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Neelie Kroes
European Commissioner for Competition
Achieving self-sustaining competition in telecommunications
9th Annual ECTA Regulatory Conference
Brussels, 27 November 2008

Commission Européenne - SPEECH/08/658   27/11/2008

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SPEECH/08/658












Neelie Kroes

European Commissioner for Competition



Achieving self-sustaining competition in telecommunications
























9th Annual ECTA Regulatory Conference
Brussels, 27 November 2008

You are at the forefront of creating a truly competitive environment in telecoms in Europe.

In the end it is you, the industry, which delivers new and innovative services to end-customers.

You invest, you innovate and you ensure that the customers' needs are satisfied.

Our job is to ensure that that anticompetitive behaviour does not prevent you from achieving this goal.

We can do this in two ways: by enforcing the EU competition rules and by getting the right kind of regulation in place.

Enforcing the EU competition rules

Competition law is the right tool to ensure a level playing field between entrants and incumbents.

In particular, we (and the national competition authorities) have used competition law to remedy exclusionary conduct by dominant operators.

Sometimes this takes the form of pricing abuses.

Last year, we found that the Spanish incumbent Telefónica had abused its dominant position in the broadband market by way of a margin squeeze.

With high wholesale costs and weakened retail competition on the broadband market, Spanish consumers were paying far too much for broadband access.

And triple-play (television, internet and telephone) broadband services are still lagging behind in Spain.

Already back in 2003, when we took action against France Telecom and Deutsche Telekom for similar behaviour, we showed that we are ready to act forcefully against price abuses, even where there is sector-specific regulation.

These cases are important because pricing abuses impact directly on end-consumers.

But I have also asked my services to investigate non-price abuses.

Attempts by dominant companies to block or delay physical infrastructure access, and in particular local loop unbundling, cannot be tolerated.

Such conduct directly hinders the development of infrastructure-based competition.

This is an area where telecoms and competition rules can effectively support each other and lead to more competition in the market.

I am particularly worried about the situation in the new Member States, where competition is still at an early stage of development.

Finally, although we focus a lot on infrastructure competition, and we will certainly continue to do so, we also recognise that today a lot of innovation and price competition comes from Internet-based services.

These are independent of the networks on which they are provided.

I think it is crucial, especially in the context of the rollout of high speed broadband networks, to ensure that networks remain open.

Network service providers and Internet-based service providers must be able to deliver innovation and better prices to the benefit of the end-consumer.

I am thinking of both fixed and mobile networks.

I will not accept any "walled garden" anticompetitive strategy by dominant undertakings.

The role of regulation

Obviously the telecoms sector is not yet fully competitive.

Even in the context of the transition towards next generation networks, enduring economic bottlenecks, such as non-replicable legacy facilities, remain.

So it is necessary to regulate access in order to allow market entry and to ensure a level playing field.

It is important though that the right rules are implemented.

Our role is to ensure that regulation is based on competition law principles.

Because our experience is that inappropriate application of competition principles always results in inappropriate regulation, whether it takes the form of over- or under-regulation.

Inappropriate regulation is obviously detrimental to the proper functioning of the telecoms markets.

It prevents the move towards self-sustaining competition.

And it delays our objective of eventually withdrawing regulation.

This is something we cannot accept.

As businesspersons, I am sure you are keen to enjoy the benefits of fair competition on the markets you are involved in.

In view of this, it is clear that we need to ensure consistency and continuity in competition enforcement in telecoms and in telecoms regulation.

They cannot develop independently.

Consistency and continuity are crucial to achieving the shift from ex ante regulation towards more ex-post control, foreseen by the current Regulatory Framework.

Let me illustrate this by providing an example.

The example relates to the Next Generation Access Recommendation.

A subject which I am sure will be much debated today.

National regulators have started work on the issues raised by the transition to high speed fibre access networks.

Already we are seeing some divergences.

In some cases the sharing of passive infrastructures is seen as the main driver of competition, and a detailed set of infrastructure access obligations is adopted.

In other cases access obligations are less well-defined.

Different national circumstances explain different access regimes.

However specific guidance will help regulators to shape consistent remedies.

They will foster broadband competition and support the development of the single market for electronic communications services.

This guidance should be flexible enough to allow regulators to take account of different investment levels and grades of risk involved in rolling out fibre in the access networks in their country.

At the same time the guidance must be sufficiently clear and stringent to create regulatory certainty for investors and a level playing field across borders.

Regulatory predictability, a consistent approach across the EU and a parallel application of the competition rules are the recipe the Commission proposes for Europe to take the lead in the fibre rollout.

Let me expand on the 3 main pro-competitive principles we have developed in the draft Recommendation:

First of all, using new technology in a network does not eliminate the requirement for the dominant players to give competitors access to this network. NGA deployment does not mean “regulatory holidays”.

Dominant companies will have to provide access to their fibre network, as they do today on their copper network.

Both the national regulators and the competition authorities will need to be vigilant.

Dominant companies may not leverage their ownership of ducts and fibre to monopolise new broadband services or, even worse, to re-monopolise telecoms markets.

Secondly, national regulators should encourage alternative operators to move up the "investment ladder" by building their own fibre network.

Where regulators can give competitors access to the dominant player's civil works infrastructure and where the rollout of several alternative infrastructures is economically viable, other forms of physical access obligations may not be needed.

However physical access obligations will remain in place as long as there is no business case for competing infrastructures.

In this regard, we are encouraged to see that in some EU countries, alternative operators are the first to build a fibre network.

Thirdly, the heavy investments necessary for building a next generation network should be taken into account when setting the conditions for mandatory access.

A fair return on investment should always be included in the access price.

For that reason we recommend that regulators allow an objective risk premium based on the level of risk to which investors are exposed at the start of the new infrastructure project.

This would be a major step toward providing the required predictability over time that investors have been asking for.

It is clear that the precise level of this risk premium cannot be set by the European Commission.

It will vary from project to project: a full assessment should be made by the national telecoms regulator to evaluate the risks faced by the investor.

You have seen these principles in our draft.

A large number of you have taken part in the public consultation.

Thank you for your very interesting and well documented contributions.

Some answers point to the limited prospect for the rollout of several competing infrastructures in most Member States. Others emphasize that in the context of the transition towards multiple-play services, dominant companies should not be allowed to leverage their ownership of ducts and fibre to monopolise new broadband services or, even worse, to re-monopolise telecoms markets.

We are currently going through your contributions and I have asked my services to take their time.

The stakes are high: NGAs are the networks of the future.

So we certainly have some homework to do.

But at any event, I want to make one thing clear: we have not been working so hard in the ten years since liberalisation was decided in order to allow the existing level of competition to be damaged by the transition to NGA.

Instead, we see NGA as a promise of more competition.

Conclusion

To conclude: I am confident that we will move towards self-sustaining competition through creating new networks and upgrading existing networks.

This requires us to closely follow market developments, so that we can intervene with continuity and consistency in order to promote competition.

It is not our role to say who should invest, at which point in time, in which area, using what technology.

You are best placed to make such decisions.

Because you know your customers, and because you are the ones who bear the risks linked to investing.

The role of the Commission is to foster a common regulatory strategy across the EU.

Europe cannot afford to be confronted with a patchwork of inconsistent regulatory regimes.

I hear concerns that the turnover of the telecom sector will be directly affected by the ongoing crisis.

As a consequence, some call for a relaxation of antitrust rules.

To those who say that I want to answer very clearly: this will not happen.

We should remember that competition enforcement strengthens the economy, even - perhaps particularly - in times of difficulty.

In the current economic circumstances, we can certainly not afford inconsistent approaches.

On the contrary, we need to strengthen the single market, which is our best protection against worldwide economic disorder.

Strong and consistent application of sector-specific and competition rules is the best way to achieve this outcome.


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