European telecom regulation boosts competition and consumer benefits but has execution problems, the European Commission (EC) said in its 11th report on e-communications regulation and markets. In 2005 the e-communications sector added 273 billion ($325 billion) to the 614 billion ($730.7 billion) information and communication technology sector, as broadband and mobile revenue kept growing, the EC said. Traditional voice services kept declining but remained the largest revenue source for companies in the fixed market. Investment levels were up 6% over 2004. Merger and acquisition activity rose due to more regulatory certainty. There are nearly 53 million fixed broadband lines, with penetration hitting 11.5% in Oct. compared with 7.3% a year earlier. New entrants’ broadband market share continued to rise, nearing 50% for the 25 EU nations. New players increasingly shifted from resale and bitstream access to local loop unbundling (LLU) as demand for triple-play services rose, the Commission said, and the number of shared access lines tripled last year. In mobile, EU penetration was 93% in Oct. Mobile termination rates began dropping and mobile number portability doubled. But international roaming rates remain a central concern, with more progress needed from industry and regulators, according to the EC. Revenue from traditional telephony services are falling an estimated 1.6% annually. The regulatory picture improved, with most countries almost finished adopting the regulatory framework into national law. The EC noted several concerns, however. Some national regulators aren’t fully independent from govts., and a particularly serious problem remains a lack of effective ways to appeal regulatory rulings. And while national regulators generally have issued rules needed to open markets lacking competition, LLU “does not appear to be working in practice” in several countries, and interconnection and cost accounting problems remain, it said. Despite these and other shortcomings, the Commission said, “most of the necessary work has been done.” Alternative operators said the report paints “a perhaps overly positive picture of the state of implementation in Europe.” Even so, European Competitive Telecom Assn. Dir.-EU Affairs Sandro Bazzanella said e-communications spending has risen since the regulatory framework became law in 2003. The report endorses spurring broadband penetration through infrastructure such as cable and LLU/bitstream. And it pegs appeals as a major issue. Bazzanella said: “The summary emphasizes a light touch role for VoIP regulation, whereas it would have been more helpful for them to have identified the threat of leverage.” Incumbents hail the report for recognizing markets to be more competitive and open, but pan the regulatory framework as not delivering “sustainable infrastructure-based competition” and failing to achieve deregulation. “Despite increased competition, the regulatory framework has led to an increase of ex-ante [pre-emptive] regulatory intervention,” said the European Telecom Network Operators’ Assn. It urged the EC to “seize the opportunity” of an ongoing review of the framework to “engage in a progressive but clear deregulation.”
Dugie Standeford
Dugie Standeford, European Correspondent, Communications Daily and Privacy Daily, is a former lawyer. She joined Warren Communications News in 2000 to report on internet policy and regulation. In 2003 she moved to the U.K. and since then has covered European telecommunications issues. She previously covered the U.S. Occupational Safety and Health Administration and intellectual property law matters. She has a degree in psychology from Duke University and a law degree from the University of Tulsa College of Law.
U.K. mobile operators O2 and Orange denied a report they're eyeing services aimed at children in violation of an industry conduct code. The London Times said Mon. members of the All-Party Parliamentary Mobile Communications Group and consumer groups had called for legislation to stop the providers from introducing such services. Both firms said emphatically Tues. they don’t market to under-16s.
European justice ministers gave final approval Tues. to mandatory retention of communications traffic data. Member states have 18 months to adopt the telecom storage rules into national law -- 36 months for Internet traffic data -- Austrian Federal Justice Minister Karin Gastinger said at a Justice & Home Affairs Council news briefing. Gastinger doesn’t expect technical difficulties with the directive, she said, but questions about the controversial measure’s impact on communications services providers leave them jittery.
Europe’s telecom market analysis process is spurring competition but “much remains to be done,” the European Commission (EC) said Tues. Since an EU e-communications regulatory framework (NRF) linking sector-specific oversight with competition law debuted in 2006, oversight is more open and consistent, and internal markets more competitive, the EC said. But monopolistic bottlenecks remain, especially in wholesale markets, it said in a communique to the Council of Ministers, European Parliament, European Economic & Social Committee and the Committee of the Regions.
The European Commission will propose Wed. to require mobile operators to cut international roaming rates. The plan, to be announced by Information Society & Media Comr. Vivian Reding, would require telcos to charge similar prices for international and national calls, her spokesman said. The Commission intends to send a formal regulatory proposal to the European Parliament and the Council of Ministers before their summer break, he said.
The EU’s current telecom rules need reworking if they're to drive competition and innovation in the sector, key players said this week. While the goals of the new regulatory framework (NRF) for e-communications are generally sound, its practical application over the last 2- years has laid bare problems and stresses that must be resolved if the industry is to achieve a single European market, most said. However, incumbents and new entrants continued to disagree over whether what’s needed is revolution or evolution. Their comments came in response to a European Commission inquiry on review of the NRF.
The German govt. could be facing a trade battle if it amends its telecom law to lift regulation on new investments such as Deutsche Telekom’s (DT’s) fiber network, competitive telcos said Tues. The Ministry of Economic Affairs unveiled language saying the inclusion of new markets in the market regulation called for by the telecom act “shall, as a rule, only apply if facts justify the assumption that otherwise the development of a sustained competitive market in the areas of telecoms services and networks would be impeded in the long run,” said Axel Spies, a German lawyer at Swidler Berlin who represents the German Common Carriers Assn. The provision said that, before it imposes antitrust remedies under the section, telecom regulator BNetzA must consider their proportionality and, in particular, whether they're in line with the goal of promoting efficient infrastructure investment and supporting innovation. The govt.’s use of “long run” indicates that regulation of the incumbent could be lifted for the “short term,” whatever the ministry believes that is, Spies said. That would let DT roll out its fiber VDSL network using empty ducts and pipes taxpayers have already paid for while avoiding price controls and other preventive measures. The negative consequences of remonopolization for consumers are huge, particularly in the broadband sector, he said. If the law is enacted and DT is exempted from regulation, the ministry “also risks a lawsuit in Geneva at the WTO because what it proposes is obviously not in line with Germany’s WTO commitments” to provide equal network access, Spies said. The possibility of a regulatory holiday for DT has sparked concern and intense discussion in Europe’s telecom sector. No one appears to favor the proposal except DT; Information Society & Media Comr. Viviane Reding has made it clear on several occasions that she doesn’t like the idea and BNetzA said it wouldn’t approve it (CD Dec 27 p6). But the amendment got legs after the recent federal election. One plank of new coalition govt.’s agreement was to “create incentives for the creation and the build-out of modern broadband telecommunications networks to safeguard the future of Germany as a place for industry and research. For this purpose, the new markets that will arise due to the investments must be kept free of regulatory intervention for a certain time period to provide planning certainty for the investor. A legislate guarantee to this end must be introduced into the new bill of the Telecommunications Act.”
Civil liberties and consumer groups lobbying the EU on Information Society issues are hampered by lack of money and access, observers said. On matters from privacy to digital rights to intellectual property (IP), these groups - part of “civil society” -- find it hard to compete with industry for lawmaker, govt. and Eurocrat attention, they said. Telecom sector lobbyists seem generally satisfied with the process’s transparency (CD Jan 25 p9), but rights advocates said the system has grave problems current reform efforts won’t fix.
Deutsche Telekom (DT) rivals challenged a govt. claim that the incumbent may be entitled to a regulatory break as an incentive to rolling out a new fiber VDSL network. In a paper handed to politicians and govt. officials, the German Competitive Carriers Assn. (VATM) called economically unsound a Ministry of Economic Affairs (BMWi) statement that natural monopolies and bottlenecks are “virtually characteristic for the telco market,” and that “temporary monopoly positions represent a key element in dynamic processes of competition” (CD Jan 11 p11). Temporary monopolies represent a “significant element of dynamic competition processes” only if they're not based on historic monopoly structures, the VATM said: If they are, the bottlenecks are permanent and deregulation would only breathe new life into the monopoly. Extending the regulatory holiday to new DT service offerings or products or new markets will create more permanent monopolies, it said. BMWi’s paper, filed in the European Commission’s (EC’s) review of the new e-communications regulatory framework (NRF), also fails to take into account the “proven connection” between effective regulation, the level of competition and total investment in the telecom sector, VATM wrote. DT’s push for a regulatory moratorium on its new network appears to be opposed by most of Europe’s telecom sector, (CD Dec 2 p8). This week, Information Society & Media Comr. Viviane Reding, speaking at Digital Lifestyle Day 2006 in Munich, said Europe needs a “political triple-play” to allow its digital economy to catch up to competitors. Reding said Europe has a “unique responsibility” to ensure that its regulatory framework encourages as much investment as possible. However, she said, “that can, in my view, not mean that regulators except those who build such networks from the rules which guarantee effective competition. I believe in innovative business models, but not in so-called ‘natural monopolies’.” Reding said she hopes the German govt. doesn’t “give in to the pressure to find unilaterally a solution at national level which could only yield benefits at national level in the short term, but would create fundamental problems, both at national level and EU-wide, in the long run.” The BMWi paper seeks to change Germany’s telecom laws as well as to influence thinking on the NRF review, Swidler attorney Axel Spies said on VTAM’s behalf. In a Dec. filing with the U.S. Trade Representative (USTR), the U.S. Council for International Business said Germany’s telecom regulator, BNetZa, “continues to be subject to inappropriate political pressure” from the govt. If BNetzA follows the govt.’s request and refrains from regulating access to DT’s new fiber network, it could violate World Trade Organization rules, Comptel told the USTR.
With a Jan. 31 end looming for the first phase of a consultation on whether to revise Europe’s e- communications regulatory scheme, lobbying groups are scurrying to weigh in. The review has huge import for telecom, and Brussels’ growing trade in lobbying has some observers fearful of a system growing “Americanized” as high-profile issues have stacks of Euros thrown at them. Some want tighter lobbying rules. Telecom lobbyists said they're just getting more savvy, and they welcome efforts to curb abuses.