Telecommunications and Beyond: What is Next for Telecom Regulators?
Judge Abdelmohssen Sheha
In most countries, Telecom regulators were created to handle the transition of the Telecom sector from monopoly to competition.
This model of sectoral regulation, firmly associated with ex-ante regulation, has appeared as an alternative to an ex-postintervention. The later, to be undertaken by anti-trust authorities when anti-competitive practices are observed, was believed to be inefficient in liberalizing monopolized Telecom markets. Such a retroactive process could have taken much longer to accomplish the transformation of the sector. Instead, an ex-ante retrospective approach was believed to deliver quicker results, by providing the sector, in advance, with the necessary conditions for a smooth economic take-off. More specifically, ex-ante regulation was used in the Telecom sector to lower barriers to entry, legal, economic, and technical. Beyond market-entry issues, ex-ante regulation was also necessary, in some cases, to enable new players to achieve a critical mass to be able to compete with the already existing players, hence serving the public interest attached to the establishment of competitive markets.
To resume, two key words identify Telecom regulators: liberalization and ex-ante regulation.
Yet, liberalization is a process, not a status. In other words, liberalization is deemed to be a transitional process that starts with the end-up of monopoly and ends with the establishment of sustainable competition. Once this goal is achieved, Telecom regulators may lack a raison d’être, as ex-ante regulation will be no more needed. A sole ex-post intervention, by antitrust authorities, should be sufficient to follow-up the state of competition in the Telecom market and intervene only in case of market failures.
Although most of the countries are already far from achieving this process, many of the Telecom sectors in the European Union (EU) have already been widely liberalized. Fixed and mobile markets become already highly competitive. Therefore, light-touch regulation is being widely applied and Significant Market Power (SMP) regulation has been considerably lightened.
With the multiplication of self-regulated markets and the approach of a sustainable competition, it becomes legitimate to wonder if Telecom regulators are doomed to disappear once the liberalization mission is accomplished?
Although being challenging, the answer is probably no. Two main on-going trends are shaping the future of the next ‘regulatory job’ for Telecom regulators, beyond the traditional Telecom regulation.
Net neutrality can be considered as the first trend. Actually, over the last two decades, the cut and clear difference between container, i.e Telecom networks, and content, i.e data content, has been eroded. A cross-movement has been witnessed: on the one hand, Telecom operators are providing content, and, on the other hand, content providers are investing in Telecom infrastructure. Sometimes, Telecom operators and content providers engage in commercial negotiations and agreements for data-processing arrangements. This cross-movement is very significant as it can have an important impact on competition, simply by segmenting the internet network depending on the type of the data transferred, its origin, or its destination. A more neutral basis for data processing, such as the rule of best effort, can then be a memory of the past.
The issue of Net neutrality has been widely debated over the last 15 years. Since 2015, the EU has adopted the Open-Internet directive (2015/2120), setting Net neutrality rules. These rules seek to ensure an open and neutral digital communications networks that treat all data equally, according to its technical properties. Practices of throttling, slowing, or blocking data transfer and processing are, in principle, prohibited. The non-discriminatory treatment is believed to protect innovation and the right of all users to equal access. To that purpose, the directive imposes tight obligations on Telecom operators and content providers to refrain from engaging in any sort of agreement that would give any preferential treatment. Hence, the European NRAs are intensifying their efforts in the last couple of years to identify and tackle any potential threats to Net neutrality. Consequently, besides Telecom operators and Internet service providers (ISPs), content providers operations are being closely monitored.
Beyond Net neutrality, a glance at the tremendous rise of Internet giants, GAFA (Google, Apple, Facebook & Amazon), is prominent. The GAFA are holding a crucial digital infrastructure. This infrastructure, although being different in nature, is very similar in effects to the physical infrastructure of Telecom operators. By playing the same role as a platform, on which people can be put together, this digital infrastructure profits from significant club effects. In the case of Facebook, people tend to be concentrated on its platform to benefit from the positive externalities associated with the huge number of people already subscribed to that same network. The idea of subscribing to other alternative platforms may not be very appealing. Hence, along with the acquisition practices in which Facebook is engaged, the company is drawing on its first-mover position to dominate the social media market. In the case of Google, Apple, and Amazon, they are holding a crucial infrastructure for digital commerce, known in the Economic theory as a two-sided markets. Producers of goods and services have to rely on their platforms to reach their targeted customers online. Hence, the control of this worldwide platform is very similar to the control of an « essential facility », which is a competition bottleneck. Besides, the GAFA are engaging in sophisticated use of big data and AI to collect and process data. The monopoly of this tremendous database will probably have adverse effects on innovation and competition unless other competitors can have access to it on reasonable and non-discriminatory basis.
The similarities between what is stated above with the Telecom sector at the age of monopoly are astonishing. In both cases, the externalities associated with the monopolistic position reinforce the operators’ ability to consolidate its market power. The negative impact on competition and innovation, at least on the long-run, is to be awaited.
For these reasons, remedies are already being discussed worldwide to impose a « technology regulation ». Some of these remedies are similar to these already used to liberalize the Telecom sector. Unbundling represents an example.
Wither it be for Net neutrality or GAFA regulation, ex-ante regulations are being currently reconsidered to tackle the process of recreation of digital monopolies, and re-liberalize the digital markets. Capitalizing on their previous experience and their technical and economic expertise, Telecom regulators appear to be the best suited to undertake this new mission. In this case, the Telecom regulator of today is to be the Digital networks’ regulator of tomorrow.
- https://www.serentschy.com/why-europes-telecom-sector-needs-regulatory-modernization/, retrieved on 23 of July 2020.
- https://www.csis.org/growing-need-us-leadership-technology-regulation, retrieved on 23 of July 2020
- https://www.dw.com/en/eu-calls-for-greater-regulation-of-us-tech-companies/a-53717205, retrieved on 26 of July 2020
- https://www.usnews.com/news/best-countries/articles/2020-01-15/the-world-wants-big-tech-companies-to-be-regulated, retrieved on 24 of July 2020.
- https://www.arcep.fr/actualites/les-prises-de-parole/detail/n/gafa-il-faut-prendre-la-bastille-numerique.html, retrieved on the 25 of July 2020.
- N. Curien & W. Maxwell, La neutralité d’internet, (La découverte, 2011).
- N. Curien, Economie des réseaux, (La découverte, 2005).
Mr. Abdelmohssen Sheha is a pre-trial judge at the State Council of Egypt (Judicial section). He has served, as a State Commissioner, at various chambers of the Court of Administrative Justice, especially at the Investment Chamber. Also, Mr. Sheha is a former member of the technical bureau of the inter-ministerial committee for settlement of investment disputes at the Egyptian Cabinet of Ministers. He was also a teaching assistant at the Faculty of Law of the British University in Egypt (BUE), teaching administrative law and contracts.
Since 2016, Mr. Sheha is a Ph.D. student at the Université de Strasbourg, France. He is preparing a dissertation on public comparative law, dealing with Telecommunications regulation in European, French, and Egyptian laws. Mr. Sheha had various publications, in English, French, and Arabic, in renowned specialized revues. With regard to Telecom, he has most recently contributed to the Revue Lamy droit de l’immatériel and LexisNexis MENA. His most recent publications dealt with specific issues in the Telecom regulation: Net neutrality in the European law and Interconnection agreements under the Egyptian Telecom law.
Prior to his Ph.D., Mr. Sheha obtained a triple Masters’ degree in public law (Cairo University, Egypt), Public administration (Université de Strasbourg, France), and Economics and Public Finance (Université d’Auvergne, France). His undergoing Ph.D. projet is drawing on this multidisciplinary background. Besides, Mr. Sheha is a former fellow of the French National School of Public Administration (Ecole Nationale d’Administration ‘ENA’, CIP, Promotion Jules Vernes 2014).
The domain of interest and expertise of Mr. Abdelmohssen Sheha is administrative law, economic regulation law (i.e regulation of network markets), digital communications law, competition law, and arbitration. In Economics, he is interested, inter alia, in network Economics and Economics of development.