 | Issue: | Latin America IV 2001 |
| Article no.: | 4 | |
| Topic: | Note to Regulators: If You Support Broadband, Set it Free | |
| Author: | Conny L. Kullman | |
| Title: | CEO | |
| Organisation: | Intelsat | |
| PDF size: | 20KB |
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Article abstract
The United States Congress is in the process of extending, for another two years, its current three-year ban on taxing purchases made online. This action-or inaction-follows a general view among policy makers that a hands-off approach is pivotal to the continued success of the Internet.
Full Article
Even though the Internet bubble has burst, this regulatory benevolence has resulted in the emergence of countless new entrants into the market. Perhaps not as robust as a year or two ago, a growing industry still exists, fuelled by a steadily increasing demand for richer content and bigger pipes to deliver it. The logical evolution path for today’s vibrant competitive Internet landscape is for broadband services. Emerging broadband technologies will likely drive the next generation of Internet growth, and the regulatory community should consider being flexible in overseeing the development of broadband when charting the course of this communications tool. Like consumers, regulators are often faced with the daunting task of assessing the impact of constantly emerging technologies. In today’s environment of rapid technological development, consumers are usually the first to adopt the newest technologies and regulators try to catch up. This happens often enough that many companies find themselves in the coveted position of being able to profit from this phenomenon while giving consumers access to new enabling services. The ease with which a new Internet Service Provider (ISP) can enter the market is, arguably, unprecedented. So far, regulators have successfully fostered competition in the telecom markets, generally by establishing low access rates and lowering the thresholds for market entry in ways designed to ensure a level playing field. This means that established operators have no choice but to share their infrastructure with their direct competitors for a part of the business that is growing, in some cases, faster than traditional business lines. Moreover, the established operators often have obligations which require that they fix and publish tariffs; build, maintain and operate the infrastructure; build and maintain infrastructure to underserved areas; monitor and bill customers according to their level of usage; and negotiate, compete for and often pay for a licence from the regulator. ISPs, on the other hand, can simply lease infrastructure capacity according to their business needs. They also can establish flexible pricing structures and although they typically must register with a regulator, they do not need regulatory approval to operate. In the United States, Congress passed the Telecommunications Act of 1996 to promote competition, reduce regulation to enable lower prices and higher quality services, and encourage the deployment of new technologies. It ended the monopoly franchises of the traditional local telephone companies and gave the U.S. Federal Communications Commission (FCC) the power to break open these local markets to competition. As a result, the Internet has flourished in the United States. Competition has exploded, leading to lower prices and increased choices. In 1992, there were fewer than 5 million online users in the United States. In 1996, there were 27 million and that number grew to 80 million by 2000. No communications technology has grown faster. Regulatory Laissez-Faire While aided in part by regulation, the Internet’s growth in the United States is also a function of the lack of regulation. The Congress and the FCC have, to date, resisted the calls of local governments and others for increased regulatory control. In a case involving the authority of local governments to regulate Internet access over cable lines, the FCC filed a ‘friend of the court’ brief in support of the industry stating that it was the only agency with jurisdiction over all the current providers of broadband technology. The Commission further noted that inconsistent regulation of different providers of broadband technology could hamper the development of competition between different providers of Internet access. Similarly, Mexico has taken a fairly laissez-faire approach to Internet services. The only requirement there for becoming an ISP is to register the company with the Mexican Federal Telecommunications Commission. The applicant pays a nominal fee for the Certificate of Registration and the Commission acts on it in a relatively short period of time. Once the certificate is approved, ISPs are entitled to do business once they have submitted a brief technical description of the services to be offered and have a concessionaire capable of providing the level of public network infrastructure needed. Once granted, the certificate is valid for an indefinite period of time. In another move designed to open the market, the government recently awarded new licences to competing satellite service providers. In mid-August, licences to land and market satellite signals were granted to PanAmSat de Mexico, a partnership between Mexican mobile phone operator Pegaso PCS and PanAmSat, GE-Americom and the Mexican broadcasting giant Grupo Televisa. These companies can now provide a range of services, including the Internet, to a broader array of Mexican customers. In Canada, the government does not impose significant regulations on the provision of Internet services. Recognising the key role that the Internet plays in economic and cultural development, the government reformed the regulatory framework to encourage the competitiveness of the Internet in a successful plan to enhance and increase the level of Canadian content and improve access to all Canadians. The policy to ‘Connect Canadians’ was supported by the Information Highway Advisory Council (IHAC), a partnership of industry and government. This policy was complemented by the enactment of pro-Internet legislation. This activity, along with similarly driven requirements imposed by the WTO, has helped move Canada from a monopoly environment to one that is vibrant and competitive. Going one step further, the government of Canada plans to issue a policy paper soon in anticipation of the evolution from the Internet as we know it today to the broadband era. It is anticipated that regulators there will adapt the current pro-competitive approach to the provision of broadband services. Moving Beyond the Borders The Internet itself is not constrained by national boundaries, which, of course, is the key to its underlying magic and universal utility. It is important for regulators in the various countries to think beyond their borders when dealing with monitoring the development of the web. Many have leaned more towards industry self-regulation. Another approach would be to adopt international policies and standards with the goal of ensuring that the industry will continue to develop in a constructive fashion. For example, there are proposals by groups, including the International Telecommunications Union and Inter-American Telecommunications Commission, which call for streamlined licensing procedures, particularly involving satellite user terminals and terrestrial radiocommunication users. This would allow satellites to compete more effectively with mobile wireless, terrestrial wireless and wireline service providers. From The World Wide Web to the ‘Web of Commerce’ Consumers have become accustomed to being able to access information at any time from any place. However, that information comes at a cost-time. The web is often referred to as the ‘World Wide Wait,’ with good reason. Broadband technologies should resolve that issue, giving customers the additional functionality that they demand. It is the next frontier and it is not that far off. In an article entitled, ‘The Internet Revolution Has Hardly Started’, IBM official and former Clinton Administration advisor Michael Nelson wrote, “We see on the horizon a set of technologies that will create what we call the Web of Commerce.” Nelson predicts that global high-speed wireless broadband networks providing a variety of communications media will be the primary vehicles connecting people to each other. Similarly, many other industry experts predict that the new broadband networks will become such an integral part of conducting the business of life that it will overshadow the web as we know it today, and will be the underlying engine for all aspects of commerce. Business and residential customers are going to drive companies to develop and refine the technologies capable of delivering new services, and regulators must continue to allow the virtually unregulated exchange between them to take place. Therefore, to allow the most appropriate broadband technologies to be developed, regulators must employ the same kind of regulatory balancing act they have used in dealing with the Internet. Conclusion Over the last few years we have seen the early demise of would-be broadband services companies. The reasons for this vary. In some cases, these companies were unable to raise sufficient financing due to the uncertain nature of the business. In other cases, companies were unable to develop the technology required to support their business proposition. In yet other instances, the business proposition itself was unrealistic. As a result, there are a relatively small-but significant-number of companies with proposals to address the broadband market. With the limited number of ‘real’ broadband systems on the horizon, regulators will need to be even more careful about imposing service restrictions. The challenge will be to implement regulations that facilitate competition and the growth of broadband services while trying to ensure that there is efficient and equitable use of the spectrum, which clearly needs to be managed. If regulations are imposed which restrict the provision of broadband services, consumers will not get the full benefit of what promises to be a new generation in communications. This kind of activity could be particularly damaging in areas where the use of the Internet as a tool of everyday life and commerce is just beginning, such as in parts of Africa, the Asia-Pacific and Latin America.
