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New EU Regulatory Framework for Electronic Communications

EUROPEAN COMMISSION. New EU Regulatory Framework for Electronic Communications. Alexandre de Streel DG Information Society Seminario di studio sulla regolamentazione Capri, 15 Ottobre 2002. OUTLINE. 1. Situation today and remaining problems 2. Need for change and the new framework

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New EU Regulatory Framework for Electronic Communications

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  1. EUROPEAN COMMISSION New EU Regulatory Framework for Electronic Communications Alexandre de Streel DG Information Society Seminario di studio sulla regolamentazione Capri, 15 Ottobre 2002

  2. OUTLINE 1. Situation today and remaining problems 2. Need for change and the new framework 3. The different directives

  3. EU Telecoms Policy 1987-1998 • The Goal • Create a flourishing single market for telecoms services and equipment in Europe, providing users with choice, quality and value for money • The Mechanisms • Liberalisation measures to remove barriers to competition • Harmonisation to prevent unnecessary differences between Member States

  4. Liberalisation in the EU 1987 Green Paper 1988 Terminal equipment1990 Value added services1993 Switched data services1994 Satellite communications1995 Cable television networks1996 Mobile communications 1998 Voice and infrastructure

  5. Liberalisation: A Success story • Evolution of growth, prices and quality

  6. € bn 250 + 9,5% + 12,5% 200 + 10,4% + 10,5% 150 100 218 199 177 160 50 0 1998 1999 2000 2001* * estimate Size of EU telecommunications market (€ bn)

  7. PSTN/ISDN Penetration

  8. 300 80% 73% 250 55% 60% 200 36% 40% 150 263 Million of subscribers EU average penetration 22% 194 100 20% 115 50 69 0 0% 1998 1999 2000 2001 Subscribers (m) Penetration (%) EU mobile subscribers and average penetration Source: Mobile Communications and European Commission

  9. 36.1% 40% 28.4% 30% 18.3% min 12% 20% max 64% min 12% min 6% max 55% 10% max 48% 0% March 2000 October 2000 June 2001 EU average household penetrationof internet access Source: Eurobarometer

  10. 15 14 14 12 10 10 8 6 5 0 Local calls Long-dist./Int'l calls 2 operators 3-5 operators More than 5 operators Consumer choice in voice telephony Number of Member States where 100% of the population has a choice between: Source: NRAs and European Commission Source: NRAs and European Commission

  11. EU15 weighted average 80 72,69 70 60 57,91 50 45,52 €-cents, VAT included 40,31 40 30 20 14,55 13,33 13,51 13,04 10 0 Aug. 1998 Aug. 1999 Aug. 2000 Aug. 2001 Local call Long-distance call Local and long-distance call charges (3 min) Source:Teligen

  12. International Leased lines Price trends 1998 - 2001

  13. 100% 90% 80% 70% 90% 80% 60% 71% 50% Local calls Long-distance calls International calls 1997 1998 1999 2000 Market shares (voice telephony) EU incumbent operators' average call market shares (by revenue) Source: NRAs and European Commission

  14. Remaining Problems • Unbundling of the local loop • Tariffs distortion and price squeeze • Mobile call termination and roaming charges • Leased lines price and provisioning • Rights of way, esp for the roll-out of 3G network

  15. Full unbundling 120 Shared access 97 110 100 90 80 70 60 50 30 40 23 18 30 15 11 10 8 20 4 1 0 0 0 0 10 0 B DK D EL E F IRL I L A P FIN S UK Unbundling agreements in place(July 2001) Source: NRAs and European Commission

  16. 250 000 € / year 211 300 200 000 150 000 100 000 63 500 30 700 50 000 13 360 12 700 1 950 0 National, 2 km National, 200 km Int'l, near EU Minimum Maximum Divergences in leased line prices for e-commerce/internet applications (2Mbit/s) Source: Teligen

  17. OUTLINE 1. Situation today and remaining problems 2. Need for change and the new framework 3. The different directives

  18. Lisbon European Council March 2000 A “competitive and dynamic knowledge-based economy” demands “an inexpensive, world-class communications infrastructure” which in turn demands “a efficient regulatory framework”

  19. Convergence Unpredictability of markets and differing degrees of competition across markets More consistency in M States’ rules Need for legal certainty Technologically neutral regulation Flexibility for NRAs and Regulation to be linked to degree of competition Better harmonisation mechanisms Strict proceduresfor NRAs Problems and Solutions

  20. Internet Convergence removessector boundaries . Voice telephony FixedMobile Data Fixed Broadcasting Cable Satellite Terrestrial Service Wireless Satellite Cable Telecoms Type of network Terminal

  21. Authorisation Directive Access & Interconnection Directive Users’ Rights Directive Data Protection Directive The new package Liberalisation Directive (Art. 86)   Framework Directive (Art. 95)   Spectrum Decision (Art. 95) Market Recommendation   SMP Guidelines 

  22. Timeline 25.7.2003 Date of application in all MS 24.4.2002 Entry into force 15 months M States transpose, but don’t apply NRAs do market analyses

  23. Electronic communications networks and services - Scope Content Services - outside scope of new framework(e.g. broadcast content, e-commerce services) Communications services (e.g. telephone, fax, e-mail) Communications networks (fixed, mobile, satellite, cable TV, powerline systems, networks used for radio and television broadcasting) and associated facilities (e.g. CAS)

  24. Main features of package (1) • Provide regulators with tools to cope with evolving future technology and market changes, within a defined framework of objectives and remedies • Roll back regulation as competition becomes effective • Ensure that national legal systems allow for appeals on NRA decisions • Strengthen the internal market through strong co-ordination mechanisms at European level

  25. Main features of package (2) • Promote European standards for interactive digital television • Simplify market entry rules and stimulate more competition. • Maintain the universal service obligations in order to avoid exclusion from the Information Society • Establish a policy framework for co-ordination of policy approaches on radio spectrum

  26. Regulatory principles of the package • Consumers interest would be best served by market forces • Intervention if • markets are not competitive • market forces do not satisfy public interest • Intervention should be • minimal and linked to degree of competition • flexible BUT harmonised at an European level • technologically neutral

  27. Amount of regulation 1990 1998 2001 Monopoly Towards fullcompetition Rely increasingly on competition rules Pro-competitive sectorial telecoms Laws Competition Law

  28. Overview of the obligations

  29. OUTLINE 1. Situation today and remaining problems 2. Need for change and the new framework 3. The different directives

  30. Authorisation Directive • Today- mainly individual licences, in particular for voice telephony services • From 2003- no prior permission for market entry- general authorisations: limited conditions and fees- individual licences only for rights-of-use of frequencies or numbers; open non- discriminatory, proportionate and transparent procedures

  31. Authorisation Directive (2) General national national law covering rights and obligations regarding all or certain types of services and networks, giving rise to a: GENERAL AUTHORISATION Supplemented by regulatory decisions with regard to individual undertakings covering : Rights to use frequency Rights to use numbers Rights of way SMP obligations Universal service obligations

  32. Framework Directive:Characteristics of the NRAs • Same objectives: • Promoting open and competitive markets • Contributing to development of internal market • Promoting interests of European citizens • Same characteristics: • Independence of any operator or services providers and of any government department that is a shareholder in an operator or service provider • Decision making processes need to be impartial and transparent • Published statement of responsibilities • Sufficient staff

  33. Framework Directive:Characteristics of the NRAs (2) • Same procedure • Consultation with market players, • other NRAs and the Commission on issues which impact the single market • Effective appeals mechanisms

  34. Framework Directive:European Harmonisation • Coordination institutions • Communications Committee • European Regulators Group Ensure the development of an European regulatory culture Composed of representative of each relevant NRA and the Commission Chairman elected among the members, secretariat provided by the Commission Consultation with stakeholders and annual reports of its activities

  35. Framework Directive:European Harmonisation (2) • Harmonisation measures • Mechanism to consolidate the internal market: • Commission able to intervene over NRA measures that create barriers to internal market, and require NRAs to withdraw the measures- on market definition and SMP designation

  36. Framework Directive:Extent of ex-ante regulation (1) Ex-ante regulation only imposed in markets where: • competition is not effective AND • competition law remedies do not suffice • except for general obligations arising from public policy reasons eg consumer protection

  37. Framework Directive:Identifying Markets (2) • Commission Recommendation • identifies product/service markets which may be subject to ex-ante regulation • NRA decides on relevant geographic market • NRA can define markets other than those in Recommendation, but Commission can block • Commission Decision (optional) • identifies trans-national markets, where NRAs have to act together

  38. Framework Directive:Significant market power (3) SMP is the threshold for ex-ante intervention by NRAs, when competition is not effective • ‘old’ threshold of significant market power based on 25% market share • ‘new’ SMP threshold linked to competition law concept of dominance (single or joint) • Commission issues Guidelines on ‘new’ SMP • Possibility to behave to a appreciable extend independently of competitors, customers, and ultimately consumers

  39. Framework Directive:Different stages of the analysis (4) • Markets Commission Recommendation • product aspect of the market NRA input Commission Guidelines NRA Market definition taking account of the Commission Recommendation define geographical aspects define other product markets, following Art 7 FWD NRA removes existing obligations; does not impose new obligations competition is effective NRA analysis is competition effective dominance test/SMP designation NRA designates SMP operator(s) - maintains or modifies existing obligations, or imposes new obligations competition not effective

  40. Framework Directive: Other provisions to facilitate entry • Numbering, naming and addressing • Co-ordination of positions in international forums • Non-discriminatory assignment • Rights of way • Procedures transparent, without discrimination and conflict of interests • Collocation and facility sharing • Commercial negotiation, or NRA intervention

  41. Framework Directive:Promote European standards for interactive digital television • Use of European standards for set top boxes and integrated digital TV sets for interactive digital TV services is encouraged (e.g. Multimedia Home Platform MHP) • Open access to information about proprietary application program interfaces (APIs) to be encouraged • Commission to review need for mandatory standards in 2004

  42. Access Directive:Objectives and mechanisms • Reliance on competition and commercial negotiations • Regulatory intervention only when market analysis reveals that competition is not effective (new SMP test), with some exceptions • Obligations to be proportionate to the problem

  43. Access Directive: Obligations on SMP operators • “Tool box” of possible obligations for NRAs to use • transparency, non-discrimination, accounting separation, mandated access, price control • Possibility to go beyond with prior authorisation of the Commission • To fix specific types of problem • Following a common set of objectives and guidelines

  44. Access Directive:Obligations beyond SMP • Undertakings that control access to end-users • Obligations to ensure end-to-end connectivity: interconnection • Undertakings that control CAS and other associated facilities • Access on fair, reasonable and non-discriminatory terms • Revision procedure • International commitments • Major suppliers and SMP operators

  45. Choice (via competition) is the best means to satisfy user needs In general the market should determine retail prices and quality, (including the provision of relevant information to users) … but … NRAS should have power to act where user needs are not met Universal service Directive:Principles

  46. Universal service Directive: Structure

  47. Universal Service: Scope • Set of services • Provision of access at fixed location (sufficient for functional Internet access, technologically neutral, no extension to mobile) • Directories and directory enquiry services • Public pay phones • Measures for disabled users • must be available under some conditions: • affordability (type of users, and geographical locations) and quality • Review at European level • Additional services at national level

  48. Universal service: Means of provision • Designation of one or more USO providers, if necessary • Use of efficient, objective and transparent mechanism • Determination of the net cost of USO • Either calculation of the net cost, or revealed during the designation process • Financing the USO cost • Two ways: general budget and/or sector-based fund (transparency, least market distortion, non-discrimination, proportionality)

  49. Enhanced consumer protection • Better information and choice • Better governance • Availability of certain related facilities to basic telecom services • Operator assistance and directory enquiry services, European emergency number 112, European telephone access code, Number portability (extended to mobile), Possible additional facilities (Tone dialing, CLI) • Rights related to media • Interoperability of consumer digital TV equipment, Must-carry

  50. Retail markets controls • Regulatory controls on retail services • If a retail market is not effectively competitive and wholesale measures are insufficient • Carrier (pre-) selection • If there is SMP operator for the provision of connection to and use of the public telephone network at fixed location • Can be extended to other networks (mobile) • Availability of a minimum set of leased lines with harmonised characteristics

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