Scott CThe Proceduralization of Telecommunications Law:
Journal of Information, Law and Technology
The Proceduralization of Telecommunications Law:
Adapting to Convergence
Colin Scott
Law Department
London School of Economics and Political Science
This is a Work In Progress article published on 31 October 1997.
Citation: Scott C, 'The Proceduralization of Telecommunications Law: Adapting to Convergence’, Work In Progress 1997 (3) The Journal of Information, Law and Technology JILT). <
1. Introduction
A central characteristic of law in the industrialized countries in the twentieth century has been the breakdown of its general character into ever more specific and technical sets of rules, often the product of legislation. Such phenomena have induced sociologists to write of crises in welfare state systems.[1] General legal norms have to some degree been displaced by 'materialized' law and wide administrative discretion, which is seen as a response to complexity.[2] The sheer bulk of law (mainly legislative law) has increased, and fragmented into specific rules and into a wide range of types of instrument, administered by a proliferation of administrative institutions (both public and private). Policy has become visible as part of an instrumental orientation of legal rules.[3]
Regulatory law in the field of telecommunications has followed this logic, leading to the development of masses of technical rules contained variously in primary and secondary legislation and in other instruments such as licences. However, changes which are now under way in telecommunications regulatory regimes are forcing us to ask whether there is evident a shift away from a pattern of highly specific rules. Is it possible that legal evolution has set itself on a reverse path in which both national and supranational jurisdictions see the evolution of more general and more procedural systems of rules, simultaneously better able both to meet new conditions in a rapidly changing social and technical environment, and to satisfy demands for more participatory and transparent procedures for development of norms? This paper sets out to address these issues as they affect economic regulation in the telecommunications sector in the light of pressures created by convergence of telecommunications of broadcasting and computing, and the trend towards globalization of service provision.[4]
2. Telecommunications and Regulatory Law
The early history of state involvement in the provision of telecommunications services in the common law countries in the nineteenth century was not conspicuously successful. The attempt to regulate through the adaptation of the ordinary contractual rules and adjudicatory techniques of the common law was adequate neither to promote or protect competition between private and municipal providers of service, nor to provide the degree of coordination necessary for the achievement of national service, within which each subscriber could communicate with every other. In the United Kingdom the nationalization of telecommunications services in 1911 removed the oversight of service provision from the legal to the administrative sphere for a period of seventy years. In the United States the response was to leave service providers in private hands, promoting the private monopoly of AT&T, while simultaneously creating specific obligations through highly technical regulation, under the Communications Act of 1934, administered by the Federal Communications Commission. Thus in the US the materialization of law in the telecommunications field came early.
With the widespread policies of privatization and liberalization other common law jurisdictions and the European Community began to observe some degree of convergence in the character of regulatory law and institutions with the regulatory experience of the United States.[5] In the UK the failure of formal law in the early history of telephony led to its displacement by the bureaucratic apparatus of public ownership, within which the legal framework remained very much at the boundaries of the governance structure. Only during the gradual process of liberalization and privatization of the telecommunications sector in the 1980s did a process of materialization occur in British telecommunications law as legislation and licences set out highly detailed provision for universal service, price control and interconnection. Legal rules were to be the chief instrument for securing social and economic policy objectives in the privatized telecommunications sector. These rules, rather than being in the form of general law, were effectively instructions directed towards one actor, the monopoly supplier, British Telecommunications plc.[6] While the determination of policy was formally retained by Ministers and parliament, the new regulatory institution, the Office of Telecommunications (Oftel), inevitably became a rival source of authority,[7] exercising policy powers through the limited instrument of the licence amendment. A similar story could be told in respect of the Australian experience. The New Zealand government attempted to avoid the creation of detailed regulatory rules and institutions, substantially leaving the governance of the liberalizing telecommunications sector to the application of general competition norms, though these steps so reduced the state's formal capacities as to require the development of informal regulatory mechanisms (see below).
Rules which are designed for the instrumental purpose of promoting competition may be universally applicable norms (for example prohibiting the abuse of dominant position) or may be highly specific (for example requiring a telecommunications firm with more than a 25% market share to permit other firms to interconnect with its network on reasonable terms or on terms determined by a third party). For some the economic purposes of both types of rule are sufficient to mean that either is legitimate and the most appropriate should be chosen.[8] A key point here is that the form and nature of the rules is not at issue - the most appropriate type for the task in hand is to be chosen. For others the abandonment of universal rules is offensive. Hayek, for example, suggests that the chief reason for the development of specific rules is so that legislation may pursue (illegitimate) social ends which interfere with a market based on transactions.[9] The placing of special social obligations on telecommunications suppliers is seen to be distortive, rather than supportive of the market, as well as corrupting of the general scheme of private law. Sharing such suspicions about intervention, political science and economics of regulation theorists see regulation as creating a framework in which the interests of the powerful or best organised will be pursued at the expense of the general polity, or of the less powerful.[10]
However, there is a problem with the direction of telecommunications regulation which relates distinctly to the characteristics of the legal system, and which challenges perspectives based on simple, instrumental notions of law. 'Law and state regulation...are being expected more and more to bring about major social changes and economic restructuring at a time when those who make use of law in this way proclaim its capacity to do less and less'.[11] Indeed, Cotterrell attacks as contradictory and ideological Hayek's position which seems to suggest that law can legitimately be used for economic and social restructuring, whereas its use for egalitarian purposes is illegitimate.[12] Put another way, it is the use of law for instrumental purposes generally, whatever they may be, which leads to the materialization and fragmentation of general legal rules into the specific and technical, and which challenges the capacities of legal systems, the strengths of which lie in application of general norms. The observation that law is a 'relatively ineffective means of positively directing behaviour towards specified objectives' is reflected both in the empirical work of sociology of law and the more theoretical concerns of the application of systems theory to law.[13]
If the problem of contemporary law is seen simply as the breakdown of the general norm characteristics of the legal system then a key theoretical question is whether any change in the nature of instrumental regulatory law which reverses its drift down an ever more specific and technical path can be explained by reference to the response of the legal system itself, whether to failings within itself, or to stimuli from without. Equally pertinent is to ask whether such change can be explained without reference to the legal system, as the product of changes external to it alone.
3. Factors External to Law in the Changing Nature of Regulation
Among the chief external stimuli to the evolution of more generalized rules for telecommunications regulation are processes of convergence and globalization.[14] The convergence of broadcasting, telecommunications and computing renders the detailed, sector-specific telecommunications regulatory regimes a potential barrier to changes which would otherwise occur in the market.[15] Each regime has its own regulatory institutions and culture. It is said that what is now required is 'technology neutral law'.[16]
Globalization of telecommunications services has created pressure on nation states to reduce the restrictiveness of national regimes, while at the same time supranational institutions (such as the EU and WTO) have sought to expand their competence into telecommunications, and have inevitably based their regimes on the most general possible norms so as to permit the widest application[17].
The deployment of such generalised norms is consistent with a broad conception of subsidiarity as applied at EU level (and implicitly by the WTO), and permit a degree of regulatory competition between jurisidictions seeking to encourage inward investment in communications infrastructures[18]. Further pressure for generalization of norms arises from the use of a principle of reciprocity as the basis for bilateral agreement on access for foreign companies to national telecommunications markets.
4. Epistemic Communities - Regulatory v Competition Communities
A precondition to the evolution of general regulatory norms has been the identification by both practitioners and academics of a regulatory 'community' of people concerned with broadly similar phenomena, whether in relation to the utilities sectors, social regulation or other areas. Though the regulatory community is nothing like as homogeneous as the competition/antitrust policy community it is now a distinctive grouping. Regulatory and competition/anti-trust communities are to some degree in competition with each other and offering competing paradigms of oversight or construction of markets[19].
Whereas competition/antitrust is dominated by economists, with others such as lawyers broadly subsuming themselves within economic paradigms [20] such a disciplinary dominance is not so recognisable in relation to regulation. The development of general norms in telecommunications and other sectors based on competition/antitrust principles would represent the triumph of the competition/antitrust community in asserting the general applicability of their norms in sectors which had previously been regarded as special and subject to particular principles[21]. Such a generalization of norms in economic form is, however, unlikely to be complete as a social regulatory agenda, for example in relation to provision of universal service, continues to be reflected in evolving rule-systems[22].
5. Decontextualization and Generalization
A central aspect of the changes engendered by the various pressures on telecommunications regulation has been a gradual decontextualization or dematerialization of regulatory rules for telecommunications. In part this has occurred in the form of the application of substantially common regimes to all utilities sectors, as has occurred in the UK. Increasingly there is pressure to treat telecommunications for regulatory purposes as part of the broader information society apparatus, attempting to develop common regimes for the economic and content regulation aspects of broadcasting, computing and telecommunications[23]. Most general is the broadly characterised shift from detailed sectoral rules to broad competition/antitrust rules as the basis for regulation.
Figure 1
Reform of the New Zealand telecommunications sector between 1987 and 1990 involved a shift away from public ownership to competition rules as the basis for regulation with little in the way of detailed rules[24]. Though widely characterised as complete deregulation, in practice the rejection of detailed regulatory principles was not as complete as superficial consideration suggests[25]. Social regulatory requirements, though not contained in legislation, were retained within the company constitution of the privatized dominant incumbent, Telecom New Zealand. Secondary legislation imposed a variety of disclosure requirements on the company, intended to reduce the information asymmetry between Telecom and new entrants in relation to access conditions[26]. Most importantly, and yet most hidden, government maintained a role in reminding Telecom New Zealand of its commitment to provide interconnection to new entrants on reasonable terms, and to threaten to invoke existing legislation or to pass new legislation to provide more detailed principles of interconnection than the competition rules supplied, if Telecom failed to honour its commitments[27]. Though this form of 'implicit regulation' is actually highly developed (Figure 1[28] ), the failure of government to escalate its intervention to resolve impasses over the interconnection issue has resulted in a loss of credibility. The attempt by the New Zealand Court of Appeal to reject allegedly ‘pure’ economic reasoning and introduce more regulatory principles into the major Clear-Telecom New Zealand interconnection dispute was effectively trumped by the Privy Council[29]. At the time of writing Clear Communications is attempting to sue the government over its failure to provide a regulatory regime adequate to permit it to secure proper entry to the market[30]. The parties have responded to the absence of detailed principles for regulation (which resulted in their negotiating interconnection 'in a fog' according to the courts) by developing their own detailed architecture of substantive and procedural principles in a contractual interconnection agreement[31]. The procedural aspects include a hierarchy of mechanisms for resolving disputes which effectively represent a pyramid within the base of the regulatory pyramid (Figure 2).
Figure 2
In other jurisdictions the shift towards competition/antitrust rules has been more gradual and/or less complete. In Australia the starting point in 1989, when a liberalization policy was introduced and a new regulator, Austel, established, was of highly detailed sectoral rules with regular legislative reform increasing the specificity and complexity of the regime[32]. However, in 1995 general competition law rules in relation to interconnection/third party access in all utilities sectors were introduced[33], and this was supplemented in 1997 with new telecommunications interconnection principles, which, though more prescriptive than the 1995 general interconnection regime, were less prescriptive than the previous sectoral legislation. These new principles were accompanied by new procedures for industry negotiation over terms of interconnection and access with only a residual role for the regulator in determining disputes[34].
In relation to interconnection the UK regime has never accorded with the formal model based on commercial negotiation with a residual dispute-resolution role for the regulator which is provided for in British Telecom's licence[35]. Interconnection principles, contained in licences, have been rendered ever more specific as the regulator has become involved in both setting ground rules and detailed terms of interconnection, albeit using new and more transparent procedures. A partial reduction in involvement is to be effected by introducing a price cap on interconnection charges, rather than have them set by the regulator directly[36].
In relation to other aspects of regulation in the UK there has been a marked shift away from detailed licence conditions towards competition rules. Lying behind these changes were concerns within the regulatory office that ever more detailed licence conditions were making the rules over-specific and unmanageable. There was uncertainty about the scope of the existing rules, and unwillingness to engage in the time-consuming procedures necessary to introduce specific new rules to address new forms of conduct, and a concern that regulated firms looked to the regulator for authoritative guidance on the interpretation of the rules, rather than develop their own capacity to interpret and implement their requirements. The new, general competition rules are to be incorporated in the licences of all UK telecommunications operators and are modelled on Articles 85 and 86 of the EC Treaty[37]. This 'spontaneous alignment' (ie non-mandatory)[38] of UK telecommunications rules with EC competition law goes beyond the content of the rules to new procedural provision, including the creation of an advisory committee, the publication of guidelines on the application of the rules and of procedures for implementing them[39]. Lying behind this change was a concern from the principal regulatee, British Telecom, that there should be procedural mechanisms to promote consistency with the EC norms, and from the regulator that if such consistency was credible firms would be able to interpret the new licence conditions for themselves on the basis of EC competition law, rather than be guided by the policy-driven interpretation of licences by the regulator as occurs with sector-specific rules.
A further aspect to this generalization of rules is a shift from highly specific instruments, such as the detailed conditions contained in individual licences in the UK, towards rules of more general application. This shift is driven in part by the promulgation of framework rules at supranational level, which are then to be implemented by participating nations. In the European Community, complex licensing rules and conditions are seen as an obstacle to the completion of a single market in telecommunications. For example the evolving EC regime for telecommunications licensing favours the issuing of class licences which refer to a general set of conditions[40].
In relation to the World Trade Organisation, the Reference Paper, which provides the framework for liberalization to which 69 states have committed themselves, is necessarily drafted with a high degree of generality. Accordingly the main emphasis of the Reference Paper is on the provision of appropriate measures to provide safeguards against anti-competitive conduct, to require that a major supplier provides non-discriminatory and transparent interconnection to other firms, and to establish a regulator who is independent of suppliers of services[41]. In contrast with EC policy, the WTO Reference Paper merely tolerates, rather than requires, measures to protect universal service obligations.
6. General Institutions
In institutional terms the pressure of generalization is reflected in the development of more general regulatory bodies. In Australia the chief powers in respect of economic regulation of telecommunications are being transferred to the general competition authority, the Australian Competition and Consumer Commission (ACCC) (the new 'super-regulator' for telecommunications[42] ), while the rump of the sectoral regulator retains only standard setting and consumer protection functions. The survival instincts of the UK regulator, Oftel, have led it to reposition itself as a 'competition authority' for telecommunications. Notoriously privatization and liberalization of the New Zealand telecommunications sector was carried out without the creation of a sectoral regulator at all, though as noted above, the Department of Commerce has carried out more in the way of implicit regulation than might have been anticipated.