Telecommunications Liberalisation: comparative overview within the EU and lessons to be learned

1. Telecommunications Liberalisation: comparative overview within the EU and lessons to be learned ECTA’s view Innocenzo M. Genna, ECTA Chairman 2° International Conference on Broadband Internet Athens, June 1-3, 2007

2. About ECTA • European Competitive Telecommunications Association represents some 150 member companies across Europe • Pursuing the regulatory agenda ECTA aims to advance liberalisation and competition within the telecoms sector • Our operator members are diverse – most with substantial investments in infrastructure

3. Liberalisation goals • Innovation, choice, value for money, increased and more efficient investment • Internet, broadband, VoIP, NGN networks, triple-play all associated with competitive, liberalised markets • Since 1998 prices in key services incl international calls, business services have fallen more than one third across EU • Investment also higher than pre-liberalisation (1998). Recovery in 2004 evident following telecoms bubble • Europe’s investment in telecoms services compares well against USA, Japan, and South Korea – ICT success story, but notable that within Europe investment is much higher in some countries than others • Better performing regulatory regimes, as measured by the OECD Regulatory Index, or the ECTA Scorecard, contribute to higher investment levels

4. ECTA Regulatory Scorecard

5. Investors respond to effective regulation… • Investment strongly correlated to effective regulation – UK invests $184 per capita whilst in Germany only $68 • Achieving best practice throughout the EU would boost investment by a third

6. …especially incumbents! • Incumbent NGN and NGA announcements often stimulated by competitive pressure • UK: relatively well regulated and competitive market. €10b core network upgrade announced by BT • Netherlands: competitive pressure from cable and unbundling. KPN announced access network upgrade • Germany: Unbundling pressure in certain areas. DT announced €3 vDSL urban investment • Japan: highest fibre penetration – initially stimulated through effective regulation of broadband • Triple play and IPTV advances competitively driven • France: €30 per month buys 20Mbit/s broadband, IPTV and telephone services. HDTV launched

7. What is effective regulation? • Effective regulation measured as function of: • Regulatory certainty • Clear legislation • Timely implementation of secondary legislation • Comprehensive guidance on interpreting legislation • Harmonisation between EU member states • Clear communication from NRAs • Clear rules allowing fair return for incumbents AND competitors (price squeeze control) • Adequate appeals processes • Adequate NRA enforcement powers and sanctions • Access to facilitates which are difficult to replicate • Unbundled loops, wholesale broadband access • Wholesale line rental, carrier pre-selection • Interconnect leased lines

8. Specific ‘Good and Bad’ Regulatory Examples • Comprehensive set of remedies to overcome identified market problems • Rapid completion of market review • Clear communication of regulatory strategy with full understanding of regulatory economics • Close working relationship between NRAs and ERG / Commission, with NRAs having right number/quality of staff, political independence and aiming for best practice • Access products not mandated: bitstream service, leased lines incl. Ethernet based services • No mechanisms to deal with price squeezes, unfair bundling and pricing incentives (discounting) • Lack of equivalence between new market players and traditional incumbents • Lack of consultation on major changes (e.g. NGN), lack of properly audited accounting separation, ineffective appeals systems, regulator lacking appropriate enforcement powers and remedies

9. Effective regulation: the starting point • Access to bottlenecks together with the ability for competitors to recover their significant investments remains vital to achieving effective competition • Countries with the most effective regulation also have higher levels of local loop competition • However, incumbent market share in the local loop remains above 80% in all Member States. Nearly 100% in most

10. Local loop unbundling ATM bitstream IP Bitstream Resale Driving investment: broadband • Broadband ladder of investment facilitates competition • Resale allows customer acquisition • With increased investment, connect at more points and gain increasing control over service • Local loop unbundling provides full flexibility on service offering • Rungs priced so as to encourage investment – no margin squeeze at any level of value chain • Narrowband ladder can link in

11. Driving investment: broadband • Ladder of investment in practice: France • Market outcome shows migration by altnets towards LLU/SA from resale • Total fixed industry investment grew by 17% in 2005 (IDATE survey) • Broadband penetration was 16.4% in Jan 2006 following swift growth • Triple play available for €30 with IPTV, 20MBit/s broadband, VoIP

12. How long for liberalisation?

13. What does this mean for Greece? • Framework has proven to be sound basis for competition and investment in telecoms. Make sure it is properly applied! • Responsibility of the Government • Ensure the regulator is independent – from Government/political involvement as well as operators • Provide effective enforcement powers – effective penalties, deterrent effect. Power to suspend provision pending compliance • Consider giving NRA powers for ‘functional separation’ • Ensure appeals system doesn’t delay or undermine measures • Responsibility of the NRA • Focus on implementation and enforcement not just paper • Complete market reviews thoroughly but efficiently • Establish clear rules against discrimination for level playing field • Ensure efficient spectrum allocation and trading • Make provisions to protect against foreclosing behaviour. We don’t want to go backwards! • Measure effectiveness of regulation. Is it really working?

14. Thank you and arrivederci • ECTA, Rue Royale 71, 1000 Bruxelles, Belgium • Innocenzo Genna, Chairman inno@innogenna.it • Ilsa Godlovitch, Director of Regulatory Affairs igodlovitch@ectaportal.com