EVEN IN LARGE telecommunications companies, lack of communication between the board and the regulatory affairs department poses an ongoing risk to the business, according to a survey by consulting house KPMG.<\/p>\n
The survey comprises a questionnaire and face-to-face interviews with 60 respondents from the Americas, Europe, Asia Pacific, the Middle East and Africa – including more than one SA telecommunications company.<\/p>\n
David Thomas, director of forensic communications regulation at KPMG, says that while the findings of the survey were of concern, they were hardly unexpected. Thomas, who previously worked for UK regulator Ofcom, says there is continuous tension between the board and the regulatory affairs department of telecoms operators driven by the different focuses of the two parts of the organisation.<\/p>\n
“Typically, people in regulatory affairs feel they have an important strategic role to play inside the company, while the board sees the role of regulatory affairs as keeping the regulator off its back,” he says. According to the survey, the majority of regulatory professionals felt they were either a business partner or a voice to the board, while the board members interviewed felt the regulatory professionals were either a voice to the board or a function to be involved by exception.<\/p>\n
He adds that the lack of communication between the business as a whole and the regulatory affairs team can have a real financial impact on the business. He gives the example of a price negotiation between the company and a regulator where the regulatory affairs team is arguing that it cannot provide a certain service for below a specific cost, and at the same time the sales and marketing team decides to offer that service at below cost, undermining the argument of the regulatory affairs team and resulting in the pricing level being set at a point where it costs the company money over an extended period.<\/p>\n
This is especially difficult in multinational groups where a lack of co-ordination across different countries can result in contradictory arguments.<\/p>\n
Part of the communications gap is because people within the regulatory affairs department see themselves as smarter than the rest of the organisation. This has led to a certain level of intellectual arrogance. At the same time, the board thinks of the regulatory affairs team as a resource that should be let out of its box to answer specific questions and then sent back where it came from as soon as possible.<\/p>\n
He says this attitude is prevalent to a greater or lesser degree depending on the extent to which a board member acts as a champion of the regulatory affairs department.<\/p>\n
Thomas comments, alluding to the survey’s findings, that the importance placed on regulatory affairs departments differs depending on whether the telco concerned is an incumbent operator, such as Telkom, or a new entrant such as Neotel. He says new operators tend to put a stronger emphasis on working closely with their regulatory affairs teams because they need to drive regulation to get the maximum benefit in their fight against the incumbent. Entrenched operators, however, tend to be fighting a rearguard action to defend their businesses against stricter regulation and new entrants and pay less attention to their regulatory affairs team.<\/p>\n
“The lack of communication is concerning, especially when you consider that regulations are probably the most important contract a telco will negotiate. These contracts affect the way companies can price their services and the competitive environment that will prevail for a number of years,” says Yunus Suleman, MD for information, communication and entertainment at KPMG SA.<\/p>\n
“Failure to focus on this aspect of the business could fundamentally damage the business,” says Thomas. One area of interest in the survey is that neither board members nor regulatory affairs teams see this as an area from which to further a career in the broader company. The survey shows that only 45% of regulatory professionals felt the regulatory affairs team was a training ground for people with a wider future business role, and only 10% of board members felt this way.<\/p>\n
Thomas says if the regulatory professionals could communicate more effectively with the board, it would improve the perception gap that appears to be hurting the industry as a whole.<\/p>\n