DUBLIN, Ireland-National industry regulators have one of the most difficult jobs in the telecommunications world and face criticism from consumers, network operators and government. But the role of the regulator in the European mobile communications sector has been made even more difficult by the unique aspects of this complex industry.
One of the most taxing issues facing European telecommunications regulators is enforcing European Union (EU) directives related to deregulating the communications market (directives 90/388/EEC and 96/19EC).
Although these directives were intended to cover deregulation of the mobile telephony market, their enforcement has been left to the individual telecom regulators of each member state. Unfortunately, because some countries have adapted the open-market philosophy more readily than others, this has led to anomalies.
Mobile operators are licensed by the national government of each of the EU states, which were set up at a time when mobile phone usage was relatively limited. The tremendous growth in mobile penetration rates has since led to the emergence of service providers, or resellers, that use the mobile service of an operator to package and bundle this service for the end user. However, a recent European Telecommunications Office (ETO) report commissioned by the EU showed mobile prices have still remained high relative to fixed-line services.
That report clearly stated the original intention of the EU in relation to the mobile industry was provided for in the directives mentioned above, and it was expected these would be sufficient to facilitate fair competition in the mobile market.
Achieving commonality
However, the Bureau Europeen de Union des Consommateurs (BEUC), the umbrella group for EU consumer organizations, believes the EU is giving member states too much leeway in deciding what prices are considered affordable.
“Common criteria for affordability and quality need to be agreed across Europe,” said BEUC spokeswoman Karin Schweren. “Consumers now expect to benefit from liberalization.”
While some network operators have allowed proportionate and nondiscriminatory access to their networks, others have resisted the introduction of competition.
In the United Kingdom, U.K. telecom regulatory OFTEL proposed that operators with “market influence” should be obliged to open their networks in response to the EU licensing directive. Revised texts for existing licenses, to be issued in the next few months, will include requirements for operators to open their networks.
Virgin Group, the U.K. conglomerate headed by businessman Richard Branson, is establishing itself as a service provider through a deal with U.K. wireless operator One 2 One.
In Ireland, however, service provider Cellular 3 is battling to secure access to the existing network infrastructure, which is being denied by dominant operator Eircell. The Office of the Director of Telecommunications Regulation (ODTR), the Irish regulator, conceded Cellular 3 is entitled to this access, but the case still ended up in the courts. The case is expected to reach the Supreme Court by year-end.
This suggests that while the regulator supported the right to network access, it was unwilling or unable to force the dominant operator to open its network.
The ODTR has now proposed a license text that would be common to all mobile network and services operators and would be publicly available for inspection. Any special clauses within the license, such as an obligation to provide network access to other operators, would be detailed clearly.
The role of regulator
In the United Kingdom, OFTEL’s long-term strategy is to withdraw from regulation as competition develops and allow market pressures to determine the direction taken by the industry.
David Staples, an analyst with international rating agency Fitch IBCA, supports this strategy: “The big regulatory question in Europe has been to what extent regulators within individual countries would implement the spirit and not just the technicalities of the framework legislation.
“Each regulator has tremendous influence within its market in terms of implementing the goals of this legislation,” he continued. “Look at countries like The Netherlands, France and Germany and the impact their regulators have had on key issues.
“I think that new market entrants have been generally pleased with the extent to which the regulators have aggressively put in place policies to create more competitive environments. New competitors will always say that they need regulators to do more work, and the incumbent operators will always say that they’re doing too much.”
But if you ask whether EU legislation or local regulators have the most impact, Staples said, it would be the local regulators with a willingness to act on the spirit of the legislation and put in place a competitive environment.
Because the cellular industry has been effectively liberalized for longer than the fixed-line market, regulators have had more time to come to terms with the implications of competition. However, because spectrum for cellular services is a limited resource, service providers have emerged and caused regulatory headaches, as was the case with Cellular 3 in Ireland.
“Spectrum allocation is clearly a key issue,” confirmed Staples. “If you look back on what companies paid for spectrum, significant revenues were generated for national governments by second and third competitors-in many cases through license auctions. The process of awarding licenses for the next generation of services will be even more interesting as the potential value will be much higher.”
This merely increases the pressure on regulators, who have to adjudicate between license holders and service providers that feel entitled to network access in the spirit of open competition.
Staples believes there has been a strong effort to have uniformity in industry regulation across Europe.
“The goal of the member countries and the EU was to have a common framework that would then be executed at the local level,” he said. “Where there were countries-such as Ireland, Spain and Portugal-that wanted additional time before competition was mandated to enter their markets, the EU gave them additional time before they were required to license competitors.”
The objective was a common framework with the local regulator being the first point of call on challenges to whether competition is being implemented according to the EU framework and the European Commission assuming a secondary role.
However, when you start to look at individual regulation, there is room for differences in terms of how interconnection is handled on a country-by-country basis, said Staples.
Therefore, the EU has established a common framework in which each country implements policy individually, he said.
Given that certain countries managed to negotiate derogations, or delays, to competition on mobile services, the strength of the regulator in each country is different. The challenge is for these individual industry watchdogs to implement EU policy both in spirit and in practice.
