REGULATORY ISSUES
Basic Telecommunications Policy Statement
from Governments of Caricom Member States.
The Governments of the Member Countries wish to move from the
present position to a situation which is in line with the developments
world-wide and which will result in benefits to the member countries and their
people. To meet that objective, the Governments of the Member Countries have
adopted the following statement of overall policy and they will co-operate and
work together on a regional basis to achieve the aims.
The Governments of the Member Countries aim to ensure that
the demand for
existing telecommunication services is met in order to support economic growth
and diversification, provide a suitable environment for tourism, informatics and
financial sectors, and satisfy the educational and social needs of the
community.
The Governments will endeavour to develop the
telecommunications
infrastructure and services by providing a liberalized and competitive
environment with open entry to stimulate the introduction of an increased range
of services using state of the art technology.
The Governments will encourage investment in the sector from
all
appropriate sources by developing and adopting and enabling legal and regulatory
framework, making it possible for the public and business users to obtain
telecommunications services at fair prices that reflect economic cost and
efficiency.
The Governments will encourage investment in the sector from
all
appropriate sources by developing and adopting and enabling legal and
regulatory framework, making it possible for the public and business
users to obtain telecommunications services at fair prices that reflect
economic cost and efficiency.
CREATING THE NECESSARY LEGAL ENVIRONMENT
The Governments of the Member Countries will review all existing legislation
and other legal instruments such as licences and agreements. Where the
legislation is outdated or not in line with the basic policy described
above, it will be revised.
PLAN OF ACTION
It is against the background outlined above that there are currently a
series
of Seminars and Workshops being held in the region to assist
telecommunication regulators to design the regulatory framework and
formulate telecommunication policies for the Governments of Caricom member
States, in order to achieve the objectives relating to liberalization and
Competition and preparing elements for the new bits of legislation that
would have to be enacted in the various Parliaments.
Regulation
A new regional body will be created to set broad policy directives for the
region, which will then be implemented by a small regulatory unit in each Member
Country.
Some of the main objectives will be to:
issue licences to telecommunications network operators and
service providers, and for the use of the radio frequency spectrum, and
collect the appropriate fees;
ensure holders of licences adhere to the conditions of
their licences;
provide conditions for fair competition between network operators
and between service providers;
prevent abuse by dominant or monopoly operators;
ensure tariffs are cost related;
assure that there are appropriate interconnection agreements between
operators;
provide a mechanism for resolving disputes;
protect consumer interests;
approve equipment for use by customers;
control and manage the use of the radio frequency
spectrum and prevent interference;
manage the numbering scheme of the region;
Licences
The intention is grant non-exclusive licences to telecommunications network
operators and service providers. The framework for the licences for a given
service will be the same throughout the region. Where there is more than one
licence for the same service in one member country, the licences will be of
the same form.
If a licence covers the provision of an additional service by an
existing network
operator, the additional service may have to be provided through a subsidiary
to ensure there is no unfair cross subsidy.
Wherever possible, licences for services which can be
provided without operating a network, such as value added services, will be
covered by a general licence so that these services can be provided by any
person who meets the requirements.
OBJECTIVES OF THE CARIBBEAN FORUM FOR TELECOM
POLICY AND REGULATION
OBJECTIVES OF THE CARIBBEAN FORUM FOR TELECOM POLICY AND
REGULATION:
to create a forum for the exchange of experiences and
practice in developing telecom policy and regulations;
to provide opportunities to bring together telecom
policy-makers, Telecom Utility Practitioners and Telecom Regulators from the
wider Caribbean;
to develop models and steps to introduce and sustain competition in
telecoms;
To become an umbrella for a Center of continuing Learning
and Excellence.
What Regulators Must Know and how they must respond
The main purpose of recent Seminars related to the
establishment of a Regional Regulatory Body, is to draw from the
experience of regulators from the more developed countries, thus providing
information that will assist those who will be involved in the regulatory
process to design and formulate the relative telecom policies.
The role of policy in governance;
convergence (pertaining to the merging of telephone systems, with
cable TV, radio and TV broadcasting, Internet Telephony and other wide-band applications);
competition and consolidation;
computers and connectivity;
Trends in Caribbean Telecom Policy Reform
One of the main contributors or resource persons providing
information for
participants was Professor Hudson Janisch from the Faculty of Law, University
of Toronto. He teaches administrative and communications law at the University.
The research focus of Professor Janisch has for some time been on
telecommunications law and regulation and has written extensively on
emerging policy and legal issues in an information age.
Topics he covered included:
Approaches to the introduction of competition;
Identifying Goals, Choosing Means, Sizing the Costs and
Allocating funds;
Institutional Design Issues Relating to Regulatory
Policy;
The Role of Legislation, Ministry, and Agency;
Who Decides what is in the "Public Interest";
How is Policy Determined and Applied.
Industry Changes Affect Regulators and World Economics is
Changing Through the new Methods of Telecommunication Delivery.
The professors topics also included:
Technological advances, changing market conditions, and
sectoral reform measures drive the transformation of the telecommunications
sector;
New technologies are contributing to a convergence, new
patterns of demand and supply;
Requirements of sector reform and the regulatory agency;
Other Discussions to Prepare Caribbean Regulators
The focus of these meetings is to establish the necessary
mechanism to make a decisive step to introduce competition. The
motivating force is that telecom services no longer relate to Local Markets.
Whereas it is sometimes necessary to provide protection for service providers in
a local market, to offer some security for their investments; in
the new technological environment, we are dealing with Global Markets, with
millions of available customers. Monopolies are not relevant in this kind of
environment.
There now needs to be a clear distinction between basic
telecom services and enhanced services. These are new frontiers, and as
regulators, we are the ones who must establish the ground rules and design the
regulatory framework with laws and regulations the will govern us in the years
ahead.
In a proposal during an informal discussion with Professor
Hudson Janisch from the Faculty of Law, University of Toronto for deliberations
with his students at the University, is the establishment of the boundaries
separating the telecom services. We agreed that all real time voice, data, and
video which are produced using analogue techniques would be classified as Basic Telecommunications.
Also under this classification would be all communication using satellites that
are in geo-stationary orbits.
Telecom services using compressed and digital techniques
would be classified as
Enhanced Telecommunication Services and should operate in a free market
environment. Low Earth Orbit Satellites (LEOS) operating in polar orbits, would
be classified as Enhanced Telecom Services and must therefore be open to
competition.
Consistent with the policy objectives of the Caricom Heads of
Governments
relating to opening up our telecom markets to competition, the necessary
legislation would have to be enacted in each Parliament to ensure that these
objectives are met.
ESTABLISHING A REGULATORY COMMISSION
Where do we get the people, and the role of the Commissioners
and
Supporting staff.
First of all a Regulatory Commission should have available
experts in each of
the related fields to advise on upcoming issues, changes in each related
industry and decisions of other similar Commissions. A Commission relies on a
team (its staff) to gather background information, do discovery, and form a
recommendation the Commissioners will know is complete. The commission
does not have to agree with its staff, however the information is what is
required to make the most informed decision.
The specific role of the staff:
The Commissioners need professionals who do not
have a substantial interest in proceedings to analyze and summarize the
positions of all parties;
the interest of the staff is the public interest and
staff should not advocate a position to the exclusion of others;
even if the matter is in the purview of one division,
consideration should be given to the views of other divisions; and
when the Commission makes a decision, it then becomes the
staff’s responsibility to implement and support it.
The role of attorneys is to:
address the procedural and legal aspects of
proceedings before the Commission, the Division of Administrative Hearings, and
in civil court;
represent the staff before the commission;
assist in completion of the record;
issue reports and recommendations to the Commission as
required; and
prepare commission orders.
The role of legislation is to:
ensure that the decisions and rulings of the Commissioners
are supported by the Law.
The role of the Ministry:
There is an overall need to fit the Regulator
into the Parliamentary System of Government;
design of effective system of Cabinet Review. (Particularly
where there are political considerations, Policy Makers should have the
right to over rule, after a review, any rulings made by the Commission)
In reference to the paragraph above, political
sensitivities and political input must be accommodated, specifically when
dealing with matters in the public interest. (e.g. The commission rules that
rates for water or electricity be increased substantially. In the public
interest Cabinet must have the right to review and make its own ruling).
Regulators have to be firm in dealing with interconnection
issues.
It is Ironic that regulations and laws have to be
established for
telecommunication services which under normal circumstances
should be unregulated since market demands for good quality
service
at the most affordable prices in itself creates an environment in which
service providers are guaranteed failure in a competitive market if the
service is sub-standard and the costs are not competitive.
Where there is a monopoly provider which is unwilling to
allow fair
competition, it is necessary to enact legislation to guarantee
competitors reasonable arrangements to interconnect with the
incumbent’s equipment, both in terms of pricing and unnecessary
restrictions in the use of the incumbent’s network.
COMPETITIVE INTERCONNECTION
Definition
Commercial and operational arrangements under
which two operators connect their networks so that customers of one has access
to the customers and services of the other.
Elements of Interconnection
Basic interconnection services: Call Termination,
Call Origination, Transit Service.
Ancillary Service: Directory Inquiries, Operator
Assistance, Emergency.
Rental of Physical Components: Support
Structures, Ducts and Poles, Co-location, Interconnection Circuits.
Use of Network Elements: Local Loops,
Switches-Local and Toll, Transmission Facilities, Network Interface Devices,
Operational Support System, Signaling Systems, Databases-Call-Related.
Enabling Functionalities: Equal access
Preselection, Number Portability.
Interconnection Pricing - Pricing Level
Interconnection Pricing is the most significant
commercial aspect of an Interconnection Agreement.
To ensure effective competition, interconnection prices
must:
have the right structure
be set at the right level
If set too high, they deter efficient market entry or
lead to inefficient duplication of resources
If set too low, they encourage inefficient market entry.
In a newly competitive market, setting prices must
recognize:
Dominance of the incumbent (monopoly provider)
Retail prices being out of balance with costs
With full competition, market forces lead to cost-based prices for
both retail and interconnection services.
Interconnection Pricing - Pricing Standard
Regulator should set a pricing standard to foster
effective competition
Desirable Pricing Standard:
Should be based on long run incremental cost for
providing the service
Should be estimated using forward-looking costing
methodology
Use a mixture of theoretical engineering models and
observed costs of world class operators to define the cost levels of an
efficient operator
Include a mark up for recovery of joint and fixed
common costs
Such a pricing standard gives proper signal to
interconnectors and reflects international trends.
Testing Interconnect Prices Against Standard
The Regulator and new entrants must judge whether the prices
proposed by the incumbent meet the cost-based interconnect pricing standards
This can be done:
By using a model of the incumbent’s costs and a
detailed analysis of its accounts to defined standards. (A valid but time
consuming approach);
By using international benchmark comparisons based on
interconnect prices charged in other countries with similar pricing standards;
By using interconnect pricing rules that constrain the
prices the incumbent can charge.
Tariff Structure
The Tariff Structure of Interconnection Services
should reflect the underlying costs of providing the service.
Tariff Elements Are comprised of::
Non-recurring one-time charges occurring once
generally near the outset of competition e.g.. Switch modification,
development of billing and operating systems.
Recurring on-going charges which are non-usage
sensitive e.g.. Interconnecting circuits.
Recurring on-going charges which are usage-sensitive
e.g.. Switching and routing of originating and terminating calls.
In an environment where there is a dominant and hostile (to
competition )
monopoly provider, the role of the regulator in exercising control over the
formulation of agreements between the incumbent and new entrants to the
market is a very critical one. It is therefore important for there to be
effective legislative measures and procedures with the necessary penalties
to protect new entrants to the market.
Here are a few more guidelines relating to Interconnection:
INTERCONNECTION AGREEMENTS - TYPICAL ELEMENTS
Interconnection charges
Specification of charges over time
= Usage charges
= Access-deficit charges
= Interconnect link charges
= Charges for ancillary and other services
= Rental of supplementary facilities
Billing Procedures
Recording charges
Billing charges
dealing with disputes and errors
Customer access and billing arrangements
Who bills the customer
Customer authentication
Supply of billing name and address
Long-distance carrier selection
Mechanism for deciding customer preference under
equal access
REGULATION AND INTERCONNECTION
Independent Regulator
Whatever pathway to competition is chosen a strong
independent regulatory authority is essential.
The regulatory authority should have
Independence
Adequate and guaranteed funds
Competent staff
Members with security of tenure for a number of
years.
