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Ladies and Gentlemen,
Thank you for being here, and thank you to my colleague Erkki Liikanen for having so effectively conveyed the importance of this moment. The last year has indeed been an important year for the European communications industry. Moreover this year will be in all likelihood, at least as important, although perhaps in a slightly different way.
Last year was characterised by the final refinements to the regulatory framework, with the Recommendation on relevant markets and the development of the Article 7 consultation mechanism. This year, on the other hand, is probably going to be very intense for all those national regulatory authorities who are in the process of coming to terms with the new framework. Furthermore, it is certainly going to be very intense for the Commission: we have already received 40 notifications from the date of transposition set in the Framework Directive, 25 July 2003. Many more will be received in the course of this year.
There is one more reason to believe that this will be a crucial year for the new regulatory framework. The work which the ERG and the Commission have launched on remedies will, later this year, come to an end. This work is particularly important as the choice of appropriate, proportionate and justified remedies is the final stage in the market analysis process. This is a task which cannot be naturally separated from the two previous stages of market definition, and of the assessment of market power. At the same time it is a very delicate task in itself, one in which regulatory authorities are called to make wise use of their technical knowledge and of their judgement.
This is the reason why I was particularly supportive of the involvement of the services of Directorate General Information Society and of Directorate General Competition in the joint effort to produce the draft document which we are discussing today. I believe this document to be a very substantial contribution to policy-making in the field of regulation. To my knowledge, this is the first comprehensive project of this nature, outlining a coherent approach to the analysis and treatment of competition problems, and of their causes, in the sector of electronic communications.
The issue of remedies is of the highest importance in itself, and Commissioner Liikanen was, as usual, particularly skilful and effective in conveying the importance of this moment for the European electronic communications industries. I am in total agreement with him. However I believe that it is also useful to consider the topic of remedies not in isolation, but in relation to the nature and aim of regulation, and to competition policy in general. There are two main aspects which are particularly relevant from this perspective. I would like to just briefly touch upon them.
Regulatory remedies and antitrust remedies
A first issue which I think it is important to address is the difference between remedies under antitrust enforcement, and remedies under regulatory intervention.
Regulation is, by definition, an ex ante type of intervention. Remedies imposed under regulatory intervention have the specific remit to allow competition to develop, and to increase the competitive conditions in any market in a self-sustaining manner.
Their aim is, or should be, creating a pro-competitive environment in the long term, while at the same time providing, in the shorter term, the benefits to end users which the market would offer if it were effectively competitive.
Antitrust remedies, on the other hand, have purely the objective of punishing forms of behaviour which have occurred in the past, and which are seen as detrimental for the welfare of citizens/users. They assume that competitive conditions are already developed and that market structures would not be automatically conducive to their degradation. I would also say that there are specific areas, in antitrust enforcement, which are closer to regulation from the point of view of the nature of the remedies imposed. The obvious example is merger control. Remedies under merger control are ex ante by definition, and offer a wider range of types of intervention than conventional antitrust, including divestiture.
From my perspective, therefore, the relationship between antitrust and regulatory remedies is particularly significant because it informs policy decisions. In a way, the aim of regulatory remedies should be to allow antitrust remedies to be the only ones needed in the long term. For the parts of the industry which can be characterised as natural monopolies, this may be difficult to achieve. However, as technology develops, regulatory intervention will increasingly play a smaller role.
There is a fine balance to be found, between short-term needs and longer-term considerations. This is perhaps the reason why the issue of regulatory remedies under the new framework seem to have sparked rather heated discussions. An obvious example is provided by the debate, between those who advocate a facilities-based model of competition on one side, and those who advocate a model of competition based on access on the other side.
Perhaps this is not the most appropriate language to describe the issues at stake. However, for the sake of simplicity, let us use the same language. My view on the substance of this debate is that there is not necessarily a contradiction between access-based and facilities-based competition. Access services are essential in opening up previously monopolistic market structures. Competition would never be able to develop, in the short term, if entrants were not able to gain access to the incumbent operator's network to start offering services. In fact, the "liberalisation" of network industries, vigorously pursued by the Commission in a number of areas, would never take place without access obligations. Even the "purists" of facilities-based competition, who often happen to enjoy a satisfactory market position in at least one Member State, would probably admit that they would not be able to enter a new market (for example a market in another Member State) were it not for the availability of some type of access service.
However, I also agree with those who are concerned about providing the right incentives to new entrants. In the longer term, the regulatory framework should privilege operators which base their competitive advantage on building their own infrastructure. The reason for this is simply that it is such operators who are more likely to best improve the competitive conditions of the market, by changing its structure.
Therefore I believe that, in order to reconcile access-based and facilities-based competition, it is necessary to take account of the time dimension. NRAs should provide incentives for competitors to seek access from the incumbent in the shorter term, and to rely increasingly more on building their own infrastructure in the longer term.
I am glad to see that the draft document clearly refers to this issue, by devising the useful concept of "investment ladder". A similar approach has been used, not long ago, to define the market for wholesale broadband access. While discussing the list of markets to be subject to regulation, the Commission has taken the view that bit-stream services are a useful complement to local loop unbundling, but also that they must be characterised as access services. This choice reflects the conviction, which this draft document shares, that an access service is different from an end-to-end product, as the new entrant must have a minimum of own infrastructure in place to use an access product.
The new regulatory framework allows NRAs to take this approach, since both the objective of investment and the objective of the welfare of end users are explicitly mentioned. I am glad that the ERG and the Commission services have been able to put these considerations in an appropriate and coherent framework.
Infrastructure and content
The second aspect of the relationship between regulatory and competition policy, and of the role of remedies, which I would like to discuss is the link between infrastructure and content.
For a number of reasons, the common experience in Europe has been setting up a publicly owned, publicly run monopoly for the provision of voice services. As digital technology evolved and as the process of convergence started, it has become increasingly clear that a lot of potential existed for what is now known as the electronic communications industry to develop into an engine for productivity and growth.
However, most of the gap between the industry potential and its actual performance will depend on the drivers of growth. In particular, availability of content is likely to drive the take up of electronic communications services. The distinction between infrastructure and content, which has been crucial in the past to inform policy decisions, is now becoming more blurred, or, better, their interaction and complementarities are becoming increasingly vital to ensure the success of both.
This is particularly true for broadband. Ensuring a level playing field as regards access to communication infrastructures is certainly a necessary condition for the development of competitive broadband services. Regulation should make it possible for this playing field to exist, while antitrust enforcement should safeguard it. Yet, this is not sufficient to guarantee that the potential of such services will be fully exploited to the benefit of citizens/users.
While a gradual take-up of broadband is all but inevitable, its pace can be substantially affected, in each Member State, by the presence or absence of highly sought-after content. This is why the Commission needs to actively monitor the development of the market, and intervene when necessary through the two main tools at its disposal: merger control and antitrust enforcement.
Through its antitrust enforcement action under Articles 81 and 82 of the Treaty, the Commission seeks to ensure that communications companies do not engage in anti-competitive agreements with other companies or abuse their market power to the detriment of competitors and consumers. Such anti-competitive practices can take the form of leveraging market power from traditional onto new media markets or of foreclosure of these markets by barring access to premium content needed by potential entrants. The granting of long-term exclusive licences for premium content to a single dominant operator can produce these anti-competitive effects.
The Commission will thus use all the instruments it has got in order to make sure that the crucial interplay between infrastructure and content does not fall under the control of companies with a high degree of market power, which may be in a position to use the strong network effects characteristic of this industry to the detriment of end users.
Conclusions
Please allow me just a few words to briefly conclude. The Commission intends to continue to have a key role in shaping policy and in supporting its implementation. However, not everybody seems to agree on how large the scope of the Commission action should be. For some observers, the Commission is constantly stepping out of the boundaries of its remit, and should leave all competences to national authorities. For others, the Commission should be more involved, in particular in such a delicate issue such as the choice of appropriate remedies, to ensure effective harmonisation.
Let me say, in answer to these conflicting views, that I believe that the balance struck so far is not far from being the right one. This document proves that a balance can be found. It witnesses a close collaboration of national authorities and the Commission, striving to harmonise best practice across Member States while remaining sensitive to national specific circumstances. This is why this draft document has managed to achieve, in my view, much more than an individual sector-specific contribution. This contribution is important because it represents the final piece in the mosaic which the new framework has designed. It must be read within the context from which it originates. The context is, as I have already said in the past, using competition and regulation as tools to achieve the best outcome for final users of electronic communications products and services. Regulation and competition follow different routes to achieve the same end. It is the end that matters: maximising the welfare of users/citizens. And this same principle is valid regardless of the specific sector.
Perhaps, then, I could summarise the main achievement of this document by saying that it brings economic analysis to the centre stage. Regulatory and competition policy are grounded on the same set of economic principles, and this document gives new life to those principles, by translating them into practical and operational tasks.
I thus believe that this contribution is going to be of great support to the successful implementation of the new framework. It will help grounding policy-making conclusions on far more solid foundations than it was the case earlier. Also thank to this contribution, therefore, the huge leap forward which has been made possible through the introduction of the new framework is now clearer.
Thank you very much for your attention.
