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1.4.1 What is regulation?

Regulation is the process by which governments seek to influence markets in order to achieve social and economic objectives. Regulatory measures can vary from direct intervention to letting market forces prevail; the approach depends on the nature of the regulated industry, the political landscape, and the associated legislative framework.

Given that market structures and institutional frameworks vary by country, diverse regulatory regimes have emerged over time. However, with the advent of globalised telecommunications and media markets, as well as international membership bodies such as the European Union and the World Trade Organisation (WTO), certain policies have been adopted by many countries, although this does not necessarily mean that they are implemented in exactly the same way.

The following section describes the types of regulatory authorities in the key comparator countries of this report, the different kinds of regulatory policy they pursue together with examples of their implementation, as well as the future challenges facing communications regulators around the world.

1.4.2 Regulatory authorities in the communications sector

The majority of regulatory authorities are, to varying degrees, independent organisations which are set up by, and accountable to, the government of the day. For example, the European Union’s Directives require that National Regulatory Authorities (NRAs) be independent of industry, audiovisual media service providers and national governments.

The WTO reference paper on telecommunications regulation stated that the regulator should be independent of any operators in the market, but it did not specify the extent to which the regulator should be independent of the policy-maker.

Figure 1.26 lists the communications sector regulatory authorities for the countries included in this report.

Figure 1.26: Communications sector regulators

1 ARCEP’s predecessor was ART, which was established in 1997
2 BNetzA ‘s predecessor was RegTP, which was established in 1998
3 Broadcasting is regulated at the state (Länder) level in Germany
4 Broadcasting is regulated through a subsidiary organisation called SARFT, which is accountable to and supervised by the MII
5 The BCI was established as the Independent Radio and Television Commission and changed its titled to the BCI in 2001
6 Broadcasting in Spain is currently regulated by the Ministry of Industry, Tourism and Commerce
7 The UKE replaced the Office of Telecommunications and Post Regulation, which was established in 2002

1.4.3 Spectrum management

The effective and efficient management of electromagnetic spectrum is one of the key regulatory challenges across the world. Traditionally, spectrum has been managed using a ‘command and control’ structure, where governments control spectrum, issue spectrum licences, and often mandate its use for a particular service (e.g. for broadcast TV, mobile telecoms etc.) or technology. This approach was deemed necessary as a means to address concerns such as interference, and to provide opportunities for international harmonisation; such an approach was possible as there was less demand for spectrum.

Over the past few years, however, spectrum management worldwide has started to shift towards a more market-oriented approach, with increased emphasis on technology and service neutrality, and towards free-market trading of spectrum among operators. This approach has been driven by increased demand for spectrum and by convergence, which means that services which were once delivered in a distinct band are now delivered over a range of platforms using different spectrum bands.

1.4.4 Telecommunications regulation

Telecommunications regulation has evolved in broadly two different ways. For most of the countries covered in this report, the telecommunications market developed like a public utility with an obligation to provide a universal service to all households and businesses; in other words the public is considered to have the right to access basic telecommunications services on reasonable terms. The universal service aspiration remains a basic principle of the telecommunications agreement of the WTO. In some countries however, notably the US, the telecommunications market developed more as a business model designed to meet consumer demand. A few American rural telecommunications companies are owned by local municipalities, but otherwise the country does not have a history of a state-owned network operator.

There is sometimes a tension between strengthening infrastructure through public intervention and encouraging a competitive market through liberalisation. Consequently, differences remain in the extent to which state-owned incumbents have been privatised. In the UK, 99.8% of British Telecommunications (BT) had been privatised by 1993, at just the time that the state telecommunications monopoly in China started undergoing structural reform. There are currently six main basic telecommunications service providers in China, but the state remains the majority owner in all of these, resulting in comparatively limited competition from the private sector.

A similar tension applies to whether direct intervention is appropriate in other areas of the telecommunications regulatory framework, such as local loop unbundling, interconnection and international roaming. For example the European Commission (EC) has proposed maximum international roaming wholesale charges in an effort to enable European citizens to make cheaper calls from abroad. This has been criticised by some groups as preventing operators from providing tailored tariffs for different consumer groups and introducing perverse incentives into mobile price bundles. By contrast, the Japanese communications authority has no international roaming regulation, and the charges are left to market forces.

1.4.5 Broadcasting regulation

As broadcasting has historically tended to be funded primarily by advertising or a licence fee, the economics and regulation of the sector are quite different to that of telecommunications. Although there are almost as many approaches to broadcasting regulation as there are countries, the US can loosely be seen as representing the commercial model, and Europe as representing the public service model. The European Commission asks all EU Member States to recognise the role public service broadcasters (PSBs) play in providing certain qualities and standards in programming. The main network providers in the US do not have PSB obligations, and hence the provision of news, educational and cultural programming is dictated by these channels’ commercial interests. In addition to competition regulation, the cultural, social and political influence attached to the broadcasting industry makes it a strong candidate for content regulation. Content regulation concerns the material which is broadcast – and typically addresses issues of accuracy, impartiality and plurality.

Differences in content regulation can be observed, for example, by comparing the US and France. In 1987 the US abolished the Fairness Doctrine, thereby releasing broadcasters from the obligation to report information without bias. By contrast French regulation requires the PSB to avoid conflict of interest that may undermine credibility, and to declare any collaboration with external organisations. In France there are also programming and film production quotas which serve to protect the national language and culture, (although all EU members are subject to quotas on the quantity of material commissioned from independent companies (i.e. not affiliated to a broadcaster) and the level of European-originated programming).

Content and competition regulation in the broadcasting sector are of course intertwined. PSBs are granted ‘free’ access to scarce spectrum on condition that they meet programming requirements which are more onerous than those for commercial broadcasters. Although the European Commission allows Member States to define their own public service remit, it does require that PSB financing does not distort trading conditions and competition. Other competition regulation in the broadcasting sector concerns cross-ownership and foreign investment.

China’s broadcasting sector is different in nature from those in the EU and the US. It is 100% state owned, and consequently the regulator (SARFT) controls all material transmitted. In Japan there are commercial broadcasters and controls have recently been tightened to ensure that they are not taken over by foreign interests.

1.4.6 Challenges facing communications regulators

Despite the international differences in the telecommunications and broadcasting markets, many of the challenges facing regulators in different countries are broadly similar. They include addressing questions posed by convergence, managing spectrum in the face of increasing demand, and the conditions under which next-generation networks should be provided. In addition, many countries have separate telecommunications and media regulators with distinct remits but this arrangement may be put under strain with the advent of converged media such as mobile TV, and the supply of bundled triple and quadruple play services: in Japan, for example, regulation remains in the hands of the relevant Ministry.

In a similar vein, spectrum management will require collaboration across the communications sector to ensure the optimal allocation of spectrum. Next-generation networks (NGNs) will be able to carry the full range of current communications services via data packets, and the nature and timing of NGN deployment will depend partially on the policy decisions regulators make about whether to intervene (and in what manner) in relation to these infrastructure upgrades.

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