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Presentatie

Speech Chris Fonteijn over regulering en concurrentie in de telecomsector: Wat heeft de consument eraan?

07-07-2015

Chris Fonteijn, de bestuursvoorzitter van ACM, heeft het de GCR 4th Annual Telecoms Media Technology and Competition Law Conference in Londen geopend met een keynote speech over mededinging en regulering in de telecomsector.

Fonteijn heeft voorbeelden gegeven van zaken waarmee ACM recent te maken heeft gehad. En hij heeft een aantal vraagstukken voorgelegd aan het publiek over consolidatie, Europese harmonisatie en het betrekken van het consumentenperspectief.

Lees hieronder de volledige Engelstalige speech van Fonteijn over mededinging en regulering in de telecomsector.

Volledige speech van Fonteijn over "Regulation and competition: Does the consumer really care?"

Introduction

Good morning ladies and gentlemen. I would like to extend my warmest thanks to the organisation for organising this impressive conference. Thank you for inviting the Netherlands Authority for Consumers and Markets to deliver the keynote speech. My name is Chris Fonteijn, and I am the Chairman of ACM. I hold the Competition portfolio and the Strategy portfolio. Before ACM existed I was Chairman of both the Post and Telecoms Regulator (OPTA) and the Netherlands Competition Authority (NMa). In 2011 I chaired BEREC (Body of European Regulators for Electronic Communications), the platform of EU Telecoms Regulators and the European Commission.

First I will tell you some more about ACM and the issues we faced in the recent past. After that I will go into the major questions we, as a multifunctional regulator, see in the telecoms sector.

About ACM

ACM was created in April 2013 through the merger of three authorities in the Netherlands: the Consumer Authority, the Independent Post and Telecoms Authority (OPTA) and the Competition Authority (NMa).

The tasks of ACM encompass:

  • general competition oversight;
  • sector-specific regulation of the energy, telecommunication, postal services and transport markets;
  • and consumer protection.

ACM is a unique regulator in the sense that worldwide it is one of the very few authorities that houses all these activities in a single independent authority.

It is ACM’s mission to create opportunities and options for businesses and consumers. Creating this new authority gave us the opportunity to look for a common denominator on which we could focus our market oversight, and we came up with the consumer. In fact we want to make consumers central to every action we take at ACM. Increasing consumer welfare is ACM’s primary goal.

In its oversight style ACM focuses on the impact of its actions; the instruments follow. Enforcement is one of ACM’s core tasks. However, ACM does not want to enforce just for the sake of enforcement. The impact of our actions is central. ACM therefore looks at the broader context when carrying out its statutory tasks. For example, we explore the question whether an observed violation is an isolated incident or a symptom of a larger, underlying market problem. The objective is to solve market and consumer problems. ACM subsequently selects the instrument, or a selection of instruments that offers the highest probability of producing a structural solution to the problem. Imposing sanctions is an important instrument, and ACM will not hesitate to use it in case of violations. In addition, ACM uses, amongst other instruments, normtransmitting discussions, commitment decisions, informal opinions, monitoring, market scans and strategic communication. Finding customised solutions based on sound problem analyses.

Being a multi-sector regulator, combined with competition and consumer protection, places a responsibility on ACM for finding synergies within the organisation itself, next to coordinating the actions between the different departments of ACM. ACM is ambitious and wants to make effective use of the synergies between the different departments.

In the recent past ACM was faced with several strategic cases in the field of telecommunications. I would like to highlight these, because I think that these Dutch cases are representative for the issues we have to deal with within the EU. And it shows that we had to combine both our role as a competition authority and our role as a regulatory authority.

The Netherlands is in the position that the country is almost entirely covered both by the network of the former incumbent, KPN, as well as the combined networks of the cable companies. Our consumers benefit from the competition between KPN, cable companies and providers offering services based on regulated access to the network of KPN.

UPC/Ziggo

In 2014 our two largest cable providers, UPC and Ziggo announced their plans to merge. As you may know ACM wanted to handle this planned merger. However, the European Commission decided to handle it themselves. ACM co-operated with the Commission in this case, as ACM has a lot of knowledge about the sector. Subject to conditions related to premium Pay TV film channels and audio-visual OTT services, the European Commission approved the merger. As a result there are now two fixed networks that basically cover the Netherlands nation-wide.

Merger KPN/Reggefiber

In the past years KPN and an investment company Reggeborgh rolled out a fibre-optic network, using the name Reggefiber. As competition authority, ACM was requested by KPN whether it could become the full owner of Reggefiber. In October 2014 ACM approved this request by KPN. Should it lead to competition problems, such as refusing access requests from competitors, ACM concluded that it would also have to solve these problems as a regulator by performing a market analysis. The required remedies follow from the market analysis decision for local loop unbundling. Therefore it was no longer necessary to impose a remedy in the merger decision. This is an efficiency gain which was facilitated by the merger of competition and regulatory oversight.

Market Analysis Unbundled Local Access

After the European Commission decided to approve the merger between UPC and Ziggo, ACM published its draft Market Analysis decision for Unbundled Local Access together with the merger decision KPN/Reggefiber.

As I said, there are now two major networks in the Netherlands on which consumers are able to go online, watch television, and make calls. KPN has a strong position in the business market for fixedtelephony services and business connectivity services. After all, Business Parks usually do not have any coaxial cable. That fact alone is reason enough to force KPN to allow other providers access to its network.

In addition, it is not possible to offer the same type of access to Ziggo’s cable network as to KPN’s copper and fiber-optic networks. Whereas other providers have the possibility of offering their own products on KPN’s network, this can only be facilitated to a very limited extent on UPC/Ziggo’s network.

ACM concluded that KPN has Significant Market Power and that it must continue to grant competitors access to its network. Access to KPN’s network is enough to make competition in the consumer market possible. One of the important elements in this decision is related to the access obligation to offer Virtual Unbundled Local Access (VULA). This obligation is very important as it contributes to the possibility to upgrade the copper network. After consultation with the market ACM decided that if KPN and the access seekers find an agreement on how VULA should be implemented and the tarrifs, ACM will accept this agreement as a way to comply with the obligation. ACM will then refrain from further regulation of this form of access.

If ACM were not to step in, there would be too little choice: Dutch telecom company KPN and cable company UPC/Ziggo would then dominate the market. In ACM’s opinion, having just two providers on these markets cannot be considered effective competition.

Following the notification with the European Commission, the Commission had serious doubts about the analysis of the wholesale market for wholesale local access combined with the retail market for consumer internet access. And it had doubts about the related question whether KPN can continue to benefit from its strong position on the wholesale market when confronted by cable operator UPC/Ziggo.

 

We find it very valuable that in such a procedure BEREC (the body of EU Telecoms regulators) is to issue an opinion on the Commission’s concerns. In this case BEREC did not agree with the serious doubts of the Commission and it recommended the Commission to withdraw its serious doubts.

Following the serious doubts and the opinion of BEREC, ACM had discussions with the European Commission and ACM decided to further substantiate its market analysis decision. ACM will make adjustments to certain parts of the analysis, while still ensuring that competitors will continue to have access to KPN’s network.

What is happening in the Netherlands now is related to the consolidation trend that we are seeing across Europe. We are entering a new phase when it comes to ex ante regulation. The problems are changing and maybe we need different solutions now.

What helps us in a situation like this is to look at cases from multiple perspectives: competition and regulation, national and European. But also, let us not forget: from the consumer’s perspective. How can consumers benefit the most?

What does ACM see, as a multifunctional regulator, as major issues in the telecommunications sector?

This is the main question of my contribution. First, I will go into the developments relating to networks. Then I will touch upon consumer issues. Finally I will raise some questions with regard to harmonisation.

1. Networks

We see a lot of in-country consolidation within Europe: mergers resulting in fewer players with fixed networks and mobile networks. Some say that we need this in-country consolidation in Europe. There may be too many players now, but will in-country consolidation bring the benefits which operators promise? And will it contribute to across-country consolidation? Will it create European companies which are able to compete at a global level and at the same time serve consumers?

The question is: are we on the brink of having this single European market?The networks are a crucial element when defining the geographic markets and we still see that most of the networks are national.

When it comes to fixed networks within ACM we constantly ask ourselves the question: Are two networks enough? We are not convinced that the answer is yes. In the Netherlands we conclude that the market is conducive to coordination, which will ultimately be at the expense of consumers. Maybe the situation will be different depending on the country’s specific circumstances and maybe it will be different in the Netherlands in the future. Within ACM we therefore keep asking ourselves that question. For now we find that the two fixed networks are not enough to ensure that market parties invest and innovate to make sure that consumers get the best offers when it comes to price and quality.

The OECD published a very interesting paper last year on Wireless Market Structures and Network Sharing. It revealed that in each OECD country there are at least three mobile network operators (MNO’s), which broadly compete at a national level. It also found that in countries where there is a larger number of MNO’s, it is more likely that more competitive and innovative services are introduced and maintained. One particular finding was that in markets where new players are introduced or that have at least four operators, investments in new network infrastructures increase and are brought forward by existing operators, in order to defend against challengers. This report therefore shows that in-country consolidation might not be the best way forward if you want market participants to invest and be innovative.

2. Consumer issues

We consider it important, when we look at consumer rights, that we look at the problems that consumers actually perceive.

Net neutrality

For example, for years we have been talking about net neutrality as an urgent issue that should be solved. Many subjects were mentioned in the context of net neutrality, ranging from technological aspects such as network management to human rights such as ‘everything should be open to everyone’. However, the consumer’s point of view was very rarely part of the discussions we were having.

After all these years of debates, BEREC only recently published a study on how consumers value net neutrality. The research shows that consumers put most emphasis on price in their purchase decision of an Internet access service, but also base their purchase decision on attributes that relate to traffic management. The BEREC report is a very interesting and valuable contribution to the public debate on the complex issue of Net neutrality. It shows that consumers highly value net neutrality. Earlier this week an agreement was reached to have an EU law on net neutrality.

Consumers most probably very much welcome that new law that ensures that every European must be able to have access to the open internet and all content.

OTT-services

Two months ago ACM participated in a meeting of NRA’s and the European Commission (DG Connect) discussing Consumer Rights in the context of Electronic Communications. We talked for example about developments such as services provided by Over the Top players (OTT). These are all very relevant developments, as consumers have different rights when it comes to such services compared with traditional telecoms services. Do the rights they have match their expectations?

However, the feedback I got from my colleagues was that the discussion easily could have resulted in an endless debate on what an ECS was, what OTT-1 was and what OTT-2 was? But does the consumer really care about whether the app he uses is considered to be one of those incomprehensible abbreviations? We focus so much on our own tasks and responsibilities that it is sometimes hard to look at the matter from another perspective. Having worked for 2 years now for a multisector regulator, we at ACM feel that looking from other perspectives has become second nature to us.

General vs. Sector-specific consumer protection legislation

Another aspect that we should take into account when looking at consumer rights is general consumer protection legislation versus sector-specific consumer protection legislation. ACM is also the consumer protection agency in the Netherlands and consumer protection is one of our main tasks, next to competition and regulation. It is not always clear to market participants and consumers which legislation is in place to protect consumers. The rules are fragmented. For these rules to be effective, we would advise a different approach. The principle should be that generic consumer protection regulations is sufficient as much as possible. Only if it is absolutely necessary to have sector-specific consumer protection rules on top of that, it should be added to sector-specific regulations. We would very much welcome a new analysis, where both the sector-specific regulators and the consumer protection agencies are involved.

When we think about new rules and regulation, the consumer perspective should be taken more into account.

Harmonisation

Market problems and consumer harm do not stop at national borders. International co-operation is essential in order to be effective. ACM actively participates in European Union bodies, such as BEREC, ACER, ECN and CPC, and at a global level, such as ICPEN and ICN.

National regulators are usually a bit defensive when it comes to harmonisation and focus very much on national characteristics. However, we do see that there is room for improvement in all the fields where ACM is active. These are the common threads we see within the EU:

A. For the same violation, national legal systems have different systems of enforcement. There are differences when it comes to investigative powers and to sanctions. As a result, the effects of enforcement actions for similar violations may vary among EU Member States.

B. EU rules are not always applied in a uniform way in the Member States. And, depending on the individual field, there is either a preference for maximum or minimum harmonisation, thereby creating different rights. Especially when products and services are bought across the border, it is very important that it is crystal clear to both companies and consumers what consumer protection rights are in place. This is not the case now.

C. There is quite a big difference in the division of tasks between Member States and the European Commission in the various fields falling under ACM’s oversight. In some fields, such as competition and telecommunication, the Commission has substantive tasks to ensure harmonisation. However, when it comes to other fields, such as consumer protection (CPC Regulation), the role of the Commission is limited to coordination and support.

We should analyse carefully whether an issue is national or an EU-wide problem and whether it requires a national or an EU-wide approach.

Conclusion

I raised a number of questions that we could go into during our discussions today. These questions are:

  • We see a lot of in-country consolidation, but not that many examples of across-country consolidation. Why is that? Are we indeed on the brink of a European market and do we need consolidation? Or is consolidation not desirable, as it leads to less innovation and less investments?
  • Are we capable of looking at consumer rights question from the consumer point of view?
  • What sector-specific consumer protection regulation is actually needed on top of general consumer protection regulation?
  • Do we need more harmonisation when it comes to enforcement systems in the EU?

And, being the Chair of a multisector regulator combined with competition tasks and consumer protection tasks, I also would like to raise the question: Do we see benefits in the Dutch regulatory model and could it be an example for regulators in other Member States?

Following the publication of the Digital Single Market Strategy by the European Commission the floor is open again to review the whole regulatory approach to digital markets. I very much welcome this debate and today’s conference contributes to it.

I would like to quote Einstein to inspire you today: “If you always do what you did, you always get what you got.” I challenge you to look at the perceived problems from different perspectives, especially from the consumer perspective. Let us inspire each other to brainstorm openly, and let us use our innovative ideas when looking at market problems. I wish you a very fruitful day.