Experiences with Liberalisation and EU Accession
Views by Gabor Frischmannformer president of the Communications Authority of Hungary, now independent
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…
Sofia, 10th of May 2005 G. Frischmann: Experiences... 3
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
Sofia, 10th of May 2005 G. Frischmann: Experiences... 4
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?
Sofia, 10th of May 2005 G. Frischmann: Experiences... 5
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?
Sofia, 10th of May 2005 G. Frischmann: Experiences... 6
• 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?
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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?
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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!
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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!
Sofia, 10th of May 2005 G. Frischmann: Experiences... 10
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
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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
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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?
Sofia, 10th of May 2005 G. Frischmann: Experiences... 14
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.
Sofia, 10th of May 2005 G. Frischmann: Experiences... 15
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
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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
Sofia, 10th of May 2005 G. Frischmann: Experiences... 17
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
Sofia, 10th of May 2005 G. Frischmann: Experiences... 18
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
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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
Sofia, 10th of May 2005 G. Frischmann: Experiences... 20
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.)
Sofia, 10th of May 2005 G. Frischmann: Experiences... 21
Let’s make a balance
Cost of non-conformity
Cost of conformity
Total cost for the
SocietyTotal
benefits For theSociety
Thank You!Thank You!
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