The European People's Party (EPP) and European Democrats (ED) organised a hearing today in the European Parliament, at which the state of implementation of the regulatory framework for electronic communications was discussed, as well as its possible review.

Speakers included Commissioner Reding, MEP's, CEO's, regulators, and representatives of associations and operators. The hearing lasted for more than 4 hours, hardly without interruption. T-REGS attended the hearing in its entirety, and we took extensive notes.

Key highlights are as follows.

Commissioner Viviane Reding gave the keynote speech, which included comments on the pending review of the Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation, and a roadmap for the 2006 review of the EU regulatory framework. She indicated that the review of the Recommendation would address, amongst others, VoIP and TV over xDSL, with an open call for input scheduled for December 2005. She also made clear that, 'whilst it is premature to give precise indications, I do not expect that the review of the regulatory framework would lead to profound changes'. She did indicate that modifications of the framework will most likely seek to complete the internal market, for instance by addressing numbering, authorisation procedures, and new technologies.

T-REGS Note: Relying on other indications made in public meetings by European Commission officials in the past several months, this can be expected to include proposals to introduce a 'principle of country of origin' into telecommunications legislation/regulation.

As part of the 2006 review, an assessment will also be made of the functioning of the market analysis procedures. A consultation will be launched in mid-2006, focusing on whether the objectives have been achieved and the extent to which changes are needed, followed by formal proposals for modifications to the directives by end-2006.

T-REGS Note on French MVNO Access: Commissioner Reding also talked about a 'joint venture' between the European Commission and the French regulatory authority about Market 15 (mobile access and call origination). Later in the day, it was revealed that the ARCEP (this is the new name of the French authority after it became responsible also for postal services last week) had withdrawn its notification relating to Market 15, and would provide quarterly reports to the European Commission about the situation of MVNO access. The European Commission's press release (available in French only at this stage) about the French Market 15 can be accessed by clicking here. Update 31 May 2005: The ARCEP has now also published a statement (in French) on MVNO access, which can be accessed by clicking here.

Kip Meek, senior Partner at Ofcom, the UK regulatory authority, stated that the EU regulatory framework, implemented through Ofcom's combination of sector-specific responsibility and competition power law powers, has led to a 'fantastically productive and successful market analysis process', which resulted in continuity with the previous UK framework, whilst putting regulation on a much more sound economic and intellectual basis. He also emphasised that, ‘despite 20 years of liberalisation, BT still provides most fixed infrastructure, and has a very high share of narrowband as well as broadband markets, whilst alternative network operators' business sustainability remains in question’. Kip Meek also made clear that, in Ofcom's view, ‘NRAs need to ensure that there is sufficient advance thinking on the regulatory implications of strategic market developments, in particular the introduction of Next Generation Networks.

Daniel Pataki, of the Hungarian regulatory authority NNH, stressed that the EU regulatory framework is adequate for the new Member States.

T-REGS Note: This is in sharp contrast to the statements that have been made by certain Eastern European operators.

He also emphasised that ‘the goal of the NNH is to seek competition among different (infrastructure) platforms as a medium-term objective of regulation, so as to be able to switch to light-handed regulation over time’. For the 2006 review, he suggested that Markets 11 (unbundled access), 12 (wholesale broadband access) and 18 (broadcast transmission) could usefully be regrouped (to deal with developments such as TV over xDSL), and that lighter market analysis requirements could usefully be applied to 'non-focus areas', so as to focus regulation on the areas in which regulatory attention is essential. He also stressed that Next Generation Networks represent a challenge to the framework, and that these may require a new regulatory approach, especially with regard to issues of interoperability.

Achim Kaspar, of the Austrian association of alternative operators, emphasised that, from the perspective of his members, strong national regulatory authorities, and strong EU supervision, are essential to sustain competition, and that the details of regulation are essential. In his words: 'if we lose a key among the key points, the market can quickly revert to monopoly'.

Marco Tronchetti Provera, President of Telecom Italia, suggested that 'we should think about telecommunications regulation being organised along the lines of the European Central Bank'. T-REGS Note: This was a suggestion to devolve powers to the EU level, to focus on the main principles, and avoiding micro management. He expressed disappointment about the National Regulatory Authorities, which, in his view, are changing the perspective, i.e. transforming a deregulatory agenda into increased regulation. He focused on services provided over the Internet Protocol (SoIP) and emphasised that 'it is not because consumers may perceive new IP services as a substitute that the National Regulatory Authorities should regulate them in the old way, and abstract from innovation'. He specifically cautioned against extending television regulation to Video on Demand, and requested that ‘the flexibility originally envisaged in the 1999 Review should be put back into the regulatory framework’.

Kai-Uwe Ricke, Executive Chairman of Deutsche Telekom, stressed that, in his opinion, 'the main problem is not the current legal framework, but the current regulatory practice, which leads to more regulation, including of newly emerging markets and innovative services'. In his presentation, he openly confronted the European Regulators Group (ERG), which, according to him, 'is putting lots of effort in issuing guidelines and recommendations to justify regulation, including of new markets, and is not working on reducing regulation'. Mr Ricke emphasised that DTAG needs certainty about the scope of regulation, that risks are greater than ever before, and that risks are increased by the threat of regulation. He praised the United States for its recent forbearance from regulation on broadband and internet markets, and indicated that Deutsche Telekom will focus over 50% of its investment outside Europe, especially in the United States (T-Mobile USA). He also stated very explicitly that 'if policy makers want investment in Europe, there is a need for an immediate change of regulatory policy, i.e. to reduce the scope of regulatory intervention', and that 'the European Parliament should exercise political control on the implementation of the legal framework by National Regulatory Authorities' and that 'a new strategic review is needed at EU level.'

Tele2's Jan Tjernell, and Roger Wilson of ECTA, the European Competitive Telecommunications Association, offered opinions directly opposing the points of view expressed by the CEOs of Telecom Italia and Deutsche Telekom. Tele2 focused on the need for implementing the framework before starting to review it. Mr Tjernell stated that 'if you remove regulation, you'll destroy everything that has been achieved'. Roger Wilson of ECTA presented research showing that investment flows (by new entrants as well as by incumbents) go to those markets where regulation supports competition, and he emphasised that 'detailed non-discrimination regulation is probably a key building block to effective competition'. He also implored EU institutions to be pro-active, especially with regard to Next Generation Networks (according to ECTA, local access bottlenecks will remain after NGN introduction) and relating to VoIP, for which he expressed concerns about VoIP being presented (by incumbents) as a new product, in order to escape from regulation.

Duco Sikkinghe, CEO of Telenet (a Belgian cable-tv, broadband, and telephony company) vigorously denied that investments from incumbents and new entrants are comparatively low in Belgium (this was a direct response to the ECTA study in which Belgium is given a low ranking), but went on to emphasise in no uncertain terms that asymmetric regulation is, in his opinion, still needed. He stated that 'if regulation is removed, we will be crushed by the big guys' (referring to the incumbents' cash-flow which is a multiple of that of even the largest new entrants), and 'big money will own the content of tomorrow, i.e. own digital TV', and 'if the European model is for incumbents to acquire start-ups, Europe will lose in terms of innovation'. He also indicated that 'the small guys need a route to mobility' whilst making reference to WiFi and WiMax.

The hearing went on with presentations from: Alcatel, UGC Europe (also on behalf of ECCA, the association of cable-tv network operators, which addressed State Aid for municipal fibre networks), Ericsson, Amena and Intel.

For further details, or for a discussion, please contact Yves Blondeel.