Gillwald ascribes unevenness of telecom reform to failure to adapt models to developing countries’ political economies in ITU Economic Experts Roundtable

The ITU recently hosted an Economic Experts Roundtable Meeting entitled, “The role of Government and the Public Sector in the post-COVID 19 digital world”. The purpose of the roundtable was to take stock on the role of public policy, regulation, and public sector participation in the post-COVID-19 digital world with particular reference to the following questions: (a) What are the implications of the growing importance of the digital economy for regulatory models, frameworks, and institutions? and (b) Should governments continue to play a role in the ownership and management of ICT infrastructure, or should privatization and spin-off of public assets be emphasized?

RIA’s executive director, Dr Alison Gillwald, participated in the roundtable arguing that the problem with the World Trade Organisation (WTO) GATTS telecom reforms over the past three decades is that they failed to consider the political economy of developing countries, and particularly the underdevelopment of  many of these economies as a result of colonialism and neocolonialism and more recently, neoliberalism, which have structurally impeded the development of equitable digital economies. 

Within this frame, some of the obstacles she highlighted include insufficient attention being paid to robust state formation and effective resource mobilisation to enable the transition from public utility provisioning to effectively regulated private sector delivery of public goods. So-called “best practice” reforms assumed that the institutional endowments of mature democracies and competitive markets, resulted in a lack of traction or perversions of reform processes. Despite significant funding being channelled to capacity building, the centrality of effective regulation to manage inherently imperfect telecom infrastructure markets was often not at the centre of policy formulation and often at odds with incentives associated with political settlements.

Gillwald also challenged the generalised evidence of correlations between privatisation and liberalisation and public interest outcomes. There is currently considerable evidence, including the seminal global studies by Scott Wallsten, that the sequencing of the reform process was critical to achieving intended outcomes. Failure to set up autonomous regulators to oversee them in advance of privatisation processes, did not result in pro-competitive or consumer welfare outcomes. Also, the preferencing of privatisation over liberalisation because of the immediate gains for the, sometimes patrimonial, state (often with a monopoly extension to maximise the sale price), also had unintended outcomes in the longer term—dominance and anti-competitive behaviour, power asymmetries between incumbent and regulator, regulatory gaming and political interference.

The outcomes of 20 years of reform by the turn of the millennium is that although basic mobile voice services were becoming universal, the high cost and complexity of broadband services saw poor take up of these services in African countries.  And while states in many developing countries have once again started talking about the need for state-owned backbone networks in the face of dysfunctional markets, Gillwald argues that without the resources to operate state-run broadband networks, most states need to explore alternatives to the commercial, supply-side only value in resource allocations that have dominated policy and business models until now. 

What is needed is low-risk policy experimentation and regulatory innovation that enables the entry of players with alternative low-cost business models, with low regulatory transaction costs that crowds in productive private investments and frees up resources for public investment, that recognises the demand-side value of digital goods as essential inputs downstream in the modern economy and as critical public goods, particularly in post-pandemic economic and social reconstruction.