ICT Policy For Networked Society - Ericsson · PDF fileWe are at an inflection point of an ICT-led transformation ... talent Attraction of ... ICT Policy For Networked Society

ICT POLICY for the

SocietyNetworked

Progressing a transformative ICT Policy Approach

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Executive Summary ................................................................................................................................................................................................ 5

The role of ICT in the society and the economy................................................................................................................................... 6

The emergence of the networked society ................................................................................................................................................ 9

Why regulate? .........................................................................................................................................................................................................10

What ends in mind? - Regulatory objectives .......................................................................................................................................12

How to regulate? ....................................................................................................................................................................................................16

Key global ICT policy issues ...........................................................................................................................................................................17 - Spectrum Management ................................................................................................................................................................................18 - Network regulation ...........................................................................................................................................................................................18 - Convergence ........................................................................................................................................................................................................18 - Media/content regulation.............................................................................................................................................................................19 - Copyright ...............................................................................................................................................................................................................19 - Information Management ........................................................................................................................................................................... 20

Conclusions .............................................................................................................................................................................................................. 21

References and suggestions for further reading ............................................................................................................................... 22

index

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Over the last 30 years a number of different policy and regulatory approaches have been used to cope with the challenges encountered at the time. For instance, many countries have moved away from state-owned telecommunications monopolies and have adopted liberalization and deregulation to embrace a market-based regulatory approach that relies on competition policy.

No regulatory framework (why, what and how to regulate) comes with a lifetime warranty. Historically, we have heard calls for less regulation, better regulation, more equitable regulation, smarter regulation, and now for more holistic regulation that focuses on the cumulative impact of regulation. Each of these calls serves as a reminder that technology moves faster than regulation and hence there is a continuous need for keeping regulatory frameworks aligned with technological, business, consumer, market, and societal realities.

In this context of constant change, it is worthwhile to remind ourselves that the networked infrastructure that blends computing and communication is the largest construction project in human history. [i] It is also useful to take a “helicopter view” of the transformative role of information and communications technology, “ICT”, in society and its role in accelerating socio-economic well-being. There is an opportunity cost of a narrow or one-sided policy framework that does not adapt to market realities and stimulate the contribution that commercial stakeholders can bring to society. [ii] The strategic benefits of a prudent, forward-looking ICT policy can be put at risk if policy-makers fail to appreciate the crucial role of ICT in society.

We are at an inflection point of an ICT-led transformation of the society we know today. A new productive shift in economies is expected with the rise of a networked society. Developing the strategic capability to master this change in the most advantageous fashion must be the key priority for policy-makers. Minimizing the gap between technology and regulation must take center stage on the agenda of policy makers. The absolute as well as relative success of societies and economies of this largest human project in our history is substantially determined by policy makers and regulators.

Ericsson would like to share its thoughts and ideas on some of the key elements of a progressive and prudent future policy and regulatory framework. Nations that will benefit the most from an ICT-led societal transformation will be those that adhere to a transformative ICT policy approach that is holistic and not sector-specific i.e. a converged regulatory framework. This relative change of focus in policy approach fundamentally reflects the desire of societies and nations to maximize their national competitiveness of their industries and public sector. Ericsson hopes that this document can be a source of insight for advancing current policy realities of societies, economies, businesses, cities and citizens.

EXECUTIVE SUMMARY

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A society that has no wheel and no writing is limited in what it can achieve. Technology has the ability to remove limitations on individual, organizational and social action. Some technological advancements not only transform economies but also lead to structural changes affecting production, distribution, communication and consumption in societies. The capacity for structural change is a highly valuable skill for a nation. It can be applied in order to stimulate development and then to preserve and increase the gains as the context and opportunities change.[iii] The societal skill to master change is a key strategic capability, as it shapes competitiveness at the national level. It defines the capacity of an economy to shift economic activities and hence output to more productive activities which in turn can generate higher levels of real wages.[iv]

ICT enhances productivity and is a key source of economic growth, job creation, and new business creation which leads to an increased tax base. Understanding ICT- induced economic growth beyond the stimulus caused

by direct ICT investment is crucial. Some important effects of ICT investments on productivity that have been identified are: [v]

• Improvementsinhumancapital:ICTcreatesdemand for higher skilled labor and eliminates simple and tedious tasks.• Multifactorproductivitygrowth,whichincludesthe impact of intangible investments such as organizational changes, new distribution and production processes, and new methods of doing business related to the use of ICT technology.• Forevery10percentagepointincreaseinbroadband penetration the isolated economic effect on GDP growth is around 1% of GDP, with estimates varying between 0.5% - 2%.• Forevery1,000additionalbroadbandusers,around 80 jobs are created, with estimates varying between 20 and 130.• Doublingtheaverageattainedbroadbandspeedfor an economy increases GDP by 0.3% points.

ThE ROLE Of ICT IN ThE SOCIETY ANd ThE ECONOMY

A n et w o r k ed c it y c a n be seen a s a c o m bin a t io n o f t h r ee pr in c ipa l so c iet y sph er es w h er e ic t is a n en a b l er f o r t r ipl e bo t t o m l in e d ev el o pm en t

Change in consumer behavior

Employment

Creativity/ innovation

Knowledge intensity

City

Increased usage of ICT

Citizen

Improved public sector efficiency

Improved governmental

finances

Effect on education

Networked Society

Attractiveness

Attraction of talent

Attraction of capital

Improved private sector efficiency

Change in industry

mix

Work place flexibility

Self fulfillment Business

Effect on healthcare

Income level

Traffic management

Green development

Private sector growth

Improved economic

output Investments

in ICT

Entertainment

Social interaction

Emission levels

Energy consumption

Productivity

Figure 1: A simplified overview of the interdependencies between ICT and its effects on society

Illustrative and simplified

Source: Ericsson Networked Society Index 2011

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The 21st century is the first digital century! Digitization is present in all aspects of our lives, including: communication, information, collaboration, advertising and media, as well as in retail commerce and banking, e-commerce, e-/m-payments, and social networking

The digital information revolution is opening up an amazing array of information for people to get access to, particularly through the Internet. But to see the information revolution as principally about the ability to more easily access text or video information is to only see the tip of the iceberg. Information access on the Internet is an amazing innovation, but the full breadth and depth of the digital information revolution goes far beyond Web surfing, for the digital information revolution is extending to virtually all aspects of our lives, all parts of society and all organizations. It is only now, when a vast array of information is in digital form and when it is far easier and cheaper to create, manipulate, organize, transmit, store and act on information that we can truly speak of being in the digital information age. [vi]

Digitization is a product created by ICT industries and is the key driver of convergence. Wireless and fixed broadband access is the prime enabler of convergence as it sets the fundamental conditions and boundaries that determine how we interact with digital information.[vii]

Within just a few years we have moved from a communications system that provided us individually with a mere trickle of information (a few kilobits), to a stream (megabits over broadband), and soon to a veritable flood (gigabits of ultra broadband communications). It is the equivalent of moving from horses, to trains, to personal automobiles, to personal jets all within a few years. [viii]

Societal transformation led by ICT is not just the tale of the prosperous states doing better. Most developing countries view the increased use of ICT as a critical tool in their efforts to eradicate poverty, enhance human development, and achieve the U.N. Millennium Development Goals. Recognizing this untapped potential, infrastructure initiatives and development strategies incorporating ICT are being increasingly promoted and launched. [ix] This movement is known as ICT for development, ICT4D. Access to ICT and particularly the Internet can provide an even bigger boost to economic growth than access to mobile voice service and simple data such as SMS. However, to make the most of the Internet, users need to have a certain level of education and literacy. The Internet’s effect on development may be greater in the long term, but is unlikely to be as sudden and dramatic as that of the spread of mobile phones in the first decade of this century.

Throughout the history of telecommunications, mobile communication has made a bigger difference to the lives of more people, more quickly, than any previous technology. [x] What GSM has done for connecting voice globally will be repeated by 3G and LTE mobile technologies for the Internet to truly become a global network for all. In this sense, there is no contradiction between these two technologies. Rather, they are reinforcing each other. The mobile Internet will empower billions of new users who will not otherwise have the opportunity to use the Internet. It will create new digital markets and wealth, enable new business models and innovation, and enable new forms of social activity and organization.

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Understanding the effects and benefits of ICT on nations has been the standard way of analyzing the impact of ICT for decades. However, increasingly the impact of ICT must be understood within a city, business and citizen framework because doing so allows for more meaningful comparisons. [xi] If we take the example of a city framework we can observe the following. Firstly cities represent a more universally comparable context compared to the more commonly used nation based frameworks. Comparing London with Shanghai makes more sense than comparing the UK with China. Hence a city focus provides opportunities for a faster learning and global best practice sharing. Secondly, already today more than 50% of the world’s population lives in urban areas and by 2030 the number is expected to grow above 60%. There is a steady stream of people moving from the countryside to the cities. The global urban population increases by over 5 million people every month, equivalent to the size of Miami or Sydney. Today more than 20 cities in the world are classified as

mega cities with more than 10 million inhabitants. By the next decade at least eight additional mega cities will emerge, with half of them located in the developing countries. [xii]

No matter the path of economic development a country has chosen, urbanization remains an inevitable outcome of this effort across the world. [xiii]

Increased urbanization leads to increasing influence for cities. According to McKinsey Global Institute, the 600 largest cities account for more than 50% of the world’s GDP but only 22% of the global population. At the same time it is the medium-sized cities with populations ranging from 150 thousand to 10 million that are predicted to account for the largest growth in terms of GDP up to 2025. This highlights the fact that it is not only the mega cities that will drive development but many big cities will take part in shaping society going forward.

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ThE EMERgENCE Of ThE NETwORkEd SOCIETYToday’s mobile and digital life is expanding into more areas of society and business. We now stand on the brink of transformative innovation opportunities across industries, public service and private life. The digital revolution that we today can see all around us is based on the rise of the Internet, broadband, advanced digital devices and applications. These have given rise to digital natives and digital organizations that have adopted and integrated the tools facilitated by the digital revolution. As a result, they have quite distinct expectations and behavior compared to their analogue peers.

Over the coming years, ICT infrastructure performance will increase rapidly, fuelled by technology advances. This will bring new opportunities for people and business to create, learn, sustain and innovate leading to a positive impact on our world. Ericsson calls this new emerging society “The Networked Society”.

In the Networked Society people, knowledge, relationships, information and things are networked for the enhancement of life, businesses and society. In the Networked Society the majority of the world’s population will have grown up with a culture defined by openness, sharing, networked production/organization, peer production [see box 1 for more information], and global self-organization. This will fundamentally change the way in which we orchestrate capabilities in society to innovate, to collaborate, to create goods and services, to govern, and to sustain. Once this social change begins, it cannot be reversed.

Our world today is at an inflection point. Today people, enterprises, markets and societies are all benefiting from real-time connectivity and networking enabled by broadband. Today, connectivity to the network everywhere is something taken for granted. Digitization extends into all possible areas of society and mobility supports interactions whenever and wherever desired. With the practices of today’s digital life expanding

into more and more areas of society and business the Networked Society will take shape and benefit from fundamental transformation across industries, public services and in private life.

Information and communications technology is converging into a single “social infrastructure” critical for everyday life and for the continued innovation to build prosperity in the Networked Society. Thus it becomes a common ‘flat’ infrastructure in which differences in technology are largely invisible either because they are not relevant to users or because the infrastructure has an inherent ability to choose the ‘best’ technology for each purpose. It adapts to the situation to which the networking experience currently relates. It provides seamless connectivity, and application and content “cross-over”. It minimizes distinction between different devices and different usage contexts. Services and content can deliver the ‘feeling’ of seamlessness, simplicity and comprehensive reach to end-users.

As individuals across the globe today we collectively share real-time experiences of a digital world hardly known just a decade ago. The new ways we have adopted for interaction, sharing of experiences and knowledge, as well as for sharing innovation are now set to fundamentally change the way society evolves.

In the Networked Society things will be made differently, created with higher efficiency and productivity with new and enriched experiences. Key traits of the Networked Society are continuous transformation driven by collaboration and creativity. Creativity originates in the interaction between people and businesses and takes different shapes and forms as it is expressed in the society we live in. The information age is an input, and not the outcome along the road towards the transition to a knowledge society. The Networked society is a knowledge society that knows how to use information.

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In the academic fields of economics and sociology, networks came to mean a mode of governance that is different from managerial hierarchies or markets. The concept of networked organization emerged within the transactions-cost economics (Coase 1937, 1960 and Williamson 1975, 1985) and was originally intended to explain the organization of economic production. The sociologist Walter Powell argued in a famous paper the break with the transaction-cost theory. Powell concluded that networks constitute a distinctive “organizational form” or type of governance that was neither market nor hierarchy. A network is a relationship rather than a transaction and it is based on long term bonds of reciprocity and trust among economic actors. A more recent, Internet-related argument about networked production starts with the presence of ubiquitous, powerful networked information technology (Paul Adler, Yochai Benkler). It then continues, with the availability of this technology that significantly reduces costs and magnifies the

scope of establishing relationships based on the reciprocal benefits of association, i.e. peer production. Yochai Benkler, the author of The Wealth of Networks, has a concept of peer production which is very similar to Powell’s networked organization. But there is one important difference. While both recognize the benefits of reciprocity obtained without a market or a hierarchy, the roles of trust and depth/strength in relationships between actors significantly differ between them. In peer production, relationships are mostly based on relatively anonymous and automated encounters with no particular expectation of trust and long-lived relationships. Trust provides a level of certainty in planning, execution, performance, cost control (and hence liability) and above all in receiving cash and non-cash compensation. This single but vital difference is extremely significant in understanding what to expect from networked and peered productions or organizations.

BOX 1. NETwOrkEd PrOduCTION & OrgANIzATION: - PrOduCTION NETwOrkS vS. PEEr PrOduCTION whAT IS ThE dIFFErENCE? [XIv]

whY REgULATE? A regulatory framework consists typically of three key elements as depicted in figure 2. Its parts aim to answer the following three questions;• WhyRegulate?–Thepolicyrationaleandlegitimacy of interventions. • Withwhatendsinmind?–Whatregulatory objectives and desired outcomes are being pursued? • Howtoregulate?–Thematchingofregulatory instruments to regulatory objectives and choosing of implementation strategies.

As a starting point one can assume that wealthy economies can be developed under a variety of policy and regulatory frameworks. [xv] These economies meet a threshold of institutional quality that ensures political and economic stability, reasonable state capacity, enforcement of property rights and contracts, sufficient provision of public goods and limits on government predation and corruption. Weak institutions are not only an inequitable burden on citizens—they also act as brake on economic growth by undermining incentives in the private sector. [xvi] This important aspect of policy making is beyond the scope of this paper. Instead the paper assumes that the institutional threshold has been reached and that legitimacy of policy makers and regulators is established. This means that the state can identify relevant regulatory approaches, understand their key objectives, highlight the importance of implementation and identify key industry issues. In present circumstances, the state will do this in the context of ICT policy and will master all necessary elements with the aims to improve the capability of society to make the most of the ICT led societal transformation with the aim to maximize the associated expected net benefits.

Ericsson Internal | 2012-03-02 | Page 2

Source; Ericsson, inspired by weatherill, Better regulation, Oxford 2007 and Prosser, The regulatory Enterprise, Oxford, 2010.

Figure 2: key elements of a regulatory framework

hOw

regulatory Framework

why

whAT

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For this paper, we assume that regulatory objectives and desired outcomes of an intervention are enough to legitimize the cost of intervention. In other words, the justification rests on the premise that regulators are doing the right thing. In addition, one can argue that legitimacy can be further enhanced if interventions are effective. That is, they are working as intended and deliver an adequate net benefit (the cost of an intervention is sufficiently lower than its benefits). A related why question is “why” the “why-regulate” changes over time? There are a number of explanations [see box 2 for more information] in the academic field of political economy that aim to answer this question. The four most recognized theories are variants on: power, technological determinism, ideas and domestic policy. All four explanations have important elements but also have their individual fallings. [xvii]

Recognized economic and social benefits of an ICT-led societal transformation as well as the expected benefits

of the rising Networked Society presented above, not only provide a strong socio-econonmical but also a technological based justification, i.e. why the why-regulate must change in a certain direction.

This absolute necessity to continuously adopt regulatory frameworks as new technology advancements change the context is also captured in Manuell Castells work:

The dilemma of technological determinism is probably a false problem, since technology is society and society cannot be understood or represented without its technological tools. Yet, if society does not determine technology, it can, mainly through the state, suffocate its development. Or alternatively, again mainly by state intervention, it can embark on an accelerated process of technological modernization able to change the fate of economy and social well-being in a few years. [xviii]

Power: theory focuses on the distribution of global power of a single power or a power club. The theory puts focus on the level of alignment of interests, the incentives and the ability of a power or power club to advance achievements. The power theory does not explain what the powerful seeks in terms of outcomes nor does it recognize the importance of the decision making process affecting the outcomes as such.

Technology: is the polar opposite of the power theory. It assumes that technology has a logic built into it that dictates the path forward. Important shifts in technology frontiers alter the costs and benefits for all stakeholders concerning market opportunities, competition and regulation. This approach has been critiqued to be too deterministic and missing the important role of the society and governments in the adoption (and rejection) process of new technologies.

Ideas: some stakeholders shape the collective agenda regarding ideas about cause and effect and about desirable outcomes. Some ideas emerge and evolve to

become powerful enough to sharply redirect policy, goals and outcomes, or in the words of the French poet Victor Hugo: “there is nothing more powerful than an idea whose time has come”. A rights based regulatory approach is one good example of an idea based theory explaining shift in policy frameworks.

Domestic politics typically focuses on interest-group politics or bureaucratic politics. The former puts emphasis on the privileged position of concentrated interests because they are well organized and have higher stakes and hence incentives in shaping the outcomes compared to the interests of other stakeholders. The latter, also known as the public-choice theory, views public officials as career-promoting and power enhancing entrepreneurs who strive to further they private agendas. Policies and outcomes reflect conflicts and cooperation among the bureaucratic players. Both these two theories are challenged on the basis that top politicians seek effective control over office and their governments and need to respond in a competitive election process to the interests of voters.

BOX 2. POlITICAl ECONOmIC ThEOry - why ThE why ChANgES OvEr TImE?

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A number of distinct regulatory approaches have emerged over time, each with a focus on specific regulatory goals with certain desired outcomes:

• Marketefficiency • Publicinterest • Rightsbased • Networkedgovernance • Transformative

It should be noted that in most cases regulators do not typically pursue just one regulatory objective at any given point in time, which means that regulators aim to balance a number of regulatory objectives within a specific framework such as telecom regulation.

A market efficiency-oriented regulatory approach is primarily based on competition policy that is focused on promotion of consumer welfare through maximization of market efficiency (allocative [xix], productive [xx] and dynamic [xxi]) and maximization of consumer choice and thus consumer sovereignty [see box 3 for more information on efficient markets]. What is understood with efficiency is the transfer from suppliers to consumers of qualitative improvements and cost reductions without

restricting the market. [xxii] In addition, keeping markets open to new entry, competition policy can also be seen as a form of accountability for the exercise of economic power and hence maximization of consumer choice. However, opening up markets for more competition (market liberalization) or keeping markets open to the extent of protecting competitors, can also restrict consumer choice, by ending cross-subsidies which have supported uneconomic services, customer segments or regions. Liberalization of the fixed telecom market that started around 1990 constituted a move away from a public interest regulatory approach to a market efficiency regulatory approach. The introduction of multiple mobile spectrum licenses rather than relying on an exclusive license arrangement and liberalization of fixed telecom market are two examples of how the market efficiency approach has entered the grounds of ICT policy.

A public interest-oriented policy approach argues that there are serious limitations to a market efficiency approach as the latter one treats all citizens equally and views all citizens solely in their capacity as consumers. Since we do not come to market as equals, our market power as consumers is determined by our position in the existing distribution of wealth and information.

whAT ENdS IN MINd?

A perfectly efficient market is one in which:

a) Consumers and producers have access to all possible relevant information to base their decisions on, i.e. market failure ‘information asymmetry’ is absent.b) Prices reflect all costs including costs to third parties, i.e. the market failure ‘externality’ is absent.c) Firms cannot profitably charge a price in excess of ‘marginal’ cost, i.e. the market failure ‘market power’ is absent.d) There is an absence of ‘public goods/services’, i.e. the market does not have to provide goods and services whose marginal cost is zero and whose enjoyment is impossible to exclude individuals from.e) There are no ‘missing markets’, i.e. there are no goods and services absent from the market whose cost of provision is less than consumers’ willingness to pay.

Since no market is perfectly efficient (all markets are exposed to some degree of market failure(s)) the case of a regulatory intervention cannot rest only on the prospect that an intervention will yield an economic benefit (increased efficiency of the market in question). A consideration to intervene must also factor in that a regulatory intervention has a cost and a probability of regulatory failure. Only when an intervention to correct a market failure is expected to yield net economic benefit (benefit of intervention being greater than the cost of intervention adjusted for probability of a regulatory failure) should an intervention be considered. In other words, identification of a market failure should not lead to the assumption that regulatory failure is less likely or less costly. This ought to be an open and empirical question, which needs analysis on a case by case basis. [xxiii]

BOX 3. A PErFECTly EFFICIENT mArkET

Regulatory objectives.

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This fact determines our ability to satisfy our preferences in a market. The public interest approach is a move away from market-based principles and may also imply a move away from competition policy and a loss of market efficiency. [xxiv] This move towards increased social solidarity is based on the idea that the state has a duty to ensure equal treatment of citizens irrespective of their economic resources. In ICT policy and regulation this approach is manifested by regulatory interventions that attempt to ensure equal access for all consumers (urban and rural) to vital services by requiring geographically averaged tariffs, rural subsidies, uniform standards of services across all served areas and requirements on a certain level of population service coverage.

Society values also other aspects apart from simple maximization of consumer welfare. Society-building relies on the promotion of culture, social values and national identity. In countries such as Canada, most of Europe and parts of Asia Pacific like Australia and New Zealand, regulation of broadcasting services is to some or a significant extent based on a public service media principle. Public service is typically associated with privileged access to scarce resources, limits to competition and privileged access to state aid financing or public ownership. Support for a strong public service media continues to prevail in some jurisdictions while in others it is almost completely rejected on the claims of an inefficient monopoly and preference for a market based solution.

A rights-based regulatory approach is not premised on a collective view but examines the individual’s rights in a society or market. The regulatory rationale to protect

some basic rights is less familiar than the competition or public interest-based rationale. The rights-based approach starts with the premise that all individuals have unconditional rights to certain levels of protection and that some risks may be unacceptable whatever their benefits. [xxv] The rights-based approach to regulation can be encountered in a number of different policy domains, such as human rights, occupational health and safety, and environmental rights regulation. There are also private property rights, limitations on regulators’ rights to expropriate private assets and procedural rights which are concerned with how public authorities, regulators, and courts operate. [xxvi] It is also fair to say that there is some element of overlap between the public interest and the rights-based regulatory approaches, particularly in access regimes. ICT policy has a number of touch points with a rights-based approach; issues such as data privacy, the right to be forgotten, net neutrality and open Internet concerns all contain elements of a rights-based regulatory approach.

The networked governance approach is increasingly gaining attention especially its applicability in an international context [see box 4 for more information on policy challenges in a Networked Society]. The main idea with this approach is to find ways to bridge the gaps between national institutions and the growing number of policy issues that are becoming global in their nature. The main focus of this approach is procedural but since it is also context specific, such as trade- or Internet-specific, it will also incorporate certain objectives and desired outcomes, such as harmonization, coherence, etc. Governance networks combine state and non-state actors and procedural means for resolving issues to

• Theglobalnatureofconnectivityandthenatureof borderless communication make imposition of national or territorial interventions more costly.

• Thelargegrowthinvolumeofdatacommunications and transactions overwhelms the capacity of a traditional regulatory process in terms of the ability to collect, process and respond to events and issues.

• Thedistributednatureofcontrol,participationand authority of global communications and connectivity challenges the territorial approach and sovereignty of nation states in policy and regulations.

• Theinteractivenatureofthenetworkedsocietywith dramatically lowered costs and increased capability for group action will result in new forms of collaboration and organization of activities, including those relevant for policy and regulation (formulation, implementation and enforcement).

BOX 4. POlICy ANd rEgulATOry ChAllENgES IN ThE NETwOrkEd SOCIETy [XXvII]

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overcome some of the limitations of governance based on territorial sovereignty. From an ICT perspective, the ITU’s World Radio Conference, CITEL, APT-WG, CEPT, ICANN and WTO are examples of networked governance approaches. From a nation state perspective a networked governance approach to policy and regulation contains elements such as multi-stakeholder participation in consultations, forums that seek to learn and reach industry consensus, and increased attention to co-regulation and voluntary industry codes of praxis. In other words this approach is also applicable in a territorial context.

A transformative policy is an approach that focuses on transformation of an industry or a society at large and more specifically on the conduct of stakeholders in that process [see box 5 on how innovation and forces of competitive economy transform firms, industries and societies]. It typically focuses on supply side policy issues i.e. the stimulation of innovations, R&D and investments in new technologies and infrastructures, including public-private partnerships. Increasingly there is also a focus on demand side policy issues i.e. the adoption of new technologies and applications by various groups of end users – including consumers, small and mediumenterprises and public authorities. The aim is to enable innovation: in new products and services; in the market place, consumer behavior and value; and in organizational skills, activities and capabilities. In the context of ICT, national digital economy initiatives that focus on the adoption and use of new technologies serve as good examples of an increasing focus on the importance of a transformative policy that aims to disseminate crucial ICT technologies to all essential sectors of an economy. The fundamental objectives of a transformational approach are to further a society’s capacity for a structural change in the most advantageous direction and the ability to preserve and increase the associated gains as the societal context changes. Some typical key policy goals are; competitiveness, productivity, competence, knowledge intensive and sustainable economic growth, and digital inclusion.

Finally, the answer to the question: “with what ends in mind?” has changed over time and hence we should expect it to continue to do so. Over time we have also witnessed an increased regulatory complexity as concurrent regulatory approaches have been moulded into coexistence. Their relative influence varies depending on context, market maturity and jurisdiction. Often the cumulative impact of regulation is complex and hard to predict. The situation is further aggravated by the ICT-enabled convergence process facilitated by digitization and broadband communications between information, communication, broadcast, media and entertainment that conflates previously sector-specific circumstances into one common context. This process at some stage will call for a policy framework overhaul a.k.a. converged policy reforms. This is why calls for a more holistic regulatory approach that reconciles at least some of the main contradictions that may arise from different regulatory and sector-specific approaches/objectives are being heard from time to time.

Ericsson believes nations that will benefit the most from an ICT-led societal transformation will do so by increasingly adhering to a transformative ICT policy approach, which is more holistic and less sector-specific, i.e. converged in a regulatory sense. This change in policy and regulatory approach fundamentally reflects the desire of societies to maximize their national competitiveness and the efficiency of their economy, industries and public sector. Compared to other regulatory approaches the transformative approach maximizes the economic and social benefits of an ICT-led transformation. The other regulatory approaches will continue to coexist to certain degrees since some societal goals and desired outcomes will continue to be important and relevant in most jurisdictions and are better served by these regulatory approaches.

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Schumpeter’s process of creative destruction is a process in which technological advances are the main source of economic growth and improvement in the quality of life. Entrepreneurship and dynamic competition fuel creative destruction [xviii] in a process that forces firms and industries to streamline their processes and develop new tools (technology leapfrogging) to make them more productive. Firms also have to cope with changing consumer demand and offer what end-users want at competitive prices or alternatively lose customers, and eventually fail. The market’s “invisible hand”—a phrase of Adam Smith—shifts resources from declining sectors to more valuable uses as workers, inputs, and financial capital seek their highest returns.

A society cannot reap the benefits of creative destruction without accepting that some firms might be worse off, not just in the short term, but perhaps forever. At the same time, attempts to soften the harsher aspects of creative destruction by trying to preserve firms and jobs or protect industries will ultimately lead to stagnation and decline, short-circuiting the march of progress.

While Schumpeter and his followers were occupied with dynamic vs. static (price) competition and relative significance of innovation in big vs. small firms, Christensen in his book “Innovator’s Dilemma” (1997) concluded that impact from technological change comes in two significantly different shapes, with different effects on firms and industries. Technology advances of the first sort sustained the industry’s rate of improvement in product performance and ranged in difficulty from incremental to radical. The industry’s dominant firms always led in developing and adopting these technologies. By contrast, innovations typically by non-incumbents (e.g. start-ups or from incumbent firms in adjacent industries) of the second sort disrupted or redefined performance trajectories - and consistently resulted in the failure of the industry’s leading firms. In other words, technological transformation is definitely not only about big vs. small and static vs. dynamic but even more about the kinds of innovations that are introduced to the market and how these technologies streamline operations, create new tools, enable new business models and create new business opportunities in relation to continuously changing end user demands.

BOX 5. CrEATIvE dESTruCTION - ThE ECONOmICS OF TrANSFOrmATIvE rEmAkINg OF FIrmS, INduSTrIES ANd SOCIETIES

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It is obvious from above that there is no one-size fits all approach to regulate ICT but rather that a number of different regulatory objectives and goals are important in different situations, times and jurisdictions. Legitimizing the interventions and their associated goals in a given context requires a convincing justification. This aspect of policy making is a complex and sometimes controversial matter that will continue to consume policy makers’, regulators’ and other stakeholders’ attention. Given that this challenge has been adequately addressed, the next obvious question is “how to regulate?” However this challenge is to some degree more straightforward and can be more objectively analyzed on the merits of identifiable facts.

Much of the discussion on policy and regulation has historically been concerned with the formulation phase of policy and regulation, the why and what. However, increasingly attention has been paid to implementation of policy and regulation. [xxix] That is, making the choice and design of regulatory instruments and the degree of appropriate targeting of these instruments to the regulatory objectives and ultimately about achieving desired outcomes. The focus on implementation and enforcement has also put more pressure on the formulation phase to more clearly define the primary objectives of a policy intervention.

It is important that the implementation phase includes an economic analysis of all relevant implementation options. This should not be limited to assessment of administrative costs. Instead it should assess all of the associated implementation costs that will be borne by public administrations as well as the market; businesses and/or consumers and/or society. Finally, the concept of regulatory failure requires attention by policy makers and regulators. The risk of a regulatory failure should be taken every bit as seriously as a risk of a market failure. [xxx]

Most stakeholders accept that the method of implementing regulation need not be confined to the conventional top-down command and control type of implementation strategy. Every single implementation strategy and every single regulatory tool has its own strengths and weaknesses and none of them is sufficiently flexible and resilient to successfully address all relevant issues in all possible contexts. Four types of regulation implementation strategies have been identified offering distinct routes to implement regulation. [xxvii]

These routes are not mutually exclusive and provide a regulatory choice. [xxxi] These are:

• Law/Hierarchy • SocialNorms/Community • Market/Competition • Architecture(orcode)/Design

A famous example to illustrate these modes states:

…the government may want citizens to wear seatbelts more often. It could pass a law to require the wearing of seatbelts (law regulating the behavior directly). Or it could fund public education campaigns to create a stigma against those who do not wear seatbelts (law regulating social norms as a means to regulate behavior). Or it could subsidize insurance companies to offer reduced rates to seatbelt wearers (law regulating the market as a way of regulating the behavior). Law could mandate automatic seatbelts or ignition blocking systems (changing the architecture or code of the automobile as a means of regulating behavior). [xxxii]

Finally, the regulatory process needs to be considered as awhole–formulation,implementationandenforcement.The implementation strategies however face the additional challenge associated with the separation of regulatory process from regulatory content. Both process and content will continue to be important. [xxxiii] In other words, a perfect process cannot compensate for poor quality of regulatory content. The challenges associated with agency dilemma [xxxiv], institutional (dis)incentives and the level of competence of a regulator still apply.

The OECD has been working over the last two decades on providing advice on how to improve the quality of a regulatory process and provides us with seven main regulatory improvement tools: [xxxv]

• Regulatoryimpactassessment • Consultationandtransparency • Reductionofadministrativeburdensandredtape (i.e. regulatory simplification) • Enforcementguidelines • Alternativestotraditionaltopdownimplementation strategies (self-regulation, market-based instruments, standards, etc ) • Sunsetprovisions • Regulatorypoliciesandreviews

hOw TO REgULATE?

17

kEY gLObAL ICT POLICY ISSUES

Ericsson’s view on some key global ICT issues areas are given in the following;

• SpectrumManagement • NetworkRegulation • Convergence • Media/ContentRegulation • Copyright • InformationManagement(suchasdataprivacyand cyber security)

These issues have significant impact on R&D investments and innovation in ICT technologies. They affect the cost, performance and capability of new ICT technologies.A number of ICT sectors such as telecom, broadcast, media, entertainment, software and Internet online platforms exhibit similar economic realities of high fixed costs, low marginal costs, economies of scale and network

effects, and hence all face similar investment risks and uncertainties. Furthermore, these policy issues impact the timing and scale of the willingness to invest in ICT hardware, software and applications. They also determine end users’ ability to benefit from the use of ICT-based services as these policy issues define the speed, scale and intensity of ICT services adoption.

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Spectrum management. Ericsson’s positions for each issue including a brief introduction is provided below; detailed information on each specific issue can be provided on request.

To identify new spectrum bands in the ITU and license them nationally is a ten-year process. The work carried out by regional bodies, such as CEPT for Europe, CITEL for the Americas, the Asia Pacific Telecommunity and the African Telecommunication Union lays the foundations for the introduction of products with standardized connectivity that can meet the requirements of businesses and consumers with respect to performance and affordability.The policy goals of global and regional harmonization efforts should be to enable:

• Economiesofscale • Easycross-bordercoordination • Cross-borderoperation • Globalroamingcapabilities • Interoperability,choiceandaffordability • Efficientuseofspectrum,alsoinborderareas • Maximizingtheeconomicandsocietalbenefitsof spectrum usage

Network regulation. Investments in network infrastructure are long-term, large-scale undertakings that rely on confidence in the existence of stable market rules that stimulate such investments and the usage of broadband services. A typical national network costs billions of € to deploy and maintain, and has a payback time that can be greater than a decade. The continuous technological evolution gradually risks making past investments obsolete. Network investments are also upfront heavy, irreversible and once deployed the investments exhibit sunk cost characteristics. National market rules differ between countries due to legacy concerns. Active infrastructure competition should however be promoted as the primary tool to achieve competition in the provision of and usage of broadband services. In some situations open access publicly financed network deployments are necessary to change the dynamics of a market and/or to compensate for market characteristics such as low population density. Global standards should be the basis for all regulatory measures.Consumer and property rights need to be respected and should be balanced. Consumers should be entitled to access the lawful Internet content of their choice and run applications and services of their choice that comply with the terms of their service plans, including bandwidth limits and quality of service considerations, so long as it does not harm the network.

Network operators must be allowed the commercial freedom to offer tiered service plans in a competitive market and to tailor service offerings to meet consumer demands. Network operators must be permitted to employ transparent, reasonable, competitively neutral network management techniques, which may include prioritization or differentiation of classes of traffic, and to otherwise adjust network resources to ensure coverage, quality of service, and quality of consumer experience. Network Neutrality principles should not apply to competitive wireless networks since these are subject to capacity constraints due to varying demand and limitations in spectrum availability which have significant implications on network performance.

Convergence. Convergence is a process that breaks up existing vertical service-specific value chains and technologies into a multitude of horizontal service offerings. Convergence is about services and about new ways of doing business and of interacting with society. [xxxvi] This technologically driven process can be understood by considering the new possibilities it brings to end-users, businesses and society. Convergence changes markets by transforming industry sectors, blurring historical market boundaries, changing the composition and range of possible market offerings and challenging the robustness of previously successful business strategies. From a policy perspective, converges enables increased demand-side and/or supply-side substitution that can ultimately deliver more choice, competition and innovation. In a converging environment, a regulatory framework that treats similar services differently, for example on the basis of the technical platform, leads to inconsistencies and uncertainties that limit substitution. This prevents the market from fully benefiting from the opportunities provided by technological progress. A vertical and sector-specific regulatory approach in an increasingly converged business environment amplifies the risk for unintended and dysfunctional market outcomes, suboptimal resource utilization and decreasing end-user value. Policy makers should increasingly consider a technology-neutral framework that treats the underlying platforms equally. Furthermore, as a principle the starting point of a regulatory implementation strategy should be the service in question not the platform that delivers the service. This should not be interpreted as a need to regulate all services but rather that those that do need to be regulated should be so based on the justification and desirability of certain goals and outcomes. The implementation strategy should be service-specific rather than platform-specific.

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media/Content regulation. A multi-platform audiovisual policy approach needs to recognize the fast-growing availability and accessibility of audiovisual content in an environment with various complementary and alternative networks. In a multi-platform environment, the same rules and principles should apply to all technologies and distribution platforms. Media policy regulation should be technology-neutral and platform-independent. In other words, regulation of audiovisual media services should function irrespective of the underlying platform or means of distribution.

The key elements that need to be present in a multi-platform approach are:

• Supportofopenindustry-widestandardsforIP based media distribution via Set-Top Boxes, Connected TVs and IPTV. • Aplatform-neutralapproachtoregulationof audiovisual services. • Cleardefinitionsofwhatconstitutesanaudiovisual service and a definition of audiovisual media service providers, along with a delineation of their responsibilities and obligations. • Mechanismsforfairlymanagingthecompetition within audiovisual distribution markets with tools that ensure the efficiency of program/content aggregation for the distribution market. • Copyrightreformsthatunlockbarrierstomulti platform, anytime, anywhere digital distribution.

Internet content regulation is increasingly becoming a contentious issue. All regions and nations have their different norms, systems, values and sensitivities. When these norms are challenged by the progress of technology or development in society a rights-based policy approach typically challenges the established views. In addition, media convergence is another related development sometimes confused with Internet content regulation. However, converged media regulation is focused on the issue of how to systematically regulate the different types of professionally produced content classes in a converged environment: entertainment, current affairs reporting and cultural works. In this case the issue of editorial responsibility of a professional media publisher is of main concern. While Internet content regulation is fundamentally about free speech, the level of legitimate individual responsibility of a citizen (that is, legitimate limitations to free speech) and the level of expected responsibility of intermediaries enforcing these limitations are some examples of key concerns.

Copyright. A revision in most countries of the current digitally restrictive copyright approach offers a unique opportunity for nations to set and lead by example. This is an opportunity that should not be missed. Through National Digital Agendas, policy makers can update the current state of play in the digital creative market by tearing down key structural barriers to making lawful (licensed and exempt) digital content widely available in an appealing, timely and user-friendly way.

Policy makers need to address some of the fundamental barriers that hinder the possibility to reap and share the digital productivity and creativity gains that societies need. It is time to tear down barriers and solve the market supply failure of lawful (licensed and exempt) digital content. This failure is caused mainly by three structural barriers:

• Limitedavailabilityoflawfuldigitalcontentcausedby “windowing”, exclusive licensing and territoriality Windowing refers to selling and re-selling products over time using various distribution channels, for example the film industry using cinemas, home video, rentals, cable, video-on-demand, and free-to air broadcasting.• Technology-specificcopyrightconditionsincluding licensing, exceptions, safe harbors and exhaustion that limits or delays innovation of new services.• Unreasonabletransactioncostsmakedigitalcontent unnecessarily expensive.

A competitive and consumer-friendly digital content market and an appropriate legal framework to enable easy lawful (licensed) access to digital content are essential preconditions for the creation of a culture of lawful, rather than unlawful, consumption. Copyright enforcement policy should be developed from a clear evidence-based approach that is:

• Fact-based. • Balancedtoincludeallrelevantstakeholders. • Focusedonend-userdemand. • Respectstherighttoprivacyandfreedom of communication. • Supportscontinuedinnovationinnewtechnologies and services. • Promotesgrowthoflawfullicenseddigitalservices, and market efficiency. • Respectstherelativenatureofpropertyrightssuch as copyright. • Avoidsoutsourcing,e.g.toISPs,ofprivate property enforcement.

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Information management. The value of information as well as its strategic risks, such as cyber security, rises with the growth of broadband networks and the expansion of attention economy [see box 6]. This value/risk is amplified by the use of networked applications offered on a multi-territorial basis, such as social networking, cloud architectures and proliferation of access points. This leads to a need for coherent analysis of the roles, relationships, responsibilities and liabilities of all involved stakeholders:

• End–users:consumer,businessesand public authorities. • Serviceproviders:controllersofinformation and its use. • Data/informationprocessors,includingcloud providers, and • Technologyproviders.

From a consumer perspective information management has been concerned with issues like spam, data privacy, identity theft and Internet bullying. From a national security perspective, cybercrime, such as phishing, trade with counterfeited and stolen goods, corporate espionage, botnets and DoS (Denial of Service) attacks pose threats to commercial and civic society. End-user confidence in using networked applications is crucial and hence consumer protection will become even more essential. Keeping the emerging Networked Society sufficiently secure will require new approaches to criminal enforcement that can deal with cyber security problems that can be highly scalable, difficult to trace, distributed across multiple territories and often exceeding the capacity of national approaches.

The rapid growth of information causes scarcity of attention:

“...in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it” [xxxvii]

The fundamental idea behind the attention economy is to facilitate a marketplace where consumers agree to receive services in exchange for their attention. The ultimate purpose is of course to sell something to the consumer, but the selling does not need to be direct and does not need to be instant. The most important factor in attention economy is relevancy. The more one knows about consumers the more relevant and hence successful one can be in the attention economy.

“Personal data is the new oil of the Internet and the new currency of the Digital World.” [xxxviii]

BOX 6. ATTENTION ECONOmICS

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The networked infrastructure that blends computing and communication is the largest construction project in human history. We are at an inflection point where a significant change in competitive opportunities of nations, industries, firms and cities is expected. The emergence of a Networked Society holds the promise of an economic shift and of significant societal benefits. This is possible if we can adopt national and global policies and create a regulatory framework that can accommodate and nurture this desired change.

In this context, as policy makers and regulators take on some of the key issues, such as spectrum, network regulation, media regulation and convergence, some crucial questions will continue to be at the center stage of national and global ICT policy and regulatory development:

• WhyRegulate?–Thepolicyrationaleandlegitimacy of interventions. • Withwhatendsinmind?–Regulatoryobjectivesand desired outcomes being pursued. • Howtoregulate?–Thematchingofregulatory instruments to regulatory objectives and choice of implementation strategy.

The constantly changing market and business conditions mean that ICT policy and regulatory frameworks (why, what, how) must also continue to evolve to reflect new realities, and to allow the potential offered by the constant influx of new ICT innovations and developments to be realized. No successful policy framework comes with a lifetime warranty. In the continuously ongoing transformation process,

the least desirable outcome of an ICT policy framework would be the protection and conservation of the past and a delay of the future.

To master the societal change of an ICT-led transformation in the most advantageous direction, future ICT policy and regulatory frameworks will need to carefully consider how they shape the structures of industries, the conduct of stakeholders and how they set in motion major shifts in economic value. Increasingly, a conventional supply side policy focus will also have to be complemented with demand-side policy considerations – e.g. theadoption process of new technologies and applications byvariousgroupsofend-users–includingconsumers,small and medium enterprises and public authorities. This adoption enables innovation in new products and services, innovation in the market place, new consumer behavior and value, and innovation in organizational skills, activities and capabilities.

Ericsson believes that an ICT policy approach that not only recognizes but also elevates the strategic importance of ICT technologies will enable nations and societies to master the ongoing transformation in the most advantageous way and thereby enable a distinct and sustainable productive shift in their economies. This will release all of the associated positive benefits and Ericsson therefore believes that the future ICT policy approach should shift towards a transformative approach which is more holistic and less sector- specific. This relative change of gravity in policy approach fundamentally supports the desire of societies and nations to maximize their national competitiveness to the benefit of their economy, industries and public sector.

CONCLUSIONS

22

i Cowhey and Aronson, Transforming Global Information and Communication Market, the Political Economy

of Innovation, 2009.

ii A policy framework includes following elements: a) formulation of legitimacy of a regulator and

interventions (why regulate) b) clear specification of regulatory goals and objectives (what ends in mind) and

c) how to best target regulatory instruments with regulatory objectives (how to regulate?). It also includes

all phases of a policy/regulatory process; policy definition, policy design, implementation, enforcement

and policy review.

iii Carlota Perez, Technological Revolutions and Financial Capital, chapter 2, 2005.

iv Stephen Cohen et al. Global Competition: New Reality vol. 3 of John Young Competitiveness: the Report

of the President’s Commission on Industrial Competitiveness, Washington DC, 1985.

vTheliteratureisenormousforsomeprominentexamplessee;WiredForInnovation–HowITisReshaping

the Economy, Brynjolfsson and Saunders; MIT 2010. The Economics of the Digital Society, Soete and

Wheel, 2005. The Rise of the Network Society, Second Edition, Castells 2010. Boston Consulting Group,

Socio-economic impact of allocating 700 MHz band to mobile in Asia Pacific, 2010, EPC/Copenhagen

Economics–TheEconomicImpactofaEuropeanDigitalSingleMarket,2010.ADL,Socioeconomicimpact

of broadband network investments, 2010. See also http://www.ericsson.com/news/1550083 Ericsson

Press Release: “New study quantifies the impact of broadband speed on GDP”.

vi Digital Quality of Life, October, ITIF, page 3, 2008.

vii To read more about digitalization and ICT technology advancements, see for example: Competing for the

Future- how digital innovations are changing the World, Henry Kressel, 2007.

viii TV or not TV - Three Screens one Regulation?, Eli M Noam, 2008. http://www.crtc.gc.ca/eng/media/

noam2008.htm

ix ICT Policy Formulation and e-Strategy Development U.N. DP, Asian-Pacific Development Information

Programme, 2005

x The Economist, Finishing the Job, 24th of September 2009.

xi Ericsson’s Networked Society City Index, Triple bottom line effects of accelerated ICT Maturity in world

wide Cities, 2011.

xii World’s top global mega trends to 2020 and implications to business, society and cultures , Frost &

Sullivan

xiii UN-habitats, State of the World cities 2010/2011

xiv Source: Networks and States, The global politics of internet governance, Mueller, 2010.

xv To offer a precise definition is to risk arguments at the margin. Policy and Regulation are used

interchangeably, with a broad meaning; policy/regulation is the sustained and focused attempt to alter the

behaviour of others according to defined standards or purposes with the intention of producing a broadly

identified outcome or outcomes, which may involve mechanisms of standard-setting, information gathering

and behaviour modification. For further reading see: Regulation: Legal Form and Economic Theory, Ogus,

1994. Also the relation between regulation and legislation is relevant to address. If regulation is about

altering behaviour, then legislation is a subset of regulation. On the other hand, to the extent that regulation

does not encompass task such as constitution making and dispute-resolution the law is broader than

regulation, in other words law and regulation intersect with one another but are not co-extensive. For further

reading: Rights, Regulation, and the Technological Revolution, Brownsword page 7, 2008.

xvi The World Bank Policy Research: A Historical Overview, Jean-Jacques Dethier, 2009

xvii Transforming Global Information and Communication Markets, the Political Economy of Innovation,

Cowhey and Aronson, 2009.

xviii Manuel Castells, The Rise of the Networked Society, Second Edition, page 5-7, 2010

xix Allocative efficiency: a situation when conditions of perfect competition prevail and where goods and

services are allocated between consumers according to the price they are prepared to pay and price never

rises above the marginal cost of production. (Some times also called static efficiency)

xx Productive efficiency: a situation when as little of society’s wealth is expended in the production of

goods as necessary, so goods are produced at the lowest possible cost. (the emphasis in on the internal

management of a firm’s resources)

xxi Dynamic efficiency: refers to market conditions that appropriately balance short run concerns (allocative

static efficiency) with concerns in the long run (focusing on encouraging research and development).

Through dynamic efficiency, an economy is able to further improve efficiency over time by making

investments in R&D, Education and Innovation that act as forms of new market and demand discovery.

xxii Further reading see, Chicago School literature and its influence on US Antitrust law, Amato (1997)

Bork (1993).

xxiii Financial Risk Outlook, London Financial Services Authority, C McCarthy 2005.

xxiv For more expanded discussion see for example: The limits of competition law, markets and public

services, Prosser, 2005

xxv For further reading see; Rights, Regulation and the Technological Revolution, Brownsword, 2008 and

The Intersection of Rights and Regulation, Morgan, 2007.

xxviAftertheRightsRevolution–ReconceivingtheRegulatoryState,Sunstein,1990.

xxvii Inspired by: Networks and States, The Global Politics of Internet Governance, Mueller, 2010.

xxviii Originally the term creative destruction was derived from Marxist economic theory, The Communist

Manifesto, Marx & Engels 1848 and later in “Das Kapital” 1863. However the term has been popularised by

John Schumpeter who further developed the concept in his theory of economic innovation in “Capitalism,

Socialism and Democracy” (1942).

xxix To get an overview of the state of the art of the Public Policy Implementation Research an Introduction

to the Study of Operational Governance; Hill and Hupe, Implementing Public Policy, 2009.

xxx Better Regulation, Weatherill, page 7 and 58, 2007.

xxxi Controlling the New Media, Hybrid response to New Forms of Power, Murray & Scott, 2002 and The

Regulation of Cyberspace, Murray 2007.

xxxii Code and other Laws of Cyberspace, Lessing, chapter 7, 1999

xxxiii Better Regulation, Weatherill, 2007.

xxxiv Principal–agent problem or agency dilemma treats the difficulties that arise under conditions of

incomplete and asymmetric information when a principal hires an agent, such as the problem of potential

moral hazard and conflict of interest, in as much as the principal is—presumably—hiring the agent to pursue

the principal’s interests. For more information: http://en.wikipedia.org/wiki/Principal%E2%80%93agent_

problem

xxxv The reference list is extensive, some examples see: OECD, Regulating Policies in OECD Countries,

2002. OECD, Improving the quality of government regulation OECD 1995, OECD Regulatory Reform OECD

1997, OECD Regulatory Impact Analysis, OECD 1997.

xxxvi EC Green Paper on the convergence of the Telecommunication, Media and Information Technology

sectors and the implications for regulation, COM (97)623.

xxxvii Herbert Simon, “Designing Organizations for an Information-Rich World” 1971 pp 40-41.

xxxviii Maglena Kuneva, European Consumer Protection Commissioner, March 2009.

rEFErENCES ANd SuggESTIONS FOr FurThEr rEAdINg

ABOuT ErICSSON

Ericsson is the world’s leading provider of communications technology and services. We are enabling the Networked Society with efficient real-time solutions that allow us all to study, work and live our lives more freely, in sustainable societies around the world.

Our offering comprises services, software and infrastructure within Information and Communications Technology for telecom operators and other industries. Today more than 40 percent of the world’s mobile traffic goes through Ericsson networks and we support customers’ networks servicing more than 2 billion subscribers.

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