Interview | Tuesday, 31 October 2007

Regulating the flux of convergence

Roberto Viola, Secretary General, AGCOM and Chairperson of the European Regulators’ Group (ERG) explains to Charlot Zahra how the role of electronic communications regulators in the EU will change considerably as technologies in this sector converge

Why was the European Regulators Group (ERG) set up, who are its members and what is its function?
The European Regulators Group was set up by the European Framework Directive for Electronic Communications, so it was set up under European rules. The main purpose is to ensure that European rules in the telecommunications sector are applied consistently all over Europe. It is about making sure that citizens have an industry with the same rules all over Europe.
The regulators of the Member States from the European Union (EU) are members of the ERG. The ERG also has four members who come from the European Free Trade Area, plus Switzerland. Moreover, we have as members regulators from the accession countries, that is, the countries that have now asked to enter the European Union – Turkey, Croatia and the Former Yugoslav Republic of Macedonia.
Probably by now, with 34 members all over Europe, ranging from Scandinavia to Malta and from Portugal to Turkey, we are the largest network of regulators all over the world.

How does the ERG lobby with the EU to ensure that the interests of different players in the electronic communications market – the operators and the consumers – are effectively represented in EU legislation?
Well, the term “lobby” maybe is not the right word because it is generally used to describe an industry group or a group of interest. We are a group of institutions, and the ERG is an institution. The ERG has been set up to be the trusted advisor of the EU. When Commissioner for Information Society and Media Viviane Reding speaks about us, she always refers to us as the “trusted advisor” of the European Commission. So we are not a lobby group in the technical sense of the word; it is up to the industry and other associations to lobby. We work with the Commission to make sure that the best rules in telecommunications can be made. We do not bring forward the interests of one group or another – we bring together the interests of European citizens.

In your view, is the legislative framework of the EU regulating the Union’s electronic communications market adequate and effective in regulating the ever-changing situation. If so, why? If not, what can be done to improve the situation?
The European framework is probably the most advanced in the world because the underlying philosophy of the framework is to regulate when there is a market failure.
It is based on a proper analysis of the market, and sets rules after having analysed whether there has been significant market power or dominance, and determines the need for remedies.
We are not just putting in rules because we like to put in rules. It’s a system that is proportionate and intervenes only where there is a problem. It does not impose regulation for the sake of imposing regulation.
The effectiveness of the framework has been proven by the fact that in this sector, prices have been decreasing. The ERG announced its investigation into mobile termination tariffs in Europe and a week ago I announced that between 2004 and now, prices in Europe have dropped by 30 per cent.
This year, prices went down by four per cent in mobile phone communication rates. So prices are going down, new services have been offered to consumers and new companies can enter the market, so we believe overall, the framework has been a success.
As in every success, things can be improved and there is no time for complacency. This means that the new framework must be improved in terms of strengthening cooperation among regulators, and making sure that rules can be consistently applied in Europe.

What is your assessment of the Maltese electronic communications market? How does it compare with other EU countries in terms of regulation and the effectiveness of the national regulator?
We are positively surprised by the liveliness of the Maltese market in terms of growth of new services, the upcoming start of convergent offers on the market, and the fact that there is healthy competition in the mobile sector. Of course we are pleased to see that there will be a third operator coming into the mobile sector and we think this is good for consumers. We also have looked with interest at the case for broadband regulation. We understand there are two main competing forces but it is important in this context that service providers and other players have access to the network. We value very much what the MCA is doing in this respect to open up the proper market.

What function do national regulatory authorities (NRA’s) such as the MCA have in a fully liberalised electronic communications market like the EU? Can you elaborate a bit more?
First of all, let me say that the MCA is a well-run, young and very dynamic organisation that contributes a lot to the work of the ERG. Many of MCA’s specialists contribute in our working groups and put forward good ideas. So it’s one of the success stories in terms of a national regulator working together with the ERG.
I have a very good friendship with MCA chairman and CEO Joseph V. Tabone and we work hand in hand in terms of steering the policy of the ERG towards a new evolution – all those regulators, 27, they should look at national markets but should have common tools to analyse them. I don’t think there is a unique solution for Malta and for Finland, but at the same time the way the two markets are analysed should be the same.
It is clear that the economies of scale of the Maltese cellular network are completely different from the economies of scale of a German cellular network. But the way to look at costs, the way to look at competition, the way to look at market entry should be the same.
Therefore the real purpose of regulators working together, such as the MCA, AGCOM in Italy, FYCORA in Finland, is really to be sure that we speak a common language.

Do NRAs still have a role to fulfil in this fully liberalised electronic communications market or they have been rendered obsolete now? Why?
You know this is an ongoing debate: whether regulation should stop, leaving everything to competition law. The situation in the electronic communications market is that there is a lot of competition in mobile line communication. The problems remain but mobile termination rates must go down. Competition is going in the right direction.
In fixed line networks we still do not see the right competition, so this is not the right time to stop looking at regulatory pressure on industry in terms of opening up the networks.
Regulation should be directed in a much different manner than in the past – much more directed to innovation and provision of new services. At the same time, the end of the regulation for light services should be there.
When you look at the future, probably what you see is that the role of the regulator will be much more intense in terms of the social responsibility of networking rather than the dynamics, but this is in 20 years from now. Probably in the next 10 years you will still see regulation exerting its force on the market to ensure that it is an open market.
And more and more you will see when you go to the new generation of Web 2.0 and all the new forms of social networking, the role of the regulator being a guarantor of fair communication in the market, rather than the classic regulator.

How will the convergence of technologies in the electronic communications sector affect the work of NRAs? What new challenges will they have to face now?
First of all, NRAs have to change the way they work because they cannot just look at sectors in a strict way like they did before, with broadcasting on one side and telecommunications on the othe. Now they have to think and act convergently – they have to look at services across the whole spectrum; they have to look at problems related to access at the level of content; they have to look at problems such as intellectual property rights, protection of minors and whatever has to do with content security. Therefore in terms of what skills and strategy they need to have, it changes completely.

What are the effects of convergence of technologies on the consumer of electronic communications services? Who will protect the interests of the consumer in this situation of flux? How?
As I said, for consumers convergence is a good thing: they should get more services at a better price as well as more innovation. What the immediate effect of convergence on consumers is the possibility to access what is called a “bundled offer” that contains broadband internet, voice and video in the same package. Very soon – and in some markets it is already a reality – mobile telephony will be offered as well, in what is called the “quadruple play offer”.
Now for the consumer this means the possibility of making unlimited calls, to watch a number of TV channels and use the mobile phone at home and outside at a fixed price, therefore knowing exactly how much they will spend beforehand.
We are not yet fully there, but we can see that in two to three years from now, consumers will pay a single price to access everything. This is definitely a step in the right direction. There are two things we have to be careful of: on one hand, that bundling will not destroy competition, because if strong players who make bundled offers in a way that would prevent other competitors from making offers, this would be good in the short term for consumers but in the long term it would be a disaster asthere would be less competition, less innovation as well as fewer possibilities for prices to go down. Hence, for a regulator, it is important to manage the short-term and secure the long-term.
The other issues that are important for all citizens, rather than only consumers, include protection of minors, to make sure there is the right tool to educate their children without being bombarded by content they do not want; that there is a responsible use of mobile phones; that people are not bombarded by unwanted advertising, and also that the advertisements should be fair.
The use of internet should be as freely accessible as possible, but at the same time it should not give the possibility for people who want to damage the stability of society to have their voice. Here is the challenge: to secure the interest of the citizens without of course intruding into the democracy of the internet. That democracy should remain there.

How does the ERG work with the European Commission to ensure that the interests of the consumer are effectively protected in its electronic communications legislation?
What we do is that we work hand in hand, but we do different things. The European Commission is, of course, responsible for legislation in Europe and that is the sole responsibility of the Commission. We make regulations in the various markets, so we make secondary legislation. Therefore we make sure, by confronting the Commission almost every day, that what we do in the internal market is coherent with the goal of the common European market, thus building together a common environment by which the Finnish citizen has the same right to access new technology and new services compared to the Maltese or Italian citizen. That we do by collaborating with the Commission, holding meetings and by issuing common positions, reports and opinions that really move the regulation industry in this direction.

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