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Competition

1998: Inauguration of the telecommunications market

Van Miert

19/1/1998

Solvay

Introduction

In concluding this event, I would like to do three things. First, I would like to examine the achievements of the liberalisation process. Second, I would like to outline some of the general challenges ahead. Finally, I would like to identify some of the current major issues and how we are tackling them.

The past - the achievement

Telecoms liberalisation is one of the major European achievements of the 1990s.

We have progressively liberalised a sector which is vital to the competitiveness of Europe into the next millennium, using both Article 100A (harmonisation) and Article 90 (liberalization) in an efficient way.

We have put in place a set of rules at national and EU level to enable the new markets to function effectively.

And, not least, we have silenced those who doubted whether it could ever be done.

We can be proud of the efforts that led from the 1987 Green Book to today's full liberalisation. Together, we did liberalize stage by stage all services. Together, we did strike the right balance between universal service and respect for national differences, on the one hand, and applying the same principles across borders, on the other hand. This is exactly the kind of policies the EU should be developing. Without it, in the XXIst century, several European countries would be left behind: they would never reach the Information Society. We can be proud of this achievment, and it is time to give some thanks.

Thank you to those responsible

Thanks to the Parliament for supporting our actions and having the long term vision to embrace change and having always insisted on benefits for companies and consumers.

Thanks to the Council of Ministers for adopting the legislative programme..

Thanks to all 15 Member States. There were useful arguments about specific points, and some difficulties leading sometimes to action by the Commission. But there was always consensus on the necessity of liberalisation. This consensus will be further strengthened through peer pressure for good implementation. And the example given by the UK, today's Presidency, in pioneering telecoms liberalisation was an important one.

Thanks to industry. Everybody is a new entrant somewhere, all are asking for clear rules, as we have heard today. The European economy is showing that it can renew itself.

Thanks to the workers and trade unions. They have understood the need for change, the opportunities to be unleashed with liberalisation. They have generally focused on making the reforms acceptable rather than opposing them.

And finally thanks to Martin Bangemann and his people, to my services and to the others who have helped with telecoms liberalisation in other parts of the Commission. It is an immense effort, but well worth it.

Benefits of liberalisation

There are major gains ahead for customers and for employment.

After liberalisation, the customer becomes far more important. Indeed, now that the regulatory framework is in place, the main force of competition is now customers.

Large users are already fully aware. We have approved a number of alliances which now provide seamless services to multinationals. The liberalisation of value-added services and satellite services greatly helps the development of European companies.

Small and medium sized enterprises should now receive more adapted services, thanks to competition. Already, they greatly benefit from competition for mobile telephony. Telecoms prices are decreasing rapidly, which is important for their profitability, and innovative services are increasingly available.

As for consumers, millions already enjoy mobile services, and the others are just starting to compare new services. In order to understand all this, in order to reap the full benefits of liberalisation, they need information from the media. They should also get an open hearing from public authorities.

Due to the rebalancing of telephone tariffs, we sometimes hear that liberalisation is not such a good deal for consumers, especially those that make mainly local calls. There are four answers to this:

- first, indeed, we have to check that rebalancing does not lead to an abuse of their dominant position by the incumbent operators. Some competition cases have shown the Commission's ability to do it.

- secondly, concerning the basic subscription fees, the principle of affordability is part of the Universal Service obligations: there are special social tariffs in most countries

-thirdly, consumers are already paying lower prices for long distance and international calls. Benefits really depend on one's consumption profile: not only privileged persons call long distance. Think for example of elderly persons away from their children, of students away from their parents, of migrant workers.

- finally, in the future, with new technologies, even local prices should decrease.

So, all in all, most users of telecommunications benefit greatly from the liberalisation.

Benefits for employment

Some of you alluded earlier to the impact of liberalisation on growth and employment. Let me stress this dimension briefly.

Figures vary, but they net impact, direct and indirect, is expected to be very positive. There are job cuts at the incumbent operators, but most was achieved in a social way. In parallel, new entrants and neighbouring industries working in the Information Society are recruiting strongly. More generally, the whole economy benefits from reduced telecoms prices, this improves its international competitiveness.

The verdict is still out on this, but let's look beyond statistics. Newspapers are full of ads from telecoms operators, system companies, new media groups. This is for qualified and well-paid jobs, those our young graduates are expecting. This is the beginning of the Information Society. We were absolutely right to seize the opportunities these markets offers.

European telecommunications are becoming world class

One of the main objectives of the '1998 package' was for continental countries to catch up.

At the beginning of the 1990's, there was a huge gap with the US in terms of service availability, of innovation, and of prices.

Closing the gap is now within sight.

One should compare apple to apple, i.e. regional telecoms in the US to national telecoms in Europe. You know that regional telecoms in the US are generally still monopoly situations.

So, taking the degree of market opening, in legal terms, we have now closed the gap on paper.

In terms of prices and service variety, operators in Europe still have efforts to make, this is for the next few years.

Based on their competitive domestic market, European operators will now become very competitive worldwide.

The future - making liberalisation a reality

over the past couple of years, I have consistently said that even though the achievements of the liberalisation process are great much still remains to be done. Several of the panel members told us the same this afternoon.

Lots of work remains to be done

Today I heard several speakers call for clear and consistent rules of the game, in order to make a success of the 1998 package. Indeed, all the necessary legislation has been agreed at EU level, but some of the details are missing in some countries.

Martin Bangemann already mentioned the main regulatory tasks ahead of us.

Some countries' transposition is still lagging behind, despite recent improvements. There will be a new implementation report in a few weeks, we will insist on complete transposition of all liberalisation and harmonisation directives. This applies also to countries which benefit from derogations for part of their obligations.

From now, though, the focus of regulatory work will be on real implementation in practice, in individual decisions. Not only on formal transposition in laws. This is chiefly the work of the new national telecoms authorities. In addition, the Commission will intervene whenever necessary, like it has already done in 1997.

Accompanying legislation will also be required, e.g. on number portability.

In addition, there is an increased role for competition policy

Even implementing the directives perfectly will not be enough. The market is established, it now needs to work like a real market. The Commission and the national regulatory and competition authorities have a vital role here. The more that can be done at the national level, the better it is. But the Commission will be vigilant and intervene as often as necessary, using its direct powers under competition law.

Alliances will continue to require our scrutiny, especially when involving incumbents. As we have done before, we will look at the actual degree of openness of the domestic markets before agreeing to cross-border alliances.

The present

Finally, I would like to provide some thoughts on the current important issues. These are the role of the Commission, structural issues and the development of new technologies.

Role of the Commission

Over the next five years, the new markets will begin to operate, new entrants will come on to those markets, and customers will begin to benefit. The role of the Commission during this period is clear. To ensure that implementation is complete and to intervene when appropriate to prevent anti-competitive market structures from developing. We have already had first examples of this.

We will continue to work with national authorities, and when necessary directly, to ensure that problems of this nature are solved in a way which is compatible with the competition rules.

Structural issues - the Cable Review

We are also currently actively tackling market structures.

The Commission adopted the Cable Review just before Christmas. We will be publishing it in the Official Journal within the next two weeks for comment by all interested parties. Our approach in the Review is two-fold. First, to ensure the structural separation of telecoms and cable companies where they are both owned by the same company which is dominant on one or both of the markets. This will be done by means of a directive under Article 90. We are currently inviting comments on this draft directive. We will finalise the directive once we have received comments from the industry. Second, we will apply the competition rules to specific situations in the member states where these issues of joint ownership are raised or where telecoms or cable operators are moving into related fields such as digital TV or interactive services.

Through the application of case law, we will also act to prevent anti-competitive market structures emerging. We are currently considering two major cases relating to the introduction of digital TV and interactive services - Kirch/Bertelsmann and British Interactive Broadcasting. In neither case will we allow previous monopoly or dominant positions to be strengthened or recreated in the new liberalised environment.

New technologies

We will not stand in the way of the development of new technologies, so long as they do not breach competition rules. For example, last week we published a notice on voice telephony over the Internet. This notice sets out the conditions which will apply for the consideration of voice over the Internet being considered as voice telephony. Once it is, then Member States can apply the appropriate regulatory regimes to the provision of those services, including the recovery of universal service provisions. However, it is not our view at present that voice over the Internet is sufficiently technically developed as yet to justify being defined as voice telephony. However, the position can change rapidly. What is most important however, is that national regulations are not used to block the entry of Internet telephony providers into the newly liberalised markets.

Conclusion

To conclude, ladies and gentlemen, yes indeed, we can congratulate ourselves on a magnificent achievement so far. There is still work to do in the coming years. To those who say that it cannot be done, I only need to point to the magnitude of our achievements so far. Everybody will benefit from telecommunications liberalisation, operators, users, employees, and indeed the European Union itself.

And that will be the true achievement of us all. Thank you.

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