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Regulatory Reforms and Theoretical Framework

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Building Telecom Markets

Part of the book series: The Political Economy of the Asia Pacific ((PEAP))

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Abstract

Triggered by neoliberal market reforms in the United Kingdom and the United States in the 1980s, regulatory reforms, such as privatization of public ownership and market liberalization, rapidly and extensively spread to many regions. This was believed to be the solution to state failure in a market economy. Acknowledging the diminishing role of the state in managing and controlling a market economy, scholars have questioned the transformation of state authority in the globalized and liberalized telecom market. The impact of structural and institutional changes on regulatory reform has been widely discussed in the literature.

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Notes

  1. 1.

    The standard definition of natural monopoly is based on a cost function that assigns total costs to outputs. If a firm can construct and operate the service at a lower cost than other firms, the existence of a natural monopoly in the local exchange is justified for the regulators of the industry.

  2. 2.

    For a more extensive review of regulation theory, refer to Robert Baldwin and Martin Cave, Understanding Regulation: Theory, Strategy, and Practice (Oxford: Oxford University Press, 1999), and Paul L. Joskow and Roger G. Noll, Regulation in Theory and Practice: An Overview, California Institute of Technology Social Science Working Paper 213 (May 1981).

  3. 3.

    An integrated service network provides digital connections between users and network interfaces.

  4. 4.

    Jeffrey Frieden best articulates this kind of explanation of deregulation in the financial markets. His main argument is that sectors most vulnerable to government policy change (because they face high costs when shifting resources to other uses, because of their asset specificity) and best able to organize to overcome collective action problems (this is so by default because the holders of high-specificity assets are small in size and have the highest stake) can get what they want because they can lobby most effectively for policies they want. Increased international capital mobility strengthens the interest of holders of financial assets (banks, financial investors, and multinationals) as opposed to holders of fixed assets (national industry), leading the former to promote policies that will further increase international financial integration. See Jeffrey Frieden, “Invested Interests: The Politics of National Economic Policies in a World of Global Finance,” International Organization 45(4): 439 (1991).

  5. 5.

    George Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2(1): 3–21 (1971).

  6. 6.

    A technological paradigm can be defined as a pattern for solution of techno-economic problems. (For a discussion and a definition, see Dosi 1982.) A technological paradigm defines the technological opportunities for further innovations. Thus, technology develops along relatively ordered paths. A technological trajectory is the activity of technological progress along the economic and technological trade-offs defined by the paradigm (Dosi et al. 1988: 225).

  7. 7.

    Technological capabilities consist of the resources needed to generate and manage technical changes, including skills, knowledge and experience, and institutional structures and linkages (Bell and Pavitt 1997: 89).

  8. 8.

    Jessop defines governance as “strategic context-steering.” In “strategic context-steering,” he argues that the invisible hand of the market is combined with the visible hand of the state in a context of negotiated decision-making. Thus, on the one hand, market competition is balanced with cooperation. On the other hand, the state is no longer the sovereign authority for governance. It becomes but one participant among others in the pluralistic guidance system and contributes its own distinctive resources to the negotiation process (Jessop 1997: 117).

  9. 9.

    A comprehensive account of global change is essential to illuminate changes associated with globalization. The global order is to be conceived “as all-encompassing” (Rosenau 1992). Hewson and Sinclair consider that a historicist epistemology and ontology are essential for understanding globalization. Historicist theory aims at proximate explanatory constructions, which correspond to the changing forms (Hewson and Sinclair 1999). My aim is to understand the origins of forms of governance in order to anticipate their transformation into other forms over time, rather than the pragmatic concerns of most positivist or problem-solving work.

  10. 10.

    For this categorization of different types of regulatory reforms, I am greatly indebted to the work of Vogel (1996). Vogel categorizes four different types of regulatory reforms: pro-competitive reregulation, juridical reregulation, strategic reregulation, and expansionary reregulation. However, my analytical distinction of different regulatory paths does not use the word “reregulation,” which accompanies his four types of regulatory reforms. Vogel (1996: 16) argues that the regulatory reform in the telecom and financial markets was “a combination of liberalization and reregulation” rather than “deregulation.” While this view correctly points out the elements of reregulation in regulatory reform, Vogel’s distinction of liberalization and deregulation is problematic in the sense that the regulatory reform must accompany deregulation of the formal or informal rules in order to liberalize the domestic markets. Liberalization may encompass not only deregulation but also a reregulation trend in regulatory reform. Thus, Vogel’s distinction of liberalization and deregulation at the expense of emphasizing reregulation phenomena may not reveal the actual process of regulatory reform.

  11. 11.

    This study is aware that governance is not always more efficient than markets or states in dealing with the economy, and there always exists a possibility of governance failure, as in the case of markets or states.

  12. 12.

    The term “wireless communication” as used here refers only to the use of mobile telephones.

  13. 13.

    For the main technological characteristics in modern telecommunications systems, see A.M. Noll, Introduction to Telecommunications Electronics (Boston, MA: Artech House, 1995).

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  1. Yonhee Hall, Yonsei University, Seoul, Soul-t´ukpyolsi, Korea, Republic of (South Korea)

    Whasun Jho

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Jho, W. (2014). Regulatory Reforms and Theoretical Framework. In: Building Telecom Markets. The Political Economy of the Asia Pacific. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7888-1_2

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