Regulation and Deregulation in Telecommunications

Abstract

This article addresses the role and limits of regulation in telecommunications. The author puts forward seven hypotheses. First, the traditional arguments for regulation in the form of public enterprises (‘natural monopolies’) have become obsolete. Second, there is a continuing need for the special regulation of the incumbent. Third, the ultimate goal of this regulation should be to render itself superfluous. Fourth, it is essential that the regulatory agency be independent from political influence. Fifth, it is less important whether the regulatory power resides with a specialised agency or with a general competition agency. Sixth, procedural rules are necessary in order to support substantive regulation, for example, in connection with the need for ex ante regulation rather than ex post supervision, the asymmetry of the regulation focusing on the incumbent, the means to positively design market conditions, the need for speedy execution of the regulatory agency's decisions and the development of a principled rate regulation. Seventh, privatisation and the concurrent withdrawal of the state from the provision of telecommunications services in order to allow market forces to compete is the preferable solution.