The Economics of Self-regulation in Telecommunications under Sunset Legislation

1. The Economics of Self-regulation in Telecommunications under Sunset Legislation Andreas Freytag and Klaus Winkler, University of Jena, Germany ITS Berlin, 06.09.04

2. Overview • Background and problem • Sunset Legislation • Self-regulation - an efficient approach combined with Sunset-Legislation? • Conclusions The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

3. Background and problem • Overregulation is seen as major obstacle for the development of markets • However, radical changes in regulatory regimes cause problems • A combination of different regulatory instruments could be an efficient solution for the market • The search is on for an efficient regulatory tool The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

4. Sunset Legislation (I) • The changing benefits of regulation over time • When is how much regulation necessary? • Problem of Capture • Ex ante clause could be helpful • What is Sunset Legislation? • Control mechanism for regulation • Finding the right indicators is difficult The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

5. Sunset Legislation (II) • Some experience with Sunset Legislation • No large measurable effects visible • At least expansion of regulatory regimes is hampered • Pros and cons of Sunset Legislation in telecommunications regulation • Pros: Faster, chance for trials, could discipline the regulator, keeps incumbent from making use of market power, rationalizes the legislative process • Cons: No indicator available, different rules for different market segments necessary, even more bureaucratic efforts The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

6. Sunset Legislation (III) • Normative conclusions: basic requirements of sunset legislation in telecommunication • Contestability as the goal • Assessment of need for regulation and regulatory body should be made simultaneously • Find categories that describe the different speeds of deregulation of different segments • Members of sunset committee must be independent and • should also be public • Sunset Legislation needs support to be effective The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

7. Self-regulation– an efficient approach combined with Sunset-legislation? (I) • Dynamics of regulation: different regulatory and “de-regulatory” regimes for different time phases • Self-regulation does not imply no regulatory backing • Different services might need different regulatory processes The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

8. Self-regulation– an efficient approach combined with Sunset-legislation? (II) • Cases: The mobile network-operators, AKNN and Billing • In areas with no or less regulation self-regulatory regimes are common, such as in the mobile sector • Association agreements are common especially for technical issues • A combination of Sunset Legislation and Self-regulation is the new billing contract of Deutsche Telekom The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

9. Self-regulation– an efficient approach combined with Sunset-legislation? (III) • Conditions for successful Self-regulation under sunset legislation • Framework needs to be made transparent • Necessary to establish a common goal for all actors • Strategic incentives of the actors must be undermined (possibly by the regulator) • Sunset Legislation together with Self-regulation proves to be effective if certain, but realistic conditions are met The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

10. Conclusions • Self-regulation is not toothless if combined with Sunset Legislation • Different market phases need flexible tools • Actors are more likely to reveal what they can do for the market with Self-regulation • Especially in a fast market such as Telecommunications the possible gains of Sunset Legislation together with Self-regulation are worth the effort The Economics of Self-regulation in Telecommunications under Sunset Legislation Klaus Winkler

11. DISCUSSION The Economics of Self-regulation in Telecommunications under Sunset Legislation Andreas Freytag and Klaus Winkler, University of Jena, Germany ITS Berlin, 06.09.04