Introduction. But let me first start with a short introduction of BEREC.

Transcription

1 Speech of Chris Fonteijn at the IBC Conference on Competition Law & Regulation in the Telecoms, Internet & Broadcasting Sectors 2011, Brussels, 26 October 2011 Introduction First of all I would like to thank the IBC for the invitation to give a speech at your conference. For someone who was quite recently appointed as Head of a Competition Authority that will be merged with the Telecommunications Regulator and the Consumer Protection Authority, this seems to be the right place to be. Today I will spend a few words on BEREC s experiences with the implementation of the new framework and how BEREC works on harmonisation. And you will notice that the Digital Agenda, that mr. Peltomäki just presented to you, plays a guiding role in that respect. But let me first start with a short introduction of BEREC. BEREC BEREC had a fairly long and rocky incubation period. Most of you will know ERG, the European Regulators Group, BEREC s predecessor. It was felt particularly by the European Commission that ERG lacked the resources and the authority to contribute effectively to harmonisation. Ms Reding, Ms. Kroes predecessor had some fairly strong, some find somewhat exaggerated views on this matter. It was no surprise therefore that the first versions of the proposed organisation that finally became BEREC, was a rather 1

2 centralistic institution with the power to overrule individual decisions by national regulators. Evidently the independence of regulators clashed with that view. It has to be said however in defence of Ms. Reding, that it was not just the issue of over-centralisation. Some doubts as to the actual independence and capacities of certain regulators seemed to be justified as well. After that, a long and sometimes acrimonious debate followed between regulators, ERG, the Commission, Member States and Parliament. The outcome, ladies and gentlemen, is BEREC. My personal take of the outcome is that much of the powers have been left with the regulators and BEREC. It is also clear to me, however, that if BEREC does not deliver in the forthcoming 2 to 3 years, the debate on a more centralistic European regulatory authority may very well come back with a vengeance. This is very clear to the Heads of the Regulatory Authorities! What is BEREC? Let me now describe BEREC at bit more to you. BEREC is the official European body of electronic communications regulatory authorities. BEREC is now comprised of a Board of Regulators consisting of Heads of 27 national regulatory authorities (NRAs) from the EU Member States, with observers from the Commission, from the EEA state NRAs (Switzerland, Norway, Iceland and Liechtenstein) and from EU accession countries (Turkey, Croatia and the Former Yugoslav Republic of Macedonia). This summer, Montenegro started negotiations with the EU on accession, so now the Montenegrin NRA EKIP is also observer. 2

3 What are BEREC s objectives? I will discuss BEREC s objectives and using these objectives, I will discuss some recent developments. Advice to the institutions The first objective that I mention here is that BEREC should function as a source of expertise and as a trusted adviser to the European Institutions. We advice the Commission, the Council and the European Parliament on electronic communications. Let me give you two examples. The Commission asked BEREC earlier this year to gather information on net neutrality; information that could be used as a basis for a decision to develop a policy on net neutrality, or abstain from it. BEREC provided the Commission with the information that we were able to find within the time constraints given. Recently, the Commission and BEREC agreed to do a follow-up of this exercise. BEREC, together with the Commission, will issue a questionnaire on net neutrality issues that will be sent to operators and other stakeholders. We expect to be able to publish the results by the end of February next year. This is important with a view to the Digital Agenda, because if we want to foster the uptake of broadband and broadband services, we need to make sure that consumers and businesses know what their rights are. Another issue that BEREC gave advice on was international roaming. The Digital Agenda stipulates that the difference between roaming and national tariffs should approach zero by This is very ambitious. The least we can say at this moment is that roaming continues to be at the forefront of the debate. The 3

4 current roaming regulation expires mid next year. The Commission has published a proposal for a new regulation and BEREC has issued its Opinion on the Commission proposal. Let me say some more on that issue, because after all most you will be using roaming services, constantly. BEREC concluded in its Opinion that it agrees with most of what the Commission presented: that regulation is still needed, that we should extend the regulation to data roaming and that we need a structural solution to avoid eternal price regulation. On certain other aspects, BEREC concluded that the Commission s proposals may be called sympathetic but that they cannot be endorsed. This pertains to the dual IMSI-solution that the Commission proposes. BEREC therefore concluded that further work needs to be done to find an appropriate structural solution. We expect to be able to define a common view shortly that should be supported by policymakers as well as the industry. Also, BEREC has argued that the proposal should include bill shock measures outside Europe. To date, the bill shock measure only applies within the EU. This Opinion was of course sent to the Commission, but also to the European Parliament and Council. I have presented the Opinion at the ITRE Committee and in the IMCO Committee of the European Parliament. I think this is a perfect example of how BEREC gives form to its objective of providing assistance to the Institutions. 4

5 Best practices A second objective of BEREC is to develop and disseminate best practice on the implementation of the EU regulatory framework. This is a very important objective, because agreement between national regulatory authorities on coherent regulation is indispensible for attaining the internal market yet another goal of the Digital Agenda. Here also, net neutrality provides us with an example of what BEREC does. At our Plenary meeting in Barcelona, on 30 September, the Board of Regulators of BEREC agreed to publish for consultation a document on guidelines on net neutrality and transparency. These guidelines emphasise the importance of effective transparency for end users and the best approaches to achieve it. In BEREC s view, transparency will empower consumers by enabling them to compare conditions and tariffs. This will exert pressure on the market players to provide competitive products, realising the full potential of the new regulatory framework. With this consultation we try to obtain the views of stakeholders on these draft guidelines. Further guidance in relation to net neutrality can be expected later this year, when BEREC will produce its findings on quality of service aspects of net neutrality. BEREC s predecessor ERG already published best practices on topics like wholesale bitstream access, wholesale leased lines and wholesale unbundled access. We have reviewed these common positions and we have decided to redraft them in order to increase the harmonising effect. The results of this exercise will become available in the first half of next year. 5

6 Article 7 A third and very important objective of BEREC is to contribute to harmonisation via the so-called article 7 procedures. Article 7 and article 7a of the amended Framework Directive describe the process where a NRA takes an SMP-decision. The process is that the NRA has to notify its decision to all other NRAs, the Commission and to BEREC. BEREC can then provide the NRA with advice. We call this Phase one. As I already expressed on other occasions, in my view it is very much in the interest of harmonisation that BEREC should play a significant role in Phase one. This is possible because we now have our support staff in Riga, BEREC Office, up and running. The Riga Office was officially opened only two weeks ago. We have high expectations of the administrative and professional support that BEREC Office will provide. But we cannot expect that every article 7 notification will be assessed. Priorities will have to be set. Personally I think that BEREC should aim for those notifications with the biggest impact on harmonisation. Markets 4, 5 and 7 appear to be the most logical candidates. Because access to next generation networks and termination markets provide us with the most imminent regulatory challenges. In the second phase, the cooperation between BEREC and the Commission will be crucial. The most visible part of that cooperation is in cases the Commission expresses it has serious doubts regarding decisions of individual NRAs. Doubts can relate to market definition, the designation of SMP-operators, or if the Commission makes recommendations regarding the imposition of obligations as 6

7 intended by a National Regulatory Authority. BEREC will have to express its opinion to the Commission in these cases. We have to separate between two situations in phase 2. The first one is where the Commission has expressed serious doubts regarding market definition or SMP-designation. In this situation, BEREC will provide the Commission with its opinion, and the Commission has to take the utmost account of BEREC s opinion. In the second situation the serious doubts of the Commission relate to the measures that an NRA wants to take. BEREC has to express whether it agrees with the Commission. If so, the Framework Directive requires the Commission and BEREC to work closely together with the notifying NRA. The objective of this cooperation is to find the most appropriate and effective measure. If BEREC does not share the opinion of the Commission, the Commission is then required to take the utmost account of this advice when making its recommendation to the notifying NRA. Notifications Possibly, you are interested in the notifications that we have received. Since 25 May, we have received 19 notifications. 9 of these notifications pertained to the markets 4, 5 or 7 1, which I think are the most interesting markets. Most of the notifications passed without comments from the Commission. Now that BEREC Office is officially functioning, we expect shortly that BEREC is able to fulfil its duties under article 7. 1 Broadband (market 4, 5), Termination (market 7) 7

8 Implementation of the new regulatory framework But even when BEREC is ready to fulfil its duties under article 7, there are still a couple of obstacles to overcome. The first one has to do with the implementation of the new regulatory framework. Today, only 9 out of 27 Member States 2 have transposed the new regulatory framework into national legislation. So that is one third. The transposition date, ladies and gentleman, was 5 months ago. I call on the governments that are responsible for implementation it is usually not the NRA to make sure that transposition will take place very soon now. And yes, I am also saying that to my own government. Because timely implementation is of course conditional for harmonisation. Without a harmonised legal framework, one cannot expect BEREC to contribute to harmonisation effectively. Without a harmonised legal framework, the goal of an internal market cannot be attained. Therefore we absolutely need the remaining 18 Member States to transpose the new regulatory framework. Another consideration regarding BEREC s effective contribution to the internal market, is the role that national courts play. I mentioned this issue already, in a speech in Vienna in May this year at the conference of the International Bar Association. It is evident that the rights to appeal to an independent court is beyond any discussion. But there is a flipside. Generally speaking, the outcome of any round of market analyses take so long because of legal proceedings, that we 2 DK, EE, IE, LV, LU, MT, FI, SE, UK 8

9 are still waiting for the outcome when we are taking the new market decisions., In daily practice we and other regulators have developed decisions of great complexity and length. Complex because the matter is complex and looking forward. History can no longer be the basis for the future. Decisions are lengthy because each and every argument has to be countered in advance. And over the years extra requirements for motivation have been added by the courts. And so we are confronted with products that should be finalised in months that end up taking years also because courts sometimes lack resources and (in some countries) expertise. Today, I can add an example of a lengthy procedure with a surprising outcome. Recently the Dutch court ruled in final instance that OPTA is not allowed to use pure BULRIC when regulating fixed and mobile terminating rates. This conclusion was based on the fact that the pure BULRIC measure was not needed to solve any of the competition problems that OPTA had found on the wholesale termination markets itself (like excessive pricing). OPTAs conclusion in the decision was that pure BULRIC was appropriate because of the positive effects it created on the downstream retail market. The court mentioned that in case of the competition problem of excessive pricing that was identified by OPTA on the termination markets OPTA may go further than just preventing excessive tariffs and can impose cost orientation as an obligation. As part of cost orientation it is also allowed to model a hypothetical efficient operator. However, it is not allowed to go further than that by, for example, going to an incremental cost standard. This means that the concept of 9

10 cost orientation cannot be stretched to the extent that it excludes nonincremental cost, so pure BULRIC is in conflict with cost orientation. But, ladies and gentlemen, the Commission has issued a recommendation which puts forward pure BULRIC as the right method. So it will be interesting to see what will happen in other Member States. I think that OFCOM will be the next NRA to have a court decision on this matter. For the sake of harmonisation, one might argue that the English court decision should be the same as the Dutch. But for the sake of effective regulation, I think it would be better if the Netherlands would form the exception to the rule. In any case, my conclusion is that we still have some hurdles to take before we can say that there is an internal market. We have to start by having the new regulatory framework transposed in time, in every member state. And then the application of the framework should be supported by timely judicial reviews that take into account the European context of NRA s decisions. Only then the EUwide regulation of electronic communications can be successful. But this case also shows the difficult position that NRAs are in. The increasing demands from courts with respect to the substantiation of our decisions, require regulators to make very elaborate decisions. At the same time, the economic crisis hits governments. Budgets are cut, also from NRAs. So with less resources, we have to do more. And thirdly, consumers in particular have increasing demands with respect to what we deliver. This is relevant in the context of ex ante regulation as well as ex post regulation. I call this the Bermuda triangle of 10

11 regulation. It really requires us to make choices, in a transparent way, if we want to continue to be successful is what we are doing. Before I finish, it might be good to elaborate a bit on what we would term a success in this context. Effectively, the truly successful regulatory authority is the authority that regulates so effectively that it can withdraw regulation and let market forces do their job. So actually it means that regulators do their utmost to become obsolete. But as I have argued earlier, we are still quite far away from that. Regulating the international roaming markets continues to be a challenge, just like access to next generation networks and the rollout of broadband. Just a few major topics where NRAs and thus BEREC play a crucial role and that will stay on our agendas for the years to come. But at the same time I do think that we need to look further than that, and devote more time to think about how we should design a smooth transition from ex ante regulation to ex post competition oversight and merger control. The regulatory framework already lays a foundation, by ensuring that market regulation is founded on the principles of general competition law. But there is more to do. In merger control, it is always important to consider the trade-off between the benefits that economies of scale can deliver for consumers in a particular market, and the benefits of competitive dynamics for consumers in that market. This trade-off is thrown sharply into focus as mobile networks migrate to LTE and fixed telecom and cable migrate to fibre-based networks. We see that in such situations the call for increased investment tends to lead to consolidation, as players seek more significant economies of scale. Weighing up the consequences of such consolidation for consumers is one of the big tasks of those of us active in 11

12 market oversight. It s a task that is being faced in some markets already, and that we can expect to be faced in Europe over time. In the Netherlands, the decision has been taken to merge the competition authority NMa, the electronic communications regulator OPTA and the Consumer Protection Authority. I am supposed to head this merged authority, which will be called the Authority for Consumers and Markets (ACM). The ACM should be in place as of January One of the things that we consider to do, is to organise the ex ante regulation of electronic communications and energy, in the same unit as the ex post competition prohibition of abuse of market power. Because I think it s time to put the defenders and the attackers in the same team and on the same pitch. And in my view, this could be a way forward for the regulation of markets. Conclusion Let me finish my presentation, ladies and gentlemen. I have laid out a picture of what BEREC is doing at the moment. From advising the Commission, the European Parliament and the Council, to work on best practices. From the discussions that we have on the regulation of international roaming, to common positions on topics such as transparency related to net neutrality and wholesale bit stream access. With the goals of the Digital Agenda as important guiding principles. I talked about the advice that BEREC gives to NRAs within the scope of article 7. We do all this because we believe that BEREC can and should play an important role in contributing to the internal market. But how can we be 12

13 successful in doing that, if the new regulatory framework has not been implemented in 2/3 of the Member States? I certainly hope that EU-wide transposition will be completed in the shortest possible term. Also, I shared with you my views on the way that courts deal with the cases that are brought before them. And the increasing dilemmas caused by the combination of public expectations, legal requirements and budget cuts. And I presented to you in particular the dilemma that the Dutch court ruling on pure BULRIC shows. That is: should we settle for a less effective system, but one that is applicable across the entire EU, or should we accept that there are differences in the EU states and appreciate it, especially if most countries would implement the more effective rules contained in the recommendation? I am wondering what your views are on that. And finally I talked to you about the merger of the Dutch competition authority NMa, OPTA and the Consumer Protection Authority. My view is that there is definitely added value in such a merger, but I would certainly hope to hear your views on that, as practitioners. I am not sure whether there is some time for questions. I am happy to do so. But I hope you would engage yourself in a discussion on these topics. Thank you. 13