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Assessment of the competitive situation in the market for broadband

access

Leo KoolenDG Information Society

European Commission

PLC Workshop, 16 October 2003

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ContextContext

A “competitive and dynamic knowledge-based economy”

requires

“an inexpensive, world-class communications infrastructure”

Lisbon European Council March 2000

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Broadband Access

Implementation of a widely available broadband infrastructure is probably the key challenge for the Information Society and telecommunications in Europe, over the next 5-10 years.

e-Europe 2005 Action Plan

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EU liberalisation policyEU liberalisation policy

Member States to ensure competition in the provision of networks and servicesEU Framework Directive for Electronic Communications Networks and Services

Member States shall not grant or maintain in force exclusive rights; and take all measures necessary to ensure that any undertaking is entitled to provide electronic communications services or to establish, extend or provide electronic communication networks Commission Directive on competition in the markets for electronic communications networks and services

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Penetration rates in EU Penetration rates in EU

Broadband penetration rate in the EU (% of population)

10.44%

2.33%

10.19%

6.62% 6.64%

9.36%

10.03%

4.72%4.65%4.47%4.43%

4.09%

2.87%2.82%

0.25%0.02%

0%

2%

4%

6%

8%

10%

12%

EL IRL L I P F E UK EU D A FIN NL S B DK

Source: European Commission

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The level of infrastructure competition in broadband supply*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Austri

a

Belgium

Denm

ark

Finlan

d

Franc

e

Germ

any

Irelan

dIta

ly

Luxe

mbo

urg

Nethe

rland

s

Portu

gal

Spain

Sweden UK

Entrant using owninfrastructure

Entrant using ULLs

Entrant retailingincumbent's DSL

Incumbent retailingits own DSL

*Source: ECTA 2002

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The level of infrastructure competition in broadband supply*

DSL market

0% 20% 40% 60% 80% 100%

AustriaBelgium

DenmarkFinlandFrance

GermanyGreeceIreland

ItalyLuxembour

NetherlandsPortugal

SpainSweden

UK

Retailed by incumbent Retailed by indep. ISP LLU

Source: ECTA Sept 2003

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Infrastructure-based competition and broadband take up*

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

0% 10% 20% 30% 40% 50% 60% 70% 80%

% market non incumbent

Bro

adba

nd s

ervi

ces

per

100

popu

latio

n

L

D

F

I

E

SF

UK

A

B

DK NL

P

S

US

Jap

*Source: OVUM

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Where are we now?Where are we now?

Broadband market development is encouraging but concerns about competitive conditions

New clamors that access network is a ‘natural monopoly’

New clamors for safety and security and QoS, to restore special rights?

Marketplace approaching new status quo where local loop remains bottleneck

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What do we need? (1)What do we need? (1)

A healthy market structure for genuine effective and sustainable competition in the long-run

Facilities-based competitionPolicy that attracts powerful parties with key

strategic interests (customer ownership)A changing mentality that competitive

dynamics at the network level is good for all

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What do we need? (2)What do we need? (2)

Competitive dynamics in the supply of broadband networks

Facility based competition between alternative infrastructure of strong players with strategic interests superior to services based competition

Stimulates investment in network technologies, product and services innovation and pricing packages which do not exist with services based competition

Creates incentives for cost saving innovations, to become more cost efficient at network level, important in environment with rapid technological improvements

Create environment that enables talent, gives room to innovation, ensures rapid technology dissemination of R&D and reap dynamic efficiencies

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What do we need? (3)What do we need? (3)

Legal certainty about regulatory treatment of technologies and systems

Stable and predictable regime and its enforcement should encourage investment

Risks for market players to be reduced to normal business risks

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375M people in EU (+100M from 2004)

150M households (with central Europe 190M)

About 20M SMEs

Powerline grid in Europe is the best in the world

Powerline grid is ubiquitous

Number of powerlines comparable with number of household and SMEs

Some statistics*

*Dec 2002

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How can PLC help to achieve How can PLC help to achieve Lisbon goals?Lisbon goals?

PLC may help to introduce facilities-based competition in the access network

PLC IP platform may help to keep development of the market horizontal

PLC may enable the individual to participate in eEurope

PLC can help enhance regional development (local municipalities can become TO)

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Who needs to do what?Who needs to do what?

• Market challenge is for market players (business case/model; partnerships..)

• Government and regulators:

• to create a regulatory level playing field for all technologies and remove regulatory uncertainties

• to protect the legitimate use of radio spectrum against harmful interference

• to encourage facility-based competition to create a dynamic and competitive growth environment which is sustainable in the long term