How to Build a Ubiquitous EU Digital Society
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DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY INDUSTRY, RESEARCH AND ENERGY How to Build a Ubiquitous EU Digital Society STUDY Abstract In this study, we analyse the achievements and failures of the European Regulatory Framework for Electronic Communications, with an eye to its impact on the broader EU economy; contrast it with regulatory models in other parts of the world; evaluate the costs and benefits of various interventions such as international mobile roaming; consider the interaction between fixed and mobile networks; assess the European Commission’s proposed Connected Continent proposals of 11 September 2013; and make policy recommendations going forward. IP/A/ITRE/ST/2012-09 November 2013 PE 518.736 EN This document was requested by the European Parliament's Committee on Industry, Research and Energy AUTHOR(S) J. Scott MARCUS (WIK) Ilsa GODLOVITCH (WIK) Pieter NOOREN (TNO) Bram VAN DEN ENDE (TNO) Jonathan CAVE (RAND) Werner NEU (WIK) RESPONSIBLE ADMINISTRATORS Fabrizio PORRINO Mariusz MACIEJEWSKI Policy Department A: Economic and Scientific Policy European Parliament B-1047 Brussels E-mail: [email protected] LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR To contact the Policy Department A or to subscribe to its newsletter please write to: PoldepH [email protected] Manuscript completed in November 2013. © European Union, 2013. This document is available on the Internet at: http://www.europarl.europa.eu/studies DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy. How to Build a Ubiquitous EU Digital Society ________________________________________________________________________ CONTENTS LIST OF ABBREVIATIONS AND GLOSSARY 9 LIST OF TABLES 25 LIST OF FIGURES 26 EXECUTIVE SUMMARY 28 1. INTRODUCTION 34 1.1. European Policy Instruments, Electronic Communications, and the Digital Single Market 34 1.2. Our Methodology 36 1.3. Structure of this Report 36 2. A SINGLE MARKET TODAY? 37 2.1. The Evolution of Network Infrastructure Services and Markets 37 2.1.1. Networks and Services 38 2.1.2. Competitive Dynamics 38 2.1.3. Revenue Trends 40 2.1.4. Next Generation Networks and Services 41 2.2. Cross-border Entry 42 2.3. The Evolution of Network Usage 43 3. ACHIEVEMENTS AND FAILURES OF CURRENT EUROPEAN POLICY INSTRUMENTS 49 3.1. A Range of Policy Instruments 50 3.2. What is the Single Market? 51 3.3. Objectives of European Policy for Electronic Communications 53 3.3.1. Objectives 53 3.3.2. Observations 55 3.3.3. Action Lines to Implement the Objectives 55 3.3.4. Confusion, Contradiction and Hubris? 56 3.3.5. Tensions Among the Objectives 59 3.4. Overview of the Policy Instruments Available to the European Union 60 3.4.1. The Regulatory Framework for Electronic Communications 60 Overall Framework 60 Addressing Market Power 61 PE 518.736 3 Policy Department A: Economic and Scientific Policy _________________________________________________________________ Specific Regulatory Instruments 62 3.5. Mechanisms for addressing market power 63 3.5.1. Main Features 63 Definition of Significant Market Power (SMP) as Equivalent to Competition Law Dominance 63 Joint Dominance 63 Market Analysis Procedures 65 European Commission Guidance on Relevant Markets and SMP 65 Geographic Scope of Markets 69 Remedies to Address Significant Market Power 74 Phase-out of Asymmetric Economic Regulation 77 Symmetric Regulation – an Alternative to SMP Measures 78 3.5.2. Objectives 80 General Objectives 80 Specific Objectives 80 Assessment of the Objectives 81 3.5.3. Evaluation 82 Effectiveness 82 Efficiency 84 Coherence 85 3.6. Mechanisms to Promote Affordable International Mobile Roaming (Roaming, or IMR) 87 3.6.1. Main Features 87 3.6.2. Comparison to the United States 92 3.6.3. Objectives 94 3.6.4. Evaluation 95 3.7. Mechanisms for Ensuring Consistent Regulatory Decisions 95 3.7.1. Main Features 97 Methods to Achieve Consistency: Harmonised Obligations vs. Harmonised Procedures 97 Achieving Harmonisation in a Flexible Framework 98 3.7.2. Objectives 102 General Objectives 102 Specific Objectives 102 Assessment of the Objectives 102 3.7.3. Evaluation of Measures to Achieve Consistency 103 Effectiveness 103 4 PE 518.736 How to Build a Ubiquitous EU Digital Society ________________________________________________________________________ Efficiency 107 Coherence 107 3.7.4. Evaluating BEREC 108 3.8. Broadband and Next Generation Access (NGA) Policy: Regulatory Aspects, Universal Service, State Aid Rules, and Industrial Policy 109 3.8.1. Main Features 109 3.8.2. Objectives 110 3.8.3. Evaluation 111 3.9. Mechanisms for Authorising New Services 112 3.9.1. Main Features 112 3.9.2. Objectives 113 3.9.3. Evaluation 113 Effectiveness 113 Efficiency 114 Coherence 115 3.10. Spectrum Management 115 3.10.1. Main Features 115 3.10.2. Objectives 116 3.10.3. Evaluation 117 3.11. Privacy and Security 117 4. COMPARISONS TO OTHER REGIONS AND COUNTRIES 118 4.1. Networks, Services, and Global Competition 119 4.2. The United States and Canada 120 4.2.1. Institutional Arrangements 120 4.2.2. Procompetitive Instruments 121 4.2.3. Market Structures 124 4.2.4. Effectiveness and Efficiency 125 4.3. Australia and New Zealand 126 4.3.1. Institutional Arrangements 127 4.3.2. Procompetitive Instruments 127 4.3.3. Market Structures 128 4.3.4. Effectiveness and Efficiency 128 4.4. Japan 128 4.4.1. Institutional Arrangements 128 4.4.2. Procompetitive Instruments 128 4.4.3. Market Structures 129 4.4.4. Effectiveness and Efficiency 129 PE 518.736 5 Policy Department A: Economic and Scientific Policy _________________________________________________________________ 4.5. Singapore 130 4.5.1. Institutional Arrangements 130 4.5.2. Procompetitive Instruments 130 4.5.3. Market Structures 131 4.5.4. Effectiveness and Efficiency 131 4.6. Mexico 131 4.6.1. Institutional Arrangements 131 4.6.2. Procompetitive Instruments 131 4.6.3. Market Structures 132 4.6.4. Effectiveness and Efficiency 132 4.7. India 132 4.7.1. Institutional Arrangements 132 4.7.2. Procompetitive Instruments 133 4.7.3. Market Structures 133 4.8. Comparisons of the European Union to Other Regions 133 5. ASSESSMENT OF COSTS AND BENEFITS TO EUROPE 135 5.1. Costs and Benefits of Lower Mobile Termination Rates (MTRs) 136 5.2. Costs and Benefits of the Roaming Regulation 143 5.3. Benefits of Achieving the Digital Agenda 146 5.4. Costs of Regulation in Europe 147 6. THE CONVERGENCE OF THE FIXED AND MOBILE NETWORKS 148 6.1. The Technological Evolution of Wireless 149 6.2. The Evolution of the Usage of Wireless Networks 154 6.3. Policy Implications 157 6.3.1. Substitution of Mobile Voice Services for Fixed 158 6.3.2. Substitution of Mobile Broadband Data Services for Fixed 159 6.3.3. Implications for SMP Regulation of Last Mile Fixed Network Bottlenecks 160 7. THE EUROPEAN COMMISSION’S CONNECTED CONTINENT PROPOSALS 162 7.1. Overall Design 163 7.1.1. The European Commission’s Proposal 163 7.1.2. Assessment 164 7.2. Authorisation 169 7.2.1. The European Commission’s Proposal 169 6 PE 518.736 How to Build a Ubiquitous EU Digital Society ________________________________________________________________________ 7.2.2. Our View 169 7.3. Spectrum Management 171 7.4. Wholesale Access Remedies 172 7.4.1. The European Commission’s Proposal 172 7.4.2. Assessment 173 7.5. Roaming and International Calls: Retail Regulation of Cross-border Communications within the Single Market 174 7.5.1. The European Commission’s Proposal 174 7.5.2. Assessment 175 7.6. Network Neutrality 177 7.7. Consumer Protection and Standard Contract Terms 178 7.7.1. The European Commission’s Proposal 178 7.7.2. Assessment 179 7.8. Institutional Design Issues 179 7.8.1. Article 7 Procedures 179 7.8.2. BEREC 180 7.8.3. A Single Regulator in the Longer Term? 180 7.8.4. Assessment 180 7.9. Objectives Warranting the Imposition or Removal of Ex Ante Regulation 181 7.9.1. The European Commission’s Proposal 181 7.9.2. Assessment 182 7.10. Overall Assessment 182 8. OVERALL ASSESSMENT 185 8.1. Regulatory Harmonisation and Institutional Design 186 8.1.1. Authorisation 189 8.1.2. Broadband Deployment 189 8.1.3. Cross-border Communications 190 8.1.4. Wholesale Access Remedies 192 8.1.5. Network Neutrality 194 8.1.6. Consumer Protection 194 8.1.7. Spectrum Management 195 8.1.8. Overall Assessment 195 8.2. Industry Consolidation 199 8.2.1. Consolidation and the Digital Single Market 199 8.2.2. Consolidation Across Member States Borders 200 8.2.3. Consolidation within a Member State 202 8.2.4. Overall Assessment 204 PE 518.736 7 Policy Department A: Economic and Scientific Policy _________________________________________________________________ 9. CONCLUSIONS AND RECOMMENDATIONS 205 9.1. Findings and Conclusions 205 9.1.1. A Single Market? 205 9.1.2. Achievements and Failures of Current European Policy Instruments 205 9.1.3. Comparison to other Regions and Countries 206 9.1.4. Assessment of Costs and Benefits to Europe 207 9.1.5. The Convergence of Fixed and Mobile Networks 208 9.1.6. The Commission’s Connected Continent Proposals 208 9.1.7. Overall Assessment 209 9.2. Recommendations 211 REFERENCES 213 8 PE 518.736 How to Build a Ubiquitous EU Digital Society ________________________________________________________________________ LIST OF ABBREVIATIONS AND GLOSSARY 3rd Generation Partnership The 3rd Generation Partnership Project (3GPP) is Project (3GPP) a collaboration between groups of telecommunications associations, known as the Organizational Partners.