1. ITCOM Increasing Role of Public Private Partnerships in the ICT Ecosystem 25 Years of Telecom/ICT Sector Reform in Europe, and Beyond… Morten Falch Associate professor, CMI Aalborg University CPH falch@cmi.aau.dk 14-15 November 2012, Geneva, Switzerland

2. 2 The EU ICT initiatives  ICT industry R&D  Precompetitive research  Sharing of a common European vision Standardisation  Common European standards  ICT Infrastructure Sector Reform Privatisation and competition  Information Society The Lisbon Process Focus on the broader perspective

3. Sector Reform: Telecom Liberalization  Began in US in late 1960s; UK in 1984; EU in 1987 Green paper; then spread globally.  A process of converting national monopoly markets to competitive ones.  Independent regulatory authorities (NRA) established to implement policies.  A much more complex, difficult and time-consuming task than expected.  It is still far from achieving its objectives.

4. Purposes of Liberalization  Competitive market operational efficiency.  Stimulate investment in network rollout, as monopolies tend to restrict investment.  Stimulate innovation, the adoption of new technologies and market development.  Provide a modern infrastructure for other sectors, stimulating economic growth.  Provide a foundation for building an EU common market.

5.  A universal service obligation (USO) is included in EU directives  Creation of real competition is considered to be a more efficient remedy to address the same issue  USO has been seen a way to protect the incumbents  USO has played a limited role at the European market What about universal service? 5

6. Current Status of Liberalization in Europe  All reform movements go through a familiar cycle – initiation, growth, maturity.  Maturity may reflect Completion or normalisation of the sector barriers that cannot be overcome or mid-stream policy changes.  The next step then will be either, maintenance of the level of liberalization that has been achieved  Or less competition and more significant monopoly power (SMP).

7. EU Liberalization  Stage 1: 1987-98: Establishment phase; reforming national monopolies, establishing NRAs. Establishing of legal frameworks Focus on voice telephony  Stage 2: 1998-2009: Implementation phase Fine tuning of competition regulation Service based vs. Intfrastructure based competition encompassing ICT convergence.  Stage 3: 2009 – continuing: Maturity phase The ICT ecosystem Focus on infrastructure development

8. Stage 1: 1987-1998 The Establishment Phase: Objectives  Create a liberal telecom market in 1998  Reforming national monopolies – restructuring, privatizing, preparing for competition.  Establishing independent NRAs, a new institutional form for many countries.  Licensing competitors.  Introducing regulations to reduce barriers to entry and access that will provide a foundation for efficient competition.

9. Stage 1: 1987-1998 The Establishment Phase: Actions  1998 the deadline for introducing a liberal telecom market  An heroic task of institutional change.  Strong resistance from incumbent monopolies and many national govts.  NRAs inevitably weak in initial learning phase.  New laws, policies and regulations must be transposed and implemented nationally.  Many complex issues to address – interconnection, network access, discrimination, pricing, etc.

10. Stage 1: 1987-1998 The Establishment Phase: Results  The 1998 deadline for liberalisation was met (in principle)  Institutional restructuring completed in all 15 EU member states, ie., transposition of policies and directives.  Limited progress in implementing them.  Most NRAs just beginning to address most issues of implementation.  Very limited competition; national incumbent dominance in all markets.  New institutional structure now ready for serious implementation of policies and regulations.

11. Stage 2: 1998-2009 Growth of Liberalization: Objectives  Rapid progress in implementing the reforms at the national level through NRAs.  Extending the reforms to 12 new member states.  Fine tuning regulation based on the 1999 review  Modifying and extending policies and regulations to reflect the rapid technological and market changes in mobile and IT, i.e., Internet and ICT convergence.  Address new issues relating to spectrum, access to non-voice services, and remove barriers to players in neighboring industries.

12. Stage 2: 1998-2009 Growth of Liberalization: Actions  New Regulatory Framework 2002  EC began to publishing annual implementation reports from mid-1990s to stimulated compliance.  An updating of fundamental issues - interconnection, network access, pricing, etc.  Led to new directives (2002) for transposition and implementation by national govts and NRAs.  EC directive in 2003 requiring NRAs to measure significant market power (SMP) in 18 markets.

13. Stage 2: 1998-2009 Growth of Liberalization: Results  The reform agenda was being pushed by the EC and a few leading countries – DK, NL, UK.  Powerful resistance from incumbents in all countries and weak regulation in most.  Incumbent market shares declining, but strong SMP retained in all major markets, including mobile markets and alternative infrastructure.  Shift to SMP as reference point for regulation provides foundation for anticipated competition.

14. Stage 3: 2009-continuing Maturity: Objectives  Consolidation of the industry  Telecom regulation will focus on markets where competition is ”still lacking”, not incumbents.  Digital Agenda for Europe focus on broadband access for ultra-fast Internet.

15. Stage 3: 2009-continuing Maturity: Actions  New policy speaks of ”reinforcing competition”, but offers no new initiatives.  BEREC replaces IRG for 27 NRAs to exchange expertise & best practice, advise, consult and give opinions – no real power.  Implementation reports no longer required.  EC steps in to regulate prices for mobile roaming and termination prices. (NRA failure?)

16. Implementing EU Liberalization Policy: Incumbents Broadband Market Share (%) Country 2005-6 2010 UK 24.8* 28.0 DK 55.4 62.3 NL 44.5 42.7 SW 39.1 39.0 FI 66.8 68.0 FR 44.0 44.3 BE 48.8 47.6 Source: EC

17.  eEurope (2000-2002) Cheaper, faster and more secure Internet Investment in people and skills Greater use of the Internet  eEurope 2005 (2003-2005) Modern on-line public services Dynamic e-business environment Widespread Broadband Access Secure information Infrastructure  I2010 (2006-2009) A single European Information Space Innovation and investment in research Inclusion of better public services and quality of life  Digital Agenda 2020 The Lisbon Track in the EU ICT policy 17

18. Digital Agenda 2020

19.  Emphasis on the interplay between supply and demand  Demand: initiatives on e-business and e-government  Supply: Public participation in infrastructure development in rural areas Use of European Regional funds Use of PPP E-Europe programmes and beyond 19

20. EU: Available instruments  Communication from the Commission on ‘Bridging the Broadband Gap’ (COM(2006) 129 final) termed ‘available instruments’: Implementation of the regulatory framework for electronic communications Public funding State aid and competition policy EU funding: Structural Funds and Rural Development Fund Demand aggregation and procurement Fostering the creation of modern public services

21. Rules for state aid  EU Commission reviews national projects for state funding of broadband infrastructure Infrastructure support must be given only to bridge the digital divide Support should, therefore, be limited to areas where it is not commercially viable for private sector operators to establish adequate facilities  EU Commission distinguishes in this context between white, grey and black areas White areas are sparsely populated rural zones, where no broadband access except via satellite or leased lines is available. In such areas, state aid is in general allowed Grey areas are areas where broadband is already provided. Here, permission for state aid demands a more detailed assessment Black areas are those where at least two competing infrastructures exist, and where there will be a high risk for market distortion if state funding is allowed - in such areas state aid is generally not allowed

22.  Funding from Municipalities, Government and European Regional Development funds  Broadband available to all citizens (100 Mb) (Estonia)  Broadband available in rural areas (e.g. Germany, Poland, Slovenia, Spain and Sweden)  FTTH: Citynet Amsterdam, Zurich and Basel  Focus on ICT literacy (Lithuania, Malta and Poland)  Public Internet access points (Biblionet in Romania a.o.) European PPP initiatives 22

23. Conclusions  The EU agenda has broaden its focus from sector reform to include the entire ICT ecosystem  The liberalization agenda in the EU has ground to a halt and has begun to retreat  More focus on investment stimulation and less on competition  Less focus on regulation and more focus on other kinds of governance including PPP