|Issue:||Europe I 2007|
|Topic:||European regulatory environment for fixed/wireless mobile convergence|
|Title:||Chairman, ECTA (European Competitive Telecommunications Association); Chairman, OneAccess; Director, Viatel|
|Organisation:||OneAccess/Viatel/ECTA (European Competitive Telecommunications Association)|
Kevin Power is the Chairman of ECTA (European Competitive Telecommunications Association), the Chairman of OneAccess and a Director of Viatel. Mr Power has more than 20 years’ experience in telecommunications and currently advises start-up and growth stage technology companies on market and M&A strategies. He was formerly a member of the Board of Universal Access. Mr Power worked previously with the Global Telesystems Group and was Managing Director of GTS Monaco Access, a joint venture with the Principality of Monaco, before becoming President of GTS Wholesale Services. Prior to that, Mr Power was with Orion Network Systems, where he held a variety of positions from the start-up phase to the launch of the first satellite. Mr Power also served in a senior management position with INTELSAT. Mr Power holds an M.A. degree in Economics and a B.Sc. degree in Business Economics, both from the State University of New York.
Fixed/mobile network convergence is now a reality in markets throughout the world, but regulatory action is needed to guarantee the fully competitive marketplaces needed for its unimpeded spread. Limited radio-spectrum, lack of fixed network access and such, hinder the growth of competition. Fixed services have traditionally been subject to oversight to guarantee competition; whereas mobile services, perceived as inherently competitive, have not. The growth of competition in a converged environment will depend upon more effective regulatory oversight of the mobile sector.
Convergence, at least as a telecoms buzzword, has been around for the past ten years or more. For most of that period it was just a buzzword, networks were not converged and operators could not provide converged services. The telecom landscape has changed radically in the past few years. The technologies have matured and converged; multi-technology, multi-service platforms that offer a variety of services are now possible. The changes have also been driven in large part by a new generation of IT and web-savvy consumers and businesses demanding more sophisticated service offerings to meet their everyday needs. What will these developments mean for competition? Do they have major implications for the way in which communications is regulated? To understand this, it is important to look at what we mean by fixed mobile convergence, and take a hard look at what is new about the service and what is simply a better way of combining existing services to improve the customer experience. A common misconception of convergence is the belief that services that were previously separate will somehow be seen as inter-changeable by customers – that, whereas previously customers used fixed phones for some services and mobile for others, they may now use either as perfect substitutes for one another and compete head-on for the same customers. In fact, the reality is far more subtle. Convergence should be viewed as a combination of the best aspects of fixed and mobile so that consumers get the best of both worlds without regard to the underlying technology used to provide those services. I believe consumers are most interested in ubiquitous connectivity, simplicity, quality and cost. The technology is now available to deliver what consumers want – our job is to make sure the regulatory environment allows service providers to deliver the goods. Fixed networks remain the most reliable mechanisms through which to make calls and access high-speed data services without compromising quality. Mobile networks sacrifice some of that clarity and speed for the sake of mobility, and it comes at a cost. So a converged service will be one that makes the best use of the most appropriate technology at the right time, ideally with just the right combination of service features when they are needed. That means good value, high-quality communications in the office and at home with seamless mobile transfer outside. In technical terms, there would be two separate access networks complementing each other, with next generation core backbone networks providing the unifying link and enabling interoperability. The architecture of convergence has important implications for competition. Competition is ultimately the main driver for innovation, as companies vie to provide the best value proposition – i.e. the most innovative and comprehensive user-friendly service packages for the right price. So the level of competition in both the fixed and mobile networks will ultimately determine the success or failure of fixed/mobile convergence. If the fixed and mobile networks are meant to be complementing each other, the level of competition in the ‘convergence’ space will be determined by the lowest common denominator. Any market failure in either the fixed or mobile markets thus has the potential to undermine the whole convergence equation. After a decade of progressive liberalization of markets in Europe, we are still faced with the need for a more competitive fixed communications sector that further distances itself from its legacy of historic monopolies. It is commonly recognised that significant bottlenecks remain, particularly in access networks, where former incumbents have the ability, if unchecked, to maintain a stranglehold over the local loop for some time to come. Some countries, such as the UK, have recognised this through the construction of a functionally separated access division, Openreach, and the Italian incumbent and regulator are also examining this model. However, the issue is far from resolved, so we need to be vigilant to ensure that the progress made to date is not jeopardized by faulty regulatory thinking and decision-making. Broadband markets in some countries have become more competitive, in no small part due to efforts by regulators to break open these markets. Still, there is a real risk that we could go backwards if regulatory holidays are adopted when incumbents upgrade their access networks to higher speeds. This alone could give incumbents the edge in fixed services, and the ability to provide converged services – often through their own mobile arm – that other companies simply cannot match. In addition, and importantly, most of the focus to date has been on fixed competition. Less attention has been paid to the competitiveness of mobile markets because there is a common, possibly erroneous, assumption that they are competitive, as typically there are three or more players in the market. However, going forward, we cannot afford to take anything for granted, as mobile competitiveness will become increasingly important in a converged world. National communications regulators have been required under the EU Framework to examine the mobile access market, and many have found that it is competitive. This should, in theory, mean that the market is sufficiently open and dynamic to allow all firms to compete on a level playing field in the provision of converged services. However, regulators in Spain, Ireland, Malta, Cyprus and Slovenia have found dominance amongst the mobile firms, the market remains under close review elsewhere, and some larger countries, such as Germany, have not yet completed their analysis. In ECTA’s, the European Competitive Telecommunications Association’s, view, the key test in these markets should be whether a company with a truly innovative idea and sufficient capital can go in and deliver it. If they can’t, for example because the existing mobile players won’t allow them to rent their network in a way which enables them to add value, then we have a problem. In countries where this has been a particular issue, the regulator has typically mandated MVNOs, mobile virtual network operators, as the solution on the basis that market players have been unable to reach satisfactory commercially negotiated solutions. This is the right approach, but we believe regulators need to be more sophisticated in how they deliver it, including taking some lessons from the fixed segment, where in the absence of effective competition, regulators have in some countries – such as France – successfully built a broadband ladder of investment that allows entrants to do much more than provide a ‘me-too’ equivalent of the dominant player’s service. An investment ladder in the mobile sector would contain not just the resale options that are characteristic of many MVNO offers, but ‘deeper’ MVNO options that enable real innovation with data – as well as voice – so that entrants pass “progressively through several stages of infrastructure competition, as they ascend a ‘ladder’ of infrastructure construction” – a concept first popularised by Warwick Business School Professor Martin Cave. Of course, the highest rung in the ladder for mobile is a full mobile network operation. The best case scenario would be for regulators to take the necessary action to ensure that sufficient spectrum is available to enable competition to become more intense in the mobile space. They need to be flexible about how they do this so that niche players, such as business convergence providers, and not just mass market mobile operators can flourish. Since it takes time to make arrangements for this, the mobile ladder of investment could be just what we need to pave the way towards quicker deployment of mobile services, once spectrum is available. As well as addressing issues of competitiveness, fixed mobile convergence is also beginning to raise issues about the use of numbering. Late in 2006, for example, an Italian court blocked Vodafone’s proposed launch of a converged fixed-mobile service, after Telecom Italia filed a suit claiming the offer represented ‘unfair competition’. The service would have allowed Vodafone subscribers to answer calls to their fixed line phones on their cellular handsets free of charge, but the court found that Telecom Italia was not obliged to offer fixed mobile portability. A key question that regulators will have to consider going forward is whether particular numbering arrangements have the potential to create unfair competitive advantages for certain players, by enabling them to offer services in a way that others cannot match. In the medium term, ECTA expects that mobile technology will remain largely unchallenged in its role in the provision of mobile services, making open mobile markets a vital pre-requisite for competition in convergence. However, technologies such as WiFi and the increasing availability of multi-modal mobile devices clearly have the potential to make that market more dynamic. In the long run, other challengers, such as WiMAX, could emerge in the mobility space, although the extent to which they will be a genuine substitute is unclear. Policy-makers should, in any event, establish a framework that maximises the possibility for technologies such as this to reach their full potential. The European Commission’s efforts to establish a more technology and service-neutral regime for spectrum through its review of the Communications Framework will be an important driver – and one that we fully support. Ultimately, the main lesson regulators and policy-makers need to take from developments in convergence is that the regulatory issues – particularly in access – are not really that different. It’s just that we will need to worry more about making sure that there are no barriers to competition anywhere in the sector, as just one blockage will ripple through the whole system, creating distortions and ultimately depriving customers of the real advances available through innovation.