The Necessity of Sector Specific Regulation in Electronic Communications Law

• Author: Antonios G. Broumas
• Position: broumasantonis@yahoo.com
• Pages: 176-184

Page 176

1. Prologue

The telecommunications industry plays a prominent role in today's economies and societies, as it provides the means for the dissemination of information¹, which can be regarded as the most important asset of our time. During the last 25 years, great technological and structural changes have revolutionised this crucial sector of the economy. The phenomenon of information and communication technologies convergence and the rapid liberalisation of the sector have launched an unprecedented change in business and law.

In search for the ideal regulatory environment to accommodate progress and innovation in the now converging e-communications sector ² policy makers have made the strategic choice of deregulation, in an effort to unleash the dynamics of the market. The model, which evolved in practice as the most appropriate for the regulation of the sector, is based on the combination of sector specific regulation and competition law, put into effect by entities independent of states or market players³. The former field of law intervenes ex ante while the latter ex post facto. As the market is evolving towards a state of effective competition, concerns are raised over whether sector-specific regulation is still necessary and whether general competition law could guarantee effective regulation of its own accord.

This paper questions the capacity of generic competition law to efficiently regulate the electronic communications sector and concludes instead in favour of the continuance of sector-specific regulation, oriented towards competition law principles and independent regulatory agencies that will adequately correspond to the phenomenon of convergence. Section one examines the technological and structural changes that have impacted upon the ICT industry worldwide. An analysis follows on the internationally prevalent electronic communications regulatory model with focus on the European Union case. Finally, arguments are offered for and against the abolishment of sector-specific regulation and a proposition is made in favour of its conditional sustenance in future electronic communications.

2. Changes in the Electronic Communications Sector

The continuing reliance of e-communications regulation on a three-pillared system of sector-specific laws and generic competition law administered by an independent regulatory body is the outcome of an evolutionary process in the industry. In particular, due to the bounding progress of information and communication technologies, the defining lines between neighbouring sectors are gradually disintegrating and the traditional telecommunications industry is tending towards convergence with the broadcasting, information technology and content industries. Concomitantly, the telecommunications sector is in the process of extensive liberalisation, moving from a state of monopoly to a state of effective competition. All these structural changes observed in the Page 177 market inevitably have a great effect upon law and regulation, pushing towards less and yet still effective legal intervention.

2. 1 The Phenomenon of Convergence

In order to adequately examine the phenomenon of convergence and its additional impact upon regulation, it is first essential that its nature be adequately analysed. The term 'convergence' describes the merging of different networks into a unified, open, global network of networks ⁴, with the capacity to convey data regardless of its kind. This convergence is primarily technological, implying the unification of network platforms by exploiting the merits of packet-based technology⁵, and the homogenisation of all kinds of information, either voice, video or data, by the use of digital technology. But the technological convergence has a further impact on the market, where what were previously clearly delineated sectors of the economy, i.e. the telecommunications, broadcasting, information technology and content industries, are now coming together, forcing businesses to change their models in an attempt to fully exploit the potential of the new trends. The phenomenon also leads to a merging of services that were once deemed distinct from one another but can now be delivered by the same infrastructures, as well as a merging of products, thus having a profound influence on the everyday life of consumers. In summation, it may be said that the phenomenon of convergence, issuing from technology, has an extensive impact on the economy and society as a whole, an impact that has not left policies and legal frameworks untouched.

2. 2 Convergence & the Three-Pillared Regulatory system

Convergence poses serious challenges for policy-makers. A balance must be struck between the need to establish fair competition and the aim to encourage innovation. The ideal regulatory framework ought to be on the one hand technology neutral, in order to facilitate the provision of different services via different platforms. On the other hand, it should be flexible enough to accommodate new trends in the market. In addition, public intervention should be limited and the market should be left alone to fully exploit the potential of technological progress spurred on by the merits of competition. Such technology neutrality, legal flexibility and market competitiveness can only be achieved through a deregulatory approach based on competition law principles, applied through the combination of generic competition law and sector-specific regulation.

2. 3 The Process of Liberalisation

Along with the phenomenon of convergence, another kind of sweeping reform has significantly altered the market structure of the telecommunications industry to a worldwide extent. In the 1980s states began to recognise the importance of telecommunications for economic growth and the need for liberalisation in order to achieve progress. Since then, the shift from state or private monopolies towards market competition has seemingly revolutionised the e-communications market and laid the basis for a fully competitive business environment. In the first phase of the reform, countries privatised their national operators, state or private owned. Secondly, new services, such as mobile telephone technology, which were not controlled by the incumbent operators, were introduced into the market. At the last phase, the state of exclusivity was being phased out in the direction of full competition. Legal intervention was deemed essential in the new environment to attain and later sustain effective competition.

2. 4 Liberalisation and the Three-Pillared Regulatory System

The process of liberalisation in electronic communications gave birth to a threefold regulatory system of sector -specific regulation combined with generic competition law and supervised by an independent regulatory authority. This system is considered to be the most appropriate to guarantee effective competition in the liberalised e-communications market. It combines ex ante sector-specific regulation of the market and ex post regulation by competition law, where ex ante regulation fails or lacks the ability to prevent anti-competitive practices. In the context of liberalisation, an analogy exists between regulatory intervention and market maturity. As the process of liberalisation evolves towards a fully competitive e-communications market, it has been claimed that the need for regulation will be more limited, thus relying solely on competition law. The nature of this regulatory model and its application in practice will reveal whether or not the aforementioned position is accurate, and whether such Page 178 regulation is merely a contemporary convention during a transitory period or a paradigm serving far deeper needs in the e-communications sector.

3. The Three-Pillared Regulatory Model

3. 1 Introduction

In most states nowadays, the e-communications sector is liberalised or heading towards liberalisation. The effect of convergence enhances competition in the various layers of the sector and creates a highly innovative, fluid and unpredictable market. The model employed to address the regulation of such a complex market has three pillars. These are sector-specific regulation and generic competition law, which complement each other and provide a robust legal framework, and in the centre of the regulatory model, an independent regulatory authority with the task of applying the legal framework and supervising the sector.

3.1. 1 The Underlying Hypotheses

The aforementioned model of regulation is based on certain underlying hypotheses, which define its nature. The first hypothesis is the strategic policy choice of competition as the most appropriate mechanism...