Cernobbio, 27th March 1998
Dr. Herbert UNGERER
Cernobbio, March 1998
Global competition and issues of
Thank you for giving me the opportunity to say a few words at the
start of our discussions on global competition in the communications
The Mega Trends
I believe that the basic scenario for our discussion is set by four
Mega trends :
Digitisation basically means
transforming our networks into multi-purpose / multi-use carrier
systems. This means new possibilities. New possibilities mean new
market structures. Digitisation has radically transformed telecom
networks since the beginning of the eighties and led to complete
reform of telecommunications markets and their system of governance.
It is likely that digitisation of television will do the same in its
field in the last years of the nineties.
Liberalisation of telecommunications
in Europe has meant a fundamental change of the market place in a
dramatically short period. 1st January 1998 in fact stands for two
major milestones :
||Full liberalisation of the European
telecommunications markets, as fixed in the EU Liberalisation
||World-wide commitments taken by the
European Union, the United States, Japan, and a number of other
countries according to their commitments in the WTO framework
Privatisation completely transforms
the incumbents operations in a top-down revolution. It is in
Europe a necessary rsponse to a liberalised market place. At the
same time we see the arrival of completely new types of newcomers on
are seeing the convergence of markets : fixed / mobile ;
telecoms / media - ultimately, the Internet which is
testing the basics of our regulatory and pricing structures.
The total markets at stake world-wide are impressive. According to
any count total volume corresponds (in 1998) to some 3 trillion ECUs
(some 4.000 billion Lire) : roughly a third in telecoms, a third in
computing, a third in the audio-visual sector. Out of the world-wide
cake, approximately a third is in Europe.
I have said that we are seeing dramatic change through the
liberalisation in the EU telecom market. It may be best to recall some
figures. According to the most recent implementation report ("Third
Report on the implementation of the telecommunications regulatory
package", COM(98)80 final of 18th February 1998) published by the
European Commission, in all of the ten Member States of the EU who had
to liberalise their market by 1st January 1998, new licences for
network and full voice telephony operations have now been allocated.
This country is one of them. It has caught up substantially even if
not all issues are resolved.
Let me give some more detail :
- More than 500 local loop
licences had been allocated by end February in the European
Union. The Member States leading the list were the UK (173), the
Netherlands (129 - mainly cable) ; Finland (51), Sweden (32),
This is, of course, a moving target, with a
number of licences allocated since. It means that since 1st January
1998 only Greece, Ireland, Luxembourg, and Portugal are still left
with full network monopolies.
However, one must
also clearly see that in most Member States far more than 90% of the
market remain with the incumbent. While 1st January 1998 has lifted
regulatory restrictions and Member States have initiated the
licensing process, the problem of market structure remains.
- This shows the overriding
role of mobile communications for bringing competition to
the telecom market in Europe.
By February 33 GSM licences
were allocated in the European Union with at least two in all Member
States, and additionally some very important analogue licences like
- 47 DCS 1800
licences, even if 25 of those were in Finland and many were still
By the end of February, there were still
no DCS1800 licences in Belgium, Spain, Ireland, and in Italy -
but in Italy this is, of course, going to change very soon with the
allocation of the third mobile licence.
Without going into further detail, this shows the magnitude of
change and the challenge for the markets and the governance of the
Therefore, 1st January 1998 was a real watershed for Europes
and the global telecommunications systems - the ITUs
World Policy Forum in March in Geneva and the World Development
Conference in Malta have emphasised this is an impressive matter.
The Internet gives the ultimate global dimension and drive to the
new telecommunications world, the digitisation of television extends
it into the media world - or extends the media
world into telecommunications.
What is on the other side of the watershed ? Where will the
development carry us ?
What should we focus on ?
It seems to me that, in Europe at least, there is a growing
conviction that the critical points for the future development are the
areas where the different actors meet.
- Access and
interconnection where the network operators and the regulators
are determining the basis of future competition and investment, both
in the telecom and in the media field, be it access to telecom
networks, to cable, or to frequencies.
- Alliances, both
horizontal and vertical, where national operators meet their
international partners to position themselves or where telecoms and
media forge new positions on new segments.
- More generally, what has
now come to be called convergence : telecoms /media
where a major debate has been launched by the European Commission
with the publication of the Convergence Green Paper but also mobile
/ fixed and their combined offerings - which may
become the hottest topic in European telecom later this year -
and, of course, the Internet which has the potential to "net"
all these actors.
Most of these topics are loosely inter-related, all of them are at
the centre of attention in Europe, and some of them may be of major
interest to our debate at this conference.
A word on the governance of the system which is so central for the
investment climate as Reed Hunt emphasised a number of times during
the discussions yesterday.
In the European Union, the system is just settling down :
- Setting up of the new
National Regulatory Authorities (the NRAs) ;
- Ensuring the full
enforcement of Community harmonisation - ONP -
and Competition Law in the now liberalised sector ;
- Working out the
relationship of the new sector-specific NRAs with the general
National Competition Authorities ;
- Convergence : the
convergence of authorities regulating media and authorities
regulating telecoms ;
- The interfaces between
sector specific regulation / general competition law / EU / WTO.
In none of the Member States, I believe, a final balance has been
reached. It remains a dynamic situation, but the outcome and the final
balance will be determining the future investment and innovation
climate for the sector, both in the telecom and media fields.
On the more global level, we seem to be faced with :
- on the one hand, a
profound transformation of the traditional telecoms system, most
notably with the rapid erosion and the apparently imminent
break-down of the accounting rate system and the tension this can
bring between the developed and the developing world ;
- on the other hand, the
build-up of a completely different approach coming from the
Internet, largely based on private self regulation, with the promise
of flexibility and innovation but at the same time the open question
who will control those private regulators and substantial questions
about securing future competition.
All of this can give rise to substantial debate and perhaps it will
do so during our discussions.
Let me conclude on some of the most burning immediate questions.
- The major short term
question will be how to create real competition in the local
We have changed regulations, but we have not
taken radical steps for changing market structures. Divesting cable
from telecoms will be one necessary route towards this goal in most
European countries. This is the aim of the EU Cable Review we have
undertaken. Radically increasing frequency allocation to mobile and
wireless may a route in others, like in this country.
- The other major immediate
question underlying most competition cases is how to allow integration -
television / telecoms or mobile / fixed in a situation where
competition in these markets is clearly still insufficient. We have
liberalised to allow innovation. Convergence can not now mean the
creation of new super-monopolies - and this is danger is
- Finally, the Internet
puts all concepts for the telecoms / television sectors in question -
not in its current form, even if can already deeply revolutionise
most of current services and distribution sectors.
more so in a future form. Imagine an Internet with 100 times current
performance / cost levels in throughput and speed to the final user.
Telephone would become a by-product with a few cents per minute only
even for trans-Atlantic traffic, nearly un-limited distribution
capability for television or other video products from distributed
video servers via the Internet may become ultimately available -
not just for national but for world-wide distribution. Actors in
both sectors would have to completely review their current
strategies and revenue base, as we would have to review the
Such possibilities may seem remote at
current Internet performance and use, but there are some indications
: cable access to the Internet, Internet telephony, high performance
video streaming techniques. Also, do not forget that the computer
sector doubles now its performance / cost ratio according to some
every six months or so.
If this carries over to the
Internet, we could be faced with such a situation in three to four
years from now, unlikely as it may sound. Band-with requirements
within the Internet have started already now to double every half
year. If this is an indication of where we go, I believe we will
have to prepare for radical innovation, radical change of markets
and a radical challenge for competitive structures and the
governance of the system.
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