Revisiting regulatory independence: The relationship between the formal and de-facto independence of the Egyptian telecoms regulator

Abstract

Regulatory governance scholars tend to focus on either the formal or de-facto independence of regulatory agencies. Very little attention has been given to linking these two sides together and even less has been said about the relationship between these two aspects. In this paper, the relationship between the formal and de-facto independence of the Egyptian telecoms regulator will be investigated. The aim is to contrast these two aspects of regulatory independence. In addition, the way in which the formal independence is translated by the sector regulator into practice. The paper argues that the formal independence of the Egyptian telecoms regulatory agency is an important but not a sufficient factor to guarantee the de-facto independence of the agency. Empirical data collected from 44 interviews with different stakeholders in the Egyptian telecommunications market is analyzed. Documentary analysis of the telecoms Law and other official policy documents and reports is also considered. The initial findings of the paper show that the telecoms law grants the regulator the ability to act independently from the Ministry and the regulated industry. Nonetheless, this strong legal mandate has not been fully translated into independent practices on the ground in regards to the way the regulatory agency connects with the Ministry of Telecoms and the previous sector incumbent. The paper suggests that the relationship between formal and de-facto independence of telecoms regulators should be carefully considered.

Keywords

Developing countries public administration public management policymaking regulation

Introduction

A glance at the literature on regulatory independence reveals that the autonomy of regulatory agencies is important in establishing effective and functional regulators. The reality of independent utility regulators is far more complex and provides different modalities with regard to legal formal independence and the way in which regulators turn those formal aspects into independent practices when dealing with other regulatory stakeholders. In this context, a fundamental question would be in what way is formal legal independence linked to regulatory practices. In other words, would formal independence automatically lead to independent regulatory decisions? Also, would a formally independent regulator work at equal distance from all regulatory stakeholders? When we consider the formal and informal aspects of utility regulators’ independence, what are the possible theoretical modalities? And where the telecoms regulator in Egypt could fit?

This paper will address these questions by reflecting on formal and de-facto regulatory independence in the Egyptian telecoms sector. The aim is to determine the relationship between these two aspects of regulatory independence. Such an investigation will help in understanding whether formal independence is enough to guarantee independent regulatory practices and decisions. The paper is divided into three sections. In the first section, a theoretical and conceptual framework is developed in which the concept of regulatory independence is examined as is the relationship between formal and de-facto independence. The second section provides an empirical analysis of the formal and de-facto independence of the telecoms regulator in Egypt. In the third section, the paper concludes with some reflections on the way in which regulatory independence is perceived and interpreted by the telecoms regulator in Egypt as well as the studied policy actors.

Formal and de-facto regulatory independence: A theoretical and conceptual framework

The number of Independent Regulatory Agencies (IRAs) established worldwide has dramatically increased (Busch et al., 2004; Jordana and Levi-Faur, 2005; Levi-Faur, 2005, 2011). In this section, the concept of independence will be unpacked and the notion of IRAs will be fully explored. The relationship between formal and de-facto will also be discussed to set the stage for the empirical section.

Conceptualizing regulatory independence

Among the most important prerequisites for utility regulators to work effectively is regulatory independence. Nonetheless, many scholars including Gilardi and Maggetti (2010) have acknowledged that independence is a difficult construct to conceptualize and operationalize. Independence may mean different things in different contexts due to the administrative traditions of the county studied (Bianculli et al., 2013). Moreover, the creation of the IRAs can be perceived and interpreted through different institutional rationales and techniques including layering and displacement (Maggetti, 2014). Additionally, the concept of independence is of a dynamic and subjective nature that allows for the intersection with other related constructs such as autonomy (Verhoest et al., 2004). From this angle, regulatory independence reflects complex relational characteristics and calls for the investigation of different variables including formal organizational structures and tasks, formal autonomy, size of budget as well as path dependency (Bach, 2014; Maggetti and Verhoest, 2014; Van Thiel and Yesilkagit, 2014). In this regard, Rommel and Verhoest (2014) have emphasized that, to better understand the notion of autonomy, a relational approach is needed in which the overall features of the institutional constellation are examined. The concept of regulatory independence also raises concerns about accountability and the way it should be perceived at political, managerial, and operational levels (Biela and Papadopoulos, 2014).

Difficulty in defining independence has reflected in the ability to develop a clear definition of IRAs. In practice, IRA is a fuzzy concept that is not well defined. For example, the World Trade Organization (WTO, 1997) interprets the term as referring to a regulator who makes decisions independently without outside interference. In the European Union (EU), the term IRA is used to describe a regulatory agency that is independent of the regulated organizations and of the government. Smith (1997) has defined regulatory independence as an arm’s length relationship with regulatees, consumers and other private interests, and political authorities. By concentrating on the independence of decision-making, Melody (1997) has defined regulatory independence in terms of autonomy to implement policy without undue interference from politicians or industry lobbyists. The Better Regulation Task Force (2003) has defined IRA as “a body which has been established by act of parliament, and operates at arm’s length from government and which has one or more of the following powers: inspection, referral, advice to a third party, licensing, accreditation, or enforcement.” Hence, IRAs operate under the authority of laws issued and revised by legislators. Their budgets must be approved and the regulator must be appointed for a fixed term. IRAs are also subject to judicial reviews and perform their duties within the overall policy frameworks established by legislators. The structure of the relationships between the aforementioned parties will define the nature of regulatory independence.

Following on from these definitions, regulatory independence can also be perceived as not being captured. In the words of Srivastava (2000), regulators should be insulated from improper influences from parent political organizations and regulatees. From this angle, for utility regulators to be independent, they should be captured neither by parent organizations nor by regulatees. As Mitnick (1980) notes, regulatory capture is said to occur in one or more of the following circumstances: when the regulated interest control regulation; when the regulated parties succeed in coordinating the regulatory body’s objectives with their activities; when the regulated party manages to neutralize or ensure non-performance or mediocre performance by regulators; when the regulated party succeeds in coopting the regulators into seeing things from their own perspective, and when the basic structure of the reward system leads to venal or incompetent regulators.

Despite the fact that all regulatory regimes are vulnerable to capture by organized interest groups, particularly those whom the regulation seeks to control, the risk of regulatory capture can be higher in the case of utility regulators (Dnes, 1991). As sector-specific regulators, utility regulators are vulnerable to capture by the very industry they regulate because they depend on the industry for information and cooperation in order to do their job. As noted by Jacobs (2001: 7–8), the risk of capture can increase if regulators are under-equipped and under-financed. Another factor facilitating capture is the political power of sector incumbents which can intimidate regulators through the political system. Additionally, capture can also happen if regulatory systems allow excessive appeals and layers of decisions, so that regulatory decisions become delayed in years of controversy before they become effective.

Building on these contributions, the term independence will be used in the context of this paper in a broad sense to refer not only to the legal or formal independence of the regulator but also to structural and organizational independence. Accordingly, a distinction can be made between two forms of regulatory independence: formal and de-facto. Formal independence will be used to refer to the determinants of regulatory independence as stated in the legal mandate of the regulatory agency. As such, formal independence of an agency can be assessed by looking at different indicators including the status of the agency head; status of the members of the management board; relationship with government and parliament; relationship with the regulated industry; financial and organizational autonomy; and regulatory competencies (Gilardi, 2005; Johannsen, 2003). With regard to de-facto regulatory independence, it will be perceived in terms of the way in which these determinants are translated into independent actions. The regulatory agency should work without unnecessary interference of other stakeholders, namely the parent organization (see Thatcher, 2005). Accordingly, the de-facto independence of an agency can be determined by looking at the agency's preferences and the degree to which those preferences are translated into regulatory acts (see Maggetti, 2007).

The relationship between formal and de-facto independence

A glance at the literature on regulatory independence reveals that regulatory governance scholars tend to focus on either formal or de-facto independence of regulatory agencies. Very little attention has been given to linking these two sides of regulatory independence together and even less has been said about the relationship between these two aspects. Additionally, previous research on the relationship between formal and de-facto regulatory independence has indicted that there is not a clear-cut correlation between these two aspects (see Badran, 2012; Koop and Hanretty, 2009; Maggetti, 2007). As rightly described by Maggetti (2007: 271), “formal independence is neither a necessary nor a sufficient condition for explaining variations in the de-facto independence of agencies.” Accordingly, different regulatory regimes can tell different stories and provide a mix of regulatory practices wherein the formal and de-facto aspects come into play.

In that sense, my contention is that the formal independence of the regulator is not mechanically associated with its de-facto independence. At the formal level the regulatory agency may enjoy a high level of independence as per its legal and formal mandate. However, when it comes to regulatory practices and actions, such independence can be compromised at many different levels. From this angle, the theoretical relationship between formal and de-facto regulatory independence may include different modalities (see Table 1).

Table 1.

Formal and de facto regulatory independence modalities

	Formal independence
De facto independence		Strong	Weak
	Strong	Fully independent regulatory agency Ex: an experienced agency working within a well-developed regulatory framework.	Partially independent regulatory agency Ex: an experienced agency with a weak legal mandate
	Weak	Partially independent regulatory agency. Ex: a newly established agency with a strong legal mandate.	Fully dependent regulatory agency [captured] Ex: an agency captured by the interests of the industry of the parent organizations.

On the one hand, a regulatory agency may enjoy a strong level of formal independence as per its legal mandate in addition to a strong de-facto independence in terms of the ability to translate that formal independence into actions by keeping equal distance from all regulatory stakeholders. On the other side of the continuum, one may find an agency with weak formal and weak de-facto independence. In this case, the authority given to the regulatory agency to act independently is limited and its independence is not fully secured by legislation. Consequently, the agency will be heavily reliant on the parent organization or any other actor in the regulatory arena and unable to make independent decisions.

Two other modalities can be identified by looking at the formal and de-facto independence of regulators. One of those modalities is the situation wherein the regulatory agency has weak formal but strong de-facto independence. In this case, despite the limited powers granted to the agency on paper, the regulator is trying to increase its independence on the ground by making independent decisions. This issue may create conflicts with other regulatory stakeholders. The last model is when the regulatory agency enjoys a strong formal independence as per the law and its legal mandate but for some reason such as its novelty or lack of experience this strong formal mandate does not fully materialize on the ground.

Given such an understanding of the relationship between the formal and de-facto regulatory independence, and drawing on the operationalization of this concept provided by Gilardi and Maggetti (2010), the analysis of regulatory independence in the Egyptian context will combine different formal and de-facto elements (see Table 2).

Table 2.

Measuring formal and de factor independence of the NTRA

Type of independence	Measurement
Formal independence of the NTRA	• Structural and functional independence as reflected in the Egyptian Telecoms Law.
De facto independence of the NTRA	• The NTRA’s independence from the MCIT. • The NTRA’s independence from the regulated industry. • The NTRA’s independence from the previous incumbent TE.

NTRA: National Telecommunications Regulatory Authority; MCIT: Ministry of Communications and Information Technology; TE: Telecom Egypt.

At the formal level, the legal mandate for establishing the regulatory agency will be examined to identify the formal determinants of the independence of the agency. At the de-facto level, the relationship between the regulator on the one hand and the Ministry of telecoms and the previous incumbent on the other will be examined. Moreover, the relationship between the sector regulator and the regulated companies will be brought into a sharper focus in an attempt to determine the way in which the regulatory agency has translated its legal independence into practice.

The analysis of the regulatory independence in Egypt

This section focuses on investigating the notion of regulatory independence in the context of the Egyptian telecoms sector. The discussions start with an overview of the methodological background and the scoping conditions of the paper. For contextualization purposes, a brief overview of the telecoms sector’s reform and liberalization is provided in “Contextualizing the debate: Telecoms liberalization and privatization in Egypt” section. The formal and de-facto independence of the sector regulator is discussed in the section entitled “Formal and de-facto independence of the NTRA.”

Data, methods, and the scoping conditions

The analysis in this paper will focus primarily on two subsectors in the Egyptian telecoms market: mobile telephony and Internet service provision. The reasons behind selecting these two regulatory arenas are (1) these two subsectors are more liberalized than the other market segments; (2) the mobile telephony and Internet service provision arenas present two different models in terms of complexity. These differences will enable insights on how regulatory independence is perceived in different telecoms sectors.

For the two investigated arenas to be fully examined, the key actors involved in the regulatory processes had to be identified. To this end, a mapping exercise was undertaken which started with an analytical review of a wide range of written materials and documents. This included the telecommunication law, official reports, official presentations, previous studies, press articles, and analytical reports (Acioly, 2004; Besussi, 2006; Trochim, 1989; Turnpenny et al., 2005). These background materials helped the researcher in identifying the potential actors participating in the regulation of the telecommunications sector in Egypt. A broad distinction has been made between state and non-state actors (see Table 3). Given the operational definition provided and the identified scope of the study, the actors have been selected to represent the regulatory body, the parent organization, the incumbent, and the private regulated companies.

Table 3.

State and non-state network actors in the Internet and mobile regulatory arenas

State actors
• The MCIT • The NTRA • TE
Non-state actors
1- The mobile telephony arena
• Mobinile • Vodafone Egypt • Etisalate Misr
2- The Internet service provision arena
ISPs class (A)	ISPs class (B)
• EgyNET	*Equant	*Noor
• LINKdotNET	*Raya telecom	*Yalla
• TEData	*Internet Egypt	*Menanet
• Nileonline	*Soficom	*Batelco

MCIT: Ministry of Communications and Information Technology; NTRA: National Telecommunications Regulatory Authority; TE: Telecom Egypt.

Semi-structured interviews were used to gather primary data from people in senior and strategic positions within the selected organizations. Three interview question guides were developed in advance in order to ensure the uniformity and the consistency of the data collected. The respondents were asked to answer a series of open-ended questions. In order to avoid interrupting the flow of conversation, the researcher took “key word” notes during the interview. These short notes were extended and transformed into detailed reports immediately after every interview. The detailed versions of the notes include the researcher’s impressions and observations about the interview content, the participant, the context, and questions that might assist with the interpretation of the interview data. They also include testimonies, stories, and illustrations given by informants that can be used in the final analysis.

Given the complex nature of the Egyptian telecoms sector and the multiplicity of actors involved in the regulatory processes, it is necessary to explain the scope of the empirical analysis in this paper. Firstly, the paper does not make any claims of the representation of the Egyptian case to the regulatory state in the global south. Secondly, the empirical analysis will focus on the formal and de-facto independence of the regulator in relation to three main sets of players: the Ministry, the previous incumbent, and the private-regulated companies. This is not to say that these are the only players involved in regulatory processes. Nonetheless, analyzing regulatory independence in relation to all the involved actors such as coregulators, competition authority, media regulators, and regional and international harmonization bodies is beyond the scope of this paper (see David and Verhoest, 2014). Thirdly, and as has been indicated earlier, independence is a multi-dimensional concept. However, the analysis of the formal and de-facto independence of the National Telecommunications Regulatory Authority (NTRA) will be restricted to the dimensions previously identified in the conceptualization section.

Contextualizing the debate: Telecoms liberalization and privatization in Egypt

The telecoms sector in Egypt has gone through a reform process since mid-1990s. The milestones of the liberalization process can be summarized in Table 4.

Table 4.

Milestones of liberalization and regulatory reform in Egypt’s telecoms

Year	Liberalization and regulatory reform measures
1997	- Liberalization of public payphone services
1998	- Separation between regulatory and operational activities - Liberalization of the mobile phone market
1999	- Foundation of the MCIT - Liberalization of public data networking services
2000	- Elaboration and adoption of the national plan for telecommunication and information technology
2001	- Drafting and discussion of a unified telecommunication law
2002	- Commitment to liberalize telecommunication services following WTO agreements - Free Internet initiative
2003	- The issuance of telecommunication unified law 10/2003 - The launch of Egypt’s information society initiative
2004	- Financial reconstruction of Telecom Egypt (the previous incumbent)
2005	- Flotation of 20% of Telecom Egypt
2006	- Liberalization of landline services and international calls - The third mobile license

MCIT: Ministry of Communications and Information Technology.

As the table indicates, the process started in 1997 with so-called non-basic services. In an attempt to assert its commitments to telecommunications liberalization, Egypt signed the WTO General Agreement on Trade in Services, the Basic Telecommunications Agreement, and the Declaration on Information Technology of the WTO (Information Technology Agreement [ITA]) in 2002. Over the years 2004 and 2005, Telecom Egypt (TE), the incumbent, became the focal point for all market players as it was prepared to be privatized. In 2006, a third mobile operator was licensed (Etisalat Egypt) but landline services have not witnessed the intended liberalization for economic as well as political reasons. Between 2006 and 2007, no major changes have taken place in the Egyptian telecoms sector in relation to further liberalization and privatization efforts. The involvement of the private sector in telecommunications provision has resulted in a more complex market structure. With so many new non-state players in place, not only the structure of the market has changed but also the way in which regulatory independence was interpreted.

Formal and de-facto independence of the NTRA

A core component of the telecoms reforms and liberalization process in Egypt was the establishment of an independent sector regulator to manage and regulate the transformation process in all telecoms subsectors and to create a level playing field for all players old and new. The institutional guarantees for regulatory independence have been fully explicated in the legal mandate of the agency, which theory should ensure that the NTRA can act independently. In order to locate the NTRA in the previously discussed typology with regard to the strength or weakness of its formal and de-facto independence, these two aspects will be further discussed in this section.

The formal independence of the NTRA

At the formal level, the telecommunication Law in Egypt has clearly identified the role of the NTRA and its formation and responsibilities. In this context, just by looking at the legal mandate for creating the regulator it can be concluded that the agency enjoys a considerably high level of formal independence. For instance, the law states that the agency has the right to take all necessary actions “without limitation to the governmental rules and regulations” (article 5) with no formal obligations upon the NTRA towards the government or the parliament. Additionally, the independence of decision-making is assured by stating in (article 13) that “The NTRA Board of Directors is the dominant authority over all of its affairs and disposition of its matter and shall take whatever decisions it considers necessary to achieve the goals it was established for.” Moreover, the NTRA is independent from a structural point of view from the Ministry and it has a board of directors responsible for handling internal decisions.

The de-facto independence of the NTRA

The first-hand impression about the formal independence of the regulator has to be tested empirically to see if the NTRA was able to translate the strong formal independence into strong de-facto arms-length relations with the regulatory stakeholders. To this end, I asked respondents to reflect on the level of independence between the NTRA and the Ministry of Communication and Information Technology (MCIT) on the one hand, and between the NTRA and the regulated industry including the previous incumbent TE on the other hand. In plain English, respondents were asked how independent they think the NTRA is from the MCIT and from the regulated industry including TE.

The NTRA’s independence from the MCIT: The industry’s point of view

The answers to my question varied according to the respondents’ understanding of the meaning of “independence.” The term was not intentionally defined for them at the beginning in order to give them the opportunity to reflect on the different aspects of this concept. From the responses in the interviews, it can be noted that when it comes to the relationship between the NTRA and the MCIT, there is an overall agreement that the NTRA is not independent of the MCIT. However, it is worth mentioning that informants’ opinions varied regarding the nature of the relationship between the NTRA and the MCIT. For some regulated companies, the NTRA, the MCIT, and TE represent the interests of the government. In constrast, private-regulated companies were thought to represent the interests of businesses. According to this dichotomous viewpoint (government vs. business), there is no room to talk about “independence” in the relationship between the NTRA and the MCIT.

At the end of the day, the NTRA and the MCIT are parts of the government apparatus. They both work together within a wider framework that reflects the policy orientations of the government. Therefore, personally I think there is no difference between these two bodies. (Interview with the Governmental Relations Manager LINKdotNET)

In addition to the group of respondents who rejected the notion of regulatory independence to describe the relationship between the NTRA and the MCIT on the ground that both organizations have the same affiliation, another group of respondents share the same opinion but on different grounds. Structurally speaking, this group of regulated companies’ representatives rejected the notion of regulatory independence due to the fact that the Minister of Telecommunications is the head of the board of directors of the NTRA. This is summarized by some respondents:

With the existence of the Minister at the top of the NTRA nobody can say that it is totally independent. In many cases the NTRA do what the Minister tells it to do because they both represent the interests of the governmental side. From this perspective when the company has a problem with the NTRA it resorts to the Minister hoping that he would support the company but this did not happen. (Interview with a Regulatory Affairs Manager, Etisalat Egypt)

Regarding the relationship between the NTRA and the MCIT, the former is not independent from the latter. The MCIT in fact presides over the NTRA. The NTRA cannot do anything that the MCIT does not want it to do. And if it tries, the Minister is there as the head of its board of directors to correct this situation if it happened. (Interview with a Governmental Relations Manager, Yalla Misr)

Another group of respondents have seen the NTRA as partially independent in its relationship with the MCIT. The analysis of this group’s answers reveals that their interpretation of the term “independence” differs in that they adopt more functional interpretation of regulatory independence. Their understanding of the notion of independence is very close to the way in which scholars such as Melody (1997) define the concept. According to them, independence means the ability of the regulatory authority to make its own decisions and to implement them without undue intervention from political authorities. In other words, they regard regulatory independence as non-interference by the MCIT in the way that the NTRA regulates the sector. From this perspective, the majority of interviewees have confirmed that, when it comes to technical and regulatory issues, the Ministry gives the NTRA enough authority to make and enforce its own decisions.

Following on from the above discussion, it can be concluded that, regarding the relationship between the NTRA and the MCIT, the regulated industry considers regulatory authority as either dependent on the Ministry or partially independent based on their interpretation and understanding of the notion of independence. Looking at the historical roots of the NTRA and the way that the agency was developed gave some of the industry representatives grounds to reject the notion of regulatory independence. For this group of informants, the NTRA and the MCIT are two sides of the same coin. Additionally, having the Minister of Telecoms serving as a head of the agency’s board of directors represented another reason for others to reject the notion of regulatory independence. Despite the fact that the agency has been historically and structurally connected to the Ministry of Telecoms, some responses pointed at the partial independence of the NTRA in making its own regulatory decisions. The question that needs to be answered now concerns the independence of the NTRA from the regulated companies.

The NTRA’s independence from the regulated industry: The industry’s point of view

With reference to the interviewees’ responses, apparent agreement on the independence of the NTRA from the regulated companies can be inferred. Most of the interviewees from the regulated industry have confirmed that, while they regard the regulator as totally or partially dependent on the Ministry, they have no doubt that it is independent of the regulated companies. The following comments by interviewees support this observation:

In its relations with the regulated industry the NTRA is totally independent. It tries to be an impartial player and make decisions that benefit the whole sector. (Interview with the Regulatory Affairs Manager, Etisalat Egypt)

The NTRA is not independent from the MCIT because the Minister of telecommunications is the head of its board of directors. However, when it deals with the regulated companies the NTRA tries to be fair as much as it can and from this perspective it is trusted and respected by most of the companies. (Interview with the Governmental Relations Manager, Noor)

The NTRA is not independent from the MCIT; however, it is impartial and fair in dealing with the regulated companies. (Interview with the Governmental Relations Manager, Menanet)

These comments by the industry representatives show that the NTRA tries to remain at arm’s length from the regulated private companies. In doing so, the regulator is respected by market players and is seen as neutral and fair. However, this arm’s length relation does not exist in the relationship between the NTRA and TE.

The NTRA’s independence from TE: The industry’s point of view

In spite of the agreement of the regulated industry representatives that the NTRA is largely independent in its relationship with private companies, they also highlighted the fact that this is not the story with other state actors such as TE.

In my view, the NTRA has a special relationship with TE upon which all ISPs depend in providing their services. Because of the close relationship between TE and TEdata the former always gives the latter preferable treatment. (Interview with the Governmental Relations Manager, LINKdotNET)

[…] there is a special relationship between the MCIT, the NTRA, and TE as the three of them are governmental bodies. However, what is important for us as a regulated company is that the NTRA is balancing the interests of all parties and its decisions do not benefit one of them at the expense of the other. One example of such a special relationship is that sometimes the NTRA consults TE first on a specific issue before the other regulated companies. (Interview with the C.E.O and Vice Chairman, Nile on line NOL)

The discussion so far reflects what the regulated companies think about the independence of the regulator from the parent organization and from the regulated industry. In order to provide a complete picture, the views of the NTRA and the MCIT are required.

The NTRA’s independence from the MCIT: The government’s point of view

The analysis of the interviews’ responses received from the NTRA and the MCIT reveals that both organizations view regulatory independence in a similar way to the interviewees from the regulated industry (partial independence). Firstly, staff in both organizations admit that the regulatory agency is not truly independent. Some statements made by the regulator, when asked to reflect on the relationship between the NTRA and the MCIT can clarify this issue. The regulator described such a relationship as “organic” which means both bodies are part-and-parcel of the overall governmental machinery. In addition to this, the interviewees commented on the notion of independence by saying that “there is not a 100% independence between regulators and parent organisations anywhere in the world.”

Secondly, based on the mutual respect for different jurisdictions and spheres of actions as one of the ground rules that govern the relationship between all actors involved in regulatory arenas, representatives from the NTRA and the MCIT have confirmed that the NTRA enjoys a high level of independence with regard to making and enforcing regulations and regulatory decisions.

Regarding the process of policy-making the NTRA is involved in the processes of making policies and the processes of implementation as well. In the process of making policies, the NTRA is only one vote among many other stakeholders who participate in this process. However, in the implementation process it is the main player responsible for enforcing regulations and policies. (Interview with the Vice President NTRA)

Despite agreement on the partial independence of the NTRA, the interpretation of the NTRA and the MCIT regarding regulatory independence is broader than that adopted by the regulated companies. In addition to the independence of decision-making and implementation processes, respondents from the NTRA and the Ministry have added some new elements such as independence with regard to financial and human resources. In this sense, to be independent is to work at arm’s length from the parent organization and the regulated industry at the same time (see Smith, 1997). Accepting this notion in principle, the following question will be how long is that arm that separates the NTRA and the MCIT? Is it long enough to enable the NTRA to perform its regulatory duties? And if so, what about the Minister and his presidency of the board of directors of the NTRA? The answers to these questions may clarify the issue of regulatory independence and reduce the level of confusion regarding what is meant by independence.

What is wrong with being so close to the parent organization?

It can be concluded from the answers of the interviewed staff in both the NTRA and the MCIT that the length of the arm that separates the two parties is enough for the former to perform its regulatory duties in an effective way without any kind of unwanted intervention from the MCIT. Added to this, most of the interviewees do not see any problem with the Minister of Telecommunications as the head of the regulator's board of directors. As clearly put by a Senior Advisor to the Minister of Telecommunication on Policy Issues at the MCIT, when we talk about the independence of the NTRA, we should consider the fact that it is divided into two main parts: the board of directors and the executive body. From this perspective, the existence of the Minister of Telecommunications as the head of the board of directors does not affect the independence of the NTRA for many reasons:

Firstly, at the end of the day, the NTRA is the prime organisation responsible for regulation enforcement and not the MCIT. In this area, the NTRA is very independent and has the authority to play this role effectively.

Secondly, from a structural viewpoint, the NTRA is not a part of the organisational structure of the MCIT. It has its own rules that regulate its internal affairs. It also has its independent budget and its organisational chart that does not come under the MCIT.

Thirdly, the board of directors consists of representatives of the different stakeholders who might be affected by the authority’s decisions.

Consequently, all parties are represented and the powers within the boards of directors are balanced. Each party can defend the interests of his organization and the final decision should be taken on the majority ground. The Minister of Telecommunications represents only one vote among many others that can oppose him.

Added to the above-mentioned points, some of the staff in the NTRA see the role of the Minister of Telecommunications within the board of directors as a necessity for reporting, coordination, and other functional purposes. Indeed, the Vice President of the NTRA has mentioned that the NTRA is financially and managerially independent from the MCIT but it should be reporting to someone. Regulators all over the world follow the minister concerned, the prime minister, or the parliament. In this case in Egypt, I see it is better to follow the Minister of Telecommunications for the following reasons:

As the minister concerned, the Minister of Telecommunications is most capable of understanding the nature of the market and the characteristics of the problems that the players in this market face. Hence, he would be able to cooperate with those players to come-up with a solution that serves their interests.

As the minister concerned, the Minister of Telecommunications has the power to pressure some major player such as TE to provide information or to take actions that cannot be done without his interference.

From a competency point of view, other institutions such as the Parliament are not qualified enough to be involved in discussion on technical issues related to telecommunications.

Additionally, the dual role of the Minister of Telecommunications as the head of the NTRA’s board of directors and the MCIT serves the coordination purposes between the two organizations.

Taking all these reasons together, the Vice President of the NTRA has concluded that the existence of the Minister of Telecommunications as the head of the board of directors is in the best interests of the NTRA and the whole sector. She added, “We should not worry too much about the independence issue because there are many votes within the board that can counterbalance the powers of the Minister.”

It is worth mentioning in this context that the above-expressed viewpoint regarding the benefits of the existence of the Minister of Telecommunications as the head of the NTRA board of directors represents not only the opinion of the state actors but also the view of some of the regulated industry. As put by the Vice Chairman and Managing Director of a leading Internet company, the existence of the Minister of Telecommunications at the head of the NTRA board of directors has benefited the latter. The reason for this is that the Minister comes from the industry. He is a communication engineer and he fully understands the nature of the industry and the way in which the sector should be dealt with. Such expertise and awareness are reflected in the way in which the MCIT is dealing with the NTRA and the approach that both of them follow to manage and regulate the ICT sector. In this context, the MCIT has emphasized the impartiality of the NTRA and tries to reinforce its independence. If we supposed the opposite case, in other words, the Minister of Telecommunications coming from another industry, such harmony and understanding in the relationship between these two bodies would disappear and the independence and impartiality of the NTRA might be affected.

The same point has been emphasized by the regulator when he referred to the mutual understanding between himself and the Minister because they have the same technical and educational background (both are telecoms engineers). That means they both can speak the same “language” and can understand the nature of the problems that face the sector and in turn develop a common vision with regard to how to solve these problems.

Such an understanding of the nature of regulatory independence and the justifications given to explain the close relationship between the NTRA and the MCIT have far reaching implications of the research focusing on the rising regulatory state of the global south. The apparent similarity between the regulatory state of the west and the regulatory state of the global south needs to be further investigated.

Does regulatory independence really matter?

Following on from the above discussion, a final question needs to be addressed: does regulatory independence really matter from an industry point of view? A simple and straightforward answer to this question is yes; it does matter, as it is necessary for guaranteeing the effectiveness of the regulatory system. However, the examination of the two studied regulatory arenas has revealed that regulatory independence is a necessary but not a sufficient factor to guarantee the effectiveness of the regulatory system. From the perspective of the regulated companies, the existence of a fair and responsive regulatory system that ensures transparent and clear ground rules, which are applied for all players on equal footing, can be more important than independence. As noted by the C.E.O and Vice Chairman a class (A) Internet service provider:

Dependency relationship does not necessarily mean it is negative by nature. On the contrary, I see it as a positive relationship because what matters at the end of the day is the way in which the NTRA deals with the regulated companies. In this respect, I can assure you that the NTRA plays its role as a regulator very well; it is fair, competent, and works in the best interests of the whole sector.

To sum-up, the de-facto and formal independence of the NTRA have been perceived in different ways by the examined actors. The difference in opinion among respondents was expected given their diverse backgrounds and organizational affiliation. The analysis and discussion have highlighted interesting insights with regard to the way in which the NTRA deals with the MCIT and TE in terms of the close connections and organic relations with these two entities. Such observations can be interpreted in the way that the NTRA has not fully utilized the institutional guarantees for its independence as reflected in the legal mandate. Additionally, the preferential treatment given to one of the market players, TE, can have far reaching consequences on the competition in the market.

Conclusion

In this paper, the notion of the formal and de-facto regulatory independence has been examined in relation to the level of the NTRA independence from the Ministry, the incumbent, and the private-regulated industry. The investigated case provides a clear example of an agency with a relatively strong formal but weak de-facto regulatory independence. The discussion has indicated that regulatory independence in terms of working at arm’s length from all affected parties in regulatory arenas has not been fully achieved in the Egyptian telecoms market. If a study was only to consider the formal independence of the agency as defined in law it would be concluded that the NTRA enjoys a strong formal independence. Nonetheless, the analysis of the interview material and the comments from the regulatory members of staff as well as representatives from the regulated industry have pointed in the opposite direction by referring to the “organic” and very close relations between the regulator and the Ministry on the one hand and the regulator, the Ministry, and the incumbent on the other.

The analysis of the interviews material has also indicated that when it comes to the independence of the regulatory agency from the regulated industry, the majority of the interviewees confirmed that the NTRA stands at equal distance from all private companies. Nonetheless, when it comes to the way in which the regulator treats the previous incumbent, which is still majority owned by the government, some informants underlined the preferential treatment given to the gigantic TE. This behavior by the regulator restricts in the ability of the private companies to compete fairly with the gigantic TE.

To conclude, the findings in this paper have confirmed that there is no mechanical relationship between the formal and de-facto regulatory independence. The NTRA enjoys a considerable level of independence at the formal level, however; its de-facto independence from the MCIT and TE was questioned by other market players. Consequently, these findings suggest that the relationship between the formal and de-facto independence of regulators should be carefully considered within a range of possibilities including the different conceivable combinations between strong and weak forms of regulatory independence.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

References

Acioly C (2004) Process Mapping: Disclosing Actors and Citizen Participation in Recife. Institute for Housing and Urban Development Studies, The World Bank. Available at: http://www.worldlibrary.org/wplbn0000157121-process-mapping–disclosing-actors-and-citizen-participation-in-recife-by-the-world-bank.aspx?.

Bach

(2014) The autonomy of government agencies in Germany and Norway: Explaining variation in management autonomy across countries and agencies. International Review of Administrative Sciences 80(2): 341–361.

Badran

(2012) Does formal independence matter for regulatory outcomes? Measuring regulatory interdependence in networks: The case of telecoms sector in Egypt. International Journal of Politics and Good Governance 3(3.2): 1–30.

Besussi E (2006) Mapping European research arenas. UCL working papers, 103.

Better Regulation Task Force (2003) Principles of good regulation. Available at: http://archive.cabinetoffice.gov.uk/brc/upload/assets/www.brc.gov.uk/principlesleaflet.pdf (accessed 29 March 2016).

Bianculli AC, Fernández-i-Marín X and Jordana J (2013) The world of regulatory agencies: Institutional varieties and administrative traditions. In: EPSA 2013 annual general conference paper, 786.

Biela

Papadopoulos

(2014) The empirical assessment of agency accountability: A regime approach and an application to the German Bundesnetzagentur. International Review of Administrative Sciences 80(2): 362–381.

Busch

Jörgens

Tews

(2004) The global diffusion of regulatory instruments: The making of a new international environmental regime. European Integration online Papers (EIoP) 8(21): . Available at: http://eiop.or.at/eiop/texte/2004-021a.htm (accessed 29 March 2016).

David A and Verhoest K (eds) (2014) Multilevel Regulation in Telecommunications: Adaptive Regulatory Arrangements in Belgium, Ireland, the Netherlands, and Switzerland. Basingstoke: Palgrave Macmillan.

10.

Dnes

(1991) Franchising, natural monopoly, and privatisation. In: Veljanoveski

(ed.) Regulators and the Market: An Assessment of the Growth of Regulation in the UK, London: Institute of Economic Affairs.

11.

Gilardi

(2005) The formal independence of regulators: A comparison of 17 countries and 7 sectors. Swiss Political Science Review 11(4): 139–167.

12.

Gilardi

Maggetti

(2010) The independence of regulatory authorities. In: Levi-Faur

(ed.) Handbook of Regulation, Cheltenham: Edward Elgar.

13.

Jacobs S (2001) Building credible regulators for liberalized utility sectors. In: Paper presented at the first workshop of the APEC-OECD, co-operative initiative on regulatory reform, Beijing, China.

14.

Johannsen K (2003) Regulatory independence in theory and practice – A survey of independent energy regulators in eight European countries. Odense, Denmark: Syddansk Universitet.

15.

Jordana

Levi-Faur

(2005) The diffusion of regulatory capitalism in Latin America: Sectoral and national channels in the making of a new order. The Annals of the American Academy of Political and Social Science 598(1): 102–124.

16.

Koop C and Hanretty C (2009) Measuring the statutory independence of regulators. In: Presented at the American political science association, Toronto, Canada. Available at: http://www.chrishanretty.co.uk/publications/HK09.pdf (accessed 29 March 2016).

17.

Levi-Faur

(2005) The global diffusion of regulatory capitalism. The Annals of the American Academy of Political and Social Sciences 598: 12–32.

18.

Levi-Faur

(2011) Regulation and regulatory governance. In: Levi-Faur

(ed.) Handbook on the Politics of Regulation, Northampton, UK: Edward Elgar Publishing.

19.

Maggetti M (2007) De facto independence after delegation: A fuzzy-set analysis. Regulation & Governance 1: 271–294.

20.

Maggetti

(2014) Institutional change and the evolution of the regulatory state: Evidence from the Swiss case. International Review of Administrative Sciences 80(2): 276–297.

21.

Maggetti

Verhoest

(2014) Unexplored aspects of bureaucratic autonomy: A state of the field and ways forward. International Review of Administrative Sciences 80(2): 239–256.

22.

Melody W (1997) Policy objectives and models of regulation in telecom reform: Principles, policies and regulatory practices. Denmark, Technical University.

23.

Mitnick

. Williamson

(1980) The Political Economy of Regulation: Creating Design and Removing Regulatory Forms, New York: Colombia University press.

24.

Rommel

Verhoest

(2014) Exploring effects of coordination on the autonomy of regulators: Energy regulators in Belgium. International Review of Administrative Sciences 80(2): 298–317.

25.

Smith

(1997) Utility regulators: The independence debate. Public policy for the private sector, Washington, DC: World Bank Group.

26.

Srivastava L (2000) Issues in institutional design of regulatory agencies. In: Paper presented in SAFIR core training course on infrastructure regulation and reform organised by the World Bank and Tata Energy Research Institute, New Delhi.

27.

Thatcher

(2005) The third force? Independent regulatory agencies and elected politicians in Europe. Governance 18(3): 347–373.

28.

The Egyptian Telecommunications Law 10/2003. Available at: www.ntra.gov.eg (accessed 29 March 2016).

29.

Trochim

(1989) An introduction to concept mapping for planning and evaluation. In: Trochim

(ed.) A Special Issue of Evaluation and Program Planning (Vol. 12), New York: SAGE Publications, pp. 1–16.

30.

Turnpenny J, Alex H, Irene L, et al (2005) Mapping actors involved in climate change policy arenas in the UK. Tyndall centre for climate change research, working paper, 66.

31.

Van Thiel

Yesilkagit

(2014) Does task matter? The effect of task on the establishment, autonomy and control of semi-autonomous agencies. International Review of Administrative Sciences 80(2): 318–340.

32.

Verhoest

Peters

Bouckaert

(2004) The study of organisational autonomy: A conceptual review. Public Administration and Development 24(2): 101–118.