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IIC Conference on Electronic Communications Market New Regulation. Rome Tuesday, 27 May 2008. Peter Alexiadis Brussels Office Gibson, Dunn & Crutcher LLP. Table of Contents. General Framework for Proposed Amendments Harmonisation Goals Institutional Issues Specific Policies.

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iic conference on electronic communications market new regulation

IIC ConferenceonElectronic Communications Market New Regulation

Rome

Tuesday, 27 May 2008

Peter Alexiadis

Brussels OfficeGibson, Dunn & Crutcher LLP

table of contents
Table of Contents
  • General Framework for Proposed Amendments
  • Harmonisation Goals
  • Institutional Issues
  • Specific Policies
a general framework for proposed amendments
A. General Framework for Proposed Amendments
  • New Institutional Structures
  • More Streamlined Article 7 Process
  • Availability of a Functional Separation Remedy
  • Strengthening Existing Remedies
  • Encouragement of VoIP Services
  • Spectrum Liberalisation Policy
  • Reinforcement of Consumer Rights
  • Harmonisation Policies
  • New Approaches
  • Timing
b harmonisation goals
B. Harmonisation Goals

I. Costs and Benefits of Harmonisation

1. Transaction costs

2. Costs of uncertainty

Welfare Loss

Implications

3. Costs of inappropriate or ineffective

regulation

4. Costs associated with the failure of

pan-European or trans-national markets

b harmonisation goals1
B. Harmonisation Goals

II. Prioritising Relevant Markets for Harmonisation

Mature markets

Key Characteristics

Markets of key strategic importance

Markets that are key inputs into trans-national services

b harmonisation goals2
B. Harmonisation Goals

III. Case Studies for Remedies (1)

Prevalence of asymmetry for many years after liberalisation

Fixed

Termination

Different cost structures of ANOs

Growth of FMC services

Mature

Markets

Impact of IP technology

Industry structure differs from fixed environment

Reliance on late market entry, licence costs, frequency

assignments, market shares

Mobile

Termination

Absence of any systematic weighing of

factors to justify duration of asymmetry

Divergence with level of fixed termination

rates in light of FMC service growth

and IP technology deployment

b harmonisation goals3
B. Harmonisation Goals

III. Case Studies for Remedies (2)

Relationship with LLU : investment decisions and the

“ladder of investment”

Access at different levels of network hierarchy

Wholesale

Broadband

Access (WBA)

Different cost models

Price squeeze issues

Availability of “naked DSL”

Key Inputs for

trans-national

services

Impact of NGA

Mixed record of effectiveness

Wholesale

Line Rental

(WLR)

Availability with/without CS and CPS remedies

Whether obsolete in a non-voice environment

Patchwork of conditions

Mobile

Access & Call

Origination

(MACO)

Removal from list of recommended markets

Growing demand for FMC products for multinational clients

Whether “trans-national market” mechanism

in Art. 15(4) FD can apply

b harmonisation goals4
B. Harmonisation Goals

III. Case Studies for Remedies (3)

Current regulatory lacunae

VoIP

(Retail)

Current ambivalence in treatment of VoIP in market definitions

Numbering resources and USO issues being addressed

Relevance of “naked DSL” to portability

Strategically

Important

Markets

Impact of industry structure

Impact of functional separation

Next

Generation

Access

(Wholesale)

Unknown nature of remedies

Relevance of access to ducts

Change in definition of LLU

Integrated nature of analysis with LLU

c institutional issues
C. Institutional Issues
  • The role of the European Commission in decision-making
  • Centralisation vs. decentralisation goals
  • Pan-European markets
  • Injunctive powers
  • Appeals “on the merits”
c institutional issues1
C. Institutional Issues
  • Possible Institutional Models
    • Modified Status Quo?
    • European Advisory Body?
    • The Commission as Decision-maker?
    • A Euro-regulator?
    • Options Regarding Resource-management Institutions?
  • EECMA vs. BERT
    • Trautmann Report
    • Del Castillo Vera Report
d specific policies
D. Specific Policies
  • Mobile Termination Rates
    • The problem with termination policy in general
    • Current problems with asymmetry and absolute tariffs arising through the Article 7 process
    • Common principles for regulating termination markets (costs and asymmetry)
    • Commission’s approach designed to enforce LRIC model
slide12
The application of cost-based remedies
    • Choice of technology
    • Definition of the increment
    • Efficient scale of operators
    • Choice of technology
    • Externalities
    • Implications of recommended approach for MTRs
  • Forward-looking considerations
    • RPP
    • Bill & Keep
    • Reciprocity
    • Migration to IP Interconnection
  • Likely ERG Response
    • General observations
    • Specific issues
slide13
2. Sub-national geographic markets
  • Proposed Recommendation has been replaced by Article 7(3) comments letter on Ofcom’s notification of WBA measures in the UK (14/02/2008: UK/2007/0733)
  • Criteria for assessing sub-national markets
    • Market definition
      • 3 identified patterns of competition
      • relevance of number of operators present in a local exchange
      • structural criteria such as population density and actual planned entry
      • introduction of de-averaged wholesale prices and product functionality
      • historical patterns of wholesale market share evolution per BT local exchange
      • Stability of market boundaries
slide14
SMP assessment
    • effective constraint on behaviour of fixed incumbent from alternative providers, taking into account structural and behavioural factors
    • determining whether market conditions rather than regulation is driving differentiated commercial behaviour
    • due regard to impediments in entry/expansion within the identified geographic areas likely to adversely affect competitive constraint being exercised
    • risk factors for alternative operators to be taken into account, including investment effects on unbundlers from NGN roll-out
  • Commission guidance through its comments:
    • strength of indirect constraint from vertically integrated operators
    • geographic market definition and Ofcom’s definition of sub-national markets
    • monitoring of trend towards effective competition
    • sustainability of competition from alternative providers
slide15
3. Next Generation Access (NGA)
  • Proposed Commission Recommendation (timing)
  • A central dilemma: incentivising investment in the context of periodic SMP reviews
  • Continued importance of infrastructure competition evidenced through remedy selection:
    • inside wiring
    • duct sharing
    • access to street cabinets

** Ambiguous nature of the obligations under Article 12

slide16
Importance of technology issues
    • Fibre to Node
    • Fibre to the Home
    • The role of bitstream access
  • Pricing signals
    • Built vs. future network considerations
    • The role of bitstream access
  • Pricing signals
    • Built vs. future network considerations
    • The role of bitstream in each Member State
  • Transitional arrangements
    • Notice
    • Planning permission
    • More ‘communal’ approach to remedy selection
    • More symmetric regulation?
slide17
GIBSON, DUNN & CRUTCHER LLP

Peter Alexiadis

Partner

IT TOWER

480, Avenue Louise

1050 Brussels

Belgium

www.gibsondunn.com

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