a user perspective
|
European telecommunicatons;
a user perspective |
| Telecommunications in Europe Summer School | |
A presentation by Ewan Sutherland.
Introduction
Firstly, thank you for the invitation to speak today. As a former university teacher it is nice to have the chance to interact with students again, every if only for one hour.
I know Professor Johannes Bauer at Michigan State University from a
long time ago. We were participants in a seminar in telecommunications
in Salzburg. Also there were Bill Drake and Lee McKnight whom some of you
will have come across. I spent the fall of 1995 teaching on the MBA Program
at Georgetown, when I met Professor Martin Irvine in the days when he was
setting up a new Masters' programme on which some of you are now studying.
I will be back in DC, though on the other side of the Potomac, in September
for the Telecommunications Policy Research Conference (TPRC) to talk about
international roaming charges and competition law.
INTUG
INTUG, the International Telecommunications Users Group, is a relatively and perhaps surprisingly old organisation. It was founded in 1974 at a time when the industry looked very different from today. That is not to say that we have achieved everything we want. There are still many areas where we want to see improvements.
Our membership comprises national associations such as BELTUG here in Belgium, AFUTT in France and the ICA in the USA. These associations vary considerably from a focus on corporations through to predominantly consumer organisations. Some corporations are members of INTUG, often they are also members of national associations. There are some individuals, mainly consultants, lawyers and academics. (There is a list on the web with links to their web pages.)
INTUG exists to represent the views of the users wherever decisions are being made about telecommunications policy. We try to be a counterbalance to the opreators who have understanable commercial interests in the decisions. We are active in the International Telecommunications Union (ITU), in the Organisation for Economic Cooperation and Development (OECD), the Alliance for Global Business (AGB), the International Chamber of Commerce (ICC) and in regional organisations such as APEC and here in Brussels with the European institutions, the Parliament and Commission, as well as nationally with the member states. It is primarily about the European institutions that you are interested today. There is a lot of peer-to-peer activity, of members talking to each other and sharing experiences and approaches to solving problems.
The concerns of telecommunications users and managers are, inevitably,
about the costs and availability of services. They are very keenly aware
of prices in other countries and compare cost and quality of service as
well as the launch date and geographical availability. Many corporations,
as a part of general policy, are telling all managers to reduce the number
of suppliers to a handful in each area of business. This is an impossibility
in telecommunications where in so many countries you have to purchase services
nationally and often from different suppliers for fixed and mobile telecommunications.
For all that we talk of the "internal market" in the European Union, there
are disturbingly few companies who can get one operator to meet all their
fixed telecommunications needs. There is no pan-European mobile service
available today, you have to patch it together, country by country.
European Competition law
The original Treaty of Rome contains some very powerful articles on competition law, primarily Articles 85, 86 and 90. These are re-numbered as 81, 82 and 86 in the present Treaty of Amsterdam, but are otherwise unchanged. Until very recently these were very much stronger than domestic laws in most member states.
Article 86, which concerns "special and exclusive rights" granted by member states to corporations has been very especially important in the liberalisation of telecommunications. It was used to break open the markets for customer premises equipment and, more recently, to force dominant incumbents to dispose of their cable television operations. Such decisions are made by the Commission alone, without Parliament or Council.
These articles are effected by the Merger Regulation. This requires the Commission to consult on various categories of mergers, acquisitions and "concentrations". We have to be careful since our own members are themselves involved in mergers and must obtain approval. Nonetheless, there are times when we must speak out on the needs of users and what we see as the realities in the market. Approval of mergers may well involve undertakings by the merging parties. For example, to dispose of overlapping interests in a particular market. Many of these undertakings have helped to open the market. (see the web pages of DG Competition.)
One year ago, on 27 July 1999, the Competition Directorate-General launched a sectoral investigation into telecommunications under these three Articles. It concerned three specific aspects of telecommunications:
Mobile roaming I will discuss at greater length, but we would hope to results of the investigation before the end of the year.
The local access market has become more politically important as the
EU pushes to catch up the US adoption of the Internet. Commissioner Liikannen
recently suggested that some Asian countries could overtake member states.
There is concern that dominant incumbent are abusing their position in
the pricing and in the launching of services.
International roaming for mobile telecommunications
Back in the late 1990s INTUG became concerned at the spiralling costs of roaming charges for mobile telecommunications. We instigated a survey and are presently repeating that. The aim is to compare the costs of international calls within the "internal market", the charges to those making the call who are "home" customers and those are "roamers" making a call the same country. We found some very, very odd prices. The information was hard to come by, with operators reticent to provide their own customers with price information. Though they are happy enough to act as the billing agent and taking around 15-25 per cent margin. The prices were often extremely high. There were also weird variations, even some cases where the roaming customer was paying less than the local customer. (see http://www.intug.net/surveys/gsm/)
The problem is that competition in the GSM market is largely froth. It is visible and confusing with complex tariffs. However, underneath there is simply no competition in international calls and in roaming. The GSM Association would have us believe that all the successes of mobile telecommunications are the result of competition. However, there is a very much simpler and more plausible explanation, state sponsorship. The standard was supported by the European Union and individual operators were given licences by member states. Strangely, all of these will get 3G/UMTS licences. Sometimes the GSM Association will claim that proof of competition is to be found in the lack of profitability. However, this is more frequently due to the high levels of "churn", sometimes thirty per cent. Indeed they claim that these levels show competition, rather than the inadequacy of customer care and the less than straightforward tarrif packages they offer. Or indeed the lavish and extravagent practices they have in acquiring new and replacement customers, not the least being "free" handsets. Businesses are now moving to buy direct from the manufacturer to avoid these gifts. Before you believe profitability arguments, please check what the real costs of building the network are.
In many countries there is still no mobile number portability and the operators are resisting its introduction. However, that is included in the new regulatory package. The next stage is to emulate Denmark and Finland which have introduced carrier selection for mobile. A more complicated regulatory measure would be to introduce Mobile Virtual Network Operators (MVNOs). (see me recent talk to a conference.) An MVNOs bundles under a brand name of long distance and international calls together with a roaming service. In the UK we have recently the appearance of a consumer and a business brand MVNO, respectively Virgin with One2one and Energis with Orange.
At present it is impossible for an operator to engage in roaming unless they have a GSM licence. This seems to us to be discriminatory and significantly reduces competition in the market. It is creating an unusual interest in GSM and UMTS licences in markets such as Iceland, Andorra and Leicthenstein.
It was amusing to listen to the press conference yesterday of VoiceStream and Deutsche Telekom AG (see investor relations on http://www.voicestream.com/). DTAG was describing the USA as an emering for mobile telecommunications. Despite the reservations of Senator Hollings it seems that this acquisition will go through.Global mobile operators are slowly emerging, but services remain fixedly national, requiring companies to manage multiple accounts, process multiple bills and talk with many different account managers. It also serves to diminish their otherwise considerable buying power.
In the USA you have Enhanced-911 where, I believe the requirement will be to provide accuracy to with 125 yards in 67 per cent of calls. A debate on this is underway in the European Union where the number is 112. The proposed Universal Service Directive simply says that location information must be passed to the emergency services. It is being left to an industry-led group to sort out the details. This comprises the manufacturers, GSM and fixed operators with the emergency services, users and consumers. Clearly mobile networks have some knowledge of your location and they are proposing to develop commercial services based on it. However, it is much harder to determine what the universal service requirement should be. It could be expensive either putting GPS capability into the many millions of mobile phones or adding systems to the network. It will require large organisation to pass the location of call from inside oil refineries and university campuses.
The question of the extent to which the "industry" should engage in
self-regulation and co-regulation is still something which is unanswered.
It may yet prove to be a substantial burden.
Harmonisation and subsidiarity
There is a dialectical relationship between harmonisation and subsidiarity.
Industry policy
The 1999 Communications Review
The Review began in 1998 and will not finish until the last member state implements the last Directive, which could be as late as 2002. Some aspects of the legislation which are new law will not be known for sure until 2006, when the European Court of Justice in Luxembourg has given a ruling. (The web page for the 1999 Review has all the documents including preliminary studies and submissions.)
The position today is that the European Commission has finished a long exercise involving many consultations and hundreds of formal submissions. INTUG produced four position papers between October 1999 and June 2000 in order to make its inputs to the Commission (these can be found on the web). The Commission was very open to comments. The criticisms are that the pace was rather faster than we expected and the final stage seemed to be something of a sprint finish.
The process now is co-determination with equal status and weight being given to the European Parliament and to the Council of Telecommunications Ministers, representing the member states. This process is already underway with the Industry Committee of the Parliament having appointed rapporteurs on the five directives, one regulation and one decision. This will end in a conciliation process as early as November, but more likely early in 2001.
The strong political impetus from the Lisbon Summit of the heads of government in last March has meant that the Commission accelerated its work and the Parliament and Council has responded. The European Union is seen as having a slight edge over the USA in mobile telecommunications and the mobile Internet and this is seen as something which must be maintained. Everything which can be done to catch up on fixed access is also to be encouraged. Hence, the enthusiasm to unbundle the local loop to facilitate aDSL services and to licence FWA/WLL.
One of the crucial issues in the new regulatory package and one where there has been considerable disagreement is over the definition of Significant Market Power (SMP). This is the definition used to enforce regulation below the threshold of dominance. Regulation based on the existing definition of SMP has been extremely beneficial to users in all member states. In our view it should be continued.
There is no disagreement in principle about what to do. Sector-specific
regulation should be withdrawn as and when there is sustainable competition
in a market. There is enormous disagreement about whether this applies
to any market and some efforts by operators to define very broad markets
in order to show that they are not dominant. Even if one believed that
mobile telecommunications was competitive there are bits of that market,
for example, international roaming and termination of calls, which are
demonstrably not competitive. There will be long battles ahead on the definition
of markets and the determination of whether or not they are competitive!
Implementation of directives
The legislative means available to the European Institutions are varied, they detailed in the Treaty of Amsterdam and in legal textbooks. Rcommendations are approved only by the College of Commissioners, but must be implemented by national regulatory authorities, though sometimes they will require primary legislation. Regulations are proposed by the Commission and approved by the Parliament and the Council. Once passed, they apply directly in European Union law. Directives are proposed by the Commission, approved by the Parliament and Council, but then require implementation by member states by primary legislation. The Commission constantly monitors the implementation of directives by member states and from time to time takes legal action against them to enforce particular directives.
In telecommunications there is annual monitoring of the implementation of directives by the Information Society and Competition Directorates-General. The result is a series of report of which the most recent was published in November 1999. The Implementation of regulatory package [COM(1999)537] is a detailed critique of the activities of member states, regulators and incumbents in each member state. The European Parliament issues a report on the Commission's study (available on the web).
The Commission is presently in the process of consulting consumers,
users, new entrants, established operators and regulators to compile the
Sixth Report. INTUG has met with the Commission and is providing detailed
input country by country in addition to general points. The Sixth Report
will be debated in the Parliament, both at the Industry Committee and in
Plenary. This completes the political cycle and will allow a review of
the effectiveness of moves towards a harmonised internal market.
Privacy
The growth of m-commerce and in particular location-based services raises a range of concerns for users. It is far from clear who will have access to this information and just how much detail and analysis will be permitted.
The issue gets considerably more complicated if you roam to another
country, where additional network operators and service providers become
involved. It may be obvious to all of these that you are in a different
jurisdiction.
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