Experiences with Liberalisation and EU Accession Views by Gabor Frischmann former president of the...

Experiences with Liberalisation and EU Accession

Views by Gabor Frischmannformer president of the Communications Authority of Hungary, now independent

[email protected]

Sofia, 10th of May 2005 G. Frischmann: Experiences... 2

Contents

• History

• Why to liberalise?

• Liberalisation– In theory– In practice

• Results of EU accession?

• A balance…


HistoryPenetration

0 50 100

telephone mobile Internet

Real price-level (basket)

0 50 100 150 200

telephone mobile Internet

2004 Law on Electronic Comm

2003 Numb.Port, MOB Term.

2002 SMP, RIOs, RUOs, CS

2001 Law on Communications

2000

1999 Voice o. IP

1998 3rd GSM operator

1997 Matáv IPO

1996

1995

1994 Telecom Act, 2 GSM lic.

1993 Privatisation of MATÁV

1992

1991 Westel Starts

1990 Matáv Starts


If the History is so nice, why aren’t we satisfied?

• Nobody is happy!– Good sign, but must not be a target!

• Still both Analogue and Digital divide! – Does the market solve everything?

• It has been very slow!– Do we have effective tools?

• Innovation has slow down!– Is there any incentive?


Why to Liberalise?• Everyone do liberalise its telecom market…• It is an EU requirement…• Alternatives want it…• To let the market operate…• Market is the most effective regulator…• To cut the prices…• To create a continuously evolving market?• To create the basis of an I-Soc?

Did we ask this Question before starting?


• If not: – Let’s look at the result!

• If yes:– Did we find the good strategy of getting to the

target?– Did we implement the strategy in proper way?


Liberalisation

In theory:• Minimise state ownership• Just remove restrictions• Assure equal rights• Load incumbent by

additional remedies• If market can’t solve

supply, create USO • Create powerful NRA,

improve enforcement• Depolitise NRA

In practice:• OK, lobby power remains• Nothing happens• Nothing happens• Hopefully works after 2-3

years • Is there a working model

in CEE and EU?• OK, but final power at

„amateur” court• Is it possible?


Minimise state ownership• It is not enough just to sell majority or all shares• Difficult to manage:

– All key knowledge remains with Incumbent– All personal and professional relations maintained– Increased lobby power: owners come too, and

• „Leaving the country”• „No more investment”• Even government level pressure• Increasing unemployment etc.

• But:– Why to place all government orders to incumbent?– Build independent (regulation, market and economics)

knowledge!– Do not believe threats.– Real public hearings!


Just remove restrictions & assure equal rights

• No legal entry barriers – far not enough• Equal rights – far not enough

– Huge financial entry barriers– Huge differences in size (1:100-1:10000)– Asymmetric historical distribution of natural and

network resources

• But: create equal chance instead!– Why to place all government orders to incumbent?– Introduce asymmetric regulation– Real public hearings!


Load incumbent by remedies

This is a good idea,

But:• it is very complex and time consuming• doesn’t solve the problem of „final interpretation”

It can be successful, in case of• well prepared NRA• well prepared and co-operative operators• open and transparent process• using best-practices…

Sofia, 10th of May 2005 G. Frischmann: Experiences... 11control and supervision

market identification

market analysis

Data coll.

SMP identification

defining remedies

EU notification

transparency

publication

non-discr.

publication

account sep.

transparent pricing

facility sharing

access,co-location

non-discr.

RxO

„approve”

cost orientation

fair wholesale prices

no chance ofcompetition

obligations

price regul.

Market Regulation


Time table of first Market Analysis

prepare data collection

market survey – demand side

other qualitative studies

education

data coll. evaluatedata

market analysis, def. SMP

EU notification

define remedies

pub

lic c

on

sult

pub

lic c

on

sult

pub

lic c

on

sult

Before new law After new law in force

4th Q 2003 1st Q 2004 3rd Q 20042nd Q 2004

01.09.2004

2nd Q 04 3rd Q 04 4th Q 1stQ


If market can’t solve supply, create USO

It is a very good idea, but very difficult to create a working solution

– Affordability? According living standard or social problems?

– What kind of services? Home and public telephone? In 21th century?

– What kind of technology (e.g. telephone, but fix or mobile or both?)

– Who shall be selected as US provider? And how? (huge lobbies!!!)

– Who shall contribute? (huge lobbies!!!)

– How to minimise market distortion?– How can USO contribute market development and

growth?


previous regime new regime

content telephony, access, public phones, info.

telephony, access, public phones, info

technology fixed (and prov. fixed GSM)

no theoretical limitation

USprovider former monopolies, based on contract

by appointment (!), based on contract

selection criteria automatic most effective provision

financing loss in revenue (32 M EUR)

max. net avoidable cost (0)

contribution to the fund

all market players relatively big players only

handling of social problems

no (only by price package)

by special social coupons

Example: Changes in USO regime in H.


Create powerful NRA, improve enforcement

It is important, but can NRA be really powerful? • EU guarantees of limited authority power:

– No legislative power, just application of legislation– Must of reasoning– Decisions may be appealed

• But there are elements of power:– Knowledge and information– Transparency– Independence (both political and from market)– Enforcement and penalising– immediate applicability– Communications– Success in front of court (0-70-90-100%) – but after 1-3 years


NRA can and shall learn and be preparedFrom advanced markets:

– well working/non working models– benchmarks: business, productivity, price etc.– patience

From advanced regulators:– best practices, methods, models– way of transparency, conciliation, moderation– real independence

How?– active participation in IRG/ERG work– utilising relative delay– from general to specific education, some together with operator’s

experts– preparatory projects on all new issues – preparing new procedures– completing IT investment


Example of Transition

membership based items

01.Jan.04. 01.May.04. 01.Sep.04.

number portability (geographical)number portability (mobile & nongeogr.)

new HRA (Hungarian Regulatory Authority)

first market analysis new SMPs and remedies

new USO regime

new act in force

RIO/ROU RIO/ROUaccount sep.

transitory USO regime

accessdeficitcomp.

old USO

HIF

former SMPs – new remediesold SMP


Interpretation

forbidden „uncertain” free „uncertain” obligatory

Newcomer’s interpretation on inc. obligations

Newcomer’s interpret. on incumbent’s restrictions

Newcomer’s wish on

incumbent’s room

NRA Interpretation

NRA can be wrong too

Incumb’s interpret on what is obl.

Incumb’s interpret. on what is forb.

Incumbent’s wished room


How EU accession influences all these?

• If your answer on „Why liberalise?” was, that because of EU, you will get a lot of problems with EU and yourself

• If it was one of the last two (evolving market, i-soc), in that case EU adds a lot of new tools and power:– Best practices, tools– Relations– Safe legislative background


Summary - ChallengesFor the operators• higher flexibility, less

pre-defined rules• wide scale of remedies• new customer

protection rules incl. comparativeness

• playing in EU playing field

• audited account separation & data provisioning

For the regulator• creation of a brand

new decision process• market analysis, new

SMP def, remedies etc.• implementing effective

Customer’s Rights represent. function

• higher flexibility, less pre-defined rules

• development of competencies

• notification (Art.7.)


Let’s make a balance

Cost of non-conformity

Cost of conformity

Total cost for the

SocietyTotal

benefits For theSociety

Thank You!Thank You!

Experiences with Liberalisation and EU Accession Views by Gabor Frischmann former president of the...

Documents

Transcript of Experiences with Liberalisation and EU Accession Views by Gabor Frischmann former president of the...