A regulatory regime that benefits

citizenscitizens

Rohan Samarajivarohan@lirneasia.net

eAsia, Dhaka, 3 December 2011

This work was carried out with the aid of a grant from the International Development Research Centre, Canada and UKaid from the Department for International Development, UK.

Agenda

• The success of voice & the challenge of Digital

Bangladesh

• What can regulation contribute?

– Not a comprehensive discussion– Not a comprehensive discussion

• How to do good regulation

– Bracketing the need for new law and policy

Voice: A success in difficult

circumstances• ~100% of national territory covered by signals

• High uptake

– 99% at BOP say they have used a phone in last 3 months

– More phones than radios (and even TVs) in BOP – More phones than radios (and even TVs) in BOP

households

• Prices among lowest in the world

– Result of Budget Telecom Network (BTN) business model

• Voice has become a commodity; profits a problem �

mobilizing capital more difficult

99% of BOP have used a phone in previous 3 months

Bangladesh Pakistan India Sri Lanka Java Thailand

2008 95% 96% 86% 88% - 77 %

2011 99% 96% 89% 90% 90% 91%

Used a phone in the last 3 months (% of BOP)

2011 99% 96% 89% 90% 90% 91%

4Among BOP (OUTER SAMPLE)

SEC D& E, corresponding to those living on less than USD 2/day

Representative sample of 2,050, +/- 2% at 95% confidence interval

Household access to electricity, phone,

TV, radio, computer

70%

80%

90%

100%

Household access (%BOP outer sample)

5Among BOP (OUTER SAMPLE)

Ele

ctri

city

Ele

ctri

city

Ele

ctri

city

Ele

ctri

city

Ele

ctri

city

Ele

ctri

city

Ph

on

e (

Fix

ed

+ m

ob

ile

)

Ph

on

e (

Fix

ed

+ m

ob

ile

)

Ph

on

e (

Fix

ed

+ m

ob

ile

)

Ph

on

e (

Fix

ed

+ m

ob

ile

)

Ph

on

e (

Fix

ed

+ m

ob

ile

)

Ph

on

e (

Fix

ed

+ m

ob

ile

)

Tele

vis

ion

Tele

vis

ion

Tele

vis

ion

Tele

vis

ion

Tele

vis

ion

Tele

vis

ion

Ra

dio

Ra

dio

Ra

dio

Ra

dio

Ra

dio

Ra

dio

Co

mp

ute

r

Co

mp

ute

r

Co

mp

ute

r

Co

mp

ute

r

Co

mp

ute

r

Co

mp

ute

r

0%

10%

20%

30%

40%

50%

60%

Bangladesh Pakistan India Sri Lanka Java Thailand

20

30

40

50

60U

SD

pe

r m

on

th

Voice + SMS TCO: Brazil = Bangladesh x 23

Voice, SMS & Internet TCO: Morocco = Sri Lanka x 57

Different business model in sub USD 10 countries?

Budget Telecom Network (BTN) model

Nokia total cost of ownership study 2011

0

10

20

Ba

ng

lad

esh

Sri

La

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a

Ch

ina

Pa

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Ind

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Uzb

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Ke

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Su

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Eth

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Ca

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ail

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Gh

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Ta

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nia

Ha

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Ph

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Tu

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ue

Nig

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ep

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Bra

zil

Monthly TCO

(USD)

Internet premium

(USD)

Ave: USD 11.47

Ave with Internet premium: USD 15.05

Source: Nokia

The challenge for Digital Bangladesh: Lowest

Internet users & fixed broadband subs/100 in

region (mobile broadband not reported)

12

14

16

18

Based on ITU data for 2010; ITU

data supplied by MOPT/BTRC

and their equivalents; responsibility

for errors lie with data suppliers

0

2

4

6

8

10

BD IN NP PK LK

Internet users/100

Fixed broadband/100

Computer use @ BOP low overall

83% 74% 76%

12% 16%

60%

70%

80%

90%

100%

Usage of computers (% of BOP teleusers)

Don't know what a computer is

5% 4% 2%

17% 21% 22%

83%96%

81%

83% 74% 76%

0%

10%

20%

30%

40%

50%

60%

Bangladesh Pakistan India Sri Lanka Java Thailand

No

Can't remember when, but I have used

one before

Yes

Among BOP teleusers

Not used a computer in last 12

months

Used a computer in last 12 months

Internet use similarly low@BOP; awareness problems in BD & IN

82%

98%

74%

89%78%

17%24%

40%

50%

60%

70%

80%

90%

100%

Internet use (% of BOP teleusers)

I haven't heard of the internet

No

Can't remember when, but i have used it before

Less than once a month

At least once a month

At least two to three times a month

Bangladesh Pakistan India Sri Lanka Thailand

Use the Internet (% of

BOP teleusers)2% 2% 1% 9% 21%

Among BOP teleusers

74%

0%

10%

20%

30%

40%

Bangladesh Pakistan India Sri Lanka Thailand

At least two to three times a month

At least once a week

At least two times a week

At least once a day

A challenge that can only be met . .

• By creating conditions for extending the Budget

Telecom Network model to broadband

– Low prices essential

– Costs must be kept down if low prices are to be sustained

• By enabling the build out of wireless access networks

capable of handling data cost-effectively

– Backed up by non-discriminatory, cost-oriented access to

fiber backhaul, including redundant capacity

• By offering applications that are of value to

consumers, giving them reason to use broadband

Regulatory contributions to Digital

Bangladesh• Understand that what amount to overlay networks will have

to be built; Also understand that creating platforms for

applications will require investment

– Major investments, with relatively long gestation periods, required

• Regulatory risk must be reduced, especially re licenses, renewals &

spectrum

• Develop, in consultation with stakeholders, a roadmap on

when and what spectrum will be made available

– And adhere to it

• Leverage the BTN model to achieve policy objectives, rather

than work at cross purposes to it

Reduce regulatory risk for Digital

Bangladesh networks• Market entry

– Build on recently concluded license-renewal debate to

establish coherent market entry-exit policies

– Model: Pakistan licensing policies of 2003

• Emphasized transparency and predictability• Emphasized transparency and predictability

• Resulted in all operators being brought to a level playing field

• Renewal handled in exemplary manner

– But market-entry policies are incomplete without market-

exit rules

Reduce regulatory risk . . . (market

exit)

• Who can best decide number of suppliers?

– Not Minister; not regulator; but the market

• Transparently assign as many licenses as resources

(spectrum) permit in blocks adequate for data and

voice; no point in fragmenting � increasing costs

– Allow secondary trading so operators can find the optimum

distribution of spectrum

• Create orderly exit mechanisms (ideally, known at time

of entry), so that market can settle at optimum level

– Includes rules on spectrum, secondary trading is a solution

– Also safeguards for consumers

Reduce regulatory risk . . . (scarce

resources) • Spectrum is the most critical input in providing wireless

broadband access

– Spectrum refarming is central

• All users of spectrum must understand that assignments are not for ever; that

countries that are technology-takers must realign their spectrum assignments

periodicallyperiodically

• Difficult process; I did it in 2002-04 (900 and 1800 bands)

– Requires extensive consultation with all affected stakeholders

– Lots of listening and talk

– Need to use proceeds of auctions to compensate “losers”

– Operators must be able to plan and to mobilize resources

• Not just a question of auctions versus administrative allocation

– Auctions are best, but unless embedded within a credible roadmap, they will

distort bidder’s incentives

Reduce regulatory risk . . . (road

map) • Best way to improve spectrum regulation is to set out

principles and a schedule for refarming actions (known as

roadmap)

– Build on 2009 consultation, but make principles explicit and include

time (when specific blocks will be refarmed/made available)

– To the extent possible, reduce technology bias in spectrum

assignments: e.g., why should 900 band be limited to specific

technology?

– Change and certainty

• All should recognize that nothing is permanent in spectrum assignments

• But change should be predictable and the path decided through extensive

consultation based on principles

Reduce regulatory risk . . . (other

scarce resources) • Costs (time and money) of obtaining rights of way

are escalating

– Multiple levels of government involved

• Not necessary to rewrite laws/Constitution

• Simply enact amendments that provide for compulsory arbitration • Simply enact amendments that provide for compulsory arbitration

and time limits

• Numbers are a finite resources that is running out

because all (regulators and operators) are treating it

as infinite

– Consider pricing and incentives to reuse

– Start work on numbers/addresses for a converged world

Focus on high priority tasks and pull

back from others

• As retail prices come down, greater attention must

be paid to vertical price squeeze

• Building on inchoate decision to separate BTCL’s

backhaul operations create PPP to manage publicly

funded backhaul (including international)

• Pull back from tariff regulation

– A form of banded forbearance exists in Bangladesh

• Why not make it formal, allowing reallocation of regulatory

resources and reducing regulatory risk

How to regulate well

• Focus on legitimacy = acceptance in the eyes

of others

• Sources of legitimacy

– Expertise– Expertise

– Transparency

• Fair procedure, including consultation

• Willingness to explain reasons for actions

– Openness to review and appeal

Expertise � legitimacy

• Requires good hiring procedures

– Focus on those willing to learn; continual need for new

knowledge

• Ability to hold and motivate good people

• Consistent focus on training

• Now, both Ministry and BTRC require expertise

• Without expertise, little basis for ex-ante, sector-

specific regulation

– But state of markets and technology are such that

individual expertise alone is not enough

Procedural legitimacy

• When things are done the right way, more

likely that outcomes will be seen as right

• In addition, serves to appeal-proof decisions

• Also permits regulatory authorities and staff • Also permits regulatory authorities and staff

to draw from a range of information sources

and to assess the veracity and value of

information

Explain, explain

• Regulators should behave like idealized

bureaucrats, not as quasi-judges

– Reasons for decisions must be given to

• Stakeholders• Stakeholders

• General public via the media

Appeal and review

• Appeal and review should not be seen solely

as causes of delay

• To the extent appeals and reviews can be

done expeditiously, they relieve the pressure done expeditiously, they relieve the pressure

on the regulatory agency

For more . . .

• Samarajiva, R. (2010). Leveraging the budget telecom network business model to bring

broadband to the people, Information Technology and International Development, 6, special

edition: 93-97. http://itidjournal.org/itid/article/view/630/270

• Samarajiva, R. & T. Iqbal (2009). Banded forbearance: A new approach to price regulation in

partially liberalized telecom markets, International Journal of Regulation and Governance,

9(1): 19-40.

• Samarajiva, R. (2006). Preconditions for effective deployment of wireless technologies for • Samarajiva, R. (2006). Preconditions for effective deployment of wireless technologies for

development in the Asia-Pacific, Information Technology and International Development,

3(2): 57-71. http://itidjournal.org/itid/article/view/224/94

• Samarajiva, R. (2004). Getting from dysfunctional government to e(ffective) government:

Mapping a path in Sri Lanka, International Journal of Regulation & Governance, 4(2): 171-85.

– A discussion of designing a Digital Bangladesh like initiative with regulatory reforms and details on spectrum refarming

• Samarajiva, R. (2002) Why regulate?, chapter 2 of Effective regulation: Trends in

Telecommunication Reform 2002. Geneva: International Telecommunication Union.

• Samarajiva, R. (2001). Regulating in an imperfect world: Building independence through

legitimacy. Info, 3(5), 363-68.