NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
LIBERALISATION & REGULATION IN THE
ELECTRONIC COMMUNICATIONS SECTOR
Introduction – The International &
European framework of Telecom
Reform
http://www.netmode.ntua.gr/
Courses/Graduate/Liberalization & Regulation in
the Telecommunication Sector
Vasilis Maglaris <maglaris@mail.ntua.gr>
Vassilis Merekoulias <merek@netmode.ntua.gr>
NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Introduction to the course
• Objective: To provide an in-depth understanding of the
main issues and options of telecommunication
regulations and reform at the EU level.
• Main Tools: Economic & Legal principles of Competition
Law, Technological Advances in Electronic
Communications (e.g. Broadband & Wireless Access to
the Internet), Empirical Evidence of Regulation in
European countries (e.g. Interconnection & Unbundling
of Services)
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Topics addressed
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The international framework of telecom reform
Cost modelling and price regulation
Interconnection: Economic and policy aspects
Universal Service, Universal Access and the digital
divide
The European experience in telecommunications
regulation
The new EU Regulatory Framework (July 2003)
Local Loop Unbundling: Economic & technical aspects
Metropolitan Area Fibre Networks – Fibre to the X
(FTTX)
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Logistics
• Information resources for the course
– See the course site
• Students’ evaluation
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See the course site
Group assignments
Possible topics for study
Methods of communication
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Electrical & Computer Engineering School
Setting the Stage: The International &
European framework of telecom reform
• The historical approach to telecommunication service
provision
• Main pressures for change (technological and socioeconomic)
• Major steps of reform: Strategies for the restructuring of
markets from the 1980s till now
• Reform experiences in the US, the UK, and Europe
• Main features of the telecommunications industry that
are important in the process of regulatory reform
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
The Historical Approach to
Telecommunication Service Provision
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The PTT (Post, Telephone and Telegraph Administration)
– granted monopoly
– provision of telecommunication infrastructure and services
– since late 19th century.
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Basic model world-wide = monopoly (public or private) on equipment and
on basic network and service provision
The natural monopoly doctrine:
– Large fixed costs
– Duplication was neither profitable for private investors nor socially desirable.
– Telecommunications was one of the societal benefits linked with economic
development.
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European PTTs became large and powerful employers, often capable to
subsidise other social programmes.
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
(…cont’d)
• Until 1990s: PTTs acted as policy-maker, regulators &
operators.
• Experiences in performance & liberalisation varied
among countries (e.g. UK, France, Greece).
• 1990-2008:
– Competitive service provisioning by alternate PNOs (Public
Network Operators)
– Protection against incumbent PNO (former state monopoly)
• State Regulation,
• Competition Monitored & Enforced by independent National
Regulatory Authorities (NRAs) after the US FCC paradigm (UK
OFTEL, now OFCOM, Greek EETT etc.)
– Towards competitive service – network providers & infrastructure
utilities (natural monopoly ?)
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Main pressures for change (since late
1970s)
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Radical developments in the electronics/computer industry and digital
technology lowered the costs for certain types of infrastructure, exposed
the inefficiencies of PTT monopolies, and offered opportunities for market
entry.
Increasing technological convergence between previously separated
industries (consumer electronics industry, telecommunications, and media
publishing) created new types of value-added services.
Internationalisation of business urged national carriers to compete in
attracting customers wishing to establish multinational private networks.
In Europe, concerns were raised over creating a single European market
for equipment and services able to compete against the US and Japanese
rivals.
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Major steps of reform: Strategies for
the restructuring of markets in the
1980s
• Market structure Strategies
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Liberalisation
Deregulation
Divestiture (e.g. AT&T)
Consolidation (for capturing economies of scale and scope, e.g.
through mergers and acquisitions)
• Ownership strategies
– Semi-Public Corporation (loosens direct government control on
the PTT)
– Full Privatisation – Competition
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Electrical & Computer Engineering School
… (cont’d)
• International Strategies
– Expansion into new international markets
– Alliances
• Competitiveness Strategies
– Industrial policy considerations
– Vertical integration (often with equipment manufacturers)
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Reform experiences in the US
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Until the 1960s US telecom industry was dominated by a single private
monopoly, AT&T.
1963: Competition in the long distance market following a request
filed by MCI. This generated policy debates on interconnection
arrangements with the local operating facilities of the Bell System.
1968: Carterphone decision (FCC approves third party CPEs to the AT&T
network)
1974: the Department of Justice filed an antitrust complaint against AT&T
monopoly position asking for its divestiture.
1984: break up of AT&T.
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AT&T kept its long-distance operations, its manufacturing subsidiary, and its R&D facilities
(Bells Labs). Also allowed to enter other markets.
Seven Bell Operating Companies (BOCs) restricted to local telephone service. Also known
as LECs (Local Exchange Companies) or ILECs (Incumbent LECs). Each LEC was serving
one of the 192 Local Access and Transport Areas (LATAs). Inter-LATA services were
provided by long-distance carriers such as AT&T and MCI.
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Electrical & Computer Engineering School
… (cont’d)
• 1993: Restrictions in RBOCs’ line-of-business started to be
gradually abandoned and were allowed to offer information services
• 1994: RBOCs filed a request to enter into long-distance service
provision and equipment manufacturing
• 1995: Restrictions in RBOCs’ long-distance service provision and
equipment manufacturing were abandoned
• 1996: Release of the US Telecommunications Act of 1996
– The Act aims to foster local market competition and will enable RBOCs to enter
the long distance market once there is ‘sufficient competition’ in the local market
– Entry into local markets can be done through own facilities, resale, or unbundling
– Players need to enter into symmetrical and non-discriminant interconnection
agreements
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
US Recent Developments
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1995: WorldCom formed after LDDS acquired Williams Telecommunications
Group (WilTel) for $2.5 billion.
1996: WorldCom merges with MFS Communications Company (MFS) and
UUNet Technologies, an Internet access provider for businesses.
1997: SBC Communications, Inc. acquired Pacific Telesis Group ($ 16.5
billion).
1997: Bell Atlantic Corporation acquired NYNEX Corporation - New York
Telephone Company and New England Telephone and Telegraph Company
($25 billion).
1998: BT fails to acquire MCI
1998: WorldCom completes three mergers: with MCI Communications ($40
billion), Brooks Fiber Properties ($1.2 billion) and CompuServe ($1.3 billion).
1998: SBC Communications, Inc. acquired Ameritech ($62 billion).
1998: SBC Communications, Inc. acquired Southern New England
Telecommunications Corporation ($4.4 billion)
2000: 5 January 2000 - AT&T and BT announce the $10 billion joint
venture, Concert (October 2001 - Final death of Concert).
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
… (cont’d)
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2000:Bell Atlantic Corporation and GTE Corporation merged into Verizon
Communications ($53 billion – 250,000 employees).
2000: U S WEST Communications Group merged with Qwest
Communications International, forming Qwest Corporation. ($45 billion)
2000: Verizon Wireless, a joint project of Verizon Communications and
Vodafone (55% - 45%). Largest wireless US service provider (51,000
employees – 43.8 Million customers - $24.4 Billion annual revenues 2004)
2002: July 21 — WorldCom CEO Sidgmore says the company will file for
Chapter 11, with the company listing assets of over $100 billion, and having
more than 1,000 creditors, debt estimated at $32.8 billion, serving around
20 million consumers and running the world's biggest Internet network
2004: Cingular Wireless acquired AT&T Wireless Services Inc. 2nd largest
wireless US service provider($41 billion)
2004: Sprint Corp. acquired Nextel Communications Inc. forming the 3nd
largest wireless US service provider. ($35 billion)
2005: SBC Communications (a Baby Bell) acquiring the No. 1 longdistance carrier, AT&T, for $16 billion.
2005: Verizon, MCI to link up in $6.7 billion deal
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Reform experiences in the UK
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1982: Licensing of Mercury for long-distance and international service
provision. Operations began in 1986 and duopoly maintained until 1991.
Discussions over interconnection charges began.
1984: Privatisation of British Telecom (BT)
1991: Licensing of several new long-distance and international operators.
Cable TV companies allowed to offer local telephony services and longdistance and international through wholesale agreements with BT’s
competitors. BT and Mercury were excluded from offering television
services on existing phone lines.
1996: Ionica entered the local market through a fixed wireless service. BT
and Mercury were excluded from offering fixed wireless service.
Currently BT is loosing significant market share out of new competitors
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
Reform experiences in Europe (up to
2001)
• 1987: Issue of the EC Green Paper on Telecommunications. It
proposed the introduction of competition in the equipment and
services market.
• 1988: Commission Directive on competition in the markets for
telecommunications equipment.
• 1990: Commission Directive on competition in the markets for
telecommunications services. Its scope was gradually extended until
1998 when voice telephony and networks were completely
liberalised.
• 1996: Commission Directive with regard to the implementation of full
competition in telecommunication markets (96/19/EC).
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
The New European Regulatory Regime
(2003)
From Telecommunications to Electronic Communications
Electronic Communications Networks (ECN)
Electronic Communications Services (ECS)
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Framework Directive (2002/21/EC)
Authorization Directive (2002/20/EC)
Access & Interconnection Directive (2002/19/EC)
Universal Service and Users' rights Directive (2002/22/EC)
Data Protection Directive (2002/58/EC)
Unbundled Local Loop Regulation (2000/2887)
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NATIONAL TECHNICAL UNIVERSITY OF ATHENS
Electrical & Computer Engineering School
… (cont’d)
• Major principles underlying EC liberalisation measures:
– removal of special or exclusive rights
– objective, non-discriminatory and transparent conditions for granting of
licences and access to networks
– breaking of “monopoly bottlenecks” e.g. local loops, obligation for
fairness in wholesale services market.
– universal service provisioning
The old Regulatory Framework: The ONP Principle (OPEN NETWORK
PROVISION), access and interconnection rights for licenced operators
at wholesale, cost-based tariffs imposed by NRAs to ex-post
regulation of incumbent operators.
The new Regulatory Regime: Competition Law. Definition, Analysis and
Remedies of Markets by NRAs, ex-ante regulation of SMP
(Significant Market Power) holders.
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