Best Practices for Regulators Willing to Learn

In visiting regulators—often newly established ones—across the developing world, we’ve noticed their office settings.  Many are housed in old, even crumbling buildings, some without elevators.  The professionals on staff can be quite dedicated but are not necessarily highly recognized or independent. 

At the other extreme is a regulator in one of the poorest West African countries.  The regulator is housed in—in fact, owns—a most impressive new building (see views below) with a host of top-level tenants, including a multilateral bank that might otherwise be helping the regulator find its way.  Needless to add, the regulator plays an influential government role.

But apart from better office space, what are other challenges developing country regulators face?  Having dealt with them widely—from Honduras to East Timor to Malawi—we know they do not usually lack staffs.  In Africa, for example, ICT sector regulators generally have 100 to 600 employees, which matches or exceeds the levels in the UK (about 500 at Ofcom) or U.S. (1700 at the FCC) when adjusted per capita.  Moreover, no systemic case has been made that staff size produces better regulatory results.

So what are the biggest challenges?  Independence is certainly one of them.  In a recent review across 20 countries from Ghana and Tunisia to Jordan and Pakistan, we found lack of independence prevailing in a third of the cases and bubbling up at times in another third.  Not that regulators in developed economies are free of political interference—for example, when commissioners are appointed.  Yet arbitrary and behind-the-scenes procedures and decisions remain the norm in some developing countries, even where sound legislation and policies may be in place.  In fact, overall, the biggest challenge regulators face is not establishing good policies but knowing what to do once a regulatory framework has been adopted.

Recently, when we organized a training workshop for a new regulator, we asked the Director General what the focus should be.  He did not mince words, “What the senior staff needs is not regulation but management training.”  The staff could learn about its regulatory responsibilities from available handbooks and from the new telecommunications law.  What was missing from their playbook was how to manage and implement the regulations.

Unlike regulatory theory, management calls for the setting of priorities, using methods appropriate to a given context, and integrating regulatory procedures with market, government and stakeholder cultures and practices.  In the country on which our workshop focused, stakeholders still rely on an “oral business culture.”  This runs counter to the regulatory practice of written decrees and decisions and, thereby, to transparency itself.  How to split the difference is a major challenge.

By the same token, regulatory theory strives for perfection while from a management standpoint a success rate of 60% can be exceptional.  So if handbooks on regulatory principles are the handmaidens of regulation, case studies, we have found, are the best medium for grappling with regulatory management issues.  Mini cases we have developed—from both developed and developing countries—allow “trainees” to learn why certain practices, such as the licensing of eight mobile operators, were adopted in advanced countries and later mimicked in developing ones, with as many as16 operators being licensed in one country.

The cases also provide a window into the consequences of such decisions.  In the eight-license case, too few spectrum blocks were available when next-generation networks had to be licensed.  This in turn led to only four operators being awarded spectrum and to the dismembering over time of the others.  The lessons learned combine policy, procedural and context-related aspects.  Without these considerations, best practices can be adopted willy-nilly.  With them, even well-established regulators can draw instructive lessons.

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