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SPEECH/01/292

Erkki LIIKANEN

Member of the European Commission responsible for Enterprise and the Information Society

"Wireless Communications in Europe: Present Challenges and Future Perspectives"

EVUA (European Virtual Private Networks Users Association) Plenary

Helsinki, 15 June 2001

Ladies and gentlemen,

If you read the newspapers every day you will be struck by the pessimism enveloping the mobile sector. However, there is a danger to miss the wood from the trees.

Telecoms remains, in spite of current difficulties, one of the most dynamic sectors in the European economy. It has significantly contributed to the general economic growth of the EU (European telecom service market in 2000: €200bn, 12.5% growth).

Mobile communications is the main driving force of this growth: 30% of total telecom service revenues, 235 million GSM users, penetration rate 63% in average in the Community)

The basic premises underlying 3G is also unaltered. By combining the two main technology drivers of recent years the Internet and mobile communications 3G is bound to have a tremendous impact on Europe in both societal and economic terms.

Nevertheless, we are now facing 3 challenges:

  • Global downward trend in high-tech and telecom stocks. After a steady growth period, an extraordinary growth of telecom stock values took place between January '98 and March 2000. The subsequent devaluation of technology stocks, notably "dot.com" stocks, has triggered a phase of readjustment of values, which today have returned to the levels which existed before the appreciation phase;

  • High 3G license costs and fragmentation of licensing conditions;

  • Uncertainty deriving from the fact that the market for new wireless applications remains largely untested. The challenge is therefore to ensure a smooth transition between 2G and 3G (GPRS, EDGE will provide a useful test in this respect)

The main question now is: what needs to be done to guarantee that Europe maintains its lead in wireless communications and services ?

3 things ( Commission Communication on 3G)

  • facilitating the deployment of 3G (short-term)

  • getting the new regulatory framework right

  • action in support of future digital wireless services

1. Facilitating the deployment of 3G networks under current legislation

As we all know, 3G licences have already been granted in most of the Member States on the basis of the existing national and Community law.

However, a number of important regulatory questions are now emerging in the radically changed financial context. Questions such as network infrastructure sharing or the treatment of delays in fulfilling deployment obligations, are being raised on a daily basis in several Member States. There is a risk of increased fragmentation of the regulatory environment in the EU unless co-ordinated European approaches are sought.

For this reason, the Commission launched last April a dialogue with the Member States and other stake-holders (operators, equipment providers) to address these questions at the European level, following up on its Communication on 3G. I believe we can find a European added-value here, instead of each Member State trying to find its own solutions for similar problems.

Clearly, the responsibility for the licences that have been issued remains with the Member states. However, the Commission can act as a facilitator and encourage the Member States to seek co-ordinated solutions.

Some positive effects of this dialogue are already visible. In particular, the possibility of permitting network infrastructure sharing has now been explored with positive results in several Member States. The German regulator recently took a rather open position and set out guidelines for operators who want to pursue sharing schemes. In Sweden, the Netherlands and Belgium the different options available are also being discussed.

The results of such a dialogue will be useful not only in view of finding immediate solutions for 3G services. They may also help in defining future licensing modalities with the aim of minimising the negative effects of fragmentation in the future and to tackle the issues related to the organisation of further licensing rounds.

This brings us to the second essential element to ensure the success of wireless communications in Europe: getting the new regulatory framework right.

2. Getting the new regulatory framework right

As there are limited possibilities for intervention under the present framework, it is essential to get the future one right!

This means to set in place regulation that will help us address licensing issues in the future in a more co-ordinated way and will be flexible enough to keep up with the pace of technological change while providing at the same time the necessary legal certainty to operators.

I will focus on two aspects that are particularly important for mobile communications: 1) licensing and 2) access and roaming issues.

    1. Improved co-ordination on licensing and spectrum policy issues

Under current legislation, 3G licensing methods and conditions were decided at national level fragmentation. The Commission proposals will enable us to avoid such a situation in the future as they provide the tools for ensuring Community coherence while leaving the necessary degree of responsibility at the national level.

The following aspects are of particular importance:

    a) Consultation and transparency procedure (Article 6 of the Framework Directive).

Under our proposal for this article every decision of national authorities related to the use of radio spectrum would have to go through prior consultation with other Member States and the Commission. This mechanism would allow us to discuss common issues at European level, instead of having each Member State taking divergent decisions that may jeopardise the Single Market.

    b) The proposal for a Radio Spectrum Decision

This Decision will provide for a policy platform to discuss radio spectrum issues that are relevant to Community policies (goes beyond electronic communications). Furthermore, our proposal provides a framework within which a consensus can be built on the need for harmonisation of licensing methods and conditions, provided the necessary political will is there.

    c) Avoiding over regulation

The new rules seek to limit ex-ante regulation to the minimum necessary while in the long run relying more on competition rules. This is a necessary condition to create the sound investment context the industry needs in view of the increasing initial cost for the implementation of new and innovative services.

The adoption of flexible but harmonised procedures is essential to tackle rapidly changing technical and market conditions. This approach is also adopted in the proposals relating to access and interconnection.

    2.  Access and Roaming Issues under the New Framework

Access and roaming issues are at the heart of the convergence of networks and services. The new regulatory framework seeks to address these issues in a way that reflects the changed telecom environment (convergence, MVNOs etc. ).

The electronic communications sector is characterised by strong inter-dependencies between market players. Networks need to be 'interconnected' either directly or indirectly to provide users with interoperability of services (any-to-any communication) and for users to access a wide-range of services from any operator of its choice. The current Community legislation (Directive 97/33/EC on Interconnection) has been instrumental in the successful transition of markets from a monopoly situation to a liberalised and competitive market.

Today, with the explosion of Internet, the development of fixed and mobile broadband technologies and the convergence of services, the contentious issues in the negotiation between undertakings has shifted to 'access' issues, notably access to mobile network infrastructure and roaming for virtual network operators (MVNOs).

Other examples would be:

  • access to the local loop for high speed Internet services,

  • access to intelligent network facilities to integrate fixed/mobile services,

  • access by content providers to portals (fixed or mobile) and multimedia distribution networks.

Fair 'access' by third parties to network infrastructure (and associated interfaces and facilities) is important to foster an innovative and competitive market and provide users with a wide range of services.

Of particular importance, in the light of the limited number of holders of mobile licenses and their national scope, is the availability to third parties of roaming agreements on a national and international basis, and/or access to particular elements of mobile infrastructure (e.g. access to radio stations for location services, etc). This will enable the creation of a European single market for mobile applications and services.

However, it is important to bear in mind that we have to strike the right balance between creating incentives for investments in infrastructure, and the access to infrastructure.

Under the current EU regulatory framework, the provisions concerning access agreements and the resolution of disputes arising from them refer only to the obligation of operators that have significant market power (SMP) to provide "reasonable access" to their networks. Some virtual mobile operators have in fact reach commercial agreements in this regard, i.e., VIRGIN Mobile agreement with ONE-2-ONE in UK, DEBIS Mobile with T-MOBILE in Germany. However, the current regulatory framework (that was designed in 1995 and adopted in 1997) is not clear enough or legally precise on the powers of NRAs to enforce mandated access to mobile networks including its technical and commercial conditions when negotiations fail. This possibly has hampered the emergence of MVNOs in most EU Member States.

The new proposed Directive on Access and Interconnection will empower NRAs to address any type of access issue, using harmonised procedures and criteria to impose obligations.

The proposal is based on the following principles:

  • priority given to commercial negotiations between parties to agree on the terms and conditions for access and interconnection.

  • a defined framework with common rules for national regulatory authorities to address issues of access and interconnection in particular when commercial negotiations fail,

  • the duty for national regulatory authorities to intervene to address identified market failures, using harmonised market analysis procedures, and acting in accordance with the principles of transparency, objectivity, and proportionality.

The Commission will help NRAs with Guidelines on market analysis and criteria for the determination of operators with significant market power on relevant markets that will be defined in a harmonised way.

  • When market analysis indicates that a market is not effectively competitive, obligations may be imposed on operators having significant market power in that particular market.

  • Obligations may be imposed for the mandated access to and use of specific network facilities, including open access to network elements and interfaces that is indispensable for virtual network operators, and re-sale of specific services where necessary (eg, wholesale roaming).

  • Technical and economic conditions may also be imposed for the fair and timely provision of the mandated access if operators do not reach commercial agreements.

  • Obligations will be reviewed on a regular basis, in order to decide whether to maintain, modify or withdraw them (following an analysis of the market).

The European Parliament had proposed some key amendments to the access Directive, that call for ad-hoc imposition of cost oriented obligations to mobile operators in relation to mobile call termination and international roaming (EP amendments 39 and 40 voted by EP on access Directive on 1st March 20001).

Although the Commission shares the objective of markets being truly competitive both at wholesale and retail level, the Commission can not accept such amendments because the imposition of automatic obligations depart from the market analysis principles that are at the basis of the new regulatory framework. Obligations can only be imposed when justified, and on a temporary basis until the market concerned returns to be effectively competitive.

This does not mean that the markets of mobile call termination and international roaming are today effectively competitive everywhere in Europe. When the new regulatory framework enters into force, National Regulatory Authorities will have to make a market assessment of the competitive situation of those markets and, where justify, impose appropriate obligations. New regulatory measures, such as the introduction of number portability on mobile networks and enhanced tariff transparency for consumers, together with the mandated access obligations for MVNOs explained above will improve the competitive situation of mobile services where necessary.

It is worth repeating that when imposing obligations, national regulatory authorities are bound by transparency procedures that will improve market certainty and ensure a fair level playing field in the EU Single Market. Access obligations can therefore only be imposed following public consultation and consultation with the Commission (transparency mechanism).

In any case, competition rules always apply. In this regard, the Commission opened in the year 2000 several competition investigations on access issues, in particular a sector inquiry on the level of charges for international roaming. The preliminary findings of this inquiry (November 2000) raise serious concerns both in term of competition and market structure.

The price for mobile call termination in a national mobile network is about 20 Euro-cents per minute at peak time (source: 6th Implementation Report) and price trends point to a decrease. Nevertheless, the prices of international roaming between two national networks largely exceeds the combined costs of handling mobile calls through both networks and are usually in a range of three to four time the costs of an average national mobile call. Moreover, there are no indications on downward price trends, although some operators are introducing more transparent price roaming schemes (e.g., Vodafone one rate scheme of 80 Euro-cent across most of the EU).

The investigation run by my colleague Mr. Monti is still ongoing in co-operation with national competition and regulatory authorities.

To sum up, the new regulatory framework and new access and inter-connection provisions will ensure that the communications market can develop along the lines of a healthy business-driven economic model. We want a market which is self-sustainable, with increased choice for users, that encourages commercial access agreements between operators, and also rewards investment risks and entrepreneurial behaviour. Nevertheless, when negotiation fails NRAs will be empowered to trigger proportionate obligations on access. This will ensure the competitive dynamics and innovation necessary at all levels of the value chain for the benefit of users.

This brings me to the last part of my intervention: how can we build a bridge to future wireless services and technologies?

3. Action in support of future wireless services

Together with setting the right regulatory environment, continued support for research activities and for the development of European customised multimedia content for wireless applications is key to the success of future wireless services.

    Research:

First, the private sector, the Member States and the Community need to maintain a high level of research for future wireless technologies. In its proposal for the 6th Framework research programme, the Commission proposes to strengthen the priority for research for wireless technologies. This is pro-competitive research within a 5-6 years time horizon. Also, the societal applications, such as eHealth, will be given priority. These services can be increasingly accessed by mobile terminals.

    eEurope Action Plan:

First of all, content. 3G is important not so much as a technology but rather as an enabler of new services and applications. Users are interested in the content they get, not in the technology.

It is crucial that we have favourable conditions for the creation of digital content in all European languages. People are unlikely to pay for services that are not available in their own language.

The main responsibility for content creation is of course within industry, but the eContent programme that the Council adopted last December will provide for incentives for multi-lingual European content production.

The use of public sector information is also becoming increasingly important. Geographic information, traffic information or meteorological information can provide important material for value-added, location based services for mobile devices.

    Internet Protocol version 6:

A fully-fledged Mobile Internet where every terminal would have its own internet address will not become a reality unless we move gradually to a new Internet Protocol, IPv6. With the current protocol, IPv4, we will shortly run out of addressing space. IPv6 will offer limitless address space and allow the Mobile Internet to become a reality.

Conclusions

The Commission remains confident in the development of the future wireless communications of which 3G is an important step.

In my intervention, I have highlighted some of the challenges lying ahead and the developments of regulatory approaches to cope with them. It is the task of the European Commission, among other players, to foster an environment which is supportive of new technologies and new applications. My objective it to continue sustaining this effort.

Nevertheless, the main onus of success for 3G, like for any other commercial venture, remains with the industry itself. The provision of appealing, diversified, rich content for 3G is crucial to the sector's future. By ensuring a plurality of services, MVNOs have a distinct role to play in the sector's success.

I thank you for your attention.


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