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

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

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

ECTA Regulatory Scorecard

Scorecard 2005

218

220

230

244

281

286

291

296

300

311

311

327

339

349

398

440

0 100 200 300 400 500

Greece

Germany

Poland

Czech Republic

Belgium

Hungary

Spain

Netherlands

Portugal

Sweden

Italy

Ireland

Austria

France

Denmark

UK

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

Relationship between Scorecard and Investment as percentage of GFCF

0

1

2

3

4

200 250 300 350 400 450

Scorecard

Inve

stm

ent

DE BE NL

ES

IE

FR DK

ATSE

IT

UK

…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

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

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

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

Effective regulation: the starting point

Driving investment: broadband

Local loop unbundling

ATM bitstream

IP Bitstream

Resale

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

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

Retail DSL market

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

avr-0

3

juin-

03

oct-0

3

avr-0

4

juin-

04

oct-0

4

avr-0

5

juin-

05

oct-0

5

avr-0

6

LLU

Bitstream

France Telecom

2003 2004 2005

1st triple play offers: Free (LLU) & France Telecom

Triple play offer of Neuf Cegetel (LLU)

Triple play offer of Telecom Italia France (LLU)

2006

Retail DSL market

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

avr-0

3

juin-

03

oct-0

3

avr-0

4

juin-

04

oct-0

4

avr-0

5

juin-

05

oct-0

5

avr-0

6

LLU

Bitstream

France Telecom

2003 2004 2005

1st triple play offers: Free (LLU) & France Telecom

Triple play offer of Neuf Cegetel (LLU)

Triple play offer of Telecom Italia France (LLU)

2006

How long for liberalisation?

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?

Thank you and arrivederci

ECTA, Rue Royale 71, 1000 Bruxelles, Belgium

Innocenzo Genna, Chairmaninno@innogenna.it

Ilsa Godlovitch, Director of Regulatory Affairsigodlovitch@ectaportal.com