Free Trial

Global Telecoms Business Copying and distributing are prohibited without permission of the publisher
Email a friend
  • Please enter a maximum of 5 recipients. Use ; to separate more than one email address.


A deregulator at heart

01 October 2006

Europe's chief lobbyist on behalf of competitive operators is Steen Clausen. He's looking forward to learning the details of the new review of the industry from the European Commission in Brussels, due in November. There is a lot to do before competitive operators can do business on the same terms in all 25 member countries, he says

Read more: Europe competition telecommunications Viviane Reding ECTA regulation European Commission

Steen Clausen
 
Steen Clausen: We are pleased that we now see deregulation, because regulation should only be there for the market to work, and if it's working everything is fine
 
 
 

Steen Clausen is looking forward to mid-November. That's not only when the European Competitive Telecommunications Association, which he leads, has its annual regulatory conference in Brussels; but it's also when the European Commission is due to publish its framework review of the EU's telecommunications regulation.
 

And as Viviane Reding, the European Commissioner with the media and telecommunications portfolio, is due to make a keynote speech at ECTA's event, there should be a lively reception. "And we're also going to have Philip Lowe, the director general for competition, as a keynote speaker."
 

Clausen finds Lowe's agreement to speak as significant as Reding's. "I think we see a trend towards the Commission wanting to use competition law as a regulator. In real life it's not quite as easy."
 

Clausen took over as managing director of ECTA at the beginning of 2006. He's known in the industry from a long spell at Sita and then Equant — where he became vice president and general manager for the UK and Ireland — but he's also worked for NCR, Cable and Wireless and other companies.
 

He's a Dane, and like most educated Danes he speaks English, French and German as well as other Scandinavian languages. If you're lobbying in Brussels with politicians and officials from across Europe, you need to speak in at least three of the major languages.
 

He's a deregulator at heart: "We as an organisation, and our members in particular, are very pleased that we now see some deregulation, because at the end of the day regulation should only be there for the market to work, and if it's working everything is fine and dandy."
 

He's pleased to see what's been happening with mobile roaming charges in Europe during 2006. At the European Commission Reding complained strongly about international roaming charges and threatened action to reduce them, and as a response the operators announced lower rates.
 
 

Converged services
 

ECTA represents fixed operators, not mobile companies, but the move positively affects his members, says Clausen, "because of the converged services coming about". Without access to mobile, ECTA members can't deliver. "When the noises started coming out that rates were to be regulated, we saw the actions from the industry, which is the right way."
 

The regulators in EU member states reacted to Reding's comments by saying that they didn't quite agree with her stance, he says. They objected to her proposal for retail price regulation, suggesting that regulation should be at the wholesale price level.
 

"We happen to believe that is right," says Clausen. "At the retail level there has to be competition sorting out the pricing. You can't prescribe pricing." That's "an old economic fallacy of the Marxist state". But there had been an inertia from the industry and that's why "she was pushing", he says.
 

This move by Reding prepared the ground for the framework review of telecommunications which she is due to publish later in 2006. Clausen has been studying some of the early consultation papers, and it is clear that, while the review will "not be quite as dramatic" as was initially expected, there will be proposals on a Europe-wide regulator, on bandwidth trading and "a whole lot of those issues that are very important to a functioning market".
 

Reding achieved "what she set out to achieve", he says. And ECTA is pleased that many of the policies it has been proposing as good practice seem to be happening. The European Regulators' Group — which brings together regulators from EU member states — has been working to harmonise their policies, and Clausen thinks that a good thing "because I'm not sure that EU members would like power going to Brussels". The regulators in the individual countries are those who "know best about what's happening locally", he says.
 

ECTA is essentially a lobbying organisation. It is the voice of the competitive operators in the seat of European Commission, Brussels — though its actual head office is in a suburb of Reading in the UK. More about that later. There are other associations which lobby for competitive operators with governments and regulators in individual countries — UKCTA in the UK, for example — and it does not represent either incumbents in their own countries or mobile operators.
 

Its 110 members range from AOL, AT&T and Cable and Wireless via Fastweb, Global Crossing and Liberty Global to Viatel, UPC and Wind. Including affiliates, they represent 150 companies. Half of the members are operators, and the others are "industry-related players", such as vendors — such as Intel and Cisco — and law firms. He'd like to see more ISPs, but currently they're nationally focussed, and many of them question the need for a Europe-wide organisation, he says.
 
 

Time and effort
 

It's not just a question of signing up and paying your €5,000 annual fee. ECTA expects its members to commit time and effort to working groups. "You have to dedicate some of your regulatory staff resource. But you get full time representation in Brussels, where it's all happening. For €5,000 you couldn't have 5% of a regulatory person anywhere."
 

What are the other big issues for the industry that need to be tackled? "Access in terms of broadband," he says instantly, meaning access in different ways. "There's no question that the main driver for economic growth in the EU comes from the ICT sector." He says 30% of growth is directly attributable to ICT.
 

"We have to have a dynamic ICT market and, for that to develop, broadband is absolutely essential. We can't live in situations where we have such a divide in broadband penetration that we have between those lowest ranking country in Europe and the highest ranking."
 

The bottlenecks need to be tackled. They exist locally in terms of access and competition and Europe-wide in terms of regulation, he says.
 
 

Regulatory scorecard
 

ECTA publishes its regulatory scorecard every year, in which the association tries to determine the regulatory effectiveness across 17 EU countries of the 25 members. "What we are seeing is that where we have very good, effective regulation we also have very high penetration rate. It is regulatory certainty that causes competitors to invest, causes new entrants to go in and provide services," he points out. They don't do it just on the basis of wholesale products, but on the basis of investing in their own network developments and implementations.
 

So which are the good countries from the point of view of regulation, and which are the poor. The UK and Denmark scored highly. Germany and Greece were low down.

He wonders why Germany, the biggest economy in Europe, is so far down the list. Is it the locomotive of growth that it should be? "That's really the key issue," says Clausen.
 

When we spoke Deutsche Telekom was seeking a regulatory holiday before it would commit to investing in VDSL access services. That tactic seems now to have been defeated following Reding's effective persuasion of the German regulator.
 

A regulatory holiday would have been dangerous, feels Clausen: it could have stifled competition in Europe's biggest market, and that would have affected the whole of Europe, by giving other protectionist-minded authorities the wrong message.
 

Last year's ranking of Germany might not have been entirely fair, he notes, as changes were made just after survey data were gathered. "It's a dynamic situation, and it is not that bleak." A broadband scorecard, published in August, shows Germany at tenth out of 15 countries. Greece and Ireland bump along the bottom.
 

The German regulator and the German ministry "are very much aware of what they want to do and what they have to do", he adds.
 

Why was Germany so slow at introducing competition? Clausen thinks it is partly a result of unification of Germany after the Berlin Wall came down in 1989. Unification cost "such a lot of money" and political stalemate led to a government which did not have the power to force the incumbent's hand. Deutsche Telekom was doing the right thing for the company, he says, "but for the country it's not the right thing, and that's the whole issue".
 

If the EU's framework is designed to create competition, "we can't have the biggest country in Europe left behind". The German VDSL debate showed that "somebody's doing something about it now", he says. "At least we hope so."
 

So, if Denmark and the UK are ahead in the scorecard, are there positive benefits for those incumbents in being in such competitive, deregulated markets? They're not ECTA members, but can he say whether there are benefits?
 

Clausen ripostes: "Both are members of ECTA." Not as incumbents, but their offshoots in other European countries are competitors of the local incumbent, so are entitled to membership. "TDC is a member through Song, its Nordic network. And BT Global Services is a member." Indeed, October's board meeting of ECTA will be hosted by BT Global Services — not at BT Centre in London but at its Paris office.
 
 

Openreach praise
 

And Clausen is eager to praise what BT has done in the UK, with the creation of Openreach, and the work it is doing with competitors on the new generation network. "That shows it can be done, and it can be done voluntarily to the benefit of the whole industry."
 

He is genuinely excited by BT's Openreach model. "There's no question it has a value, and BT could float it if they want to. They are selling the basic infrastructure that everybody needs. If it is open and competitive it will be fully utilised because it will be cheaper for new entrants than to go through all the steps of investment to replicate the network — and they will never fully replicate the local loop."
 

As a competitor, BT is behaving "well very", he says. "The UK is a good example of where competition is working, and where there is technology neutrality."
 

He thinks the model could be extended to other countries, and he's pleased to note that France is trying to ensure France Telecom collaborates with its competitors in rolling out broadband.
 

But he focuses on Denmark and the other Scandinavian countries to show that the market is changing. The process of consolidation is creating some interesting challenges, he notes. TDC, he says, charges substantially more for broadband in its homeland of Denmark that it does under the Song brand in Sweden. Denmark and Sweden are close neighbours, and people commute from one country to the other — for example, from the southern Swedish city of Malmø across the Øresund bridge to work in the Danish capital of Copenhagen. "They cannot understand why they pay so little at home and so much in the office for the same service."
 

Companies such as TDC and Telenor, the Norwegian incumbent, are focussing on turning themselves into competitive regional players, he says. He's expecting interesting developments when Jens Adler, the former CEO of Swisscom, takes over at TDC — now owned by private equity — in October.
 

Competition is better if there are more access methods, he says. That's why MVNOs are a central concern for ECTA — they allow members to be able to get wholesale access to mobile products so they can offer triple play or quadruple play packages.
 

Regulation is forcing operators to allow MVNOs. Denmark, again, is the home of most, but he's pleased to see that the Spanish and Maltese regulators are now in favour. "New entrants are providing new, dynamic services that are being picked up by the users, and it's in competition with the incumbents."
 
 

Regulatory utopia
 

He has a utopia that he dreams about: harmonised remedies in all 25 member countries of the EU, a set of regulators that act in a similar matter. That would allow members to provide cross-border services and they would know that they could provide them on similar terms in all countries — Germany, the UK and France, say. "Today those are three different regimes, and they are just three out of 25 countries in the EU. Within Europe you should be able to provide the same service, but you can't today."
 

Take Spain, for example. "If you buy ethernet-based products from Telefónica, it's five times cheaper than the equivalent product that you buy from a new entrant, because you cannot buy a wholesale ethernet product from Telefónica, and you cannot cover the country with equipment in all the exchanges."
 

That means a competitor has to spend a lot on leasing lines and adding protocol converters. "Your leased line rental cost is higher than the Telefónica retail offer. So we still have a lot to do in ECTA."
 

In the short to medium term, he sees more of what ECTA has been doing. It seems a slog, going country by country and fighting issue by issue on behalf of members.

ECTA works with affiliate country organisations and with member companies to identify such issues that need to be taken to a European level.
 

"On this ethernet issue we're dealing with Spanish members as well as with other members that are providing services into and out of Spain." International companies such as AT&T and BT Global Services are affected just as much as internal Spanish competitors. "They add their voice."
 

ECTA is careful, though, about what steps it takes on any issue. Everything is done after full consultation with members and with their full agreement. "We cannot afford to represent one special interest. What we stand for and what we put forward is essentially for the industry."
 

He believes that many of the positions that ECTA has adopted have been accepted by the regulators. Much of the work by the European Regulators' Group on the harmonisation of remedies "I think can be directly attributed to an idea that came from ECTA."
 

And he's found that some national regulators have used ECTA's regulatory scorecard as a starting point for revising their policies. "They want to be number one, which is a very healthy sign." The German regulator in particular has given good input to the annual measurement of telecoms competition. "Nobody wants to be last."
 

ECTA wants competition to work. "We're not saying we want it all, that incumbents have had a monopoly for years, so therefore give it to us. It's business and you invest and make a return on the basis of how good you are and how clever you are."
 
 

Focus for the future
 

What things about ECTA would Clausen like to change? The organisation has been distracted, he hints, by things such as conferences. They made a return and helped fund the budget "but our efforts are best spent focussing on the regulatory agenda."
 

On the practical side, he's encouraged members to formalise how ECTA takes its consensus decisions — something that is very necessary, he feels, as convergence brings more of them "into territory that goes beyond the common interest of fixed line operators".
 

There has been consensus so far, and mobility more than anything is getting ECTA "onto thin ice". And if there is disagreement, then member companies can submit their own views directly to the Commission.
 

"What we talk about content we are also getting into areas where we may not have full agreement of the membership." Members include content providers such as AOL and service providers such as Fastweb, so some disagreement is, he feels, inevitable eventually.

There are changes afoot. The organisation is just about breaking even, he says. It has eight staff, divided between Brussels and Wokingham, a suburb of Reading. "That's something you can debate," he admits hesitantly.
 

He is wondering "what we should do there", and clearly wonders why a European industry lobby group should be headquartered so far from Brussels. "I can't talk about it, but one has to be realistic. What are we doing in Wokingham if we're trying to influence politicians and the Commission in Brussels?" That will be on the agenda for the October board meeting in Paris. GTB
 

The ECTA regulatory conference takes place on November 15-17 2006 in Brussels. See www.ectaportal.com for more. Viviane Reding will also be speaking at a Global Telecoms Business conference in London in April 2007: see www.globaltelecomsbusiness.com for details.

European broadband league table
 
ECTA's broadband league table — separate from its annual regulatory scorecard — shows that there a widening gulf between the top and the bottom. Denmark tops the league with broadband penetration of nearly 30%, while worst placed Greece trails far behind at just 2%. The poorly scoring countries are not growing quickly enough to catch up, which is creating a widening gulf between connected and unconnected countries

Ranking

Q1 2004

Q1 2005

Q1 2006

1

Denmark

Netherlands

Denmark

2

Netherlands

Denmark

Netherlands

3

Belgium

Finland

Finland

4

Sweden

Belgium

Sweden

5

Austria

Sweden

Belgium

6

Finland

France

UK

7

France

UK

France

8

UK

Austria

Luxembourg

9

Germany

Luxembourg

Austria

10

Portugal

Portugal

Germany

11

Spain

Italy

Italy

12

Italy

Germany

Spain

13

Luxembourg

Spain

Portugal

14

Ireland

Ireland

Ireland

15

Greece

Greece

Greece



 




Have your say
  • All comments are subject to editorial review.
    All fields are compulsory.



Advertisements