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National Broadband Infrastructure: Global Regulatory Re-Think Required

Around the world governments, regulators and the industry are struggling with the old regulatory legacy systems. These have become a major stumbling block in the transition to a new environment. Increasingly countries are beginning to understand the social and economic benefits a national broadband infrastructure can offer, but it is impossible to bring that about while the systems are based on the present regulatory regimes.

To take these broader benefits into account we will need to develop government policies to facilitate the digital economy. That will inevitably lead to open, wholesale-based national broadband infrastructure, and this will automatically make current regulatory issues such as access pricing less relevant—and, one would hope, eventually totally irrelevant.

Unfortunately, at present, since we are still working according to the principles of the old telco world, these issues are dominating the debate. By placing too much emphasis on them we might lose sight of the future and could be wasting valuable time and resources.

Others surrounding the telco industry are more than happy to let the telcos become mired in the past, while they build their business models for the new environment. In this way the telco industry would be left behind, with little to do but dig the holes for the pipes the others need for the delivery of their innovative new services.

Furthermore, if the telco industry remains stuck in the out-of-date regulatory system the IT industry will be ready, willing and able to concentrate on the wholesale business and deliver the intelligent infrastructure that can be linked to these pipes. Look at the leadership IBM is providing through their ‘smart’ advertising and their many white papers on a huge variety of smart developments. I haven’t seen anybody in the telco industry taking such a thought-leadership role.

The telco industry should concentrate on also providing that degree of thought-leadership—what this new environment should look like; what needs to be done to make it a commercial success for them—there are plenty of new opportunities up for grabs. The industry should be more involved in the policy debates around smart grid, e-health and education, which are currently being developed by the governments. Some of the incumbent telcos might have done something in this respect—albeit more or less in isolation, and certainly not in the role of national leader.

Many regulators admit that the old regulatory system is broken. So let’s not try to fix it—let’s start working on what is needed to move forward.

I am eager for the discussion to move away from these legacy regulation issues—issues that date back to an era that was different from the one we are now moving into. Instead I suggest we look at the much broader issues of national broadband infrastructure. This will hopefully see government policy moving away from its regulatory approach to one that gives a serious commitment to using the broadband infrastructure for e-health, education and other applications. Certainly, many governments are making all the right noises, but they need to establish clear policies before the industry can carry out the implementation. The government should provide the vision and high-level strategies but it is up to the industry to make it happen.

At the moment, in the absence of any government leadership the industry is confused and rather rudderless—not knowing what to do, calling for the government to come up with business plans, arguing about out-of-date regulations, navel-gazing at technologies to decide what is bigger and what is better. They are missing the point. The debate should be on what is needed to lift developments to the next stage and they need to lobby their governments for clear directions.

Both the government and the telco industry is not paying enough attention to this. They seem to be stuck in the past, with endless access pricing debates about TSLRIC and other issues that tend to complicate matters rather than clear the way ahead. By following that route we will only get ourselves deeper into a morass, and in the meantime we are losing sight of what would actually generate innovations and new growth opportunities for the industry. By all means manage the transition, but focus on the future.

If we were to achieve industry cooperation we could start moving away from a totally regulated market to one that is based on what makes business sense, and where we can increase the size of the pie rather than limiting the growth of the market through out-of-date regulations to protect vested interests.

If we could agree on that future direction then this would be a good incentive to get the interim period right too—preferably through industry negotiation, rather than through exhaustive regulation. I think regulators would be interested in ideas and suggestions that came out of a more united industry, at least at a high strategic level. In the foreseeable future issues that require the leadership of the regulators will continue to arise, but the end goal should be to make regulation increasingly unnecessary.

The National Broadband Network developments in Australia—based on an open, wholesale-based infrastructure approach—could provide some guidelines on how this process might work.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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The Way Forward Rob Frieden  –  Jul 28, 2009 4:10 PM

In the U.S. the way forward has been deregulation regardless of empirical evidence of market failure.  Most incumbent stakeholders love this regulatory vacuum, because they can have it both ways: in some forums claiming robust, facilities-based competition, but in other forums filing for government subsidies.  In the worst case scenario, a carrier receives government universal service and broadband infrastructure development subsidies for locales that the carrier probably would serve without tax payer underwriting.

I don’t see much quibbling at all about regulatory finetuning: The U.S. government has pretty much abandoned oversight of the ICT sector, even for tasks mandated by statute. Much of the procompetitive goals in the 1996 Telecom Act have not been realized and the FCC has given up trying.  The big lie spouted out at every opportunity is how competitive and globally superior the U.S. marketplace is.

The way forward requires serious market scrutiny using tried and true empirical fact finding.  If a market is competitive, then deregulation is appropriate.  A section in the 1996 Act provides for such market specific deregulation.  If a market remains less than fully competitive—whether by industry mergers, or market failure—the national regulatory authority still has a job to do.

Dear Rob,You will not be surprised to Paul Budde  –  Jul 28, 2009 10:53 PM

Dear Rob,

You will not be surprised to hear that I fullheartedly agree with you. Obama said Yes we can, and he wants change, this certainly is an area where it doesn’t work to fix broken systems. We do need to be dold and start talking about open networks where infrastructure gets seperated from the services. The rest of the world is moving into that direction as they see the economic and social bebefits of that approach, we do need to take the national interst into account not just the profits of a few incumbents.

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