Recent Developments and Current Regulatory Issues in European Telecom Markets

Dr. Ernst-Olav Ruhle

SBR Juconomy Consulting AG

WestLB-Telco DayFrankfurt, 28 August 2008

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Current Regulatory Issues within the EU Current Regulatory Issues within the EU 22

Digital DividendDigital Dividend33

Broadband in Rural Areas (“White spots”)Broadband in Rural Areas (“White spots”)44

Sub-national Markets / Regionalization of RegulationSub-national Markets / Regionalization of Regulation55

CONTENTS

EU-Review in GeneralEU-Review in General11

SBR Juconomy Consulting AGSBR Juconomy Consulting AG66

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Main Issues of the EU-Review

currently discussed

1 | EU- Review in General (measures proposed by EC)

European Regulatory Body Discussion regarding

different approaches EECMA*, BERT+, ERG Council and Parliament

opposed to EECMA Majority of NRA‘s opposed to

a “European Regulator”

Spectrum Harmonisation Aim to achieve freedom and

flexibility regarding frequency usage

Strengthening technology and service neutrality

Expansion of hamonisation measures

EC‘s Veto Power EC’s veto power applies to

market analysis (SMP finding) today

Veto power also on remedies is now being proposed

After such a veto of EC NRAs would have to amend the draft notification

Majority of member states opposed to this expansion of veto power

Market Recommendation Number of markets susceptible

of ex-ante regulation reduced from 18 to 7

Focus on wholesale markets for future regulation

Already implemented

Functional Separation Potential remedy on

vertically integrated SMP operators

Ultima ratio if competition problems not solved (additional new remedy)

Question of enforceability vs. voluntary separation

*European Electronic Communication Market Authority; +Body of European Regulators in Telecommunications

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2 | Current Regulatory Issues within the EU

Furture Call Termi-nation Regulation

Sub-national Markets

EC’s recommendation regarding termination rates in fixed and mobile networks

ERG’s common position on symmetry of fixed and mobile termination rates (consultation terminated December 2007)

Decisions in UK and Austria; market analysis in Belgium First focus on wholesale broadband markets and markets for

leased lines; other markets will follow Commission’s view on decisions and the analysis published ERG consultation on sub-national markets (terminated) Discussions in further member states; consultations

expected for autumn (incl. Germany)

Next Generation Access Intensively discussed on national level; different status in

member states EU plans draft recommendation or consultation soon ERG’s consultation on regulatory principles of NGA (2007)

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3 | Digital Dividend

Spectrum is a scarce resource with high economic relevance – EU Commission estimates its value to 250 billion € within the EU

Great dissatisfaction with the spectrum policy in the past, as it has created “artificial scarcity” and prevented market entry for new operators

Political vs. technological discussion: definition of a political framework preferable but no predetermination for certain technological solutions or applications

Current dividend discussion focuses on the UHF-band between 470 and 862 MHz

Generally very high demand for spectrum below 1 GHz

EU recommendation contains three applications of the digital dividend Increase number of TV programs Usage for high quality (HDTV) or new (DVB-H) broadcasting services Usage for non-broadcasting services, e.g. IMT or wireless broadband access

Which allocation approch(es) ensure that a “dividend” is really achieved?

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Penetration / Coverage

Definition of broadband

Approx. 3 million house-holds without or with insufficient broadband services, mostly in rural regions

Commercial providers have no/little economic incentive to invest, because of cost and low population density

Intense political discussion to improve the situation

"digital divide" between urban and rural areas

Involvement of public financing (“state aid programmes”)

Communities need knowledge transfer regarding available and suitable technologies as well as implementation

Improvement of “clas-sical” network operator / provider model

Risk of stagnation of economic development in rural areas

Involvement of public financing (“state aid programmes”)

Communities need knowledge transfer regarding available and suitable technologies as well as implementation

Improvement of “clas-sical” network operator / provider model

Risk of stagnation of economic development in rural areas

4 | Broadband in Rural Areas (“White Spots”)

Regional economic development

Sustainable networks

Adequate technology

Facts ConclusionKey Indicators

Information Society

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Market definition and analysis of sub-national markets as an upcoming regulatory challenge regarding the further liberalisation and regulation of European telecommunications markets.

Discussion has started already

What are the reasons for sub-national markets?

Decisions in UK and Austria as paradigm?

Common position of competitors possible?

Who benefits?

Consultation of BNetzA expected for autumn

German discussion

Necessity of sub-national markets

Choosing an appropriate geographic unit

Assessing the competitive conditions

Define geographic markets vs. differentiate remedies

Criteria to aggregate areas

Possible implications

ERG consultation

Geographical segmen-tation must be compliant with Commission’s framework

Criteria based on compe-tition law principles

Regulatory approaches need to be consistent

Sub-national markets and geographic differentiation of remedies are not substitutes

Commission’s view

5 | Sub-national Markets

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Dr. Ernst-Olav Ruhle

E-Mail: ruhle@sbr-net.comTel: + 49 211 68 78 88 48Fax: + 49 211 68 78 88 68 Mobil: + 49 178 68 78 88 4

SBR Juconomy Consulting AG Nordstraße 116D-40477 Düsseldorf

CONTACTS

Matthias Ehrler

E-Mail: ehrler@sbr-net.comTel: + 49 211 68 78 88 32Fax: + 49 211 68 78 88 68 Mobil: + 49 178 78 78 89 0

SBR Juconomy Consulting AG Nordstraße 116D-40477 Düsseldorf