Responding to Convergence: Different Approaches for Telecommunication Regulators
140 Pages Posted: 5 Sep 2012
Date Written: September 30, 2008
The independent telecommunication regulator of the Netherlands, OPTA, commissioned this report to describe the phenomenon of convergence in the market for digital information and communication and to assess the consequences of this development for telecommunication regulators and regulation; with the ultimate goal of drawing useful lessons from approaches applied in United States of America, United Kingdom and South Korea.
Approach: The report is based on a review of relevant literature to define ‘convergence’ and what regulatory issues it triggers. In internal meetings with the OPTA team the insights were discussed to allow effective scoping of the issues (technical, economic and societal) to be researched further. A limited number of expert interviews were used to validate findings. On the basis of this general understanding of the issues three detailed case studies were conducted of the market governance and regulation in the United States, the United Kingdom and South Korea. The cases were selected because of their distinct characteristics, and aimed to disclose different regulatory approaches to allow insightful assessment and comparison. The case study process involved a review of policy documents, presentations, scientific literature, existing case studies, and annual reports as well as interviews with local stakeholders and experts.
Convergence: In the past, broadcast and telecommunications were clearly separate markets, based on different technologies, with distinct governance and regulatory frameworks. Broadcasting often had a strong public-sector interest, driven by concerns about free speech, diversity of supply, decency, programming (cultural content, sports, major events), advertisements, objective information provision, protection of minors, etc. Public broadcasters were supervised by content boards or similar institutions ensuring that the supply of content services complied with the desired societal objectives. Through media ownership restrictions and other rules these were also extended to commercial broadcasting services.
Telecommunications markets were ruled by economic and technical issues, including network access; the public interest was the derived goal of ensuring affordable services to everyone. Telecommunication markets, which were mostly liberalised in the 1990s, usually had a regulator to ensure that neither the natural monopoly nor the technical characteristics of incumbent operator(s) would be used to restrict network access or otherwise be exploited to create and abuse significant market power.
Through a number of technological advances – especially the increase of processing speed, storage capacity, transmission speed, compression techniques and standardisation – this well-organised and segregated situation changed, allowing for a single or similar set of services to be offered over different platforms (e.g. over cable, satellite, and telecommunication networks), and for the bundling of distinct services onto a single platform (triple and quadruple play). The process of this change is usually referred to as ‘convergence.’ It challenged the previous modus vivendi because new forms of competition by unregulated players tended to undercut the implicit subsidies of the old model and to disrupt long-term governance relations.
This convergence trend is painting a new and much more diffused picture, which can be (temporarily) captured in an image of an integrated ‘Information delivery’ chain (Figure A); running from the information (or content) source, through publishers and broadcasters, search agents, connection provides, and devices to the ultimate consumer of the information. In the current ‘converging’ situation none of these elements of the delivery chain are stable and many of the established players are experiencing the impact of disruptive technologies and business models. New services and new entrants are emerging, whilst established players are vertically integrating or even exiting the market.
It should be noted that this is a very dynamic situation in which suppliers to one market consistently try to expand into adjoining fields and absorb the market that exists between the functions. Information sources try to bypass publishers by gaining access to search agents and the consuming public. Producers/publishers try to integrate forward by providing search capabilities of their own and sometimes also by offering competing information sources. Soft- and hardware producers try to enter the information delivery chain in the understanding that this is the area where value added will grow. Search engines are investing in mobile devices and operating systems. Connection providers, who realize that the value-added of transmission services can only decrease as bandwidth supply increases, are actively trying to integrate upwards in to additional search and publishing/producing activities. Thus the chain should be seen as a heuristic to help visualize the new converged reality, whilst acknowledging that in practice it is neither linear, nor clearly defined.
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