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Trend 2007 – regulation that matters – converging communication markets – are regulators too late again? France – vive la difference

January 3rd, 2007 · No Comments ·

We have previously addressed regulatory issues but with the beginning of 2007 we thought it might be interesting to look at the converging communication markets and how 1 or 2 countries try to get a handle on it.

AT&T’s takeover of BellSouth for U.S. $ 107 bn was approved by the U.S. Feder Communications Commission (FCC) during the last days of 2006. It is the largest telecom’s takeover ever and with it these two giants are hoping to stop their respective firm’s flattening growth curve by offering new services such as mobile and internet through Cingular, their mobile provider.

But back to Europe.

_GERMANY_

2006-09-13 Germany’s telecoms regulator demanded that Deutsche Telekom prove it is offering novel products on a €3bn ultra-fast broadband network it is building in 10 German cities or allow rivals access to these new internet lines. The regulator gave Deutsche Telekom three months to name a price for granting any rival access to all its broadband lines irrespective of technological standard – VDSL or the slower DSL or ADSL standards.

Brussels has been suggesting to telecom operators that they could be forced to separate their service and infrastructure operations. It is hoped that such a move would would help ensure smaller rivals had access to the companies’ broadband network. so that the newer groups can offer a full range of services to customers. BT, the UK’s former monopoly operator, reached a deal with British regulators in 2005 to establish an independent subsidiary that ensures that rivals can control landlines that run to customers’ homes. This arrangement is supposed to ensure healthy competition in broadband provision.

Now, Brussels is preparing to launch legal action against Berlin once the government’s amended telecommunications act comes into force at the beginning of next year. The European Commssion claims that the law protects Deutsche Telekom from competition.

Despite being the European Union’s largest economy, broadband penetration is just 12.5 per cent in Germany. This is the average level for the EU but below that of smaller countries such as Estonia.

Digital divide is dead but keeping broadband competition alive remains a challenge

In addition, Germans pay among the highest prices for the technology in the 27- country union.

_SWITZERLAND_

Switzerland has a far higher broadband penetration than Germany (just about 25% according to the OECD report, see above link).

But similar to Germany, communication markets are narrowly defined and the telecom regulator does not regulate cable TV networks (access to those by competitors is restriced) and it is unclear if the Zurich electricity works’ (publicly owned entity) high-speed network, whereby:

– 350,000 inhabitants fund a 200 Mio Sfr. network = approx. Sfr. 715.00 per individual taxpayer,

– serving 4,020 firms and 13,124 households

will be open to competitors.

In fact, offering broadband via DSL as well as cable (e.g., Cablecom) and other technologies is no guarantee that competition is thriving. The Swiss market for broadband services would suggest it can fail if certain technologies are offered by a quasi monopolist – Cablecom.

Switzerland has competitors that enjoy a monopoly or sometimes an oligpoly regarding a particular infrastructure (e.g., cable). Maybe it is time for the Swiss to check out how the French are leading the pack.

OECD Broadband Statistics to June 2006 – What type of infrastructure is being used to supply home users with broadband?

_FRANCE_

France has few if any users getting broadband via cable (see OECD stats above) but has managed to truly deregulate the last mile. This has allowed France Telecom’s smaller competitors to provide broadband at _Euro 30_ per month. The latter subscription includes such services as:

– internet access with _unlimited_ data transfer;

– free telephone service (usually getting a fixed line number costs euro 15 or more in Germany and Switzerland – on top come metered calls of course);

– free calls to stationary phones/telefon numbers in France (another 20 Euros or mor per month for people in Germany or Switzerland who have metered service);

– free calls to stationary phones to some countries;

– free access to dozens of TV channels; as well as

– access to pay TV and ‘video on demand’ is possible.

But it seems that while this unbundling of infrastructure and services to customers is important, France has launched a discussion about the reality of telecom, TV and other media markets converging. It again would suggest that similar to its effort regarding the OpenDocument standard and open source software, France might be ahead of other EU member states.

Emile Blessig – Député de la 7ème circonscription du Bas-Rhin

has prepared a report to the parliament outlining some of the trends and issues and proposes the consideration of various alternatives ranging from new regulation to merging regulatory agencies and having just one that regulates TV, radio, Internet and telecommunication including wireless.

N° 3531 – Rapport d’information de M. Émile Blessig déposé par la délégation de l’Assemblée nationale

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