Saturday, December 12, 2015

"Level Playing Field" Impossible, or Only a Matter of Policy?

One of the least-controversial statements one can make about competition in any market is that a “level playing field” where all contestants are treated alike is a good policy. The problem always comes in the detail. In most markets, contestants are not literally treated the same.

In markets where wholesale access is the main way competition is enabled, the underlying facilities provider is treated quite differently than everyone else.

In markets where mandatory wholesale, provided by one provider, is not the only form of competition, incumbents are governed by rules that do not apply to any other contestants.

That typically is the case for former telecom incumbents, which almost universally face obligations no other contestant faces. In a few markets (North America and Singapore perhaps illustrative in that sense), there are multiple facilities-based providers. Even there, the playing field is not level.

There tends to be a former incumbent operation operating with wholesale obligations, and then one or more facilities-based competitors who do not have any mandatory wholesale obligations.

And that raises regulatory issues. At what point, if ever, does the playing field really need to be harmonized? When can all contestants--at least facilities-based contestants--play by the same rules?

Presumably there still will be differences, even if all facilities-based providers were to be governed by precisely the same rules. Wholesale operations presumably would not have the obligations the facilities firms face.

It is a difficult issue. In Singapore, facilities-based competition almost makes robust wholesale unnecessary. U.S. regulators, while maintaining most incumbent obligations, opted for an approach that creates incentives for facilities-based competition nearly two decades ago.

But anyway one looks at the matter, treating everyone the same is not the practice, anywhere.

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