NRAs in a brave new world

1. NRAs in a brave new world Pierre Larouche Professor of Competition Law Co-Director, Tilburg Law and Economics Centre (TILEC) pierre.larouche@uvt.nl OPTA – TILEC Symposium The Future of Telecoms Regulation 2 November 2006

2. Outline • Introduction • Uncertainty • Letting go • Next Generation Networks • Making sense of ex ante and ex post • Hypothesis

3. Introduction • Current developments • Next Generation Networks • 3G – 4G • Fixed-mobile convergence • Triple play – Quadruple play • Attractive presentations by • Engineers • Business consultants • Economists • Marketing people • What should a lawyer think of all this? Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

4. Uncertainty • Basic constraint • From the point of view of the firm: regulatory uncertainty (c.f. London Economics): • Law is not clear • NRAs go in all directions • Insufficient monitoring and enforcement • Critique • From the point of view of the NRA: market uncertainty • Ensure fulfilment of mission in longer term • Avoid micro-management Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

5. Letting go • NRAs must let go of sector • Market uncertainty not for NRA to solve • Regulatory ↔ operational also for NRA ! • Yet paradox: NRAs must develop own vision • No longer incumbent ↔ newcomer game • Static ↔ dynamic, short ↔ long-term tradeoffs • Sector is more than just incumbent, BUT • No need to support competitors at all costs Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

6. Letting go • Proposed vision (derived from current framework) • As little regulation as possible (but as much as needed) • “Fragmented” approach • Regulation only when added value over and above competition law • Perils of alignment with competition law • Three-criterion test : improvement • Can test be even better focussed? • Retail – Wholesale – Retail iteration • Regulatory “emulation” between NRAs Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

7. Next Generation Networks • Options currently being discussed • Regulatory holiday • State support • Milliardenpoker • Regulatory holiday (proposed in Germany) • Beware of relying on Trinko ! • Competition law always applies • Member State cannot commit Commission, even less private enforcers • State support • Only on the margins Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

8. Making sense of ex ante and ex post • Choice is not between ex ante intervention and “nothing” • What is the real difficulty with ex post? • Posteriority OR • Unpredictability (c.f. roaming regulation) • The general risk (allgemeines Risiko) linked with investment as a starting point Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

9. Making sense of ex ante and ex post • Signposts to make regulatory intervention more predictable • Expectations as to working of the market • Situations which can lead to intervention • Stick to economic analysis and regulatory framework!! • Regulation in force: use “emerging market” concept, not NGNs • “Safe harbours” • No ex ante intervention ahead of any investment being made Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis

10. Hypothesis • Infrastructure duopoly probably not enough to justify removal of regulation altogether • Current ex ante approach must be replaced with more prudent approach • ex post regulation made predictable ex ante • Imposing access obligations or even separation from day one will not deliver • Not NRA’s job to predict the future Introduction Uncertainty Letting go NGNs Ex ante - ex post Hypothesis