|Topic:||Regulating for growth in Germany|
|Organisation:||The Regulatory Authority for Telecommunications and Posts, Germany|
Matthias Kurth is the President of Germany’s Regulatory Authority for Telecommunications and Posts, having previously been its Vice President. During his career, he has been Director of Business Development, Law and Regulation for COLT Telekom GmbH, Chairman of the Conference of Heads of Administration of the Ministers of Economics, at federal and state level and Member of the Supervisory Board of the Deutsche Ausgleichsbank. Mr Kurth has also been Representative of the State of Hesse in the Committee of the Regions of the European Union, Representative of the State of Hesse in the Regulatory Council for Posts and Telecommunications, State Secretary in the Hesse Ministry of Economics, Transport and Urban and Regional Development, Head of Administration and Permanent Deputy of the Minister, Parliamentary Secretary and Deputy Chairman of the SPD Group in the Land Parliament, member of the Presidium of the Hesse Land Parliament and judge at the Darmstadt Regional Court. Mathias Kurth studied Law and Economics at Frankfurt am Main University, and was a postgraduate legal trainee in the Administration of Justice of the State of Hesse.
Market players bring services and new applications for customers. IP technology and the introduction of next generation networks offer them huge potential in this regard, but only for users with broadband connections. The spread of IP-based broadband networks requires the oversight and support of regulatory authorities to make new services secure and available to as wide a customer base as possible through competition. Guaranteeing competitive access to the costly last mile infrastructure is critical to the growth of healthy competition.
The Internet as an information medium has already revolutionised society around the world and opened up entirely new markets and business models. This trend is by no means over. The Internet Protocol and next generation networks will transform the telecommunications and media landscape. Some see this process as a revolution, while others consider it more evolutionary. Yet more crucial, is that it will happen and is unstoppable, nationally and internationally. Internet Protocol and next generation networks This dynamic will re-energize competition. It is important now that the competitive structures that emerged from the traditional line-switched networks are not stymied or, worse, eliminated because of IP technology. All competitors, without exception, must take up the challenge of structural change. Yet it is also important to make sure that companies with significant market power do not deploy technologies that limit other companies’ access or competitive opportunities. Network and services interoperability is the crucial issue facing the markets. It is at this point that regulation kicks in. The job of the regulatory authorities is to shape the regulatory environment in such a way that competition is not distorted and investment is secured even at times of technological change. Regulation must therefore focus on the real bottlenecks. Access to networks and network elements, the last mile, is most critical in the end customer area. The last mile cannot be replicated without great cost. Access to it is therefore restricted to exclude competitors from essential facilities or, at least, to delay their provision. Non-discriminatory provision of scarce resources such as numbers and radio spectrum must also be secured. The job of the market players is to further develop services and devise new applications for the customers. The conversion to IP technology and the introduction of next generation networks offer huge potential in this regard. Network intelligence, today still located in the network itself, is shifting more and more to the terminal equipment, in other words closer to the user. Ultimately, users will be able to decide for themselves what services to use, and will possibly configure their own or use the services offered from one or more providers on one or more platforms. Theoretically, then, the network is simplifying as the service offer expands, creating synergies in the provision of network capacity while opening up diverse service offers for the users. The benefits for users and hence for further growth are clear. Nevertheless, there are risks. New services and technologies create new potential for fraud and negative influences. Already, the damage caused by spam, phishing, unlawful diallers, Trojan horses, worms and viruses in Europe alone is estimated to reach several billion euros annually and the trend is upwards. Such activities have already deterred many from using services such as home banking, online shopping and premium rate services. Online sales could be significantly higher if the Internet were more secure. The cost advantages of home banking or electronic services could benefit companies and customers alike. We cannot expect to prevent each and every form of fraud and misuse, despite specific measures, but it is essential not to be complacent, and to strengthen users’ confidence in technology and services by taking action. Constant vigilance The German regulatory authority has been largely successful combating dialler misuse by, for example, compiling a register of diallers that must meet precisely defined consumer protection requirements. Yet experience shows the need for constant vigilance, due to constant efforts to circumvent the requirements. The universal nature of the Internet allows activities to be moved to other countries, consequently preventing national regulatory authorities from intervening. In many cases, objectives require international action flanked by national measures. These measures should not be the responsibility of state institutions alone. Network operators and service providers should play a part. Concerted action is the only way to stem abuse and spur growth. The ITU has a fundamental role internationally, co-ordinating as it does international Internet governance. Promoting broadband The services enabled by IP technology and next generation networks will only be available to users with broadband connections, allowing them to use the whole spectrum of services in user-friendly quality and at user-friendly speed. Currently, then, broadband and its promotion is one of the most important issues in Germany and Europe as a whole. The European Regulators Group (ERG), a group of national regulatory authorities created by the European Commission, is currently addressing issues of broadband penetration. An ERG working group headed by the German regulatory authority has begun an empirical study of developments in the broadband access market. Assisted by national regulatory authorities, it has collected important data that allow initial conclusions to be drawn about the extent to which regulatory strategies and the availability of regulated access stimulate competition. The study begins by looking at the current structures in the individual member states. Whereas in other countries cable provides a large number of broadband connections, the number of cable connections in Germany, compared to telephone network DSL connections, is very low. Of the 6.9 million broadband connections in Germany at the end of 2004, only 145,000 were by cable. The data shows that in many countries only intermodal competition triggered by cable has thrown down the gauntlet to the telephone companies. The study shows that a diversified range of access products boosts competition in the broadband market considerably. The ERG is currently discussing a model based on a ‘ladder of investment’. The ladder stands for a range of access products, the different stages of an investment scenario for competitors. The first rung of the ladder represents pure resale, while the next rung, bit stream access, leads to the fully unbundled local loop. The top rung is self-operated infrastructure. The broadband market is well advanced wherever many wholesale products are available on many rungs of the ladder. This facilitates market entry, since entry is possible at any point. Access products, however, must be consistently priced so that a competitor entering lower down the ladder can more easily climb to the next rung. Provision should be made for migration paths facilitating the move from one rung to another. For example, competitors acquiring customers by way of resale should have access to consistently priced products such as bit stream access. The ladder describes the various stages of the value chain which competitors can reach, step-by-step, successively replacing wholesale products they initially bought with their own infrastructure. When they have reached the top rung and possess infrastructure, the regulation of wholesale products can start to be rolled back. At present, a host of detailed questions are being discussed. How can, for instance, new access products such as ‘standalone bit stream access’ that are being demanded be integrated meaningfully in the ladder of investment? How can consistent price regulation be secured for the whole of the ladder? What are the implications of the use of IP technology and next generation networks for the existing PSTN (public switched telephone network), particularly with regard to costs and hence price regulation generally? Will there be a new interconnection regime with different cost allocation? Finally, we do not know whether the current European regulatory framework will be able to clarify these issues or whether, here too, modifications will prove necessary. Competition The European telecoms regulators debated these questions at length at a broadband seminar in Bled at the end of May. The national regulators will have to make their own assessments through studies of the broadband market, but there is a common understanding that broadband promotion is a concern of all member states. Looking at the ladder of investment situation in Germany, competition in the centres of population is already on the upper rungs. Measured by the figures for full unbundling, Germany is leading the way. There are more unbundled local loop rentals here than in all the other EU Member States. In the cities, competitors have much of their own infrastructure and thus, apart from the last mile, largely have no need for Deutsche Telekom AG’s wholesale products. Outside these conurbations, the competitors, mainly resellers, are wholly reliant on Deutsche Telekom’s infrastructure. Competition there is on a much lower rung of the ladder and is much less prevalent than in France, for instance, as can be seen in the price of DSL access. Where competitors provide DSL access using unbundled local loops prices are lowest, that is to say, with a lot of their own infrastructure. To catch up with the leaders in Europe’s broadband markets, we will have to intensify competition. Regarding unbundled local loops, we have created a pro-competitive environment with our latest reduction in the monthly rental. Where intermodal competition is concerned, we expect, by awarding spectrum for Fixed Wireless Access, WiMAX, etc., to accelerate broadband penetration outside conurbations through wireless access. Finally, the missing middle rung of the ladder, bit stream access, not yet available in Germany, may be a sensible addition to the range of wholesale products, particularly outside the conurbations. The French experience demonstrates that infrastructure-based competition in no way suffers as a result, while market penetration benefits considerably. The spread of IP-based networks and services is a process that must be overseen and supported by regulatory authorities. Crucial for user take-up is whether we manage to make the new services secure, resistant to fraud and misuse, and available to as wide a customer base as possible through the promotion of broadband. This is the only way to maximise the markets’ growth potential and boost the global economy. Doing so is a huge challenge for the regulatory authorities, both at national and international level, a challenge that can be overcome only by joining forces and acting together.