Role of regulation and policy in promoting national broadband development


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Mahmoud Zaghalil, Director of Regulatory Affairs at Zain in Jordan discusses how governments and policymakers should promote and incentivize broadband development and rollout

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Role of regulation and policy in promoting national broadband development

  1. 1. Role of Regulation and Policy in Promoting National Broadband Development IIC – Telecommunications and Media Forum Bahrain – May 2009 A Wonderful World
  2. 2. Widespread Broadband: Alternatives • Limited landline coverage in many MENA countries means spectrum based solutions (3G, WiMAX) must be used to promote widespread broadband coverage. Both, regulations and public policy have a great role to play here. 2
  3. 3. Broadband: Feasibility of Investment • Global history of telecoms shows that mobile communications has been one of the most successful new technologies of all time, compared to fixed telecommunications, mobile constitutes no economic bottleneck and enjoys easier entry. Quote rapid growth in mobile penetration in Jordan and elsewhere. Mobile has brought communications to millions, perhaps billions of people who would never have had a landline. • The success of mobile has been built on totally independent and infrastructure-based competing firms who do not need to rely on each other to provide service (except for termination). Compare this with fixed lines where the incumbent remains in a dominant position almost everywhere. Government release spectrum and can then stay out of the picture and let competition and market deliver consumer benefits. No different from any normal market. 3
  4. 4. Wireless Broadband: Socio-Economic long term gains Vs short term treasury gains What kind of broadband technologies for the future – fixed or wireless or both? What kinds of business models offer the best chance of success? • The same mobile success can be repeated with wireless broadband, but this requires that governments follow a policy for spectrum release aiming at promoting broadband, NOT maximising revenue for the treasury. Our recipe is: spectrum should be released in sufficient quantities at a reasonable price to allow multiple players to provide wireless broadband in a sustainable way. Experience in other countries suggests that 3 – 4 competitors is the optimum amount. Firms should then be able to compete with each other free from regulator interference and free from any expectation that regulators will expropriate future profits. Regulators should only step in when there is real evidence of market failure. 4
  5. 5. regulatory principles to ensure effective regulation leading towards self- regulated industry • Only regulate where there is clear and objective evidence of a lack of competition in the market where that lack of competition is itself distorting investment incentives and harming consumers; • Regulation should be aimed at the deepest level of the network, where economic bottlenecks are unlikely to be removed in the medium term. • Where regulation is found to be necessary, the TRC should make a commitment that regulations will be consistent over time so that firms have the confidence to invest. This does not however preclude regulatory reviews to ensure they continue to be best suited to meet the original objectives of a properly functioning market. • Co-ordinate the regulatory cycle with the investment cycle. This means that the TRC should acknowledge that some assets, for example networks, have longer life spans than others, for example services. Remedies put in place to correct market distortions in long asset life markets should themselves have a longer life. • The TRC should avoid the use of regulatory tools which might artificially limit firms’ ability to earn a reasonable return. A clear example is the use of the Weighted Average Cost of Capital (WACC) which might limit the ability of a firm to earn profits, but not limit its potential losses. 5
  6. 6. Government role and National Strategy elements: - Consistent and transparent ICT policy that is fully aligned with other government Policies (Treasury, Tax, Investment, Audiovisual…etc.). - Leadership in setting forth sustainable long-term goals for Economic & social development as well as growth. - Incentivise Investments (Tax exemption, up front entry fees, review schedule of spectrum tariffs, review Government revenue share…etc.) - Government Funding to respond to Market Failure due to lack of competition (economic barriers) or to mitigate Economic downturn. - Implementation of Technology Neutrality (although it’s been adopted since 2003)
  7. 7. Thank you A Wonderful World