Effective regulatory regimes and impact on investments in the telecom sector:

A perspective from ECTA

ECTAEuropean Competitive Telecommunications Association

14 April 2005

Tom Kiedrowski

Regulatory Affairs Manager, ECTA

What is ECTA?

The European Competitive Telecommunications Association is the leading pan-European trade association serving the alternative electronic communications industry.

ECTA has some 150 member companies, operators and service providers as well as national associations of such.

ECTA objectives are to: Work for a fair regulatory environment which allows all electronic

communications providers to compete on level terms in order to multiply investment and innovation throughout an effective European internal market.

Represent the electronic communications industry to key government and regulatory bodies

Maintain a forum for networking and business development throughout Europe.

Policy context

Recently Commissioner Viviane Reding outlined her

i2010 agenda.

One of those ‘i’s is for innovation and investment in ICT.

[Europe]”should be world-class in the take-up of new informational products and services.”

Investment is critical to development in most industries and to the growth of economies in general: ICT is no exception

Communications Competition and Investment

In “ICT”, the “C” of communications plays a significant role in delivering EU growth objectives and driving innovation and productivity.

ECTA believes that effective competition is key to unlocking the potential of the electronic communications sector because:

• it drives innovation• it drives down prices• it boosts broadband penetration and adoption

and above all else:• it stimulates investment

The (not so) New Regulatory Framework

The single most important way of achieving the benefits of competition is through effective implementation of the new regulatory framework (NRF)

Mid-term review: the Kok Report

• “the regulatory framework for electronic communications adopted in 2002 should be fully implemented and strictly enforced, so that competition is more effective in driving down prices for consumers and businesses.”

It provides the right tools to foster competition and many of the existing bottlenecks could be resolved by using these tools in an effective manner

The liberalisation process is NOT complete

transposition by Member States has been difficult – some better than others

Moreover, effective implementation still varies significantly across Member States and is not compliant with the directives in some cases

This leads to significant discrepancies that do not benefit end-users and can impact growth

Ofcom Strategic Review

• Regulation is still needed and Ofcom plans to reinforce its efforts to prevent discrimination by the incumbent.

• Non-discrimination is a key element of the NRF and probably the best tool to ensure effective competition

Regulatory Effectiveness

Regulatory effectiveness still varies significantly across Member States

Regulatory Scorecard Results

200

215

253

257

267

276

293

309

318

384

0 100 200 300 400

Germany

Belgium

France

Spain

The Netherlands

Sweden

Italy

Denmark

Ireland

United Kingdom

Uncompetitive Investment

European Commission and NRAs are being pressurised to shift their regulatory policies from one that encourages altnets to one which focuses on rewarding operators investing in new networks

The numbers game

It useful to look at all this incumbent investment …

Investment in Belgian telecom market – Platform members & Belgacom

Investments by Telecom Operators (in mio €)

0

200

400

600

800

1000

1200

1400

1997 1998 1999 2000 2001 2002 2003 2004

Platform Telecom Operators & Service Providers Belgacom Groep

Financial Results

A similar story is to be found looking at the results of other major telecos such as KPN in the Netherlands and Telecom Italia in Italy

It I can read financial statements, regulators and policymakers should, too!

Competition stimulates Investment

Incumbent and altnet investment follows a similar pattern: highest in “best” regulated (most competitive) markets

Relationship between Regulatory Scorecard and Investment as Percentage of GFCF

0

2

4

6

8

200 250 300 350 400

Regulatory Scorecard

Inve

stm

ent a

s %

of

GF

CF

UK

IE

DK

SE IT

NL

FR ESBEDE

Source: JonesDay & SPC Network (Regulatory Scorecard)

Keys to fostering investment through effective regulation

Ensuring equivalence of access• Non-discrimination is not always understood or effectively

enforced. Commission must clarify this concept and enforce it consistently

• Key to relaxing burden of regulation is creating a compliance culture. Need to assess and embrace incentives, penalties and organisational structures which entrench compliance

Enabling convergence• ‘New Services’ , (e.g VoIP), offer the potential to transform

regulatory landscape.Clear Commission Guidance and urgent amendments to the Universal Services Directive needed to remove barriers

• Vital also to ensure that competition is maintained and enhanced with the transition to converged ‘next generation’ networks (legacy assets will still be fundamental to network roll-out)

Keys to fostering competition (cont)

Securing implementation of the framework

• Many countries have yet to complete the market reviews. Directives don’t adequately specify deadline.

• In some cases the Directives have not been accurately transposed, leading to uncertainty and less harmonisation.

• Both issues need to be addressed through infringement or possibly formal mandate

Addressing lengthy appeals procedures

• In some countries appeals are lodged as a matter of course and take up to 5 years. Action is needed by Member States to establish deadlines and ensure effective appeals process. The Commission must play a role in facilitating this.

Conclusions

i2010 is achievable given political will and regulatory guidance

Communications has and will continue to play a vital role in delivering an effective and productive European information society

Altnets must be allowed to climb the ladder of investment Evidence demonstrates that competition and regulatory

effectiveness is key in driving innovation, investment and growth.

Underlying implementation issues concern ‘equivalence of access’, implementation of the NRF and appeals procedures.

Thank you

Tom Kiedrowski

Regulatory Affairs Manager, ECTA

tkiedrowski@ectaportal.com