1
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)
2
2
•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
3
3
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
4
4
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
5
5
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
6
6
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
7
7
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
8
8
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.
9
9
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