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The Public Interest in Telecommunications and the Internet

Dr. Maria Michalis

University of Westminster

This paper examines the public interest in relation to telecommunications and internet. It aims to

establish the importance of these two sectors and show the interdependency of three elements:

access to the physical infrastructure, access to content, and skills. The paper first sets out the ideal

scenario and then explains why telecommunications and the internet matter. It moves on to define

the public interest in telecommunications and the internet, and goes on to touch on some important

issues like investment and universal service. It ends with a summary of the main points.

The ideal scenario as far as telecommunications and the internet are concerned can be summarised

in three words: everyone, everything, everywhere. Everyone should have access to all available

content, services and applications irrespective of where s/he is.

Why do the telecommunications and internet sectors matter? Telecommunications and the internet

present significant benefits. They contribute to economic growth and may promote social cohesion

and equity, political participation, and cultural diversity. Before we briefly discuss these benefits, a

point of caution. Telecommunications and the internet are not a panacea but rather mere enablers.

For instance, they may facilitate the process of democratisation but they are not sufficient in

themselves to cause economic, social, political or cultural change. Rather they are facilitators. Put

differently, broader transformations in the economic, political, social and cultural spheres are

significant and mutually reinforcing in any democratisation effort, and I would argue more significant

than changes in the narrow sectors of telecommunications and the internet.

In terms of benefits, it is not just that telecommunications and the internet have themselves

significant growth potential but importantly their optimum development contributes to the growth

of other economic sectors. In addition, telecommunications and the internet can promote social

cohesion (an example here is applications such as e-government, telemedicine, and distance

education) and cultural diversity (especially as the internet’s reach and usage keep on growing and

much of the innovation and activity takes place at the edges of the network by ordinary end-users

without requiring central approval from network operators). Last but not least, as the internet

becomes an essential part of everyday life and we access online most of the information, content,

services and applications, the internet is increasingly linked to the notion of citizenship, civic and

human rights (for instance, freedom of expression), as well as political and social participation and

activism, for example through social network sites. In sum, the significance of telecommunications

and the internet is not just economic but also, and increasingly, social, political and cultural.

Policy makers need to work on three key interrelated areas in order to achieve the ideal scenario

(‘everyone, everything, everywhere’) and reap the potential benefits as just outlined: 1) access to

the physical network (supply side), 2) access to content, services and applications (demand side) and

3) skills and digital literacy schemes. Below, we’ll examine these in turn.

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In general, the public interest in telecommunications and the internet comprises the following:

expansion of the physical network to meet demand, modernisation of the infrastructure in place to

improve the level of service, efficient market players who will result in lower consumer prices,

innovation which will feed into new and better offerings, all of which will in turn contribute to

providing the best value for users. Policy makers need to set clear and realistic priorities, the starting

point of which will be the users’ needs. It follows that the exact priorities will reflect the

characteristics and needs of a given society.

What are the means to achieve these public interest objectives? Throughout the world, policy-

makers have used a combination of three tools to meet the above aims: market liberalisation (the

introduction of competition), privatisation of the main state-owned monopoly provider in

telecommunications, and regulation.

Successful market reform is dependent upon regulatory intervention. It is not enough to say that

market is open. There has to be an enabling and supportive regulatory framework in place to

facilitate successful market reform in practice. To start with, a good regulatory framework is

dependent on three elements: independence, sufficient powers and resources, both human and

financial. In addition, successful and sustainable market reform is dependent upon a clear,

transparent and not unduly bureaucratic regulatory system that is consistent and stable (for instance,

clear and consistent criteria for the award of operating licences). Policy makers and regulators need

to set realistic targets and, importantly, provide incentives through regulation to encourage market

players to meet the objectives set whilst allowing for a reasonable return on investment. Incentive

regulation works best and can increase compliance. This means that regulation should not be just

stick but also carrot (an example here is the price cap regulatory mechanism under which the

regulated company is allowed to keep a percentage of the higher profits gained from greater

efficiency improvements). Regulation is not static but will evolve to respond to market and

technological changes. Due care should be taken to balance the rights and obligations of market

players. Hence, if one or more companies get special rights (e.g. monopoly rights or access to scarce

resources such as radio frequencies), there should be clear benefits to the society for doing so

(typically, network rollout and/or other universal service obligations within a given timeframe), and

policy makers need to explain clearly and in advance if, and if yes when and under what

circumstances, such special rights may be revoked.

Access to the physical infrastructure (supply-side)

In promoting market competition and network investment, policy-makers and regulators need to

make a judgment as to how much and what kind of competition a given society can afford. A key

question here is the level of reasonable duplication of facilities and equally the level above which

competition would result in unnecessary and costly duplication of resources. This relates to the form

of competition, specifically the balance between facilities- and services-based competition, which

again differs from country to country and within countries.

Universality has two meanings. Universal access refers to public access such as access to

telecommunications and internet services at a public space for example a public library or payphone.

Universal service refers to individual access whereby everyone (or every household) has access to

telecommunications and internet services, for example through a mobile phone. In either case,

universality is conditioned on three factors: availability of the service in question and the supporting

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infrastructure, accessibility by all citizens regardless of their specific characteristics or circumstances

(for instance, regardless of location, age, gender, language, disabilities etc.), and finally, but

importantly, affordability to all citizens (this includes different forms of payment, such as cash or

card payments, post- and pre-payment options, low-user schemes etc.).

Countries around the world, with different characteristics and at different stages of development,

have used one or a combination of the following means to promote universality: competition;

compulsory network and service rollout obligations; promotion of new technologies especially

wireless solutions1; subsidies; setting up a universal service fund; and public-private partnerships.

New business practices (market-based solutions), such as pre-paid cards which allow consumers to

control their consumption, can also promote universality. There is no space to discuss each method

in detail but suffice to say that the list is long enough which means that the task in hand is difficult

but not impossible.

Access to content, services and applications (demand-side)

The physical infrastructure is an enabler. One needs access to the infrastructure in order to access

the content, services (e.g. e-commerce, e-government) and applications (e.g. user-generated

content websites) which run over it. Not surprisingly, as internet penetration and significance grows,

calls to regulate it increase. To give an idea of some of the challenges which lie ahead, I’ll briefly talk

about network neutrality, a regulatory issue of great importance in the USA, Europe and increasingly

internationally. In simple terms, network neutrality means treating all internet traffic equally that is

not discriminate between different types of traffic. But, for instance, some fixed and mobile

operators block or slow down peer-to-peer traffic arguing that such content is bandwidth hungry

and often illegal. Similarly, mobile operators in Europe block Skype, the internet telephony provider

whose low cost services present a direct threat to the revenues and profits of mobile operators. The

risk is that in the absence of network neutrality, fixed and mobile providers as well as internet

service providers act as police and content regulators, determining which content, services and

applications users can and cannot access. Such practices have serious implications for civic and

human rights. Are we all accessing one and the same open internet or are we accessing one of many

closed internets?

Having said that, I would like to emphasise that the internet is not a panacea nor is it free of

regulation. Network neutrality is threatened not only by governments but also by commercial

market players. The most obvious example here, and possibly the least controversial, is the blocking

of harmful content such as viruses and malware which may damage the integrity and security of

networks by network and internet service providers. But over and above this, all countries have red

lines and regulate different aspects of content for instance to combat child pornography or in the

name of national security, counter-terrorism and copyright enforcement, to mention but a few. In

other words, traffic management is a fact and network providers strengthen this argument by

claiming that in actual fact network capacity limitations make traffic management a necessity

whether we like it or not. Thus, the crucial policy question is more rightly not whether traffic

management is justified but rather how much and under what circumstances traffic management is

1 The future is wireless, not just in emerging markets but everywhere. For instance, mobile penetration has

long overtaken fixed-line penetration. In Egypt this happened in 2004. Thus, if you don’t have a wireless strategy, you don’t have a future strategy. Radio spectrum management is therefore crucial.

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justified. Clearly, the filtering, blocking and censoring of content has potentially enormous

consequences for economic growth, innovation, market competition and freedom of expression and

this makes traffic management extremely controversial.

ICT Skills and digital literacy

Finally, access to technology does not guarantee that people can and will take advantage of the

possibilities offered. Policy makers throughout the world are introducing various ICT and digital

literacy skills schemes to enable users to benefit from the opportunities digital technologies offer.

Summary

The significance of telecommunications and the internet is not just economic but also, crucially,

social, political and cultural. The ideal scenario can be summarised as ‘everyone, everything,

everywhere’. A policy framework which promotes this ideal needs to take into account three

interrelated elements: 1) access to the physical infrastructure (supply side) 2) access to content,

services and applications (demand side) and 3) ICT and digital literacy skills.