new regulatory framework

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Informationand Communication Networks

NEW REGULATORY FRAMEWORK

Karsten MeinholdSiemens AG, Munich

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Information and Communication Networks

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COMPETITION GOES ON

ConsolidationConsolidation

Explosion

97 98 99 00 01 02 03

Operators

Time

Restructuring

TrafficVolume

Telecom Tariffs

Sou

rce:

Gart

ner

Gro

up

The battle is going on

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IMPACT OF COMPETITION ON ECONOMY

Model: Competition shall

drive prices down give incentives for innovative services and

infrastructure allow users, consumers better choice

Consequence: Electronic communication is more readily used, market volume goes up.

This increased use of electronic communications is basis for a more competitive and dynamic economy in general.

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PRICES

EU weighted average tariff reduction for national calls(variation 1997 – 2000)

Residential users - 9.5 % Business users - 20.0 %

EU weighted average reduction for international calls(variation 1997 – 2000)

Residential users - 32 % Business users - 34 %

Source: European Commission6th implementation report 12/2000

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Traffic growth in fixed networks; Germany

+ 10

Annual growth in %

+ 17 + 26

1997/1998 1998/1999 1999/2000Source: Annual Report RegTP

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Telecom liberalisation: Work in progress, results

Incumbentsstill dominate

96%

Incumbents’market share

1997 / 1999

91%

Some prices down

Prices 1997 / 1999

- 40%

International

local+ 7%

160 bn

Euro

191 bn

Euro

1999 2000

Telecoms servicesmarket

Fast-growing market

+20%

218

557

1998 1999

Network operators

More choice

+155%

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Sixth Report on the Implementation of the Telecommunications Regulatory Package - Summary

growth continues at an average rate of 9% over 1999 market size €191 billion in 2000. for mobile services market :

penetration increased 36% to 55% 194 million subscribers 54 operators licensed

for the fixed line service market: 461 operators are offering public voice telephony for long-distance

calls, up 89% on 1999 468 for international calls, up around 67% 388 for local calls, up 74%. 861 operators have been allocated access codes for carrier selection.

Tariffs continue to move downwards national calls decreased 10.5% on 1999 for business, 4.6% for

residential international calls decreased 15.1% for business, 13.5% for

residential

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MATTERS TO BE ADDRESSED

licensing procedures are still in some cases cumbersome timing of the licensing of 3G in a number of countries too slow tariff rebalancing has still to be completed supervision of cost accounting systems full range of carrier pre-selection services negotiation of the physical requirements for the installation of new

entrants’ equipment at local exchanges for the provision of local access services may require decisive regulatory intervention

difficulties in obtaining rapid and equitable interconnection call termination tariffs in mobile networks are in some cases still

not competitive timely delivery of leased lines the incumbent continues to enjoy first mover advantage in the roll-out

of ADSL continued concern at the lack of monitoring at national level of

consumer issues

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Seventh Report on the Implementation of the Telecommunications Regulatory Package - Summary

growth continues at an average rate of 9.5% for 2001 market size €218 billion in 2001. for mobile services market :

penetration increased to 73% Revenue growth 22.3% 36% more subscribers

Tariffs continue to move downwards Long distance calls decreased 45% since 1998 for 3 min. Call Long distance calls decreased 47% since 1998 for 10 min.

Call Advanced Services:

Internet penetration in EU households was 36% in June 2001 Some Regulatory bottlenecks still to be addressed:

Local Loop Unbundling Development of Broadband Services

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findings of the 7th Implementation report

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bottlenecks of the 7th Implementation report

x 7

x 5x 10

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Expected actions by EC

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EXISTING REGULATORY PACKAGE

• Services Directive (90/388/EEC)• extended to: Satellite (94/46/EC)• Cable (95/51/EC)• Mobile (96/2/EC)• Full competition (96/19/EC)• Cable ownership (1999/64/EC)• ONP Framework Directive

(90/387/EEC amended by 97/51/EC)• Licensing Directive (97/13/EC)• GSM Directive (87/372/EEC)• ERMES Directive (90/544/EC)• DECT Directive (91/287/EEC)

• S-PCS Decision (97/710/EC)• UMTS Decision (99/128/EC)• European Emergency Number

Decision (91/396/EC)• International Access Code Decision

(92/264/EEC)• ONP leased lines Directive

(92/44/EEC amended by 97/51/EC)• TV standards Directive (95/47/EC)• Interconnection Directive

(97/33/ EC amended by 98/61/EC)• Voice telephony Directive (98/10/EC)• Telecoms data protection Directive

(97/66/EC)

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THE NEED TO OVERHAUL THE 1998 TELECOMS FRAMEWORK

Respect review obligations from current directives

Amplify the benefits of competition for users (choice, prices, quality)

Adapt the framework to technology changes (convergence, Internet, etc.) and to market changes (e-commerce, changes in competition, etc.)

Meet the demands of the Lisbon Summit, to have the package adopted by the end of 2001

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GOAL OF THE REVIEW PROCESS

to continue the liberalisation process which was started in 1998

to adapt the regulation to the technological evolution

to cope with the aspects of convergence

to harmonise the EU landscape, and

to simplify the regulatory framework (from 20 to 8)

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Towards full competitionMonopoly19981990 2001

Amount ofregulation

Competition Law

Pro-competitivesectorial telecoms Laws Regulation &

governance of EC

EC: electronic communication

RELY INCREASINGLY ON COMPETITION RULES

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Voicetelephony

FixedMobile

Service

Type of network

Terminal

Broadcasting

CableSatellite

Terrestrial

Data

FixedMobileWireless Satellite CaTV Telecom

Wire-line Cu or Optical

Internet

Electronic Communication

CONVERGENCE REMOVES SECTOR BOUNDARIES

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EU‘s NEW REGULATORY FRAMEWORK

SpectrumDecision(Art. 95)

LiberalisationDirective(Art. 86)

Authorisation

Directive

Access & Interconnection Directive

Users’ Rights Directive

Data Protection

Directive

Unbundled local loop Regulation

Framework

Directive(Art. 95)

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THE NEW FRAMEWORK CONTAINS

1 Regulation: in force from 31/12/2000 unbundled access of the local loop

5 Directives: to be in force by 25/07/2003 (one exception tobe in force by 31.10.2003)

a common regulatory framework for electronic communications networks and services

the processing of personal data and the protection of privacy in the electronic communications sector

the authorisation of electronic communications networks and services

universal service and users’ rights relating to electronic communications networks and services

access to, and interconnection of, electronic communications networks and associated facilities

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EQUALLY IMPORTANT DOCUMENTS

A draft Commission Liberalisation Directive

A Decision on Community Radio Spectrum Policy

The documents can be found on the EU web at:

http://www.ispo.cec.be/infosoc/telecompolicy/review99/Welcome.html

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SIMPLIFICATION, CLARIFICATION

Services Directive (90/388/EEC)extended to: Satellite (94/46/EC)

Cable (95/51/EC)Mobile (96/2/EC)

Full competition (96/19/EC)Cable ownership (1999/64/EC)

ONP Framework Directive (90/387/EEC amended by 97/51/EC)

Licensing Directive (97/13/EC)GSM Directive (87/372/EEC)

ERMES Directive (90/544/EC)DECT Directive (91/287/EEC)

S-PCS Decision (97/710/EC)UMTS Decision (99/128/EC)

European Emergency Number Decision (91/396/EC)International Access Code Decision (92/264/EEC)

ONP leased lines Directive (92/44/EEC amended by 97/51/EC)

TV standards Directive (95/47/EC)Interconnection Directive

(97/33/ EC amended by 98/61/EC)Voice telephony Directive (98/10/EC)

Telecoms data protection Directive (97/66/EC)

Liberalisation Directive

Framework DirectiveAuthorisation Directive

Access & InterconnectionDirective

Unbundled local loop Regulation/Ordinance

Users’ Rights Directive

Data protection Directive

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FRAMEWORK DIRECTIVE I

Scope: electronic communications services, electronic communications networks, associated facilities (incl. fixed, mobile satellite and broadcast networks/services)

Aim: tasks of NRAs, harmonised application of the regulatory framework

NRAs legally distinct and functionally independent from all organisations providing communications services, networks,...

Policy Objectives and Regulatory principles: maximum benefit for users (choice, price, quality) no distortion or restriction of competition efficient investment in infrastructure, promoting innovation efficient usage of radio frequencies and numbering

resources

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FRAMEWORK DIRECTIVE II

Significant Market Power (SMP): definition criteria: power to behave to some extend independently of competitors, customers and ultimately consumers.Criteria for such assessment in Annex II.

Where an undertaking has SMP it may be also deemed to have SMP on a closely related market

Market definition according to Annex I (minimum coverage of services of other directives)

Standardisation: The Commission shall draw up and publish in the Official

Journal of EC a list of standards/specifications (CEN, CENELEC, ETSI, ITU..)

Member States (MS) shall encourage the usage of these standards

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COMMON REGULATORY FRAMEWORK

Main obligations: applicable to ‘electronic

communications networks’ increased power of NRA’s installation of Appeal Body definition of ‘significant

market power’ installation of

‘Communications Committee’

Important consequences: impact on activities in

transmission, switching, routing and other resources conveying signals by wire, radio or optics in satellite, fixed (CS, PS, IP), mobile, radio and TV broadcasting, CATV and PL networks

Brings Europe in the lead on Liberalisation of Telecom

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UNIVERSAL SERVICE DIRECTIVE I

Aim & Scope: Publicly available services with good quality, to which all users have access at an affordable price:

establishment of rights of end-users, including on corporate networks:

includes retail provision of leased lines Definitions:

public telephone network, network termination point (NTP), geographic and non-geographic numbers

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UNIVERSAL SERVICE DIRECTIVE II

Member States shall ensure that the following services of the directive are made available to all end-users at affordable price:

Connection at fixed location telephone, fax, data communications with rates sufficient for

internet access telephone directory European call number 112, 00, 3883 measures for disabled users Quality of service parameters according to Annex III (ETSI

Quality Standards) Transparency and publication of information on prices,

standard terms,.. (Annex II)

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UNIVERSAL SERVICE DIRECTIVE III

Specific facilities and services according to Annex I: Itemised billing Selective call barring for outgoing calls, free of charge Pre-payment systems Phased payment of connection fees Appropriate measures against non-payment of bills Tone dialling or DTMF (dual-tone multi-frequency

operation) Calling-line identification

Consumer equipment for digital TV reception shall allow the de-scrambling according to ETSI standards, > 30 cm screen: DVB common interface connector

Interoperability between analogue and digital TV sets Minimum set of non-discriminatory leased lines, cost based

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UNIVERSAL SERVICE AND USER‘S RIGHTS

Main obligations:

covers speech, fax and data services (including internet) at a fixed location, wireless or by wire-line connection

to all users in the territory for reasonable price

by at least one operator special measures for disabled

users

Obligations for NRA’s control prices/ transparency

Important consequences:

number portability, CS and CPS applicable to fixed and mobile networks US obligations can also be fulfilled by New Operators

numbering issues: 112, 00, 3883 in all member states

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ACCESS DIRECTIVE I

Aim: harmonisation of access to and interconnection of electronic communications networks and associated facilities for sustainable competition and interoperability

Scope: rights and obligations for operators and undertakings seeking access to and interconnection of their networks (incl. local loop and broadcast especially access to wide screen 16:9 television services) and associated facilities.

Operators of public communications networks have the right and obligation to negotiate interconnection. Operators shall offer access and interconnection to other undertakings on terms and conditions consistent with obligations imposed by NRAs

Networks for digital TV shall be capable of 16:9 wide-screen

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Duty to maintain wide screen format Conditional Access (CA): Conditions of Annex I:

Operators of CA services who provide access to digital TV are to:

offer to all broadcasters on fair, reasonable and non-discriminatory basis compatible with competition law

keep separate financial accounts regarding their activities as CA provider

Other facilities to which conditions apply: Access to application program interfaces (API) Access to electronic program guides (EPG)

ACCESS DIRECTIVE II

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Concerning unbundled access: NRA’s shall ensure the publication of reference offer containing at least the elements of Annex II:

local sub-loop, unbundled access to the local loop, full unbundled access shared access conditions for unbundled local loop:

network elements to which access is offered Collocation services: physical and virtual collocation, equipment

restrictions in collocation space, security issues, access conditions for staff of competitive operators, rules for allocation of space, inspection

Supply conditions: Lead time for responding to requests, service level agreements, fault resolutions, standards contract terms, pricing for all aforementioned points

ACCESS DIRECTIVE III

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ACCESS AND INTERCONNECTION

Main obligations for Notified Operators:

publish detailed and transparent Reference Offer

Obligations for NRA’s

control pricingimpose accounting separationimpose to grant accessresolve disputes


accelerate the market penetration of New Operators

increases the market volume for ADSL technology by Notified and New Operators

potential impact on IP network interconnection

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AUTHORISATION DIRECTIVE I

Aim: Harmonisation and simplification of authorisation rules and conditions.

Scope: Authorisations for the provision of electronic communications services and networks

The provision of electronic communications may only be subject to general authorisation: Notification yes, but not explicit decision or administrative act by NRA.

General Authorisation: gives right to install facilities, negotiate interconnection, to contribute to universal service, to use general authorised frequencies, where risk of harmful interference is negligible

Where necessary: individual rights of use for radio frequencies and numbers shall be granted to general authorised undertakings through open, transparent and non-discriminatory procedures (incl. broadcast)

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AUTHORISATION DIRECTIVE II

Conditions attached to general authorisation and right of use for radio frequencies and numbers may contain only the conditions of the Annex:

financial contributions to U.S. obligation administrative charges interoperability and interconnection accessibility of numbers from national numbering plan use of public and private land collocation and facility sharing financial and technical guarantees to ensure the

proper execution of infrastructure works

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AUTHORISATION DIRECTIVE III

„must carry“ obligations personal data and privacy protection consumer protection restriction of illegal content information duties legal interception, security measures special access frequency usage and usage of standards

Limitation of number of right holders: objective, transparent and non-discriminatory selection criteria

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AUTHORISATION

Main obligations:

general authorisation and notification by undertaker

commercial activities can start immediately after notification

measures to facilitate the exercise of ‘rights of way’ and ‘rights of interconnection’


Simplifies the process and start-up for New entrence extensively

changes the importance and the role of NRA


increases the market volume

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Processing of personal data,protection of privacy

Scope: Processing of personal data in connection with electroniccommunication services

Aim: Protect fundamental rights and freedoms with respect to processing of personal data; complement to directive 95/46/EC.Not covered: issues outside the Treaty, like defence, state security

Covered:Security of servicesConfidentiality of communicationsHandling of traffic dataItemised billingCalling and connected line identificationAutomatic call forwardingDirectoriesUnsolicited communications

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PERSONAL DATA AND PRIVACY PROTECTION

Main obligations:

restricted use and storage of traffic data

calling- and connected- line identity control by user

restricted use and storage of location data

measures against unsolicited communications


Protecting the privacy of citizens by limiting storage of data

Powers to act against spamming

Potential impact on functional implementation in networks and products

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UNBUNDLED ACCESS TO THE LOCAL LOOP

Main obligations for Notified Operators:

full unbundled access shared access collocation conditions in place by 31/12/2000

Obligations for NRA’s control pricing - cost based resolve disputes


increases the market volume in general

Enforced collaboration between incumbent and new operator on basic infrastructure


Stimulate penetration of Broadband Band connections

increases the market volume for ADSL technology by Notified and New Operators

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Sources: Cahners, IDC, Yankee Group

Number of customers (million)

0

5

10

15

20

25

30

35

40

45

2000 2001 2002 2003

Total

Asia

Europe

N. America

FORECAST FOR DSL EQUIPMENT (FEB. 2000)

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Situation

The European Parliament and the Council of the European Union approved the Regulation on ULL Dec.2000, immediately applicable in all member states

The European Parliament and the Council of the European Union approved 4 out of 5 of the Directives which are to be implemented into National law by the member states by 24/7/2003

The ‘Personal Data & Privacy Protection’ was approved in mid July 2002. The implementation period lasts until 31/10/2003.

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Situation (cont.)

Commission recommendation on definition of relevantProduct and service markets: in consultation

Commission gudeline on assessment of SMP: adopted

Committees for harmonised applicationCommunications committeeEuropean regulators Group

Radio spectrum committeeRadio spectrum policy group

new regulatory framework

Documents