Telecommunications Regulation

Provides regulators with a practical guide to methods used to regulate telecommunications, focusing on best practices in licensing, interconnection, pricing and universal service obligations. (Also in Arabic and Spanish).

Section Title	English	Arabic	Spanish
1. Overview of telecommunications regulation	497KB, PDF	3,222KB, PDF	627KB, PDF
2. Licensing telecommunications services	528KB, PDF	547KB, PDF	435KB, PDF
3. Interconnection	730KB, PDF	645KB, PDF	584KB, PDF
4. Price regulation	636KB, PDF	754KB, PDF	607KB, PDF
5. Competition policy	627KB, PDF	658KB, PDF	553KB, PDF
6. Universal services	748KB, PDF	851KB, PDF	613KB, PDF
7. Appendices	1,035KB, PDF	1,115KB, PDF	653KB, PDF

1. Overview of telecommunications regulation

Regulatory objectives	The successful transformation of monopolistic telecommunications markets into competitive ones requires regulatory intervention. Over time, the need for regulatory intervention should diminish.
Regulatory organizations	The role and options of a regulatory authority are described, including a discussion of the main features of regulatory (independence, funding) and the advantages and disadvantages of multi-sector regulators. Various international telecoms institutions, such as the International Telecommunications Union (ITU), play an important role in telecommunications regulation and useful references are provided.
The regulatory process	Describes the challenges for the regulatory decision-making process, and suggests approaches to help regulators achieve the hallmarks of good decision-making, including: transparency, objectivity, professionalism, efficiency and independence.
Principles for effective regulation	The main principles include: to introduce competition and to minimize regulatory intervention after competition is established.

2. Licensing telecommunications services

Introduction	A telecommunications license authorizes an entity to provide telecommunications services or operate telecommunications facilities, and generally defines the terms and conditions of such authorization. The section discusses WTO and EU licensing rules and objectives.
Types of licensing regimes	This section describes three approaches to licensing: individual operator licenses; general authorizations; and no licensing requirements (i.e., open entry).
Licensing process	Five common types of licensing processes are discussed, including: licensing incumbent operators, licensing new entrants, general authorizations, spectrum licenses, and spectrum auctions, lotteries and comparative evaluation processes. Good practices will help ensure the success of a licensing process.
Licensing practices	A roadmap for good practice: transparency, public consultation, license fees, balancing of certainty and flexibility, and distinguishing licensing from procurement. The section also addresses the requirements of special arrangements such as concessions and build-operate-transfer arrangements(BOTs), the need to define service areas, and qualification and selection criteria.
Contents of licenses	Provides examples of contents of licenses depending on local

3. Interconnection

Interconnection principles	With the liberalization of telecommunications markets, effective interconnection arrangements (connection with neighboring operators) have become key to the operations of an increasingly wide range of services (long distance, mobile, etc.). This section stresses the importance of interconnection, and describes the main interconnection principles.
Interconnection procedures	This section discusses interconnection arrangements, the role of the regulator, dispute resolution, and "ex ante" regulatory guidance.
Financial terms of interconnection	There are several approaches to structure interconnection charges, and these are presented here. One section focuses specifically on internet and mobile interconnection.
Technical and operational conditions	The technical and operational conditions of interconnection include: the provision and treatment of information, unbundling, sharing of infrastructure and collocation, network access, and quality of service.

4. Price regulation

Introduction	This section refers to the objectives of price regulation, i.e., financial sustainability, efficiency, and equity objectives, and provides an introduction to rate balancing, the adjustment of price levels for different services to more closely reflect the costs of providing each service.
Approaches to price regulation	There are various approaches to price regulation, including discretionary price setting, rate-of-return regulation, and different types of ROR-incentive regulation. The analysis considers how well the three approaches achieve the broad objectives of price regulation.
Price-cap regulation	This section introduces the basic formula for price cap regulation and how to calculate price-cap variables, such as inflation and the productivity factor. It discusses the inflation factor, the productivity factor, capped and non-capped services, service baskets, individual service pricing restrictions, duration and review of price cap plans.
Price-cap variations	Price-cap variations are discussed, including the inclusion of a factor that reflects an "exogenous" variable (the exogenous factor), a factor that reflects the standard of quality of services, or that ensures different treatment for new services (to promote them).
Appendices:
OECD rate balancing	This appendix provides and overview of the OECD tariff comparison methodology and recent analysis of rate rebalancing trends in the OECD member countries.
Welfare benefits of rate balancing	This appendix provides an overview of the potential benefits to public welfare that may be expected from rate rebalancing.

5. Competition policy

General principles	Competition serves the public interest by inducing suppliers to become more efficient and to offer a greater choice of products and services at lower price. The main objectives of government intervention are to respond to market failures, to limit abuse of market power and to improve economic efficiency.
Basic concepts of competition policy	This section discusses the concept of market power and its effect, and potential barriers to entry.
Remedies for anti-competitive conduct	There are various forms of anti-competitive conduct (abuse of dominance) but equally there are various possible remedies. The section addresses: refusal to supply essential facilities, cross-subsidization, vertical price squeezing, predatory pricing, misuse of information and other restrictive arrangements. Each sub section sets out a specific remedy.
Mergers, acquisitions and other corporate combinations	The basic rational for merger control is that it is better to prevent firms from gaining excessive market power than to attempt to regulate abuses of their market power once such power arises. This section discusses merger analysis and merger remedies.

6. Universal services

Universal service and universal access	The principle objective of universality is to expand and maintain availability of affordable telecommunications services to the public.
Defining universality: what to fund?	Different countries use different approaches. This section looks at the funding of universal service in industrialized as well as developing and transitional economies.
Implementing universality: how to fund it?	This section outlines the criteria for selecting universality mechanisms. It then looks at mechanisms used to implement universality policies, including service obligations, cross subsidies, access deficit charges (ADCs) and universality funds and compares the various options.
Universality funds	Universality funds are designed to meet universality goals by subsidizing specific initiatives to extend or maintain services or access. This section looks at sources of funds, and at criteria for determining the amount of subsidy.
Appendix: Universality case studies	Universality case studies: Chile, Peru, European Commission, Spain, CEE (Central and Eastern Europe) and CIS (Commonwealth of Independent States) countries, Canada, US, South Africa, Australia, Asia.

7. Appendices

WTO regulation reference paper	The WTO regulation reference paper is part of the Agreement on Basic Telecommunications, which came into effect in 1998. In the whole handbook, this reference paper is considered as the basic international telecommunications act.
The economics of telecommunications prices and costs	This appendix sets out in graphic form the distinctions between various concepts of costs, everything from LRIC and TSLRIC/LRAIC to FDC/FAC and Stand-alone costs, and then illustrates the practical application by a regulator.

Permanent URL for this page: http://go.worldbank.org/17TUCEMO30

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Telecommunications Regulation