The Independence of Regulatory Agencies In Practice

343 Pages·2014·12.7 MB·English

The London School of Economics and Political Science
The Independence of Regulatory Agencies In Practice:
The Case of Telecommunications Regulators
in the United Kingdom and France
Paolo Subrato Dasgupta
A thesis submitted to the Department of Government of
the London School of Economics and Political Science
for the degree of Doctor of Philosophy
London, July 2009
UMI Number: U615699
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Abstract
The PhD thesis examines the independence in practice of telecommunications regulatory
agencies in France and the UK. It builds on existing literature, which has selectively
focussed on formal delegation and institutional design of ‘independent’ regulators, in
particular, on the statutory provisions defining their formal resources and formal
constraints.
This thesis’ central research question is whether the independence of regulatory agencies in
practice reflects their formal independence. The thesis aims to explain whether and how
factors other than different formal institutional arrangements influence the policy-making
of the two agencies examined. It develops and applies an analytical framework for studying
whether and how regulatory agencies exploit, or are hindered by, formal and informal
policy resources.
Building on Nordlinger’s work on state autonomy, which is defined as translating
preferences into action, five non-formal indicators are proposed to assess the
independence of regulators in practice. Participants and resources, preferences, processes,
time-length of decision-making, and outcomes, are the indicators applied to selected sub­
cases that help to evaluate the autonomy of the two telecommunications regulators, the
Autorite de Regulation des Telecommunications (ART) and the Office of
Telecommunications (Oftel).
The findings counsel a comprehensive review of the conceptualisation of regulatory
independence. The thesis shows that policy preferences guide whether and how formal
institutional arrangements are used. The preference convergence and/or divergence that
regulators face shape which policy resources will be deployed in support of, or in
opposition to, the agencies as they pursue their policy preferences.
Three of the four sub-cases relating to 3G licensing and local loop unbundling (LLU)
policies developed by the two regulators show that to achieve preferences persuasion was
applied more than imposition. Only in one sub-case, the French regulator actively sought
to use formal resources as well as non-statutory ones. Crucially, the thesis shows the
significance of non-statutory resources such as policy expertise, informal ties and ‘physical’
assets for the regulators and other policy participants to pursue their preferences
notwithstanding national formal arrangements.
Contents
Page
List of Tables and Diagrams 4
Acknowledgements 6
Introduction 7
Chapter 1: Existing Theories on Regulatory Agencies’ Independence
and ‘State Autonomy’ 23
Chapter 2: Creating a New Framework for Analyses on Independence -
Indicators and Autonomy Scenarios 60
Chapter 3: Formal Institutional Actors within National
Regulatory Frameworks 92
Chapter 4: Oftel and 3G Policy in the UK 119
Chapter 5: The ART and 3G Policy in France 156
Chapter 6: Oftel and Local Loop Unbundling in the UK 193
Chapter 7: The ART and Local Loop Unbundling in France 238
Chapter 8: Conclusions 278
List of Interviewees 307
Bibliography 308
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List of Tables and Diagrams
Page
Table 1: Nordlinger’s State - Autonomy Type scenarios; Own Labels (Level 1) 44
Diagram 1: State preferences translated into action vis-a-vis society 62
Diagram 2: Regulatory preferences translated into action vis-a-vis ‘n’ actors 66
Table 2: Type III Autonomy: State and Regulatory scenarios (Levels 1 and 2) 82
Table 3: Type II Autonomy: State and Regulatory scenarios (Levels 1 and 2) 83
Table 4: Type I Autonomy: State and Regulatory scenarios (Levels 1 and 2) 84
Table 5: Summary of Formal Regulatory Arrangements: the ART and Oftel 117-8
Table 6: Oftel’s 3G Type II autonomy 152
Table 7: The ART’s 3G Type II autonomy 190
Table 8: Summary Features of 5 Oftel Options Proposed 202
Diagram 3: Wholesale Option 4 - BT provides OLO or SP with higher bandwidth
access to the end-user via a point-to-point data service 205
Diagram 4: Option 2 LLU - BT PBLC between OLO equipment at customer
premises and at BT exchange leased by new entrant 206
Table 9: Oftel’s LLU Type II autonomy 234
Table 10: Summary Features of 5 ART Options Proposed 247
Table 11: The ART’s LLU Type I autonomy 274
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Declaration
I certify that the thesis I have presented for examination for the MPhil/PhD
degree of the London School of Economics and Political Science is solely my own
work other than where I have clearly indicated that it is the work of others (in
which case the extent of any work carried out jointly by me and any other person
is clearly identified in it).
The copyright of this thesis rests with the author. Quotation from it is permitted,
provided that full acknowledgement is made. This thesis may not be reproduced
without the prior written consent of the author.
I warrant that this authorization does not, to the best of my belief, infringe the
rights of any third party.
Acknowledgements
The author would like to thank very much his supervisors at the London School of
Economics and Political Science (LSE), Professors Mark Thatcher and Julia Black, for their
persevering and patient support and advice throughout the writing of this thesis. He
gratefully acknowledges the Economic and Social Resource Council’s (ESRC) funding
support (Studentship PTA-030-2003-00021). The author is furthermore thankful to
everyone at the Centre for the Analysis of Risk and Regulation (CARR), especially to its
Director, Professor Bridget Hutter. Fruitful exchanges were had with too many to mention
individually both at the LSE and outside. Still, LSE Director Sir Howard Davies deserves a
special mention for his availability, as do his staff past-and-present for providing generous
access.
Jean Jameson and Sue Haines of LSE’s Disability office have been a constant source of
support in difficult times. Simeon Underwood and his colleagues at the LSE Research
Degrees Unit have also been promptly helpful through the years. Last but not least,
without forgetting other friends - with a mention for Daniel Stivey - and family, this thesis
is as much mine as it is of my splendid parents Monty and Anna Dasgupta whose
unwavering support and encouragement were critical from the start to the end of my PhD
experience.
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Introduction
I. Research Purpose
The spread of independent regulatory agencies across Europe constitutes a key element of
the ‘regulatory state’, claimed to have replaced the ‘positive state’ as the mode of
governance of markets from the mid-1980s1. The scholarly interest in the institutional
change represented by the creation of ‘independent’ regulatory agencies bodies has fuelled
a select body of research ‘measuring’ their formal independence from Governments.
Exponents of the formal institutionalist approach assess and explain variation in regulatory
agencies’ independence according to variation in formal institutional arrangements.
Instead, this PhD thesis examines the independence2 of national regulatory agencies in
practice. It therefore explores whether regulatory agencies are ‘independent’, without tying
the concept to formal independence, by asking two sub-questions that help to develop a
new analytical approach. First, in the presence of a set of policy-specific constraints, is the
regulator able to reach its policy objective? Second, is the achievement of the policy
objective based on the regulator’s degree of formal independence, or can the agency’s
exploitation of non-statutory, ‘informal’3, resources be important?
Regulatory agency independence in practice, or autonomy, is here defined as the regulator’s
ability to translate a policy preference into action. This definition is consistent with
Nordlinger’s ‘state autonomy’ approach which describes how the unitary democratic ‘state’
he analyses pursues its preferences vis-a-vis powerful (non-state) ‘societal actors’4.
Nordlinger’s analysis applies only to the preference fulfillment of the state vis-a-vis societal
actors, and so needs some refinement in order to delineate preference fulfillment by
regulatory agencies. The thesis therefore adapts and develops Nordlinger’s analytical
framework to allow an analysis of the extent to which one part of the state, the regulatory
agency, is able to translate its preferences into action with respect to other parts, as well as
1 Majone,G 1994 “The Rise of the Regulatory State in Europe”, 17 West European Politics; pp.77-101; (ed.)
1996 “Regulating Europe”, London: Routledge; and 1997 Trom the positive to the regulatory state: causes
and consequences of changes in the mode of governance’, Journal of Public Policy 17(2): 139-167
2 For the sake of clarity and convenience, throughout the thesis, the terms independence and autonomy will
be used interchangeably
3 The analytical focus on formal independence thus far means that the use of the adjectives ‘non-formal’,
‘informal’ or ‘non-statutory’ in this thesis simply aims to distinguish from indicators, or instruments, directly
tied to statutory arrangements governing the regulatory activity of the selected agencies
4 Nordlinger,E 1981, “On the Autonomy of the Democratic State”, Harvard University Press
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with respect to societal actors, notably regulatees. Building on Nordlinger, the thesis
develops an analytical approach which distinguishes three types of regulatory autonomy:
• Type III autonomy - preferences are achieved in the absence of divergent
preferences between regulatory agencies and other policy participants, such as
elected officials with formal powers and regulatees;
• Type II autonomy - the regulator persuasively shifts the preferences of key actors
that have divergent preferences from it (hereafter referred to as divergent actors),
before translating its own preference into action; and,
• Type I autonomy - the regulator acts upon its preference irrespective of divergence
with the preferences of predominant actors - hereafter also referred to as divergent
actors.
The proposed analytical framework addresses the key issues of variation in agencies’
‘independence’ from policy to policy, and the consideration of dynamic and ‘informal’
factors present in regulation in practice. Both issues are neglected by formal
institutionalists, but are shown to be important herein.
The selected case is telecommunications regulation in France and in the UK. The sector’s
development is ‘strategic’ for its direct impact on other industries5, and has featured a high
degree of Government intervention6. Comparing telecoms regulators’ independence in
practice in France and in the UK is especially interesting given non-institutional similarities
but dissimilar formal institutional arrangements.
The sub-cases examine salient policies concerning high-speed broadband internet provision
through mobile and fixed telecoms networks. The 3G licensing policy sub-cases analyse the
Governments’ sale of unique national spectrum for the transmission of advanced mobile
services. The local loop unbundling (LLU) sub-cases examine the introduction of fixed
broadband competition by allowing new entrant operators to access incumbent operators’
local access networks, reaching end-users across the two countries. The selected sub-cases
are comparable because both policies were developed in France and in the UK around the
end of the 1990s.
5 ThatcherJVT 1999, “The Politics of Telecommunications - National Institutions, Convergence and Change”,
pp.22-3, 66-7, Oxford University Press (OUP)
6 Hulsink,W 1999, “Privatisation and Liberalisation in European Telecommunications - Comparing Britain,
the Netherlands and France”, p.5, Routledge
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