Regulatory Reform- Comparing the Experiences of the US and Lebanon

Ross Marchand

November 30, 2018

Last month, TPA policy director Ross Marchand spoke at Balamand University and AZM University in Lebanon on the subject of regulatory reform, hosted by the Lebanese Institute for Market Studies. Below are his abridged remarks. 

At first glance, the United States and Lebanon seem to have little in common. Compare, for instance, Lebanon’s system of confessional democracy (which guarantees specific positions based on a person’s religious sect) with the US Constitution’s mandate that “no religious test shall ever be required as a qualification to any office or public trust under the United States.” Defenders of the Lebanese model say that this enshrined mixing of religion and politics has been maintained in order to ward off violent sectarian conflict. Yet, nearly thirty years after then end of a horrific fifteen year civil war, peace has returned to the Levantine nation, and predictable problems- many of which also plague the US- are the main focus of most citizens. 

Internet coverage in Lebanon, for instance, remains painfully slow and uneven, as telecommunication giants with government guarantees attempt to connect the entire country via fiber optic cables. Meanwhile, the lights flicker on and off, as the government tries in vain to take the lead in providing electricity. While American provisions of these services are far from perfect, recent regulatory reforms showcase a way for Lebanon to improve its residents’ quality of life and become a leader in technological innovation. By embracing deregulation and opening up protected industries to market pricing, Lebanon has a chance to put its problems in the past.  

Lebanon’s sluggish internet speeds have led politicians and officials to suggest replacing outdated copper line infrastructure with fiber optic cables. In February of 2018, Prime Minister Saad Hariri declared a nationwide-effort to deploy fiber optic cables across the country, in order to bring 4G internet speeds to underserved cities and villages. But keeping such efforts under the purview of central authorities risks letting a better internet standard- 5G- fall by the wayside. 

As in America, deploying fiber optic cables to rural villages is costly, since high deployment costs will benefit relatively few people. But 5G, which can operate via “pizza box” sized deployments free of cable connections, can bring faster service than 4G at a fraction of the cost. Since the start of 2017, the Federal Communications Commission (FCC) has committed to a series of regulatory reforms that force cities to decide quickly whether or not to allow providers to deploy 5G boxes in their municipalities. 

Until recently, the careful scrutinization of antenna designs, impact on property values, and landscaping rules violations has led to 800-day waiting periods in some municipalities. This might have been needed back in the days of gigantic cellphone towers, but the tiny 5G deployments have now rendered this regulatory process obsolete.

The FCC has attempted to fix this issue by introducing shot clocks that limit the amount of time for review to 60 days in most cases. Federalism is a balancing act, though, and the FCC order affords cities an additional couple of months of consideration if physical structures stand to be “significantly modified” by wireless attachments. Additionally, the times when cities charged anywhere from $2,600 to $11,000 to rent space on city-owned telephone poles have come to an end. In September, the FCC approved an order limiting city fees to the cost of processing applications and managing right-of-way issues; normally these maintenance costs come out to less than $300. Adding to these deregulations was the December 2017 repeal of Title II, an Obama-era “net neutrality” framework that stymied broadband investment and made internet providers hesitate to expand. 

Obviously, deregulation in Lebanon won’t take on exactly the same shape as it has in the US over the past two years. But reforms in the general direction of lowering barriers to deployment are key; exposing leading internet providers to market pressure will provide a significant boost to investment, and the Lebanese economy. Leading US providers such as Verizon and T-Mobile face the prospect of going out of business  if they fail to innovate or provide poor services. These competitive pressures force them to invest in new technologies, unlike Lebanese government-backed networkswhich lack the incentives provided by the market. In addition, any telecom reform effort in the country must be accompanied by electricity reform, as powering an enhanced internet network will require gargantuan amounts of new energy. The government runs production and distribution, but since they have no incentive to keep rates reflective of demand or invest in new capacity, power plant output languishes as citizens’ needs multiply. 

As with internet provision, the Lebanese government ought to take a step back and allow market competition to work its magic. While utilities in America must work within a regulated framework to raise rates, they still have that flexibility and use proceeds to invest in new power sources. With linked telecommunication and electricity reforms, Lebanon can let its citizens browse the web- and keep the lights on- for longer.