The Economics of Self-regulation in Telecommunications under Sunset Legislation

1
The Economics of Self-regulation in
Telecommunications under Sunset Legislation

• Andreas Freytag and Klaus Winkler,
• University of Jena, Germany
• ITS Berlin, 06.09.04

2
Overview

• Background and problem
• Sunset Legislation
• Self-regulation - an efficient approach combined
  with Sunset-Legislation?
• Conclusions

3
Background and problem

• Overregulation is seen as major obstacle for the
  development of markets
• However, radical changes in regulatory regimes
  cause problems
• A combination of different regulatory instruments
  could be an efficient solution for the market
• The search is on for an efficient regulatory tool

4
Sunset Legislation (I)

• The changing benefits of regulation over time
• When is how much regulation necessary?
• Problem of Capture
• Ex ante clause could be helpful
• What is Sunset Legislation?
• Control mechanism for regulation
• Finding the right indicators is difficult

5
Sunset Legislation (II)

• Some experience with Sunset Legislation
• No large measurable effects visible
• At least expansion of regulatory regimes is
  hampered
• Pros and cons of Sunset Legislation in
  telecommunications regulation
• Pros Faster, chance for trials, could discipline
  the regulator, keeps incumbent from making use of
  market power, rationalizes the legislative
  process
• Cons No indicator available, different rules for
  different market segments necessary, even more
  bureaucratic efforts

6
Sunset Legislation (III)

• Normative conclusions basic requirements of
  sunset legislation in telecommunication
• Contestability as the goal
• Assessment of need for regulation and regulatory
  body should be made simultaneously
• Find categories that describe the different
  speeds of deregulation of different segments
• Members of sunset committee must be independent
  and
• should also be public
• Sunset Legislation needs support to be effective

7
Self-regulation an efficient approach
combined with Sunset-legislation? (I)

• Dynamics of regulation different regulatory and
  de-regulatory regimes for different time phases
• Self-regulation does not imply no regulatory
  backing
• Different services might need different
  regulatory processes

8
Self-regulation an efficient approach combined
with Sunset-legislation? (II)

• Cases The mobile network-operators, AKNN and
  Billing
• In areas with no or less regulation
  self-regulatory regimes are common, such as in
  the mobile sector
• Association agreements are common especially for
  technical issues
• A combination of Sunset Legislation and
  Self-regulation is the new billing contract of
  Deutsche Telekom

9
Self-regulation an efficient approach combined
with Sunset-legislation? (III)

• Conditions for successful Self-regulation under
  sunset legislation
• Framework needs to be made transparent
• Necessary to establish a common goal for all
  actors
• Strategic incentives of the actors must be
  undermined (possibly by the regulator)
• Sunset Legislation together with Self-regulation
  proves to be effective if certain, but realistic
  conditions are met

10
Conclusions

• Self-regulation is not toothless if combined with
  Sunset Legislation
• Different market phases need flexible tools
• Actors are more likely to reveal what they can do
  for the market with Self-regulation
• Especially in a fast market such as
  Telecommunications the possible gains of Sunset
  Legislation together with Self-regulation are
  worth the effort

11
The Economics of Self-regulation in
Telecommunications under Sunset Legislation
DISCUSSION

• Andreas Freytag and Klaus Winkler,
• University of Jena, Germany
• ITS Berlin, 06.09.04