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No. 82 - A Single EU Market for eCommunications?

DigiWorld Economic Journal - C&S - 27/06/2011 No. 82 - A Single EU Market for eCommunications?

2nd quarter 2011

Competition policies which are fostered by Bruxelles and the EU member states regarding the telecom sector have always been associated with the prospect of a single market for telecommunications within the European Union: What is today’s situation? Have we made the right choices? What are the remaining barriers? What is the new perspective of this issue in the Internet era?

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A Single EU Market for eCommunications?

Edited by Denis LESCOP, Lorenzo Maria PUPILLO & Ulrish STUMPF

Introduction: A Single Market for eCommunications: A Three-Phased Regulatory Process



Single eComms Market? No Such Thing…

Jacques PELKMANS & Andrea RENDA

Do You Speak European ? Media Economics, Multilingualism and the Digital Single Market

Olivier BOMSEL

Where Should the European Union Intervene
to Foster the Internal Market for eComms?

Philippe DEFRAIGNE & Alexandre de STREEL

Geographically Segmented Regulation: Lessons from the FCC
for European Communications Markets


Geographic Segmentation of Broadband Markets:
Appropriate Differentiation or Risk to a Single EU Market?


Competitive Dynamics Between MNOs in the Mobile Telecommunications Single Market: Lessons from the U.S. Experience



Franco BERNABČ, Chairman of GSMA,
Chairman and Chief executive Officer of Telecom Italia

Chris FONTEIJN, Chairman of BEREC,
Chairman of the Commission of OPTA


Firms and Markets
The Future of Telecoms - Strategies for 2020

Technical Innovations
Report on NAB 2011

Book Review

Manuel CASTELLS, Communication Power

By Jean-Dominique SEVAL

Daniel CHANDLER & Rod MUNDAY, Oxford Dictionary of Media and Communication

By André LANGE

Author biographies


- 22nd European Regional ITS Conference (Budapest)
- TPRC - 39th Research Conference (Arlington, Virginia)
- DigiWorld Summit 2011 (Montpellier) - Will the device be king?
- Trans-Atlantic Telecom Dialog 2011 - Net Neutrality: Act II (Montpellier)
Dossier: A Single EU Market for eCommunications?

Single eComms Market? No Such Thing…

Jacques PELKMANS & Andrea RENDA
Key words: electronic communications, Internal Market, liberalisation, spectrum, regulatory authorities, price differentials.

Notwithstanding the undeniable success of telecoms liberalisation in terms of price reduction, new services and technologies as well as consumer satisfaction, EU telecoms policy is at least a half failure. This might seem hard to believe, but we show in this paper that there is no such thing as an EU telecoms (or eComms) single market. We provide ample empirical economic and regulatory evidence of profound and lingering fragmentation as well as a brief assessment of the flaws of the eComms package as amended in 2009, and recently entered into force. Overcoming the fragmentation cannot but yield a considerable welfare improvement for the Union, which is exactly what a single market should be expected to deliver. Doing away with the flaws in the EU system requires a better institutional design. We wonder whether the regulatory (and competition policy) approach is really suitable for the Union and whether the fundamental conflict between the EU constitutional doctrine and the building of the single market (just as much a constitutional duty!) should not be resolved in novel ways.

Do you speak European ?
Media Economics, Multilingualism and the Digital Single Market

Olivier BOMSEL
Key words: media economics, price discrimination, versioning, bundling, multilingualism.

The economic specificity of media is that their competitiveness relies on the efficiency of their price discrimination schemes. However the discrimination schemes set up in each EU member state result from the path of regulations that have framed the domestic rollout of the media, from the start to the digital age. Besides, multilingualism adds specific costs to all media distribution schemes and inhibits economies of scale in producing or marketing the media across Europe. In order to resist competition from the monolingual United States, the challenge of Europe is to build up coordinated media distribution systems aiming at lowering the discrimination costs of each media while increasing the revenues of their industries. This challenge should be part of the digital single market agenda.

Where Should the European Union Intervene
to Foster the Internal Market for eComms?

Philippe DEFRAIGNE & Alexandre de STREEL
Key words: electronic communications, internal market, regulation, subsidiarity, fiscal federalism.

This paper analyses when EU intervention is needed to achieve this internal market for electronic communications. It sets legal and economic criteria to determine the appropriate scope of the EU intervention. It applies these criteria to several case studies and concludes that sometimes the EU intervention is not always justified (such as regulation of mobile termination rate, price control of Next Generation Access networks), whereas in other cases EU intervention is justified (entry regulation, international roaming, spectrum). The paper calls for a more open debate of the concept and the means to achieve the digital internal market. It also submits that EU intervention should focus on the areas where its benefits are the highest (in particular given the possibilities of economies of scale provided by the technology or the cross-country externalities), and where its costs are the lowest (in particular given the heterogeneity of national preferences or the need for regulatory experimentation and competition). In particular, this paper calls the Commission to use its new power on regulatory remedies with extreme caution, especially in the context of the deployment of NGA, given the uncertainty on the best form of regulation.

Geographically Segmented Regulation:
Lessons from the FCC for European Communications Markets

Key words: Next Generation Networks, geographic markets, geographic remedies, market definition.

Since telecommunications markets were liberalized, competition has not developed in a geographically uniform manner, and the introduction of NGA networks is likely to exacerbate these geographic differences. Geographic variations in competition have caused European regulators to consider the use of geographically segmented regulation. Unfortunately, geographically segmented regulation is complicated and requires compromises and judgment calls. As a result, there is a danger that inconsistent implementation of geographically segmented regulation by NRAs may threaten the Single European market. This paper examines the experience of the Federal Communications Commission (FCC) in defining relevant geographic markets and in adopting geographically segmented regulation. The paper begins by sketching the statutory and regulatory framework within which the FCC must operate. It then describes the FCC's approach to defining relevant geographic markets for purposes of merger review and dominance determinations. The paper then examines how the Commission has attempted to adjust regulation for geographic differences in the level of competition, both in rulemaking proceedings and in response to petitions seeking forbearance from regulation. Drawing on the U.S. experience, the paper concludes with some observations on the difficulties and tradeoffs that European NRAs are likely to face in implementing geographically segmented regulation.

Geographic Segmentation of Broadband Markets:
Appropriate Differentiation or Risk to a Single EU Market?

Key words: geographic markets, Next Generation Networks, market definition, remedies.

Until recently, wholesale broadband markets have usually been considered to have a national scope, with some exceptions associated with the existence of different incumbent fixed operators in different geographic areas, like the Hull area in the UK. The development of local loop unbundling and the deployment of alternative infrastructures to provide telecommunication services, such as cable, have changed the competitive landscape in certain areas. This has resulted in a higher degree of heterogeneity in the competitive conditions observed in wholesale broadband markets across geographic areas, which has led some regulators, like Ofcom and ANACOM, to define sub-national geographic markets, imposing obligations only in those markets were significant market power operators have been identified. In other cases, like in Austria, the regulator has opted for defining a single national market but imposing differentiated remedies to take account of the heterogeneity in the competitive conditions observed in different geographic areas. Based upon this recent experience in the context of wholesale broadband markets, this paper aims to provide insights on the main issues associated with the implementation of the analysis of geographic markets and its consistency with the European Commission's objective of developing a single EU telecommunications market.

Competitive Dynamics Between MNOs in the Mobile Telecommunications Single Market:
Lessons from the U.S. Experience

Key words: routingSingle Market, competitive dynamics, harmonisation, main mobile groups, telecommunication services.

Within the framework of the Digital Single Market, the European Commission is paving the way for a Single Market in the European mobile telecommunications services by, among others, studying how to reduce regulation heterogeneity in the 27 fragmented national markets. This article aims to complement this initiative by analysing the U.S. experience and drawing lessons that the potential unified European mobile market can benefit from regarding the small operators in the market. Three major points are identified in order to create an internal market for mobile telecommunications with high competitive dynamics: to prevent market consolidation by a limited number of large operators, to block practices that raise barriers to competition by the dominant operators such as exclusive handset arrangements, and finally, to adopt harmonised and favourable measures to include second-mover operators in the competition.
 The Editors

Denis LESCOP is Director of TEM Research (Research Centre of TELECOM Management School, Institut TELECOM) and associate professor in economics. After obtaining his Ph.D. in economics, Denis joined the French Regulatory Authority for Telecommunications in 2001, where he managed telecom markets observatory and economic studies. He then worked for the strategic department of La Poste group as an analyst-economist. In 2004, he became case-officer for the French Competition Council. He was in charge of cases related to telecom and media sectors. In late 2006, he joined TEM, the management school of Institut TELECOM. In 2007, he participated in the creation of the laboratory CEMANTIC (Centre of Research in Management and ICT) and managed the Innovation research team. In February 2010, he became Director of TEM Research. The research of Denis Lescop focusses on economics of iCT regulation, new forms of competition (open innovation, business ecosystems) and their impact on both market structures and regulatory processes. He is author and co-author of numerous articles published in scientific journals and books in economics, regulation and strategy.

Lorenzo Maria PUPILLO is an Executive Director in the Public & Regulatory Affairs Unit of Telecom Italia and Affiliated Researcher at Columbia Institute for Tele-Information. In Telecom Italia, he is working on Next Generation Networks, ICT & Energy, Net Neutrality, Geographic Markets, Functional Separation and is providing Policy Advising to senior management. He is an economist by training and has worked in many areas of telecommunications demand and regulatory analysis, publishing papers in applied econometrics and industrial organization. He has also been Advisor to the Global Information and Communication Technologies Department of the World Bank in Washington. Before joining Telecom Italia in 1992, he was a member of the technical staff at AT&T Bell Laboratories in Murray Hill, New Jersey. Dr. Pupillo also serves on numerous committees for international organizations and on scientific and advisory boards around the globe. He obtained a Ph.D. and an M.A. from University of Pennsylvania, an MBA from Istituto Adriano Olivetti in Ancona Italy and an MS in Mathematics from University of Rome.

Ulrich STUMPF is Director at WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH / WIK-Consult GmbH, where he leads the eComms regulation and competition practice. Over the last decade, Ulrich has been extensively involved in consulting National Regulatory Authorities and operators during regulatory reviews of eComms markets and consultation procedures under the EU regulatory framework. Member States in which he undertook regulatory reviews including Belgium, Germany, Greece, Ireland, Portugal, Romania and, outside Europe, in Turkey and Jordan. In addition, he provided expert advice in a variety of jurisdictions on multiple regulatory issues and in legal proceedings. For over a decade he also advised the German NRA on spectrum policy issues. In 2006, he was one of the three economic experts who advised the European Commission on the revision of the Recommendation on Relevant Markets Susceptible to ex ante Regulation. Before joining WIK in 1990, Ulrich held positions as a Senior Economist at the Monopolkommission, an advisory body for competition policy at the German Ministry of Economics, and as Assistant Professor at the Technical University of Berlin. He holds a doctoral degree of the Technische Universität Berlin.

The interviewees

Franco BERNABČ has been Telecom Italia Chairman and Chief Executive Officer since April 2011 and was Chief Executive Officer in the previous three-year period. He has a degree with honours in Economics and Political Science from University of Turin. Mr. Bernabč worked for two years as a post-graduate fellow at the Einaudi Foundation before beginning his professional career in 1976 as a Senior Economist at the OECD Department of Economics and Statistics in Paris. He joined the Planning Department of FIAT as Chief Economist then worked for Eni as an Assistant to the Chairman and later Head of Corporate Planning, Financial Control and Corporate Development. He was also CEO of ENI FROM 1992 to 1998. In November 1998 he became CEO of Telecom Italia. At the end of 1999 he founded FB Group, an investment company active in the areas of financial advisory, ICT and renewable energy. In 2004, he was appointed as Vice Chairman of Rothschild Europe. Mr. Bernabč is currently Chairman of the Board of GSMA, the international organisation of mobile operators, member of the Board of Directors of PetroChina, and member of the European Roundtable. He is also Co-President of the Italy Brazil Business Council and Vice President of the Rome Industrialist and Enterprises Association with special duties for innovation and Broadband.

Chris FONTEIJN is Chairman of BEREC (Body of European Regulators for Electronic Communications). Born in 1955 (Den Haag), he studied law in Leiden; during his years in military service, he worked in the Military Intelligence Service. From 1980, until his appointment as Chairman of the Commission of OPTA on September 1st 2005, Chris worked as a lawyer at NautaDutilh in Rotterdam, where he became a partner in 1988. He specialized in Business and Energy Law, and over the years he held a variety of positions at NautaDutilh; for several years he worked for NautaDutilh in the Middle East. During his last years at NautaDutilh, Chris was director of the Energy & Utilities Group. In 2011, Chris Fonteijn is chairman of BEREC.

The authors

Steven ANDLAUER was Head of telecom's Strategy and Prospective practice at IDATE until 2011. He is specialising in the analysis of industrial, financial and strategic issues in the telecommunications industry. Prior to joining IDATE in 2007, Steven was a Senior telecom and media analyst for McKinsey & Company. He holds a degree in strategic financial and industrial analysis, of the Conservatoire des Arts et Metiers.

Laurent BENZONI is a Professor of Economics with tenure at the Sorbonne Universités, where he is a member of the Equipe de Recherche sur les Marchés, l'Emploi et la Simulation (ERMES). He is also a member of the Forum d'Avignon - Culture, économie, média, and of the Scientific Committee of the French Ministry of Economics, Finance and Industries in the "Competition Workshop". Laurent has more than 20 years of consulting experience in the telecommunications industry. He has received a number of awards, such as the Harvard - Expansion Award for his book Economics of Energy, and the Institute for Research in Economics and Social Sciences in Telecommunications Prize (IREST Prize), in recognition of his work on telecommunications regulation and economics. Laurent holds a Ph.D. in Economics and a Master in International Finance from University of Paris XIII.

Olivier BOMSEL is Professor of Economics at MINES ParisTech and ParisTech Chair of Media and Brand Economics. Since 1998, his works have dealt with the rollout of digital technologies and the economics of Intellectual Property. His latest book, L'économie immaterielle, industries et marché d'expériences (Nrf essais, Gallimard) was released in 2010.

Bruno DEFFAINS is Professor in Economics at University Panthéon Assas – Sorbonne Universities. He is the Director of the Research and Master programs in Law and Economics. He also taught as Associate Professor at the European Business School at Wiesbaden. He is a member of the Board of the European Association of Law and Economics. He has strong research achievements in several of the topics relating to the fields of law and economics, industrial organization and public economics. Bruno holds a Ph.D. in Law and Economics from the University of Nancy.

Philippe DEFRAIGNE is a director of Cullen International, a company monitoring regulatory developments in telecommunications, media and electronic commerce. He is an economist by training and has spent the last 20 years analysing telecommunications regulation and market developments across Europe. He started his telecommunications career as a researcher at the University of Namur in 1988. Between 1991 and 1994, Philippe worked for the European Commission where he was mainly involved in the legislative process that led to the adoption of the ONP Leased Lines Directive.

George HOUPIS is a Director at Frontier Economics and head of its Telecommunications Practice. Prior to joining Frontier, George was a Director in the Strategy group of KPMG Consulting where he led their economic work in the telecoms sector. In this capacity he was involved in a number of projects dealing with the theory and application of regulation and competition policy, market research and forecasting of demand and tariffs in the telecoms, media and other sectors. Examples of his recent project work include advising regulatory authorities and operators on the application of the EU telecommunications regulatory framework, fixed and mobile interconnection, regulation and costing of NGNs, margin squeeze cases in the broadband internet services market, and advice on auctioning of spectrum. George took his Ph.D. at the London School of Economics where he also taught Economics and Mathematics for several years.

André LANGE was Lecturer at the University of Liege and Brussels.

Júlia LUCENA BETRIU is a consultant at Frontier Economics. Prior to joining Frontier in April 2008, Júlia was part of the electricity practice of the Madrid office of NERA Economic Consulting. Júlia has wide experience advising in utility industries, such as electricity and telecommunications. In the electricity sector, she has been involved in projects for the Spanish energy regulator as well as for leading electricity firms. She participated in the set-up of the electricity distribution auctions in Spain (CESUR Auctions) and has contributed to give regulatory advice to electricity and gas companies in the Spanish and Colombian electricity markets. In telecommunications, she has developed models to estimate the cost of regulated services, advised on price cap design and provided support in margin squeeze cases. Júlia Lucena holds an MSc in Economics and Finance from Centro de Estudios Monetarios y Financieros (CEMFI) and a B.A. in Economics from Universitat Pompeu Fabra.

Anh Tuc NGUYEN is a consultant at Tera Consultants, where she has focused on applied economics in the telecommunications sector. She worked as a Project Manager for European projects at ParisTech prior to joining Tera Consultants. Anh Tuc graduated from the London School of Economics (LSE) with a Bachelor in Economics and from the CEMS programme at LSE and HEC Paris with a Master in International Management.

Jacques PELKMANS is the Jan Tinbergen Chair of European Economic Integration at the College of Europe, Bruges, and Director of the Economic Studies department at the College. He has also been Senior Fellow at the Centre for European Policy Studies (CEPS) since October 2009. Dr. Pelkmans occupied the Chair "Business & Europe" at the Vlerick School of Management in Leuven & Gent between spring 2007 and October 2009. He was Council member of the WRR, a think-tank on public policy analysis attached to the Dutch Prime Minister Office in The Hague from 2001 until spring 2007. Between 1990 and 2001, he was already Senior Research Fellow at CEPS. Between 1992 and 2002, he was part-time professor of Economics at Maastricht University, and before 1990, professor of economics at the European Institute of Public Administration (Maastricht), and (1979–1982) associate professor of economics at the European University Institute in Florence. While being at CEPS in 1995-1996, he was appointed Research Director of the European Institute for Asian Studies, Brussels, immediately after its establishment, setting it up as a think-tank and handing over to a full-time Director once the Institute had developed a solid research, publications and activities agenda. Dr. Pelkmans holds a Ph.D. in Economics from Tilburg University. He has published widely, including his worldwide textbook European Integration, Methods and Economic Analysis, 3rd wholly revised edition, Pearson Education (also in Japanese, Chinese and Romanian). Jacques Pelkmans has been advisor to the Commission, a range of international economic institutions and ASEAN.

Didier POUILLOT is Director of Studies and Head of Practice "Telecom Economics and Business modelling" at IDATE. A specialist in telcos and telecom services markets, he contributes to a variety of research and study assignments on the sector's regulatory, technological and industrial issues (ultra-broadband outlook, telecommunications investments and employment, European industry's competitiveness…). Didier is also the editor-in-chief of the annual DigiWorld Yearbook, report on the stakes and challenges of the digital economy. Before joining IDATE, Didier worked as a consultant for Paris firm, B.I.P.E. He is a graduate from the ESSEC business school in Paris, France (1982).

Alain PUISSOCHET works as an independent expert. His interests cover several aspects of ICT, including audiovisual equipment, consumer electronics, embedded systems and software and digital convergence. His current activities include consulting and assessment for small and large R&D and innovation programmes and projects, as well as techno-economic analysis and market analysis. Previously (1991-2006) he was director of studies and head of digital electronics practice at IDATE, where he led the assessment of large European and national R&D programmes, and published multi- and mono-client studies on technologies, industry strategies and markets. Alain Puissochet is an engineer in computing science, and worked 20 years (1970-1991) as a researcher for CNET (France Telecom's research centre).

Andrea RENDA is a Senior Research Fellow at the Centre for European Policy Studies (CEPS), where he started and currently manages the Regulatory Affairs Programme. He is also the Manager of the CEPS Digital Forum. Andrea is Professor of "Economic Analysis of Law", "Antitrust and regulation", "Policies and policymaking in the EU" and "International Public Governance" at Luiss Guido Carli University, in Rome, and a Senior Research Fellow at Luiss' Law and Economics Lab. He also lectures at the Erasmus University of Rotterdam, at the University of Stockholm and the College of Europe in Bruges. He was awarded a Jean Monnet Fellow at the European University Institute from 2011 to 2013. Andrea is member of the Editorial Board of the international peer-reviewed journal Telecommunication Policy (Elsevier); a member of the Scientific Board of the International Telecommunications Society (ITS) and of the Scientific Board of EuroCPR. He holds a Ph.D. degree in law and economics from the Erasmus university of Rotterdam. Dr. Renda is the author of several publications, including the forthcoming Law and economics in the RIA world (Intersentia, September 2011): and Law and Policy of Innovation in the EU (co-authored with Massimiliano GRANIERI), Springer, Fall 2011.

Oliver SALESSE is a partner at Tera Consultants, a consulting firm specialised in applied economics most notably in telecommunications. With more than 10 years of experience in regulatory affairs, he has led many consulting projects for French as well as international regulatory bodies and major mobile operators. Prior to joining Tera Consultants, Olivier worked as Head of Service for the Group La Poste, where he was responsible for the cost modelling service of the Mail division. He is a graduate of University of Paris XIII where he completed a Master's degree in Industrial Economy.

Juana SANTAMARIA is a consultant at Frontier Economics and she is specialized in the area of telecommunications. Prior to joining Frontier in February 2008, Juana was part of the telecommunications practice of the Madrid office of NERA Economic Consulting. Juana has a deep knowledge of the economic literature addressing the relevant issues in mobile and fixed telecommunication sectors. She has worked for both regulatory authorities and leading companies in the sector advising on a range of issues, including regulation, competition policy and damage valuation. Her experience includes the analysis of access charges in the context of mobile termination markets, the analysis of fixed and mobile markets for regulatory purposes, advice on geographic market segmentation in the context of wholesale broadband markets under the EC regulatory framework and assistance in margin squeeze cases. Juana has also worked as an assistant professor in the Economics Department at the University of Alicante and Juana Santamaria holds a Ph.D. in Economics from the European University Institute in Florence, Italy.

Jean-Dominique SÉVAL is Deputy CEO and Research Business Unit Director at IDATE. After obtaining a post-graduate degree from Université Paris IX-Dauphine (DEA in Management Sciences - 1986), Jean-Dominique spent more than 15 years in the consulting business with the firms PRECEPTA (Director of studies) and BIPE Conseil (Director of the Information Technologies Department) before joining IDATE as the Director of Sales and Marketing. Responsible for promoting IDATE's expertise internationally, he is in charge of marketing the Institute's study and consulting services, as well as its publishing and conference-related activities. Jean-Dominique is also the head of the Research Business Unit, and is therefore responsible for the planning, production and marketing of all of IDATE's market reports and the services that make up its annual catalogue. He is also Affiliate Professor at the IAE (Montpellier II University) in charge of the telecom-Internet-media economics.

Donald K. STOCKDALE, Jr. is a partner in the law firm of Mayer Brown, LLP. Prior to joining Mayer Brown, he held various leadership positions at the Federal Communications Commission (FCC), including, most recently, Deputy Chief and Chief Economist of the Wireline Competition Bureau. While at the FCC, he led the review of major mergers, supervised the Commission's 2008 effort to reform intercarrier compensation and universal service, and managed all pricing proceedings, tariff investigations and accounting issues. He was also instrumental in the development of much of the Commission's current approach to market definition, merger analysis, and analysis of competition and market power. Mr. Stockdale holds a B.A., J.D., and Ph.D., all from Yale University and a B.A. from King's College, Cambridge University.

Alexandre de STREEL is professor of European law at the University of Namur and the Economic School of Louvain in Belgium. He is attached to the Research Centre for Information, Law and Society (CRIDS), focusing his research on Competition Law and Regulation in the network industries. He is also a member of the Scientific Committee of the Florence School of Regulation at the European University Institute. Previously, he worked at the Belgian Permanent Representation to the European Union, and at the European Commission (DG Information Society and Media). He holds a Ph.D in Law from the European University Institute (Florence), and a Master Degree in Economics from the University of Louvain.




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