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Transcript of 1 WTO Telecommunications Reference Paper Prof Franco Papandrea Director Communication and Media...
1
WTO Telecommunications Reference Paper
Prof Franco Papandrea
Director
Communication and Media Policy Institute
University of Canberra
Email: [email protected]
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GATS: TelecommunicationsRequirements
All WTO member countries are bound by GATS obligations and disciplines such as:
Non-discriminatory market access provided to operators from member countries (Most Favoured Nation Treatment)
Licensing must not be used as a barrier to tradeAll requirements for entry of foreign operators in
telecommunications market must be published (Telecommunications Annex to GATS)
Comply with additional commitments made as part of WTO Agreement on Basic Telecommunications (ABT)
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WTO Reference PaperAnnex to commitments of most WTO members under Agreement on Basic Telecommunications
Developed as part of the GATS negotiations on basic telecommunication services
Applies to basic telecom services (not value added) Establishes legally binding principles for government regulation of ‘major
suppliers’ A major supplier is one that can affect the terms of participation in the market
(price and supply) because: it has control over ‘essential facilities’ It possess substantial market power
Essential facilities are elements of a public network necessary for the delivery of a service:
• that are exclusively provided by one operator; and• whose substitution is not economically or technically feasible
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Purpose of Reference Paper Provides for special treatment of basic telecommunications
services within GATS trade regime Allows domestic regulation that may constrain free trade for
social policy reasons But sets limits to the extent and form of the regulation
Ensures that permissible regulation is Transparent Objective; and Non-discriminatory
Restrain major suppliers from anti-competitive use of their market power
Promote outcomes likely to prevail in a fully competitive market
Ensure equity and transparency in regulatory policy and procedures
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Coverage
The WTO Telecommunications Reference Paper covers six areas:
1. Safeguards to Prevent Anti-competitive Practices by Major Suppliers
2. Interconnection with Major Suppliers
3. Universal Service
4. Transparency in Licensing
5. Independent Regulator
6. Allocation and Use of Scarce Resources
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Anti-Competitive Safeguards Major suppliers have market power that can be used to
frustrate competition Ample opportunity to abuse market power particularly in the
supply of services to other operators that compete with them General approach is to ensure fair competition in the
supply of services WTO requires appropriate regulation to prevent major
suppliers from engaging in or continuing anti-competitive practices, such as
Engaging in anti-competitive cross-subsidization; Using information obtained from competitors with anti-
competitive results; Withholding timely technical information about essential facilities
and commercially relevant information needed by competitors to supply services (in competition with major supplier).
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Interconnection Interconnection is extremely important to the competitive
supply of telecommunication services An established operator can frustrate competition in a
variety of ways including: Charging excessive rates for interconnection Unnecessarily delay provision of equipment and facilities needed
for interconnection Misuse of customer and competitive information Impose limits on the number of points of interconnection Impose unnecessarily stringent technical standards for
interconnection Supply a lower grade of network services to interconnecting
parties
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Regulation of Interconnection
Effective and efficient interconnection arrangements backed by regulator needed
WTO requires regulation to establish the right of competitors to interconnect with major suppliers
The rates and procedures for interconnection must be enforceable
The rates and procedures for interconnection must be available publicly
Public procedures must be established for the resolution of interconnection disputes
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Reasons for Public Procedures Publicly available principles and procedures for
interconnection are required because: Established suppliers have little or no incentive to facilitate
competitors connections to their facilities Publication of principles and procedures will facilitate
negotiations and reduce disputes Avoids special or anti-competitive deals not available to all
operators Major suppliers should be required to either publish their
interconnection agreements or a reference interconnection Regulator may publish a reference agreement applicable to all
parties setting out minimum requirements for interconnection Dispute settlement should be on the same basis as the
published principles and procedures for interconnection Dispute settlement must be timely
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WTO Interconnection Requirements Interconnection must be provided on transparent non-
discriminatory terms, conditions and rates Rates must be transparent, cost-oriented and reasonable
having regard to economic feasibility The interconnecting service must be sufficiently unbundled
to exclude payment for components or facilities not required for the supply of the service
Interconnection must be ensured at any technically feasible point
On request, at other than network termination points on charges reflecting the cost of construction of necessary additional facilities
Interconnection must be supplied in a timely fashion Quality must be no less favourable than that provided to
the own production of similar services.
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Interconnection Charges
Charges should approximate those likely to prevail in a competitive market.
WTO requires ‘cost-oriented’ rates but does not specify the use of a particular methodology
The basis of calculating appropriate rates, therefore, requires judicious consideration and careful choice
A major feature of competitive markets is that prices of products or services naturally tend towards marginal cost
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Economic Cost Models
FDC(Fully distributed
cost)
LRIC*(Long run
incremental cost)
SRMC(Short run
marginal cost)
SAC(Stand alone
cost)
Cost of producing extra unit
Cost of producing extra unit
Specifically related
fixed costs
Cost of producing extra unit
Cost of producing extra unit
Specifically related
fixed costs
Specifically related
fixed costs
Allocate part of common
costs
Allocate part of common
costs
All fixed and common
costs
=
=
=
=
+
+
+ +
+
+
*variations include LRAIC, TSLRIC, TELRIC
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Universal Service
Most countries consider access to telecommunications services to be important for social and economic development
The primary objective of universal service is policies is to provide basic telecommunication services at affordable prices to everyone
Without such a policy, access to services in many areas, including rural and remote, would reflect the high cost of serving those areas
Traditionally, cross-subsidies were used by monopolist operators to fund the provision of access in high cost areas
In a liberalized environment, competitive operators will not supply uneconomic areas without some form of universal service obligation (USO)
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WTO USO Provisions
A country has the right to define the kind of universal service obligation it wishes to maintain.
Any such USO obligation will not be regarded as anticompetitive per se, provided it is:
Transparent Non-discriminatory Competitively neutral No more burdensome than necessary to achieve the defined
universal service. Important to define a practical and realistic universal
service goal ‘No more burdensome’ usually means that levies are cost-
based and relate only to provision of USO services
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Purposes of Licensing
Licensing is used for a variety of reasons, including: Attract investment Promote an orderly industry structure and development for the
provision and extension of services Provide regulatory certainty by defining rights and obligations of
licence holder (important for investment) Define competitive framework (particularly where there is no
strong competition legislation in place) Establish basic rights (protection) of consumers Establish enforcement procedures Allocate scarce resources Generate revenue
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WTO Requirements for Licensing The use of licensing for promotion orderly industry
development and regulatory administration is recognised Licensing must not be used for anti-competitive purposes Must be transparent and fair
Specifically, the following are to be publicly available: All the licensing criteria The period of time normally to reach a decision on the allocation
of a licence The terms and conditions of individual licences In addition, the reasons for the denial of a licence are to be made
known to an applicant upon request
Licence revocation and suspension procedures must be equally transparent and based on objective criteria
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Independent Regulator WTO reference paper requires the establishment of an
‘independent’ regulator. An independent regulator is separate from and not
accountable to any supplier of basic telecommunications does not mean independence from the laws and policies
established by the government Regulator is accountable to government or legislature for
the performance of its mandate The decisions and procedures of the regulator must be
impartial with respect to all market participants important to market confidence and promotion of investment
Need to avoid conflict of interest between the regulator and operators (including government-owned operators)
Regulators must not be appointed to the Board of directors or any other office in an operator or hold a financial or other interest
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Regulatory Process
The regulatory process must be: Objective Independent Transparent; and Efficient
All decisions, rules procedures and notices should be publicly available
Operators should not have doubt on what their rights and obligations are
Desirable to consult publicly with interested parties on all proposed rules or major changes to existing rules
Independent appeal and dispute resolution arrangements
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Regulatory Decisions Principles Decisions are consistent with the regulator’s mandate Government policy is properly applied Must not be made at the direction of others Decisions are made in good faith and for proper purposes Decisions are reasonable Only relevant matters are considered Decisions are based on factual evidence The reasons for a decision are made public Affected parties are given the right to respond to evidence
before a decision is made Affected parties have the right to appeal regulatory
decisions to a court or tribunal
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Allocation of Scarce Resources
Each country may define its own policies for the allocation of scarce resources (e.g., spectrum, numbers and rights of way)
Procedures for the allocation of scarce resources must be:
Objective; Timely; Transparent Non-discriminatory.
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Spectrum Licensing The current spectrum allocation plan is to be made
publicly available Detailed identification of frequencies for specific
government use is not required Establish procedures for the allocation of
frequencies to telecommunications operators Terms and conditions of licences must be publicly
available, objective and non-discriminatory All rights and obligations of users must be clearly
established Terms and conditions of use of spectrum must be
transparent
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Telephone Numbers
Telephone numbers are a scarce resource A numbering plan is to be made publicly available Establish procedures for the allocation of numbers
to operators Terms and conditions of allocation must be publicly
available, objective and non-discriminatory Ensure equitable allocation of desirable numbers and
access codes among operators
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Conclusion
Regulation of telecommunications is directed at: Prevention of anti-competitive practices by major suppliers Ensuring interconnection Establishing a USO policy
Licensing may be used for orderly industry development and allocate scarce resources
All regulation (and Licensing) must be: Transparent Objective, and Non-discriminatory
Regulated charges must be cost-based Independent regulator required to administer regulation