Tom Ruhan speech ECTA Regulatory Conference
Ladies and Gentlemen, I am delighted to welcome you to ECTA’s annual regulatory conference. It means a lot in this time of economic crisis, when Governments, companies and consumers have been focusing on making it through each day, that you have chosen to join us for a debate on the future of telecoms. It is also significant that political leaders chose to highlight the digital economy when they met in October to discuss the financial crisis in Europe. Our sector is an important part of the answer to the global economic crisis. That is because telecoms has the power to change our way of doing business, and how we interact with each other. I hope that the debate over the next two days will help to identify the actions that we can all take – as operators, policy-makers and financiers – to drive the sector forwards and unleash its potential to deliver investment and innovation that in turn will drive growth in Europe and beyond.
The challenges we face are numerous.
Firstly, it is becoming increasingly clear that Europe is falling behind on high speed broadband. The European Commission’s first digital agenda scoreboard found that take-up of 100Mbit/s broadband is painfully low. If we continue on our current path Europe will fail to meet its targets for 2020, and perhaps even more significantly, will fall even further behind other regions of the world. In South Korea and Japan, more than 40% of households are taking fibre-based services, whilst only a few countries in Europe have achieved even 5% penetration. Two thirds of Europe’s fibre lines have been driven by enterprising new entrants and utility companies. However, the hold that incumbents retain on legacy copper networks, and the large customer-base they control has stalled further progress in making the transition to fibre.
We need the right regulatory framework to change this dynamic and end the deadlock. Today, we have a culture in which, in many countries, incumbents are rewarded for not investing. That has pushed up broadband prices for consumers and is holding Europe back. We believe the European Commission is asking very important questions about wholesale charges in the consultation they issued in October – the deadline for responding was last night. Our fundamental view is that consumers and competitors should not be made to pay for dominant firms to make excess profits on legacy copper networks. The Commission has suggested that perhaps an exception could be made when incumbents commit to invest in open fibre to help pay for the investment and avoid a rate shock when customers switch. We would prefer a clean approach in which each technology stands on its own merits. However, if any subsidies are allowed, the mechanism should ensure that consumers and operators paying the subsidy – and not just the owner of the legacy network – can benefit. Using the money to lower fibre wholesale charges or setting up a fibre "fund” with the excess returns could be ways of achieving this. We met yesterday with Commission Vice-President Neelie Kroes, and hope these ideas can be considered as she develops her proposals.
Europe’s broadband targets – for both affordable universal access and high take-up of ultra-speed services - are critically dependent not only on the charges for wholesale services, but on their quality. However low prices are, if it takes 3 weeks to sign up to a competitor’s service when the incumbent can offer services today, consumers will not be encouraged to switch. The principle of "non-discrimination” or "equivalence” is embedded in the EU Framework, but its application has been very patchy. For this reason we believe the Commission’s proposals for a Recommendation on non-discrimination are timely and important in ensuring that consumers are not being misled about service quality and have a real choice across Europe. A key element of the proposal is that regulated firms should publish key performance indicators to demonstrate that they have treated their own retail divisions and competitors on an equal footing. We believe a core set of KPIs should be set at European level so that comparisons can be made not only in-country, but also on whether dominant firms are offering their customers poor service levels compared with their peers elsewhere. I believe this will be an important tool for consumers in addition to informing regulatory policy at EU level. Secondly, we would like to see guidance from the Commission on when "enough is enough”. Under what circumstances can we judge that the rules have been broken so often or so seriously that further steps are needed – in the form of functional separation? We hope of course that this measure will not be necessary, but it is important for all players to clearly understand where the boundaries lie.
A further challenge and opportunity for Europe’s broadband development comes from convergence. There is no consumer provider these days – whether fixed or mobile - that does not need a content strategy. A BEREC report in 2010 found that in 38% of customers are now buying bundled services, and increasingly content is part of that bundle. That means that unless we adapt the rules to take account of the importance of content we could in time lose the hard-won benefits that have been gained from more than 10 years effort to promote broadband competition. Discussions have begun in some countries about access to cable platforms, premium content and how wholesale products can be designed to support triple-play. The implications of convergence are also likely to be debated when the Commission next reviews the list of relevant markets that inform regulation of dominant players across Europe.
Another way in which content is changing the landscape is that the Internet is increasingly being used to deliver content-rich services such as streaming video. Inevitably this means that both consumers and over-the-top providers are placing increasing demands on the quality of their broadband connections. We believe that competition is a fundamental part of the solution and will be essential in maintaining the open and "neutral” character of the Internet. But that does not mean that the work can stop there. We need to ensure that competition is a reality by fully enforcing the EU Framework. Competition will not work unless customers have all the information they need to exercise their freedom of choice, so we would like to see some common principles on what is meant by an Internet service as opposed to a managed service, and better procedures to enable customers to switch provider. We stand ready to work with others to develop guidelines amongst the industry, which we hope could avoid the need for heavy-handed rules or unilateral action which could stifle innovation. The Internet is global – we need at the very least a common approach across the EU to address these important issues.
Lastly, I would like to congratulate the Polish Presidency and MEP Gunar Hokmark on reaching a swift conclusion on another important dossier for Europe’s social and economic development – the Radio Spectrum Policy Programme. The adoption of the programme should pave the way for the release of digital dividend spectrum by 1 January 2013. It is also very positive that policy-makers recognised the importance of ensuring that spectrum is assigned in a pro-competitive way. The next challenge as ever, will be in the implementation. In today’s constrained economic environment there are undoubtedly temptations to view spectrum as a way of plugging gaps in public debt. We hope that Governments will resist that temptation and assign spectrum in a pro-competitive way that will maximise the societal and economic benefits for the long term.
Telecoms is part of the answer to the economic crisis. We hope that as you listen to the debate at ECTA’s conference, you will all take away something that helps to put us back on the path to growth.