First published on MLex 10 January 2017. By Magnus Franklin.
French telecom watchdog Sébastien Soriano has an answer for those who say regulation is too sluggish for the fast-paced digital economy: If you amass enough market data on an app, consumers will gain the power to keep companies competitive — without state intervention.
“We will try to see if it works sufficiently well for the self-organization of the market,” he says.
Soriano’s assertion might sound odd coming from a regulator in the country that gave us the word dirigisme. But he insists in an interview with MLex that a telecom agency should be interested in “the goal, rather than the means.” And that involves “regulating with data,” as he puts it.
The role of a telecom authority is to “not just be a regulator, but a watchdog,” says Soriano, the 41-year-old chairman of the Autorité de régulation des communications électroniques et des postes, or Arcep.
Soriano is on a mission to reinvent regulation for the Internet age, and his quest is set to influence colleagues around Europe as he begins this year’s chairmanship of the EU’s umbrella group for national telecom watchdogs, the Body of European Regulators for Electronic Communications.
Soriano at a Body of European Regulators for Electronic Communications (BEREC) meeting.
He’s hardly the first regulator to think about new modes of enforcement at a time when terms such as Regulation 2.0 and Agile Policymaking have become common. But most of his peers have confined themselves to developing theoretical models. Soriano is intent on putting the models into practice.
One cornerstone of regulating with data is collecting information in the first place. So Arcep plans to launch an ambitious data-gathering system this year to shed light on all sorts of indicators in the telecom market, ranging from mobile coverage to connection quality.
The agency will run some, but not all, of these databases. But once they are in place, Soriano’s idea is to package the information into apps that would allow consumers to pick and choose operators with more precision. Any misbehavior would show up on the datasets, making it easy for consumers to ditch companies that don’t match their expectations.
This is a far cry from the regulatory regime that the EU created in the 1990s, when the goal was to expose Europe’s old phone monopolies to competition. That approach involved capping prices and forcing the incumbents to give rivals access to their networks.
Today, by contrast, “we are not assuming regulation for data to do everything,” Soriano says, acknowledging that the approach is unlikely to do much good for the traditional opening of fixed networks.
The first target of the regulator’s new approach will be wireless operators, he says. That’s because mobile services are already competitive, leaving EU regulators with few tools for fixing imperfections in the market.
Arcep plans to collect and publish data about the operators’ coverage, connection speeds and other metrics. Independent developers could then package this information into apps and rating systems, giving the companies extra incentives to improve their services and meet consumers’ demands — without the regulator getting directly involved.
‘Regulation, the Internet way’
Soriano says he draws his inspiration from “Regulation, the Internet Way,” an influential paper by Nick Grossman of Union Square Ventures. The venture capitalist sums up his core message this way: “Regulate using an accountability-based model, rather than a permission-based model.”
Today’s prevailing regulatory models, by contrast, reflect rules drawn up during the era of standardized mass production associated with Henry Ford’s assembly line, Soriano says.
Soriano says the Fordist economy gave rise to a regulatory system that sought to rein in abuses and protect consumers and workers. This extended to services such as taxicabs rides, where licensing was introduced to rein in an accident-prone black-market sector.
The question today is whether this system remains effective at a time when gig-economy services such as Uber and Airbnb are wreaking havoc on regulated traditional services in the transport and hospitality businesses.
“For a long time, we have not been asking ourselves if it is necessary or not,” says Soriano, who rose to prominence as the chief of staff for the country’s former digital economy minister, Fleur Pellerin.
The magic number
Soriano’s approach could help answer a question that has perplexed regulators for several years: How many mobile operators can a national market realistically support?
After examining a wave of wireless mergers around Europe, Soriano says he confident that he has hit on the correct number: 3.5.
He’s joshing, of course, but the number encapsulates a challenging reality. A market with four operators can result in wasted duplication and generate value-destroying price wars. But cutting the number to three can lead to oligopolistic tendencies with bad service and higher prices.
This is where regulating with data comes in, Soriano says. The goal would be to encourage operators to compete on other parameters than price, such as the reach of the network in rural zones, or the consistency with which the advertised speed is achieved, he said.
Rewarding good behavior
The system would, in effect, rate operators in the same way Uber passengers and drivers review and grade each other, rewarding good behavior and giving consumers the power to shape the market. A mobile operator could charge a premium if it’s able to prove — with data verified by a third party — that its service is better than a rival’s.
“We want to make sure that we give them the chance to be in a position to monetize their networks,” Soriano says.
This approach might be well received in an industry that has seen years of falling revenue, rising regulation and exploding demands to invest in wireless licenses and upgrades to keep pace with mobile-data technologies.
Soriano stresses that Arcep is hardly the only European regulator developing more flexible tools for regulating the business. There’s now a community of “likeminded” officials in countries such as the UK, Sweden, Austria and Slovenia, he says.
But with Soriano in the EU limelight as the head of Berec this year, all eyes will be on Arcep to see if its new approach delivers better outcomes for consumers.
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