Home EuropeEurope I 2007 Convergence and regulation in Portugal

Convergence and regulation in Portugal

by david.nunes
José Manuel Amado da SilvaIssue:Europe I 2007
Article no.:4
Topic:Convergence and regulation in Portugal
Author:José Manuel Amado da Silva
Organisation:Autoridade Nacional de Comunicações (ANACOM), Portugal
PDF size:248KB

About author

José Manuel Amado da Silva is the Chairman of ANACOM – the National Communications Authority of Portugal. He is also a full Professor at the Universidade Autónoma de Lisboa, and a Visiting Professor at the Instituto Superior Técnico. Mr da Silva was a Professor at the Instituto Superior de Ciências do Trabalho e da Empresa, of the Instituto de Novas Profissões of the Faculty of Economics of the Universidade Nova de Lisboa and of the Universidade Católica Portuguesa in Lisbon and Porto. He has been the Vice Rector and Dean of the Faculty of Economics and Business and was the Director of the Centre for Applied Studies at the Universidade Católica Portuguesa. He is also a former consultant for the Ministry of Planning and for the Ministry of Industry and Energy. Mr da Silva holds a Doctorate in Economics from the Universidade Católica Portuguesa, Lisbon, and graduated from the Instituto Superior Técnico, Lisbon as a Chemical-Industrial Engineer.

Article abstract

Convergence raises important challenges for regulators around the world. What concerns regulators is the impact that platform, network, service and device convergence has upon competition and the needs of their country’s citizens. The previously distinct voice, video and data markets are converging as operators adopt platforms that combine these services on a single network. This has led to operators bundling distinct and separately regulated services, and forces regulators to re-examine their policy of unbundling of services to foster competition.

Full Article

Convergence is a word used constantly in today’s electronic communications world. Obviously, regulation can’t escape the challenge raised by convergence, whatever it will be, as markets will not be the same, neither in scope nor in structure. However, to face this challenge any regulator must be able to define clearly what convergence means at any given moment – and what the trends are, namely regarding its potential influence on the shape of the markets. In Portugal, we need to understand the influence of convergence on such regulatory issues as: • How much of the actual markets – prone to ex ante regulation – will exist with the development of convergence? • What is the influence of convergence on the efficiency and flexibility of spectrum use? • Will convergence push the idea of a European Regulator still further? • Does convergence enhance innovation and investment? • How can convergence enhance citizenship? What is convergence? In our opinion, most of the approaches to convergence are strictly focused on what the market offers, specifically, upon FMC, Fixed Mobile Convergence. In fact, there is a great deal of literature on this last issue, based on the integration of wireless and wire line networks and services, leading to a unique telecommunications network structure. Most of the approaches stress the various types of convergence, namely service convergence, network convergence, commercial convergence and terminal convergence, but although the last may be linked to consumers, most types of convergence are structural. Even with this, we must emphasize that there is a growing asymmetry in the paths towards convergence and in the weight each type of electronic communication infrastructure will have as a focal point of convergence. In fact, we are assisting a huge and multivariate development of mobile services that cannot be entirely replicated through services provided by fixed infrastructures, although the quality and the reliance may be in favour of the latter. This is the result of an overwhelming change in the concept of communication receptors when switched from a location, say – the family residence, the company office, an organisation’s headquarters – to a personal one, a mobile person, who can be reached at any moment, anyplace. Fixed/mobile convergence favours mobile services, a unified converged network and a single, converged terminal device for all services – fixed or mobile – according to need. If we limit ourselves to considering only the fixed versus mobile alternative we forget the ‘real’ convergence, that of services, which requires convergent infrastructures to carry it and convergent terminals to use. Voice, video, data – including services of all sorts, SMS, banking, email, e-commerce, etc. – may be transmitted and operated in this new infrastructure, but are they simply substitutes for existing services? Of course, some of these may be seen as substitutes, but most answer different needs, provide truly new services, and can’t be considered substitutes. Moreover, there’s another type of convergence that must not be neglected: the convergence that turns one-way transmission and passive reception – broadcasting – into true two-way communication that facilitates interactivity and ‘social communication’. The emergence of ‘blogs’ on the Internet turned what was a clear boundary into a fuzzy line, and made the roles of the transmitting entity and that of the receiver interchangeable. Whereas, in the past, radio and TV broadcasting were exclusively one-way forms of communication, today, because of convergence, they are becoming increasingly two-way and interactive as the YouTube phenomenon demonstrates. Bearing in mind the big chunk of spectrum now allocated to these two activities, we can’t avoid the need to consider the incorporation of these new features when evaluating more efficient and flexible ways to allocate the radio frequency spectrum. Convergence and the market Looking in detail at the relevant markets in accordance with the EU rules that Portugal follows, we expect to face significant changes affecting regulation on account of convergence. In fact, we now have separate fixed and mobile, as well as wholesale and retail markets. Convergence tends to put them all under the same umbrella and to merge most of the actual relevant markets for regulatory purposes, but this may not be quite as clear-cut as it seems. First of all, let us stress that convergence leads to the building of multi-function, converged platforms. This leads to the configuration of a new type of competition – competition among platforms that enable operators to offer a wide variety of services in different markets and not, as we commonly see today, competition among individual operators in the same market. This means that the markets these platforms serve cross most of the traditional market boundaries and, as a consequence, most of the services are merged together into a single package. In other words, the services are bundled into a single service package; previously, the regulatory trend has been to favour the unbundling of services. What is the best way to deal with this reversal of an old issue? Today, this service bundling based upon economies of scale and scope is leading to an ever greater concentration of the overall market. Notwithstanding, consumers choose the services they use according to the merits and utility of each one, although they may be tempted into buying a service bundle at a price that is cheaper than the sum of each isolated item. If this scenario accurately describes the prevailing consumer behaviour, how can we maintain the divisions between the relevant, significant markets for regulatory purposes? The issue is still more bothersome if we consider the options available to citizens forced to live on a reduced budget, and need to acquire sophisticated and expensive terminals they don’t need or know how to use. To defend the rights of our citizens, and to deal with the increasing gap between the haves and the have nots in our society, the regulator must be alert to problems such as these, which force him to re-evaluate carefully the real needs of market players and users alike. The regulator must also be fully aware of the tendency of the bigger actors to operate in most if not all of the markets sectors and, often, to cross-subsidise markets raising important questions about fair competition. On the other hand, the need to take advantage of economies of scope and scale points to the need for big platforms. Generally speaking, the big platforms belong to firms that often, especially in small countries like Portugal, serve various countries. This raises questions about the most effective and efficient way to regulate these companies. Should this be the responsibility of the regulators in each specific country, an EU regulator, or of a coordinated network of regulators? The issue is relevant and we must rethink it in terms of the problems raised by convergence trends. Convergence and spectrum use As we have already emphasized, the broad concept of convergence places great importance upon the efficient allocation of scarce spectrum resources. Until now, the spectrum has been allocated in a very controlled manner based upon the clear separation between different types of uses. Convergence, based upon technological innovations that enable us to use almost all of the spectrum more flexibly, calls for new criteria upon which to base frequency allocation. Nevertheless, we are fully aware that if the new criteria are based strictly upon the ‘economic rent’, the financial returns, that can be generated by spectrum use, certain types of uses, namely broadcasting, can be expected to die. This, in our view, is not acceptable. Again, this is a matter of great concern for the regulator who faces the challenge of balancing the financial return from the use of the spectrum with the need to put it at the service of the country and its citizens. Convergence and innovation Looking at the technological development of electronic communication and, in a broader sense, into the digital economy, we see the prior innovation that led to the trend for convergence. We must now ask ourselves if this trend will provide the stimulus we need for further innovation in the field or, on the contrary, will hinder its development. The answer to this question depends strongly upon the structure of the electronic communications market, even though the market is not the only determinant of innovation and progress. Once again, the regulator must be aware of the trade-offs between the size and number of competitors, the platforms convergence leads them to use, the investment in innovation convergence encourages, the economies convergence can generate, and the way these economies can be translated into better prices, quality and services for consumers. We are looking closely at the wide range of important new regulatory questions raised by convergence. We feel that the prevailing regulatory scheme is often not well suited to dealing with the new problems convergence brings. In Portugal, the existing regulatory framework, in the context of convergence, often makes it difficult for the Regulator to achieve the set of goals to which it is committed. That is why a new and a comprehensive regulatory approach, based upon specific research to enable the restructuring of the present regulatory paradigm to meet the challenges of convergence, is called for.

Related Articles

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More