••• 1

Review of the EUregulatory framework for

electronic communications

Stephen BanableEuropean Commission

DG Information Society and Media

ITU Conference January 2006The Future of Voice

‘Refining the enabling environment’

••• 2

Contents

1. Brief overview of the EU telecoms market

2. Review of the regulatory framework

••• 3

The ICT Market in Europe

••• 4

Fixed voice decline

Sector Size (EUR billion)

89 88 8683

0

20

40

60

80

100

120

140

160

2003 2004 2005 2006

Year

EUR

bill

ion

Fixed Voice Mobile Fixed Data Cable Linear (Fixed Voice)

••• 5

Revenue breakdown

fixed

mobile

fixed data

cable

fixed

mobile

fixed data

cable

••• 6

Incumbents market share in voice telephony

••• 7

Pricing

••• 8

Broadband penetration – international comparison (provisional)

••• 9

Broadband platforms and competition

INCUMBENTS 48% NEW ENTRANTS 52%0%

20%

40%

60%

80%

100%

Incumbents' vs. new entrants's retail market share by technology, October 2006

Total lines: 72 600 067

Other

Satellite

WLL

Fiber to the home

Cable modem

DSL

••• 10

Mobile penetration

••• 11

Bundled packages

• 0%

• 5%

• 10%

• 15%

• Penetration

• 2P • 3P • 4P

• EU Household Penetration of Bundled Offers

• Internet+Fixed • TV+Fixed • Internet+TV • Other

• Internet+TV+Fixed+Mobile

• Internet+TV+Fixed • Internet+Fixed+Mobile

••• 12

Review of the framework

• Existing framework basically sound– Evolution not revolution

• Objectives remain valid– Promoting competition– Consolidating the single market– Promoting the interests of the

citizen

••• 13

ePrivacy Directive

Public consultation Public consultation

Framework

Directive

Authorisation Directive

Access & Interconnection Directive

Users’ Rights Directive

Recommendation on relevant markets Revision

••• 14

Regulatory approach

• Regulation focused on markets where competition is not effective, and on market players with ‘significant market power’

• Regulation is removed once competition is effective

• Market-based approach facilitates convergence

••• 15

Proposals for change

• Spectrum management• Streamlining market reviews• Consolidating the internal market• Strengthening consumer

protection and user rights• Improving security• Removing outdated provisions

••• 16

Specific issues

• Emerging markets• Structural / functional separation• Art 7 procedures• Appeals mechanism• List of markets• Pricing and consumer protection• Regulatory models

••• 17

Treatment of emerging markets

Is the market stable enough to apply the 3 criteria test ?

••• 18

The 3 criteria test

- used to identify markets which may justify ex-ante regulation the presence of high and non-transitory

barriers to entry; no tendency towards effective

competition (in the absence of regulation);

the insufficiency of competition law to address the market failure

- applied cumulatively

••• 19

Treatment of emerging markets

Remedies

Transparency

Non-discrimination

Accounting separation

Access obligations

Price control

“Taking account of the initial investment by the facility owner, bearing in mind the risks involved in making the investment” Art 12 AID

••• 20

Structural separation varieties of form

• Divestiture

• Creation of separate legal entities, without divestiture of assets

• Functional separation, with separate management structures

• Accounting separation

••• 21

Structural and functional separation responses

• ECTA – ‘explicit NRA powers to apply functional separation’

• ERG ‘calls for the strengthening of non-discrimination obligations by … allowing NRAs to oblige functional separation where necessary

• ETNO – ’Any forced … separation of networks and services … risks discouraging investment … and damaging harmonisation and innovation in the single market’

••• 22

Market review procedures (Article 7) responses

• Many recognise the achievements of the Art 7 process

• Some support Commission approval of remedies

• Some support a stronger role for ERG

• Some call for abolition of Art 7• Some support creation of a

European regulator

••• 23

Appeals responses

• ERG - supports the aim of the Commission proposal relating to the suspension procedure

• ECTA - welcomes clear conditions on appeals

• ETNO – an effective appeals process is essential

••• 24

List of relevant markets responses

• Some oppose removal of retail markets

• Some want more markets removed• Different views on possible

withdrawal of: - market 15 (mobile access and call origination)

••• 25

Pricing and consumer protection

In general:

• Consumers seek more protection, especially in the area of pricing

• Operators and service providers resist

••• 26

Pricing and consumer protectionsome options

• Framework to have more specific provisions, eg on price transparency– where is the right balance between general

principles and detailed provisions (‘better regulation’)

• Framework to give more powers to NRAs – risk of fragmentation across EU (VoIP)

• No change to framework, more guidelines– guidelines not legally binding

••• 27

Key issues

• NGN’s• VoIP• Interconnection• Bundling• Roaming regulation

••• 28

2005 2006 2007 2008 2009

Commission Communication launching public consultation

Draft revised Recommendation on

relevant markets

Adoption by Commission of proposed legislative measures

Transposition of Directives in

Member States

Call for input on Directives and

Recommendation on relevant

markets

Adoption by Commission of revised

Recommendation on relevant markets

Negotiation in EP and Council

2010

Timeline for implementationTimeline for implementation

Application of Recommendation

••• 29

long term goal

• ‘An open and competitive internal market, offering affordable and secure high bandwidth communications, with rich and diverse content and digital services’ (i2010 Communication, 2005)

• ‘A world class communications infrastructure’ (Lisbon, 2000)

• Choice, quality, value for money for users’ (Green Paper 1987)