An Innovation-Centric Approach of Telecommunications Infrastructure Regulation

Konstantinos Stylianou, University of Pennsylvania

Abstract

This paper considers the mechanics and role of innovation in telecommunications networks, and explains how regulation can be designed to maximize innovation. To better focus on the relationship between innovation and regulation an effort is made to distinguish innovation from competition, although the two concepts are closely related, and several reasons are presented on why the fast changing, networked and technical nature of telecommunications offers a very favorable environment for innovation to thrive, as well as why innovation benefits from a large number of actors. Moreover, the paper further explains that even small players are useful in the innovation process and that a decentralized polyarchic system of innovation can work, without that meaning that it is superior to centralized innovation. The two systems can and do coexist.

With that in mind, the paper suggests that the goal of a diverse and populous innovation pool of actors is reconcilable with both the high entry barriers in telecommunications and the disincentives sharing obligations may create. The key is to construct a system of regulation whereby entry is facilitated only while competition remains underdeveloped. The overall tradeoff is a few years of managed competition and suppressed incentives for a properly working competitive market in the long run.