Critical Factors in Telecom Reform

Xu Yan (xuyan@ust.hk) HKUST

Telecom Reform v.s. Telecom Regulation

Telecom reform: to facilitate the transition from monopoly to market

Telecom regulation: means to supplement the market force

Both India and China is in the transitional phase of telecom reform.

Four Key Factors of Reform

Independence of regulator Market liberalization Privatization Legal framework

Independence of Regulator

In China, market was liberalized in 1994 but the independent regulator (Ministry of Information Industry) has not been established until 1998.

The dual status of the former Ministry of Posts and Telecommunications led to a twisted asymmetric regulation in such areas as interconnection

Independence of Regulator

In India: DoT had been regulator, licensor, policy maker, incumbent operator until TRAI was established in 1997 although the market was liberalized in 1994

TRAI (since 1997) + DoT TRAI was an independent regulator

without much power until TRAI Act of 2000

Market Liberalization

Structural approach: e.g. splitting up the incumbent in geography and service

Behavioral approach: e.g. regulation on interconnection, CPP v.s. RPP

Privatization

India: pro-privatization – pave the way for the regulator to deploy pro-market policy

China: pro-state ownership, and the regulator always fall in the dilemma between defending users’ interests and strengthening the state assets – a deadlock for further reform

Legal Framework

A legal framework may lead to low efficiency but can enhance confidence for investors

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