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Neelie Kroes

European Commission Vice-President for the Digital Agenda

Telecoms markets – working together for change

Address at Annual Conference of European Telecommunications Network Operators Association (ETNO)

Brussels, 23 September 2010

Ladies and Gentlemen,

Good morning everybody. Let me first say that I am delighted that ETNO has organised this Summit, bringing together so many distinguished participants. It comes at the right time as we move into the implementation stages of the Digital Agenda and into broader reforms to ensure our long-term economic health in Europe.

The Digital Agenda

With 101 actions and 31 pieces of legislation to implement – not to mention and a new investment and entrepreneurial culture to build - it is certainly a challenging time for the European Union and for me personally. There are thousands, if not millions, of important partners, including each of you in this room.

This action plan is absolutely essential for Europe's long term economic recovery. It depends on us working together effectively.

You are certainly aware that this week, the Commission adopted a comprehensive Broadband package, the first major follow-up since the announcement of the Digital Agenda. With the adoption of such important measures we can say that the Digital Agenda moves from 'vision' to 'concrete action'.

As you know, the Broadband package includes:

(i) A Recommendation on regulated access to Next Generation Access (NGA) Networks

(ii) A proposal for a Radio Spectrum Policy Program (RSPP), and

(iii) A Broadband Communication on encouraging increased investment.

These three documents work alongside the revised legislative framework for electronic Communications and the 2009 Broadband State Aid Guidelines to deliver major improvements to investment environment. They bring us several steps closer to the first-class, high-performance internet.

These initiatives are primarily addressed at you - the telecommunications sector – and they will be the focus of my remarks today. That is no surprise, as the Digital Agenda is a lot about the telecoms landscape of tomorrow, of which modern infrastructures and broadband services are both crucial parts.

NGA Recommendation

Let me start from the NGA Recommendation, as I know that for many of you NGA networks lie at the heart of your businesses.

Europe's incumbent operators today face competition from cable network operators and new entrants, as a result of liberalisation designed to move us to a telecoms Single Market. In this challenging context you are in the process of investing significant funds to modernise your networks. For example, to deploy fibre in order to offer your customers superior user experiences and ever faster connections.

Let me be clear: all investing companies have my strong support in this transition to fibre.

And I believe that the NGA Recommendation indeed strikes a good balance between giving an extra impetus to investment and protecting the competitive process.

The Commission's Recommendation does not and could not grant regulatory holidays for NGA networks. Such holidays are not possible under our regulatory framework and, most importantly, would be against the interest of European citizens and business that benefit, and should continue to benefit, from competitive broadband offers.

When network operators have significant market power in a broadband infrastructure/wholesale market and the conditions for ex ante regulation are fulfilled, National Regulatory Authorities (NRAs) should normally mandate cost-oriented access to such networks. This approach improves the competitive landscape by allowing new market entrants to climb the 'ladder of investment' and gradually deploy their own infrastructure in the incumbent fibre network or ducts. NRAs should therefore be able to identify the most appropriate access remedies for each case, taking into account in particular the prevailing level of competition.

I know that incumbent operators often argue, to quote ETNO, "that a systematic application of cost-based regulated access obligations is not appropriate in an NGA environment and highly competitive markets". I can understand that they would like to be as free as possible – and I could even say that I would have been worried if they had 100% welcomed the Recommendation…..

But jokes apart, please remember that access obligations can only be applied when, following a market analysis, NRAs conclude that the relevant markets are not competitive and network operators have significant market power. Access remedies are not automatically imposed – and any remedies imposed must comply with the principle of proportionality. And this is also why the Recommendation allows NRAs to fine-tune ex ante remedies to reflect the different level of competition existing in different geographic areas (rural and urban) – more intense competition can imply less intrusive regulation.

Having said that, we are well aware of the huge investment required to deploy NGA networks. The risks you take investing justify the application of risk premiums in regulated access costs. Of course, this risk can vary from one case to another so that it is not possible or desirable to set a single "European" risk premium. However, the Recommendation provides specific guidance on the elements to take into account in setting the risk premium in different cases, in order to achieve similar outcomes for similar circumstances.

And it is also for this reason that the Recommendation provides strong support for co-investment arrangements which can reduce the level of risk taken by each individual company. Moreover, for risky fibre-to-the-home investments, the Recommendation allows setting lower access prices to the unbundled fibre loop in return for up-front commitments on long-term or volume contracts, while ensuring that efficient competitors are not squeezed out of the market.

All in all, I think our approach creates a more attractive investment climate, in which even risky projects can flourish. Our approach is consistent with attractive returns on capital for telecommunications companies for many years to come.

Most importantly, the NGA Recommendation gives all market players long awaited regulatory clarity. It provides a solid and stable framework for the tasks of national regulators in an NGA context, and will be good for network deployment.

On the other hand, it is also important to keep in mind that the competitive process promoted by the Recommendation may play an important role also in the framework of the net neutrality debate.

Competition at the network level, combined with appropriate transparency measures, gives customers the ability to choose among different providers for their internet connections, making any potential danger to net neutrality less clear and present. After all, if consumers are dissatisfied with the quality of the internet connection offered by their provider, competition enables them to switch.

In other words: strong competition in broadband markets may allow a more relaxed regulatory approach to net neutrality issues. This may allow network operators and services and content providers to explore innovative business models, leading to a more efficient use of the networks and creating new business opportunities at different levels of the internet value chain and better services and applications for European consumers.

To conclude on the NGA Recommendation, I think that this important measure is good news for you and your customers.

Broadband Communication

Having touched upon the regulatory framework for NGA networks, let me now turn to the Broadband Communication. This text sets out a coherent framework for meeting the broadband targets and, in particular, indicates how public authorities may support broadband investment. It is an "umbrella" to the other initiatives, and covers three key areas:

1. National operational broadband plans

We want Member States to produce updated and fully operational broadband plans, which should also cover the roll-out of ultra-high speed networks and should foresee concrete implementing measures, including provisions for the necessary funding. In 2011 we will work with Member States to foster convergence between national approaches.

2. The stimulation of investment through co-financing and a better use of EU funds

The Commission is in particular working with the European Investment Bank to bring in more funds for broadband. The EIB already invests €2 billion each year in broadband projects and this will likely increase, as the Bank re-focuses its lending strategy on the Europe 2020 priorities. The EIB involvement will have a catalytic effect on other banks, bringing in more funds for broadband, and could underpin gross investment up to 15 times greater than the EIB's initial contribution.

That is in addition to EU funds that may support direct investment in broadband: the Cohesion funds and the Rural Development Funds. These funds have not been used effectively in the past for broadband development – that must change with the Digital Agenda. It is clear that it is not the mere availability of funds which makes a difference; we therefore need to have clear and simple rules for their actual use.

3. The reduction of investment costs

Reducing investment costs through public intervention can make a major contribution to the rollout of fast broadband networks. This could be done through local planning regulations, for instance co-ordinating network roll-out with other public digging work (for water pipes and electrical cables, for example). In addition, the revised Regulatory Framework for e-Communications brings additional powers to use ‘symmetrical remedies’ for passive infrastructures (in particular "in-building" wiring) to tackle bottlenecks in the networks and to promote the development of new networks. It is also common sense to try to co-ordinate network roll-out with other public digging work, for water pipes and electrical cables, for example.

Spectrum policy and wireless broadband

As we know, wireless network will play a key role in delivering the objective of ‘Broadband for All.’ The Commission proposal for a multi-annual Radio Spectrum Policy Programme (RSPP), to be adopted by the European Parliament and the Council, is particularly important here. We will now work actively with these two institutions to ensure the widest support and a timely adoption. And I particularly welcome the involvement of the European Parliament in the development of the spectrum strategy.

This proposal provides a comprehensive strategic framework for European spectrum policy for the next five years, covering several EU policy areas, including transport, health, environment or climate change.

In particular, the Programme aims at ensuring these general objectives:

  • regulatory clarity

  • reinforcing the principles of flexibility and trading

  • emphasising effective use as a condition of access to this scarce and valuable public resource.

  • boosting competition.

With specific regard to broadband development, I can underline the following three points:

  • We have proposed a requirement for Member States to ensure that sufficient spectrum is allocated for coverage and capacity purposes so that wireless applications contribute effectively to achieving the target for all citizens to have access to broadband at a speed of at least 30 Mbps (megabits per second) by 2020.

  • We have proposed an obligation for Member States to finalise, by 1 January 2012, the procedures necessary to authorise the use of all spectrum already designated for broadband services by earlier Commission decisions.

  • We suggest setting a 1 January 2013 deadline for making the 800 MHz band of the digital dividend available for electronic communications services according to the EU harmonised conditions of use. This is a tough deadline but I think there is broad support and momentum behind this date. Setting the bar high is crucial for the wide deployment of wireless broadband, while in exceptional circumstances we could allow specific derogations up to 2015.

Before I close, let me please also say a couple of things on the Roaming Regulation, as this is a topic of great interest to many of you.

Roaming and the Single Digital Market

The roaming debate rarely rests. Most recently, Acting Minister Vincent Van Quickenborne and Paul Rubig MEP declared support for a ban on roaming charges within Europe on 4G mobile networks from the outset. Minister Q, as I like to call him, has noted that mobile downloading abroad costs a Belgian subscriber almost 30 times more than at home.

I think we can all agree that such pricing examples bear little relation to the true cost of supplying the service. 

The message I take from that is that the Commission's review of the Roaming Regulation must look at the source of the problem and potential solutions in their full context. The relevant context is the lack of a really competitive single market for all aspects of telecoms services in Europe.

For me a true digital market is a market where effective competition ensures that citizens, customers and businesses do not experience substantially different services or costs when they pass a border. A true Single Market is one where the price differences between voice, SMS and data relate only to the actual cost of providing these different services. In the future, when all transmission in networks is data, the different approaches we see to pricing for these different services should logically converge. In such a market costs will indeed do down, but the opportunities for innovation and new business models will grow.

Therefore I have set the achievement of such a true Single Market for telecoms as a key objective of my Digital Agenda for Europe (DAE). I will assess the structural, economic and legal barriers to such a true Single Market and I am not afraid to propose the necessary measures to overcome these. But some real out-of-the-box thinking is needed for that.

In this scenario the exorbitant cost of 'roaming' abroad within the EU is an outdated concept.  

I retain an open mind for a while longer about exactly what our next steps should be. But whatever step we take, it will be part of a broader, more long-term commitment to creating a true Digital Single Market in which no service is artificially sheltered from competition.

We will not be proposing another barrier, and nor will we propose endless tweaking of the current price capping arrangement without adding anything new.

I want the gap between roaming and domestic prices to approach zero. The sooner the better. Significant differences between roaming charges and national tariffs cannot be justified in a true Single Market.

The present financial and economic situation in the EU does not give us much room and time to postpone the creation of a well functioning telecom and digital internal market. We simply cannot afford not having it.


Let me come to a close. With the package announced last week, the centre of gravity of the Digital Agenda has clearly moved towards "implementation". Our job is now to give Europe the first-class internet it needs.

I am not saying that the changes needed to get us there will be easy for either you or me. But I am saying that now is the time for change.

If we do not work together to actively manage this change – it will be harder for everyone. Please join me in building a digital future that works for all parties.

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