A Short Note on Economic and Competition Regulation in an Independent Scotland - the Case of Telecommunications

Abstract

The Scottish National Party (SNP) government in Scotland has published an outline of how it wishes economic and competition regulation to operate in the event that it is successful in persuading the residents of Scotland to vote in September 2014 for independence in March 2016. It envisages a more politically directed regime with either a combined regulator and a competition authority or a single agency. The proposals remain vague, with many details having been missed out (e.g., the structure of the ministries). A timetable was omitted, but provided here together with a list of some of the ancillary agencies not considered. The emphasis on common skills across all sectors suggests a greater reliance on technical analyses, especially competition law, which may not be the best way to address problems. It appears that the Scottish Government has not thought sufficiently about the dividing line between policy and regulation, while it entirely ignored the issue of independence of the regulator. Separation from the single UK market would create the opportunity and, perhaps, the necessity for a number of contentious issues to be re-examined, notably the BT Openreach agreement on wholesale access to the fixed network and the prices for mobile termination rates (MTRs). Where underlying costs or market shares would be different then remedies would have to be reconsidered. Action to minimise such disruptions is suggested. While complaints were made about the insufficiency of support for rural broadband, the Scottish government will have to conduct a more detailed analysis and set out its spending plans (e.g., whether it would continue the level of funding presently provided by HM Treasury). The real problem with broadband in Scotland lies in low adoption rates in urban areas, not in the lack of availability in rural areas, calling rather for the appointment of digital champions and funding for training and public facilities. A number of international examples were briefly described by the government. However, further analysis suggests these are inappropriate and the lessons inapplicable. Considerable work will be needed by the SNP before it publishes its white paper in November 2013.