(Executive Development Program) Lesotho Telecommunications Authority July 25-29

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(Executive Development Program)Lesotho
Telecommunications AuthorityJuly 25-29
Fair Trade Transition to Competition

NetTel_at_Africa
University of Zambia
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• prepared presented
• by
• David Mukosa

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Sessions 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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Sessions Learning Outcomes

• Upon successful completion of this executive
  development 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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Fair Trade and Transition to Competition
Sessions Summary

• Defining Fair Trade
• Stages of 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

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Fair Trade and Transition to Competition Session
Summary /ctd

• Regulatory Intervention
• Enforcement in Competitive Markets
• Appeals during transition time
• Group Activity

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Defining Fair Trade

• Partnership based on

Fair Trade
transparency
dialogue
transparency
fair play
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Stages of Transition to Competition
Government
Remove barriers that protect existing Monopoly
provider from competition by New entrants
Monopoly
Competition
Policy Makers
Take affirmative steps to promote competition in
sector of market previously void of competition
Legal Reforms
Introduce competitive safeguards to Prevent
exercise of market powers by incumbent during
transition, e.g. conditions governing
interconnection
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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Market Structures

• 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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Advantages and Disadvantages of Different Market
Structures
Monopoly Duopoly Oligopoly Perfect Competition
Advantage Control of market Government access to revenues Balancing of interests Customer choice due to multiple providers Technological innovation encouraged
Disadvantage Strong regulator needed to control pricing and service terms Regulator must monitor interconnection to insure fairness Less stable markets Less direct policy control Lack of social objectives to society
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Regulatory Challenges
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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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Benefits of Competition

• Forces firms to perform efficiently
• Gives choice to consumers
• Instills logical balance of goods and service on
  the market
• Encourages innovation
• Reduces prices and increases quality of service
  commensurate with price

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Zambias example of Technology Change due to
Competition
AMPS
1995
GSM
1997
GSM
1998
GSM
2003
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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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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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Enforcement in Competitive Markets

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

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Food for Thought

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

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Appeals during transition time

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

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Group Activity
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• - Company Y applied for a license and was given
  10MHz of operational bandwidth.
• Company Z applied for license and requested a
  10MHz bandwidth, which was given.
• Later, company Q made an application for a mobile
  license, the regulatory authority realized there
  was a shortage of bandwidth and that company Y
  and Z were only using 60 of their allocated
  bandwidth each. Company Z has however refused to
  relinquish their unused bandwidth. What should
  the regulatory agency do and why?

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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)
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• 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