Transcript Reg TP – The German NRA for Telecommunciations and Postal

The New European Regulatory
Framework from a
Regulator‘s Perspective
Dr. Annegret Groebel, RegTP
Head of Section: European Co-ordination
ITS-14th European Regional Conference
Helsinki – 24 August 2003
http://www.regtp.de/
Telecommunications Regulation
• Liberalisation guided by regulation to guarantee a gradual and
permanent transition from monopoly to competition in the
telecommunications market:
Sector-specific competition law
• Remove all barriers and prevent the establishment of new ones
in order to create self-sustaining competition
no or low barriers to entry
• Competition will not evolve automatically, therefore the legal
regulatory instruments must go beyond general competition law
• Regulation is the economic accompaniment of liberalisation
• Regulation is technology-neutral and asymmetric
• Competition offers a wider variety of choice to customers:
lower the barriers to change the operator for users
• A strong legal basis should provide the stable and cohesive
framework necessary for consistent incentive regulation
Regulation and Competition I
 Close link to general competition law that will replace sectorspecific regulation once market forces start to work and
competition is self-sustaining, but until then regulatory
instruments must go beyond general competition law by
imposing special obligations on the dominant operator such as:
- the obligation to grant access to essential facilities at nondiscriminatory conditions in order to create a level playing field
(special control of abuse of market power and equal access);
- ex-ante price control (cost-orientation criterion) in order to
counterbalance the market power of the dominant operator
 Keep market entry open by removing all legal barriers to entry
and prevent the establishment of new economic/strategic ones
 Prevent price squeezing with regulation on the access and
wholesale level, while applying competition law on the retail lev.
 Prevent foreclosure and leverage with
ex-post price control (to stop short anti-competitive practices)
 Competition in the former monopoly telecom markets not yet
self-sustaining but still reliant on regulation, which must contin.
Regulation and Competition II
• All of these special obligations are necessary to balance the
structurally imbalanced situation (potential for abuse of market
power) in the fixed network market due to the fact that the
incumbent is a vertically integrated operator:
- owns the essential facilities, on which the new entrants rely
(vertical relationship on the wholesale level)
and
- faces the new entrants as a competitor on the retail
market for telecoms services (horizontal relationship)
• Regulation defined as the power to impose special obligations
on the dominant operator and enforce compliance is therefore
necessary to counterbalance the market power of the
dominant operator (generally the incumbent) and his
willingness to use it: structure conductive to abusive behavior
• Special control of abuse of market power (anti-competitive
behavior by the dominant operator) by the regulator as
behaviourial aspects become more important in riper markets:
competition law instruments incorporated in sector-specific law
Regulatory Rationale of LRICS
• The regulator is placing himself in the same situation as a new
operator having to make the investment decisions related to
market entry now: current costs instead of the incumbent‘s
incurred costs (historical costs) are to be used (actual prices)
as otherwise the make-or-buy decision would be distorted
• By setting prices equivalent to the costs of efficient service
provision the regulator anticipates future prices prevailing on a
fully competitive market reflecting the forward looking
investment costs which are the costs of efficient service
provision (defined as LRICS)
• Cost-orientation is especially important as it allows to steer
the market forces in the right direction by ensuring the optimal
allocation of resources at the same time
• Concept of LRICS and CCA ensures a balanced approach
to promote infrastructure as well as service competition, is
applied consistently for all services (IC as well as LLU)
Where do we go?
• With the rapidly changing market structure and the
emergence of new markets a need was felt to review the
existing European framework and adapt it to the new
technological and commercial conditions where necessary
• The discussion was started by the Commission in 1999
(Review ’99) and ended with the adoption of the new
legislation by the European Parliament on Dec. 12th ‘02
• Regulators should have more flexibility and the new
legislation should reflect the evolution of the telecoms
markets since liberalization in 1998, the state of
competition should be analysed and evaluated to assess
where a greater reliance on general competition law is
possible and appropriate
99 Review of European TC Legislation: Key Issues
• Streamlining the European legal framework:
5 proposed directives
• Technological neutrality and convergence: a single
legal framework for all electronic communications
markets
• More flexibility to adapt regulation to the rapidly
changing market conditions
• More harmonisation in the application of European law
by National Regulatory Authorities
• More reliance on general competition law where
sector-specific rules are no longer necessary taking
into account market developments since liberalization,
thus less sector-specific regulation
EU Regulatory Package I
• With the much broader concept of electronic
communications networks the new package comprises the
whole industry and takes account of convergence and new
technological developments
• Changes only where these encourage greater competition
and are necessary to ensure neutrality of regulation for
convergent technologies (technological neutrality Art. 8 FD)
• With the closer link to the dominance concept of EU
competition law sector-specific regulatory legislation is
embedded in general competition law and thus is a logical
consequence of the market development since liberalization
started in 1998
• With the New Group (ERG) + the veto power of the Cion
(Art. 7 FD) the last aim of the reform package to reach a
more harmonized approach of regulatory practices across
Europe is taken care of ensuring a consistent application of
the new directives
EU Regulatory Package II
• Package comprising the new European regulatory legislation
adopted by the EP on Dec. 12th 2001, publ. on April 24th ’02,
transposition into national law within 15 months (July 25th ’03)
• 4 directives and the frequency decision:
• Framework, Authorisation, Access+Interconnection,
Universal Service+Users‘ Rights Directive
• Commission given a veto right in Art. 7 FD
• Frequency Decision (allows spectrum trading, but not mandatory)
• Guidelines on Market Analysis published on July 9th 2002
• Draft Recommendation on Market Definition publ. for
consultation on June 17th ‘02, hearing held on July 3rd ’02,
2nd hearing (NRA/NCAs only) held on Oct. 9th 2002, finally
adopted and published on Febr. 11th 2003 (revised list of
markets – Annex I FD, 18 markets to be regulated)
• ERG decision + Spectrum Policy Group decision publ. July ’02
• LLU Regulation publ. Dec. 2000, in force since Jan. 2001
EU Regulatory Package III
• Art. 14-16, Annex I + II FD, Recommendation on relevant
markets susceptible to ex ante regulation, Guidelines on
market analysis and the assessment of SMP
• Introduction of the concept of dominance by linking the
definition of market power to EU competition law, which
also introduces joint dominance of 2 operators, which is
particularly relevant for the mobile market
• The strict 25% SMP threshold of the current ONP directive
is replaced by a dominance threshold and criteria taken
from EU competition case law analysis + jurisdiction
• Qualitative criteria such as financial power, links to upward
and downward markets, barriers to market entry and
structural links to other companies must be taken into
account when assessing the market power
• If an operator is found to be dominant (either individually or
jointly), at least one special obligation must be imposed,
which must be appropriate and proportionate to remedy the
problem to be chosen from the list in the AID/USD
Market Analysis I
EC level
National
level
Recommendation on
Relevant markets
Guidelines on market analysis
and assessment of
significant market power
Market analysis
relevant market definition
Assessment of effective competition
or significant market power
Results
can be
vetoed
Remedies
cannot be
vetoed
Important role of NRAs to choose the appropriate remedy
Remedy should be effective solve the lack of competition
Cancellation, confirmation or
imposition of obligations
Market Analysis II
• A market analysis consists of 2 steps:
- definition of the relevant market
- determination of a dominant (SMP) operator
• Definition of the relevant market:
- product:
concept of effective substitutability
- geographical: international / national / regional / local
• Dominant position is defined as an uncontrolled room for
action of an operator allowing him strategic behavior
• Criteria for dominance:
- quantitative: -- market share
-- difference in market share
- qualitative: -- financial power
-- links to upward/downward markets
-- structural relations to other companies
-- barriers to market entry (legal / factual)
-- actual or potential competition
Framework Directive
• Art. 3: National Regulatory Authority:
independence from market parties
• Art. 6: National consultation on draft measures
(market definition + SMP determination, remedies)
• Art. 7: Consultation with other NRAs and
Notification of draft measures to the
Commission: so-called consolidation procedure
Veto power on market definition + SMP
if internal trade is affected + draft measure
considered not to be in line with Art. 8 objectives,
to achieve a greater harmonisation and the internal
market, but no veto power on remedies, only
comments, which have to be taken into utmost
account by NRAs
Access and Interconnection Directive I
• AID provides in Art. 5, para 4 for NRAs the power to
intervene at own initiative to enforce access and
interconnection in dispute resolution procedures
important for disputes on SLAs, which become more
and more important with market evolution
greater reliance on competition law to enforce
contractual penalties and stop discriminatory and anticompetitive behaviour with behaviourial aspects
becoming more important than structural problems
• Choice between imposing different regulatory
obligations acc. to Art. 8 – 13, acc. to Art. 8, para 4
measures must be proportionate and based on the
nature of the problem (appropriate to solve it)
greater flexibility to act acc. to market needs, but
having regulatory instruments still available: new
mixture allows NRAs to intervene when necessary
and thus to prevent remonopolisation
Access and Interconnection Directive II
•
•
•
•
•
Art. 9 – Transparency obligation
Art. 10 – Non-discrimination obligation
Art. 11 – Accounting separation
Art. 12 – Access obligation
Art. 13 – Price control (cost-orientation)
cost of efficient service provision
• In case wholesale remedies do not work:
• Art. 17 – US-Dir.: Regulatory controls of retail services
• Art. 18 – USD: Regulatory controls of minimum set of LL
•
instead of the former automatism, the remedy
must be proportionate and appropriate to solve
the problem: increased role for the NRA
Bitstream Access I
Definition acc. to document ONPCOM01-18rev1:
Incumbent installs a high speed access link
to the customer’s premises and makes it available
to third parties, to enable them to provide high speed
services to customers
Incumbent may also provide ‘backhaul’ to carry traffic
to a ‘higher’ level in the network hierarchy where
new entrants may already have a point of presence
Bitstream access allows new entrants to differentiate
the service offered to customers as they can alter
certain technical parameters.
► Various possible handover points for xDSL traffic
between incumbent and OLO/ISP
Bitstream Access II
• Economically bitstream access is a wholesale product, which is
neither unbundled or shared access nor pure resale, but lies in
between those extremes on the value chain; bitstream access
requires less investment (“low-cost entry option“)
• Technically it‘s the provision of transmission capacity (in most of
the cases ADSL, but not exclusively) between an end-user and the
PoI of the new entrant (e.g. ATM-IC)
• Legally under the current framework the obligation to provide
bitstream access can be derived from the non-discrimination
principle acc. to Art. 16 (para 7) of the Voice Telephony Directive
(98/10/EC) and SMP operators must meet reasonable requests,
but it‘s not an obligation mandated by the ULL Regulation
2887/2000; under the new regulatory framework, bitstream access
is mentioned in the Recommendation (2003/497) as part of the
wholesale broadband access market susceptible to ex-ante
regulation and can be mandated as an access obligation according
to the AID (cf. doc. COCOM03-04rev1)
legal basis clearly strengthened
Institutional Set up in Germany I
• Umbrella approach, which means:
• The Federal Cartel Office (BKartA), which was
established in 1958 when the Restraints against
Competition Act (GWB) entered into force, has a
co-ordinating function regarding the definition of the
relevant market by NRAs (RegTP being the only NRA),
merger control remains in the responsibility of BKartA
• RegTP must acc. to section 82 TKG get agreement for its
definition of the relevant market as well as the
determination of a dominant operator
• The same threshold for dominance holds in all sectors of
the economy as the TKG refers explicitly to a dominant
position acc. to section 19 GWB, to guarentee a close link
between regulation and general competition law
Institutional Set up in Germany II
• In Germany competition law applies for market
definition, market analysis and thresholds:
SMP tresholds for the communications sector
identical to those in the rest of the economy
• Highest possible degree of coherence of sector
specific law with competition law already
achieved in Germany
• This close link between sector-specific
regulatory legislation and general competition
law will now be introduced in EU regulatory
legislation too via the concept of dominance
Institutional Set-up in Germany III
•
•
•
Section 7 – 13 of the draft law (published April 30th ’03)
transpose the relevant articles of the FD, Recom, Guidelin.
Recommendation on relevant markets as a basis,
18 markets recommended to be analysed
Review of the List of Recommendations (if applicable, to
be extended or reduced – based on COM review criteria/
workable competition, veto right of the EU Commission)
•
Market dominance: Section 19 of the Act Against
Restraints of Competition + guidelines to be considered/
Art 14(3) of the Framework Directive
•
Extensive, time-consuming consultation and
consolidation procedure (acc. to Art. 6 + 7 of the FD)
•
Participation of the Federal Cartel Office (as now)
Cooperation between National Regulators
•
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Independent Regulators Group (IRG)
Informal Group of Telecoms NRAs founded 1997 in Paris
to share experience and information
to develop common approaches
to discuss national implementation measures
with the aim of harmonising regulatory practice across Europe
and to ensure a consistent application of the European
legislation by issuing so called Principles of Implementation
and Best Practice (PIBs)
as horizontal coordination on a voluntary basis
Since Jan 2003 IRG has 29 members who meet regularly
OPTA chairs IRG since Jan 2003 for one year
With the ERG where the EU-Commission will participate,
IRG will have an official role to play, IRG continues to exist
ERG / New Group (1)
• IRG favours the establishment of a so-called NEW GROUP or
ERG – European Regulators Group – proposed by the
Commission at the NARA meeting in Brussels on Nov. 8th ‘01
• The NEW GROUP/ERG
– would encompass NRAs and Commission delegates to
discuss problems of a harmonised implementation of the
European legislation and to adopt common positions for a
uniform application of the directives.
– would discuss implementation measures only
– would have advisory functions (no commitology committee)
– would not take decisions that are legally binding
• IRG favours a joint secretariat
ERG / New Group (2)
• The NEW GROUP/ERG would organize the consultation
process foreseen in Art. 7 FD among NRAs and the
consolidation procedure with the Commission
• It would build on the existing regulators group (IRG), although
the group would continue in parallel
• The work of IRG would thus become more ‘official‘
• Transparent working structure with consultation procedures for
market parties + annual report to Cion/EP
• The chairperson would always be a NRA president
• The chairperson would be responsible for the agenda
• The NEW GROUP/ERG would set up its rules of procedure
• The decision to establish ERG was adopted by the Commission
on July 29th ’02 (2002/627/EC, publ. in the OJ on July 30th ‘02)
• Secretariat of the group to be provided by the Commission
ERG / New Group (3)
• The inaugural meeting of ERG was held in Brussels on Oct.
25th 2002 to which the 19 IRG members were invited; for the
Commission DG INFOSOC and DG COMP took part
• The meeting was opened by Com. Liikanen pointing out the
importance of co-operation both vertically between the
Commission and the NRAs as well as horizontally among
NRAs for a harmonised approach to regulation
• The Chairman of the Dutch NRA OPTA, Prof. Jens Arnbak
was elected chairman for the year 2003
• IRG provided a draft of the rules of procedure which is
checked by the Commission‘s legal services
• The Commission provided a draft paper on how to organize
the Art. 7 procedure efficiently which was checked by IRG
• Regular ERG meetings every 2 months
• A call for proposals for the ERG workprogramme was
published with the press release
• 2nd meetg. (23/01/03 /Amsterdam) + 3rd meetg. (20/05/03 /Athens)
ERG Workprogramme I
• After consulting with market parties, ERG adopted its 2003
workprogramme on its 2nd meeting
• Implementation of the new framework is a top priority,
especially the Art.7 FD procedure
• No examples as Art.7 FD is a novelty in European law
• Process should not go any further than the FD, especially
it should not prolong the 1+2 months period through the
backdoor
• Draft discussed within the IRG Implementation WG and
with the Cion‘s services on the working level before it was
transferred to the COCOM
• Final Draft cleared in the COCOM (advisory procedure 11/06),
adopted by the Cion on 23 July ’03, publ. in OJ L 190/13
• Currently ERG is drafting a working paper on remedies
with input from the Cion‘s experts, IRG working groups
and comments received in the public consultation
ERG - Remedies call for input
•
General Idea: find principles for choosing the appropriate
remedy to a competition problem (“mapping”)
•
The Call for Input on Remedies was published on ERG
and IRG website - Consultation period until 4th of July
Two layers for which input was requested:
1.
General level
Views on principles and guidelines to take into account
when designing appropriate and proportionate remedies
for market failures
2.
Detailed level
On individual competition problems and remedies
(including effects on the market and practical issues
relating to implementation)
ERG Workprogramme II
• As in the IRG Workprogramme broadband, LLU, mobile
termination rates etc. are of top regulatory priority
• Other issues proposed by the Cion are 3G network
sharing and spectrum trading
• An ERG only point is advice to the Cion on transnational
markets (Art. 15, IV FD)
• Also important is how to ensure transparency:
transparency rules adopted in the January meeting
• A vacancy notice for the temporary post of the General
Secretary for the ERG Secretariat was published
• Applicants must have 5 years of experience in a
regulatory body and a good knowledge of the rules
governing the sector
• As 1st ERG-General Secretary Prof. Otruba (former
President of RTR) was appointed. He will take up his
post on August 1st 2003
Conclusion I
• Since liberalization started in 1998 markets have developed
dynamically and show signs of emerging competitive structures
• To achieve this a strong framework of sector-specific
regulatory rules was necessary as competition would
not evolve automatically
• Especially important were the obligation of SMP operators to
grant new entrants access at cost-oriented prices
• With the initial phase accomplished and new technologies
leading to convergent markets with new players and strategies,
the regulatory framework too had to be adjusted in order to
tackle the problems of the new situation adequately, but without
risking a backlash by relaxing regulation too early as lightening
the regulation too soon would result in strengthening the
incumbent again with the danger of remonopolization
• This was done with the new European regulatory framework,
currently transposed into national law by Member States
Conclusion II
• On 25 July 2003 the new regulatory framework replaced the
ONP regime, the new framework was transposed into national
legislation in 5 Member States: Dk, SF, Ire, Swe, UK; a number
of regulatory issues are now imposing themselves on NRAs:
• IRG is preparing itself for the implementation by developing a
common understanding of the new principles in order to adjust
regulatory activities to new market situations
• The passing over from the old to the new regime requires
careful analyses of the impact that the application of regulatory
and competition law instruments will have on the
telecommunication markets
• The new framework allows a differentiated approach to address
different market stages adaquately, less intrusive intervention in
more advanced markets, continue regulation where necessary
such as in bottleneck type markets
• With the veto power of the Cion and the ERG, a closer
co-operation among NRAs takes place
Conclusion III
• Market analysis must take into account different national
circumstances, but the same regulatory consequences
should be triggered by dominance
• If the same regulatory consequences follow the
determination of market power, a level playing field is
created as operators are aware that they face the same
consequences as dominant operators by all regulators
• Currently RegTP is preparing internally to run the market
analysis as soon as the new regime provides data collection
powers, all 18 markets will be analysed
• The aim of regulation to create an effectively competitive
market should guide the regulatory reactions, which should
be proportionate and appropriate to remedy the problem