Markets do not always work well. Where regulators step in, economic analysis is critical to achieving better outcomes.
Many sectors - including telecoms, media, energy, payment systems and transport - rely on a mix of competition and regulation to deliver good outcomes for consumers.
Whilst traditional utilities have opened to competition, parts of their value chains will always remain difficult to contest. Economic regulators need to tread carefully in a complex world of trade-offs.
Consumers may need to be protected against market power but, without incentives for competitive entry and infrastructure upgrades by suppliers, we will be stuck with the status quo. Many regulated sectors are being transformed by technological change and regulation needs to keep up.
Increasingly economic regulation goes beyond questions of price control. Do consumers have adequate information to make choices? Do they face costs of switching providers that could be lessened through enforced interoperability? Are incentives to switch to new generations of telecoms services adequate and how do we protect users of legacy services? Do consumers need intervention to be able to watch their favourite national sports events?
We have worked extensively with regulators around the world in designing regulatory measures, undertaking market reviews and assessing regulatory impacts. We have supported regulated firms in drafting submissions and providing expert testimony in leading regulatory disputes.
To Low-Earth Orbit and beyond
The range of use cases for satellite communications is increasing rapidly, as is the number of satellites in orbit with the deployment of low-Earth orbit (LEO) mega constellations like those operated by Starlink, Kuiper, and OneWeb.
We were asked by a European regulator to review its satellite earth station regulatory framework. We relied on analysis of existing licence data, international comparisons and stakeholder interviews to come up with proposals that included a concave-in-bandwidth pricing model – to recover the regulators administrative costs without pricing off either smaller, resource-limited projects or new uses of high frequency spectrum – and a process for notification of new licence applications that promotes operator coordination.
This revised framework offers a level playing field for the diverse set of satellite operators and ensures that the country remains an attractive environment for innovative spectrum use.
Not rich enough in fibre...
Fibre-to-the-home (FTTH) is a crucial part of meeting the European Commission’s ambitious Digital Agenda targets in relation to ultra-fast broadband – but roll-out so far has been slow. This is to a large extent because of the challenging business case for putting fibre in the local loop, which requires huge investments and offers highly uncertain returns to investors. In addition, full benefits from fibre may only become apparent when there are services utilising higher bandwidth, but development of such services depends on fibre take up, creating a vicious circle.
A creative approach to regulatory policy is required to create the right incentives for fibre roll-out. Promising a light regulatory regime for fibre may have little effect if regulated copper prices constrain willingness to pay for fibre. Meanwhile, encouraging co-investment of service providers may help but could then raise concerns about discriminatory access. We looked at the various options for dealing with these challenges in a report for the FTTH Council Europe, which is available here (with accompanying slides).
Calling for service
Non-Geographic Numbers (NGNs) supporting the collection of revenues through call charges are an essential enabler for the provision of services over telecoms networks. However, uncertainty over the charges that apply when calling such numbers along with complaints from service providers about excessive wholesale prices for their use can discourage their use. This led ComReg (Ireland) to carry out a Strategic Review of NGNs. Underpinning this review was research conducted by DotEcon to investigate retail market conditions and identify the potential need for wholesale remedies.
We combined a conceptual assessment of why originators might have market power with empirical analysis, leading to recommendations for regulatory intervention at both the retail and wholesale levels of the NGN value chain. In the retail market, we recommended reforms to eliminate unnecessary number ranges and to make retail pricing simpler for consumers. In a separate report we set out evidence that originator market power in NGN had been exercised, and proposed various options for wholesale remedies.
On the back of DotEcon’s assessment and recommendations, ComReg has implemented several changes to the NGN market in Ireland. The number of NGN ranges has been reduced from five to just two, and the charge for calling non-Freephone NGNs is now capped at the price of a calling a geographic number. ComReg has also chosen to impose price controls on wholesale charges set by originating operators, supported by a transparency obligation that requires origination rates to be publicly available.