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Strategic Asia Telecom Series 97: 'What are the Drivers Behind Regulatory Modeling for Asian Markets?'

Ms Valerie D'Costa, Chief, International Affairs Telecommunication Authority of Singapore (TAS) Speech - Strategic Asia Telecom Series 97: 'What are the Drivers Behind Regulatory Modeling for Asian Markets?'

Ms Valerie D'Costa, Chief, International Affairs
Telecommunication Authority of Singapore (TAS)
Speech - Strategic Asia Telecom Series 97: 'What are the Drivers Behind Regulatory Modeling for Asian Markets?'
Singapore, 20 November 1997

1. The Asian Landscape

This conference is certainly timely, in view of the extraordinary changes shaping the telecommunication landscape in the Asia-Pacific region; forces of change that are driven not only by policies and developments within our own markets, but also by global forces such as those we are evaluating at this conference; namely, competition, the advent of new technologies and potentially 'borderless' services, and global alliances among service providers.

a) Continued Growth

That these changes are taking place in a region of enormous potential and scope is unquestionable. Asia continues to be a star performer. According to the ITU World Telecommunication Development Report for 1996/97, more than half of the world's fixed telephone lines are being installed each year in Asia. The region accounts for two-thirds of global telecom expenditure

Regulators and policy makers in the region accept that without the fundamentals - without a sound communications foundation upon which to base future economic activity - efforts of Asian nations to take their rightful place in the new info-communications age will be hard to achieve.

b) Continued Investment

Certainly, recent policy developments bear this out. Several Southeast Asian countries have announced they will proceed with plans to develop a national information infrastructure, despite the recent turmoil in their financial markets. Malaysia's Multimedia Super Corridor (MSC) will proceed as planned. Indonesia's information infrastructure project, Nusantara 21, was not among the list of national projects the Indonesian government intends to reschedule or postpone.

In spite of the recent upheaval in the financial markets of the region, experts have predicted that investment in info-communications infrastructure and services will continue to increase steadily over the next five years, albeit on a more cautious and measured scale. Certainly, strict priorities will have to be set and adhered to where the financing of these important projects are concerned.

c) Continued Liberalisation

We can also be confident that the region's plans to liberalise its telecommunication markets will proceed apace. In Thailand, just two weeks ago, a Telecom Master Plan was approved by the Thai Cabinet after several years of delay. The Master Plan provides for a fundamental restructuring of the sector as well as the progressive liberalisation of the Thai telecommunications market.

The Thai experience is part of a growing trend of liberalisation that has greatly spurred regional growth. Teledensity grew 8.8% in Asia between 1990 and 1995, twice as fast as any other region of the world. With competition, there has been impressive growth in mobile services. In 1990, the region's 1.2 million cellular subscribers accounted for 15% of the global total. By 1996, there were 33.2 million subscribers, one third of the world's total.

I think its fair to say that the countries of the Asia-Pacific region appreciate the benefits of liberalisation and of competitive markets. That's not an idea they need to be sold on any more. However, if the recent talks on basic telecommunications at the World Trade Organisation are any indication, Asian countries will embrace liberalisation at a pace that suits them and in a manner that nurtures their nascent local telecommunication industries and helps their operators to thrive and compete as players in the new global order.

2. Drivers behind Regulatory Modeling in Asia

These then, are the basic tenets which I believe we can say will mark the development of policies and regulations in the Asia-Pacific region over the next few years. These policies will underpin the region's response to dramatic changes in the industry which we regulate; changes such as technological advancement, globalisation of services and the recent trade accord on telecommunications. These phenomena will be the drivers of the directions taken by Asia-Pacific regulators.

a) Technological Advancement

The rate at which technology develops and renews itself has created an incredible paradigm shift for us regulators. Technology has increased capacity, lowered costs and made possible the delivery of innovative applications over non-traditional media. Internet telephony is a good example. The convergence of telecommunications, broadcasting and computing technologies has led to the creation of high-speed, intelligent networks that can carry large volumes of voice, video, text, data, images and full-motion video. Multimedia has arrived!

The Asian response to this phenomenon has been mixed. Several countries have begun building infrastructures that can link their businesses and citizens to the global information network, in the belief that how well they harness and process information will ultimately determine their future economic growth and development. I've mentioned the Malaysian MSC and Indonesia's Nusantara 21 projects. You may also have heard of the Philippines' Subic Cybercity initiative. Here in Singapore, our high-speed broadband network, Singapore ONE, was launched in June this year by our Prime Minister. Singapore ONE's ATM backbone will connect to numerous local access networks that cover the entire nation using advanced HFC and ADSL technologies. We expect that all offices and households in Singapore will be able to access Singapore ONE by the end of next year.

But other countries in Asia are still grappling with acute problems of low teledensity and large underserved rural areas. Their immediate concerns are not hooking up to the burgeoning global information infrastructure or ensuring high-speed Internet access, but rather, placing a telephone in every village. Perhaps this illustrates in fairly stark terms the immense diversity within the region and the sheer impossibility of prescribing one regulatory model for the whole region. Markets differ widely in size, maturity and demographics. So too, should the regulation of those markets.

But perhaps the one common response regulators and policy-makers in Asia could have in an industry undergoing such profound technological change is to formulate policies which effectively harness the best and most reliable technologies available. This in turn, depends on the needs peculiar to each country and its people, whether it be a small, densely populated city state like Singapore or a large, developing country like China or India. As technology becomes more affordable and accessible over time, regulators should ensure that their policies and practices encourage the rapid implementation of what's newly available and the continued upgrading of, and re-investment in, networks and services.

b) Globalisation

The growth of the global marketplace has also been, and will continue to be, a key driver of regulatory change in the region. Multinational corporations take into account the telecom infrastructure and services available in countries when considering setting up regional hub operations. And as business transactions become increasingly independent of geography, the need for reliable communications and international connectivity becomes all the more important. Customers are demanding secure, seamless end-to-end services. Asian regulators' policies cannot be thought out in a vacuum, they have to take due account of larger national economic goals.

The globalisation of the telecommunication service industry also poses new challenges. Now that services can be provided across borders, the need for regional regulatory cooperation becomes all the more necessary. The need to harmonise regulations and to minimise regulatory obstacles to these services has become a key concern of the telecommunication regulators of ASEAN, who meet annually to exchange views and co-operate on issues such as type-approval of telecommunication equipment and the allocation and use of the radio frequency spectrum.

c) Telecommunications Trade Liberalisation

Global and regional trade liberalisation pacts for telecommunications have been concluded, or now being negotiated, at fora such as APEC, ASEAN and the WTO. The historic WTO Agreement concluded in February this year marks a particular watershed. It established a liberalisation schedule and a set of common regulatory principles which WTO member countries have ascribed to.

The agreement, which comes into effect in the first of the year, will spur Asian countries' liberalisation efforts, consistent with their WTO commitments. It will also serve as a blue-print for regulators who are now progressively opening their markets. Principles such as ensuring adequate competition safeguards, transparent and non-discriminatory interconnection principles, number portability and accounting separation will also go a long way in instilling confidence in the growth of the sector and in attracting foreign investment.

3. Regulatory Models in the Region

Given the drivers that are affecting regulation of the telecommunication sector in Asia, is there then an 'Asian' model of regulation? I don't think so. I've already alluded to the vast divergence in the region: social, political, cultural and economic. With such widely differing levels of development in Asia, there can be no uniform regulatory approach. Nor need there be. Each country has to find a regulatory structure suited to its unique conditions.

A quick look at the various regulatory regimes in the region proves my point. In New Zealand, there is no regulatory authority. Competition and commercial law regulates the market and ensures universal service. In Japan, regulatory power resides within a Ministry of Posts and Telecommunications, as is also the case in Indonesia. The National Telecommunication Commission in the Philippines, the Office of the Telecommunications Authority of Hong Kong and the Telecommunication Authority of Singapore are structurally separate from telecommunication ministries. Regulators' mandate vary too: for example, here in Singapore, TAS formulates policy and regulates the sector, but it is also charged with promoting and nurturing the local telecom industry.

So forms may vary, but again, I'd suggest that this isn't important. Regardless of how they are structured, regulators have in common the objectives of protecting consumers' interests and of developing a stable environment for the industry to flourish. Users are our customers. Regulators have a common objective of ensuring choice, quality and value for money for consumers.

The industry is also our customer. Operators need business certainty, and this is achieved by transparent rules and procedures. This is especially pertinent in countries where national operators are still state-owned.

4. Future Challenges

The relentless change in the industry will continue unabated. That alone will keep us regulators on our toes! New and innovative services, new technologies, new operator alliances will all pose regulatory challenges and will require fresh and innovative solutions. The task we have will become increasing complex.

a) Setting Transparent, Fair and Stable Rules

One of the biggest challenges for a regulator, whatever structure it chooses to adopt, is the creation of a clear and stable regulatory environment. To do this, countries in the region should adopt as transparent as possible a regulatory and rule-making process. This is especially critical in guiding the transition from monopoly to a competitive marketplace.

The initial process of licensing new operators is in many cases, the easy part. The more onerous task is ensuring that the new entrants have the requisite "level playing field" to successfully compete upon with the incumbent. In Singapore, TAS is now formulating clear rules on interconnection, accounting separation, price control, quality of service standards and dispute resolution in preparation for competition in basic services.

b) Flexibility

Another challenge we face is maintain our suppleness! Regulators must be flexible in their regulatory policies, so that they facilitate, rather than obstruct, the emergence of new services and applications and so that technology can be fully exploited to meet existing telecommunication needs. Adaptability is key. Besides, by the time we perfect a regulatory response to a particular issue, chances are technology will render at least some parts of that policy obsolete in no time at all!

c) Finding the Right Balance

Regulators will need to guard against over-regulation so as not to hamper the introduction of innovative services and inadvertently discourage potential investment. Governments will need to find a balance between protecting their local telecommunication industry and opening their markets to foreign operators.

d) Enhancing Cooperation with Other Regulators

Insofar as operators are pooling their resources and expertise, regulators should do likewise. There is immense value in enhancing cooperation with other regulators, in stepping up dialogue and where possible, in adopting harmonised regulatory policies.

5. Conclusion

What is required of regulators is the ability to think outside the box, to constantly challenge ourselves to develop creative regulatory policies. The norms in regulating the plain old telephone service (POTS) fall apart when applied to the impending multimedia age. Regulators have a key role in setting the scene for tomorrow's info-communications age. The dynamism of the telecommunication industry spurs us to think ahead - and we must be prepared to change, to try something new, and learn from our mistakes.