival. Of course, this is what telcos in fact are arguing, but many beg to differ.

Perhaps another reason is that the telecom bandwidth business inherently lacks transparency, especially to end-users. It took a congressional hearing before cable operator Comcast confirmed what many customers suspected: that it was throttling the connections of some large file-swappers.

But the other is simply that this is infrastructure for which investment is always scarce. Pre-deregulation economists described telecoms as a natural monopoly; these days the starting point for regulation seems to be the 'natural scarcity' of capital.

This shows particularly when it comes to broadband.

If telecom deregulation had worked out as it should, the combined impact of competition and new technologies should mean that the industry should be able to work out broadband for itself.
In some places, like Hong Kong and Korea, that's what has happened. But in others, like Singapore and Australia, governments are driving and funding the development of next-gen broadband.

The Australian government has just called tenders for a national broadband network (NBN), offering a $4.3 billion carrot to the successful bidder. The network is intended to deliver 12 Mbps to 98% of households within five years.

Singapore has split the contracts for ownership and operation of the network and expects to issue both tenders by year-end. The IDA, too, has some serious cash to entice bidders; S$750 million ($348 million) for the builder and S$250 million for the operator of the NBN.

There's not much these two markets have in common.

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