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The digital landscape is moving rapidly, making it increasingly difficult to regulate telecommunications. Here are the main concerns facing regulators:
Key takeaways:- The telecommunications industry has experienced significant changes in the digital age that poses a range of challenges for regulatory bodies.
- Computing, content, and communications are converging, but regulation remains sector-specific and insufficient in some cases.
- Regulators must confront issues such as competition, privacy, security, and the integrity of networks.
1. Promoting fair competition
Market dominance abuse deterrence is a significant issue for regulators. Most traditional regulation tools are no longer effective in addressing modern monopolistic practices, investigating cartels, balancing the interests of established and new entrants, and promoting fair competition in general. For the most part, market dominance abuse takes the form of collusion and exclusionary conduct.Collusion based on big data and related algorithms
Nuances that allow human and algorithmic intervention make collusion more efficient than ever. Big data enables companies in price-setting agreements to monitor colluding entities’ actions in real-time, ensuring better compliance. Moreover, competing companies can collude even without drawing an agreement. For example, a company may remotely monitor a competitor’s price changes and quickly adjust its own without contacting them. Machine learning algorithms can also collude on pricing for profit maximization without the programmers’ knowledge. This means it’s very difficult for telecommunications regulators to investigate and prove deliberate collusion cases. It also raises concerns about the extent to which humans may be held liable for algorithmic intervention.Exclusionary conduct
Companies with significant market power may sometimes deliberately limit their rival’s competitiveness through exclusionary practices– like exclusive contracts, customer lock-in, refusal to access or discriminatory access to data, tied sales and cross-usage of data sets, and much more.Exclusive Contracts
Exclusive agreements between data-driven companies and third parties prevent rivals from producing similar data, making it more difficult for consumers to adopt their platforms and technology. A good example is Google’s imposition of exclusivity obligations on advertisers, barring them from posting certain types of competing ads on their website.Refusal to Access
Sometimes, because of profit maximization, companies may deny rival firms access to facilities that are indispensable to their operations when there’s no available alternative, even if it's not economically, technically, or legally feasible to develop their own. This is highly anti-competitive. But, it can be difficult for regulators to determine the extent to which companies should share essential resources and promote their competitors’ businesses. Competition authorities must evaluate essential facility cases based on the clear demonstration that the resources owned by the incumbent are unique, irreplicable, and indispensable for the operations of its competitors. Additionally, they must consider the ethical and legal implications of sharing personal information, and how to incentivize companies to develop their data sources.Tied sales
Another exclusionary challenge is tied to sales and cross-usage of data sets. There is always the possibility that companies that sell data and run analytics services could compel the parties buying data also to use their analytics services. While this can improve efficiency, it could also be a competition barrier, preventing new firms from gaining entry into the telecommunications industry. These exclusionary tactics generally cause unfair competition and make it challenging for regulators to level the playing field.2. Balancing innovation and consumer protection
Technologies like cloud computing, big data, AI, IoT, and blockchain make generating, capturing, combining, processing, and storing data easier. But, they also raise concerns about privacy and data protection. Some of the main challenges for telecommunications regulators include the following:- Defining data ownership and the legal obligations of data owners in terms of its use, storage, and liability for breaches.
- How to best protect people’s identity – For example, because big data uses a combination of different data sets, there’s always the possibility that the resulting data can identify individuals. Similarly, public blockchains make the entire transaction history accessible to anyone, which may have privacy implications depending on the information recorded in each block.
- How to share and protect data across multiple jurisdictions and different segments of the evolving internet value chain.
- How to limit the amount of customer information data processors use – Generally, organizations should only use the necessary customer information for decision-making to avoid privacy invasion. But, there’s no clarity as to what constitutes the required minimum.
- Clarifying consumers' rights regarding algorithm evaluations – For example, can they object to it? May they request access to the data companies used to evaluate them? Can data collectors price discriminate for users who consent to use their data versus those who don’t?
- How to address the black-box issue and ensure customers understand how AI systems and algorithms make decisions and recommendations affecting them.
3. Ensuring the security and integrity of networks
Cost pressures and the need for scalability and flexibility increasingly drive telecommunication companies to migrate critical functions to the cloud and rely on third parties for data hosting and other IT and software services. This poses significant operational resilience risks for outsourcing firms and new challenges for regulators. For example, if the few large providers that handle most cloud services were to fall victim to a cyber-attack or IT outage, it would act as a single point of failure, creating significant domino effects on outsourcing companies and their customers. Another challenge is the shared responsibility inherent in cloud outsourcing, where the outsourcing firms are responsible for the data they process and store in the cloud. In contrast, cloud service providers handle the security of the lower-level infrastructure layers. In regulation terms, outsourcing firms are fully responsible for the governance and security of the whole process, because security incidents affecting even the lower-level infrastructure layers could affect operational resilience and business continuity. Therefore, this mismatch between regulatory expectations and how companies manage data is a major sticking point. Moreover, it can be difficult for regulators to understand how cloud service providers store and protect sensitive data, or hold them accountable, given that most operate globally and fall out of their jurisdictions.How regulators can respond to telecommunications challenges
Technological progress and evolving business models mean that institutional arrangements and regulatory tools may have to change to ensure fair competition, consumer protection, data privacy and security, and the integrity of networks. Useful regulatory responses are as follows:- Continuous review of existing regulations and formulation of new policies where they are insufficient.
- Global collaboration of regulatory authorities in enforcing policies and investigating violations.
- Educating consumers about how data-driven firms use their personal information to promote transparency and accountability.
