Driving Performance at Peru's Telecommunications Regulator

Assessment and recommendations

Since its creation in 1994, OSIPTEL has enjoyed a stable mandate over a dynamic and rapidly evolving market as economic regulator for the telecommunications sector, and is commended by stakeholders as a technically competent body. It was created alongside three other economic regulators in the 1990s to oversee Peru’s transition to a liberalised economy and provide long-term stability over key economic sectors. Over 20 years, the telecommunications sector and market has evolved into a diverse and competitive market, which has benefitted the country’s citizens and businesses. As part of this evolution, the functions of the regulator have increased as new have been roles and responsibilities added by the executive and legislature and the range of communications services, and methods for delivering them, have continued to grow. The regulator enjoys a strong internal culture and commitment to delivering on its mandate.

As a result, there is scope for OSIPTEL to invest in several areas linked to its internal and external governance as a means towards bolstering its institutional and organisational capacity to provide certainty to markets and society. This includes building more robust and diverse internal decision-making mechanisms, including at the level of the Board of Directors, strengthening transparency and integrity processes, as well as engaging with stakeholders more regularly to report on regulator and sector performance. A more proactive external relations strategy implemented by the regulator could contribute to a better understanding of its role externally and could mitigate risks linked to external instability. This strategy should aim to cement a “no surprises” relationship with stakeholders and could, in the medium term, lay the groundwork for finding solutions to more systemic challenges faced by OSIPTEL. Working more effectively with Peru’s other economic regulators to share best practices from their operations and address shared challenges can help amplify effects and establish these regulatory agencies as examples of institutional maturity within the Peruvian public administration.

Role and objectives

Mandate

OSIPTEL is one of four economic regulators created in the 1990s to oversee Peru’s transition to a liberalised economy. The regulator shares a legal framework (Ley marco de los organismos reguladores de la inversión privada en los servicios públicos, Law 27332, or LMOR) with the other economic regulators that grants them autonomy but places them under the aegis of the Presidency of the Council of Ministers (Presidencia del Consejo de Ministros, PCM). The LMOR establishes OSIPTEL and its fellow sector regulators (energy and mining, transport, water) as specialised and decentralised regulatory bodies with technical, administrative, economic and financial autonomy. However, sector regulators depend on the PCM for approval of several procedures, from changes in organisational structure to international travel of staff, which may hinder rapid and effective decision-making and intervention, as well as create challenges to the independence of the regulator along specific pinch points in its life cycle.

OSIPTEL has enjoyed a stable mandate over a dynamic and rapidly evolving market since its creation as Peru’s economic regulator for the telecommunications sector in 1994. Created by the Legislative Decree No. 702 in 1991 and officially starting operations in 1994, OSIPTEL oversaw the liberalisation of the telecommunications market over its first years of operation (see Table 1). By law, its objectives are to guarantee the quality and efficiency of services to the user and to regulate sector tariffs. OSIPTEL also regulates and supervises competition and consumer protection in the telecommunication market, a function exercised exclusively by the National Institute for the Defense of Competition and Intellectual Property (Instituto Nacional de Defensa de la Competencia y Protección de la Propiedad Intelectual, Indecopi), Peru’s competition and consumer protection authority, for most other sectors of Peru’s economy. This mandate is reflected in the regulator’s current slogan: promovemos la competencia y empoderamos al usuario (we promote competition and empower the user). Since 1994, the telecommunications market has evolved from one state company to 5 large operators and more than 100 small- and medium-sized enterprises in 2018, as well as introduced mobile telephony, mobile and fixed internet, pay TV and fibre internet to the market to the benefit of Peru’s citizens and economy.

Table 1. OSIPTEL powers and functions

Competition	Promotes competition between telecommunications operators by reducing barriers to entry and costs for consumers to switch providers
Tariff-setting	Sets tariffs for public utilities in the telecommunications sector
Regulatory	Establishes norms and rules, define infractions and set sanctions;
Inspections and enforcement	Qualifies infractions and impose sanctions
Conflict resolution	Resolves disputes in telecommunications sector
Claim resolution	Acts as second instance for customer claims
Supervisory	Supervises that regulated entities respect sector norms and regulations emitted by the regulator

Source: (OSIPTEL, 2018[1]).

While the regulator enjoys a strong internal culture and commitment to delivering on its mandate, there is a need to make the case for independent economic regulation externally. Independent economic regulators provide certainty and predictability through medium- to long-term strategic visions and the regulatory regimes that they develop and uphold. Over time, this inspires trust in public institutions and encourages investment. The independence of regulators and their capacity to make evidence-based technical decisions gives regulators the potential to act as bulwarks against undue influence and corruption, increasing trust in the public administration. These benefits of independent economic regulation are relevant and valuable to the Peruvian political context that has been mired by instability linked to corruption scandals in 2017-18.

A more proactive external relations strategy can help stakeholders understand the role and benefits of independent economic regulation and help tackle external risks. A robust external relations strategy, built around communicating the core contributions and impact of economic regulators on the economy, would provide a counterweight to the instability that is outside of the control of the regulatory authority. While independence is important, it does not mean that regulators act in isolation; on the contrary, such a strategy should aim for constructive engagement, setting up an on-going dialogue and building trust. The impact could be amplified by implementing such a strategy jointly, when relevant, with Peru’s other economic regulators. It could contribute to the better understanding of the role of the regulator and the construction of a “no surprises” relationship with other branches of government and the regulated sector that could lay the foundation for addressing more structural shortcomings when the time is right.

Box 1. Examples of co-ordination among regulatory agencies

The challenges faced by regulators often transcend sectoral and geographical boundaries; hence, greater co-ordination and collaboration are needed. There are a number of experiences with co-ordination among regulatory agencies domestically, including:

Australia: the Utility Regulators Forum aims to facilitate the exchange of information, understanding of the issues faced by regulators, consistency in the application of regulatory functions and the review of new ideas about regulatory practices. The newsletter of the forum is published quarterly and contains articles on common challenges, summaries of recent journal articles on regulatory matters, and updates on regulatory decisions.

France: the Club des Régulateurs provides a forum for both established and new economic regulators to share common problems with a few thematic meetings every year, most recently on issues of data privacy and data handling. It is hosted by a third party, currently an academic institution.

Mexico: following the OECD’s peer review of three energy regulators (Agency for Safety, Energy and Environment, ASEA; National Hydrocarbons Commission, CNH; and Energy Regulatory Commission, CRE), a permanent co-ordination group for the energy sector was established, leading to joint briefs, inspections and an exchange programme, better equipping regulators to implement wide-ranging sector reforms.

United Kingdom (Scotland): As part of the Strategic Review of charges for 2021-2027, stakeholders in Scotland meet on a monthly basis to ensure collective buy-in and collaborative working around the key issues faced by the water and wastewater sectors. The meetings involve high-level representatives from the water operator (Scottish Water), economic regulator (The Water Industry Commission for Scotland, WICS), the quality regulator (Drinking Water Quality Regulator for Scotland, DWQR) and the environment regulator (Scottish Environment Protection Agency, SEPA), as well as the Customer Forum and the consumers association. More granular analysis from the working groups feeds into those high-level discussions.

Source: Network of Economic Regulators (NER) at the OECD, 2018.

Recommendations:

• Develop a robust external relations strategy that communicates the core objectives, raison d’être and results of the regulator, and, when relevant, do so jointly with Peru’s other economic regulators. This external relations strategy would provide a stable narrative on the work of OSIPTEL by focusing on a limited number of key indicators / results and could be communicated by all members of the board and senior management. This strategy and the resources for its implementation would be differentiated from communication activities aiming at implementing OSIPTEL function of customer protection and sharing information relative to user rights.

• Set up a forum where economic regulators of Peru can come together with the objective of harmonising messages on the role of economic regulators and jointly advocating for governance-related topics as relevant. The forum would not minimise the need for sectoral focus in the technical work of the regulators and it could, as relevant, also be open to other public agencies in charge of competition, customer or environmental protection, safety, etc. The chairmanship of the group could rotate between the regulatory authorities and the group should aim to focus on concrete deliverable and activities, rather than setting up a bureaucratic system of collaboration.

• Develop stable yearly regulatory planning linked to a strong strategic framework and a vision that promotes the mandate of the regulator. This regulatory plan should be transparently and predictably shared with all stakeholders to favour inclusive and effective participation in stakeholder engagement.

Box 2. Example of transparent regulatory planning with the Australian Competition and Consumer Commission (ACCC)

The ACCC post on its website its compliance and enforcement policy and priorities, which includes priorities for the calendar year as well as enduring priorities for forms of conduct considered so detrimental to consumer welfare and competitive processes that the ACCC will always regard them as a priority. The policy statement includes details about the principles and approaches underlying the policy, the compliance and enforcement strategy, priority factors, compliance activities, enforcement actions, and market studies. A section is also included for co-ordination with other government agencies.

Source: (ACCC, 2018[2]).

Institutional co-ordination

OSIPTEL operates within sector policy set by the executive and regularly publishes technical opinions in response to Ministry consultations but its submissions are not binding. Policy for the telecommunications sector is set by the Ministry of Transport and Telecommunications (Ministerio de Telecomunicaciones y Transporte, MTC) as per article 75 of the Telecommunications Law, approved by Supreme Decree No. 013‑93‑TCC (1993). In general, communication between the regulator and the line ministry is constructive and fluid, and by law MTC can solicit technical support from the regulator. OSIPTEL does this regularly and informally before open consultations, relying on the regulator’s high level of technical expertise and capacity. Both institutions can provide comments to the other’s open consultations. However, OSIPTEL’s technical opinions on Ministry consultations are non-binding in nature and in some instances the Ministry has acted contrary to the regulator’s recommendations.

A number of Peruvian public entities intervene in the telecommunications sector, but there are no formal and structured co-ordination mechanisms, undermining a harmonised and stable vision for the sector (see Table 2). Several entities of the executive branch as well as Peru’s unicameral Congress can initiate activities that will impact the regulator’s duties and functions. These range, for example, from national security policy by the Ministry of Interior or the national data policy by the Ministry of Justice, to legislations passed by Congress that will require the regulator to pass corresponding secondary legislation. No structured co-ordination mechanisms exist that would bring together these entities to share and align plans and activities in the telecommunications sector. On the one hand, this can contribute to a perceived lack of uniform policy and vision for the sector while, on the other, create excessive burdens on regulated entities. It can also erode the clarity of roles between the different entities. In a context of instability and unpredictability this can also lead to an inefficient and ineffective allocation of resources, when efforts focus on short-term reactive activities, instead of implementing a deliberate medium to long-term strategic vision and objectives.

Table 2. Peruvian public bodies involved in the telecommunications sector or the regulator

Institution	Role	Interactions with OSIPTEL
Congress	Unicameral legislative branch of 130 members.	Has the power to request OSIPTEL to provide comments on issues or draft laws in either full plenary or in two standing committees – the Transport and Communications Committee and the Defense of Consumers and Regulatory Bodies Commission (CODECO)
Presidency of the Council of Ministers (PCM)	Responsible for co-ordinating national and sectoral policies within the executive branch	Oversees and provides guidance on the general administrative processes, key role in nominating and appointing Board members, administering budget allocations and disbursements.
Ministry of Economy and Finance (MEF)	Developing economic and financial policy for Peru, including co-ordinating the performance-budgeting system	OSIPTEL must report on indicators regard their yearly operational plan (Plan Operativo Institucional, POI) through the performance-budgeting system
Ministry of Transport and Communications (MTC)	Defining and developing policies for Peru’s transportation systems and telecommunications sector	MTC established general sector policy, as well as performs some regulatory and supervisory functions, and oversees various projects, such as the Telecommunications Investment Fund (FITEL). Can request OSIPTEL to provide comments on issues or draft laws and regulations.
Telecommunications Investment Fund (FITEL)	Subsidises the installation, operation and use of public telecommunications services in rural areas and is funded by levies on service operators and carriers as well as fines collected from supervisions	OSIPTEL participates in non-binding discussions related to investments and supervises contracts
Proinversión	Specialised technical body attached to the MEF responsible for the promotion of national investments through public-private partnerships (PPPs) in services, infrastructure, assets, and other state projects	Can receive non-binding comments from OSIPTEL when developing investment projects
Indecopi	Independent regulatory body aimed at both providing competition and consumer protection.	Has the authority to issue binding decisions and levy penalties on regulators or decisions taken by OSIPTEL, as well as conduct ex post reviews of regulations enacted by OSIPTEL and under the jurisdiction of Indecopi.
Ministry of Interior	Oversees issues related to national security, including civil defense	New national security laws have recently given the Ministry requirements and authority to promote national and cross-border network and telecommunications security
Ministry of Justice	Oversees judicial matters in Peru	Oversees the role of the courts, including the process of appeals and judicial review through which OSIPTEL’s actions can be challenged. Proposes an attorney general for all public institutions.

Source: Prepared by the OECD Based on information collected during the review, 2018.

In addition to the role played by the Ministry, OSIPTEL provides support to the high-level policy goal of bridging the urban/rural divide through its work with the Telecommunications Investment Fund (Fondo de Inversión en Telecommunicaciones, FITEL). The fund is sourced from 1% of the gross income of service operators as well as from fines collected for non-compliance or violations (in 2017, its investment budget was USD 120 million). It finances the installation, operation, and use of public communications services in rural areas to achieve universal access. The fund was initially administered by OSIPTEL and was transferred to the Ministry of Transport and Communications (MTC) in 2006. The Board of FITEL is chaired by the Minister and composed of the Minister of Economy and Finance and the President of the Board of OSIPTEL. Projects are deployed using either Public-Private Partnerships (PPPs) or Project in Assets (Proyectos en Activos) framework. For projects implemented under the latter scheme, OSIPTEL cannot issue binding opinions over issues that intersect with their competencies, i.e. concession contracts, tariffs, quality of service, essential facilities, and competition. Moreover, for telecommunications projects implemented under this scheme, responsibility for supervising the quality of services is assigned to FITEL, which can run the risk of duplicating efforts with OSIPTEL who supervise quality of service in all other areas of the telecommunications sector. OSIPTEL can also be tasked with creating ad hoc regulations in accordance with specific projects.

Recommendations:

• Actively push for the creation and implementation of more structured and regular co-ordination mechanisms where all Peruvian entities with responsibilities and activities that impact the telecommunications sector would participate to share information, in the interest of building a “no surprises” relationship between all stakeholders. Such a mechanism would favour greater clarity of roles and enable robust forward planning by the regulator and its partners. This more high level engagement between senior management of the regulator and other branches of government, including Congress, should not replace more technical level collaboration between teams across public administration.

• Use reputation as strong and independent technical body to proactively share a strategic view on the sector, share advisory comments with the Ministry on the direction of the sector, publish comments submitted to consultations launched by other public bodies, and set up co-ordination mechanisms with stakeholders (i.e. advisory body) to share data and analysis on sector performance and what it means for the further development of the sector.

• Assess with the Ministry whether the governance and implementation of FITEL is aligned with overall strategic vision for the telecommunications sector, including optimising the role for OSIPTEL and co-operation between the regulator and the MTC at each stage of FITEL projects to ensure market distortions and unnecessary administrative burdens are not created and overlaps in functions are minimised.

Functions

The functions of the regulator have increased significantly over the years, linked to the evolution of the sector, while the Ministry still retains some central functions relative to the economic regulation of the sector. OSIPTEL estimates that since 2013, it has been granted 14 new functions linked to legislative texts originated by the legislative or executive branches without additional resources for their implementation. OSIPTEL expended PEN 5.5 million of their budget in 2017 on these new functions. Given the dynamism of the sector, it is likely that this trend carries on as the range of electronic communications services and the means of delivering them continues to grow. Moreover, the MTC retains key functions linked to the development and competition of the telecommunications sector. These include the licensing of new operators, decisions on structural separation and on spectrum allocation, the latter of which is designed and run by Proinversión. Some of these functions may be better addressed by an independent and technical regulator to ensure independent decision-making based on technical assessment. In some instances, the MTC has also come forward with instructions on tariffs and interconnection issues that fall under OSIPTEL functions. While OSIPTEL can submit and publish its opinions on MTC decisions in these areas, these opinions are non-binding and can be disregarded by MTC for the final decision. For instance, in the case of decisions by MTC on mergers with spectrum transfer, since 2015, OSIPTEL has issued opinions disagreeing with the transfer in all seven cases. In only one of these cases has the transfer not been approved by MTC; in all other cases the final decision has disregarded the regulator’s opinion (Table 2.6).

The increased focus of OSIPTEL on the promotion of user satisfaction, in addition to ensuring consumer protection, is taking its toll on OSIPTEL resources and raises a concern of balance between its functions. Customer protection is one of the main objectives and functions of the regulator since its creation. Over the last years, an increased focus of the regulator on user protection and satisfaction has mostly been visible in OSIPTEL’s function as second instance appeals body for customer claims through the Administrative court for the resolution of user complaints (Tribunal Administrativo de Solución de Reclamos de Usuarios, TRASU). This dispute resolution body processes claims that have not been successful or resolved with the operator. User complaints have risen exponentially since 2015 (by 68% 2015-16 and by 71% 2016-17, see Table 3), undoubtedly in part to being able to defer payment of a bill by presenting a complaint. As a result of the strain on OSIPTEL resources, the treatment time of second instance complaints has risen from 8-10 days in 2015 to 120 days in 2017. The number of complaints has started to decrease in 2018 following an adjustment of the corresponding regulation by OSIPTEL and will need to continue to be monitored (Table 3). Finally, the focus of the regulator and its resources user satisfaction overall may be misaligned with the structure of the market that it oversees. This function and objective may be more suitable in the case of monopolies and no longer valid in the case of a competitive market.

Table 3. Evolution of customer complaints

	2015	2016	2017	2018*
First instance complaints	1 273 780	2 133 958	3 647 026	1 636 258
Second instance on average* (TRASU)	31 226	59 047	159 371	14 643

Notes: OSIPTEL reports that, on average, 3.5% of first instance complaints move to second instance appeals with TRASU. 2018 statistics are as of June 2018.

Source: Information provided by OSIPTEL, 2018.

OSIPTEL’s decentralised offices are responsible for interacting with subnational government and the public on a daily basis. The 23 regional offices and 8 centres across the country are responsible for handling local issues, measuring service quality, promoting user rights, and providing training to local enterprises. The centres share facilities with other decentralised public bodies. Regional offices are overseen by the Decentralised Offices Department (Gerencia de Oficinas Desconcentradas, GOD), Enforcement and Supervision Department (Gerencia de Supervisión y Fiscalización, GSF), and the Protection and User Services Department (Gerencia de Protección y Servicio al Usuario, GPSU) of OSIPTEL. Regional offices interact directly with local governments when resolving issues and co-ordinate with other relevant local offices, such as Osinergmin with regard to power failures that affect telecommunications service. In addition to advocacy, staff in regional offices deal with face-to-face interactions with consumers, notably with regard to complaint resolution.

Box 3. Functions and powers of Mexico’s Federal Telecommunications Institute (IFT)

The IFT is the economic regulator and competition authority for the telecommunication and broadcasting sectors in Mexico. The IFT has the following powers:

a) The licensing, revocation, as well as the authorisation of assignments or changes to the shareholding control, ownership or operation of companies related to concessions in matters of broadcasting and telecommunications. The IFT sets the amount of compensation for granting of the concessions.

b) Imposing impose asymmetric measures upon dominant/preponderant players in telecommunication and broadcasting sectors, including the possibility of functional, structural or accounting separation when necessary, in order to prevent anticompetitive effects.

c) The licensing for the commercial or private use of spectrum (for broadcasting and telecommunication services), granted only through a public auction procedure run by IFT. The Institute publishes procedures for the respective public invitation to auction, on its website and in the Federal Official Gazette.

Source: Information provided by IFT, 2018.

Recommendations:

• Reassess if the functions and powers of the regulator are aligned with its roles and objectives, benchmarking internationally and taking into account evolution of sector. This exercise should in particular look at the division of responsibilities and functions between the regulator, the Ministry and Indecopi, and its aim should be to ensure a modernised role for the regulator to match current organisational, market and societal needs to effective regulate the telecommunications sector. Given its expertise, a more authoritative role on important decisions by the other public entities involved in the telecommunications sector should be considered. Given the dynamism of the sector, this assessment may need to be updated regularly.

• Continue monitoring trend of customer complaints and assess whether relevant regulation continues to contain loopholes that facilitate or allow for a gaming of the system in the area of complaints regarding billing. This assessment could make use of behavioural insights to consider why complaints have risen and how the issue could be resolved, based on an understanding of the actual behaviour of users and operators.

• Review approaches, functions and resources dedicated to consumer protection at the regulatory authority. This review should ensure that appropriate and proportional procedures are in place to carry out the consumer protection function of the regulator. This may include analysing if the regulator is over-stepping its role in committing resources to ensuring and monitoring user satisfaction and whether a more proportional attribution of resources could also be achieved through the roll out of more technology based engagement mechanisms.

• Evaluate the efficiency outcome of the two models of decentralised presence (regional offices and centres), and consider if cost-sharing arrangements could be extended also to offices. Outreach to users outside the Lima region should also increasingly build on digital and online tools and mechanisms.

Strategic planning

The regulator sets its strategic objectives in five-year Strategic Plans (Plan Estratégico Institucional, PEI) that have historically focused on competition, customer protection and organisational performance. These priorities are summarised in the regulator’s mission statement: to promote competition, quality of telecommunications services and user empowerment, in a continuous, efficient and timely manner. The PEI is operationalised via a yearly work plan (Plan Operacional Institucional, POI). The current PEI 2018-2022 is structured into seven strategic institutional objectives (Objetivos Estratégicos Institucionales, OEIs) in two categories: four core objectives, pertaining to customer protection and competition functions, and three support objectives that relate to OSIPTEL corporate identity and organisational performance (Table 6). This is an evolution from the previous period that only counted with three objectives, one for each area (competition, user protection and organisational performance), and appears to put more emphasis on customer protection and satisfaction compared to the functioning of the market (three versus one core objective). The current plan was elaborated over a period of six months.

Recommendation:

• Share and build on OSIPTEL methodology defining its strategic framework and performance indicators with other public entities in Peru, while working on streamlining the indicators and decreasing burden of monitoring and reporting (See Section: Output and Outcome).

Communications

OSIPTEL has an active communications strategy that, while positive in terms of the reputation of the regulator, needs to be differentiated from formal stakeholder engagement channels. Peru’s economic regulators have enjoyed visible public profiles since their creation. OSIPTEL counts with a strategic communications plan with differentiated activities for various target groups (for example, a newsletter that is directed at industry and congress, a blog for specialists and academics and personalised follow up for members of Congress). In 2016, the regulator invested in increasing their visibility in the media, resulting in a doubling of OSIPTEL media appearances from 2015 to 2016 (from 2 831 to 3 626). OSIPTEL is also very active on social media with over 84 000 followers on Twitter, 7 000 on LinkedIn, and 170 000 on Facebook. When coupled with more direct actions developed by OSIPTEL directly in municipalities in favour of engaging and informing users, the use of social media can significantly contribute to the regulator’s strategic goal of empowering and informing consumers. Care should be taken to not substitute formal channels for stakeholder engagement and consultations, such as advisory or user councils, by exchanges and views on social media. When social media is being used to augment formal channels, it is important to make clear to the public how and why their comments are being considered versus engaging in unstructured exchanges about policy ideas. A variety of experiences and applications exist to support the use of social media for structured stakeholder engagement.

Box 4. Using social media for structured stakeholder engagement in Scotland

In Scotland, water and wastewater charges are reviewed and set every six years in a process called the Strategic Review of Charges that includes extensive stakeholder consultation. The purpose of the review is to ensure that Scottish Water, a publicly owned company, is adequately funded to deliver the objectives for the industry set by Scottish Ministers. For 2021-27 Review, the Water Industry Commission for Scotland (WICS), the water regulator in Scotland, is conducting the process in an innovative way by moving away from the traditional ‘parent-child’ relationship between the economic regulator and Scottish Water. Rather, WICS is building off the successful outcome from the previous 2015-21 Review where Scottish Water worked with a Consumer Forum, a body acting as a conduit for customer views, and other stakeholders to reach a settlement that reflects the views of customers and stakeholders, allowing the operator to take full ownership of its strategy and relationship with its customers.

As part of this innovative approach, the parties involved are using Behavioural Insights research, including working with Apptivism (a social purpose start-up that focuses on improving civic engagement with chat interfaces) to co-design a behaviourally-informed Facebook Messenger chatbot. Dubbed “ChatScotland,” the bot solicited the public’s views on water issues as a means of supporting the dialogue held in traditional customer engagement fora. ChatScotland received responses from 523 users over the 20 days of the pilot, providing feedback on participants’ views, behaviours, knowledge and opinions on issues related to water. While ultimately the pilot was not chosen for use in future stages of the Review, it provided valuable lessons learned for leveraging social media for improved and structured stakeholder engagement.

Source: (Water Industry Commission for Scotland, 2017[3]); (Customer Forum,(n.d.)[4]); (Apptivism, 2018[5]).

Recommendation:

• Develop a holistic approach to bring together and clarify communications and official engagement mechanisms to extend the reach of OSIPTEL while making clear, separate, and consistent the appropriate avenues for information provision, complaints, claims, stakeholder engagement, and consultations. This approach should also take into account potential structured uses of social media as an additional means of stakeholder engagement.

Input

Financial resources and management

OSIPTEL is entirely funded by resources received from the regulated sector, but its budget is in practice limited by central government rules. The LMOR states that OSIPTEL’s operational budget will be financed by income from the regulated industry up to 1% of operator income. In practice, this amount has been capped at 0.5% by the PCM since 2002, as per Supreme Decree 012-2002-PCM. Between 2015 and 2018 this amount declined by 19% in real terms as industry income decreased. This trend has led to the regulator feeling that its activities are under-funded and its resources are stretched too thin to carry out its regular activities. This feeling is exacerbated when new functions are added to OSIPTEL’s portfolio in line with sector evolutions or new legislative texts (e.g. regulation of the National Fibre Optic Backbone). Table 4 shows execution of OSIPTEL budget for the period 2014-17, where it appears that budget execution is generally high and carry forward funds have on two occasions (2014 and 2017) provided funding for expenditure above the initial budget corresponding to the 0.5% fee on industry income.

Table 4. OSIPTEL annual budget and execution, 2014-18 (million PEN)

Year	2014	2015	2016	2017
Initial budget	79	96	82	81
Supplemental funds	24	8	12	12
Modified Institutional Budget (PIM)	103	104	94	93
Execution of initial budget (%)	120	85	94	107
Execution of Modified Institutional Budget (%)	92	79	82	93

Notes: Initial budget is sourced from funds collected from the regulatory contributions levied to regulated entities. Supplemental funds are approved by the MEF and added from the reserves of the regulator, arriving at the Modified Institutional Budget (PIM).

Source: Information provided by OSIPTEL, 2018.

Stronger evidence of a budget based on cost recovery of regulatory activities could strengthen the regulator’s case for more resources and flexibility. As an autonomous regulator, OSIPTEL sends its budget proposal directly to the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF) for consideration in the national budget. The Peruvian national administration implements a performance-based budgeting system whereby budgets are to be aligned with goals and objectives of the institution and budget execution is monitored in parallel with progress in performance indicators. While the OSIPTEL budget is prepared with inputs from internal departments and compiled by the Planning and Budget Department (Gerencia de Planeamiento y Presupuesto GPP), the total amount of budget is set according to the available resources, rather than an estimation of the costs related to the regulation and supervision of the sector.

OSIPTEL is generally independent in managing its budget directly with MEF, although this is limited by a recent change in the use of carry-forward funds. OSIPTEL has historically been able to carry forward unspent funds, which has provided flexibility for handling emerging issues and fluctuations as seen above. The 2017 Ley de Equilibrio Financiero, renewed for 2018, required all public organisms to transfer unspent funds to the treasury, including those from directly collected resources (i.e. fines or fees), which were previously exempt from this rule. While OSIPTEL budget execution has generally been reasonably high, this new practice limits the autonomy of the regulator in managing its resources and directs income from regulated entities towards funding general government activities rather than those of the sector regulator.

Recommendations:

• Seek clarity on central administration constraints that impact on the regulator’s funding model and financial management to better differentiate those linked to the current context on the one hand, and macro-economic policies on the other.

• Set up a practice whereby regulatory fees are reviewed every three years (or another regular and reasonable time frame) based on cost recovery principles of funding of economic regulators. Any unspent funds could be included in the calculation of the next regulatory fee, to lower the burden on industry over the next period. The review could also include benchmarking the appropriate level of the fee against other regulators.

• Engage in a systematic discussion with relevant stakeholders of additional resource needs generated by new functions or tasks assigned to the regulator when they arise. Given the dynamism of the sector, it is likely that these continue to grow and evolve over the next years. Transparently sharing analysis of the added draw on resources will constitute a good practice.

• Based on the principle of using income from industry to recover the costs of regulatory activities, advocate with other economic regulators for a review of the law regarding absorption of carry forward in regards the budget of economic regulators.

Box 5. Cost-recovery budgeting in Ireland and Canada

Ireland’s Commission for Regulation of Utilities (CRU)

The CRU is funded entirely through levy and licence fees from relevant electricity, gas, petroleum safety, and water industry participants. Levies from market participants comprise the bulk of the CRU’s income. The CRU sets its own budget without requiring government participation, and is defined annually on a cost-recovery basis in the fourth quarter of the year, on the basis of an estimate of CRU operating and capital budget required for the next year. There is no direct government contribution to the CRU budget and the regulator’s annual budget is approved by the Commission without approval or ex ante assessment by the Oireachtas.

Annual budgets for the electricity, gas, petroleum and water are allocated by the CRU to each sector. Revenues, expenses and capital expenditure directly incurred by each sector are recorded in the separate budgets of the electricity, gas, petroleum and water sectors. Shared costs are allocated to each sector in proportion to the staff numbers engaged in the relevant sector. Costs linked to shared administrative functions such as finance, HR, IT, and Communications are pooled for all sectors.

Where annual expenditures exceed revenue, the balance is offset against the levy income for the subsequent year. The balances for the electricity, gas, petroleum and water sectors are recorded in their respective accounts, and audited on an annual basis by the Office of the Comptroller and Auditor General, which reports to the Public Accounts Committee of the Oireachtas. The CRU also conducts an annual internal audit, which is outsourced to an audit company).

Moreover, based on a risk assessment, a contingency fund is defined on a yearly basis to provide flexibility to deal with potential legal challenges or costs linked to safety cases or events. Any excess of revenue in the financial year is taken into account in determining the levy for the subsequent year per sector. The CRU can carry unspent funds over to the following year’s budget without review or approval from external government entities.

National Energy Board of Canada (NEB)

Pursuant to the regulatory scheme in place, the Canadian NEB’s cost recovery mechanism is premised on commodity charging costs that are allocated to specific entities within those sectors (oil – oil pipelines, gas – gas pipelines, etc.). Companies pay their share of recoverable costs to the Consolidated Revenue Fund of Canada, through greenfield levies, fixed levies (small, intermediate companies and other commodities) or proportional levies (large companies). The allocation of costs to commodity categories is based on time spent on each commodity.

The NEB also has an advisory committee, which is composed of the staff from the regulator and representatives of the regulated companies, that reviews planned expenditures and discusses cost recovery issues. The NEB does not receive this funding directly from companies; rather, it receives its appropriations through Parliament, on an annual basis.

Source: (OECD, 2018[6]); (OECD, 2016[7]).

Human resources and their management

The staff of OSIPTEL is recognised as highly technical and capable, but staff do not enjoy a uniform recruitment framework, limiting accountability. OSIPTEL employs 400 professionals who are mostly hired through open and transparent procedures based on a recruitment skills model, whereby the hiring manager makes a recommendation to the General Manager who makes the appointment. OSIPTEL also counts with six senior managers who are appointed under the puestos de confianza modality (General Manager, Administration and Finance Manager, Corporate Communications, Legal Advisor, Advisor to the President and Secretariat of the Board). These posts can be filled and dismissed at the discretion of the President of the Board without a competitive process. The President of the Board directly appoints the remaining senior management positions after a competitive recruitment process, who then serve on indeterminate contracts. The position of human resources manager is currently being created to further increase and improve HR management policies and practices.

Contracts, salaries and other benefits of OSIPTEL staff are governed by two different systems that may undermine staff motivation and HR practices. Peru’s civil servants are currently regulated under one of three employment regimes, two of which are in use by regulatory authorities: a private activity regime that grants them indeterminate contracts and benefits such as health care (Law 728), and the Administrative Service Contracting (CAS) regime – a special temporary contracting regime with renewable 6-montsh contracts and some working benefits (Law 1057). The latter is meant to be a temporary contracting regime, but its use has grown beyond the intended temporary characteristic following the freezing of recruitments under Law 728, whereby new staff can only be hired under Law 728 in replacement of a departing staff member. As of 2018, OSIPTEL counts with 280 staff under Law 728 and 200 under Law 1057. The existence of two parallel frameworks may be problematic for accountability (hiring) and incentives for staff (remuneration, benefits). A new labour regime was created by SERVIR in 2013 as an administration-wide project seeks to create a unified employment regime for public officials including staff of economic regulators; but it is unclear when the SERVIR regime will be rolled out to Peru’s regulatory authorities.

As many regulators worldwide, OSIPTEL struggles to attract and retain staff given the constraints of government employment frameworks, but it has implemented many successful initiatives to make OSIPTEL a desired place to work. In general salaries offered by OSIPTEL are somewhat higher than those offered by central government entities, but significantly below those of the private sector. To counter this challenge, the authority has developed a talent retention system that is central to its institutional identity as an employer. The plan includes a generous health insurance for the employee and their dependants, as well as training programmes. However, the former is only available to staff under Law 728 contracts. OSIPTEL also implements a robust performance assessment system, that since 2018 links staff objectives to the PEI, and includes also 360 degree evaluations of managers by staff. Thanks to all these efforts, OSIPTEL was in 2015 ranked as a Great Place to Work and boasts a turnover rate of only 9.13% compared to 18% across the Peruvian national administration (2017 figures). The authority also won the 2017 Premio Abe award for good labour practices in the category of best labour flexibility programme.

Recommendations:

• Seek to implement a human resource framework regarding diversity, recruitment, remuneration and incentives that takes into account the special needs of economic regulators to attract specialised innovative technical talent while competing with the private sector for available human resources.

• Level the playing field for staff between the different categories of contracts by advocating for the implementation of one unified system of contracts with similar benefits to support recruitment efforts.

• Share good practices and results in terms of talent retention and staff well-being across Peruvian national administration and other regulatory authorities.

• Consider the possibility of implementing transparent and open requirements and recruitments for all posts in the regulatory authority, in order to tap into as wide a pool of talent as possible, diversify teams and promote innovation by bringing in people with different experiences and perspectives. At least for more senior positions, this could include binding profiles with specific requirements in terms of degrees, level of experience and other characteristics such as language skills.

Process

Decision making

Decision making at OSIPTEL is led by the Board of Directors, which holds a wide mandate and is involved in a wide variety of executive decisions but seems to have little input at the strategic level. The Board is responsible for the administration and supervision of contracts and setting a clear mandate for the organisation. The Board exerts both normative and regulatory functions via resolutions, and issues technical opinions on concession contracts. The Board also designates and removes members of the appellate bodies (i.e. TRASU) that handle complaints and appeals presented to OSIPTEL, as well as acts as the appellate body for companies receiving sanctions levied by the Enforcement and Inspections department. This latter function is complicated by the lack of guidelines for Board members for ruling on cases, which may lead to variations in decisions over time. Given its limited resources, the Board seems to principally focus on executive decision making and not on providing strategic direction to OSIPTEL.

In its current configuration, the Board appears to operate under a hybrid model whereby its functions and resources are misaligned. The President of the Board holds a full-time executive position in the regulatory authority, while other Board members only serve on a part-time basis. They attend two board meetings per month and are remunerated only for these occasions, significantly limiting their capacity to weigh in on complex technical and strategic decisions. They take part in executive decision-making but have limited resources to support this participation that may be more reflective of an advisory role. While a limited number of advisors serve the President of the Board, they appear to only serve the President and do not support other members of the Board.

By design, members of the Board are appointed on staggered contracts for continuity in decision-making; in practice, this has not been followed, putting at risk stability and independence of the regulator. The Board is composed of five members, one of whom is its President. By law, all members are on staggered five-year terms that can be renewed once. In practice, however, the mandate of three out of five Board members expired in June 2018. Instead of appointing new members, Supreme Decree No. 082-2018-PCM issued by the PCM extended their mandates once by 90 days. At time of writing new members had yet to be appointed and the Board was operating with only two active members, including the President (see Table 5). This creates a risk for continuity and capacity to function of the Board. Board members are selected by a multi-step process with checks and balances that include review by an inter-institutional selection committee, submission of selected candidates to the President of the Republic by the President of the Council of Ministers, appointment by the President of the Republic by Supreme Decree, and finally endorsement the PCM, MEF and MTC. In the past 10 years, there have been no women on the OSIPTEL board.

Table 5. Ten-year history of OSIPTEL board members

Member	Role	Profession	Start date	End date
Rafael Eduardo Muente Schwartz	President	Lawyer	2017	2022
Jesús Eduardo Guillén Marroquín	Board member	Economist (PhD)	2017	2021
Manuel Ángel Cipriano Pirgo	Board member	Lawyer	2013	20181
Jesús Otto Villanueva Napurí	Board member	Mechanical and electrical engineer	2013	20182
Víctor Jesús Revilla Calvo	Board Member	Civil engineer	2015	20183
Manuel Ángel Cipriano Pirgo	Board member	Lawyer	2013	20136
Gonzalo Martín Ruiz Díaz	President	Economist (PhD)	2012	20174
Humberto Eduardo Zolezzi Chacón	Board member	Electrical engineer	2011	20165
Carlos Daniel Durand Chahud	Board member	Systems engineer	2010	2011
Víctor Jesús Revilla Calvo	Board member	Civil engineer	2010	20137

Notes: 1., 2, & 3. Received 90 day extension according to Supreme Decree No. 072-2018-PCM; 4., 5., 6. & 7. stayed 60 calendar days after the end of their terms, in accordance with provisions in article 7 of the Regulations of the Framework Law, approved by Supreme Decree No. 042-2005-PCM.

Source: Information provided by OSIPTEL, 2018.

Box 6. Governing Board of Mexico’s Federal Telecommunications Institute (IFT)

The 2013 reform of the Mexican constitution established the IFT as an autonomous, independent public agency with its own decision-making power and operations, with legal personality and its own assets. The authority was created for regulating spectrum, networks, services, competition and efficient development of the broadcasting and telecommunications sectors. It also acts as competition authority for these markets.

The Governing Board is the Institute’s highest instance of governance and decision-making. It is composed of seven full-time Commissioners with voting rights, including its president. The IFT Chairman presides the Governing Board and Institute, and he is its legal representative.

The Commissioners remain in office for nine years. Their mandates are staggered to allow for continuity and are non-renewable. All commissioners have one vote, weigh in on complex decision-making in the sector and have non-delegable duties. All the Commissioners have to attend plenary sessions except for justifiable cause. Their powers are not limited and they are on an equal footing.

Source: information provided by IFT, 2018.

Recommendations:

• Assess whether the activity and duties of the Board reflect its mandate and structure. Consider ways to use limited available time to involve Board members in deciding on the long-term strategic direction of the organisation (including identifying priorities and targets) and monitoring the regulator’s performance against this.

• Consider supporting informed decision making by the Board by making available advisory resources to all Board members, and proposing specialisation and responsibility for certain strategic areas that could rotate between members. These areas could correspond to technical areas or specific regulatory projects, rather than high level goals of the regulator. This would allow board members to focus on specific technical area and increase their level of responsibility and accountability.

• Remove any potential conflict of interest when reviewing the duties and structure of the Board.

Internal organisation and management

OSIPTEL is managed by the President of the Board, with the support of the General Manager. The General Manager is appointed at-will along with six members of the senior management of the organisation without open recruitment (puestos de confianza). The President approves the institutional budget, balance sheets and financial statements as well as the Institutional Management Plan and administrative policies. The General Manager is responsible for legal, administrative, and judicial responsibilities of OSIPTEL and plans, organises, manages, executes and supervises the administrative, operational, economic and financial activities of OSIPTEL. The General Manager also prepares draft annual reports, budgets and makes senior management recruitment decisions, which are approved by the President. The President is supported by two advisors, the General Manager by one. Together, the President and General Manager chair a weekly meeting with OSIPTEL senior management. A large number of decision making functions are concentrated in these two executive positions.

OSIPTEL seeks to reach excellence in terms of organisational processes and management. A high priority has been placed on obtaining international certifications for management and processes, including the SGSI Certification for ISO 27001 (information security management systems) and the SGS certification for ISO 9001 (quality management systems) in 2015. OSIPTEL has also been awarded a spot on the 2015 Great Places to Work list, the 2016 National Quality Award in the public sector category in recognition of its management model, and the 2017 Association of Good Employers (ABE) Award for Labour Social Responsibility in the category of Best Work Flexibility Program. Since 2003, a formal practice has existed to send preliminary analyses on draft regulations to the various internal departments for feedback via memo. In 2017, the General Manager improved this process by encouraging departments seeking feedback to provide concrete action points attached to the memo, including a timeline.

Recommendations:

• Review the internal governance and management processes to ensure adequate diversity in decision making between the President of the Board (strategic) and General Manager (management), including appropriate resources to carry out each function. A more spread out internal governance model with adequate delegation of authority and additional challenge functions could support a longer-term vision for the regulator, as well as promote stability in decision making.

• Introduce a deliberate mechanism for quality control and check that can also serve as a challenge function with regard to decision making and processes. Several options exist for these functions – for example, on the lighted side, explicit peer review mechanisms internally or externally, or, on the more structural side, by setting up a dedicated independent body in charge of this function. Reviews may need to take place at several stages in the process, rather only at the end, to provide meaningful opportunities to the scope and direction of the task or output.

Regulatory quality processes

OSIPTEL has been a pioneer in implementing regulatory quality assessments, along with other regulatory agencies and the PCM. In response to the 2016 OECD Regulatory Review of Peru, the PCM began developing a Regulatory Quality Assessment (RQA) framework that implements measures for simplifying administrative procedures, including a requirement to assess impacts as well as conduct stock reviews and ex post evaluations for regulations that add administrative processes. OSIPTEL, independently and in parallel, developed a manual and guidelines for applying Regulatory Impact Assessments (RIA) to all regulatory decisions and not just administrative processes. In 2017, OSIPTEL released a “regulatory quality commitment” to formalise goal of developing RIA and, in 2018, released the guidelines and manual for following PCM and internal requirements for RIA. While the guidelines and manual allow for multiple types analysis proportional to the issue at hand (including a full cost-benefit analysis), to date mainly multi-criteria analysis RIAs have been completed. All draft RIAs are overseen by the counsellor of the President of the Board, who is independent of the regulatory process and performs this quality assurance function in addition to their other duties. The counsellor has the power to block and send back inadequate RIAs before presenting to the Board.

Although not mandatory in Peru, stakeholder engagement is practiced consistently by OSIPTEL with internal and external stakeholders but only at the later stages of developing regulations. All regulators are required to publish new laws and regulations in the Official Gazette and on the institutional website for comments for at least 30 days. Comments received and actions taken in response are logged in a ‘comments matrix’ and published alongside the final regulation for transparency. Early-stage consultations are also occasionally conducted in an ad hoc manner when OSIPTEL requests information from regulated entities.

The further development of digital tools to support OSIPTEL regulatory activities could enhance engagement and quality of impact. While very active on social media, OSIPTEL mostly uses these resources as a means to share information to help consumers make better decisions. A mobile application is currently in development to allow users to report disruptions to their services. Exploring existing or new digital tools to enhance stakeholder engagement can help OSIPTEL reach a wider audience when conducting outreach and consulting or soliciting feedback from users and stakeholders.

There is no formal body dedicated to bringing together stakeholders for early stage consultation, limiting predictability and inclusivity of stakeholder engagement mechanisms. Regulated entities submit comments to OSIPTEL regulations through public consultations once regulatory proposals have been developed for a period of 30 days. Users are able to participate through the same mechanisms, but the user councils mandated by law have not been set up or operationalised by the regulator. The activation of the councils, built on adequate incentive mechanisms for them to engage in meaningful exchange, and their inclusion in more inclusive early stage consultation bodies could enhance the scope and usefulness of the regulator’s stakeholder engagement activities.

Ex post reviews have not been consistently applied, but recent efforts have been undertaken to improve outdated and existing regulations. In accordance with the PCM RQA, regulations adding administrative procedures must be reviewed every three years, with some exceptions. In OSIPTEL, most ex post evaluations are conducted ad hoc or only for specific regulations. Some regulations, often involving prices or interconnection charges, are reviewed on a regular basis, based on a sunset clause or through existing norms. There is no formal guideline for ex post evaluations, including in terms of engaging stakeholders. Each department is responsible for reviewing its respective regulations through established criteria. In accordance with the RQA guidelines, OSIPTEL is currently reviewing its stock of regulations. While the RQA requires focuses on administrative processes, OSIPTEL is extending this review to their entire stock of regulations issued since its creation. It aims to review four regulations in 2018 and complete the entire process by 2021. An external consultant has been engaged to provide a diagnostic on burdensome regulations for businesses and an ad hoc group has been created to conduct the process. This group will deliver its conclusions in 2019. From 2019 to 2021, OSIPTEL will repeal, modify, or leave unchanged the regulations in accordance with the recommendations.

Box 7. Ofcom’s Communications Consumer Panel (CCP)

The Communications Act 2003 requires Ofcom – the telecommunications regulator in the United Kingdom – to set up and maintain effective arrangements for consultation with consumers. These arrangements include the establishment of the Communications Consumer Panel, an independent body with the function of advising both Ofcom and other government entities.

The Panel consists of eight experts who work to protect and promote people’s interests in the communications sector by carrying out research, providing advice and encouraging Ofcom, the Government, the EU, industry and others to look at issues through the eyes of consumers, citizens and small businesses. Four members of the Panel represent the interests of consumers in England, Northern Ireland, Scotland and Wales respectively.

The CPP is mandated to meet at least 11 times per year, with quorum set at 4 members plus the Chairperson with provisions that allow for attendance through telephone or video link for the purposes of determining a quorum. Formal minutes are taken and, once approved, posted on the CPP website as well as submitted directly to the Ofcom Board. The Panel is provided a budget for members’ remuneration, expenses, and to commission work. For the 2015-16 fiscal year, this was GBP 370 000, of which GBP 240 000 went to support functions (including an Advisory Team, research, consultancy, stakeholder relations, and design and publication).

The Panel pays particular attention to the needs of vulnerable people; older people; people with disabilities; and micro businesses. Cross-membership with Ofcom’s Advisory Committee on Older and Disabled People (ACOD) was established in 2012. Members, in their ACOD capacity, also provide advice to Ofcom on issues relating to older and disabled people which includes content on television, radio and other services regulated by Ofcom.

Source: Information provided by Ofcom: https://www.ofcom.org.uk/about-ofcom/how-ofcom-is-run/committees/communications-consumer-panel and https://www.communicationsconsumerpanel.org.uk/, 2018.

Recommendations:

• Maintain momentum towards the full implementation of the new RIA system, including the application of various methods according to the principle of proportionality.

• Review and make necessary changes to activate the users’ council mandated by law to provide structured engagement with users of telecommunications services as well as an avenue for early and open consultation.

• Create an advisory committee of stakeholders for transparent and early consultation with industry, users, and other relevant stakeholders as a means to enhance the inclusiveness and predictability of OSIPTEL regulatory activities. In setting up the council, care will need to be taken to ensure adequate balance between participants and perspectives.

• Develop use of digital tools for regulatory activities, including building bespoke tools for specific sectoral needs (i.e. the mobile application currently in development) but also using existing tools such as WhatsApp and Twitter for more structured and effective consultation and feedback.

• Develop and disseminate an annual regulatory programme that would present the regulator’s activities with regard to the development of new regulations and would contribute to minimising short-term activities.

• Use the lessons learned from evaluating the entire stock of regulations to extend ex post evaluations as a consistent and automatic component of policy making at OSIPTEL.

Box 8. Institutionalising stakeholder participation: Mexico’s energy regulators

Mexico’s Energy Regulatory Commission (Comisión Reguladora de Energía, CRE) has established two advisory bodies – one for hydrocarbons and one for electricity – with the purpose of discussing CRE’s regulatory plans (in addition to specific regulations that will be submitted to public consultation).

These advisory bodies were constituted by representatives of different stakeholders: investors, utilities, consumers, government and academia. Following the introduction of an energy reform in 2013, CRE will replace these two bodies with an “Advisory Board”, a body that is formally established in the commission statutes.

Mexico’s National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos, CNH) includes a public consultation procedure in the drafting of regulations that comprises the installation of advisory councils proposed by the Governing Council of the CNH. The Advisory Council is a forum whose purpose is to contribute to the public consultation process through the opinions of the interested sectors and thus to improve the content of the regulation.

For the elaboration of the technical provisions for the use of associated natural gas in the exploration and extraction of hydrocarbons (issued by the CNH and published in the Official Gazette 7 January 2016) an Advisory Council was created with representatives of leading institutions in the energy and academic sectors, and associations that group assignees and contractors, among others, in order to discuss the preliminary draft.

Representatives of energy sector institutions including ASEA, the Under Secretariat of Hydrocarbons of the Ministry of Energy and the Mexican Petroleum Institute, the Mexican Association of Hydrocarbons Companies (AMEXHI), the Mexican Union of Engineers Associations, and the Confederation of Employers of the Mexican Republic (COPARMEX) participated. Regarding the academic sector, the National Autonomous University of Mexico (UNAM), the National Polytechnic Institute (IPN), the National Council of Science and Technology (CONACYT), the College of Engineers of Mexico and the Mario Molina Center participated.

Two sessions were held: the first on 19 June 2015 and the second on 1 September 2015. In the first meeting, representatives of the CNH explained the purpose and the criteria of the regulation. Participants analysed the draft and sent comments 30 June 2015. The CNH analysed them and compiled a list with all the comments. At this stage the CNH received 133 observations divided into 96 opinions of a legal nature, and 37 of a technical nature.

During the second meeting, representatives of the CNH informed the participants how their comments were received, as well as the reasons for those that were not received.

In this way, the Advisory Council allows for CNH to know and take into account the opinion of sectors interested in the regulation, to strengthen the technical aspects and to strengthen the process of transparency in the issuance of regulations.

Source: Information provided by CRE, October 2014; Information provided by CNH (March 2017).

Inspection and enforcement

Inspection plans are made yearly and seek to visit new areas each year, but are not informed by a risk-based strategy. The Enforcement and Supervision Department (Gerencia de Supervisión y Fiscalización, GSF) is equipped with professional staff in Lima as well as 1 inspector in each of the 23 decentralised offices who transmit information to Lima. Inspectors are specialised in different areas – including engineering, law and economics – to ensure a multi-disciplinary approach. Supervisions are conducted with the goal of compliance and prevention. In 2016 and 2017, OSIPTEL conducted 260 and 250 inspections, respectively with 126 and 99 cases of non-compliance detected. Administrative sanctioning is the most common result, but OSIPTEL also uses corrective or preventative actions in order to give regulated entities various opportunities to correct behaviour.

Sanctions involve a lengthy administrative procedure and their level is set by the General Manager. The governing regulation gives the procedure and ranges for sanctions (according to three levels: light, moderate or heavy), which are normally in accordance with economic principles. The line department forwards a proposal to the General Manager who can approve or revise the sanction to increase or decrease the amount within the bounds of the governing regulation. The regulated entity can appeal the sanction to the Board of Directors. All sanctions are published on website as part of the mandatory procedure. OSIPTEL wants to extend this provision and publish all decisions to include the case of no sanction.

Recommendations:

• Adopt a risk-based strategy to inspections and enforcement and review methods for streamlining the sanctioning process to achieve desired behaviour changes faster and more efficiently, for the benefit of consumers, in line with the OECD Best Practice Principles and the OECD Toolkit on Enforcement and Inspections.

• Assess the validity and accountability of decision making in setting the level of sanctions as well as reviewing appeals in first instance, in the interest of transparency and stability in the process.

Transparency, integrity and accountability

OSIPTEL places a high priority on transparent and accountable decisions making. OSIPTEL is committed to publishing all regulatory, supervisory, and normative decisions on its website supported by the raw datasets and other relevant non-confidential information used to render their decisions. It makes available raw data collected from industry on its website, and uses this data to produce easy-to-read regular reports on the telecommunications sector using data collected from industry, as well as a number of newsletters, videos, and statistical reports. It also publishes information on its activities, such as meetings and a list of people met. Information distribution is supported by a well‑developed communications strategy directed towards Congress, executive bodies, industry, users, and the media.

While OSIPTEL shares information on sector performance and its activities via multiple outreach products, formal accountability mechanisms are lacking. On the one hand, OSIPTEL develops a number of tools to communicate on its activities, the efficiency of which may be increased by streamlining. On the other hand, the regulator is not required to present or discuss its annual report with Congress. While OSIPTEL can be called to appear before the Congress and its committees, the annual reports of OSIPTEL are not scrutinised on a regular basis. More structured reporting can serve the dual role of contributing to a “no surprises” relationship with the legislative branch as well as increasing understanding of the regulator’s work by Congresspersons.

Peru’s economic regulators including OSIPTEL should seek to be exemplary in the areas of integrity and transparency, given their role in providing stability to the sectors they oversee. OSIPTEL has an Institutional Code of Ethics displayed prominently throughout the workplace and an ethics working group with representatives from each department responsible for promoting ethical behaviour. The Ethics Code includes five fairly general dispositions and does not lay out supervisory and enforcement mechanisms, although violations to the Code of Ethics are subject to sanctions and reported to a designated person (currently the Advisor to the President of the Board). This person accepts responsibility on top of their regular work duties. Violations are handled by an ethics committee, with severe violations escalated to the Human Resources Manager and the SERVIR tribunal in the most severe cases. Violations are not reported anonymously and, to date, none have been reported.

OSIPTEL operates an ‘open-door’ policy for regulated entities to discuss issues with the regulator, with recent changes barring this from occurring during the regulatory development phase. Entities then have to wait until public consultation to provide their inputs into draft laws. Previously, entities would speak directly with Board members and with regulator staff, with record of the visit in the online Transparency Portal (name of entity and representatives visiting, headline about the topic discussed, and OSIPTEL staff met) but not a detailed description of what was discussed.

Recommendations:

• Put in place a regular engagement activity with the Congress to increase accountability as well as understanding of the regulator’s role and activities by the legislature. This could, for example, take place once a year as a reporting on performance and results around the regulator’s annual report.

• Assess the impact of the various reporting and transparency tools currently implemented by OSIPTEL and potentially, streamline.

• Strengthen mechanisms to supervise and enforce OSIPTEL Code of Ethics with the goal of creating a culture of integrity, transparency and justice that provides channels for protected disclosure for whistle blowers and adequate methods for handling complaints in line with the OECD Recommendation on Public Integrity.

• Further refine the online transparency portal to provide full information about visits by regulated entities and other groups, as well as further communicate on the existence of this tool and guidance for staff on how to deal with these meetings to promote a constructive dialogue with industry. Improving the oversight mechanism and formalising rules can be introduced to promote transparency and minimise conflict of interest, while providing an avenue for constructive suggestions on regulations before becoming draft texts.

• Consider live streaming meetings of the Board for full transparency in decision making, when feasible from a confidentiality point of view.

Output and outcome

Performance assessment

OSIPTEL’s strategic framework includes a mix of outcome and organisational goals, and is supported by sophisticated indicators to measure their achievement. The Strategic framework is composed of seven strategic objectives, with three focusing on consumer protection, one on competition, and three on OSIPTEL reputation and processes. The strategic institutional objectives (OEIs) are measured by high-level indicators that mostly focus on market outcomes, but targets are not fixed for them for the strategic planning period (see Table 6). These OEIs are then translated into priority actions that count with their batch of indicators, mostly focused on outputs, processes, and inputs. Furthermore, OSIPTEL has designed composite indicators (indices) that measure market performance for the OEIs and further (for example, the competition index that brings together all areas under OSIPTEL purview). OSIPTEL also shares data to inform a set of indicators defined by MEF for monitoring budget execution and performance. Not all MEF indicators are included in the overall strategic framework of the regulator which can lead to a duplication of efforts in terms of monitoring.

Table 6. OSIPTEL strategic objectives and indicators, 2018-2022

TYPE	STRATEGIC OBJECTIVE	INDICATOR
CORE	Promote competition between telecommunications operators	Mobile telephony competition index Mobile telephony price index Mobile internet competition index Mobile internet price index Fixed internet competition index Fixed internet price index Pay TV competition index Pay TV price index
	Guarantee compliance with quality standards in telecommunications services, as established or offered by the operators	Mobile telephony quality of service index Mobile internet quality of service index Fixed internet quality of service index Pay TV quality of service index
	Promote appropriate attention to users by operators	% of compliance with quality of service standards in customer service by operators % of user satisfaction with quality of customer service by operator
	Empower telecommunications service users	% of users who know they basic rights % of users with problems with service who found an adequate solution
SUPPORT	Consolidate OSIPTEL’s reputation as a transparent and highly specialised institution	OSIPTEL reputation index
	Consolidate the management model of OSIPTEL towards excellence	% of internal client satisfaction with Line bodies % of internal client satisfaction with Support and Advisory bodies OSIPTEL management excellency index
	Implement processes for disaster risk management	Number of implementation or update reports for disaster risk management

Source: (OSIPTEL, 2018[1]).

Sophisticated indicators exist to measure the achievement and implementation of the PEI, but their monitoring may be very resource intensive and under-utilised for accountability and transparency purposes. OSIPTEL has defined 14 composite indicators that measure the achievement of four of the OEIs, the others being monitored by satisfaction percentages or number of reports. However, OSIPTEL is not required to report on these indicators to Congress or other bodies, and while a sophisticated annual report is prepared, the indicators are used mostly for internal purposes. Moreover, OSIPTEL is only required to report on a sub-set of their total indicators to MEF and PCM, who also request different sub-sets themselves. The lack of alignment between indicators and reporting requirements could reduce the efficiency of the accountability and transparency systems towards improving the performance of the regulator.

Recommendations:

• Share the good experience of OSIPTEL strategic framework with other economic regulators and other Peruvian public bodies.

• Streamline PEI and POI indicators for more focused efforts and resources on monitoring and reporting. The aim of the indicators would be to support the management of the regulator and decisions on strategic (re)orientation.

• Explore including targets for indicators in the strategic framework and monitor achievement of these targets in reporting.

Data and reporting

OSIPTEL requests a number of data and information from regulated entities and publishes and uses the data through varied channels. Regulated companies are required to submit 185 forms via an online digitised system, as well as to respond to punctual requests for information sent by OSIPTEL. When incomplete or inconsistent information is sent, OSIPTEL issues letters requesting the operator to comply. Regulated entities can furthermore receive sanctions for non- or late-compliance with reporting requirements. It is also difficult for OSIPTEL to adequately use all this data in reports or communications materials, which may lead to resentment from industry. OSIPTEL is developing methods for using more of the data it collects, but also should evaluate whether or not it is collecting too much data in the first place. Most data that is not confidential is available in raw format on the OSIPTEL website. OSIPTEL reports on the performance of the sector in its annual report, as well as through snapshots in its quarterly newsletter and brief statistical reports. However, the regulator does not publish a dedicated and systematic report on the performance of the sector nor does it use the existing channels as opportunities to engage with regulated entities on market trends and evolutions.

The varied reports published by the regulator could be streamlined into more targeted and integrated reporting in line with the regulator’s strategic framework. The regulator collects a large amount of data to inform its performance indicators and publishes analysis and some raw data. Among the information that is published online are raw market data, raw data from consumer survey, analysis of consumer survey, brief statistical reports that present market trends and performance, working papers. OSIPTEL also communicates on its activities and impact via regular newsletters and produces a detailed annual report. The only obligatory reporting is to MEF on a set of indicators agreed with the Ministry, which does not necessarily coincide with OSIPTEL’s own set of indicators within its strategic framework. The strategic framework and review of indicators, as well as publication of all OSIPTEL communication outputs is resource intensive.

Recommendations:

• Further align the annual report to the strategic framework and use it as an opportunity to communicate on achievement against the strategic objectives.

• Review the scope of market performance snapshots prepared by OSIPTEL in favour of a predictable annual market performance report, which could be used as an opportunity to engage with industry. This report would be different from the general institutional annual report.

• Review the current data collection policies to ensure it is still fit for purpose and appropriate for achieving the strategic goals of the regulator to limit the data compliance burden on industry, with a priority given to only collecting data that can be reasonably used by the regulator.

• Organise public event with stakeholders for the presentation of the annual report.

• Explore opportunity to streamline or reduce data reporting requirements to alleviate issues relating to inconsistency and incomplete information, particularly by reviewing the processes through which data is collected e.g. the forms, how data is asked and understood, how easy/complicated is the data collection process.

Box 9. Sector engagement and reporting: the PSA (Norway) and Ofcom (UK)

Norway’s Petroleum Safety Agency (PSA)

The PSA developed the Trend in Risk Level Project (RNNP) in 1999 as a consensual measurement tool of the level of risk in Norway’s offshore petroleum sector, in response to disagreements on the level of risk between different parties. Since its conception, the RNNP has become an essential yearly activity of PSA.

A key output is the identification of relevant indicators that reflect different aspects of risk relevant to the petroleum industry. The RNNP relies on close collaboration with other parties, including on feedback from the industry on methodology and indicators, to guarantee agreement on a reliable description of the level of risk. Industry participation in the early stages of the process is also essential to ensure the collection of good quality data for the exercise. The project is supported by highly qualified safety experts from national academic institutions, industry, and other specialists.

Engagement with stakeholders as well as the publication of the RNNP annual report take place within the Safety Forum, established in 2001 to initiate, discuss and follow up relevant safety, emergency preparedness and working environment issues in the petroleum industry, both offshore and at land facilities, in a tripartite perspective. The forum is led by the Director-general of PSA and brings together industry associations and trade unions.

The output of the RNNP is an annual report at industry level (no results on identifiable companies are published), which is presented in the Safety Forum. The presentation identifies areas for improvement and challenges the industry to identify corrective measures and to implement them. In addition to this direct impact on industry actions to mitigate risk, the exercise also helps PSA identify strategic priorities and plan its supervisory activities.

United Kingdom’s telecommunications regulator: Ofcom

Ofcom publishes an annual Communications Market Report (CMR), which provides statistics and analysis on the UK communications sector as a reference for industry, stakeholders, academics and consumers. It also provides context to the work Ofcom undertakes in furthering the interests of consumers and citizens in the markets they regulate. The report contains data and analysis on broadcast television and radio, fixed and mobile telephony, internet take-up and consumption, and post.

The report is published in three formats: an interactive report that can be explored and customised in great depth, the narrative report that supplements the interactive report, and a summary of key statistics. Data is made available to download.

Ofcom publishes this report to support their regulatory goal to research markets constantly and to remain at the forefront of technological understanding. It also fulfils the requirements on Ofcom under Section 358 of the Communications Act 2003 to publish an annual factual and statistical report, as well as to undertake and make public their consumer research, as set out in Sections 14 and 15 of the Communications Act.

The CMR is published in August to ensure that it attracts a certain amount of attention, and care is taken to not publish any other document at this time.

Source: (Lauridsen, 2012[8]), Trends in Risk Level Norwegian Petroleum Activity (RNNP), www.ptil.no/trends-in-risk-level/category155.html (accessed 2 November 2018); (Ofcom, 2018[9]), The Communications Market 2018, https://www.ofcom.org.uk/research-and-data/multi-sector-research/cmr/cmr-2018 (accessed 2 November 2018).

References

[2] ACCC (2018), Compliance & enforcement policy & priorities, https://www.accc.gov.au/about-us/australian-competition-consumer-commission/compliance-enforcement-policy-priorities#about-this-policy (accessed on 02 November 2018).

[5] Apptivism (2018), ChatScotland, http://www.apptivism.org/ChatScotland (accessed on 10 January 2019).

[4] Customer Forum((n.d.)), Customer Forum - About Us, https://www.customerforum.org.uk/about-us/ (accessed on 10 January 2019).

[8] Lauridsen, Ø. (2012), Trends in Risk Level Norwegian Petroleum Activity (RNNP), http://www.ptil.no/trends-in-risk-level/category155.html (accessed on 02 November 2018).

[6] OECD (2018), Driving Performance at Ireland's Commission for Regulation of Utilities, The Governance of Regulators, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264190061-en.

[7] OECD (2016), Being an Independent Regulator, The Governance of Regulators, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264255401-en.

[9] Ofcom (2018), The Communications Market 2018, https://www.ofcom.org.uk/research-and-data/multi-sector-research/cmr/cmr-2018 (accessed on 02 November 2018).

[1] OSIPTEL (2018), Plan Estratégico Institucional 2018-22, OSIPTEL, https://www.osiptel.gob.pe/repositorioaps/data/1/1/1/PAR/res025-2018-pd/Res025-2018-PD_PEI2018-2022.pdf (accessed on 22 June 2018).

[3] Water Industry Commission for Scotland (2017), Innovation and Collaboration: future proofing the water industry for customers, Water Industry Commission for Scotland (WICS), https://www.watercommission.co.uk/UserFiles/Documents/SRC21_Innovation%20and%20Collaboration_Methodology_WICS_amended.pdf (accessed on 10 January 2019).