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SPEECH/06/69











Viviane Reding

Member of the European Commission responsible for Information Society and Media




Towards a true internal market for electronic communications
























European Regulators Group
Paris, 8 February 2006

Ladies and Gentlemen,

I am pleased to be your guest this evening and this is especially true for a day which has already been filled with a stimulating professional discussion among regulators, which has once again proven the “joint regulatory culture” that is developing under our common EU telecom rules.

I would like to respond to your invitation to share my thoughts as “European telecom regulator” on three key issues: on the future of the industry; on my expectations for the review of the regulatory framework for electronic communications, in particular on how the role of the European Regulators Group (ERG) should evolve; and finally on an issue about which I see a clear need for determined European regulatory action: international mobile roaming.

My Vision for the Industries Concerned

Let me take up first of all what I see as the future of the industries that are so important to us, both individually and collectively.

Electronic communications, together with Information Technologies, form part of a family of technologies that are driving fundamental changes in our society, economy and especially in ‘how we do things’. I am thinking here of how we communicate and how we produce, store, access and use information. We are currently seeing an Information Revolution to rival the Renaissance and the Industrial Revolution over the last millennium.

‘Information and Communications Technologies’ – ICTs – are to the ‘horse and buggy’ technology the equivalent of combustion engines: very disruptive. Today in our everyday lives, we are still in transition from ‘horses and buggies’ to motor cars. But, in ten years time, European society, as well as that of all of our major partners, will live, communicate, be entertained and conduct business quite differently. ICTs will combine with advanced applications to offer us new ways of getting things done.

To give a few examples, I can see the following in the future of ICT industries:

  • improved health care, advanced health technologies and treatments will emerge and will support more efficient, personalised health systems;
  • new educational opportunities: we already see the availability of online study; this possibility will become much more generalised;
  • government services will evolve towards e-government services – already today some of us are able to file tax returns online, apply for a driver’s license and pay our TV license online;
  • increased democratic participation: one day we will be able to vote online and to interact with public authorities via electronic communications;
  • new cultural opportunities will be available and new ways of creating and sharing content will develop.

The communications industries under our regulatory microscopes are the bedrock of this revolution. They are a major source of technological innovation to say nothing of their macro-economic contribution to increased productivity. In the internet world, we see that the challenges to the market leader do not come from large, established companies with a legacy network. Today’s challengers are yesterday’s start-ups, which have then succeeded and become new established companies.

This has been the case for Yahoo, Netscape, and more recently Google and Skype. I call on all of us to see this development, and the arrival of new innovative companies also from outside Europe not as a threat, but as a welcome wake-up call for Europe’s industry and policy-makers.

We have all heard of digital convergence and how it will be a key driver of growth. But for digital convergence to deliver on its potential in Europe, we need innovation and competitive markets. We need a culture of market entry and we need to keep our markets open.

  • To underpin the new entrants, we will need infrastructures that are fast, that support rich content, that are interoperable and that are secure. I see my role as ensuring that we have policies and initiatives that:
  • release the potential of digital convergence;
  • encourage innovation and market entry; and
  • maintain the degree of competition which is necessary to keep all players in their toes.

I believe we are at the start of a steep curve of growth of demand for content-rich, networked services. And, as the economics of networks tells us, the more these services grow and interconnect the more value they will create from each other.

However, I also believe that on our way to the Information Society, we should not leave anyone behind. All Europeans, whatever their state of health, their wealth or where they live, should be able to enjoy these future benefits. The Information Society should be just as accessible to, for example, senior citizens and to people with disabilities, to name just two important groups of our societies.

To achieve all this I need your help.

The Role of the ERG and How It should Evolve

I would now like to touch on the role of the European Regulators Group and its evolution in the context of the ongoing review of the regulatory framework.

One of my policies is that of creating an open and competitive single market for information society and media services in the EU. That’s where the ERG has an important role to play.

The Commission created the European Regulators Group in 2002 as a forum for expertise to be shared, both with the Commission and between the members themselves. We saw the ERG as a way of achieving more consistency in applying the regulatory framework than had been the case under the old regulatory framework. Over and over we had been told that there was no consistency of approach and interpretation between different national NRAs under the old framework. To solve this problem we were even asked to create a “European regulator”.

As you know, we chose instead to use a body, with regulators from each Member State, to act as a centre of expertise and regulatory excellence to try to achieve a consistency of approach that would help the Commission deliver an internal market to the EU, while allowing each regulator the prerogative to discharge its responsibilities in its own territory. We saw this forum as offering professional cooperation to its members and professional advice to the Commission.

This remains our vision for the ERG. I won’t hide from you the fact that the markets are telling us that Europe does not yet have a satisfactory level of consistency and harmonisation of practices between national regulators. This means that we still have some work to do before national regulators co-ordinate their work in a way that fosters the internal market. When we come to review the regulatory framework in 2006, we may agree that there is no need for increasing the Commission powers substantially, but there is room for improvement in getting regulators to think beyond their national boundaries.

As we go forward, I would ask for your support on using the ERG, not just as a source of regulatory expertise for its members, but also for the purpose of delivering more of a genuine internal market than has been the case to date, for example by seeking more consistency in the imposition of remedies.

I would also want you to consider how we can jointly encourage the arrival of more trans-national or even pan-European communication services. I will speak about roaming in a few minutes. But shouldn’t the long term objective of our policy be to make international roaming inside Europe disappear in pushing for communication services available over the entire continent?

In that respect, I believe that we should, in cases where this is economically efficient, intensify the cooperation between regulators in neighbouring countries. Being a Luxembourger, I could well imagine that some regulatory tasks for my home country could be merged with the same tasks of regulators in the neighbouring countries, and that in the not too distant future. Indeed, it makes sense in my view that, for example, the regulation of high-speed networks does not halt at the national borders any longer.

Review 2006 of the EU Regulatory Framework for Electronic Communications

The Commission is committed to taking an open, forward looking approach to the Review 2006. I am prepared to look at broad questions linked to how best to ensure that Europe achieves its Lisbon goals by promoting investment and competition. So everything is ‘on the table’ in regulatory terms as long as it is in line with these macroeconomic objectives.

Some questions that need to be answered include:

  • How can we best achieve competition and investment in next generation networks? In Europe today, the decision on finding the right balance between competition and investment can no longer be solely a national decision. The European Commission is currently looking at whether further adjustments are required. It is absolutely crucial that we all understand that this is a European process, and that the European Commission cannot tolerate fragmented national approaches which may favour only the former national incumbents and could thereby block the development of a true Europe-wide Communications market.
  • A second question to be examined is: how to ensure a balanced regulatory approach, regulating only where necessary to remove market distortions?
  • A third question we expect to look at is: how can we make the market review procedure of the regulation more streamlined, more efficient and less resource intensive for regulators?
  • We also want to examine how we can make spectrum rules more coherent across the EU, more innovation-friendly, market oriented and user friendly.

As a preliminary step, even before looking into possible changes to legislation, we will review the Commission’s Recommendation on Relevant Markets, and present a new text before the summer break. The revised Recommendation will take account of the impact of convergence on market definitions and evaluate the competitiveness of the listed markets.

Let’s be clear about what the regulatory framework should try to do in the longer term and, that is, to move towards truly competitive markets with enhanced cross-border competition. Success – in terms of the regulatory framework – will come when markets have become sustainably competitive so that we can dismantle step by step the ex ante regulation that controls the market power of dominant companies. In other words, regulating electronic communications should not be regarded as “a growth industry”. However, we are not there yet!

International Roaming

Let me finally turn to a separate issue on which I have been working a lot since I took over as EU Telecom Commissioner in December 2004: international mobile roaming and the cost that it means for consumers in Europe. We all know from surveys that in spite of many warnings and policy initiatives, roaming prices remain unjustifiably high at the retail level even though competitive pressure may have brought down charges at the wholesale level. The ERG itself made this point – which in the end means that operators are not passing their savings on to the consumer – in its conclusions of May 2005.

In October 2005, the European Commission published a website indicating the cost of using a mobile phone abroad http://ec.europa.eu/information_society/roaming. This website was not only for many weeks the most visited website of the European Commission, but also revealed that roaming prices – where they were published by operators, which was not always the case – vary considerably between operators in the 25 EU Member States. The lowest roaming price we found was 20 cents for a four minute peak-time call made on a Finnish mobile contract while roaming in Sweden. The highest roaming price we found was 13,08 EUR charged to a Maltese consumer roaming for four minutes in Latvia. Here, we got a clear indication that the market does not work.

When I launched this roaming website in October, I told operators very clearly that this is the last time that I will stand on the sidelines. I announced that I would present an updated website after six months and that I would be prepared to take regulatory action if prices do not move substantially closer to a market-oriented level. Because I consider it the duty of the European Commission to ensure that citizens too can reap the benefits of the internal market.

In the last few days, my services have started working on the update of the website. What we see so far is frustrating: Prices appear to have remained essentially unchanged. Special holiday packages, often referred to as a solution by operators, have not had the expected impact on the market. Consumers continue to pay unreasonably high prices for using their mobile phone abroad.

There are different possible policy responses to this development. The Commission and the ERG could certainly now advise consumers to leave their mobile phone at home when travelling. But what kind of a sign of the attractiveness of Europe’s Information Society and Europe’s internal market would this be? I believe that this cannot be our answer. Our answer must instead be determined action. This is why I have asked my services to start working on an EU regulation on international roaming charges – an EU Regulation that the European Commission could propose to the European Parliament and the Council well before the summer break.

Let me outline the main elements of this EU regulation on international mobile roaming charges on which our lawyers are working at the moment and for which a full economic impact assessment is under preparation: The EU Regulation will be an internal market instrument based on Article 95 of the EC Treaty. From its entry into force – which could be in the second part of 2007, if the Parliament and the Member States support the Commission to have this piece of legislation adopted rapidly – it will have immediate effect in all 25 Member States and will not require further transposition into national law. The new Regulation will not prescribe a specific “ideal” price for international roaming, but would require that international roaming charges are not higher than national roaming charges. Roaming charges are paid for using the network of another operator, and thus should not be higher in an internal market just because the other network is placed in another EU Member State. In this respect, the Regulation will follow the example of the EU Regulation on cross-border payments in euros, which mandated that bank transfers in euros between the EU Member States must not be higher than domestic bank transfers. The new Regulation on international roaming could include further provisions making charges more transparent for consumers, or facilitating authorisations for cross-border mobile offers. Of course, this Regulation will be without prejudice to competition law, as it will be an internal market instrument and would not sanction anti-competitive behaviour for which we have different rules and instruments.

I will present further details of the new Regulation in April in parallel to the launch of the updated website on international roaming charges, and will soon thereafter submit the text to the Commission College to bring the new rules in force as soon as possible. During our work on the text of the Regulation, I am of course interested in the input of the ERG. I would like to ensure that our EU regulation and the work done by national regulators in this field are mutually complementary – for the benefit both of the internal market for electronic communications and of Europe’s consumers.

Conclusion

At the beginning of my remarks, I touched upon the Information Revolution and I compared it to the Industrial Revolution. I also made it clear that I thought we were still in the process of moving between the old and the new technologies. In other words, I believe that important changes are occurring in the markets. Our role is to understand the challenges brought by such changes.

In conclusion, I would like to leave you on a lighter note and tell you the story of a general who was responsible for the British Army procurement programme before the first world war. He was confronted with a dilemma in that he had only so much money to spend. He had to choose between increasing the amount of food and fodder for his horses, on the basis that the Army would likely need more horses, or he could invest in a still 'infant' technology, about which he remained unconvinced: tanks and other armoured vehicles.

Taking the first option, the general was convinced that he was providing the best for his Army. History proved him spectacularly wrong.

We should be modest enough to avoid the trap of assuming that we know when, where and how new technologies will disrupt the old. History will judge us as it did the unfortunate general. As best precondition for a smooth and successful technological development, we should ensure that our markets are open and that any service and any technology has a meaningful chance to compete for that elusive quality: what the consumer wants. And sometimes, only sometimes, we should also not hesitate to shake up developments ourselves – when there is a clear economic and social case.

Thank you for your attention.


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