Regulating telecoms is a tricky business as shown in case studies here, yet maintaining a balanced ecosystem is fundamental to long term success
Being a regulator involves juggling various interests, keeping sub-sectors in check, and making sure that public interest is protected. In many sectors, oversight by the Competition Authority would be sufficient.
However, some industries are more complicated, requiring specialised regulators who bring in technical know-how and the ability to adapt to constantly shifting environments. These sectors are often “too big to fail” and critical to the national interests, which is why dedicated regulators become a necessity.
In key industries, regulators serve as the experts who can dive deep into the issues, while lawmakers focus on the big picture – like creating laws and deciding how to allocate public funds. This set-up allows governments to set overarching goals and lets the regulators focus on ensuring that the rules of the game are clear and fair. Ideally, this balance keeps the industry on track while promoting growth and innovation.
Regulators play a key role by issuing regulations, guidelines, and communiqués. They step in to resolve disputes and ensure that everyone is playing fairly, which creates a more stable environment for companies to build and grow. However, there is another reason to have a dedicated regulator separate from the Government: The independent regulator provides checks and balances in case governments prioritise short term goals until the next elections.
Therefore friction is inevitable between regulators and policymakers, particularly when political interests clash with the long-term well-being of the industry. When short-term fixes are prioritised, they risk undermining future investments and business stability.
Balancing competing interests
The telecom sector is a prime example of how specialised regulatory bodies can drive progress. According to the United Nations, enhancing connectivity not only boosts a country’s GDP but is also crucial for achieving Sustainable Development Goals like reducing poverty and better access to education. However, expanding internet coverage alone is not enough: services must be affordable.
Without affordable access, large segments of the population, particularly in rural and underdeveloped areas, remain disconnected. This is where a competitive business environment becomes indispensable. By fostering competition, regulators encourage companies to innovate and lower costs, and maintain high standards of service.
At the same time, a well-regulated environment ensures a level playing field for all industry players, which in turn helps to attract investment. Clear rules and fair treatment create confidence among investors, leading to more capital being channelled into infrastructure development, ultimately expanding access and improving service quality for everyone.
Telecom regulators must pay attention to voices of two main groups: consumers and industry. Consumers want better service, wider coverage, and affordable prices, while industry players need to make a profit and invest in infrastructure. Mobile network operators often get most of the attention, as they face the consumer, connecting people (and machines) to one another. They make the highest profits and therefore pay the highest taxes.
While operators are in the spotlight, there is a whole ecosystem involved in providing connectivity is far from the public eye. They include infrastructure firms like towercos, equipment manufacturers, and solution and service providers. The lack of public attention means that regulators step in to ensure that no one gets an unfair advantage.
Uneven relationship
Take tower companies is an example. They lease infrastructure to mobile operators, leaving them to deliver services without having to invest heavily in building and maintaining towers. The aim is to help the industry run more efficiently, but things do not always go smoothly.
Tower companies typically operate on commercial terms with mobile operators, and regulators only intervene if a dispute arises. In Brazil and India, regulators Anatel and TRAI respectively had to step in when these relationships soured.
For instance, when a mobile operator and a towerco had a dispute over anti-competitive practices, Anatel intervened. Similarly, TRAI had to mediate between Indus Towers and Vodafone Idea when financial struggles threatened to disrupt services. In both cases, the regulators helped to keep the markets stable, striving to make sure all players were treated fairly and that consumers were not left in the lurch.
Case Study: Disconnect in Ghana
Pre-emptive action is not always possible. A recent breakdown in the ecosystem in Ghana left people without service. The problem started when an American tower company, cut off Telecel’s access to its infrastructure. This was after months of not being paid by mobile operator that is partly state-owned.
The regulator eventually ordered the towerco to reconnect the operator, but this was interpreted as taking sides and interfering in contracts between private parties without fully addressing the root issue – unpaid debts that had pushed the towerco to the brink.
Since then, the regulator has introduced guidelines to manage service disconnections, but these rules fall short in addressing the financial strain companies face when debts are not paid. Nor does it address the conflict of interest when the state partially owns the offending non-payer.
How long the status quo can continue with a passive infrastructure company providing access without payment is yet to be seen.
Favourable investment environment
Regulators walk a tightrope between consumers’ demands for affordable, high-quality services and operators’ needs to turn a profit and continue investing in infrastructure. Focusing too much on keeping prices low can lead to underinvestment which ultimately results in poor service quality.
The key to success is maintaining a competitive, stable environment which attracts investment. In developing countries, direct foreign investment is a huge boost to the industry, and potentially whole economies.
If companies cannot trust that contracts will be enforced or that they will be treated fairly when disputes arise, foreign investors are put off. This leads to less competition, higher prices and poorer service for consumers. In the long term, mobile operators also need a fair, competitive environment in which they and they backers feel confident about investing.
Regulations must be clear, predictable, and consistently enforced so that companies can plan for the future. This not only benefits the operators but also creates a better overall environment for innovation, growth, and consumer welfare. When regulators maintain their independence and uphold key principles, they create a stable environment that attracts investment and fosters industry growth.
By remaining impartial and ensuring fair conditions for all players, telecom regulators can encourage innovation, drive improvements in service quality, and support the sector’s long-term success. This, in turn, strengthens the broader economy, allowing the telecom industry to thrive and continue making positive contributions to society.
Hussein Abul-Enein, Director, Global Government Advisory, Access Partnership