Rethinking access regulation from the transaction cost economics perspectives : a comparative analysis of the legal and policy developments for first and next generation access networks in the US, the UK, Australia and Hong Kong

Abstract

The rollout of the next generation access (NGA) networks as part of the future communications infrastructure involves substantial capital investment and risk. The design and enforcement of access regulation for the NGA networks have significant impact on the attainment of diverse policy goals concerning investment, innovation, competition and infrastructure openness.

This study compares and analyses the legal and policy developments in the US, the UK, Australia and Hong Kong for access regulation in the transition from the first generation access (FGA) to the NGA network environment, with a theoretical framework based on transaction cost economics (TCE). On the basis of doctrinal and archival researches, this study investigates four research questions. First, what are the similarities and differences between the regulatory models adopted by the four jurisdictions for access regulation in the FGA and the NGA network environments? Second, how did transaction costs arise in these four regulatory models and affect the implementation of access regulation on their respective FGA networks? Third, how do these four jurisdictions reform access regulation for the NGA network environment in response to the transaction cost problems encountered in the FGA network environment? Fourth, how does TCE contribute to the theoretical understanding and future reform of access regulation in the NGA network environment based on experience in these four jurisdictions? The study explains access regulation and provides theoretical contributions to the optimal form of access regulation in the NGA network environment on the basis of TCE theories.

This study has found that the regulatory models adopted in the four jurisdictions have achieved the rollout of NGA networks, delivered various degrees of competition in the market and avoided many of the transaction cost problems encountered in the FGA network environment. However, this study has also revealed other problems with the regulatory models. Justifications of the access regulation based on significant market power, entry barriers or enduring bottlenecks have become untenable with the emergence of alternative access networks, but mere reliance on the market may not attain the public interest objectives of effective competition and infrastructure openness. Policymakers and regulators therefore face a dilemma in applying access regulation based on neoclassical economics.

This thesis argues that the traditional concepts of market power and market failure based on neoclassical economics have constrained the ability of policymakers and regulators to address access problems in the NGA network environment. It asserts that the concepts of “transaction dependency” and transaction costs provide a better theoretical underpinning for designing access regulation. Policymakers and regulators should adopt laws and policies for access regulation to tackle problems arising from “transaction dependency” and transaction costs. This study is theoretically significant as it contributes to a new understanding of access regulation from the TCE perspectives.