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ECTA Ranking Update

InterComms talks to Ilsa Godlovitch, responsible for developing and delivering on the regulatory and policy agenda at the European Competitive Telecommunications Association

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Ms Godlovitch is responsible for developing and delivering on the regulatory and policy agenda at ECTA, the trade association representing 150 competitive (non-incumbent) operators across Europe. Prior to joining ECTA in June 2005, she was EU Affairs Director at Cable & Wireless and also represented C&W’s international businesses in developing countries outside Europe during a period of widespread liberalisation in the sector. Whilst at Oftel (the UK Telecoms Regulator), Ms Godlovitch was responsible for European Affairs and negotiated for the UK Government on the current EU Framework for Communications. She was previously a technology journalist.

She holds an MA in Classics from Oxford University and a Postgraduate Diploma in Economics from London University.

Q: Your latest Regulatory Scorecard was issued last January, what’s new?
A: There were two things that we focussed on in the latest Scorecard. One was to more clearly indicate where responsibility lay for both positive and perhaps more negative aspects of the regulatory regime. In this particular Scorecard, there is a separate indicator for institutions, addressing both legislative framework and the actual effectiveness of the regulators. There are some countries for example, like Germany, where the regulator is doing its best however; it doesn’t have the power to enforce the framework properly. That was one thing that we really wanted to bring in with this report. The other issue we looked at, which is particularly relevant right now, is how well regulators addressed forward looking issues like next generation access and more modern interfaces such as Ethernet. There was a particular section that looked at this and we found that regulators were handling this issue very differently.

Q: In what ways were they handled differently?
A: With forward looking issues, we found that there were some really, very different approaches to addressing next generation access. It ranged from Germany and Spain, where famously in both case the regulators decided not to apply access to part of wholly fibre based networks, to countries like the Netherlands, which had a very clear regime which included remedies like fibre unbundling. There are quite a range of treatments of next generation access out there. We also found that many countries hadn’t really started looking at it. Several regulators believed that it wasn’t relevant to them. That however, is not what we see when we look at the announcements being made by major operators. There is barely a country, where there aren’t some plans to upgrade what are basically, decades old networks. It really is remiss in this day and age for regulators not to have a very clear policy as to how it would approach next generation access.

Q: Who has made the most improvement over the year?
A: That is very hard to say. People shouldn’t put too much store by separate rankings. If countries are two or three points apart, you shouldn’t read too much into it. A number of years ago, France had something of a revolution in regulation and they climbed up the Scorecard. They have stayed amongst the top five although it currently looks to be slipping a bit. If you look at the bottom end of the rankings, you have countries who liberalised much later, like Poland and the Czech Republic, or have been slower to enforce regulation, like Greece. If I were to say who had improved the most, ironically it is a country who didn’t improve in score; Greece, where you can see the effect in the market place of the regulator taking action to make local loop unbundling work. For a long time, Greece had a very stagnant and very uncompetitive broadband market. It is obviously far from being perfect but now you can start to see the buds of growth in the broadband market and you can see more services and higher speeds and prices coming into the market. That a country can, by making an effort, really progress its broadband market in that way is a really nice thing to see.

Another country I would single out is Spain. Spain is a country that fell several places for rather well publicised reasons. One is that the Spanish regulator decided not to apply remedies to Telefonica’s next generation access network and permitted a regulatory holiday. The other one is that broadband competition in Spain is stagnating. It is not just that they are not taking a forward looking approach to regulation. If you also look at the market dynamics, it really hasn’t gone anywhere. Spain is still being held back in broadband by the fact that the regulator is not taking sufficient action to open its market. Quite possibly, those policies and attitudes are linked. The regulator in Spain says that it has a firm belief in infrastructure based competition. The problem is that if a market only feasibly supports one or two access lines, you have to do something more than that, just letting the market to its own devices isn’t sufficient.

Q: You’ve ranked Germany third from bottom in terms of institutions. Has there been any progress over the year?
A: No. One of the interesting things is that we very explicitly split out in the institutional regime, the part that the government is responsible for and those that the regulator is responsible for. The regulator in Germany is in many respects actually doing not a good job in difficult circumstances. The problem is that the government seems wedded to the idea that it needs to protect Deutsche Telekom and I can only really call it a protectionist policy. It is important for Deutsche Telekom, to make a fair return, but we don’t see that there is attention from the government on consumer’s interest in the German market, which I find rather surprising.

Q: What do you see as the effect of the Credit Crunch on the market?
A: It’s certainly having an effect but it’s probably having least effect on very large, incumbents. If you look at the share price, some of the largest incumbents are riding out the storm rather well and they have very high cash flows. You can see that in the annual statements which are all rather upbeat. In contrast, I am worried for competitors who would be otherwise be in a very healthy state and contribute a lot to the market, but perhaps don’t have the financial muscle behind them that would allow them to ride it out. I think the credit crunch will probably hit the telecoms sector rather unevenly with the incumbents really getting the best out of this recession. I also find it hypocritical that at the time that it is hitting the small companies far more that the larger ones, the larger companies are still going to their governments cap in hand and saying that they want a regulatory holiday.

Q: How is the European Commission continuing to use your data?
A: ECTA is well known for producing data. It’s not just the Regulatory Scorecard, it’s also the Broadband Scorecard too. When we do these exercises, the degree of co-operation from the institutions is invaluable as far as the Commission is concerned. We do discuss the score cards, particularly the regulatory scorecard with them. For them, it is primarily an input for their annual implementation report exercise. Typically we would present the results to them; shortly before they are published, to give them some input they can use for their own report. They always have a lot of interest in the results.

Q: You include Turkey, which is outside the EU. Are there plans to add further countries to those you review?
A: We would like to be as comprehensive as possible, but adding a country requires an awful lot of time and effort. To do that, there has to be some willingness on the part of both of regulators and operators in each country to put in the effort that is required to collect the data. It is quite possible that in the next edition, we might add a further one or two more countries.

In Turkey’s case, whilst they are outside the EU, they are trying to go through the accession process. We hope that the Scorecard will be helpful to them in trying to benchmark themselves against countries that are already inside the EU and see where they might amend their framework to bring it more in line with EU standards.

Q: How is regulation impacting market outcomes?
A: Some, like the German or Spanish governments, justify inaction on the basis that they want to promote investment. What we have consistently found is that countries that have the most active regulators and don’t sit back and just leave the market to its own devices, also have the highest investment levels. Telecoms, particularly fixed telecoms. are not a naturally competitive market. Particularly in these times of recession, I think everyone accepts that you are not going to get lots of parallel, duplicate fibre access networks, it is just too expensive. If you want to make the most of your network that you have, people get good prices, you find that you get much more take up of it, that will tend to expand the services on offer and desire for them which in turn increases the case for investing in more fibre access. It might sound counter intuitive that regulation effectively increases investment in the sector but we find that year after year after year. I really hope that those countries who want to promote investment in telecoms begin to look at things a little bit more holistically.

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