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Blending competition and regulation

New Dehli, December 5, 2006

Benoit Loutrel, Director,Regulation of fixed and mobile markets Department

AUTORITE DE REGULATION DES COMMUNICATIONS ELECTRONIQUES ET DES POSTES (ARCEP)

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•Overview of Arcep’s institutional Overview of Arcep’s institutional frameworkframework

•Overview of Arcep’s challenges in Overview of Arcep’s challenges in the mobile marketsthe mobile markets

AGENDA

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The liberalization of the telecommunication sector : an EU framework implemented on a national basis

EU level : EU level :

1996 Telecommunication directives

-> mandates the liberalization of the sector through the introduction of carrier selection for international, national and local traffic.

2001 Local loop unbundling direct regulation

-> mandates incumbent operator to give access to the “last mile”.

2002 Electronic communication directives

-> a toolbox for regulators and a set of check and balances.

2007 European roaming direct regulation (?)

National level : the case of France National level : the case of France

1997 Telecommunication law

-> creates the independent regulator, Arcep.

2004 Electronic communication law

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Independence and accountability

Legislative Branch Executive Branch Judiciary Branch

UpperChamber

LowerChamber

Government

ARCEP

- Set the objectives

- Issue tier I regulation

- Appoints 4 board members of

- Issue tier II regulation

- Endorse tier III regulation

- Appoints 3 board members, including the president

- Set license & frequency fees

- Issue opinion on draft Tier I & II regulation

- Issue tier III regulation

- Implement & enforce Tier I-II-III regulation

- Consult stakeholders prior to any decision

- Report to Parliament

SupremeCourt

(AdministrativeLaw)

SupremeCourt

(CommercialLaw)

SupremeCourt

(ConstitutionalLaw)

Stakeholder : consumers, corporate clients, … telcos

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Symmetric and asymmetric sectoral regulation

Symmetric regulation : Symmetric regulation : - derives from the specificities of the sector

- numbering plan, frequencies, intercommunion, public order,…

- may impact the level of competition

Asymmetric regulation : Asymmetric regulation : - non-competitive market (structurally or temporarily)

- derives from the liberalization process

- should be transitory to the extent possible and articulated with general competition law

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Principles of asymmetric regulation : market, significant market power, obligations

1996 EU framework 2002 EU Framework

Market

Defined by law:3 retail markets (fixed, mobile, leased line)1 Wholesale market(interconnection)

Defined by the regulatorAccording to EU competition law

SignificantMarketPower

Defined by law:Market shares > 25%

Equivalent to dominant positionIdentified by the regulatorAccording to EU competition law

Obligations

Defined by law for each market:

Carrier selection, cost orientation, transparency, non discrimination…

Defined by law but imposed as needed by the regulatorPossibility to invent new obligation

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Check and balances in asymmetric regulation

Market definition :Market definition :

- 18 pre-identified markets at EU level by the EU Commission

- Creating new markets : the test for expanding regulation- High barriers to entry

- No perspective for effective competition

- Insufficient effectiveness of competition law

Ex-ante check and balances : Ex-ante check and balances :

- Requirement to conduct a public consultation

- Requirement to receive the opinion of the competition authority

- Prior notification of draft decision to EU Commission and 24 other EU Regulator. The Commission can veto the market definition & designation of SMP operator and can issue public comments on proposed obligations

Ex-post check and balances : Ex-post check and balances :

- Judicial review on obligation

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NRA and NCA : Substitute or complementary

NRA = national regulation authority in each EU member

NCA = national competition authority in each EU member

- Symmetric regulation : Complementary.

- Asymmetric regulation :

- Complementary at the beginning of the liberalization process

- Substitute in case of success !

- In any case, NRA is not a substitute of NCA even in early stage of regulation.

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Overview of Arcep’s challenges in the mobile markets

Phase I – 1997 – 2003 – light touch symmetric regulation

- allocating frequencies, checking that coverage targets were met

- allocating numbering resources

- Setting the limit to the “calling party pay” principle

(Mobile termination rate)

Phase II – Since 2004 – Strengthening symmetric regulation and considering asymmetric regulation

- Low intensity of competition on retail markets

- High barriers to entry on the supply side

- Importance of switching costs for end-users

Strengthen portability requirement and reduce artificial switching costs

Introduce mobile virtual operator and thus create a competitive wholesale market

Introduce specific regulation for roaming services

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THANK YOU

Additional information on

www.arcep.frwww.arcep.fr