Expanding Telecommunications Services in a New Age

How Legal Traditions and Licensing Procedures Impact Telecommunications Industries Around the World

One would expect that lawmakers rely on economic, social, and technical analysis to support their decisions. However, in reality lawmakers’ decisions are often influenced by subjective considerations and politics. When economic, social, and technical analysis is referred to, it is often presented by parties with a vested interest. This is particularly problematic in the telecommunications industry where those without political capital historically remain left out of the decision-making process.

To address the need for reliable analysis, a group of researchers and policymakers convened at the first Telecommunications Policy Research Conference (TPRC) in 1971. Continuing this tradition, the 47th annual TPRC brought together industry players, academics, and regulators from around the world. Staying true the conference’s roots, many speakers presented research on the various ways radio spectrum could be better allocated in order to address economic, educational, and other social disparities – like political participation and housing.

I had the pleasure of presenting my research at this year’s conference. Over the past two years, I built a database of the telecommunications industry’s critical points of analysis, and then used those points to support the arguments put forward in my paper ­– Expanding Telecommunications Services in a New Age: How Legal Traditions and Licensing Procedures Impact Telecommunications Industries Around the World. The paper was selected as a Finalist for the conference’s Student Paper Competition and was featured in the “International” panel.

I first became interested in the digital divide while working on infrastructure improvement projects in Latin America throughout high school and as an undergraduate. My hometown, Gettysburg, Pennsylvania, also struggled to address the digital divide, but not nearly to the same extent as what I saw on those trips. While the work I did generally aimed at improving essential infrastructure and economic opportunity, I noticed that many communities I worked in also lacked any recognizable form of telecommunications infrastructure.

When I started travelling outside of Pennsylvania and Latin America, I realized the digital divide was a common issue that practically all countries share. This is demonstrated by the efforts of members of international organizations, such as the Global Systems Mobile Communications Associations (GSMA) and the International Telecommunication Institute (ITU).  It was not until I began work as a Research Assistant for Professor Dale Hatfield that I understood how the level of economic and social development in each country, at least as it relates to telecommunications industries, is heavily influenced by decisions about how to manage and regulate radio spectrum use.

Two issues influence the telecommunications industry the most – the balance of power between government branches and radio spectrum licensing. So, Professor Hatfield and I agreed it would be worthwhile to research how legal traditions, like common law and civil law, and licensing procedures, like auctions and comparative hearings, influence the quality of services and prices of telecommunications providers in each country. To do this, I created two separate regression analyses. This allowed me to measure the relative legal advantages for a civil law country as opposed to a common law country, and of using auctions as opposed to comparative hearing to assign spectrum.

One of the regression analyses indicated that civil law countries’ legal traditions give them a major advantage over common law countries. This may be explained by the differences between countries in respect to how power is shared between branches of government. In civil law countries, decision-making authority is traditionally concentrated in the hands of the executive branch and agencies, often at the expense of the judiciary and legislature. Alternatively, in common law countries the balance of power is more evenly shared between branches. This is observed in the exercise of judicial review and some legislatures’ ability to limit the scope of agencies’ authority.

Civil law countries do have at least one major advantage built into their legal systems: they have been able to achieve much higher Internet access, subscription rates, and broadband speeds – all without significantly increasing consumer prices. This ought to provide encouragement for regulators in countries that are struggling to keep up with telecommunications development to experiment with policies that have proven successful in civil law countries. It also indicates that perhaps they should place more faith in their agencies to make effective radio spectrum management decisions.

Licensing procedures also strongly influence outcomes in the telecommunications industry. The second regression analysis indicated that countries that use auctions to assign radio spectrum have delivered cellular and internet services to more people, and at lower costs, than countries that rely on comparative hearings. Interestingly, many countries still use comparative hearings to assign radio spectrum. This may be because comparative hearings, at least in theory, give the regulators conducting the hearing greater discretion in selecting the licensee.

It seems that auctions commonly lead to positive outcomes for consumers, faster broadband speeds, and, when conducted properly, can even help introduce competition by reducing the amount of market share in the hands of the leading operators. Again, this should encourage regulators to experiment with more dynamic approaches to spectrum regulation. In the paper, I concluded that a best practice has already been established – auctions with minimum criteria for participation and/or buildout requirements – and I encourage regulators to pursue that approach in the future.

My research also helps to confirm something I suspected while travelling abroad and throughout the rural U.S. The digital divide is influenced by both physical and political barriers. Indeed, the regression analyses indicated that political factors play an even greater role than several factors others have relied on to explain the observed disparities. I know this to be true because I controlled for several traditional explanations, including rural population, population density, GDP per Capita, and Corruption Indices. Yet, when compared to legal tradition and licensing procedure, these factors have only a slight, if not insignificant, impact on telecommunications outcomes. Therefore, politicians and telecommunications providers can no longer point to economic and physical variables to explain their shortcomings.

Taken together, the research on legal tradition and licensing procedure helps to explain why there are often large disparities between countries. I understand this marks a major departure from much previous thinking on the subject. My hope is that my research will help others to understand how legal tradition and licensing procedure can be used as mechanisms to better develop telecommunications markets.

Freddy is Managing Editor of CTLJ, Volume 18 and a Research Assistant for the University of Colorado’s Silicon Flatirons Center for Law, Technology, and Entrepreneurship. His study and research focus on identifying legal solutions for the issues that arise out of emerging technologies and increasing access to critical technology infrastructure in underdeveloped communities.