ITCOM

1. ITCOM Increasing Role of Public Private Partnerships in the ICT Ecosystem 25 Years of Telecom/ICT Sector Reform in Europe, and Beyond… Morten Falch Associate professor, CMI Aalborg University CPH falch@cmi.aau.dk 14-15 November 2012, Geneva, Switzerland

2. The EU ICT initiatives • ICT industry • R&D • Precompetitive research • Sharing of a common European vision • Standardisation • Common European standards • ICT Infrastructure • SectorReform • Privatisation and competition • Information Society • The LisbonProcess • Focus on the broaderperspective

3. Sector Reform: Telecom Liberalization Began in US in late 1960s; UK in 1984; EU in 1987 Green paper; thenspreadglobally. A process of converting national monopolymarkets to competitiveones. Independent regulatoryauthorities (NRA) established to implementpolicies. A much more complex, difficult and time-consumingtaskthanexpected. It is still far from achievingitsobjectives.

4. Purposes of Liberalization Competitivemarketoperationalefficiency. Stimulateinvestment in networkrollout, as monopoliestend to restrictinvestment. Stimulateinnovation, the adoption of new technologies and marketdevelopment. Provide a moderninfrastructure for othersectors, stimulatingeconomicgrowth. Provide a foundation for building an EU commonmarket.

5. Whatabout universal service? A universal service obligation (USO) is included in EU directives Creation of real competition is considered to be a more efficient remedy to address the same issue USO has been seen a way to protect the incumbents USO has played a limited role at the European market

6. Current Status of Liberalization in Europe • All reform movements go through a familiarcycle – initiation, growth, maturity. • Maturitymayreflect • Completion or normalisation of the sector • barriersthatcannotbeovercome • or mid-stream policy changes. • The next step thenwillbeeither, • maintenance of the level of liberalizationthat has beenachieved • Or • lesscompetition and more significantmonopoly power (SMP).

7. EU Liberalization • Stage 1: 1987-98: Establishment phase; • reformingnational monopolies, • establishingNRAs. • Establishing of legal frameworks • Focus on voicetelephony • Stage 2: 1998-2009: Implementationphase • Fine tuning of competitionregulation • Service based vs. Intfrastructurebasedcompetition • encompassingICT convergence. • Stage 3: 2009 – continuing: Maturityphase • The ICT ecosystem • Focus on infrastructuredevelopment

8. Stage 1: 1987-1998 The Establishment Phase: Objectives Create a liberal telecom market in 1998 Reforming national monopolies – restructuring, privatizing, preparing for competition. Establishing independent NRAs, a new institutional form for many countries. Licensingcompetitors. Introducingregulations to reducebarriers to entry and accessthatwill provide a foundation for efficientcompetition.

9. Stage 1: 1987-1998 The Establishment Phase: Actions 1998 the deadline for introducing a liberal telecom market An heroictask of institutionalchange. Strongresistance from incumbentmonopolies and many national govts. NRAsinevitablyweak in initial learningphase. New laws , policies and regulations must betransposed and implementednationally. Manycomplexissues to address – interconnection, networkaccess, discrimination, pricing, etc.

10. Stage 1: 1987-1998 The Establishment Phase: Results The 1998 deadline for liberalisationwasmet (in principle) Institutionalrestructuringcompleted in all 15 EU memberstates, ie., transposition of policies and directives. Limited progress in implementingthem. Most NRAs just beginning to address most issues of implementation. Verylimitedcompetition; national incumbentdominance in all markets. New institutionalstructurenowready for seriousimplementation of policies and regulations.

11. Stage 2: 1998-2009 Growth of Liberalization: Objectives Rapid progress in implementing the reforms at the national level through NRAs. Extending the reforms to 12 new memberstates. Fine tuning regulation based on the 1999 review Modifying and extending policies and regulations to reflect the rapid technological and market changes in mobile and IT, i.e., Internet and ICT convergence. Address new issuesrelating to spectrum, access to non-voice services, and removebarriers to players in neighboringindustries.

12. Stage 2: 1998-2009 Growth of Liberalization: Actions New Regulatory Framework 2002 EC began to publishingannualimplementationreports from mid-1990s to stimulatedcompliance. An updating of fundamental issues - interconnection, networkaccess, pricing, etc. Led to new directives (2002) for transposition and implementation by national govts and NRAs. EC directive in 2003 requiringNRAs to measure significantmarket power (SMP) in 18 markets.

13. Stage 2: 1998-2009 Growth of Liberalization: Results The reform agenda was being pushed by the EC and a few leading countries – DK, NL, UK. Powerful resistance from incumbents in all countries and weak regulation in most. Incumbent market shares declining, but strong SMP retained in all major markets, including mobile markets and alternative infrastructure . Shift to SMP as reference point for regulation provides foundation for anticipated competition.

14. Stage 3: 2009-continuing Maturity: Objectives Consolidation of the industry Telecom regulationwillfocus on marketswherecompetition is ”still lacking”, not incumbents. Digital Agenda for Europe focus on broadbandaccess for ultra-fast Internet.

15. Stage 3: 2009-continuing Maturity: Actions New policy speaks of ”reinforcingcompetition”, but offers no new initiatives. BEREC replaces IRG for 27 NRAs to exchangeexpertise & bestpractice, advise, consult and give opinions – no real power. Implementationreportsno longer required. EC steps in to regulateprices for mobile roaming and terminationprices. (NRA failure?)

16. Implementing EU Liberalization Policy:Incumbents Broadband Market Share (%) Country 2005-6 2010 UK 24.8* 28.0 DK 55.4 62.3 NL 44.5 42.7 SW 39.1 39.0 FI 66.8 68.0 FR 44.0 44.3 BE 48.8 47.6  Source: EC

17. The LisbonTrack in the EU ICT policy • eEurope (2000-2002) • Cheaper, faster and more secureInternet • Investment in people and skills • Greateruse of the Internet • eEurope2005 (2003-2005) • Modernon-line public services • Dynamic e-business environment • Widespread Broadband Access • Secure information Infrastructure • I2010 (2006-2009) • A single European Information Space • Innovation and investment in research • Inclusion of better public services and quality of life • Digital Agenda 2020

18. Digital Agenda 2020

19. E-Europe programmes and beyond • Emphasis on the interplaybetweensupply and demand • Demand: • initiatives on e-business and e-government • Supply: • Public participation in infrastructuredevelopment in rural areas • Use of European Regional funds • Use of PPP

20. EU: Available instruments Communication from the Commission on ‘Bridging the Broadband Gap’ (COM(2006) 129 final) termed ‘available instruments’: Implementation of the regulatory framework for electronic communications Public funding State aid and competition policy EU funding: Structural Funds and Rural Development Fund Demand aggregation and procurement Fostering the creation of modern public services

21. Rules for state aid EU Commission reviews national projects for state funding of broadband infrastructure Infrastructure support must be given only to bridge the digital divide Support should, therefore, be limited to areas where it is not commercially viable for private sector operators to establish adequate facilities EU Commission distinguishes in this context between white, grey and black areas White areas are sparsely populated rural zones, where no broadband access except via satellite or leased lines is available. In such areas, state aid is in general allowed Grey areas are areas where broadband is already provided. Here, permission for state aid demands a more detailed assessment Black areas are those where at least two competing infrastructures exist, and where there will be a high risk for market distortion if state funding is allowed - in such areas state aid is generally not allowed

22. European PPP initiatives Funding from Municipalities, Government and European Regional Development funds Broadband available to all citizens (100 Mb) (Estonia) Broadband available in rural areas (e.g. Germany, Poland, Slovenia, Spain and Sweden) FTTH: Citynet Amsterdam, Zurich and Basel Focus on ICT literacy (Lithuania, Malta and Poland) Public Internet access points (Biblionet in Romaniaa.o.)

23. Conclusions The EU agenda has broadenitsfocus from sector reform to include the entire ICT ecosystem The liberalization agenda in the EU has ground to a halt and has begun to retreat More focus on investment stimulation and less on competition Lessfocus on regulation and more focus on other kinds of governanceincluding PPP