Executive Development Program January 30 February 4

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(Executive Development Program)January 30
February 4
Fair Trade Transition to Competition

University of Zambia
NetTel_at_Africa
prepared presented by David Mukosa
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Learning Objectives

• a) Provide learners with knowledge on
  competition as it relates to market structure and
  performance
• b) Explore the importance of fair competition to
  create efficient, cost effective markets

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Learning Outcomes

• At the end of this session, the learner will
  be able to explain
• the effective role of regulators in a
  competitive telecommunication market and in
  markets in transition from monopoly to
  competition

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Contents

• Defining Fair Trade
• Transition to Competition
• Market Structures
• Advantages and disadvantages of different Market
  Structures
• Challenges in Transition to Competition
• Concerns of the Regulator on transition from
  private to competitive markets
• Regulatory Intervention
• Enforcement in Competitive Markets
• Appeals during transition time
• Conclusion

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Fair Trade Definitions

• From the International Federation for Alternative
  Trade
• Fair trade is a trading partnership based on
  dialogue, transparency and respect, that seeks
  greater equity in international trade. It
  contributes to sustainable development by
  offering better trading conditions to, and
  securing the rights of, marginalized producers
  and workers - especially in the South.

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Fair Trade Definitions

• From Fairtrade.org
• Fair Trade is an alternative approach to
  conventional international trade. It is a trading
  partnership which aims at sustainable development
  for excluded and disadvantaged producers. It
  seeks to do this by providing better trading
  conditions, by awareness raising and by
  campaigning

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Fair Trade Definitions

• From the Cato Institute
• Fair trade, as the term is now used, usually
  means government intervention to direct, control,
  or restrict trade. Fair trade means government
  officials decide what Americans should be allowed
  to buy and what prices they should be forced to
  pay. Fair trade is paternalism in international
  commerce.

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1.Defining Fair Trade

• Partnership based on

transparency
dialogue
fair play
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Prerequisites for Establishing a Competitive
Market

• Independent Regulator
• Transparent Process
• Legal Framework
• Consumer Protection

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2. Transition to Competition
Remove barriers that protect existing Monopoly
provider from competition by New entrants
Policy Makers
Competition
Take affirmative steps to promote competition in
sector of market previously void of competition
Monopoly
Introduce competitive safeguards to Prevent
exercise of market powers by incumbent during
transition, e.g. conditions governing
interconnection
Legal Reforms Privatization Regulation
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Methods of Introducing Competition

• Policy Makers
• Not restrict and complicate methods of entry
  resulting in higher prices to consumers
• Encourage efficient entry by letting market place
  select preferred approaches

• Methods
• Facility based Competition
• Unbundling of Network
• Resale

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Why Fair Trade is Important

• Some of the factors are that, it
• Facilitates competition
• Supports an efficient market place

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3.Market Structures

• Monopoly
• -market with single seller/provider,
• competition deficiency
• Duopoly
• - market with two sellers/providers
• - one providers change of pricing
  (may) trigger an
• equal reaction

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Market Structures

• Oligopoly
• - market with multiple providers with
• unequal power
• Perfect competition
• market with many buyers and sellers
• of product where no single seller or
• buyer is powerful enough to affect the
  price
• of the product

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4.Advantages and Disadvantages of Different
Market Structures
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Regulatory Challenges
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5.Challenges in Transition to Competition

• Residue of old monopoly and its interests
• Managing a new market
• Dealing and adapting with market forces
• End of cross subsidy

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Zambias example of Technology Change due to
Competition
AMPS
1995
GSM
1997
GSM
1998
GSM
2003
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6. Concerns of the Regulator on transition from
private to Competitive Markets

• Service quality
• Universal Access
• Interconnection
• Number portability and numbering as a regulatory
  issue
• Data collection by the regulator to effectively
  monitor transitional markets
• Independent regulator necessary in liberalized
  market 

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7.Regulatory Intervention

• Regulators can seek compliance with the law by
  resorting to formal enforcement and prosecution.
  However, alternative avenues of enforcement to be
  considered are
• education
• advice
• persuasion
• negotiation

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Regulatory Intervention

• Rules and enforcement
• standards and benchmarks
• enforcement strategies

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Regulatory Intervention /ctd

• When to intervene
• preventive actions
• law-based interventions
• harm based interventions

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Regulatory Interventions

• How much to enforce
• perfect compliance (ideal!)
• cost of enforcement
• sanctions according to law

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Pyramid of Enforcement Strategies
Command regulation
Insistent strategy
Persuasive strategy
Enforced self-regulation
Ian Ayres John Braithwaite
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Sanctions Pyramid
Criminal prosecution
Notices improvement prohibition
Warnings infractions written warnings, verbal
warnings
Persuasions shaming deadlines photographic
evidence dramatic techniques education and
advise
Ian Ayres John Braithwaite
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Regulatory Intervention

• Reasons for intervention
• - Limit predatory pricing and anti-
• competitive behavior
• - Improve economic efficiency by
• requiring shared infrastructure
• - Amend interconnection terms

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Regulatory Intervention /ctd

• One other reason regulatory intervention is
  necessary is for the implementation of government
  
• policy, e.g universal access,
• e-commerce, education

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Discussion 1

• Is strict enforcement (e.g legalistic
  enforcement), likely to produce undesired
  side-effects?

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8.Enforcement in Competitive Markets

• Enforcement methods by govt.
• - licensing
• - arbitration
• - regulations
• - ministry instructions
• - review amend interconnection
• agreements

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Discussion 2

• How much political interference / influence do
  governments (or politicians) exert on regulators
  and operators?

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9.Appeals during transition time

• administrative judge
• administrative process
• dispute resolution board
• appeal to ministry
• appeal to court

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Conclusion

• Disadvantages in Competition
• Impossible to have perfect competition
• Different economies, political setups, legal
  frameworks affect competition differently
• Benefits of Competition
• Forces firms to perform efficiently
• Gives choice to consumers
• Encourages innovation
• Reduces prices and increases quality of service
  commensurate with price

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Reading Material

• Principles and Practices of Interconnection
  Networks, William James Dally Brian Towles
• Handbook of Telecommunications Economics, Vol 1.
  Martin E. Cave,Sumit K Majumdar Ingo Vogelsang
• Pricing Communication Networks, Costas Cour
  coubetis Richard Weber
• Competition in Telecommunication, Jean-Jacques
  Laffont and Jean Tirole

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• H. Intven, J. Oliver and E. Sepu'lveda,
  Telecommunications Regulation Handbook, Module 3
  - Interconnection (2000)
• http//www.infodev.org/projects/314regulationhandb
  ook/
• Asia-Pacific Economic Cooperation (APEC)
  Telecommunications and Information Working Group
  materials on interconnection from1999
  http//www.apectelwg.org/apecdata/telwg/interTG/AT
  TZ2FG1.htm
•  

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• International Telecommunication Union, Trends in
  Telecommunication Reform 2000-2001 -
  Interconnection Regulation
• Michael Klein and Philip Gray, Competition in
  Network Industries- Where and How to Introduce
  it, Note No.104, Private Sector, The World Bank
  Group, January 1997
• W Melody, Telecom Reform - Principles, Policies
  and Regulatory practice, Chapter 5-
  Interconnection Cornerstone of Competition
  (2001)

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• International Forum on Dispute resolution in
  Telecommunications (R Hill and J Watkinson eds),
  White paper - Telecommunications Disputes
  Specificities, Problems, Solutions (17 June 1999)
  
• (http//www.icc-uk.com/rhill.html)
•  
• Telecommunications Association of Southern Africa
  (TRASA), Guidelines on Interconnection for SADC
  countries, 29 May 2000

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• Oftel's November 2000 report on "Consultation on
  future interconnection arrangements for dial-up
  Internet in the United Kingdom"  
• 1997 EU Directive on Interconnection. The WTO
  Reference Paper is at http//www.wto.org/english/n
  ews_e/pres97_e/refpap-e.htm

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• http//europa.eu.int/ISPO/infosoc/telecompolicy/re
  view99/Welcome.html
• "Telecommunications Interconnection A Literature
  Survey, Prepared for Asia Pacific Economic
  Cooperation (APEC) Organization," by Julian K.
  Wright, Eric K. Ralph and D. Mark Kennet (2000).
• "Setting Up Interconnection Regimes References
  for Regulators," US Federal Communications
  Commission (FCC) (22 Nov 2002 

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• Links to laws and policies of a number of
  countries can be found at http//www.itu.int/ITU-
  D/treg/related-links/links-docs/interconnectlegisl
  .html
• The UK policy at http//www.oftel.gov.uk/publicat
  ions/1999/competition/gii799.htm  

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• The OECD has materials on the interconnection
  policies of its members at http//webnet1.oecd.org
  /oecd/pages/home/displaygeneral/0,3380,EN-document
  -41-1-no-no-5001-0,FF.html  

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The End________________

• Thanks for your Attention