Thailand Law Journal 2009 Spring Issue 1 Volume 12

Thai Telecommunications and Its Shortcut Bypassing Asymmetric Regulations

Piyabutr Bunaramrueang [FN1]

Abstract

It is commonly known that telecommunications industry requires a specific set of regulations in dealing with its own specific and critical issues. Particularly, it is clear that telecommunications has required asymmetric regulation in its context of natural monopoly. Today in the digital age, telecommunications industry is transitioning; asymmetric regulations become unnecessary. Among various aspects, it is because the centralized topology is out-of-date; specific rules imposing higher obligations on the incumbent are unreasonable. The United States and the European Union have seen this aspect and developing their own regulations for more than a century, from unregulated to highly-regulated with the concept of asymmetry, and today deregulated as their higher levels of competition. However, it does not follow that a country will face the similar transformation. This paper will discuss on how have asymmetric regulations been evolved and fallen. Then the case study of Thailand will demonstrate the unnecessity of asymmetry right after its telecommunications market reform. Although Thailand has less experience in competitive market, its situation is well-positioned for level playing field of competition. Operators need not to have specific condition to deal with the powerful incumbent as were the US and the EU. Actually, they all have virtually competed and experienced in the level playing field for quite a while.

1. Introduction

It is a general understanding that a specific industry may require a specific set of regulations to deal with its own critical issues. This aspect has generally been accepted and applied especially in the industry with natural monopoly. The telecommunication industry has been regarded as an industry of natural monopoly, which requires sector-specific rules to regulate its particular market, especially for its major issues such as interconnection, allocation of scarce resources, licensing, and universal services.

Basically, sector-specific regulations are aimed to provide market conditions, among other things, in favor of small players in order to allow them building up competitiveness. It is grounded on an assumption that the dominant player is too gigantic for any new entrant to deal with its natural monopoly; it would be justified in a specific condition, for example, that the dominant player provides accesses and treatments to any other players on the basis of transparency and non-discrimination. This will follow by many considerations on the contrary, for examples: whether are asymmetric regulations rather promotions for free-riders than justified conditions for start-ups? If asymmetric regulations are needed; how intensive of regulations should be for the proper promotions? No bright line could be drawn. However, if a line is needed to be provided, it would be necessary to be redefined regularly.

Today many conditions underlying asymmetric regulations are being revisited. Natural monopoly would cease to exist as reflected particularly from the waves of merger and acquisition in business world. Small players are not able to stand alone among the business tidal waves; they substantially depressed productivity growth in the sector. As we have already seen, they have sought their consolidation and synergy strategies. Market and business environments have now changed; asymmetric regulations are unnecessary. The view of transitioning proposition from asymmetric regulation to symmetric regulation implies that sector-specific regulation is not necessary; general competition regime would be sufficient and effective for the situation to handle the industry, just like other markets. The US and EU have adopted this aspect of sector-specific regulation thus far. Thailand as a model-follower is dealing with its own situation and finds its way to transition towards general competition with none or less necessity of asymmetric regulations.

This study is aimed at characterizing the telecommunication industries and regulations in three different approaches: the US, the EU, and Thailand, in order to illustrate the regulatory evolvements based on their own environments. Moreover, this study will discuss on interconnection regulations as a transitioning approaches towards general competition of each regulatory system, which is the main driving factor for many countries who expect to gain more economic advantage from exploiting the same regulatory models as the leaders. Thailand will be a study case of a model-follower in telecommunication regulation which strives to develop and open its industry for competition.

2. The Rises and Falls of Asymmetric Regulations in Leading Industries

In order to understand the rise of asymmetric regulations in telecommunications industry, the history of U.S. telecommunication could be a comprehensive guide of regulatory development. It began with none of specific regulation in the level playing fields and then evolved into special treatment for the incumbents. The history will lead to its asymmetric regulatory model which is the most advanced model evolving from its most advanced industry. The uniqueness of its industrial characteristics is an important ground for the evolvement of U.S. telecommunication regulations; however, the appreciation of natural monopoly and necessity of asymmetric regulation had been brought to general recognition. For a purpose of comparative study, the rise of asymmetric regulations in the EU will be introduced in order to demonstrate different characters of each industry. Whereas the U.S. telecommunications introduced its specific regulations on the assumption of powerful incumbents and leave general competition matters in its antitrust laws, the EU introduced its specific regulations on the assumption of how can community integrate with smooth evolution of technology. This is an ultimate purpose to differentiate their regulatory evolvements.

2.1 The Phasing-in

The U.S. telecommunications
The embracement of asymmetric regulations has evolved along its history which now divided into 5 major phases. Since the expiration of Bell patents in 1894, then numerous telephones companies entered into the market; the competition was then intense. The first phase was come when the government sought to intervene by the only reason of antitrust, especially focused on AT&T’s business practices. With the AT&T’s exclusive long distance services, competitors either merged into the Bell system or went out of business. Mann-Elkins Act of 1910¹ was the first major attempt to deal with interstate telecommunications, and empower the Interstate Commerce Commission (ICC) as the telecommunications regulator. In 1912, AT&T’s competitors protested to the Department of Justice (DOJ) that AT&T was violating antitrust laws. To avoid an antitrust suit, AT&T committed to DOJ in the “Kingsbury Commitment”² to stop acquiring other phone companies and to connect the remaining independents to Bell’s long distance network. This could be considered as the beginning of sector-specific regulation, particularly for a regulation on “interconnection”.³ Since the theory of natural monopoly was ubiquitously accepted, then regulations were subsequently developed in favor of natural monopoly through Willis-Graham Act of 1921.⁴ The transition from antitrust to sector-specific regulation of U.S. telecommunications became complete.⁵

1 The Act was aimed to give the Interstate Commerce Commission (ICC) jurisdiction over interstate telegraphy and telephony and made telephone companies common carriers, thus requiring them to provide service at just and reasonable rates on nondiscriminatory terms.
2 The commitment are (1) disposing of its stock in Western Union, (2) acquiring no more competing telcos without ICC approval, (3) interconnecting its long distance facilities with independents.
3 Shelanski, Howard A. “From Sector-Specific Regulation to Antitrust Law for U.S. Telecommunication: The Prospects for Transition”. UC Berkeley School of Law, Public Law and Legal Theory: Research Paper No. 80 (2002), p.20.
4 The Act declared telephone service to be an industry of natural monopoly. Then telecom competition is not in the public interest, and exempted telephone companies from antitrust laws when acquiring a competing (local) company.
5 Shelanski, supra note 3 p.22.

This article is published with the kind permission of Piyabutr Bunaramrueang, Professor of Law at the School of Law, University of the Thai Chamber of Commerce. This article was presented at the 2007 ALIN International Academic Conference at Chulalongkorn University. Except where otherwise noted, content on this site is licensed under a Creative Commons Attribution 3.0 License, <http://cc.in.th/wiki/by_f>