The next five years of electronic communications regulation
Towards a next generation regulation for the Digital Ecosystem
Speech at "FSR COMMUNICATIONS & MEDIA ANNUAL CONFERENCE" Florence, 4 July 2014
Ladies and gentlemen,
It is my pleasure being with you again under a different capacity, namely as a telecoms lawyer and university professor, upon expiry of my tenure as regulator, Chair 2013 of BEREC, the Body of European Regulators for Electronic Communications, and President, between 2009 and 2013 of EETT, the Hellenic Telecommunications and Post Commission.
The FSR Annual Conference offers us indeed a suitable forum for a fruitful exchange of views on how an adaptive “next generation” regulation may attract investment in fixed and mobile broadband in Europe. In order to understand how regulation could best adapt to the emerging digital ecosystem in the next five years, we need to briefly look at the critical trends that are currently shaping its evolution.
Trends of the emerging digital ecosystem
The emerging digital ecosystem is characterized by the need for user mobility, universal broadband coverage and ubiquitous communications. The Internet of Things allows “smart” objects and connected devices to sense, log, interpret and communicate information, by acting on their own accord or in cooperation with other objects.
Traffic and energy sensors, connected cars, smart-grid meters, internet-enabled home appliances, tablets, cameras, wireless microphones and RFID readers track and sense the environment by collecting and transmitting to central repositories huge amounts of data. Wearable technology products, such as glasses, medical devices, fitness trackers, self-learning thermostats and clothing that monitors respiration, temperature and activity become widely available to consumers.
As a result, new forms of communication emerge with the user, with the environment and with other machines. Smart applications and novel information management and delivery methods open new possibilities in education, healthcare, entertainment, communication and radically transform all aspects of our professional and social life.
In order for all these innovative applications using digital data to constantly and seamlessly reach each one of us, a robust high-speed network infrastructure has to be made available to all citizens at an affordable price.
Towards a Telecoms Single Market in Europe
In this direction, the “Connected Continent” package proposes concrete legislative measures on critical issues for achieving a Telecoms Single Market in Europe. These measures aim at pushing the telecoms sector fully into the internet age through a simplified regulation for companies, the availability of standardized fixed access products, a better coordination of spectrum use for wireless broadband together with a concerted effort to attract more 4G investment in order to facilitate the provision of pan-European services. Moreover, the package contains rules that protect the open internet, fosters innovation and safeguards consumer rights, with regard to contracts, price transparency, quality of service and switching, while it abolishes roaming premiums by the end of 2015.
However, how can those legitimate high level political objectives be realistically achieved in an era of economic downturn with operators’ revenues and profitability constantly falling and access to capital becoming increasingly difficult? How can the telecommunications sector in Europe become an attractive investment target again?
Is market consolidation, relaxation of the regulatory burden through the shifting from an ex-ante model to an ex-post competition-based regime, an appropriate remedy? Is regulation alone enough to change the game without reviewing administrative and commercial law frameworks and tax regimes? Is the electronic communications sector an attractive investment target compared to other economic sectors? Despite any diverging views on the appropriate solutions, it is necessary for policy makers, stakeholders and regulators to redefine the rules of the game for the smooth transition to the digital ecosystem.
Redefining the rules of the game
Today European regulation still focuses on a concerted effort to protect competition as a result of market liberalization that has started more than twenty years ago and has produced so far innovation and consumer welfare. Local loop unbundling, radio spectrum liberalization, competitive market analysis, cost-oriented wholesale products, universal service, quality of service, consumer and privacy protection, and many other regulatory innovations of the European framework still remain fundamental for a level playing field in the market.
It is true that the telecoms and media sector in Europe continues to be subject to a high degree of regulation, much of which is intended to make the sector more competitive and lead to lower prices, higher quality and greater choice for consumers, while it attracts criticism by market players for over-regulation.
From an industry structure viewpoint, the info-communications sector in Europe continues to see an increasing level of concentration. Under the current economic conditions, providers are looking at the best way of achieving efficiencies and costs savings, given the need to invest continually to improve their networks and services.
A number of mergers between mobile operators and cable companies recently cleared by the European Commission suggest that consolidation will happen, when it is economically viable and compatible with competition rules.
Outside the area of mergers, most of the Commission’s cases have concerned potential abuses of dominance in the sectors of patents, on line search results and e-books. It is striking that nearly all of these cases have been concluded by the Commission accepting commitments from the relevant parties as a means to reach a speedy conclusion to its investigations.
Towards a “next generation” regulation
However, as fast-moving markets of ICT, telecoms and media evolve, new issues emerge that need to be effectively addressed by a “next generation” regulation. To be efficient, the new regulation should be able to holistically respond to all the technical, economic, social and legal challenges at stake.
For instance, this new wave of rules has to be flexible enough to accommodate, from a technical perspective, the gradual transition from the traditional voice-centric PSTN model towards all-IP networks and data-driven business models. It has to effectively facilitate infrastructure sharing to reduce network roll-out costs. In the same direction, a coordinated spectrum policy in Europe has to quickly release new spectrum, support the efficient use of both licensed and unlicensed spectrum, such as the TV white spaces, and further explore the application of dynamic spectrum allocation schemes.
From an economic perspective, the new regulation has to provide transparency, long-term price stability and more aligned prices across the single market. Phasing out the difference in charges paid for domestic, roaming and intra-EU calls is a significant step in this direction. Updating the SMP guidelines to take into account joint dominance, correctly pricing the pan-European virtual unbundling products, defining the relation between wholesale and retail markets or assessing the impact of operator self-supply on pricing constraints, represent additional important challenges for both the European Commission and the national regulators.
From a market perspective, multiple play bundles combining fixed-voice telephony, fixed-line internet access, mobile telephony and television are offered by telecoms providers in cooperation with media companies in Europe. In this context, should a new market be introduced by the Commission when reviewing the relevant markets’ list? Moreover, traditional markets relying on outdated leased line rental or carrier pre-selection access schemes still remain relevant for certain jurisdictions especially for elderly citizens. How those issues may be effectively tackled through a market review aiming at reducing the number of markets subject to ex ante SMP regulation?
On the other hand, Over the Top Players currently offer internet-based communication, broadcasting and retailer services. They interact with social media websites to “narrowcast” news or videos tailored on user demand. To assess market dominance, how could OTT services be potentially included within the competitive market analysis process, conducted by regulators?
Finally, new players are now forging ahead into the market for content generation and distribution, opening up access for small production companies and even individuals to take their creative visions directly to a global market through the Internet. They also try to gain financial backing for productions that eliminate the traditional distribution gatekeepers. In this context, how the EU copyright legislation can be made fit for purpose for innovation and creativity for global markets addressed at the digital age?
From a consumer protection perspective, existing privacy and information security rules have to be adjusted to protect user privacy against the government and private sector surveillance. In this direction, guidance is needed by the European Authorities on the applicable data protection policy, especially after the recent annulment by the ECJ of the data retention directive as contrary to the European Charter of Human Rights. Should operators in Europe continue collecting subscriber data on voice and internet usage and for which timeframe? Are they obliged to deliver such data to law enforcement agencies, on purposes of crime prevention, and under which conditions? Which measures are necessary to boost the music download business, establish a single area for online payments and further protect EU creators and consumers in cyberspace?
Synergies between various regulatory bodies
In a broader perspective, European policy makers have to favor synergies between various regulatory bodies, so as to effectively face new challenges, create trust, reignite interest in the European digital industry and promote an investment friendly environment.
Coordination will reduce conflicts or overlaps between various competencies of regulators for electronic communications with competition authorities as well as with institutions dealing with privacy and security, and will contribute to the effective regulation of the new digital ecosystem.
BEREC as a tool for consistent regulation
As far as consistency and regulatory harmonization are concerned, I am convinced about BEREC that I served for three consecutive years playing an increasingly important role in the regulatory arena. BEREC will play a pivotal role in monitoring, through its novel institutional design, its market intelligence and the quality of the NRA experts, the correct implementation of the Connected Continent Package, once adopted, across national markets.
The areas of single authorization, virtual unbundling, non discrimination mechanisms, adequate costing methodologies, net neutrality, consumer protection, disabled users’ accessibility to the information society and machine-to-machine communications represent only some of the BEREC fields of expertise.
In conclusion, cooperation among regulators or merging of regulatory authorities, when appropriate, will allow facing the critical uncertainties of the digital era such as user empowerment and consumer protection, market regulation, intellectual property, trust, security and privacy. The next generation regulator has to be agile, cooperative, open and nimble enough to maximize the benefits of new technologies and services, while minimizing the hazards to consumers and economies.
I look forward to a lively and productive discussion.
Thank you for your attention.
Dr Leonidas Kanellos
BEREC Chair 2013, TELECOM EXPERTS