Digital Regulation Platform

The impact of policies, regulation, and institutions on ICT sector performance



The current crisis has brought new challenges to the ICT sector. Regulatory frameworks need to be adjusted to stimulate investment while maintaining a moderate level of competition. Markets and consumer benefits are now examined by decision-makers through the lens of financial adversity and uncertain outlooks.

Amid disruption, policy-makers and regulators need evidence-based guidance that provides a solid ground for their reforms.

A new ITU study has used econometric modelling to examine the impact of the regulatory and institutional frameworks on the performance of the ICT (Information Communication Technologies) sector and its contribution to the national economy as a whole. Its purpose is to provide policy-makers and regulators with the empirical evidence required to further regulatory reform in the ICT sector and address the challenges and gaps in current regulatory frameworks for digital services and applications.

The study scope explores a set of critical questions:

Upgrading regulatory frameworks – what matters?

The evidence provided by the study points to major findings that are of great importance in informing governments, policy-makers, regulators and operators as they formulate general infrastructure and telecommunication investment decisions in the years ahead:

Regulatory power boost for mobile

Specifically, for the mobile sector, the following policies were found to have a positive and significant impact on investment, yielding in turn service coverage gains, price reductions, higher adoption levels and consequently, a macroeconomic impact in terms of GDP per capita:

On the other hand, other policy variables did not show a significant impact on investment. That is the case, for instance, of infrastructure sharing obligations, spectrum band migration allowance, or permission for spectrum secondary trading.

All in all, these findings suggest that positive market signals and flexible approaches are necessary conditions for telecommunication operators to thrive and maximize network deployment, benefitting consumers and the society as a whole. Given the dynamic nature of the empirical model, the positive impact from policy and institutional reforms will translate into further gains beyond a single time period, as capital spending in future years will continue to grow as a result of the increase in its own past values. This economic flow of performance gains can be summarized as follows (Figure A).

Figure A: Dynamic economic gains after a policy reform in period t

Accordingly, the positive impact in terms of GDP per capita will take place two years after the initiative is enacted and continue to yield a contribution through several time periods. The empirical evidence generated in this study is expected to provide useful inputs to policy-makers in terms of a deeper understanding of the linkages between the regulatory and institutional context and ICT market outcomes, and on the characteristics that effective public policies should have. However, some caveats need to be made regarding the study results. Some of the indicators are limited in terms of their full predictability. For example, the binary nature of some of the initiatives (i.e., existence of a broadband plan yes/no) does not provide an indication of their intrinsic quality. On another note, the pandemic of COVID-19 is expected to have an incidence in the presented results. On the one hand, the GDP contraction experienced worldwide is affecting telecommunication revenues, negatively impacting capital spending levels. On the other hand, the lockdown period is resulting in an enhanced use of digital technologies, thus representing an unobservable shock increasing adoption levels. These effects will be econometrically measurable when 2020 data becomes available.

With these caveats, the results are powerful in terms of informing policy decisions. Regulators and policy-makers alike should assess the quality of the institutional framework guiding industry operations and examine whether some of the policies found to be critical in promoting an improvement of performance are in place. Even if they have been adopted, it is important to examine the policies in detail to determine how much they meet some of the international best practices.

Table A: At a glance headlines from the report


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The full study on the impact of policies, regulation, and institutions on ICT sector performance is available here.

Last updated on: 10.02.2021