Experiences with Liberalisation and EU Accession

1. Experiences with Liberalisation and EU Accession Views by Gabor Frischmann former president of the Communications Authority of Hungary, now independent consultant frischmanng@axelero.hu

2. Contents • History • Why to liberalise? • Liberalisation • In theory • In practice • Results of EU accession? • A balance… G. Frischmann: Experiences...

3. History G. Frischmann: Experiences...

4. If the History is so nice, why aren’t we satisfied? • Nobody is happy! • Good sign, but must not be a target! • Still both Analogue and Digital divide! • Does the market solve everything? • It has been very slow! • Do we have effective tools? • Innovation has slow down! • Is there any incentive? G. Frischmann: Experiences...

5. Why to Liberalise? • Everyone do liberalise its telecom market… • It is an EU requirement… • Alternatives want it… • To let the market operate… • Market is the most effective regulator… • To cut the prices… • To create a continuously evolving market? • To create the basis of an I-Soc? Did we ask this Question before starting? G. Frischmann: Experiences...

6. If not: • Let’s look at the result! • If yes: • Did we find the good strategy of getting to the target? • Did we implement the strategy in proper way? G. Frischmann: Experiences...

7. In theory: Minimise state ownership Just remove restrictions Assure equal rights Load incumbent by additional remedies If market can’t solve supply, create USO Create powerful NRA, improve enforcement Depolitise NRA In practice: OK, lobby power remains Nothing happens Nothing happens Hopefully works after 2-3 years Is there a working model in CEE and EU? OK, but final power at „amateur” court Is it possible? Liberalisation G. Frischmann: Experiences...

8. Minimise state ownership • It is not enough just to sell majority or all shares • Difficult to manage: • All key knowledge remains with Incumbent • All personal and professional relations maintained • Increased lobby power: owners come too, and • „Leaving the country” • „No more investment” • Even government level pressure • Increasing unemployment etc. • But: • Why to place all government orders to incumbent? • Build independent (regulation, market and economics) knowledge! • Do not believe threats. • Real public hearings! G. Frischmann: Experiences...

9. Just remove restrictions & assure equal rights • No legal entry barriers – far not enough • Equal rights – far not enough • Huge financial entry barriers • Huge differences in size (1:100-1:10000) • Asymmetric historical distribution of natural and network resources • But: create equal chance instead! • Why to place all government orders to incumbent? • Introduce asymmetric regulation • Real public hearings! G. Frischmann: Experiences...

10. Load incumbent by remedies This is a good idea, But: • it is very complex and time consuming • doesn’t solve the problem of „final interpretation” It can be successful, in case of • well prepared NRA • well prepared and co-operative operators • open and transparent process • using best-practices… G. Frischmann: Experiences...

11. market identification market analysis EU notification SMP identification cost orientation Data coll. defining remedies fair wholesale prices no chance of competition non-discr. account sep. facility sharing non-discr. transparency obligations RxO transparent pricing access, co-location publication publication price regul. „approve” control and supervision Market Regulation G. Frischmann: Experiences...

12. 2nd Q 04 3rd Q 04 4th Q 1stQ 4th Q 2003 1st Q 2004 2nd Q 2004 3rd Q 2004 Before new law After new law in force education 01.09.2004 prepare data collection data coll. evaluate data market survey – demand side market analysis, def. SMP define remedies other qualitative studies EU notification public consult public consult public consult Time table of first Market Analysis G. Frischmann: Experiences...

13. If market can’t solve supply, create USO It is a very good idea, but very difficult to create a working solution • Affordability? According living standard or social problems? • What kind of services? Home and public telephone? In 21th century? • What kind of technology (e.g. telephone, but fix or mobile or both?) • Who shall be selected as US provider? And how? (huge lobbies!!!) • Who shall contribute? (huge lobbies!!!) • How to minimise market distortion? • How can USO contribute market development and growth? G. Frischmann: Experiences...

14. Example: Changes in USO regime in H. G. Frischmann: Experiences...

15. Create powerful NRA, improve enforcement It is important, but can NRA be really powerful? • EU guarantees of limited authority power: • No legislative power, just application of legislation • Must of reasoning • Decisions may be appealed • But there are elements of power: • Knowledge and information • Transparency • Independence (both political and from market) • Enforcement and penalising • immediate applicability • Communications • Success in front of court (0-70-90-100%) – but after 1-3 years G. Frischmann: Experiences...

16. NRA can and shall learn and be prepared From advanced markets: • well working/non working models • benchmarks: business, productivity, price etc. • patience From advanced regulators: • best practices, methods, models • way of transparency, conciliation, moderation • real independence How? • active participation in IRG/ERG work • utilising relative delay • from general to specific education, some together with operator’s experts • preparatory projects on all new issues • preparing new procedures • completing IT investment G. Frischmann: Experiences...

17. 01.Jan.04. 01.May.04. 01.Sep.04. new act in force membership based items number portability (geographical) number portability (mobile & nongeogr.) HIF new HRA (Hungarian Regulatory Authority) old SMP former SMPs – new remedies first market analysis new SMPs and remedies old USO transitory USO regime new USO regime access deficit comp. account sep. RIO/ROU RIO/ROU Example of Transition G. Frischmann: Experiences...

18. Newcomer’s wish on incumbent’s room Newcomer’s interpret. on incumbent’s restrictions Newcomer’s interpretation on inc. obligations Incumb’s interpret on what is obl. Incumb’s interpret. on what is forb. Incumbent’s wished room forbidden „uncertain” free „uncertain” obligatory NRA Interpretation Interpretation NRA can be wrong too G. Frischmann: Experiences...

19. How EU accession influences all these? • If your answer on „Why liberalise?” was, that because of EU, you will get a lot of problems with EU and yourself • If it was one of the last two (evolving market, i-soc), in that case EU adds a lot of new tools and power: • Best practices, tools • Relations • Safe legislative background G. Frischmann: Experiences...

20. For the operators higher flexibility, less pre-defined rules wide scale of remedies new customer protection rules incl. comparativeness playing in EU playing field audited account separation & data provisioning Summary - Challenges For the regulator • creation of a brand new decision process • market analysis, new SMP def, remedies etc. • implementing effective Customer’s Rights represent. function • higher flexibility, less pre-defined rules • development of competencies • notification (Art.7.) G. Frischmann: Experiences...

21. Let’s make a balance Cost of conformity Cost of non-conformity Total cost for the Society Total benefits For the Society Thank You! G. Frischmann: Experiences...