[AfrICANN-discuss] Regulators need to speak more with the investing community

[Anne-Rachel Inné]

http://www.etno.be/Default.aspx?tabid=2484

26 April 2012

*ETNO Digital: Interview with Georg Serentschy, 2012 Chair of BEREC
“Regulators need to speak more with the investing community”*

*ETNO*: Mr. Serentschy, how do the national regulatory practices
differentiate in European member states? How much is this an obstacle to
the single market and to investment?

*Mr. Serentschy*: Of course everybody subscribes to the goal of a digital
single market and to the need for a timeframe to get there. The
difficulties we face are two-fold. On one hand all member states have a
different original stand point which depends on various parameters such as
the competitive structure – the number of players in the markets, the
pressure from platform competitors such as cable or mobile. On the other
hand we still face different regulatory practices, for instance on mobile
termination rates or on bitstream access. The mission of BEREC is to create
more harmonisation on the regulatory practices but of course we cannot
change the initial situation of each member state and we have to take into
account the specific national context.

*ETNO*: Do you think a common approach for fixed network regulation all
over Europe makes sense? Would investment not benefit from a more targeted
regulatory approach depending on the local competitive realities?

*Mr. Serentschy*: Regulatory practices need to take divergent national
situations into account. Even if the same approach, for instance to cost
calculation, is applied, final results will be different throughout the EU
as the inputs vary. Harmonisation means that the calculation method is the
same, not necessarily the output. However, if your question refers to the
issue whether or not we need in each single Member State the same type of
product based on the same reference offer, the same quality levels etc. we
currently do not think that this is the right approach. This would require
Trans-national markets, meaning not only Trans-European demand but also
Trans-European supply. The European Commission which would be responsible
for defining Transnational markets has not defined so far any market for
regulatory purpose – and I think, they are right, as national circumstances
differ.

*ETNO*: Telcos claim unfair competition, because they are fully regulated
while other platform operators such as cable operators do not have to grant
access to their infrastructure. Should the increased competition between
platforms not lead to a deregulation?

*Mr. Serentschy*: If a cable operator is operational on a nation-wide or a
regional market, depending on the definition, and is found to have an SMP,
then it should be regulated. But we cannot pre-empt the result of the
market analysis of course. Speaking about unfair competition, I consider
that telecoms operators, independently of their size, face – to some extent
- unfair competition from over the top players as telcos must all have
their terms and conditions agreed by the regulatory authorities and the OTT
players do not have this obligation. When OTTs services are used as
substitutes of traditional e-communications services (for instance VoIP
applications on a smart phone or a tablet), they should be treated as
traditional e-communications services. I would expect the Commission to act
in order to create a fair level playing field. As far as increased platform
competition is concerned, this is the most effective form of competition.
The concept of ladder of investment has shown its limits. Those players who
relied on wholesale access have often stuck half way.

*ETNO*: What is the inter-relation between wholesale (access) copper prices
and investments in your experience? Would lower prices for copper encourage
investments in high speed networks?

*Mr. Serentschy*: If there is a co-relation between copper prices and high
speed network investments at all than it’s a positive one. To give an
example: Copper prices in Austria are low while NGA roll out pace is also
low. Other countries, like Switzerland and Norway rate high in term of
fibre roll out although copper charges are high. There is no empirical
evidence that lower copper prices would encourage investment. In any case,
rolling out fibre is not about pulling a switch. The scenario according to
which the copper network would be abandoned to be replaced in one go by a
fibre network is not realistic. The migration to NGA is a mid or long term
scenario which will require time and revenue that will come from existing
platforms. Taking away revenue will not lead to investment. Above all, the
demand side is key to investment although it seems sometimes that it is not
sufficiently within the line of sight.

*ETNO*: What conclusions should the regulators draw?

*Mr. Serentschy*: The main conclusion they should draw is that a disruptive
change to costing methodology is not going to help achieving the broadband
targets of the Digital Agenda. Regulators should stick to current
methodologies or to calculate the wholesale access price for competitors -
resp. in the case incumbent operators opt for an aggressive retail price
reduction the margin squeeze free price could be even below forward looking
incremental costs, but that’s just taking into account of general
competition law principles

*ETNO*: There is concern that the objectives of the Digital Agenda
regarding broadband penetration may not be reached. What kind of investment
incentives should the regulators provide in order to push the rollout of
high speed broadband networks?

*Mr. Serentschy*: First of all, regulators should avoid any disruptive
changes. They should provide certainty and clarity for investors. NRAs are
obliged to make a new market analysis every three years but if they are no
changes, then the outcome should stay the same as well. Sometimes however,
the fact that the market analysis has to be made already creates
uncertainty. Secondly, regulators should speak more with the investing
community. They should explain to investors what the role of regulators is
and give more confidence.  Finally the debate should not focus solely on
supply side, we should also address the lack of demand for new networks.

*ETNO*: The fibre networks are built in a competitive environment. Is there
not a case for a different regulatory approach?

*Mr. Serentschy*: It is important to have transitional products such as
virtual unbundling which can replace a couple of legacy products. Virtual
access does not mean however that there is no role any more for the
regulators. As far as price regulation is concerned, nothing prevents them
today from differentiating prices at the retail level. But of course these
products will need to be replicable at the wholesale level.

*ETNO*: What can BEREC do to give the tool of geographic differentiation a
higher acceptance among NRAs?

*Mr. Serentschy*: To make sure that the concept of geographical
segmentation can be fully exploited, criteria for setting a geographical
market need to be clearly defined, as has already been done by BEREC.
However,we need to avoid creating artificial markets and we need to keep in
mind the effects on competition that a fragmented landscape could bring
about. Together with the principle of proportionality this will lead us to
reasonable results.

*ETNO*: Is fibre without any alternative or do you see a future for copper
too?

*Mr. Serentschy*: Of course, we need to have a technologically neutral
approach. Ultimately all platforms (copper, mobile, cable) will play a role
but they will use fibre to get closer and closer to the end customer. The
local loop will be shorter and shorter and with vectoring, copper can be
given a second life. Fibre roll out will involve a 10-15 year evolutionary
path. Such an evolution will lead to more platform competition. A slow
transition makes sense technically and economically but also from a
societal and legal point of view.  Telco’s for instance would need less
field staff.

*ETNO*: What are the main challenges for regulators today?

*Mr. Serentschy*: Business models of the telco’s are going through severe
changes. Traditional models are at a crossroads. They need to generate new
revenues. The key challenge for regulators is to make sure that we regulate
the right markets.

*ETNO*: What is the main message you would like to deliver to ETNO member
companies, as main investors in NGA?
*Mr. Serentschy*: I would like to highlight that BEREC is fully aware that
the business situation is difficult. BEREC is extremely interested in a
dialogue with industry to make regulation more transparent and improve
mutual trust. For this reason I recently introduced a “strategic dialogue”
between BEREC and relevant stakeholders which will be rolled out over a
period of two years, meeting various different stakeholder groups like
operators, finance industry and consumer/user organizations, hosted by the
Chair and incoming Chair of BEREC.
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