Rory Macmillan Dispute Resolution in the Telecom Sector: Priorities, Processes and Trends ITU/BDT

+41 79 75 236 [email protected]

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_______________RORY MACMILLANLegal • Mediation

Rory Macmillan

Dispute Resolution in the Telecom Sector:

Priorities, Processes and Trends

ITU/BDTArab Regional Workshop on Dispute Resolution

Bahrain31 May – 1 June 2004



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Table of contents

• WHERE SHOULD REGULATORS FOCUS

• REGULATORY ADJUDICATION AND REVIEW

• TRENDS AND INNOVATIONS



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Table of contents






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Disputes are an inevitable aspect oftoday’s increasingly complex telecom

sector• Proliferation of infrastructure and service

providers

• More varieties of inter-woven and competing business relationships

• Collisions of new and old business models

• Divergent interests produce disputes!



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Liberalization and privatization disputes

• Negotiating transition to open markets without alienating key constituencies

• E.g.: Telia in Latvia; Bulgaria’s privatization; Lebanon’s mobile disputes



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Interconnection, accessand competition disputes

• Challenging dominant interests and asymmetric market power

• Pricing, operational, technical issues central to functional competition

• E.g., Batelco vs MTC in Bahrain



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Disputes between operators and regulators

• Regulatory commitments

• Industry reliance

• E.g.s: Turkey’s IsTim case on national roaming; appeals against German regulator T-Reg



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Trade disputes

• GATS

• WTO Reference Paper on Regulation

• E.g.: US v Mexico – introducing the international dimension to regulation and dispute resolution



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Consumer disputes

• Pricing, billing, slamming, quality of service, privacy, advertising

• E.g: Portugal’s DECO case; Turkey’s consumer case concerning tariffs



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Disputes resulting from structural regulatory problems, changing

technologies and markets

• Rapid transition of technologies and markets

• Matching regulatory regime to realities

• E.g.: India WLL(M) dispute; 3G/Wifi?



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What disputes are specificto the “telecommunications” sector?

Access products are at the

centre of many disputes

InterconnectionLeased lines

Infrastructuresharing

Frequency use andinterference

Pricing andcost accounting

Service level

agreements

Technical co-locationrequirements

Delays

Rights of way



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What disputes concern the telecom regulator as opposed to the courts and

other agencies?

DisputingParties

Telecom regulator

Competition authority

Consumer protection body

Court system

?

??

?



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Most countries are muddy on jurisdictional lines between regulatory adjudication and the courts

• Jordan: regulatory adjudication is “…without prejudice of licensees’ rights to go to the courts…”

Section 2.1 of Interconnection Dispute Process(similar in UK Communications Act)

• Ireland: regulatory adjudication may proceed “…if legal proceedings in relation to the dispute are not in process…”Statement of ComReg



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How should telecom disputes interact with competition and consumer disputes?

• Much telecom regulation is basically ex ante applied competition or consumer protection policy

• Many countries have competition and consumer laws and agencies

• Cooperation among agencies is crucial, but which body should be responsible?



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Setting boundaries is complex and practice varies, e.g. compare India and Australia

• TDSAT’s authority in India excludes disputes that are:– “subject to the jurisdiction of the Monopolies and Restrictive

Trade Practices Commission” – “maintainable before a Consumer Disputes Redressal

Forum or Commission”Section 14 of the TRAI Act 1997, amended 2000

• Australia views telecom access disputes as a form of competition problem, so the ACCC handles telecom access disputes as well as consumer complaints and antitrust



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The U.S. Supreme Court recently wrestled with such institutional and jurisdictional questions

• Verizon v Trinko (2004)

• Verizon was accused of breaching the Shearman Act (antitrust legislation):– Failing to provide AT&T with adequate local

loop connection to Verizon’s network– Resulting in poor quality of service for

AT&T customers



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It recognized the difficulty for courts in dealing with sharing and interconnection disputes

• “Allegations of violations of [sharing and interconnection] duties are difficult for antitrust courts to evaluate…”

• “highly technical…likely to be extremely numerous…”

• “incessant, complex, and constantly changing interaction of competitive and incumbent [local exchange carriers] implementing the sharing and interconnection obligations”



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The court drew a line between antitrust and telecom regulation disputes for practical reasons

• The effective remediation of violation and enforcement of these detailed sharing obligations is a “daunting task…beyond the ability of judicial tribunal to control”

• There is a “regulatory agency with effective power to compel and to regulate sharing”



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Dispute resolution is now a strategic concernfor telecom policy-makers and regulators

• Retards the introduction of new services and infrastructure

• Limits investment and restrains competition

• Results in higher prices and lower quality

• Ultimately impedes economic and technical development

Failure to resolve disputes effectively and efficiently



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Where should policy-makers’ andregulators’ resources be focused?

• Key obstacles to sector development

• Investment and competition

• Financial and operating conditions



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Disputes needing particular attentionof regulators for sector development

• Access and interconnection disputes which make or break competition

• Major licensing disputes that may hinder investment

• Disputes where transition of technologies and markets require regulation to adjust to reality



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An economic lens is crucial in structuring parties’ incentives and reducing or

resolving disputesMacro

Micro

Costs of delay to sector and economy

Underlying commercial and financial realities in the

industryDisparities in market power

between disputing parties (game theories)

Allocation of specific costs of dispute among adjudicators and

parties

Developing a “market” in dispute resolution

techniques

Economic incentives of parties to engage in or

resolve disputes



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What are key aims for policymakers/regulators considering

dispute resolution techniques?Efficiency of resolution

Efficacy of result

Coherent regulation

• Speed• Cost to parties and official

sector

• Implementation and enforcement

• Durability of result

• Compliance with regulatory regime

• Investment and competition• Transparency and minimal

uncertainty



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Regulatory adjudication is both a regulatory function and an adjudicatory

functionRegulatoryprocesses

Adjudicatoryprocesses

…tend to be more investigatory,consultative and on-going

…tend to be more adversarialand seek to be finite

Regulatory adjudication needs to address both functions



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The regulatory function emphasizes efficiency, sector development and

regulatory compliance• Flexibility of process is important

– Ireland’s ComReg and UK’s OFCOM publish draft determinations for comment of market participants

– Australia’s ACCC is “not bound by technicalities, legal forms or rules of evidence”

Section 152DB of Trade Practices Act 1974

• Availability of specific regulatory remedies

• The regulator/adjudicator has a policy agenda



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The “adjudicatory” nature makes it important to take into account the role of

the “3rd party neutral”Follows a formal written procedure

Adjudicator is a third party, not a party to the dispute

Parties position themselves offering adjudicator a binary choice of decisions

Adjudicator’s decision is enforced by the state

Adjudicator’s decision often produces win-lose results

Procedure must be transparent

Adjudicator must be neutral and accountable

Adjudicator must be well informed of broader sector issues

Remedies must be sure and proportionate

Correction of mistakes must be available (review and/or appeal)



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Various powers and prohibitions may be required to make regulatory adjudication process effective

Australian ACCC and Indian TDSAT:

• Power to compel witnesses to testify

• Power to take evidence on oath

• Prohibition on giving false or misleading testimony or documents

• Criminal penalties, including jail time



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Allocating costs can reduce regulator’s burden and change parties’ incentives in the dispute

• Jordan’s TRC will “charge the disputants for the cost of actual resources consumed in terms of number and cost per man hours per class of profession for resolving the dispute”

Section 4.1 of the Interconnection Dispute Procedure

• UK’s OFCOM may require parties to pay costs to each other or to OFCOM

Section 190(6) of the Communications Act 2003

• On the other hand, Botswana’s Telecom Regulatory Authority views dispute resolution as a public good paid for in license fees



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Achieving a balance betweentransparency and confidentiality

• Investor confidence requires regulators to publish dispute rulings

• Public consultation before issuing a final ruling (e.g., Ireland’s ComReg & UK’s Ofcom)

• May information provided in a dispute be used for other purposes?

Sections 152DBA and 152DK of Australian Trade Practices Act 1974

• Confidential treatment of matters sensitive to business strategy (e.g., problem in Germany)



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Relationship of courts and regulatoryadjudicators and “review” versus “appeal”

Protecting the integrity of the adjudicatory system versus ensuring individual outcomes

Focusing on bounds of adjudicator’s authority versus substance of his/her decision

Considering factors weighed by the adjudicator versus rules of evidence

Emphasizing procedure followed by the adjudicator versus finding on the merits

Traversing government (executive and judicial) branches versus upwards appeal within a branch

Reasonableness versus correctness of decision



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There are numerous approaches to internal and external review/appeal of decisionsInternal & external

(Jordan, Netherlands)

External only (Ireland, Malaysia)

Hybrids(India)

Jordanian TRC orold Dutch OPTA

Commission

Commissioneror Adjudicator

Courts

ComReg or MCMC

Commission

TDSATbench of 3

Courts

TelecommunicationsRegulatory

Authority of India

TRAIDisputingParties

Supreme Court



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Whatever the structure, appeal/reviewneeds to be efficient, transparent and reliable

• Hundreds of pending cases and appeals are taking years in Germany and The Netherlands

• Best to avoid establishing elaborate appeal processes if the appellate body is jammed with cases (e.g., Dutch OPTA is simplifying)

• The greater the confidence in the initial decision-makers and process, the less need for appeal on substance



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Delays and uncertainties are influencing the European agenda on dispute resolution

• Netherlands– OPTA’s review was averaging 7 months– Over 200 cases on appeal– final resolution can take 3½ years

• Germany– 1,000 cases pending– 2,500 appeals of RegTP decisions and 150 appeals to

higher court

• Spain– Appeal to national court can take 2-3 years– Appeals to Supreme Court can take 4 years



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Effectiveness of decisions while under appeal

is at the centre of delays and uncertainties• Netherlands: in half of cases before the

Court of First Instance, OPTA’s decisions were suspended by interim measures

BUT

• Spain: Few interim suspensions of regulator decisions so sector reform can continue despite extensive delays



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There is a trend to accelerate official dispute resolution and make it more

effective• EU Framework Directive

• Emphasis on timelines (e.g., 4 months)

• Refining regulatory adjudication and competences

• Reducing extensive appeals processes (e.g.OPTA)



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And there are some initiatives to introduce alternatives to regulatory adjudication

• Some regulators using more mediation (e.g.ComReg)

• Ombudsmen schemes

• Industry initiatives (e.g., UKCTA, BT, Vodafone)



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Recent innovation indispute resolution in various countries

• Nigeria – televised consumer parliament to popularize consumer protection

• Denmark – broad industry forum to review entire sector problems as a means to dispute prevention

• UK – industry ombudsman and dispute resolution schemes set up telecom companies; new local loop unbundling adjudicator scheme

• Hungary – establishing a telecom dispute mechanism supplied by a bank of pre-approved arbitrators



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Conclusion:priorities for effective regulatory adjudication

• Focus attention and resources on disputes that are a turning point for competition and investment

• Understand big picture institutional roles and parties’ incentives

• Give regulatory adjudicators powers and resources they need

• Fit appeal/review processes to the institutions without clutter

• Take advantage of the innovations



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For further information

• “Dispute Resolution in the Telecommunications Sector: Current Practices and Future Directions”, Robert Bruce, Rory Macmillan et al: http://www.itu.int/ITU-D/treg/Events/Seminars/2003/GSR/Documents/DRS_Final_GSR_5.pdf

• ITU Case Studies in interconnection dispute resolution, Robert R. Bruce & Rory Macmillan: http://www.itu.int/ITU-D/treg/Case_Studies/index.html

• “Reflections on Dispute Resolution and Regulation in the Indian Telecom Sector”, Rory Macmillan, 2005 Journal of Indian Law Institute

• “Dispute Resolution in the Telecom Sector”, Rory Macmillan, ITU News 2004

• ITU web pages on dispute resolution: http://www.itu.int/ITU-D/treg/related-links/links-docs/dispute.html

http://www.itu.int/ITU-D/treg/Events/Seminars/2003/GSR/Documents/DRS_Final_GSR_5.pdf

http://www.itu.int/ITU-D/treg/Events/Seminars/2003/GSR/Documents/DRS_Final_GSR_5.pdf

http://www.itu.int/ITU-D/treg/Case_Studies/index.html

http://www.itu.int/ITU-D/treg/related-links/links-docs/dispute.html