Case Study: Regulatory Sandbox Framework in Colombia

Source: CRC 2020

In May 2020, Colombia’s Regulation Communications Commission (CRC) adopted Resolution No. 5980 of 2020, which introduced a regulatory sandbox for communications services that created a more relaxed regulatory framework. The regulatory sandbox is intended to enable telecommunications network and service providers, as well as content and application providers, to test new business models while under the CRC’s supervision. (CRC 2020).

Purpose

The CRC aims to foster innovation and increase the pace of adapting Colombia’s regulatory framework to technological advances. In the resolution, the CRC identified the regulatory sandbox as an alternative regulatory mechanism that allows testing of new products, services, and solutions in any aspect of the ICT sector. These tests may be conducted for a specified period and within specified geographic areas under flexible regulation or with regulatory exemptions. Telecommunications network and service providers—whether multinational or community-based entities—may participate.

The CRC intends to use this flexible environment to inform future regulatory frameworks, which may lead to modification or elimination of current rules deemed overly stringent.

Currently, the CRC is in the preparation stage with interested parties and has begun a series of capacity-building activities to engage companies across the ICT sector. The CRC is helping these companies prepare their projects that will be presented in the public call for proposals, which is set to launch in 2021.

Limitations

Selected licensees would be subject to offering the service within the specified geographic area. In the regulation, the CRC clarified that any exemptions or light-touch rules defined for a particular project imply the authorization for the development of activities outside the testing environment. Further, proposed projects must not be found to negatively impact competition or consumers in the communications market. To this end, each project must identify the risks, safeguards, and indicators for success (CRC 2020).

Obligations

All entities selected to participate in the regulatory sandbox must report information on the project’s progress to the CRC. On a case-by-case basis, the CRC will define the information collection protocols and the indicators that entities must report during the project period.

Licence fee and duration

The licence is valid for up to 12 months, which participating companies may extend once for an additional 12 months within the specific geographic area.

Licensing process

As highlighted in Figure 1, the CRC will conduct the licensing process in four phases: (1) application; (2) evaluation; (3) experimentation; and (4) exit.

Figure 1. Four phases of the regulatory sandbox authorization process

Once the public call for proposals is issued, the CRC will conduct an initial review to ensure that the applicants complied with the requirements in the public call. The CRC will complete the initial review within 15 business days and publish its preliminary report for five business days, during which time applicants may amend their applications. Within five business days of the correction period, the CRC will verify and provide a written response as to why each proposal is either approved or rejected. There is no limit on the number of proposals that may be approved.

Those proposals that move to the evaluation phase will be subject to greater scrutiny in which applicants must demonstrate: (1) that the project offers innovative products and services not currently available in the market; (2) the various benefits to society; (3) that the product or service cannot be implemented under the current regulatory framework; and (4) that the applicant can successfully implement the project. Additionally, applicants must determine the risks of their projects, as well as specify safeguards to protect users and indicators to measure success. The proposals must also include an exit plan and applicants agree to comply with information collection requirements.

The CRC will conduct the evaluation phase within 15 business days, with a five-day period for applicants to correct their applications. Within five business days of the correction period, the CRC will identify which proposals will be authorized.

During the experimentation phase, the CRC issues the authorizations on a case-by-case basis. Each project will have its own test parameters, including the extent to which regulatory obligations will or will not apply. During this period, licensees may start commercialization or use of their products, services, or solutions. The experimentation phase lasts 12 months, which may be extended once for an additional 12 months. The CRC will grant an exception if additional studies are necessary or if the licensee is interested in continuing to run the project.

Within 12 months of completing the experimentation phase, the CRC will publish a final report identifying the conclusions and results of the project. The CRC will use these final reports to review and potentially modify the general regulatory framework.

In the exit phase, licensees choose one of two paths—either complete the project and stop the service or transition to the general regulatory framework. Whichever option is chosen, the licensee has up to four months to make any adjustments. Participants may choose to voluntarily dismantle their projects at any point and enter into the exit phase, which requires giving the CRC at least 15 days’ notice.