Motivation

Model
Case references on telecommunications regulation
Final remarks and further research
Industry-Specific vs. Antitrust Agencies:
a contribution on the institutional arrangement
of telecommunications policy
Why is this important?
Institutional design and jurisdiction overlapping.
Dominance of Industry-Specific Agencies is being reviewed
Large discussion among practitioners.

What is new on this exercise?
Institutional spectrum of choice between industry-specific and
generic (antitrust) agencies.
Regulatory fragmentation with overlapping capabilities
Trade-off Capabilities vs. Transparency
1. Motivation
Why choosing an I ndustry-Specific Agency (I SA) in telecoms?
Technology and market complexity
Statutory powers for new entry transition.
Network specificities and first-mover advantages
Learning and decisions speed
Universal Social Obligations

Why choosing an Antitrust Agency (AA) in telecoms?
Revolving-doors
Consistency for convergence (telecoms-IT- broadcasting)
Homogeneous set of tasks
Larger jurisprudence (commitment, entry).
Easier decision monitoring
Case-by-case approach
Firm rationality constraints:
Firm
Objective Function: Objective Function:

Government
Collusion-proof constraint:

Regulator rationality constraint:

Regulator rationality constraint:
Regulator
Revelation or incentive constraint:

0 > s
) (L R s >
) ( ) (
2 1
0 0 t t F >
q t
1 1
) ( 0 0 >
q t
2 2
) ( 0 0 >
) ( ) (
2 1
0 0 t t L >
Symmetric I nformation
Asymmetric I nformation
2. Model
q t
q t
2 2
1 1
) (
) (
: s constraint y rationalit Firm
0 0
0 0
>
>
{ }
( )
2 1
2 1
where
1 , dist. prob. a with
,
0 0
0 0 0
0
>

e
=
x x
q t U
0 > s
) ( ) ( s t q q S + 0
) ( ) ( ) ( ) ( F T L R s t q q S + 0
Monitoring mechanisms reduce output.
If regulatory costs too high, info rent for the efficient firm.
How high? No regulatory arrangement when
) 1 (
' ) 1 (
'

+

= >
T x
r R
C
Regulation more likely under (i) larger innovation spillover
(ii) more agency transparency and (iii) larger sensitivity to
the firm and regulator transfers
2. Model (cont.)
How is the ISA?:
more effective regulator
harder to be controlled

ISA or AA? Regulatory complexity-capabilities vs. capture-administrative control
ISA always chosen, when capabilities more important than capture.



What about joint jurisdiction (regulatory separation)? Duplicative regulatory costs
+ improved administrative controls, Laffont and Martimort (1999).
ISA has advantages under large cost duplication and smaller improved transparency
1
' '
' '

= >
ISA AA
AA ISA
C
R R
T T

2. Model.
Choice spectrum between industry-specific and antitrust regulation
' ' ' '
and
AA ISA AA ISA
T T R R > <
Pure industry-specific and pure antitrust regimes are almost inexistent
Exposure to new entry increases regulatory intensity. Consistent with
the larger need of regulation when innovation spillover is larger.
3. Case references on telecommunications policy
Telecoms in Europe
Phase1: Monopoly Phase2: Monopoly & Competition Phase3: Competition
Regulatory
Intensity
Time
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Review of EU network industries
from Bergman et al. (1999)
Intermediate
arragements
3. Case references on telecommunications policy
AA-ISA differences in expertise and transparency
WHICH
COUNTRIES?
WHY?
HOW?
Key factor: sector
specificity + complexity
EU
Japan
South East Asia
Latin-America
Small involvement of AA
Weak institutional linkage.
Intermediate
arrangements
3. Case references on telecommunications policy
ISA-AA differences in expertise and transparency
Key factor: sector
specificity + complexity
Key factor:sector vs.
competition specificity.
Criteria misalignments
ISA ass umes the
antitrust model
Explicit codes of
interaction
Small involvement of AA
Weak institutional linkage.
3. Case references on telecommunications policy
EU
Japan
South East Asia
Latin-America
United Kingdom
Brazil
European
Commission
ISA-AA differences in expertise and transparency
Intermediate
arrangements
Key factor: sector
specificity + complexity
EU
Japan
South East Asia
Latin-America
Key factor:sector vs.
competition specificity.
Criteria misalignments
ISA ass umes the
antitrust model
Explicit codes of
interaction
Small involvement of AA
Weak institutional linkage.
United Kingom
Brazil
European
Commission
Key factor: competition
specificity and Adm. controls
(Public sector contracts)
Law and innovation
Court involvement
self-regulation
institutions
New Zealand
Australia
3. Case references on telecommunications policy
ISA-AA differences in expertise and transparency
Intermediate
arrangements
Key factor: sector
specificity + complexity
EU
Japan
South East Asia
Latin-America
Key factor:sector vs.
competition specificity.
Criteria misalignments
ISA ass umes the
antitrust model
Explicit codes of
interaction
Small involvement of AA
Weak institutional linkage.
United Kingom
Brazil
European
Commission
Key factor: competition
specificity and
administrative control
Law and innovation
Court involvement
Public sector
contracts and
self-regulation
United States
New Zealand
Australia
Italy
3. Case references on telecommunications policy
ISA-AA differences in expertise and transparency
Intermediate
arrangements
4. Concluding remarks
Key driver of institutional design:
Government perception of AAs transparency advantages vs. ISAs
expertise advantages.
Case review:
Regulatory reforms respond to such differences.
Some cases respond to changes in the assumed advantages of
each agency.

Limitations and further steps of research:
Government benevolence.
Exogeneity of Government auditing costs.
Specialized regulators with scope overlapping.
More detailed case studies.