This chapter is concerned with the general issue of 'normalising' public policy towards the telecommunications and related industries. By normalisation, I mean the application of conventional competition policy approaches, rather than the use of industry-specific and interventionist regulation. If the latter approach is essentially prescriptive-the regulator, for example, fixes prices and quality standards directly, the competition approach is proscriptive, in the sense that certain courses of conduct are prohibited, but a firm avoiding such practices can do what it likes.
Governments all over the world are increasingly addressing these issues, but one country-New Zealand-resolved it as long ago as 1987, when it decided, with unimportant exceptions, to regulate its telecommunications industry solely on the basis of its general competition law, the Commerce Act 1986. The New Zealand experience has attracted considerable interest. In most countries, however, an evolutionary approach is envisaged in which the regulator progressively withdraws from detailed intervention and becomes more like a competition authority. If this approach is adopted, the time elapsed in the course of the process assumes considerable significance.
I outline the evolutionary approach in relation to the UK, where three stages of deregulation can be distinguished, two completed, the third in progress. The first was the duopoly policy (1984 to 1991), in which the UK government committed itself to licensing a single entrant, Mercury, to compete with the incumbent operator, BT. This was followed by a transitional period, characterised by increasingly complex regulation. First steps towards the third phase of 'normalisation' were taken in 1997, when a range of new approaches to most of the aspects of regulation considered below came into effect. Further progress is taking place in 2000/01.
The second section, 'Stages of regulation', deals with UK experience in regulating entry into telecommunications, the overall level of retail prices, the maintenance of universal service obligations, and the pricing of individual retail services. The third section deals at greater length with interconnection or whole-sale prices. The fourth section evaluates the experience to date, while the final section asks how far deregulation can go.