Telecommunications Regulatory Policy Dr. Iris Henseler-Unger, Vice-President

1. Telecommunications Regulatory Policy • Dr. Iris Henseler-Unger, Vice-President • Regulierungsbehörde für Telekommunikation und Post • ITS Conference • Panel Discussion – Plenary Session • Berlin – 6 September 2004

2. Crisis? What crisis? • Compared with other sectors of the economy, the ICT sector was and is a very dynamic sector of the economy • However when after the boom of the late ’90ties the internet bubble burst in 2001 a turning point marked the beginning of a new phase with more realistic expectations • The capital market downturn had a real impact as funding became more difficult, especially for fixed new entrants • Consolidation of the market to be seen positively as a sign that market forces started to work • Diversity of market players as many different business models compete • High debt levels caused UMTS operators to adjust their roll-out plans, but optimism is slowly regaining

3. Yearly Growth Rates of GDP and ICT-Market Quelle: DESTATIS, Eurostat und BITKOM

4. German Telecoms Market • Market volume 2003: ca. 63 bn. € (2002: 61.3 bn. €) • Number of jobs nearly unchanged • Competitors‘ market shares increased in fixed networks • Growth for • Fixed network services • Unbundled access to the local loop: 1.35 mio lines • Fast internet access: 5 mio DSL lines (estim. VATM) 4.7 mio DSL lines of DTAG, 400,000 competitors • Mobile telephony • Competitors of DTAG spent less on wholesale services of DTAG as they invest in own infrastructure!

5. Evolution of Jobs

6. Regulatory Challenges • Regulation can provide a stable framework for competitive and innovative forces to work • Enable investment in new technologies (emerging markets) while preventing the leverage of market power • Converging technologies lead to new markets as different markets overlap (e.g. VoIP) • Diversity of market players and business models require a more differentiated regulatory approach • High market dynamic requires more flexibility for regulators in order to intervene in a timely manner • Emerging competitive market structures require sector specific regulation to align towards general competition law • The New European Regulatory Framework on Electronic Communications Networks and Services provides a framework for the challenges ahead

7. Status of Consultation on VoIP • April 21, 2004: Consultation on VoIP • 64 comments received, which were published on 30 July • Questions adressed: • Competitive development of VoIP: legal, economic and technical aspects • VoIP business models (overview and possible classification) • Consumer protection and public interest (e.g.: emergency calls, intercepts) • Aims of the consultation: To develop • a framework enabling the market to exploit chances and potentials of VoIP • a first position on regulatory classification of VoIP based on comments • October 18, 2004: RegTP Forum in Bonn

8. New Regulatory Approach (I) • The new Telecoms Act entered into force on 26 June 2004 transposing the European ECNS Framework • Regulation is still needed, but should be phased out slowly • Promotion of self-sustaining competition • Promotion of efficient investments • Technology neutral regulation • Market definition and analysis procedure according to the Framework Directive ongoing • National consultation of market no. 11 (unbundled local loop) started on 18 August 2004 • Other market reviews are in the pipeline • Notification of draft measures planned for the next few weeks • Only general authorisation needed, except in case of scarce resources (spectrum)

9. New Regulatory Approach (II) • In case an operator is designated as SMP operator, at least one obligation must be imposed to remedy the competition problem identified • The general rule: strict regulation on the wholesale level, retail level regulation only if wholesale regulation is not sufficient • The new Telecoms Act provides for a differentiated set of remedies: • Non-Discrimination (section 19) • Transparency (section 20) • Access obligations (section 21, criteria must be checked) • Standard offer (section 23) • Interconnection dispute resolution settlement (section25) • Rates regulation (section 27ff) + accounting separation)

10. Conclusion (I) • The European Framework is not in contrast to German ideas of regulating the telecommunications sector as it enforces the idea of stepwise liberalisation of the market towards general competition law • However, regulation is still needed, but needs to be justified in greater detail • While the initial phase of liberalization required strict automatic reactions, the second phase requires a more tailored approach • Regulatory measures depend on the outcome of the market reviews and must be proportionale and appropriate

11. Conclusion (II) • The new Telecoms Act gives RegTP the powers • to intervene in a timely manner • to react flexible • to make a more differentiated use of the remedies • to give adaquate answers according to the state of competition:- with less intrusive interventions in more advanced markets and - continued strict regulation where needed to prevent leveraging of market power (as in bottleneck type markets such as the local loop) • The complete regulatory toolbox is available and RegTP is starting to use it