- Email: [email protected]
Telecom reform principles, policies and regulatory practices
Telecommunications Policy, Vol. 21, No. 8, pp. 773--774, 1997
Published by ElsevierScienceLtd. Printed in Great Britain 0308-5961/97 $17.00+ 0.00
Pergamon
Book review Comprehensive review of telecom reform TELECOM REFORM PRINCIPLES, POLICIES AND REGULATORY PRACTICES edited by William H Melody
Den Private Ingeniofond, Technical University of Denmark, Lyngby, 1997, 557pp. The interdisciplinary nature of telecommunications policy stimulates and confounds. Practitioners and students alike must have a working knowledge of such diverse fields as engineering, economics, accounting, politics, labor relations, foreign affairs, regulation and sociology. Few publications attempt to address telecommunications policy reform from such a diverse perspective and with so many different templates for evaluation. Telecom Reform Principles, Policies and Regulatory Practices, edited by William H. Melody, undertakes such a task. In large part the editor and an impressive cast of contributors have succeeded in creating a quite helpful guidebook. The book attempts to satisfy a real, but daunting need in the literature: to provide "a comprehensive review and assessment of the unfolding telecom reform process. ''~ In satisfying such a requirement, Professor William Melody has assembled a world class faculty largely able to convert complex policy issues into language comprehensible to the lay person. The book divides into seven sections that examine the purpose for telecommunication regulation, technological innovations,
how governments should manage public resources like spectrum and rights of way, policy issues from an economic analytical template, what regulatory tools provide effective oversight, special issues affecting developing countries and future issues for intelligent networks and electronic commerce. Additionally, the book provides case studies examining telecommunication policy reforms occurring in Canada, the United Kingdom and the United States as well as an overview of different privitisation strategies worldwide. This book arrives at an important time in the development and reform of telecommunications laws, policies, regulations and perspectives. The United States Congress has completed a comprehensive overhaul of the Communications Act of 1934 where it codified expectations of facilities-based and resale competition in every sector of the industry. 2 The Telecommunications Act contemplates a "network of networks" with each operator interconnected and competing with all others. This legislation, and similar efforts in other nations, attempts to provide greater specificity of what obligations a telecommunications carrier has toward other carriers, particularly for local exchange carriers and the terms and conditions for interconnection and access to another carrier's facilities. Despite greater specificity, such legislation requires regulatory agencies to implement new policies, and in doing so such regulators must have the expertise, clout, and resources to help make
773
legislative visions a reality in the face of disgruntled and uncooperative stakeholders who want the regulatory process to tilt the competitive playing field to their advantage. ''3 After the national legislature completes authorship of a broadsweeping telecommunications policy mandate, regulatory agencies then must implement the legislation and make decisions that will substantially impact the degree to which the legislation actually results in enhanced consumer welfare. Regulators will have to determine whether a competitive playing field exists and the extent they can deregulate or "lighten" the scope and type of government oversight. To make accurate assessments the regulatory authority should have personnel able to apply a variety of analytical templates including economics which has become a sine qua non for legitimacy and comprehensiveness. No matter what the prospects for unfettered marketplace resource allocation and self-regulation, the telecommunications sector historically has experienced heavy handed, command and control regulation. Accordingly, the transition to something less intrusive will take time and will need effective management throughout the process. The need for a regulatory referee increases when legislation, like the Telecommunications Act conditions removal of barriers to market entry on a determination by regulators that incumbents have met satisfied competitive checklists designed to foster full and fair competition. 4 Regulators probably will have more duties at least for the transition to marketplace competition. 5 In the interim, they will have to determine which incremental deregulatory steps to take in the face of differing views of how competitive the market already has become. On one hand deregulatory advocates can point
Book review
to converging and evolving technologies and the ample economic literature to support accelerated deregulation. On the other hand, advocates favoring the status quo or slower deregulation typically can show that the incumbent, retains market power in some market segments, or at least retains bottleneck control over an essential facility like the local loop. Regulators, in developed and developing countries alike, will need more diverse and interdisciplinary skills to sort through the assertions of advocated to determine the truth. From the perspective of the authors in this book, legislative and technological innovations bolster the importance and diversify the role of regulators rather than render them unnecessary. Competition will constitute a factor in any new regulatory model, but it will be incumbent on regulators to ensure full and fair competition, i.e. a marketplace with real competitive options and not just one with a competition policy~' and a marketplace ideology. Telecom Relin'm offers a proper starting place for anyone interested in or involved with the changing regulatory climate in telecommunications. The book does not provide a simple check list, comprehensive blueprint or eye catching graphics for complex telecommunications issues. Likewise it cannot always provide crisp and concise answers to every question, particularly complex economic ones where the reading tends to bog down, or require a degree of sophistication not required elsewhere. However changes are good that this book will provide at least a starting foundation for one's consid-
eration of just about any topical issue in the evolution and reform of telecommunications laws, policies and regulations. Rob Frieden. Penn State University 201-D Carnegie Bldg University Park, PA 16802, USA
1Melody, William, H. (ed.) Telecom Reform: Principles, Policies and Regulatory Practices, Preface and Acknowledgements (Lyngby, Denmark: Den Private Ingeniofond, Technical University of Denmark 1997). 2Telecommunications Act of 1996, P.L. 104-104, 110 Stat. 56 codified at 47 U.S.C. §151 et seq. (1996). 3See, e.g. Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98, First Report and Order, 11 FCC Rcd. 15499, 15612 (1996) (Local Competition Order), Order on Reconsideration, CC Docket No. 96-98, 11 FCC Rcd. 13042 (1996). Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98, Second Report and Order, and Memorandum Opinion and Order, FCC 96-333 (rel. Aug. 8, 1996) (Second Interconnection Order); partially reversed and remanded sub nom. Iowa Utilities Bd v. FCC, File Nos. 96-3321 et al., slip op. (8th Cir. July 18, 1997). appeal docketed sun rlom.
4The Telecommunications Act eliminates the remaining two line of business restrictions imposed on the Regional Bell Operating Companies ("RBOCs") by the Modification of Final Judgement, viz., inter-Local Access and Transport Area ("LATA"), long distance telephone service and telecommunications equipment manufacturing after the companies meet a fourteen point competitive check list evidencing full and fair interconnection and facilities access by other carriers. Under the Telecommunications Act of 1996, a
774
"local access and transport area" (LATA) is "a contiguous geographic area (A) established before the date of enactment of the [1996 Act] by a [BOC] such that no exchange area includes points within more than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State, except as expressly permitted under the AT&T Consent Decree; or (B) established or modified by a [BOC] after such date of enactment and approved by the Commission." 47 U.S.C. § 153(25). LATAs were created as part of the Modification of Final Judgment's (MFJ) "plan of reorganization" under which the BOCs were divested from AT&T. United States v. Western Elec. Co., 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); United States v. Western Elec. Co., 569 F. Supp. 1057 (D.D.C. 1983) (Plan of Reorganization), aff'd sub nom. California v. United States, 464 U.S. 1013 (1983); see also United States v. Western Elec. Co., No. 82-0192 (D.D.C. Apr. 11, 1996) (vacating the MFJ). Pursuant to the MFJ, "all BOC territory in the continental United States [was] divided into LATAs, generally centering upon a city or other identifiable community of interest." United States v. Western Elec. Co., 569 F. Supp. 990, 993 (D.D.C. 1983) SProfessor Melody acknowledges this point in the introduction. He first notes "widespread recognition than an expanded role of the market in telecom can facilitate not only improved efficiency but also the achievement of other public policy objectives as well." Telecom Reform at 3. But a few paragraphs later he states that the "more experienced view now maturing is that competition is not a substitute for regulation, but a tool of regulation that can facilitate achievement of both economic and social policy objectives." Id. at 4. 6Professor Trebing defines effective competition as existing "where there are at least five or six comparable rival with no significant barriers to entry and no single firm excerses dominance (defined as controlling more than 40% of the market)." Telecom Reform at 31.
Published by ElsevierScienceLtd. Printed in Great Britain 0308-5961/97 $17.00+ 0.00
Pergamon
Book review Comprehensive review of telecom reform TELECOM REFORM PRINCIPLES, POLICIES AND REGULATORY PRACTICES edited by William H Melody
Den Private Ingeniofond, Technical University of Denmark, Lyngby, 1997, 557pp. The interdisciplinary nature of telecommunications policy stimulates and confounds. Practitioners and students alike must have a working knowledge of such diverse fields as engineering, economics, accounting, politics, labor relations, foreign affairs, regulation and sociology. Few publications attempt to address telecommunications policy reform from such a diverse perspective and with so many different templates for evaluation. Telecom Reform Principles, Policies and Regulatory Practices, edited by William H. Melody, undertakes such a task. In large part the editor and an impressive cast of contributors have succeeded in creating a quite helpful guidebook. The book attempts to satisfy a real, but daunting need in the literature: to provide "a comprehensive review and assessment of the unfolding telecom reform process. ''~ In satisfying such a requirement, Professor William Melody has assembled a world class faculty largely able to convert complex policy issues into language comprehensible to the lay person. The book divides into seven sections that examine the purpose for telecommunication regulation, technological innovations,
how governments should manage public resources like spectrum and rights of way, policy issues from an economic analytical template, what regulatory tools provide effective oversight, special issues affecting developing countries and future issues for intelligent networks and electronic commerce. Additionally, the book provides case studies examining telecommunication policy reforms occurring in Canada, the United Kingdom and the United States as well as an overview of different privitisation strategies worldwide. This book arrives at an important time in the development and reform of telecommunications laws, policies, regulations and perspectives. The United States Congress has completed a comprehensive overhaul of the Communications Act of 1934 where it codified expectations of facilities-based and resale competition in every sector of the industry. 2 The Telecommunications Act contemplates a "network of networks" with each operator interconnected and competing with all others. This legislation, and similar efforts in other nations, attempts to provide greater specificity of what obligations a telecommunications carrier has toward other carriers, particularly for local exchange carriers and the terms and conditions for interconnection and access to another carrier's facilities. Despite greater specificity, such legislation requires regulatory agencies to implement new policies, and in doing so such regulators must have the expertise, clout, and resources to help make
773
legislative visions a reality in the face of disgruntled and uncooperative stakeholders who want the regulatory process to tilt the competitive playing field to their advantage. ''3 After the national legislature completes authorship of a broadsweeping telecommunications policy mandate, regulatory agencies then must implement the legislation and make decisions that will substantially impact the degree to which the legislation actually results in enhanced consumer welfare. Regulators will have to determine whether a competitive playing field exists and the extent they can deregulate or "lighten" the scope and type of government oversight. To make accurate assessments the regulatory authority should have personnel able to apply a variety of analytical templates including economics which has become a sine qua non for legitimacy and comprehensiveness. No matter what the prospects for unfettered marketplace resource allocation and self-regulation, the telecommunications sector historically has experienced heavy handed, command and control regulation. Accordingly, the transition to something less intrusive will take time and will need effective management throughout the process. The need for a regulatory referee increases when legislation, like the Telecommunications Act conditions removal of barriers to market entry on a determination by regulators that incumbents have met satisfied competitive checklists designed to foster full and fair competition. 4 Regulators probably will have more duties at least for the transition to marketplace competition. 5 In the interim, they will have to determine which incremental deregulatory steps to take in the face of differing views of how competitive the market already has become. On one hand deregulatory advocates can point
Book review
to converging and evolving technologies and the ample economic literature to support accelerated deregulation. On the other hand, advocates favoring the status quo or slower deregulation typically can show that the incumbent, retains market power in some market segments, or at least retains bottleneck control over an essential facility like the local loop. Regulators, in developed and developing countries alike, will need more diverse and interdisciplinary skills to sort through the assertions of advocated to determine the truth. From the perspective of the authors in this book, legislative and technological innovations bolster the importance and diversify the role of regulators rather than render them unnecessary. Competition will constitute a factor in any new regulatory model, but it will be incumbent on regulators to ensure full and fair competition, i.e. a marketplace with real competitive options and not just one with a competition policy~' and a marketplace ideology. Telecom Relin'm offers a proper starting place for anyone interested in or involved with the changing regulatory climate in telecommunications. The book does not provide a simple check list, comprehensive blueprint or eye catching graphics for complex telecommunications issues. Likewise it cannot always provide crisp and concise answers to every question, particularly complex economic ones where the reading tends to bog down, or require a degree of sophistication not required elsewhere. However changes are good that this book will provide at least a starting foundation for one's consid-
eration of just about any topical issue in the evolution and reform of telecommunications laws, policies and regulations. Rob Frieden. Penn State University 201-D Carnegie Bldg University Park, PA 16802, USA
1Melody, William, H. (ed.) Telecom Reform: Principles, Policies and Regulatory Practices, Preface and Acknowledgements (Lyngby, Denmark: Den Private Ingeniofond, Technical University of Denmark 1997). 2Telecommunications Act of 1996, P.L. 104-104, 110 Stat. 56 codified at 47 U.S.C. §151 et seq. (1996). 3See, e.g. Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98, First Report and Order, 11 FCC Rcd. 15499, 15612 (1996) (Local Competition Order), Order on Reconsideration, CC Docket No. 96-98, 11 FCC Rcd. 13042 (1996). Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98, Second Report and Order, and Memorandum Opinion and Order, FCC 96-333 (rel. Aug. 8, 1996) (Second Interconnection Order); partially reversed and remanded sub nom. Iowa Utilities Bd v. FCC, File Nos. 96-3321 et al., slip op. (8th Cir. July 18, 1997). appeal docketed sun rlom.
4The Telecommunications Act eliminates the remaining two line of business restrictions imposed on the Regional Bell Operating Companies ("RBOCs") by the Modification of Final Judgement, viz., inter-Local Access and Transport Area ("LATA"), long distance telephone service and telecommunications equipment manufacturing after the companies meet a fourteen point competitive check list evidencing full and fair interconnection and facilities access by other carriers. Under the Telecommunications Act of 1996, a
774
"local access and transport area" (LATA) is "a contiguous geographic area (A) established before the date of enactment of the [1996 Act] by a [BOC] such that no exchange area includes points within more than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State, except as expressly permitted under the AT&T Consent Decree; or (B) established or modified by a [BOC] after such date of enactment and approved by the Commission." 47 U.S.C. § 153(25). LATAs were created as part of the Modification of Final Judgment's (MFJ) "plan of reorganization" under which the BOCs were divested from AT&T. United States v. Western Elec. Co., 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); United States v. Western Elec. Co., 569 F. Supp. 1057 (D.D.C. 1983) (Plan of Reorganization), aff'd sub nom. California v. United States, 464 U.S. 1013 (1983); see also United States v. Western Elec. Co., No. 82-0192 (D.D.C. Apr. 11, 1996) (vacating the MFJ). Pursuant to the MFJ, "all BOC territory in the continental United States [was] divided into LATAs, generally centering upon a city or other identifiable community of interest." United States v. Western Elec. Co., 569 F. Supp. 990, 993 (D.D.C. 1983) SProfessor Melody acknowledges this point in the introduction. He first notes "widespread recognition than an expanded role of the market in telecom can facilitate not only improved efficiency but also the achievement of other public policy objectives as well." Telecom Reform at 3. But a few paragraphs later he states that the "more experienced view now maturing is that competition is not a substitute for regulation, but a tool of regulation that can facilitate achievement of both economic and social policy objectives." Id. at 4. 6Professor Trebing defines effective competition as existing "where there are at least five or six comparable rival with no significant barriers to entry and no single firm excerses dominance (defined as controlling more than 40% of the market)." Telecom Reform at 31.