DISPUTE RESOLUTION: Give Peace a Chance

The global telecommunications sector is in the midst of a transformation
caused by privatization, liberalization, and technological changes. These trends
have dramatically changed the way this sector functions. The number of service
providers has increased substantially, as has the range of services they offer.
Old business models and commercial arrangements are being abandoned or bypassed
while new ones are emerging. An era characterized by regional telephone
monopolies that provided 'plain old telephone service' (POTS) is yielding to
an era of multiple providers of ICT services using IP, wireless, and broadband
technologies.

Some disputes are inevitable by-products of these changes, as new interests
clash with traditional ones. Policy makers and regulators are recognizing that
effective dispute resolution is an increasingly important objective of
telecommunications policy and regulation. Failure to resolve disputes quickly
and effectively can:

• delay the introduction of new services and infrastructure;
• block or reduce the flow of capital from investors;
• limit competition, leading to higher pricing and lower service quality;
  and
• retard liberalization and-with it-general economic, social, and
  technical development.

Ultimately, the test of successful dispute resolution-as
with regulation- is its impact on investment, growth, and development in the
sector. Successful dispute resolution is important for all countries that seek
rapid diffusion of new communication infrastructure and ICT services. It is
particularly crucial for countries that have historically experienced lack of
investment and growth. Rapid and effective resolution of disputes is a key
component in bridging the digital divide.

Experience
indicates that existing regulatory and legal institutions are not always well
equipped to resolve disputes efficiently and effectively. Lack of resources,
expertise, and time often lead to delays or sub-optimal results in resolving
disputes. Therefore a range of alternative approaches to dispute resolution are
adopted.

Dispute Resolution Techniques

This section will discuss the various ways of resolving disputes.

Regulatory adjudication: Most regulatory bodies
adjudicate disputes. They decide between the positions of disputing parties,
typically after a formal process involving presentation of arguments by the
parties. Adjudicated decisions are often subject to review within a regulatory
agency and eventually by the courts or government officials. It has the
following advantages.

• There are well-structured channels for decision making.

• There is accountability on part of the official decision
  makers.

• There are established mechanisms for coordinating
  decisions among agencies with related responsibilities.

• It has the full force of government's enforcement
  mechanisms.

However, it can also bring the disadvantages of delays; abuse
by competitors; and lack of necessary economic, legal, and financial expertise
to resolve disputes efficiently and finally.

Court adjudication: This remains an important final
recourse for many types of disputes, particularly those that are less
policy-related. It brings finality and official enforcement mechanisms to bear
upon disputes. Its disadvantages are: high costs and delays in some
jurisdictions and a perceived lack of telecommunications-specific expertise to
deal with complex industry disputes.

Alternative dispute resolution (ADR): This involves
less formal means of dispute resolution, such as negotiation, mediation, and
arbitration. Parties have traditionally pursued ADR voluntarily, sometimes by
contractual commitment. Regulators are now increasingly turning to ADR
approaches to deal with the pressures and demands on their limited resources
available for resolving industry disputes.

Negotiation and mediation: These are flexible and
consensual approaches that have the advantage of encouraging parties to identify
common interests and win-win solutions.

Negotiation
and mediation processes can, however, be abused by disputing parties who seek to
delay adverse resolution of disputes or to obtain information about the other
party's case.

Regulators often require parties to try negotiation or
mediation before hearing their disputes. Some regulators also perform the role
of mediators. And some parties prefer independent mediators. Involvement of
regulators can induce parties to behave reasonably. But it can also reduce
parties' incentives to negotiate in a candid, constructive manner because
parties may see the presence of regulators as a precursor to a formal regulatory
proceeding.

This may then lead them to take a more adversarial, strategic
approach.

Arbitration: This is an adjudication process in which
the disputing parties appoint arbitrators but retain control over the design of
the process. Arbitration awards are usually enforceable in courts, where they
tend to be subject to limited review on procedural grounds, such as the scope of
the arbitrators' authority. The advantages of arbitration include:

• confidentiality;

• parties' control over the design of the process;

• speed, compared with most regulatory or judicial
  procedures; and

• the neutrality of the forum in international arbitration,
  (compared with the national courts of either of party).

Telecommunication regulators are increasingly encouraging
parties to use arbitration. There are numerous well-established arbitration
institutions around the world that have developed their own procedures and
trained arbitrators. Where individual countries lack such resources, they are
often able to find them somewhere in their region.

Common Types of Disputes

Disputes arise in various circumstances. Those that have the greatest impact
on telecommunication sector investment and growth include the following.

Related to Liberalization: Introducing competition
often undermines the financial and business interests of incumbents. Many
disputes arise from the incumbent's desire to protect its dominant market
position. Reduction of exclusive rights has frequently led to legal and
regulatory disputes.

Investment and trade disputes: Disputes often arise
where regulatory reforms diminish the value of private-sector interests. These
include: complaints by investors, operators, and service providers about early
termination of exclusive rights; licensing of new competitors; new rate-setting
structures; and changes to licenses. Other claims are contractual or based on
alleged breaches of legal commitments.

Interconnection disputes: These are common between
service providers.

New technologies have bred many alternative networks
including fixed, mobile, wireless local loop, limited mobility variations, and
fixed wireless Internet access, e.g., Wi-Fi and Wi-Max systems. Preventing and
resolving technical, operational, and pricing disputes is key to the development
of competitive markets. Dominant operators often have greater market power than
new competitors, making regulatory intervention necessary. Regulators
increasingly providing advance guidelines for negotiation of interconnection
arrangements. They are also developing specialized adjudication procedures to
resolve interconnection disputes. Where regulators lack information and
expertise, they are turning to international benchmarking and external
consultants for assistance.

Consumer disputes: Disputes between service providers
and consumers are common, particularly in basic telephone service markets.
Consumers often face problems stemming from their lack of bargaining power or
the absence of competitive options to the incumbent operator. Regulators are
using a variety of mechanisms to ensure effective resolution of consumer
disputes. Many require the service providers themselves to resolve disputes
initially. Appropriate supervision and appeal provisions are supplied, and
informal mechanisms are sometimes used, such as ombudsmen schemes. Consumer
protection agencies, as well as regulators, often address consumer disputes.

Radio frequency disputes: Radio frequency allocation
and assignment disputes are internationally dealt with through ITU mechanisms.
Domestically, disputes may arise from interference, license conditions, and
pricing.

Key Perspectives

Dispute resolution in the telecom sector is at a relatively early stage.
While there are many complex issues and perspectives, some are most relevant in
designing dispute resolution processes.

Changing patterns and assumptions: With rapid
technological development and convergence, the dispute resolution field is also
changing by introducing alternative methods for resolving disputes. This allows
telecom regulators to try new dispute resolution methods. This suggests that
regulators should re-evaluate assumptions about the roles of regulators and
market participants in resolving disputes.

Economics of dispute resolution: In evaluating the
success of dispute resolution processes, it is important to consider economic
costs to the sector as a whole. Costs may result from delays and lack of
transparency and predictability. At a more micro level, the emergence of a 'market'
for dispute resolution techniques and professional services is likely to improve
the quality of those techniques and services. Some regulators are giving the
parties a choice of alternative resolution procedures. It is important to design
appropriate economic incentives for the parties to resolve disputes. The
allocation of responsibility for the costs of disputes, for example, can affect
the manner in which parties behave.

Market power asymmetries: Choosing the appropriate
dispute resolution technique depends partly on the comparative levels of the
parties' market power. Some regulators believe they can encourage the
employment of ADR techniques when opposing parties have similar levels of market
power and when parties are more likely to negotiate solutions that meet their
mutual commercial interests. Regulatory intervention may be more necessary when
one party needs protection from another party with greater market power.

Confidentiality and transparency: It is important to
balance the competing priorities of protecting confidential business information
and publishing well-reasoned decisions.

Dealing with complexity: Many disputes involve complex
webs of interrelated issues that defy simple categorization. Pricing, technical,
operational, licensing, and policy issues all must be considered when regulatory
regimes are in transition. Jurisdictional overlaps among telecommunications
sector, competition,and consumer authorities as well as between national,
regional, and international authorities makes disputes even more complicated.
Authorities need to coordinate their actions to prevent delays and fragmented
resolution of disputes. Consensus-building measures work particularly well in
bridging jurisdictional boundaries.

Improving Dispute Resolution

At this early stage of development in global telecommunications-sector
dispute resolution, it is not appropriate to provide uniform recommendations on
how to design and conduct dispute resolution procedures. Countries vary in their
stage of market development, regulatory approaches, dispute resolution, and
general business cultures as well as in the types of disputes that commonly
arise. These factors will result in different experiences with regulatory
adjudication, arbitration, mediation, negotiation, ombudsmen schemes, and other
approaches. Policy makers and regulators can, however, take the following steps
to improve approaches to dispute resolution.

• Publish adjudicated decisions and facilitate access to
  them through the Internet and other means, in order to provide resources for
  regulators, other adjudicators, disputing parties, and their advisors.
  Creation of a well-organized international database would be invaluable to
  promote adoption of best practices in resolving disputes.

• Publish examples of innovative dispute resolution
  procedures, including less formal approaches, in order to promote their
  adoption.

• Strengthen non-official ADR approaches by endorsing their
  usage, improving understanding of the legal frameworks in which they
  operate, and supporting them with official enforcement of their results.

• Tap into the human resources available for dispute
  resolution by establishing panels of arbitrators, mediators; and
  collaborating with existing arbitration and mediation institutions.

Conclusion

Successful dispute resolution is increasingly important for attracting
investment, competition, and development. Dispute resolution mechanisms in the
telecommunication sector need to be as speedy as the networks and technologies
they serve. Official dispute resolution mechanisms are important as a basic
guarantee that the sector policy will be implemented.

Policy makers and regulators should use minimal but well-focused regulatory
intervention to create an environment where industry players have incentives to
resolve disputes constructively. This can often involve the use of alternative
dispute resolution mechanisms. Disputes can be enormously destructive to the
sector, and effective dispute resolution is increasingly central to successful
deployment of modern information infrastructure. This is particularly so where
it is necessary to encourage investment and to foster competition. This is the
best way to reach the under-served billions of people who are on the wrong side
of the digital divide.

Excerpted from ITU and World Bank Paper