EUROPEAN COMMISSION
Scope, funding mechanisms and challenges
of universal service and access
Alison Birkett
European Commission
ITU Regional Regulatory Seminar: Dalian, China, 5-8
August 2002
1
Contents
I The EU approach to universal service
- The new EU regulatory framework
- Where are we today on US, and why change?
- What’s in the US Directive?
II How will accession candidates (new EU Member
States) deal with US?
III Universal service in emerging economies and
developing countries
- Universal service or access?
- Policy options
- Issues
2
The Challenge of Convergence
Audiovisual
Telecoms
Multimedia
3
IT
Today - separate networks,
separate rules
Service
Network
Terminal
4
Voice
telephony
Fixed
Mobile
Telephone/
Handset
Data
Broadcasting
Fixed
Cable
Satellite
Terrestrial
PC
Television
Convergence is a reality
Service
Network
Terminal
5
Voice
telephony
Fixed
Wireless
Mobile
Telephone/
Handset
Data
Fixed Cable
Satellite
PC
Broadcasting
Cable
Satellite
Telecoms
Terrestrial
Television
DEALING WITH CONVERGENCE
1. All content can be delivered over all networks;
network-dependent rules are being overtaken by
technology; markets are merging; so:
- coherent regulation of communications infrastructures
and associated services
2. Content and transport are different, so:
- separate regulation for transport and for content, while
recognising the links between them
3. Regulation should be kept to a minimum, so:
- only impose regulation where competition not effective
6
and where competition law isn’t enough
Electronic communications
networks and services - Scope
Content Services
- outside scope of new framework
(e.g. broadcast content, e-commerce services)
Communications services
(e.g. telephone, fax, e-mail)
Communications networks
(fixed, mobile, satellite, cable TV, powerline systems,
networks used for radio and television broadcasting)
and associated facilities (e.g. CAS)
Regulatory approach of the package
u Identify markets
w product markets (eg call termination)
w geographical markets (eg local, national, global)
u See whether there are dominant operators on those markets
(Significant Market Power)
w minimal and linked to degree of competition
w flexible BUT harmonised at a European level
w technologically neutral
u Regulate only where an operator has a dominant position in
an identified market where competition is not effective
The new package
Authorisation Directive
Framework
Directive
(Art. 95)
Access & Interconnection
Directive
Universal Service and Users’
Rights Directive
Data Protection Directive
9
Liberalisation
Directive
(Art. 86)
Unbundled local loop
Regulation
Spectrum
Decision
(Art. 95)
Contents
I The EU approach to universal service
- The new EU regulatory framework
- Where are we today on US, and why change?
- What’s in the US Directive?
II How will accession candidates (new EU Member
States) deal with US?
III Universal service in emerging economies and
developing countries
- Universal service or access?
- Policy options
- Issues
10
PSTN/ISDN Penetration
PSTN/ISDN penetration (2001)
221%
250%
200%
110%
64%
105%
59%
100%
70%
94%
66%
54%
44%
96%
107%
120%
73%
114%
96%
54%
95%
52%
108%
63%
108%
48%
61%
96%
109%
65%
75%
97%
50%
56%
100%
102%
150%
0%
B
Source: IDC 2001
11
DK
D
EL
E
F
IRL
I
L
NL
% of population
P
A
FIN
S
UK
% of households
EU
Mobile Penetration
90%
80%
60%
50%
40%
30%
NL
A
P
Subscribers
12
Penetration
FIN
43.4
L
6.7
I
4.0
IRL
7.6
F
6.6
2.6
E
11.9
33.7
EL
0.37
26.8
D
47.1
7.0
DK
55.1
B
20%
S
UK
10%
0%
Penetration
70%
3.9
60
55
50
45
40
35
30
25
20
15
10
5
0
7.0
Millions of subscribers
Mobile subscribers and penetration rate
Total EU subscribers: 263 millions
Internet Penetration
Household penetration of internet access (October 2000-June 2001)
70%
60%
50%
40%
30%
20%
10%
0%
B
DK
Sources: Eurobarometer
13
D
EL
E
F
IRL
October 2000
I
L
June 2001
NL
A
P
FIN
EU average June 2001
S
UK
Need for change ?
w Monitoring Reports
w Consultancy studies
u No need for substantial modifications, but need to
simplify, clarify, and take into account convergence
u Scope is broadly the same
14
Contents
I The EU approach to universal service
- The new EU regulatory framework
- Where are we today on US, and why change?
- What’s in the US Directive?
II How will accession candidates (new EU Member
States) deal with US?
III Universal service in emerging economies and
developing countries
- Universal service or access?
- Policy options
- Issues
15
Scope of Universal Service:
General
uSet of services
umust be available under some conditions:
w affordability (type of users, and geographical
locations)
w quality
uScope linked to financing mechanism Member States can go further with the
general budget
uPossible review
16
Scope of Universal Service:
Different services
uProvision of access at a fixed location
w sufficient for functional Internet access
w technologically neutral (wire or wireless) on
connection at fixed location
w no extension to mobile
uDirectories and directory enquiry services
uPublic pay telephones
uSpecial measures for disabled users
17
Scope of Universal Service:
Conditions
uAffordability of tariffs
w Low income or peripheral regions
uFacilities permitting control of expenditure
uQuality of services: Publication and
performance targets
18
Means: Designation of USO
providers
uIf necessary, Member States may designate
one or more USO providers
w Use of efficient, objective, transparent, and nondiscriminatory mechanism
w to ensure that USO is provided in a costeffective manner and may be used as a means
of determining the net cost
w Designation for all or part of the different
services, all or part of the territory
19
Means: Determination of the cost
of USO
uWhen representing an unfair burden, NRA
shall calculate the net cost of USO
uEither calculation of the net cost
w Avoidable cost - provision at non-commercial
conditions - take into account intangible
benefits
uOr, cost revealed during designation
process (eg: auctions)
20
Means: Financing the USO cost
uThe net cost of USO can be financed in two
ways
uGeneral government budget and/or
uSectoral Fund
w Should respect principles of transparency, least
possible market distortion, non-discrimination
and proportionality
w Contributors: providers of electronic
communications networks and services
uTransparency
21
Contents
I The EU approach to universal service
- The new EU regulatory framework
- Where are we today on US, and why change?
- What’s in the US Directive?
II How will accession candidates (new EU Member
States) deal with US?
III Universal service in emerging economies and
developing countries
- Universal service or access?
- Policy options
- Issues
22
Applicability to EU candidate
countries
u Main lines per 100 population (1999, WIK)
w 35.4 average in candidate countries
w 54.9 average in EU15
uAvailability of universal service
w Flexibility to permit use of lower data rates (eg
to allow use of wireless technologies)
uDesignation of undertakings to provide
universal service
w designation methods do not exclude auctions or
tenders
23
Contents
I The EU approach to universal service
- The new EU regulatory framework
- Where are we today on US, and why change?
- What’s in the US Directive?
II How will accession candidates (new EU Member
States) deal with US?
III Universal service in emerging economies and
developing countries
- Universal service or access?
- Policy options
- Issues
24
Emerging economies and
Developing countries (1)
uUniversal service or universal access?
25
Emerging economies and
Developing countries (2)
uPolicy options
w Public access policies
w Universal service funds
w Competitive bidding systems
w Low interest loans and microcredit
w Use of service requirements
26
Emerging economies and
Developing countries (3)
uIssues
w Sustainability
w Pricing
w Funding
27
Possible sources of revenues for Universal
service/access funds (World Bank study)
Source of
Revenues
Interconnect
levies
Operator
revenue
contribution
Government
budget
Seed finance by
development
bank or agency
28
Definition/Description
Characteristics/Examples
Incumbent operator carries Interconnection surcharge may be
a universal service or
opaque and operator has no
access obligation
incentive to reduce costs.
Example : US
All operators charged a
Levy generally varies between 1percentage of revenue
2%, eg Peru and Dominican
Republic. In Guatemala, 70% of
revenues from spectrum auctions
go to the fund
Funds for UA provided by Eg Chile
treasury
Funds for UA come from
international organisations
Eg WB recent project in Nicaragua
includes a small portion of seed
financing for the rural development
fund. Similar schemes under
discussion in Nepal and Nigeria.
Examples (1)
uChile
w Universal service fund (national budget)
w Eligible projects (areas to be served) selected
w Public competitive bids invited
w Non-exclusive 30 year licences awarded to
winners
w Licensees set retail prices of most services
w 1994 to 2002: reduction from 15% to 1% of
proportion of population living in places without
access to voice telephony
29
Examples (2)
uSouth Africa
w Network rollout obligations in licence
w Financed through cross-subsidy of incumbent
during 5 year monopoly period
w Universal service fund (financed by telecom
licensees)
w Establishment of telecentres
w Human resources fund (financed by telecom
licensees)
30
Examples (3)
uChina?
w Up to now: China Telecom cross-subsidies
w Now: break-up of China Telecom
w Soon: Universal service fund?
w Contributions from market participants?
31
For more information ...
On the European Commission:
http://europa.eu.int/
On DG Information Society:
http://europa.eu.int/information_society/topics/
telecoms/index_en.htm
On the new legislation:
http://europa.eu.int/information_society/topics/
telecoms/regulatory/new_rf/index_en.htm