Rory Macmillan Effective Telecom Regulatory Adjudication October 29, 2004 TDSAT Seminar

+41 79 75 236 22rory@rorymacmillan.c

_______________RORY MACMILLANLegal • Mediation

Rory Macmillan

Effective Telecom

Regulatory Adjudication

October 29, 2004

TDSAT Seminar

Delhi, India

Table of contents

• DEFINING THE TERRITORY

• SOME KEY ISSUES FOR EFFECTIVENESS

• ENFORCEMENT, APPEALS AND REVIEW

• RECENT INNOVATIONS

Dispute resolution is now a strategic concernfor telecom policy-makers and regulators

• Retards the introduction of new services and infrastructure

• Limits investment and restrains competition

• Results in higher prices and lower quality

• Ultimately impedes economic and technical development

Failure to resolve disputes effectively and efficiently

What disputes are specificto the “telecommunications” sector?

Access products are at the

centre of many disputes

Interconnection

Leased lines

Infrastructuresharing

Frequency use andinterference

Pricing andcost accounting

Service level

agreements

Technical co-locationrequirements

Delays

Rights of way

Malaysia’s MCMC Guidelinesfor Dispute Resolution

The dispute must relate to the telecom laws to involve the regulator in the first place:

• Compliance with undertakings and standard access obligations

• Interference

• Access to post, network facilities or rights of way

• Provisions of subsidiary legislation under the Act

Is it a “dispute” or is it a “complaint”, and what procedures, rights and powers apply?

Ireland’s ComReg (25 July 2003):

Complaint

DisputeA grievance concerning failure of a party to comply with its obligations which is capable of being resolved by direct negotiation

An allegation that a party is engaging in more general non-compliant behaviour which is not specific to the complainant

The regulator may require different evidence, follow different procedures, exercise different powers and the

parties may have different appeal rights

What disputes concern the telecom regulator as opposed to the courts and other agencies?

Disputing

Parties

Telecom regulator

Competition authority

Consumer protection body

Court system

How should telecom disputes interact with competition and consumer disputes?

• Much telecom regulation is basically ex ante applied competition or consumer protection policy

• Many countries have competition and consumer laws and agencies

• Cooperation among agencies is crucial, but which body should be responsible?

Setting boundaries is complex and practice varies, e.g. compare India and Australia

• TDSAT’s authority in India excludes disputes that are:– “subject to the jurisdiction of the Monopolies and Restrictive

Trade Practices Commission” – “maintainable before a Consumer Disputes Redressal

Forum or Commission”Section 14 of the TRAI Act 1997, amended 2000

• Australia views telecom access disputes as a form of competition problem, so the ACCC handles telecom access disputes as well as consumer complaints and antitrust

The U.S. Supreme Court recently wrestled with such institutional and jurisdictional questions

• Verizon v Trinko (2004)

• Verizon was accused of breaching the Shearman Act (antitrust legislation):– Failing to provide AT&T with adequate

local loop connection to Verizon’s network– Resulting in poor quality of service for

AT&T customers

It recognized the difficulty for courts in dealing with sharing and interconnection disputes

• “Allegations of violations of [sharing and interconnection] duties are difficult for antitrust courts to evaluate…”

• “highly technical…likely to be extremely numerous…”

• “incessant, complex, and constantly changing interaction of competitive and incumbent [local exchange carriers] implementing the sharing and interconnection obligations”

The court drew a line between antitrust and telecom regulation disputes for practical reasons

• The effective remediation of violation and enforcement of these detailed sharing obligations is a “daunting task…beyond the ability of judicial tribunal to control”

• There is a “regulatory agency with effective power to compel and to regulate sharing”

Focus regulatory resources efficiently onthe key impediments to sector development

• Access and interconnection disputes which make or break competition

• Major licensing disputes that may hinder investment

• Disputes where transition of technologies and markets require regulation to adjust to reality

Table of contents

An economic lens is necessary to influence parties’ incentives to reduce or resolve disputes

Costs of delay to sector and economy

Underlying commercial and financial realities in

the industryDisparities in market power between

disputing parties (game theories)

Allocation of specific costs of dispute

Economic incentives of parties to engage in or resolve disputes

Regulatory adjudication is both a regulatory function and an adjudicatory function

Regulatoryprocesses

Adjudicatoryprocesses

…tend to be more investigatory,

consultative and on-going

…tend to be more adversarial

and seek to be finite

Regulatory adjudication involves both

The regulatory aspect emphasizes efficiency, competition, investment and compliance

• Flexibility of the process is important– Ireland’s ComReg and UK’s OFCOM publish draft

dispute rulings for comment of market participants– Australia’s ACCC is “not bound by technicalities, legal

forms or rules of evidence”Section 152DB of Trade Practices Act 1974

• Availability to the regulator of specific regulatory remedies

• The regulator is pushing a policy agenda

The nature of adjudicatory decision-makingmust also inform the design of the process

Follows a formal written procedure

Adjudicator is a third party, not a party to the dispute

Adjudicator’s decision is enforced by the state

Adjudicator’s decision often produces win-lose results

Procedure must be transparent

Adjudicator must be neutral and accountable

Remedies must be sure and proportionate

Correction of mistakes must be available (review and/or appeal)

Various powers and prohibitions may be required to make regulatory adjudication process effective

Australian ACCC and Indian TDSAT:

• Power to compel witnesses to testify

• Power to take evidence on oath

• Prohibition on giving false or misleading testimony or documents

• Criminal penalties, including jail time

Increasing attention and various approaches to timelines – outside deadlines can reduce delays

Jordan Malaysia Ireland India

Pre-dispute negotiation 10+20 days Required Required Unspecified?

Accept request from party 5+ days 30 days Unspecified Unspecified?

Claims and counterclaims Unspecified 14 days 14 days Unspecified?

Decision after submissions/hearings

2 months 30 days Unspecified Unspecified?

Internal appeal 30 +15 days None None 30 days to appeal TRAI

Industry review of draft decision

None None 14 days Some in practice

Overall time plan/limit 2 months 150 days 4 months* 90 days

* EU Framework Directive requires 4 months of all member states except in exceptional circumstances

Allocating costs can reduce regulator’s burden and change parties’ incentives in the dispute

• Jordan’s TRC will “charge the disputants for the cost of actual resources consumed in terms of number and cost per man hours per class of profession for resolving the dispute”

Section 4.1 of the Interconnection Dispute Procedure

• UK’s OFCOM may require parties to pay costs to each other or to OFCOM

Section 190(6) of the Communications Act 2003

• On the other hand, Botswana’s Telecom Regulatory Authority views dispute resolution as a public good paid for in license fees

Achieving a balance betweentransparency and confidentiality

• Investor confidence requires regulators to publish dispute rulings

• Public consultation before issuing a final ruling (e.g., Ireland’s ComReg & UK’s Ofcom)

• May information provided in a dispute be used for other purposes?

Sections 152DBA and 152DK of Australian Trade Practices Act 1974

• Confidential treatment of matters sensitive to business strategy (e.g., problem in Germany)

Table of contents

The regulator requires legalpowers to enforce regulation

• Suspending licenses

• Imposing fines

• Imposing conditions

• Reducing frequencies available

The courts are also acrucial part of enforcement

Malaysian MCMC’s decision:

• “…may be enforced by the High Court…”

• “…as if the decision was a judgment of such court…

• “…except in the case of an injunction”Article 25 of July 2003 Guidelines for Dispute Resolution

Most countries are muddy on jurisdictional lines between regulatory adjudication and the courts

• Jordan: regulatory adjudication is “…without prejudice of licensees’ rights to go to the courts…”

Section 2.1 of Interconnection Dispute Process(similar in UK Communications Act)

• Ireland: regulatory adjudication may proceed “…if legal proceedings in relation to the dispute are not in process…”

Statement of ComReg

Distinguishing “review” versus “appeal” can enable more focused, efficient procedures

Protecting the integrity of the adjudicatory system versus ensuring individual outcomes

Focusing on bounds of adjudicator’s authority versus substance of his/her decision

Considering factors weighed by the adjudicator versus rules of evidence

Emphasizing procedure followed by the adjudicator versus finding on the merits

Traversing government branches (administrative to judicial) versus upwards appeal within a branch

Reasonableness versus correctness of decision

There are numerous approaches to internal and external review/appeal of decisions

Internal & external(Jordan, Netherlands)

External only (Ireland, Malaysia)

Hybrids(India)

Jordanian TRC orold Dutch OPTA

Commission

Commissioneror Adjudicator

Courts

ComReg or MCMC

Commission

TDSATbench of 3

Courts

TelecommunicationsRegulatory Authority

of India

TRAIDisputing

Parties

Supreme Court

Whatever the structure, appeal/reviewneeds to be efficient, transparent and reliable

• Hundreds of pending cases and appeals are taking years in Germany and The Netherlands

• Best to avoid establishing elaborate appeal processes if the appellate body is jammed with cases (e.g., Dutch OPTA is simplifying)

• The greater the confidence in the initial decision-makers and process, the less need for appeal on substance

Where there are delays in decisions and appeals, treatment of interim measures becomes crucial

• Appeals against CMT’s decisions in Spain take up to 7 years to complete if they go to the Supreme Court (recurso de casación)

• Hard to meet high threshold for suspending CMT decisions, so they are rarely suspended and regulatory policy can advance

• But Germany’s RegTP decisions are often suspended pending appeal, so regulatory development is held back

Table of contents

Finding resources for disputeresolution where resources are scarce

• Interest in alternative dispute resolution, like mediation and arbitration (e.g., Jordan)

• Taking shortcuts, e.g., using consultants and international benchmarks absent accounting information (e.g., Botswana)

• Attempts to shift some of the burden to industry (e.g., Malaysian Access Forum and UK’s Ofcom)

• Cutting waste of resources through unnecessary internal appeals (e.g., Dutch reform of OPTA)

Recent innovation indispute resolution in various countries

• Nigeria – televised consumer parliament to popularize consumer protection

• Denmark – broad industry forum to review entire sector problems as a means to dispute prevention

• UK – industry ombudsman and dispute resolution schemes set up telecom companies; new local loop unbundling adjudicator scheme

• Hungary – establishing a telecom dispute mechanism supplied by a bank of pre-approved arbitrators

Priorities for effective regulatory adjudication

• Give regulatory adjudicators powers and resources they need

• Focus attention and resources on the key disputes that are a turning point for sector competition and investment

• Understand big picture institutional roles and parties’ incentives

• Fit appeal/review processes to the institutions without clutter

• Be open to alternative dispute resolution resources and involve them where available and helpful

For further information

• “Dispute Resolution in the Telecommunications Sector: Current Practices and Future Directions”, Robert Bruce, Rory Macmillan et al: http://www.itu.int/ITU-D/treg/Events/Seminars/2003/GSR/Documents/DRS_Final_GSR_5.pdf

• ITU Case Studies in interconnection dispute resolution, Robert R. Bruce & Rory Macmillan: http://www.itu.int/ITU-D/treg/Case_Studies/index.html

• ITU web pages on dispute resolution: http://www.itu.int/ITU-D/treg/related-links/links-docs/dispute.html

• Contact Rory Macmillan directly on +41 79 752 3622 or at rory@rorymacmillan.com

Rory Macmillan Effective Telecom Regulatory Adjudication October 29, 2004 TDSAT Seminar

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