Telecoms Watchdogs Lack Powers to Fight Monopolies

The powers and independence of National Regulatory Authorities (NRAs) have in many cases been restricted and their ability to enforce rules under the EU Telecoms Framework have been compromised, according to a report issued today by ECTA at its Regulatory Conference.

The independence of the telecoms regulatory system from Government appears to affect the overall ‘regulatory effectiveness’ of countries as measured under the 2007 ECTA Regulatory Scorecard. In particular, state ownership in telecoms companies seems to be particularly influential in determining overall effectiveness of telecoms regulation.

This report, commissioned by the European Competitive Telecommunications Association (ECTA), compares the telecoms regulatory environment and the application of the current legislative Framework in 19 European countries. This year’s results show that countries where regulators have taken action to enable competition to flourish, including the UK, Netherlands and Scandinavian countries, have seen strong performance in their telecoms markets. However, others including Poland, the Czech Republic and Greece have fallen behind, while institutional weaknesses may be preventing Germany, Belgium and Finland from reaching their full potential.

The 2007 Scorecard also clearly illustrates that the ability of the regulator to tackle competitive problems can have immediate and tangible consequences for consumers – affecting the price of telecom services, as well as affecting longer term investment in the sector. In particular, in countries where regulators have enforced access to the incumbents’ local loop to open broadband markets to competition, broadband prices are typically the lowest and the broadband speeds the fastest.

Innocenzo Genna, Chairman of ECTA said, “If you are paying high prices for broadband, it may be because your regulator has not been able to open the market to competition. It is time for policy-makers to ensure all regulators are fully equipped to tackle the challenges that long-held monopolies can create for consumers and the sector as a whole. Functional Separation – which involves clearly identifying and targeting regulatory action on competitive bottlenecks – is a tool that could be used to support this.”

Another key finding is that regulators are not moving quickly enough to understand and address new issues that are raised as the sector evolves and networks are gradually upgraded with newer technologies – such as replacing copper with fibre, or traditional voice networks with networks carrying IP. Such delays create serious risks that each time technologies and networks are updated, there will be periodic set-backs or even reversals of the competitive process.

Yvan Desmedt of Jones Day, co-authors of the research, said, “There is a real danger that all the hard work done by regulators to open telecoms markets over several years can be undone in a matter of months if regulation fails to keep pace with technological change. We saw this happen when dial-up Internet access was replaced with broadband. And the results of the study show that we are potentially heading in the same direction today as broadband lines are upgraded to even faster speeds.”

The reports’ findings suggest that an active approach to promoting competition by Governments and regulators is typically the most rewarding in delivering consumer benefits and competition both the short and longer term. Richard Cadman, Director SPC Network, co-author, said, “Evidence shows that more competitive markets, where unbundling of the incumbent networks accounts for a larger share of the market, tend to have a greater take-up of broadband and higher investment levels overall. This combination may create the demand and conditions for further investment in higher speed fibre access lines. On the other hand there is no evidence that the success of unbundling negatively affects take up of cable networks and other infrastructures”.

Genna concluded: “The Regulatory Scorecard shows that consumers in many countries are paying more for lower quality services because they do not enjoy the same level of choice and competition as their neighbours elsewhere in Europe. We need in the ongoing Review of the EU Telecoms Framework to place priority on empowering and strengthening all national regulators. We also support the idea of a formal role for the European Regulators Group, if necessary through creating an Authority, providing its duty is to harness and not to replace regulators’ expertise.”