Reposition: Optimizing the Role of Regulator in Network Infrastructure

Just like in any industry, to promote the transparency of information for con-sumer is a important element of competition and efficiency. The most important function of the telecommunications regulator, which is commonplace, is to provide consumers with information about the characteristics of telecommunications prod-ucts and services, especially pricing. Because of the complexity of the pricing sys-tem, it is possible for the competitors to weaken price competition.

As a trusted information publisher, the regulator should be capable of inform-ing the customers about the real price structure of the different packages in

Hausman, Jerry A., and William E. Taylor. "Telecommunication in the US: from regulation to competition

141

(almost)." Review of Industrial Organization 42.2 (2013): 203-230. p.219.

Ibid.

142

Ibid

143

munication market. It will be quite easy to set up the required infrastructure to satisfy the information needs of customers and respond to their demand for comparative in-formation on alternatives . Regulations are usually considered that the consumers ¹⁴⁴ can independently compare prices and other elements, such as security, flexibility, reliability, availability, and consumer-friendly of telecom products and services.

It is the responsibility of the regulator to make such information in an industry utility such as telecommunications be published. Administrator should foster con-sumers the ability to automatically and accurately screening information. For exam-ple, in the UK and Germany reputation management seems to be a goal of communi-cation in addition to providing information . The regulators in Germany aim at in¹⁴⁵ -forming the decisions and positions of the public industry. Primarily, communication is used not only for information but also for building regulators’ reputation . ¹⁴⁶

2.2.2. As protector of network infrastructure

On one hand, regulator is the price maker in local wireline access network. In telecommunications, traditional theory holds that that the bottleneck is the local loop, and the potentially competitive segment is long distance. The local loop may be probably not anymore an essential facility because of the development of new tech-nologies of wireless. However, the local wireline network still remains the feature of natural monopoly. Although the alternative technologies have conquered the other fields in telecommunications network, there is no rationality to duplicate the wireline access network, which directly connects with terminal business clients or consumers.

The possible methods that can be taken in this market, is to open all the access to network facilities under the attainable technologies at appropriate prices and condi-tions. Therefore the price for accessing essential facilities is regulated, to ensure that the network is open to all the players without discrimination. What’s more, the

Boyer, Marcel. "The measure and regulation of competition in telecommunications markets." (2005). p.28.

144

Puppis, M., Maggetti, M., Gilardi, F., Biela, J., & Papadopoulos, Y. (2014). The Political Communication of

145

Independent Regulatory Agencies. Swiss Political Science Review, 20(3), 388-412. p. 397.

Ibid.

146

termination of the price is crucial. Excessive pricing will expel the potential entrants to seek substitution, which will reduce the efficiency of the whole society. Low Pric-ing, however, can not give the incumbent adequate incentives to promote the network and to make innovation.

On the other hand, the telecommunications regulator has to be the booster of efficiency in network infrastructure investments. First of all, investments in network facilities are sometimes enormous along with high risk. Because of the significant economies of scale, the investment is hard to organize. And once failed, the cost will difficult to Secondly, because of the development pace of network infrastructures are out of step, unified deployment and coordination of regulator is essential. Thirdly, the variability of demand and the irreversibility of resources in network construction re-quire new evaluation and insurance methods, for which network investors are not fully qualified.

Therefore, an appropriate assistance of the regulator is necessary. In such situa-tion, the regulator has to guarantee that the access to essential facilities is attainable, without discrimination and at appropriate conditions and prices. What’s more, it has to ensure the reciprocation of the incumbent, in order to encourage the construction of network infrastructures.

2.2.3. As safeguard of competitive market

Standard economic theory holds that the profits of natural monopoly ascend speedily when the market grows, because of the linear growth of revenues with the increasing number of consumers, while the costs arise very slowly, due to the charac-teristic of economies of scale, economies of scope and network economies . In a ¹⁴⁷ traditional industry, such profitability will attract more participators. However, in a natural monopoly industry, what is important to the potential competitors is not the

Depoorter, Ben WF. “Regulation of natural monopoly.” Encyclopedia of Law and Economics, Part V-Regula

147

-tion of contracts (1999). pp.498-499.

present price and profit that the incumbent takes, but the possible price and profit will be, when they join the market and become rivals to the incumbent . ¹⁴⁸

For the reason that, a competitive market requires not only a more efficient ap-proach to regulate monopoly pricing or predatory pricing, but also a more realistic approach to foster a level-playing field in short-term competition, while at the same time to maintain a high level of incentives for long-term competition . Such ap¹⁴⁹ -proaches depend on carrying out the unregulated pricing policy to all telecommuni-cations players, which has to be supervised and enforced by the regulator. In “The Digital Single Market strategy”, to create the proper circumstances and a level-play-ing field has been seen as one of three pillars to the further development of EU telecommunications sectors . ¹⁵⁰

Regardless of deregulation and re-regulation, policymakers in formulating regulation should bear the following principle in mind, and regulations should be adjusted to make sure that it applies only if competitive options do not exist or are not efficient enough in the mar-ket.

The policy should be accomplished by the following mechanism. If there are sufficient competitive alternatives, consumers can turn to other services providers instead of the one who applied rejection. If there are sufficient competitive alternatives, the real problem is whether the market is allowed to enter. If the answer is affirmative, it should be traded off that the cost of short-term static efficiency and benefit of waiting for entry as the long-term dy-namic efficiency. When the entry is impossible, the objective of trying to promote entry should be abandoned and the secondary goal of promoting competition in complementary services which are possible should be taken through access regulation. In summary, the regu-lation does not itself become the reason for the suppression of competition . ¹⁵¹

Boyer, Marcel. "The measure and regulation of competition in telecommunications markets." (2005). p.21.

148

Gentzoglanis, Anastassios, and Anders Henten, eds. Regulation and the evolution of the global telecommuni

149

-cations industry. Edward Elgar Publishing, 2010. p.122.

A Digital Single Market Strategy for Europe, COM(2015) 192 final, p. 3.

150

Yoo, Christopher S. "Deregulation vs. Reregulation of Telecommunications: A Clash of Regulatory Para

151

-digms." Journal of Corporation Law 36 (2011): 847. p. 867.