Home EuropeEurope II 2007 Re-thinking regulation in the age of convergence

Re-thinking regulation in the age of convergence

by david.nunes
Corrado Calabrò Issue: Europe II 2007
Article no.: 3
Topic: Re-thinking regulation in the age of convergence
Author: Corrado Calabrò
Title: President
Organisation: AGCOM – the Communications Regulatory Authority, Italy
PDF size: 244KB

About author

Corrado Calabrò is the President of AGCOM, Italyís regulatory authority. He served previously as the President of the Regional Administrative Court of Lazio Region, where he also chaired the section that oversees the Competition Authority, Consob (Stock market Control Authority) and the National Bank of Italy. At the Council of State he was assigned to jurisdictional and consultative sections and to the Council of Administrative Justice of Sicily Region. Mr Calabrò has served in a great number of significant posts, including: Head of Cabinet to a number of ministers (Budget, South, Health, Industry, Agriculture, Commercial Navy, Post & Telecommunications, Public Education and University, EU Policies, Institutional Reforms); President of the 3rd Section; President of the Section for regulatory acts; Chairman of the Permanent Advisory Committee on intellectual property; President of the Association of Judges of the Council of State; Head of the technical-legal Secretariat of the President of the Council of Ministers, Aldo Moro. Mr Calabrò was first ranked in a national competition for the Council of State, of which he later became President. He is the author of a number of works on labour and administrative law. He is a poet and a writer. Mr Calabrò graduated, magna cum laude, in law from Messina University. Both Mechnikov University of Odessa, in 1997, and Vest Din University of Timisoara, in 2000, awarded him honorary degrees honoris causa ad gradum.

Article abstract

The rapid technological evolution of the telecom sector, the expansion of the global information-based economy, and the need to ensure equitable, universal access to society as a whole has focused attention upon the need for independent regulators. The regulator must balance the needs of society and regulate the use of telecommunications for the common good. Fostering the affordable availability of broadband access, and the services it carries, is essential to the growth of Italyís economy and the well-being of its population.

Full Article

The trend towards the convergence of the broadcasting and telecom sectors is widely acknowledged. What remains to be assessed, fully understood and tackled are the regulatory consequences with regard to telecom and broadcasting networks, services and operators, including the new emerging markets such as broadcasting to mobile devices, broadcasting over the Internet, over broadband networks, and the like. Bottlenecks may arise because of convergence that might result in the appearance of new monopolies that restrict access to certain resources, such as networks, spectrum and content, among others. Regulation to guarantee fair competition and access to scarce resources will need to be addressed, focusing upon the regulatory approaches that are being applied or considered. In this context, the topics that the stakeholders need to address and focus upon are: ï should all service providers be subject to the same regulation? ï Who has access to the necessary resources? ï How should access to networks or spectrum be provided and regulated? ï Who shall be authorised or licensed? ï Who can access, develop and deliver content? Who is entitled to distribute self-generated content? and, ï What sort of competition should be encouraged and guaranteed in order to access content? Lately, an article in The Economist began by questioning whether todayís convergence frenzy is a case of mass hysteria in the telecom sector. This is clearly a provocative question, but it helps us bring the discussion back to earth and deal with the problem more realistically than has been the practice in recent debates. In the past we have too often witnessed forecasting failures. I remember, a drive to concentrate marketing and operations based upon a so-called ëmulti-utilitiesí concept, this was to have resulted in the bundling of a wide variety of services such as telecom, electricity, and even water and gas into a single package. In the past few years, however, the bundling, the convergence, has just occurred in the communication services sector (voice, data, video, content, and IT services) with little or no inclusion of services from other sectors. In addition, overly optimistic forecasts have prevailed in the market for 4-C (computer, communications, consumer electronics, e-content) convergence; remember, for example, the prices paid in Europe for 3G licences and how heavily European operators were burdened as a result. Convergence is now seen, however, in joint offers of integrated communication services that bundle fixed telephony and broadband access to the Internet for a double-play package, the addition of audiovisual content for triple play and, finally, the inclusion of mobile services to create a quadruple-play bundle. It is still difficult to say how these will contribute to the growth of individual operators. If these services are to succeed, the government, the regulatory institutions in particular, need to adopt a long-term strategy that fosters and facilitates the dissemination of convergent services. The dissemination of broadband is of critical importance for Italy – it will change our countryís productive paradigm and impact profoundly our nationís entire social and economic system. This need to improve the growth of our economy makes it even more necessary and urgent to update and modernise the telecom infrastructures – especially the broadband networks. Currently, the broadband market in Italy has its highlights and shadows. On one hand, we have recently stepped ahead significantly. During the past two years we have shown continuous growth at levels above those of other major European countries. Today, prices have fallen to best practice levels and there are now about 8.3 million broadband connections, 97 per cent of which are ADSL. Other technologies have smaller penetration; Italy has 200,000 fibre accesses and 100,000 Internet satellite accesses. With regard to the market structure, broadband is shaping up as an increasingly competitive sector; broadband prices are falling and service offerings are on the rise. On the other hand, the spread of broadband service in Italy seems to have been slowed by such structural limitations as: ï the low IT ëalphabetizationí of the population creates problems on the demand side – 56 per cent of 16- to 74-year-old citizens have never used a PC (compared to a Europe-wide figure of 34 per cent and 17 per cent in the UK); and, ï limited infrastructure presents problems on the supply side that significantly limit the options for the effective diffusion of new services. Although the demand side problem is national in scope, there are significant geographical differences in the demand and utilization of electronic communication services, particularly broadband. These are due to the dualistic nature of the Italian economic system. To reach the levels of IT and Internet service usage seen in other European countries, Italy needs to tackle its regional usage and availability differences. First, letís focus on the infrastructural issue. Italy is one of the few European countries where, due to the lack of widespread alternative broadband networks, the entire sector depends on the access network of the former telephone monopoly. The dependence of the sector on a single copper infrastructure creates at least three problems that regulation can only partially solve, and this weakens Italyís ability to compete in international markets. First, new convergent services tend to saturate the copper networks that still supply most of the connectivity in urban areas and interfere even with the core of the system. Looking ahead, the problem will be to tackle the bottlenecks that make it difficult to expand services to all users. Second, there is only one wide-scale access network based upon an intensely vertical infrastructure, and so a sizeable part of the population could be cut off from the innovation and services that broadband brings. It is estimated that some 13 per cent of the Italian population currently resides in ëdigitally dividedí territories. Italy is also highly fragmented geographically and, of its 8,101 municipalities, about 3,200 lack DSL coverage completely and areas of another 2,400 municipalities are only partially covered. In the past, Italy fell behind technologically for lack of a suitable long-term vision to guide it, so now is the time to adopt a strategy that provides incentives for the creation of hybrid infrastructures – such as fibre optic in the urban areas, WiMAX, Worldwide Interoperability for Microwave Access, in the rural ones – to bring broadband to the entire country. This could satisfy the need to lift the burden on the single access network (Telecom Italia), upon which our system currently relies and meet the need to foster competition in the broadband network market. We have great expectations for WiMAX technology. It is likely that WiMAX will be used in those rural areas where it has not been economically or technically feasible or productive for operators to install cable or DSL networks. Given the ease and low cost of WiMAX deployment, it is likely to be a commercially valid solution, especially if the government considers it to be strategically important to guarantee the ëuniversalí availability of broadband services. The government could then step in, directly or indirectly, and provide operators with incentives to offer broadband services. By fostering this wireless broadband technology, the government could help modernise the most remote regions of our country. Accordingly, we urgently need to regulate the spectrum to make the needed frequencies fully available for this new service. We are optimistic about the outcome based upon the early results of the efforts to coordinate this within the administration. Agcom and Europe The NRAís, National Regulatory Authorityís, role proved to be the key to the coherent development of the telecom sector. The NRA exercises a delicate function; it must be neutral with regard to differing technologies and platforms in order to balance the market well between the interests of each company, innovation and new technologies, competition and the consumerís interest. To maintain its neutrality, regulatory activities have to be independent from the government. Indeed, NRAs have been created as inherently independent from the executive power. Of course, this does not mean that the regulators could not be ëcontrolledí. On the contrary, we have a duty to listen to public opinion, to parliament and to representatives of our countryís leading institutions. We must also balance and assess our guidelines and the outcomes of our activities with those of other European NRAs. With todayís rapid technical, social and market evolution, the European Regulators Group, ERG, proved to be a useful gathering point for the sharing of ideas and the framing of homogenous rule. The European space is the correct geographical and institutional framework to address the emerging technologies that provide real trans-frontier services – especially when enterprises tend to merge into international ones. Remaining ëlocalí would be a setback and would effect overall national and – eventually – European welfare negatively. It would also be contrary to the principles of the European Union. In this context, the ERG is coordinating among the NRAs to protect the skills and experience they have acquired in the field, and to provide best practices and guidelines to other NRAs. AGCOM chairs the ERG throughout 2007. Among the highlights on the agenda are the evolution of the European regulatory framework, convergence and new generation networks. It is part of the European vision to stimulate and foster competition and innovation in the communication sector, without localism and distortions. In the common, single, market that our fathers conceived for the circulation of goods and workers, the telecom market, due to the inherent difficulty of confining technologies, is the one that least tolerates geographical and administrative boundaries.

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