Regulating Telecommunications

The proposed new Telecommunications Bill is not a perfect document. But Vanuatu is not a perfect place. Considering the limited resources it can bring to bear, the great gains it’s made in improving communications nationwide are truly commendable.

[This week’s Communications column for the Vanuatu Independent.]

Last Thursday, members of the IT industry, researchers and interested members of the public got together with Ministry of Infrastructure and Public Utilities to discuss proposed new laws governing Vanuatu’s burgeoning telecommunications sector.

At issue was a Bill to define the precise role of the Telecommunications Regulator. Designed to supplement the existing Telecommunications Act of 1989, it outlines in detail the extent of the Regulator’s mandate to influence the newly-liberalised telecoms market.

The draft Bill describes an environment wherein the Regulator has wide latitude to impose his will on telecoms operators if they misbehave. Among other things, he can enforce fair and equitable access to rare or unique infrastructure (known as bottleneck resources), he can intervene if telecoms operators are deemed to be offering preferential or prejudicial prices to others and if necessary he can enforce tariff or pricing regimes on carriers if they don’t play fair.

Viewed in the light of their exemplary track record, the draft Bill reflects well on both the Ministry and the Regulator. To date, their attitude has been to let market forces work with little if any intervention. They have nonetheless made sure that the regulatory stick they hold in reserve holds real clout. The proposed Bill gives this all the force of law. Rather than relying in the language of various negotiated agreements, they’ve outlined a set of rules that applies to anyone and everyone operating in the telecoms sector.

Others aren’t so sure that a big regulatory stick is such a good thing….

Digicel Pacific’s General Counsel David Dillon objected vociferously to the draft Bill, remarking that investors need more than verbal assurance that the Regulator’s broad mandate won’t be abused in the future. While expressing all confidence in the incumbent Interim Regulator, Dillon nonetheless contended that you can’t take good will to the bank.

Telecommunications is an expensive business, he explained. Digicel’s investment to date is close to 3.5 billion vatu, with more planned. The benefits for Vanuatu are undeniable, he said, with an estimated total of 100,000[*] people now actively using one or other of the mobile telephone services.

What is required, Dillon suggested, is a regime that makes it more difficult for the Regulator to intervene in the market without good reason. He repeatedly mentioned the need to establish a ‘clear threshold’ for action. Put plainly, the Regulator should not be able to intervene in the market unilaterally and arbitrarily.

According to Dillon, one way to ensure this is to make the Regulator’s role more reactive. If, for example, the Regulator could only intervene following a formal complaint filed in accordance to a high standard of evidence, then a telecoms operator could be assured that they wouldn’t face unduly high legal and consulting fees spent fending off frivolous complaints designed only to slow them down and make them less competitive.

Dillon also suggested that the Regulator have a more clearly defined ‘toolkit’ of actions available to him. The range of available remedies should be defined by the circumstances, he said. Again, this would have the effect of ensuring that some future Regulator doesn’t run roughshod over the marketplace.

Lastly, Digicel complained about the lack of higher authority. As the Bill is written, the Regulator’s decisions can be appealed to the Supreme Court, but the court can rule only on whether the Regulator followed the correct process. It can’t rule on whether the substance of his decision was right or wrong.

Why not follow the European Union model, asked Dillon. Current EU regulation allows for the creation of an appeal board composed of industry experts. This board can rule not only on the process, but they can also decide whether the substance of the decision is correct.

State Law’s legal advisor replied that this approach had been considered, but was ultimately rejected due to cost considerations, along with concerns about sovereignty. This technical expertise necessary simply doesn’t exist in Vanuatu, he maintained. What would people think if we were seen to be outsourcing our legal decisions overseas?

While TVL’s Managing Director Ian Kyle had little to say at the meeting itself, he confirmed that he had already voiced reservations about the regulatory framework.

Digicel, he claimed, “has only 50 sites in operation and a relatively modest US $30m investment. TVL has 260 sites across the country, has invested hundreds of millions of US dollars into our network, and applies a further US $10m each year” in capital and operating expenses. (Digicel claims 63 operative sites in Vanuatu.)

“We therefore endorse the essence of this point, as do our shareholders.  On the other hand, we are confident, from our prior negotiations with Government, that they too understand the matter.”

TVL were more reticent about the issue of appealing regulatory decisions. Kyle stated that they and their shareholders would rather avoid litigation due to the expense and inherent uncertainty of the process, but hinted that other players might not be so inclined. To this end, he said, a clearly defined framework would help everyone.

Reiterating his confidence in the government’s intentions and ability, Kyle nonetheless characterised the proposed Bill as a ‘work in progress’ – a commendable effort that required further clarification before it could be considered properly finished.

Other parties from civil society and local research institutes expressed overall confidence in the government’s commitment to building a healthy and vibrant telecoms market. Nikunj Soni of the Pacific Institute of Public Policy made the distinction between policy and legislation, suggesting that a clear statement of the Government’s position and intentions would do more to clarify the Bill than any additional legalese.

Vanuatu has an excellent track record in telecoms regulation, he maintained. Far better, in fact, than past efforts, like the much-maligned VMA, for example. One need only consider the Bill in light of these past failures to see that important lessons have been learned, and most – if not all – of the critical protections against abuse or politicisation of the Regulator’s position will be in place when the Bill becomes law.

DPAA’s Andonia Piau-Lynch was largely supportive of the work the government had done to date, but admonished them that market forces should not be the only consideration when striving for universal access. She encouraged all parties to remember the disadvantaged and to ensure that they too have equal access to our newly abundant communications services.

Legal wrangling notwithstanding, Government representatives were glad of the opportunity for robust engagement on these important issues. John Crook, Interim Telecommunications Regulator expressed satisfaction with the process to date, and said, “I expect that the government and the advisors will take the major points into account as the law drafting is finalised.”

The proposed new Telecommunications Bill is not a perfect document. But Vanuatu is not a perfect place. Considering the limited resources it can bring to bear, the great gains it’s made in improving communications nationwide are truly commendable.

Contrasted with other legislative efforts (like the recent Employment Act amendments), its efforts in telecommunications are truly laudable. Much work remains to be done, but so far, Vanuatu’s record in this area is world-class. If things continue along this track everyone, investor and consumer alike, can be confident about Vanuatu’s status as a reputable and reliable place to do business.

[*] Note: This is the first time we’ve seen a public pronouncement from either telco operating in Vanuatu with regards to usage levels. I subsequently asked Dillon how he arrived at that figure. He stated that it was a rough estimate based on what Digicel knew about its own usage levels and on the call levels they saw going to TVL numbers.

Others have expressed doubt about the number, but without hard evidence to work with, their suppositions were based more on whether the number ‘feels right’ (i.e. if it matches whatever anecdotal evidence they have available to them). I provide the number here uncorroborated, though I assume it must have some basis in fact if Digicel is willing to use it in public.

I’ll write more about the significance of this number in a separate post….

Here’s a more detailed analysis.