In search of the 'level playing field'

Wednesday 24 June 2015 | 11:34 CET | Background

European incumbent operators have called on EU regulators and policymakers to ensure a 'level playing field' with over-the-top service providers. As services such as WhatsApp, Skype and Netflix are increasingly seen as competitors to the traditional voice, messaging and TV services from telecom operators, EU regulation needs adapting, goes the argument. At the ETNO regulatory conference in Brussels, operators and regulators discussed what the 'level playing field' might look like.

First off, what is the current playing field for telecom operators? Most at the conference agreed the EU telecoms regulatory framework, put in place nearly 20 years ago to police state-owned monopolies and manage scarce resources like national networks and spectrum, has worked well. Europeans enjoy some of the most affordable telecom services in the world, thanks to healthy retail competition among multiple service providers in most markets. The latest Digital Agenda Scorecard also shows wide availability and take-up of broadband services, both fixed and mobile.

With the declining market share of incumbents due to increased competition on retail markets, much of the original system of ex ante regulation of network operators was repealed last year, in the EC's new recommendation reducing the number of relevant markets. Members of ETNO, like Deutsche Telekom's VP for European Affairs Roland Doll, would like to see an even further reduction in the "heavy-handed" ex ante requirements. The sector's revenues and margins are under pressure, in part from the new competition from OTT services, and reform of the regulatory system is "long overdue", he said. According to Doll, there is no demand for as many as half of the wholesale access products offered by DT, and these regulatory requirements are only creating extra costs and administration for operators. This is money that could be better spent on infrastructure investment and innovation.

ETNO's chairman Steven Tas (also head of regulatory affairs at Proximus) said there should be more room for network operators to negotiate commercial agreements with wholesale customers, with regulators only intervening if no deal can be reached. A number of countries are already trying this, such as the Netherlands, where KPN is negotiating a new wholesale reference offer with alternative operators. Jonas Bengtsson, TeliaSonera's General Counsel, called for a shift to more ex post regulatory oversight like this, based on general competition law. Regulators should only focus on the "bottlenecks" – when market forces don't work.

Non-access regulations

ETNO's members are not just in favor of less regulation of network access. When it comes to competing with over-the-top service providers, the issue is not network access, but the myriad other regulations facing providers of electronic communications services (ECS). Top of the industry group's list is repealing the EU's ePrivacy directive, which lays down special requirements on personal data protection and security for ECS providers, such as controlling spam, cookies and various sales practices. Over-the-top service providers, many of whom are based outside the EU, do not face the same requirements as licensed ECS providers, leaving the European telcos again with an extra cost and administrative burden. ETNO would like to see many of these rules withdrawn or incorporated into the ongoing reform of the EU's general Data Protection Directive, which will also be extended to non-EU companies operating in the region.

According to Eduardo Martinez Rivero, head of anti-trust issues in the telecom sector at the European Commission's DG for Competition, this is where discussions on a 'level playing field' must start – the non-access regulations. The difficulty is defining the service markets where the regulations apply. Only then can it be decided whether the rules should apply to telcos, OTT service providers, neither or both. 

TeliaSonera's Bengtsson noted that in consumers' eyes, the technology used makes no difference, and many telco and OTT services are seen as the same – WhatsApp can replace SMS, Netflix is an alternative to a cable TV subscription. Furthermore, WhatsApp already generates 50 percent more messages per day than SMS worldwide, he noted. Similar services should face similar regulation.

Paid vs free services

The regulators are less convinced these services are the same. Roberto Viola, deputy director general at the European Commission's DG CNECT, drew the distinction between paid, managed services, like the traditional voice telephony from telcos, and the 'free' services from VoIP providers like Skype or Google. Current EU regulations already make this distinction, focusing on services with 'remuneration'. According to Viola, more regulation of the managed services is not unusual, as these carry the promise of a higher level of quality. 

Managed services are 'always on', offering any-to-any communication, guarantees on accessibility and emergency services, responsive customer service and a minimum consumer protection. This is different from the closed user group model of services such as instant messaging and social networks. There can be no 'level playing field' between these paid services and the open internet, said Viola.

Competing services?

The European Commission's recent proposal for new legislation on the Digital Single Market makes a similar point, noted Medina. The text reads: "The review of the telecoms rules will look at ways of ensuring a level playing field for players to the extent that they provide competing services and also of meeting the long term connectivity needs of the EU." Hence, existing telecom rules will be extended to OTT markets only if these are found to be truly the same services.

Many operators at the ETNO conference said though that the aim is not extending regulation to other providers, but eliminating regulation altogether. Eric Debroeck, Senior VP for regulatory affairs at Orange, said regulation should cover only networks and internet access, as other service markets are already competitive.

No OTT data

It will be up to regulators to decide whether telcos and OTT services are actually competing on the same market. According to Fatima Barros, head of the EU telecom regulatory body Berec and Portuguese regulator Anacom, this is so far proving a difficult task. Since the reform of the relevant markets recommendation last year, national regulators are already taking into account OTT services in their market analyses. Finding appropriate, comparable data on the state of the OTT services market though is not easy, she noted. OTT providers are not required to submit data to regulators as ECS providers do, and the emerging market is still highly fragmented. Berec aims to deliver its own opinion on the Digital Single Market proposal by December this year.

Viola said the Commission hopes to start public consultations on the Digital Single Market before the summer holidays, or just after. He said the EC will "not spare consultations", and seek a wide range of input in order to achieve "minimum resistance" to the final legislation. The most important focus in the legislation will be ensuring the needed investment in Europe's broadband infrastructure to support the digital economy (see above: "meeting the long term connectivity needs of the EU"), he said. With over 85 percent of that investment already coming from the private sector, telecom operators will have a key role to play.

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