27 October 2006
Required network (nods-transport links)
Technical economies of scale
Average cost of servicing decreases with the size of the costumer base
Upfront capital investment required
Positive demand side externalities
Value of the product to the consumer increases with the number of total units sold in the market
Network industries represent strong incumbent firms
i.e. Telecom Italia
Choice: Turning into oligopolistic markets or maintaining natural monopolies
Water: nat. mon. INTO oligopolistic market (UK)
Energy: natural monopoly – quasi monopoly
Poor performance of incumbent operators
Business demand for advanced services at lower rates
Consumer demand for Internet services and high penetration
The ultimate goal: competitive market – consumer benefits
Generally: used to be a natural monopoly
Owned by the government
Offering voice services over analogue network
Network has been built over a century
Vertical integration between equipment suppliers and service providers was commonplace ( → limiting output) – Matav (Posta)
Question : Monopoly with innovation due to economies of scale and R & D or many providers/competitors?
Preserving current status?
Reserving a monopoly?
Social benefits through network externalities
Recit. 8 of Directive 2002/22: examp. provide users upon request with a connection to the PTN at a fixed location, at an affordable price. (only narrowband)
Like everywhere else:
Efficient allocation of resources
Technical and innovative efficiency
Cost-oriented and non-excessive prices
Provision of new services/consumer needs
Fair interconnection (rates, services, etc.)
BIG GOAL: cross-border services in the EU
Provision of universal services in Europe is an utmost goal
(i.e. defined minimum set of services to all endusers at an affordable price)
See also Recit. 3. of Directive 2002/22, plus WTO
Try to find the match between the substantial demand and the innovation potentials in
US: first license to compete in public switch long-distance services (MCI) 1969 → 1980
EU: 1987 Commission’s Green Paper on the
Development of Telecoms services
First liberalized area: „terminal equipment sector” (1988) – on the basis of Art. 90 of the EC
Commission Directive 90/388/EEC on the competition in telecoms services (except for voice telephony!) → DID NOT WORK
Amendment of 90/388/EEC in 1996
Abolition of monopoly rights by 1 January
Supply and transmission of voice telephony services INCLUDED
Mobile communications are liberalized already in
1990, but did NOT work ( Commission Decision against Italy ) → 1996 New Directive on mobile and personal communications
The result of the above: FULL LIBERALIZATION
Wireless communications (Wi-fi)
Provision of cable TV infrastructure
Concern: Integrated ownership of cable and telecommunications networks
Content regulation (ISP)
Tools: Directives, Regulation, Decisions, Soft
Institutionally: DG Comp, DG Infsoc, NRAs
No single regulatory authority
NRAs are independent
DG Comp: mainly with Article 90 of the EC Treaty
DG Infosoc: Important role in regulations, research and development programs
Urge that operators are treated the same way
Extends the scope of regulation to cover broadcasting networks as well as telecoms and cable TV networks and services.
Broadcasting content is excluded, however.
Technological neutrality (emphasis on services)
Authorizations (general) and not licenses
Burdensome restrictions on: SMP, Scarce resources
From Regulation to Competition (also SMP)
Market analysis’ by the Member States (Art. 7 procedures)
The overall context of the New Regulatory
Framework is set out in the Framework Directive , which describes and establishes a broad framework under which regulation of all electronic communications will occur. This Directive sets out specific policy objectives for the regulation of electronic communications networks and services. It also defines overall principles which flow through all the Directives.
The Authorization Directive describes the general mechanisms through which services and networks may be provided, including the conditions which may be applied to operators.
The Access Directive describes how networks and services may be accessed and how interconnection between public network and service providers will be regulated.
The Universal Service Directive considers how universal service will be protected and regulated and also addresses consumer rights.