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Denmark Disbands Telecom Regulator

By Bret Baker | October 26, 2017

Removing the incentive for bureaucratic entrenchment is key for the reform of telecommunications and technology industries.

Discussions comparing Denmark's telecommunications regulations to those in the US have concluded that a lean and focused FCC could both provide necessary oversight and foster the necessary investment and competition that allowed the internet to develop rapidly like it did in the late 1990s and 2000s.

Jakob Willer, the Director of Telecommunications Industry Association Denmark, has said that with rapidly changing technology, governments typically struggle to pass effective legislation, which is why his advice to Danish politicians is to “keep their hands off” and let markets and evolving technology solve these problems as they arrive. In an industry that has seen monumental change in the past ten years alone and could change even more in the next ten, this seems to be a lesson learned that has benefited Denmark enormously.

Roslyn Layton, a visiting scholar with the American Enterprise Institute, has noted how a telecommunications regulator’s job is to put itself out of business, but often that ultimate goal is undermined by the agency’s need to preserve itself. This is exemplified by the FCC’s lack of use of its forbearance authority according to Lawrence Spiwak, President of the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

In contrast, the Danish government planned out a clear telecommunications policy before the late 1990s digital revolution and at the time included a bipartisan goal of disbanding their telecommunications regulator entirely when the regulator was initially established. This made sure the long term needs of the country were put ahead of partisan interests, which is not always the case in the US.

To foster the transition away from a dedicated telecommunications regulator, the concept of bureaucrats as “Lego bricks” that are interchangeable and put to their best use amongst different government agencies was introduced. This meant that as telecom bureaucrats destroyed their jobs overseeing telecom regulation, they could move to new government positions that use their talents, such as cybersecurity.

Both FCC Chairman Ajit Pai and Jakob Willer noted in a recent discussion at the Mercatus Center at George Mason University how rapidly advancing technologies can help bridge that divide. Cutting through outdated restrictions has allowed out-of-the-box ideas such as Google’s “Project Loon,” which sends wireless signals to underserved areas via balloons, to come to fruition and provide solutions to problems like the lack of wireless communication from the recent hurricane in Puerto Rico.

The US has a seen a disparity emerge over the past 20 years between rural and urban areas, with rural areas lacking the internet development that has taken place in urban centers. This is because of both costs associated with building the necessary infrastructure and the fewer people who would benefit from such investment in rural areas. In Denmark, the relatively flat geography makes telecom investments much easier to make, so there is no noticeable divide of this sort there.

Advancements in the wireless sector in particular, rather than focusing on wired solutions, have been described by former FCC Commissioner Robert McDowell as creating “constructive chaos” that can unleash a wave of competing companies to areas that had little online access before because of prohibitive fixed costs to install cable.

In Denmark, allowing for this variety of competing delivery methods to take place creates the incentive for innovation and development on behalf of companies to reach previously untapped customers and provide them the best online experience, which achieves the regulatory mission of a country’s telecommunications regulator.

Allowing market forces to work and focusing on ex post regulatory enforcement, where restrictions are implemented based on a developed market, rather than hampering innovation with preemptive, ex ante oversight permitted Denmark and other countries to significantly reduce the size of their telecommunications agencies until they were completely disbanded. More importantly, their citizens saw their online access improved.