Europe’s ICT regulators have an identity crisis on their hands. Their objective should be laissez-faire regulation-as-required, yet most regulators are interventionist by inclination. At the same time, those people who believe in a free market still pillory regulators for failing to intervene often enough, swiftly enough or effectively enough. Few of us support politically-motivated regulation, but some politicians still see telecom regulators as levers of industrial policy (and some regulators relish that role).

In the midst of this convoluted and contradictory environment sits the regulator, tugged on all sides and in all directions by commercial and political vested interests. This often turns into a case of ‘lynch the linchpin’.

Quis custodiet...?
In the casualty-strewn wreckage of the technology sector, most regulators appear to have got away with, at worst, minor cuts and bruises. Yet is it too much to hope for a degree of Redux in the field of regulatory performance, which in turn could stimulate a broader Redux across the industry? To understand how the latter might come about, you need to appreciate just how badly most regulators fouled up in the period when brief boom turned to bathetic bust in the two decades running up to the new millenium.

Notwithstanding the potential for schizophrenia outlined at the beginning of this article, regulators by and large fumbled the ball when it came to understanding and unleashing the true force of competition. Politicians may have worked long, hard and reluctantly to create a climate of competition in telecom. But, to disinter a common cliché at the time, this resulted in re-regulation rather than deregulation.

Optimists would vouchsafe that it was ‘liberalisation’, and to a degree this was true. But the outcome was not ‘free competition’ but ‘regulated competition’. In markets where ex-monopolists casually wield power that is not just significant but overwhelming, any tardy or indecisive or inept regulatory action becomes the overriding force. In the telecom markets of Europe and beyond, this is exactly what took place.

Regulators were preternaturally inclined to favour the incumbents on spurious grounds such as universal service. If they were not so inclined, parent governments could put pressure on them to see the world their way. Indeed, these parents treated their regulators as nannies for their recalcitrant offspring, instructing them to suspend judgement in order to indulge these mischievous (but well-intentioned!) telcos.

...ipsos custodes?
It is harsh – but not necessarily wrong – to blame regulators for the failure of the first flush of liberalisation in telecom. On the one hand, they were quite willing to endorse technically superficial criteria for selecting wireless operators, especially when it came to 3G. On another hand (do not speculate on how many hands your average regulator can stick on the end of its tentacular limbs), the failure to facilitate, let alone promote, local loop unbundling probably sounded the death knell for an entire category of first-wave new entrants.

What we witnessed in scenarios such as these was a position in which regulators, whether motivated by malice or Machiavellian intent, succeeded in sending more signals to the market than new entrants could ever hope to. For the alternative carriers, themselves no strangers to the concept of bumbling ineptitude, the regulators turned into ‘hanging judges’.

Intergovernmental bodies like the ITU and inter-national umbrella regulators such as the European Union might conceivably have dealt with this. They failed to do so with the ITU looking particularly irrelevant and the EU trying its best to catch up with the sorry example set by the gnomes of Geneva.

To be fair, the EU is currently in the midst of a re-examination of its approach to regulation of all things, with the implicit aim of freeing itself from the ‘bureaucrat/Eurocrat’ tag. One of its seven policy steps comprises “looking at possible policy options to meet the objectives, making sure to always consider the option of taking no action at all at EU level, and examining alternative approaches to regulatory actions.” That’s OK then.

So regulators in ICT are browbeaten by commercial combatants, bullied by governments, litigated against by lobbyists, pressured by consumer groups and yet they have their hands tied behind their backs by the Queensbury Rules of such engagements. Message to regulators: hit back.

Politicians now talk of ‘impact analysis’. I can think of one form of impact and where it should be directed that would keep most of the parties listed above quiet for a while.
Jim Chalmers

Tomorrow: should shareholders shun the shambles of ICT investment?