1. 1 The Challenge for Regulators - Technology and Regulation at a Crossroad Roberto Viola ERG Chair for 2007

2. 2 Areas of discussion The challenge for ERG in 2007 ERG work on convergence ERG work on harmonisation International roaming regulation

3. 3 The challenge for ERG in 2007

4. 4 Foundations laid in 2006 Regulatory disciplines agreed in Madeira, Oct 2006 –undertaking to review and keep updated priority areas for harmonisation – priority given to broadband access and termination markets –development of case studies of regulatory “best practice” applying Remedies CP to priority markets – so far WBA and WLA –NRAs commit to providing reasoned regulatory decisions by reference to the relevant CP – transparency, accountability –method of monitoring and evaluating regulatory approaches to be agreed –collaboration database of NRAs with expert knowledge/expertise in specific areas available to other ERG members Secretariat proposals agreed in Bratislava, Dec 2006 –Full-time, dedicated secretariat resource to be established in Brussels, initially staffed by up to 4 secondees from member NRAs, to support fulfilment of Madeira commitments

5. 5 The challenge for ERG in 2007 A very exciting and challenging time to become Chair Need to build on the foundations laid in 2006 Accelerate identification of best regulatory practices Intensify efforts to disseminate best practices Focus on challenges of today but plan for challenges ahead -Next generation networks -Convergence Engage in debate started by Commission on future institutional framework for regulation

6. 6 Some of the challenges for 2007 HarmonisationInnovationRegulation Review of Framework Article 7 processes Recommendation on relevant markts International Roaming Regulation Review of Universal Service Broadband access VOIP Regulatory accounting systems Mobile termination Fixed termination Wholesale leased lines Monitoring and evaluation IP-IC/NGN NGN Princ VOIP IC NGN cost Convergence Bundling (abuses) Broadcasting (Access to content) Service Convergence & Consumers

7. 7 ERG work on convergence

8. 8 Applications (email, TV, web, voice, …) NGN Cable Telco 2G/3G /4G Wifi/ Wimax Broadcast Hybrid Telco-broadcast Service Network Access Device Cable Telco Cellullar Broadcast Service Network Access Device Convergence might be seen as the migration from vertical to horizontal markets, at different levels. Hybrid Cellular-Broadcast Hybrid 3G-Wimax Levels of convergence Hybrid fixed-mobile

9. 9 Old regulatory boundaries should be reconsidered. A change of traditional perspective is required: From network/technology oriented towards service/application oriented Quick solutions must be reached to avoid the disruption of market development. Regulation must not hinder innovation. Regulatory challenges: regulation has to converge…

10. 10 ERG work on harmonisation

11. 11 Harmonisation – responsibilities of NRAs NRAs are required by the Framework Directive to co-operate with each other and with the Commission to ensure “consistent application” of the provisions of the Directives Many market players (and the Commission) generally believe that ERG does not do enough to achieve harmonisation -Lack of harmonisation may deter market entry -Lack of harmonisation may obstruct achievement of the European Single Market Opinions differ on whether ERG could do more – or whether institutional changes to the Framework are necessary

12. 12 Harmonisation – what does it mean? Same regulatory obligations on SMP players throughout Europe? Appropriate regulation of SMP players to achieve similar market conditions throughout Europe? Appropriate regulation of SMP players to achieve similar end-user experience throughout Europe? Similar regulation throughout Europe of cross-border services? Exchange of best practice amongst regulators? Or something entirely different? How much do we need and why and who is best placed to deliver this?

13. 13 Dangers of too much harmonisation Policies that do not reflect local circumstances Lose ability to learn from experience from other sectors Deter emergence of good new approaches

14. 14 Same circumstances – similar remedies? Different SMP Remedies Different economies of scale/density Different sizes of SMP players Different rates of convergence Different network Topologies Different Market sizes Different degrees of integration

15. 15 Is ERG doing enough on harmonisation? Lot of ERG effort –Revised Remedies CP (May 06) –Reports, common positions / statements on specific topics –Madeira commitments and Article 7 expert groups Natural limits on harmonisation – remedies must take proper account of national circumstances But stakeholders believe that we need to do a lot more –Best practice not disseminated quickly enough Focused effort to strengthen harmonisation in priority areas Renewed effort to disseminate best practice, not only to identify it

16. 16 Prioritising harmonisation of approaches to regulation Benefits appear greatest in the following circumstances: 1.Services with pan-European potential where a high degree of uniformity required, e.g. Voice over IP (VoIP) 2.Services with a significant cross-border dimension e.g. international roaming 3.Key access services needed for efficient national markets –in this case, near-uniformity of remedies is often undesirable and impractical –but there is a strong case for consistency and transparency of methodology for choice of remedies …. –… and effective dissemination of best practice

17. 17 Some harmonisation deliverables for 2007 Finalise Common Positions on broadband access following recent consultations (March) Reconsider need for more consistent approach to regulation of VOIP –Classic Single Market service – service provider anywhere, customer anywhere –Pan-European potential not yet realised –NGNs / Convergence will bring more services of this kind Work out proposals for monitoring of adoption of ERG Common Positions –Consistent regulatory philosophy across Europe strengthens Single Market –Agreement on Common Positions good, implementation in 27 member states much better! Intensify efforts to identify case studies of best practice, provide mutual support to transfer experience Develop further Common Positions on choice of remedies in specific markets – termination, wholesale leased lines

18. 18 International roaming regulation

19. 19 Roaming - ERG role Discussions in Council and Parliament at a fairly advanced stage ERG role at this stage to provide expert commentary, not to take formal position ERG expert analysis based on regulatory objectives: reduction in currently high wholesale prices; consumer protection against high retail prices; prevention of unreasonably high retail profits; and protection of flexibility and incentives to innovate and compete.

20. 20 Commission aspiration for retail price reduction across Europe of 40-60%. How best to achieve this? ERG considers that… –price regulation is necessary, and in consumers interests but… –…regulation must be measured – allowing flexibility and innovation, and long lasting and sustainable competition But expert ERG analysis suggests that a number of important details need reconsideration Methodological problems in Commission’s proposal have unpredictable consequences Price levels need to be reconsidered to promote development of competition and tariff innovation in practice Tools chosen by Commission discourage tariff innovation and competition Possible to deal with these concerns while attaining the desired retail price reduction

21. 21 What can market players do? Industry has not helped itself –Slow to react to political concerns –Price reductions too little, too late –Plenty of rhetoric, not many hard facts available Should provide robust evidence of commercial consequences of various options Should be prepared to make firm commitments to secure preferred option –Council and Parliament seem likely to take a firm line, but want regulation to be practical and effective Example: Understand market players generally prefer “Opt-in” consumer protection tariff to “opt-out” –Opt-in only works if consumers are well-informed –What firm commitments are market players prepared to make in order to ensure consumer awareness?

22. 22 Alert! Data roaming General belief that data roaming charges are outrageous Very strong feeling that regulation will be necessary in the next few years, unless prices rapidly and significantly reduced NRAs would definitely prefer not to have to regulate …. …. But seems very clear that there will be an appetite in Commission, Council and Parliament for regulation unless industry regulates itself

23. 23 Summary ERG believes regulation to deal with persistently high roaming prices is necessary But, just as important, is that regulation also ensures the development of tariff innovation and long term and sustainable competition from which all European consumers benefit Unnecessary to compromise on these objectives – all are achievable Concerns have been expressed about delays, legal challenges and over- complex regulation. All such concerns deserve careful consideration but: –Simplicity is good, effective regulation even better! –ERG has considerable practical experience about what does and does not work in practice our analysis is based on that experience we have no interest in advocating proposals which will be ineffective!