Regulation for Fair Competition
It is an honor to address this distinguished audience.
I welcome the opportunity to be here with my counterparts from other nations. And I thank
the ITU for providing a forum for us to share our experiences in promoting fair competition in
this dynamically changing industry.
Although each nation faces its own unique combination of circumstances, we share a common
interest. All of us want our citizens to reap the greatest possible benefits from
I am mindful, of course, of the heterogeneity of the community of nations. Among us, there
are differences in levels of wealth. Our telecommunications infrastructures have been
developed to differing degrees. Our histories of telecom regulation are not the same. Each
nation faces a different array of needs that compete for societal resources.
Despite these and other differences, all of us are experiencing similar pressures. We all are
affected by the rapid pace of technological change. Throughout the world, telecom providers
are pressing for strategic advantage. Everywhere, consumers' expectations are rising.
Service providers and business users alike demand more rationalized systems that eliminate
artificial costs and, instead, promote economic efficiency. Consumers want more and better
services, and lower prices.
We respond to these pressures in different ways, but each round of response brings us closer
The Competition Consensus
The ongoing international dialogue -- of which this conference is a part -- is leading to far-reaching changes. What is happening in communications regulation signifies an emerging
world consensus that is entirely without precedent.
Most of the countries in the world now recognize that telecommunications is a key engine of
economic and social development. And a growing number of countries, representing a large
majority of the world population, now accept that the best means of fueling that engine will be
Competition has proved itself to be the best way to promote efficiency, attract capital, create
options, and lower prices. This is true for domestic services and for international services. It
is true for services to businesses and for services to consumers.
It is becoming clear that this is a path that we all must walk.
We are not all at the same place in the transition to competition, but we have a shared
No nation can be expected to transition immediately from a nascent telecommunications
infrastructure, served by a monopoly provider, to an advanced infrastructure with robust
competition. But it is important to commit to this objective. Immediate benefits can result
from making the kinds of structural changes that many countries committed to in adopting the
WTO Reference Paper.
Preconditions for Success
The Reference Paper reflects the collective experience with the transition to competition. There is now a consensus on the elements needed to enable new companies to secure a healthy and vital start. Among the most important are:
Decisions on rules to create fair competition are best made by those with the appropriate independence and expertise.
Unnecessary restrictions on who can enter the market or offer a particular service, are best avoided.
It is important that such rules allow new entrants to use only those segments of the incumbent's facilities that are needed, and at reasonable cost.
Ways to prevent anticompetitive behavior include insuring that technical information necessary to permit effective use of essential facilities is available on a timely basis; and employing measures to identify and address cross-subsidies that disadvantage new competitors.
The Role of Government
In this new environment, regulators are called upon to make difficult decisions. Three key points come to mind:
First, many decisions are best left to the market, not to regulators.
For example, what is the optimal number of competitors to offer either wired or wireless services? Should competition be provided via facilities-based carriers, resellers, or some combination? I believe these questions are best answered -- not by regulatory fiat -- but by the marketplace, so long as adequate spectrum exists to support multiple providers.
In my view, government should not attempt to limit the scope of competition. Nor should it attempt to pick winners and losers.
Second, when regulators do make decisions, it is important that their decisions be transparent and open to public participation.
The stakes are high. Large investments are inevitably required. Transparent regulatory procedures improve the quality of decision-making. They increase confidence on the part of the service providers, the capital markets -- and most importantly, the public.
Third, there are certain decisions from which regulators cannot shy away.
The marketplace can achieve fair outcomes, and the transition can succeed, only if there is
reliable follow-through on regulatory principles and competition policies. It is not enough to
establish the right rules; they must also be enforced. Parties must be able to have their
disputes resolved quickly and fairly.
The U.S. Experience
I would like now to take a few minutes to discuss some of the difficult issues we have
encountered in the United States as we implement these principles.
The biggest challenge for us has been to establish and administer an effective interconnection
regime. Entrenched incumbents do not willingly enable the success of new competitors. And
ways abound in which the incumbents can thwart the new entrants' efforts to penetrate a
We needed to ensure fair pricing -- for interconnection, for resale, and for access to the piece-parts of the incumbent's network. In all of these relationships, the usual incentives in
commercial negotiations are not present. The new entrant invariably requires access to
something that the incumbent has, and the incumbent naturally wishes to preserve its
That is why we in the United States have set pricing principles that are fair to incumbents and new entrants alike. A vital aspect of these principles is to promote economic efficiency.
We want to eliminate pricing distortions that would dissuade an efficient provider from
entering the market. We try to avoid distortions that would cause an inefficient provider to
enter. We seek to enable competitive entry without favoring resellers over facilities-based
competitors, or vice versa.
We have encountered difficulties in addressing the administrative aspects of interconnection.
Number portability is one example. There are different ways to achieve it, with different
technical and economic consequences. Even more complex is the array of issues associated
with ordering and billing of services.
We would prefer that the details of these arrangements be negotiated by the industry
participants themselves. But experience has taught us that these matters are unlikely to be
resolved without a process for quick and certain dispute resolution. Delay benefits only the
incumbent -- not the new entrant and not the consumer.
Universal telephone service is a goal we all share. In the United States, we believe that
competition will expand universal service. But where there is a monopoly provider, subsidies
are more likely to be implicit. And competition jeopardizes the sources of these subsidies, as
new entrants attack the high profit segments of the market.
That is why we have begun to devise mechanisms of universal service support that are explicit.
They are also competitively neutral. In other words, they are available regardless of the
technology used to serve the customer, and they are portable when the customer changes
Our experience in the United States and that in other countries teaches that the road to
competition is not always straight or smooth. There are pitfalls that cannot always be avoided.
For one thing, the transition to competition generates a large degree of turmoil. Once
expectations of competitive bounty have been created, consumers can become impatient
waiting for new entrants to generate promised new services. Relationships among the
operators, and between the operators and the regulator, need to be thrashed out. Business
plans change constantly as competitors react to the changing marketplace.
For another, laws and regulations may at times prove too inflexible to accommodate the needs
of the competitive marketplace. In the United States, we spent many years trying to stretch,
bend, and adapt the Communications Act of 1934. Finally, we recognized that the old
structure simply was too confining; a new paradigm was needed.
This is one area where countries that lack a developed infrastructure and a detailed regulatory
regime may have an advantage. They may be able to structure systems and rules that are
unencumbered by yesterday's limitations and reflect tomorrow's possibilities.
A final lesson we have painfully learned is that competition takes a lot of work and a lot of
time. Our Telecommunications Act created a new framework 16 months ago, but there is still
much to do. Despite diligent effort by the regulators and many industry players, we do not yet
enjoy the abundant benefits that we believe will ultimately result from robust competition in
the local marketplace.
This is not a reason to abandon our efforts to promote competition, but to redouble them.
Despite the formidable challenges of introducing competition, I believe that governments have
no choice. The imperatives for change are inexorable. The benefits of competition,
transparent rules, and independent regulation are undeniable.
Although the challenges are formidable, no one should be deterred. As Lao Tzu once
observed, "A journey of a thousand miles must begin with a single step." We have not so far
to go and our reward is within our reach.
Thank you. I welcome your comments and perspectives.