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Competition

T h e W i r e l e s s B o o m

Dr Herbert UNGERER

Third Annual CEO Summit on converging Technologies

Brussels

5/06/1996


INTRODUCTION

Mobile communications is seen as a major mover on Europe's telecommunications scene.

Let me quickly refer to the following :

Ö Mobile communications in the framework of the general move in Europe towards full liberalisation 1988. Yesterday, Mr Van Miert made clear the Commission's determination to use its powers under competition law to drive this process forward ;

Ö The major steps which we are planning for mobile ;

Ö The central role of personal / mobile communications in breaking up the local bottleneck.

THE GENERAL FRAMEWORK 1998

The general framework is established by the EC Full Competition Directive as adopted in April. The Directive has the same basic objectives as the new US Telecommunications Act. It aims at full-scale competition across the board (local, long distance, and international) in most EU Member States by 1 January 1998, with some additional transition periods in others currently being negotiated.

Mobile communications have been the major entry point of competition in the EU's telecommunications sector to date. During the last two years, EC competition law has forced open the way for additional mobile licences in seven Member States.

All EU Member States, with the exception of Luxembourg, now have competition, together with most having strong US participation, namely the Baby Bells to date. Luxembourg is following suit.

THE MAJOR STEPS

The major steps for mobile communications are specified in the EC Mobile Directive issued on 15 February. The Directive will be fully transposed into national legislation by 15 November this year.

The Mobile Directive :

Ö abolishes any remaining monopoly rights ;

Ö opens the use of own and third party infrastructure ;

Ö allows for the combination of GSM, PCS/DCS1800, and DECT technologies where pro-competitive ;

Ö establishes PCS licences in all Member States by 1 January 1998 at the latest.

Consequently, EC competition law will become the main driving force behind the introduction of PCS in Europe as it has been for the introduction of second GSM operators. The Directive, therefore, will :

Ö offer a better base of operations for mobile in the European Union ;

Ö build mobile into a full scale competitive infrastructure ;

Ö allow operators to do this in an economically efficient manner through the introduction of DCS1800 and the possibility of combining mobile technologies.

Combining services and technologies is important for achieving a nation-wide roaming capability for micro-cellular systems, particularly PCS systems.

At the moment all PCS / DCS1800 systems suffer from insufficient coverage. We believe, therefore, that multi-mode equipment and roaming agreements are vital.

Nevertheless, they must be done in a way which does not create or extend dominant positions. The Directive, therefore, foresees evaluating the extension of current licences in order to investigate their impact on the overall competitive market structure.

FUTURE ISSUES

As new mobile technologies move into Europe, we expect three major issues to come to the fore over the coming months.

Pricing

As mobile moves into the mass market and new competitors enter, there will be major pressures on prices. There will also be a strong temptation for incumbent market players to use their market power to block the entry of others. The current interconnection disputes provide an important example of this.

Mr Van Miert has made it clear that we will fully use EC competition rules to prevent the abuse of bottleneck power.

Merging of fixed and mobile telephony concepts

As prices in the local field will inevitably move towards fixed telephony, to tap the mass market which PCS requires, we will witness a merging of fixed and mobile telephony concepts in the EU.

Within the next two years, i.e. by 1998, all mobile operators will have to question whether they want to remain "pure" mobile (niche) operators or whether they also want to expand into fixed operations.

Given the basic nature of modern cellular systems as card-based services, which can find a market beyond mobile and which will have to compete at least partially with card based services derived from the fixed network, the question as to whether the concept of "pure" mobile operators has a future arises.

Breaking the local bottleneck

Its new broader role makes mobile, besides alternative fixed networks and cable, the third major technology to break the local bottleneck of the phone companies. Such is the major task of any effective competition policy in the sector, aiming at enlarging consumer choice.

We must allow economic players fully economical operations. This means lifting the current restrictions between the different mobile technologies, between fixed and mobile, and between the different services; all foreseen in the Mobile Directive and originally proposed in the Commission's Mobile Green Paper.

It also means openness towards other technologies, such as CDMA in the context of the future UMTS system. It will also entail integrating global LEO systems in a transparent manner into the competitive market environment.

As is well known, we are currently reviewing the major LEO consortia under EC competition rules in order to ensure such integration.

CONCLUSIONS

I think I have made it clear that, besides multi-media and globalisation, we see mobile communications as the start of a real transformation of our telephone systems.

Two years ago, we estimated a potential of 40 million cellular users in the EU by the year 2000. Today, the estimates of independent consultants are up to 100 million.

This means that a penetration of well over half of the total telephone penetration is achievable within that time span.

If the EU's mobile communications sector manages to rapidly adjust to full-scale personal communications, we estimate penetration rates as high as 80% of the population, far above present telephone penetration. Such figures ultimately exceeding 200 million users in Europe during the first decade of the next millennium.

In order to achieve such results, we are conscious that we need a market open to new ideas, entrepreneurial initiatives, services and technologies as those discussed at the Geneva talks.

We will fully use EC competition rules to make a major contribution towards this goal.

  
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