The principle of technology-neutrality can be a major facilitator in creating an environment that is accommodating and flexible enough

There is a strong need today, to review the existing regulatory regime in order to keep pace with technological changes blurring the traditional boundaries of telecommunications, broadcasting and online services. But regulating for the future is indeed a challenge, given that the rules of the game are constantly changing.

Although the future is uncertain, existing trends can be strong indicators and there is an urgent need for evolving the right strategy in order to meet the challenge of regulating in an unconventional world of seamless communications. A future regulatory regime should be based on the principles of good governance, self-regulation, technology neutrality, improving quality of services, network security, and empowerment of industry stakeholders, including the consumers. 

Sooner or later, regulators and policy makers will have to deal with the problems of convergence, which is complicated because different countries have different legal frameworks and different cultural traditions. What is legal and socially acceptable in one country may not be so in another. In spite of these differences, because the services like the Internet are available worldwide, we have to find out global solutions to these problems.

To prepare for the future, two approaches could be considered—evolutionary and revolutionary. While the first approach leaves convergence to the process of evolution, the second takes a proactive stance and provides a long-term plan to systematically utilize convergence as a tool for proper planning and policy making.

In the above context, Malaysia is a good example worth quoting. The need for redesigning all the regulatory instruments and policies was envisaged as early as in 1996. Thus, many strategic initiatives have been undertaken till date, among which is the Communications and Multimedia Act (CMA) 1998. The CMA provides an institutional and regulatory framework to harness the potential of convergence and to drive the growth of the communications and multimedia industry. 

Licensing and Regulatory Framework
The development of digital technologies raise a number of challenges for policies and regulations. Network owners can face a wide and conflicting array of regulations on the delivery of telephony, broadcasting and the Internet, despite the fact that all are being delivered over the same network. The same service delivered over different network may face different regulations.

These developments may undermine consistency and can bias outcomes in favor of one type of service, technology or service provider. At the same time, the existence of multiple regulating agencies create inefficiencies and add ambiguity to the communications and multimedia sector. 

The first and foremost need for regulating for the future should be to harmonize the role of multiple agencies responsible for regulating the converging sectors of telecommunications, broadcasting and online services. Setting up of an institutional framework for regulating the communications and multimedia (C&M) sector should be a priority, which can be accomplished by establishment of a converged sector regulator. 

The next step is to design the horizontal framework in a technology-neutral manner. It obviates the need to issue a new license each time there is a new high-tech product or service available in the market. Service providers who are still being licensed in accordance with vertical services platforms have to be migrated into the newly converged licensing regime. In practice, this takes time, concerted effort and patience. 

This single framework, to promote the growth of convergence activities, should cover the traditionally separate sectors of broadcasting, telecommunications and online services. Also, the licensable activities need to be classified under the four generic heads of network facilities providers (NFP), network services providers (NSP), applications services providers (ASP), and content applications service providers (CASP).

This is not only a matter of drafting a piece of enabling convergence legislation. A whole set of policies and other measures are required for its proper execution. In addition, there must be transparency when regulators devise instruments that dictate policies and regulations. In the process towards transparency, industry participation is an important ingredient in the quest for instilling greater confidence and certainty in policy and regulatory development.

As such there is a constant need to review the provision of the framework and its subsidiary rules and regulations. A model that may be suitable at the moment may need to be revamped or at least reviewed from time to time, in view of new market shifts. 

Technology Neutrality
Given the convergence between fixed and mobile, broadcasting, telecommunications and online services, regulators should ensure that the same regulation applies to all operators. This will ensure fair competition and non-discriminatory behavior that is essential to protecting customer interests. Technology-neutral regulation is a very important concept and would rationalize development of competition in a world of convergence and technological change. Like services should be treated in a like manner. For example, voice services should be treated equally, whether they are based on circuit switching or on packet switching. Internet access services should be treated equally, whether they are supplied on fixed networks, mobile networks or broadcasting networks.

The principle of technology-neutrality can be a major facilitator in creating an environment that is flexible enough to accommodate any new advancement in technology without promoting any specific technology per se. It can ensure that the framework does not become obsolete and remains relevant with the evolution of ever-changing technologies. This will future-proof the framework. 

To site an example of technology-neutrality, if we take the case of 3G, it is traditionally required in other jurisdictions that new 3G licenses will be issued. But in Malaysia, existing network licensees who provide 2G services will not be required to apply for new 3G licensees if they have sufficient spectrum and capacity in terms of licensing requirements. Henceforth, 3G, in the case of Malaysia, relates to the selling of new spectrum blocks rather than issuing new 3G licenses. This equates to considerable savings on the part of the licensee and creates fewer problems each time a new technology is introduced. 

Self-regulation
Another important mechanism towards regulating for the future is to establish a regime of industry self-regulation, supported by fallback regulatory safeguards that may be administered by the regulatory body. This will enable active participation in the process of policy-making, regulate the activities of members, and maximize their benefits in line with the policy objectives.

Ultimately, it will minimize government intervention, reduce costs and promote industry compliance.

Under the self-regulation process, various industry forums could be entrusted with the responsibility to formulate and implement voluntary industry codes. In case a voluntary code is ineffective, the regulatory authority should determine the standard.

Access and Digital Divide
Access to advanced digital services at affordable cost implies widespread availability of competing services and of the networks used to deliver them. Unfortunately access has not been equitable so far and the world average is only about 36 and this primarily covers telephone line services. The digital divide in many parts of the world seems to be widening instead of getting bridged. 

How can we improve access and bridge the digital divide? Success will depend on the proper allocation and innovativeness of financial resources. Technology must not be seen as an end in itself and investments in technology must go far beyond funding for hardware, software, and wires. Efforts should be made in developing programs that help people and organizations understand and apply technology. Initiatives should encourage participation in and by low-income communities. Meaningful change will happen when people apply technology with tangible economic, educational, and social end results—or outcomes—in mind. These measures will provide requisite thrust to improve access and help bridging the digital divide. 

Next-gen Interconnection
It is universally recognized that interconnection is the key to effective regulation. To promote competition, based on a level-playing field, a fair, transparent and non-discriminatory interconnection between service providers should be ensured. Interconnection arrangements stipulate a set of techno-commercial terms and conditions involving various operators. Technical conditions involve specification of quality of service on each of the technical interfaces, so that end-to-end quality of service could be guaranteed to customers in a multi-operator environment connecting heterogeneous networks such as PSTN, ISDN, mobile 2G, 3G, ATM, Frame Relay, and IP. 

A change in technology from circuit-switched to IP-based networks may affect the cost of providing and running networks and may alter the basis on which the costs of some key interconnection functions such as call origination and call termination have been based. This may require that regulators not only revise the figures that they determine but also revise the basis of determining those figures. The present interconnection charging arrangements are based on an exact measurement of the traffic flowing from one network to another network in terms of minutes of use of the network elements. But the future network traffic will be predominantly IP, where the traffic may be measured based on amount of information transacted. 

Sophisticated inter-carrier charge billing systems based on CCS7 signaling have been implemented under the aegis of the regulators in some developed countries such as Japan. No such models are available for an inter-carrier billing system, for a VoIP-based long distance networks. IP products are particularly deficient in this regard. VoIP gateways capable of network management, security and number translation or directory function will be required. In contrast to traditional connection-based billing based on call detail records (CDRs), future systems will require charging based on concepts such as content-based, QoS-based or value-based, using new IP detail records (IPDRs). 

Finally, the future interconnection framework should be flexible and forward looking, based on principles of non discrimination, transparency, equitable allowing the creation of attractive services and ensure end-to-end seamless service provision, ensure interoperability between and within the different policy domains, allowing phased migration towards next-generation networks 

Competition Laws and Asymmetric Regulations
The intervention by the government through laws and policies on competition should be made only in case the market fails to limit abuse of the market power, or to improve economic efficiencies. These interventions can be of two types:

• Modifying the behavior of a firm or a group of firms. This includes collusive practice or agreements. 
• Those affecting the market structure of the industry. This for instance, includes mergers of two major industry players. 
  Here, the role of sector-specific regulator with that of the general-competition law authority can be compared and contrasted in many ways. Sector-specific regulation typically involves both prospective and retrospective activities.

Competition authorities, however, tend to exercise their powers on a retrospective basis and with a view to correcting problems that result out of actions of particular firms. 

For example, Malaysia has come out with the guidelines on how the Commission will apply the competition law concepts such as ‘substantial lessening of competition’ and ‘dominant position’. The guidelines identify the concepts and analytical processes used in evaluating certain conducts. There could be instances when the dominant players might indulge in anti-competitive behavior or abuse of market powers. In such cases, application of asymmetric regulation could be warranted to even out the differences between the dominant players and the new entrants. 

Spectrum Policies
Even though the move to the digital era will allow a more efficient use of spectrum, it will continue to remain a scarce and valuable public good because of the range of competing uses. This was clearly illustrated in the recent auctions for 3G licenses in a number of European countries. The social cost of inefficient management and use of spectrum increases accordingly.

Convergence is likely to change the relative value which different uses place on spectrum. It will also break the boundaries among different uses to which spectrum can be put. In this environment, it is necessary to reassess whether the existing allocation of spectrum among various users will maximize benefits in terms of both revenues earned and the social objectives set by the governments, while ensuring that spectrum reserved for various services is used in the most efficient manner. 

License conditions should not define so narrowly the uses to which the spectrum can be put to such that the operator is unable to take the advantages of technical advances. While regulators may wish to set some minimum conditions in terms of the level of services that must be provided, operators should be able to provide additional services if technology and efficient management of the spectrum so allows.

In summary, the future regulatory regime should be based on the principles of good governance, access with equity, quality of services, network security, and empowerment of industry stakeholders including the consumers. Towards this end, the process of policy making should follow the principles of transparency, non-discrimination, technology neutrality and self-regulation. Convergence is the goal here, and the means in itself too, as it implies a single organization capable of discharging regulatory responsibility in a coordinated and structured manner.

Sameer Sharma, advisor, MCMC, Malaysia