The Review of the Telecommunications Regulatory Framework

Transcription

1 POSITION PAPER 16 December 2015 The Review of the Telecommunications Regulatory Framework 1. INTRODUCTION Embracing the digital information revolution is crucial to ensure Europe s competitive advantage in the global economy. Europe has the assets to be at the forefront of this revolution and EU industry should be empowered to leverage on them. However, in the recent years, Europe lost ground in the digital economy. Just eight of the world s top 100 high-tech companies have their headquarters in Europe and generate only a tenth of the industry s global revenues. The EU needs to grasp the opportunities and values that digital can create, as well as clearly addressing and solving existing problems. Europe must focus on its growing digital society, where the creation, distribution and use of information, mainly through broadband networks, is at the core of most economic, political and cultural activities - to the benefit of both citizens and businesses. To support this, Europe must first create the favourable conditions for the digitalisation of its economy. The true benefits of a digital society in terms of higher productivity and resource efficiency, innovation, citizens welfare, jobs and growth creation will only materialise if European companies can prosper, taking full advantages of the digitalisation process. With a completed digital single market, it is estimated that Europe will gain 4% of GDP by Digital can truly be at the heart of Europe s recovery, but only if the EU gives itself the means to trigger a digital transformation. We share the Commission s focus on the need to unlock a new season of investment in Europe, including in the digital area. In this context, policy should aim at effectively promoting investments in innovative networks and infrastructures and, even more importantly, in putting ICT and digital technologies to use. Policy makers need to put in place a regulatory framework where competitiveness and investment considerations are systematically taken into account. The digital market structure has dramatically changed, making it possible to provide an increasing number of services by different actors. Accordingly, new digital products and services have appeared, with sometimes different rules applying to players offering comparable services Currently, telecoms sector-specific rules add to horizontally applicable rules. This makes it necessary to establish a level playing field amongst players that offer the same service. Whether services are the same, however, should be soundly assessed and any outcome should not hinder either innovation or consumer benefits. The new regulatory framework should ensure a level playing field irrespective of the nature of the service provider, with downsized and futureproof regulatory solutions fostering innovative services. BUSINESSEUROPE welcomes the new Commission s strong emphasis on the digital economy and would like to bring forward its recommendations in the context of the review of the EU regulatory framework for electronic communications. BUSINESSEUROPE a.i.s.b.l AVENUE DE CORTENBERGH 168 BE 1000 BRUSSELS BELGIUM TEL +32 (0) FAX +32 (0) MAIN@BUSINESSEUROPE.EU EU Transparency register

2 2. KEY OBJECTIVES OF THE FUTURE REGULATORY FRAMEWORK Broadband and ultra-broadband networks are the backbone of digital economy. An increase in the broadband penetration rate by 10 percentage points is estimated to increase annual per-capita GDP growth by 0.9 to 1.5 percentage points. Investments in infrastructure that enables fast and reliable connectivity provided at competitive prices will be the foundation of future EU growth and job creation. Networks investments have remained stable in absolute terms, but have grown when expressed as a percentage of total revenues. While in the light of falling revenues, Europe s operators have been forced to scale back their absolute level of investment in 2013, their peers in the US have continued to increase their capital expenditures by more than 5% compared to 2012.The majority of the funds invested is directed to fixed networks, reflecting notably the cost of civil engineering works for deploying fibre closer to the end user. Last year, in total EUR 26.3bn were invested in fixed infrastructure. In the mobile sector, total capital expenditure amounted to EUR 20.4bn in Nevertheless, as also recognised by the consultation we still face an investment gap of 106 bn until 2020 (ETNO annual economic report). Fiber networks have therefore been extensively deployed across Europe over the last years, but still the EU targets have not been achieved under the current regulatory framework. A robust infrastructure is the backbone of the digital economy and ensuring the right incentives for private investment to take place is a fundamental prerequisite to EU industry s digitalisation. Ubiquitous high speed networks are the key enabling technology for the full realization of an Industrial Internet. Competition and strong incentives for continued investment in the EU on broadband infrastructure will be essential to meet the exponential connectivity and quality demands associated to an Industrial Internet. Constant availability, reliable speeds and adequate capabilities of communication infrastructure are crucial elements in order to avoid disruptions and downtime costs in fully automated processes. Regulation affecting the digital economy must reflect its structure and its global nature. More and more devices and areas in the world are interconnected. The digital economy is borderless. Different regimes across Members States or substantial divergences between the EU regime and other countries can disrupt digital services, solutions and business models, which are global by nature and can deliver the best value to society when deployed uniformly inside and outside Europe. In this context, BUSINESSEUROPE believes it is crucial to accelerate progress towards a more integrated single European telecoms market, as a crucial element of a true Digital Single Market. This translates into the need for a more consistent European regulatory and policy framework, avoiding fragmented implementation at national level and strenghtening legal certainty while taking into account the national competitive situations and infrastructure roll-out. Rules must be future-proof and reflect the rapidly changing nature of the digital world. Models and practices valid today might not be relevant anymore tomorrow. Therefore the legislation should not seek to anticipate or steer future developments or, worse, to stifle them. It is essential that any legislation reflects this reality, providing technology-neutral solutions which create a level playing field and avoid excessive regulatory burdens based on backward-looking approaches in particular by acknowledging that the technical link between communications services and networks does no longer exist. This brings along BUSINESSEUROPE Views on the Review of the Telecoms Regulatory Framework 2

3 the need to distinguish the rules applicable to networks operation and those applicable to services, as both can increasingly involve different players). 2.1 Encourage investment Europe needs a new wave of investments in the digital industry as a driver not only for economic recovery, but also for innovation, entrepreneurship and other societal goals, such as more inclusion or better education. In this context, investment in next generation access networks (NGAs) is key and can be achieved through co-investment. In this moment, fiscal and monetary policies have limited capacity to invert the economic downturn and the room for fiscal stimulus is very limited. Therefore private investment must be encouraged as much as possible. The private sector should pave the way. Business needs a new paradigm which sets the right incentives for investmentsand ensure first-class quality infrastructure that supports current and future needs. In particular, the revised framework should reward companies sharing investment risk by allowing them to negotiate proportionate access conditions. 2.2 Include competitiveness and investment considerations in competition policy Competitive markets are fundamental in encouraging innovation and they must not be endangered. It is equally important that competitiveness, innovation and investment considerations are further taken into account, not only by the overall underlying regulatory framework but also in the case-specific competition law analisys. At times, the current competition regulatory framework has hindered important economies of scale due to a lack of a sufficiently dynamic approach in merger cases. Telecoms operators often signal that mergers and acquisition are too difficult in their market due to competition law constraints. This leaves little incentive for large investments in innovation and networks. The current merger rules acknowledge that mergers are to be welcomed when in line with the requirements of dynamic competition and capable of increasing European industry s competitiveness and growth (para 76 of the Horizontal Merger Guidelines and recital 4 of the Merger Regulation). Hence, EU merger policy and rules in principle allow for a dynamic, long-term perspective. The problem is the overly narrow approach used in practice, where efficiencies are taken into account if they are proved to be of direct benefit to consumers and merger-specific, substantial, timely and verifiable. Other synergies which in a wider perspective may be more important are being disregarded, ultimately to the detriment of consumers, business and society alike. At the same time, consolidation might reduce choice and competition and allow the rise of stronger, dominant positions. Regulators must remain especially vigilant that these positions are not abused when entering adjacent markets for applications and services run over the Internet. This is even more relevant considering that the Internet value chain is blurring, with different players entering in different markets at the same time. BUSINESSEUROPE believes that the only sustainable approach compatible with the overarching objectives of competition policy and the general interest of innovation and investment is to keep merger review open to all kinds of efficiencies, to be assessed on their own merits and with realistic and achievable standards of proof. BUSINESSEUROPE Views on the Review of the Telecoms Regulatory Framework 3

4 Precisely in light of the importance of the digital economy for the future of Europe, and since some of the relevant markets are evolving rapidly, policy makers should also consider how antitrust policy could provide faster interpretation and guidance against the backdrop of new developments to face new challenges, as a result of the way digital markets operate and to ensure timely intervention where needed. National and European antitrust authorities must keep up with these developments and adapt their analytical approach to the current characteristics of digital markets, including multi-sided market models where the offering is not provided against monetary compensation. In particular, competition authorities should consider the principles of transparency, interoperability, non-discrimination and consumer choice when analysing the exercise of market power. Secondly, they should examine how much the regulation of other markets and players takes account of the competition pressure exerted by electronic products and how much a digital substitution could lead to developing hybrid markets in which uniform framework conditions should apply to ensure a level playing field. The EU should seek to encourage innovation and investment capacities of companies. Growth and employment require investments. Competition policy should not have an adverse impact on investment capacity, innovation, employment and growth. 2.3 Ensure a level playing field and an effective regulatory framework The world is entering a new revolution powered by technology as manifested in industrial internet and in general billions of devices being connected to the Internet. Given the realities of today s digital market dynamics, Europe s digital strategy should allow all businesses to compete effectively and be innovative in a highly competitive market. This should also be reflected by a review of sector-specific rules, based in particular on new definitions for i.a. digital services. Under a better regulation approach, the first reflex should be to review the need of existing regulatory obligations. The overall approach should always be to simplify and decrease regulation that is not needed or not anymore and where it is not needed, and not to add new rules unless necessary. This should also lead to tackle potential regulatory asymmetries in order to ensure a level playing field, following a sound assessment of the services similarities, and guaranteeing that innovation or consumer benefits are not hindered. Rather than adding sector-specific regulation on new sectors, the existing sector-specific regulations on existing market players (such as electronic communication networks and services) should be lowered. Specific rules could be maintained for example if justified by some specific features of a service. This should also be complemented by reducing ex-ante regulation to the minimum necessary. For example, platform providers can also extend into downstream markets with own applications that compete with other providers. Competition law is designed to deal with potential abuses, but that process can take years, which is problematic in the fast-moving Internet world. Proportionate instruments that effectively ensure consistent standards and fair competition should be considered wherever necessary. On the other hand, there does not seem to be an adequate case about why certain business models need special regulation. As the technical and economic developments cannot be foreseen, it is better to start with a principle and evidence-based approach, rather than a heavy handed, sector specific ex ante regulation. From a regulatory perspective, at BUSINESSEUROPE Views on the Review of the Telecoms Regulatory Framework 4

5 this point in time the fast growing and dynamic nature of those markets suggests that a stringent and constraining ex ante regulation would not be advisable. In order to have a more innovative Europe, with a positive impact on growth and jobs, one should avoid creating new rules for every new innovative product or business model. At the same time, it is crucial to ensure that existing rules are effective, fast enough and properly enforced to meet the new challenges and ensuring a level playing field. Interoperability, transparency, innovation, non-discrimination, consumer choice and a level playing field should be among the paramount principles for the digital economy of the future. Most issues can be solved with an appropriate review of the regulatory framework and adequate application of competition law (ex post). The EU competition regulatory framework has broadly proved its worth however, when applied to digital markets, a careful analysis is needed, in particular of potential new barriers to effective competition and how to ensure faster intervention where needed, as well as an assessment of the way vertically integrated supply chains and multi-sided markets function in connection with Internet platforms. When considering action, it should be kept in mind that targeted regulation can be very problematic, in particular for small companies. The consequences of new rules designed for targeting specific companies, sectors or business models would in all likelihood have broader and unintended spill-over effects into other companies and sectors, with a negative impact on jobs. This would be particularly the case for smaller European businesses and start-ups, which have fewer resources to face increased regulations and burdens. The same level of regulation that only slows down larger businesses can knock down promising SMEs altogether. 2.4 Efficient spectrum allocation must allow uptake for mobile broadband Spectrum is a scarce and critical resource, and as such must be managed in the most effective way. Greater harmonisation in spectrum is important, because the application of various uncoordinated national policies across the EU creates inconsistencies and fragmentation of the single market, which hamper the roll-out of services and the completion of the single market for wireless broadband communications. Therefore, it is vital to ensure that spectrum is managed across the EU in effective and more harmonised way, thus contributing to EU growth. Greater coordination and consistency would also enhance the predictability of the network investment environment and allow greater transparency, economies of scale and technical standardization. At the same time, it is important to bear in mind that, even if spectrum harmonisation can be enhanced, the detailed conditions, such as terms of licensing and timetables should still remain under national powers. Not only should an effective spectrum policy provide a sufficient availability of spectrum resources, but also guarantee that the needs of all stakeholders are taken into account. Ensuring certainty on spectrum allocation is a must. Licensing conditions should not be so restrictive as to limit the ability of operators to fully use spectrum resources and to risk delaying investment in new services. In particular, allocation of sufficient spectrum for mobile broadband services will be critical. European businesses cannot expect to regain competitiveness if they are not able to integrate mobile solutions in their processes. Spectrum supply for mobile broadband needs to increase to be able to offer quality services at competitive prices to European companies and citizens. BUSINESSEUROPE Views on the Review of the Telecoms Regulatory Framework 5

6 2.5 Network access rules should encourage investment and competition As all activities in the digital economy depend on networks, a powerful and reliable broadband infrastructure is crucial. The future framework needs to provide more favourable conditions for the intensive investment required to build the networks needed to meet the new digital economy demands. Rules were designed to spur competition in existing networks but should also provide the right incentives to create new, innovative and quality infrastructure. * * * BUSINESSEUROPE Views on the Review of the Telecoms Regulatory Framework 6