Overview of Regulation challenges in Telecommunications

Overview of Regulation Challenges in Telecommunications

Task force: E. Agiatizidou, C.Kalogiros, G. D. Stamoulis, and N.Vettas

Athens University of Economics & Business

1st Workshop on New Methods in the Analysis of Market Competition: Oligopoly, Networks and Regulation

December, 2012

THALES: Regulation Challenges - 2

Outline Relevant markets Functional Separation Digital Dividend Dynamic Spectrum Management Universal Service Obligation Net Neutrality




Relevant Markets Not enough competition due to Significant Market Power (SMP)

leads to loss of social welfare in that market. Telecommunication markets are frequently characterized by SMP.

NRAs have the authority to impose ex-ante remedies, if justified.

A 3-step process: Definition of relevant product/service market & geographic scope Competition assessment & identification of SMP operators Imposition of remedies on SMP operatorswhich is periodically repeated.

NRA identifies scope of market

NRA assesses market power

NRA imposes ex-ante obligations

(if SMP found and accepted by EU)

Next analysis round


New Recommendation on Relevant Markets

Πρόσβαση στο δημόσιο τηλεφωνικό δίκτυο σε σταθερή θέση

Προέλευση (εκκίνηση) κλήσεων στο δημόσιο τηλεπικοινωνιακό δίκτυο που παρέχεται σε σταθερή θέση

Απόληξη (τερματισμός) κλήσεων σε μεμονωμένα δημόσια τηλεφωνικά δίκτυα που παρέχεται σε σταθερή θέση

Χονδρική παροχή αποδεσμοποιημένης πρόσβασης σε μεταλλικούς βρόχους και υποβρόχους

Χονδρική παροχή ευρυζωνικών υπηρεσιών

Χονδρική παροχή τερματικών τμημάτων μισθωμένων γραμμών

Απόληξη φωνητικών κλήσεων σε μεμονωμένα δίκτυα κινητών επικοινωνιών

Λιανική

Χονδρική

Πρώην αγορές 1 & 2

Previously market 8

Πρώην αγορά 9






Relevant Markets across EU Member States

Source: European Commission, DG Information Society and Media, as of 15 April 2012

http://ec.europa.eu/information_society/policy/ecomm/doc/implementation_enforcement/eu_consultation_procedures/market_overview_15_april_2012.pdf





Functional Separation The aim is to ensure fair and equal access to bottleneck

network assets. E.g., local loop

Functional separation should be seen as an extreme remedy against SMP. A special case of accounting separation.

An NRA must: Identify persisting competition problems in related relevant

markets Analyze the impact of proposed separation Receive EC approval


Options for Functional SeparationDegree Separation option Description Countries

0 Accounting separation Costs and revenues of upstream and downstream products are allocated in different baskets. Preserves efficiency of vertical integration but does not provide equivalence of access.

Austria, Denmark, France,Germany, Greece*, Hungary,Ireland*, Malta, The Netherlands, Poland*, Portugal, Spain

1 Creation of a wholesale division

The incumbent has a separate wholesale division which supplies upstream inputs to competitors. The retail arm still has a preferential way to access products. No equivalence of access.

2 Virtual separation First form of equivalence of access as internal and external customers are treated equally. No physical separation of the businesses.

3 Functional separation Physical separation of businesses and new business practices, e.g. new office location, new brand, separate OSS/management info systems.

4 Functional separation with localized incentives and/or separate governance arrangements

As 3 plus different managers’ incentives and different governance.

UK, Italy, Latvia, Sweden and intention of Poland*

5 Legal separation (separate legal entities with the same ownership)

As 4 but with a separate non-executive board. Intention of Greece* and Ireland*

6 Ownership separation As 5 but with different ownership

Source:Tropina, Whalley, and Curwen, “Functional separation within the European Union: Debates and challenges”. Telemat. Inf. 27, 3 (August 2010)




Digital Dividend Digital dividend refers to spectrum released from the switchover

from analogue to digital terrestrial television. 1st digital dividend: 800MHz 2nd digital dividend: 700MHz (will come into force from 2015)

How should the digital dividend be shared between different radio services to maximize social welfare? Broadcasting: more channels and/or increased quality HDTV Mobile broadband: higher data rates and/or increased quality (4G) Other services (e.g., military) Greece - Technology penetration forecast by

connections [Source: Analysys Mason, 2012]


Digital Dividend – Overview of EU Member States

Figure adapted from http://en.wikipedia.org/wiki/Digital_terrestrial_television

2013

2015

2013 2013

2013

2013

Analysys-Mason consulted the Hellenic Republic to allocate the 800Mhz sub-band for mobile broadband, using a market-based mechanism, such as an auction.

Source: Analysys Mason, 2012


Outline Relevant markets Functional Separation Digital Dividend Dynamic Spectrum Management Universal Service Obligation (USO) Net Neutrality


Spectrum Management and Challenges Demand for wireless data

traffic has been increased 20.000% the last 5 years

An 18-fold increase in mobile data traffic until 2016 (10.8 exabytes per month)

NTIA: re-farming1755-1850 MHz band would require 10 years and 18 billion dollars!

Challenge: maximize the use of under-utilized bands through spectrum sharing

TV white space (TVWS): opens up new spectrum bands


Current trends FCC 2010: TVWS spectrum unlicensed use by commercial

devices FCC: coordination use of 4.9 GHZ public safety band through

a geo-location database FCC 2012: allow sharing of the 3.5 GHz band between federal

agencies and commercial systems 802.11af: Wireless LAN in TV White Space: IEEE 802.11

standardization efforts to allow operation within this spectrum ETSI RRS use cases and deployment scenarios: operation of

Reconfigurable Radio Systems (RRS) within White Spaces in the UHF 470-790 MHz (Europe)

Ofcom Voluntary National Specification (VNS): rules and requirements for devices using UHF TV Band White Spaces.




Definition Assurance of the availability of a minimum set of

high-quality services: to all users at an affordable price without distortion of competition

Includes: A connection to the fixed network Reasonable geographic access to public call boxes A range of services for customers with disabilities Emergency numbers


Challenges: Universal Service and Broadband

Already adopted in many countries Switzerland (2008), South Korea, Finland, Japan…

Governmental Programs/Plans for broadband penetration/adoption Australia – “Australian Broadband Guarantee”

– 512 kbps download and 128 kbps upload minimum, 3GB/month data usage at a total cost of $2500 over three years for residents and small business

UK – “Digital UK”– 100% broadband coverage by 2012, with a minimum speed of

2 Mbit/s EU – “Broadband Package”

– The Broadband Communication: action and outlining proposals for achieving the targets

– The NGA Recommendation: regulatory guidance to promote legal certainty

– Radio Spectrum Policy Programme: improve coordination and management of spectrum in the EU


3rd Periodic Review of USO in EU Level Criteria:

1. Availability to the majority of consumers? Lack of availability by a minority results in social exclusion?

2. Availability and use convey a general net benefit to all consumers such that public intervention is warranted where needed?

Criteria in previous reviews (2005/06 and 2008) were not met In 2010 Broadband Penetration: 95% (EU

population) Broadband usage rates vary (23%

households in Romania - 83% in Sweden)

Majority reached for broadband usage but not yet a substantial majority

The costs of EU-wide USO would fall on telecom providers and consumers

For mobile: competitive provision resulted in widespread affordable access

No need to include in USO

• Next review in 2013

No meet of the second criterion




Definitions NN is the principle that all Internet traffic should

be treated equally Absolute non-discrimination

“…a maximally useful public information network aspires to treat all content, sites, and platforms equally.", Tim Wu

Limited discrimination without QoS tieringQuality of service discrimination as long as no special fee is charged for higher-quality service,

Limited discrimination and tieringHigher fees for QoS as long as there is no exclusivity in service contracts

First come first served“a neutral Internet must forward packets on a first-come, first served basis, without regard for QoS considerations”, Crawford


BEREC January 2010: Body of European Regulators for

Electronic Communications (BEREC) – advisor role

BEREC remarks for NN Limits on the speed of peer-to-peer (P2P) file-sharing

or video streaming (France, Greece, Hungary, Lithuania, Poland and the United Kingdom)

Blocking or charging extra for VoIP services in mobile networks (Austria, Germany, Italy, the Netherlands, Portugal and Romania)

Constant consultations and reports for NN


BEREC October 2011 – consultation on “draft Guidelines on Net Neutrality and Transparency”

Best practices and Recommended approaches Transparency obligations to apply to the whole value chain Extend transparency to interoperability, services and

equipment, applications and content providers, terminal suppliers

Existence of competition sufficient to handle Net Neutrality concerns

Regulations must foster competition Transparency and competition are part of the answer, they

do not provide the full solution

Conclusions: Competition should rely on effective transparency and the possibility for end-users to easily switch between service providers

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BACKUP SLIDES


Relevant Markets in GreeceMarket Greek NRA Analysis Results (Identified SMPs)

EC Rec. 5406/ 2007

EC Rec. 497/ 2003

Description Round 1 Round 2 Round 3

Market 1 1, 2 Access to PSTN for residential and non residential users

OTE OTE

3 Retail local/national fixed calls for residential users

OTE OTE

5 Retail local/national fixed calls for non residential users

OTE OTE

7 Retail leased lines OTE

Market 2 8 Call origination on fixed network OTE OTE

Market 3 9 Call termination on fixed network VIVODI, FORTHNET , COSMOLINE, ALTEC, TELLAS,TELEPASSPORT, VOICENET, HOL, ALGONET, LAN-NET, TELEDOME, ΝΕΤ ΟΝΕ, QTELECOM/CATIONS

OTE, ALGONET, COSMOLINE, COSMOTE,CYTA, FORTHNET, HOL, ΝΕΤΟΝΕ, VIVODI, ONTELECOMS, VOICENET,VODAFONE, WIND

10 Transit on fixed networks OTE OTEMarket 4 11 Wholesale (physical) network

infrastructure accessOTE OTE OTE

Market 5 12 Wholesale broadband access OTE OTE OTEMarket 6 13 Terminating segments of leased lines OTE

14 Trunk segments of leased lines OTE15 Access/call origination on mobile

networksNo SMP

Market 7 16 Voice call termination on mobile networks

VODAFONE, COSMOTE, TIM HELLAS/Q-TELECOM

VODAFONE, COSMOTE,WIND

VODAFONE, COSMOTE, WIND

Source: http://www.eett.gr/opencms/opencms/EETT_EN/Electronic_Communications/Telecoms/MarketsAnal/

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Overview of Regulation challenges in Telecommunications