1. Recent Developments and Current Regulatory Issues in European Telecom Markets Dr. Ernst-Olav Ruhle SBR Juconomy Consulting AG WestLB-Telco Day Frankfurt, 28 August 2008

2. 2 Current Regulatory Issues within the EU 2 Digital Dividend 3 Broadband in Rural Areas (“White spots”) 4 Sub-national Markets / Regionalization of Regulation 5 CONTENTS EU-Review in General 1 SBR Juconomy Consulting AG 6

3. 3 Main Issues of the EU-Review currently discussed 1 |EU- Review in General (measures proposed by EC) European Regulatory Body  Discussion regarding different approaches  EECMA *, BERT +, ERG  Council and Parliament opposed to EECMA  Majority of NRA‘s opposed to a “European Regulator” Spectrum Harmonisation  Aim to achieve freedom and flexibility regarding frequency usage  Strengthening technology and service neutrality  Expansion of hamonisation measures EC‘s Veto Power  EC’s veto power applies to market analysis (SMP finding) today  Veto power also on remedies is now being proposed  After such a veto of EC NRAs would have to amend the draft notification  Majority of member states opposed to this expansion of veto power Market Recommendation  Number of markets susceptible of ex-ante regulation reduced from 18 to 7  Focus on wholesale markets for future regulation  Already implemented Functional Separation  Potential remedy on vertically integrated SMP operators  Ultima ratio if competition problems not solved (additional new remedy)  Question of enforceability vs. voluntary separation *European Electronic Communication Market Authority; + Body of European Regulators in Telecommunications

4. 4 2 |Current Regulatory Issues within the EU Furture Call Termi- nation Regulation Sub-national Markets  EC’s recommendation regarding termination rates in fixed and mobile networks  ERG’s common position on symmetry of fixed and mobile termination rates (consultation terminated December 2007)  Decisions in UK and Austria; market analysis in Belgium  First focus on wholesale broadband markets and markets for leased lines; other markets will follow  Commission’s view on decisions and the analysis published  ERG consultation on sub-national markets (terminated)  Discussions in further member states; consultations expected for autumn (incl. Germany) Next Generation Access  Intensively discussed on national level; different status in member states  EU plans draft recommendation or consultation soon  ERG’s consultation on regulatory principles of NGA (2007)

5. 5 3 |Digital Dividend  Spectrum is a scarce resource with high economic relevance – EU Commission estimates its value to 250 billion € within the EU  Great dissatisfaction with the spectrum policy in the past, as it has created “artificial scarcity” and prevented market entry for new operators  Political vs. technological discussion: definition of a political framework preferable but no predetermination for certain technological solutions or applications  Current dividend discussion focuses on the UHF-band between 470 and 862 MHz  Generally very high demand for spectrum below 1 GHz  EU recommendation contains three applications of the digital dividend  Increase number of TV programs  Usage for high quality (HDTV) or new (DVB-H) broadcasting services  Usage for non-broadcasting services, e.g. IMT or wireless broadband access  Which allocation approch(es) ensure that a “dividend” is really achieved?

6. 6 Penetration / Coverage Definition of broadband  Approx. 3 million house- holds without or with insufficient broadband services, mostly in rural regions  Commercial providers have no/little economic incentive to invest, because of cost and low population density  Intense political discussion to improve the situation  "digital divide" between urban and rural areas  Involvement of public financing (“state aid programmes”)  Communities need knowledge transfer regarding available and suitable technologies as well as implementation  Improvement of “clas- sical” network operator / provider model  Risk of stagnation of economic development in rural areas  Involvement of public financing (“state aid programmes”)  Communities need knowledge transfer regarding available and suitable technologies as well as implementation  Improvement of “clas- sical” network operator / provider model  Risk of stagnation of economic development in rural areas 4 |Broadband in Rural Areas (“White Spots”) Regional economic development Sustainable networks Adequate technology FactsConclusionKey Indicators Information Society

7. 7 Market definition and analysis of sub-national markets as an upcoming regulatory challenge regarding the further liberalisation and regulation of European telecommunications markets.  Discussion has started already  What are the reasons for sub-national markets?  Decisions in UK and Austria as paradigm?  Common position of competitors possible?  Who benefits?  Consultation of BNetzA expected for autumn German discussion  Necessity of sub-national markets  Choosing an appropriate geographic unit  Assessing the competitive conditions  Define geographic markets vs. differentiate remedies  Criteria to aggregate areas  Possible implications ERG consultation  Geographical segmen- tation must be compliant with Commission’s framework  Criteria based on compe- tition law principles  Regulatory approaches need to be consistent  Sub-national markets and geographic differentiation of remedies are not substitutes Commission’s view 5 |Sub-national Markets

8. 8 6 |SBR Juconomy Consulting AG – Know How Afghanistan Austria Bahrain China Czech Republic France Germany Ghana Greece Italia Kosovo Madagascar Namibia Netherlands Norway Oman Poland Romania Saudi Arabia Slovenia Spain Switzerland Tunisia United Arab Emirates United Kingdom SBR has gathered worldwide experience Focus on Regulatory proceedings Contract negotiations Business development Benchmarks & Market research Monetary analysis / Business cases Project development & management Network interconnection Regulation & Lobbying Technological strategy

9. 9 Dr. Ernst-Olav Ruhle E-Mail: ruhle@sbr-net.com Tel: + 49 211 68 78 88 48 Fax: + 49 211 68 78 88 68 Mobil: + 49 178 68 78 88 4 SBR Juconomy Consulting AG Nordstraße 116 D-40477 Düsseldorf CONTACTS Matthias Ehrler E-Mail: ehrler@sbr-net.com Tel: + 49 211 68 78 88 32 Fax: + 49 211 68 78 88 68 Mobil: + 49 178 78 78 89 0 SBR Juconomy Consulting AG Nordstraße 116 D-40477 Düsseldorf