In the Shadow of the Pyramid: Consumers in communications self-regulation

Telecommunications Journal of Australia, Winter 2005 by Wilding, Derek

Consumer involvement in self-regulation has been in the foreground of communications regulation since the Consumer Driven Communications Report was published by the Australian Communications Authority at the end of 2004. In this paper, Derek Wilding argues that while consumer participation has received attention, there has been a reluctance to conduct a genuine assessment of self-regulation. After several years' practical experience of self-regulation in both telecommunications and broadcasting - and as Australia heads into a converged communications regulatory environment - it is worth examining how those systems can be refined and improved. Rather than dismissing the operation of self-regulation in telecommunications, the author argues that its lessons need to be acknowledged and applied to the broadcasting sector.

BACKGROUND - SELF-REGULATION AND CONSUMER DRIVEN COMMUNICATIONS

The Consumer Driven Communications (CDC) project focussed attention on consumer participation in regulation.[1] While the work of that project continues in connection with government, regulators and industry, the most important part of the Report relates to self-regulation - making improvements to the current model and finding the right balance between industry-based and other forms of regulation. It is a slim achievement to improve regulators' own handling of consumer issues if the self-regulation scheme itself is sidestepped on account of the difficulties of legislative change.

The reason that this is of significance for anyone other than consumer representatives and the Australian Communications Authority is that government and industry both need consumers to invest in self-regulation. Self-regulation offers the greatest opportunities for consumer representatives to participate in the drafting and review of rules that directly affect their constituencies. But it is not reasonable to ask consumer groups to participate in a system which has design flaws that counteract their participation and which has, at times, produced dubious consumer protection outcomes.

The CDC project applied the concept of the 'regulatory pyramid' to explore options for consumer participation at all levels of regulation (from acts of good corporate citizenship to black letter law). At the level of self-regulation, the Report concluded that relatively minor changes could improve the operation of self-regulation and its outcomes and provide some motivation for consumer groups to participate in - and commit to - self-regulatory processes'21. This article explores some of the problems with self-regulation in telecommunications and broadcasting and the ways in which consumer participation can enhance its results in a converged communications regulatory environment. It explores ways of bringing consumers out from the shadow of the regulatory pyramid.

CONSUMER PARTICIPATION AND SELF-REGULATION - WHY BOTHER WITH REFORM?

There are good reasons advanced by legal theorists for why a self-regulatory scheme, correctly designed and operated, should be more efficient than direct intervention by the regulator. Self-regulation is said to promote outcomes better attuned to the industry being regulated; to offset obsolescence and provide flexibility in industries where technological developments are routine; and to reduce the cost of regulation to government.[3]

In practice, however, much of the thinking behind the use of self-regulation is that it is better for business than is 'command and control' regulation. Some critics have suggested that self-regulatory initiatives may be pursued by industry in order to avoid more stringent regulation, rather than in order to achieve public policy outcomes.[4] In addition, consumer groups have offered the view that the outcomes for consumers are generally better under direct regulation than self-regulation. In a sense, these are all generalisations, but they inform the positions that a range of industry and consumer groups have taken to questions of regulation in telecommunications and broadcasting, at least over the last five years.[5]

What complicates the matter for consumer representatives, at least in the telecommunications domain, is the high likelihood that self-regulation will continue to be a core feature of the communications policy of any Coalition or Labor government in the near future. As an illustration of this, the majority (comprising ALP and Australian Democrat members) of the Senate ECITA Committee investigating the recent ACMA legislation, while critical of some aspects of self-regulation, recommended changes to the circumstances in which self-regulation is used, rather than any major structural changes.161 More fundamentally, self-regulation gives a far greater role to consumer involvement than direct regulation ever would. This last factor might lead an observer to conclude that if the choice is between protections enshrined in 'black letter law' or self-regulation, consumer participation is not so important after all ...

In turn, what complicates the matter for government and industry is that consumers continue to spend almost as much time complaining about self-regulation as they do actively contributing to it. This is industry's problem as much as consumers' since consumer participation in telecommunications industry regulation will never be active and effective while consumers continue to struggle and oppose self-regulation itself. This opposition to selfregulation and support for strict regulation is partly attributable to the failings of the model for self-regulation itself. In the early 1990s Ayres and Braithwaite (1992) observed,