From department to regulator – the liberalisation of telecommunications

Transport and Communications Minister Censu Galea addresses a conference on ‘Managing the transition from a government department to a regulator’. Mr Galea highlights the liberalisation of the telecommunications sector and stresses the importance of competing openly and fairly

After the liberalisation of the telecommunication sector in the United Kingdom in the early eighties, various countries all over the world have realised the benefits of a liberalised market and implemented radical changes in most sectors of this industry. In Malta, we are now, also, gradually, experiencing this change from a monopolistic situation to a liberalised market according to a carefully planned process as outlined in the National Plan for the Liberalisation of the Telecommunications Sector. This plan was launched in August, 2000 and will be reaching its climax at the end of this year when the last remnants of the old monopolies will be removed. This will mean that fixed line telephony as well as the international gateway service will be open to competition.
For this reason, I find it most appropriate that we are meeting here, at this particular point in time, to discuss liberalisation and the setting up of an independent regulatory body in the telecommunications sector, which will oversee and facilitate the great changes that are taking place in this vital sector of our economy.
Over the past three decades, as telecommunications market liberalisation developed, many governments realised that the introduction of new regulatory systems was essential for a competitive telecommunications market. Various governments embarked on different approaches ranging from the setting up of a Regulatory Authority under full government control, to the example that was pioneered in the Nordic countries where they set up fully fledged independent bodies.
The Nordic model was a success and was adopted by a number of other industrialised countries. This line of thought has yielded results, and the restructuring in the regulatory sector paved the way for the entry of new operators, the development of new technologies, the provision of new services and in the creation of new skills and numerous job opportunities.
Some key elements in the setting up of Regulatory Authorities were universally accepted and the first key requirement was to develop a regulatory institution independent of all interested commercial parties, in order to ensure fair competition among all market participants. In Malta, this presented the Government with a problem, as it was faced with a situation where the old monopoly was partially privatised before the market was liberalised.
We all accept, that the best way to establish a telecommunications regulatory body which has no connections with interested parties, is to ensure regulatory independence. This is the principle that we adopted when the Malta Communications Authority was set up. A telecommunications Regulator that is not only independent from the industry, but also operates at a distance from the Ministry as well as or other government bodies, at a time when the Government is still a major shareholder in the old incumbent.
At this point, one might ask, how can the Minister expect the Malta Communications Authority to be independent when it still falls under his responsibility? I believe that The Malta Communications Authority should be accountable to the Ministry by adhering to Government policy as outlined in the National Plan for the Liberalisation of the Telecommunication Sector. I also expect it to strive for efficiency, effectiveness, value for money, transparency and impartiality in the execution of all its activities.
These expectations in relation to a regulatory authority should, in reality, be no different from what the Minister expects from such an Authority, other than latitudes in financial and human resources management. In the case of the Communications Authority, the Minister can ensure accountability in financial matters and regulatory performance by applying the tools at his disposal as enshrined in the Malta Communication Authority Act.
The law clearly states that the Minister may, in relation to matters affecting the public interest give instructions on policy to be followed by the Authority in carrying out functions vested in the Authority.
The Authority is also legally obliged to grant the Minister facilities for obtaining information with respect to its property and activities and furnish him with returns, accounts and other information with respect thereto, and afford to him facilities for the verification of information furnished, in such manner and at such times as he may reasonably require.
The Minister is also briefed on the operations of the Authority in an annual report submitted to him and the Minister of Finance, which contains any information relative to the proceedings and policy of the Authority.
The separation of policy-making from regulatory functions may at times become a grey area. However, the difficulties or problems that may arise from such separation stem from the extent to which Ministerial discretion is exercised in relation to the overseeing of the activities of the Authority, in ensuring that the Authority moves in line with Government policy and in utilising the accountability tools afforded to the Minister.
There is really no magic formula for ensuring that the Ministry does not opt for either abdication or excessive control. It is really a question of close co-operation between the policy maker and the regulator to ensure responsiveness of regulation to Government Policy on an ongoing basis. The role of the Ministry in ensuring responsiveness on the part of the regulator is therefore to lay emphasis on the attainment of Government’s strategic goals and rather less on control of the day-to-day running of the regulatory body.
The advantages of the separation have to do with visible detachment of Government from the regulatory aspects of the telecommunications market. It creates an environment that is fair and as a result is conducive to liberalisation and investment in the telecommunications sector.
The presence of regulatory authorities in my portfolio has not altered my constitutional responsibilities as a Minister in any way, and I am still fully responsible for the business of Government in articulating policy relating to telecommunications and in ensuring that such policy is implemented. In this scenario, the Permanent Secretary in my Ministry has specific responsibilities regarding regulatory authorities. The Permanent Secretary supports the Minister in ensuring the accountability of the authorities under his portfolio as laid down in the law and in providing policy advice to the Minister.
My Government has committed itself to liberalize the telecommunications sector. On the other hand, it is important that this liberalisation is carried out with our feet steadily on the ground. It is also imperative that no one gets a dominant position that prevents the possibility of new operators joining the fray. As it has always been said, there must be a level playing field where nobody is afforded any advantages.
Therefore, the role of the regulator, which has now been enhanced with the setting up of the Communications Authority, is a vital role which will reach its full capability when the market is fully liberalised. During the interim period of partial liberalisation the Regulator had to operate within the prevailing legislation of the country. From time to time, this period of gradual change presented the Regulator with various quandaries mainly in dealing with the natural reluctance of operators which had been used to the comfort of a monopolistic situation in accepting that change was after all in their interest.
Over the last couple of years liberalisation of the Telecommunications market has brought various changes that even the most liberal minded amongst us could ever imagine. These initiatives to open up the market were inspired by the beliefs in the merits of the free market which itself is the catalyst that brings technological change. The combined effects of deregulation and technology have opened up the local telecommunications market and this trend has led to a proliferation of services that most of us had previously believed impossible to exist in a small island economy like ours.
I do not believe that anyone now contests the fact that liberalisation has been beneficial not only to the operators and their workforce, but even more so, to the consumer who now has a choice of operator, services, as well as custom made tariffs at very competitive prices. Now we must ensure that we maintain this momentum of expansion while being even more vigilant to prevent any attempt by any operator to corner a particular market by resorting to anti-competitive practices. We must also strive to create a situation here in Malta which will make our country more investor friendly. The advantage of having an efficient and truly independent Regulator in a small island economy is vitally important. I believe that the record of the Malta Communications Authority, so far, augurs well for the future.
There is no easy formula to guide the regulator’s tasks and actions but there is no doubt that the role of Regulatory Authorities elsewhere has contributed greatly to the smooth transition from the old monopolies to the present situation where operators can compete openly and fairly. I believe that as the Telecommunication sector matures, we can move closer to a situation where the role of the Regulator will be gradually facilitated by market forces.