18 February 2000

Jean-Eric de Cockborne
Head of Regulatory Framework Unit (A/1)
Information Society Directorate-General
Rue de la Loi 200
B-1049 Brussels

Dear M de Cockborne

The UK Service Provider Interest Group, SPIG, which represents the interests of independently owned service providers, welcomes the opportunity to respond to the 1999Communications Review. SPIG members supply fixed, mobile, Internet and content services. A list of members may be seen on the SPIG web site, www.spig.org.uk.

General comments

SPIG welcomes and applauds the general intention to achieve competition and consumer choice together with the policy principles that the Commission has set out to achieve it. In particular:

• We agree that there should be a single regulatory framework for communications infrastructure and associated services so that the historic differences in regulation now applied to similar end products are removed;
• We agree that there is no distinction between delivery systems and that Internet protocol transport should be treated in the same way as other transport services;
• SPIG supports the move towards operator licensing by means of general authorisations, except where there are scarce resources such as radio spectrum, numbers and copper access;
• We agree that there should be common principles for the regulation of access and interconnection across all communications infrastructure;
• SPIG recognises that co-operation between the Commission and the NRAs should be improved and firmly believes that all work should be conducted in a transparent manner.

In common with other industry participants SPIG has interpreted the Review document as setting out rules that relate to markets and not technology.

We believe that Directives arising as a result of this Review should cover the achievement of competition in both call origination and call termination if customers are to have a real choice.

Local loop unbundling is in our view one of the most important ways of promoting the rollout of broadband services and we support both the publication of a Recommendation on the technical and economic aspects and the setting of a target date for LLU of December 2000. We note that the UK Chancellor of the Exchequer is urging Oftel to bring forward the date of July 2001.

Indeed, access to dominant, oligopolistic and SMP network infrastructure should all be mandated, and operators should not be allowed to cherry pick the market by first mover advantage nor discriminate who has access. Exclusive content arrangements across gateways to scarce resources such as numbers, radiospectrum and copperwire, as well as IP interconnect and IN functionality are discriminatory. We are concerned that de facto monopolies may be set up by using propriety equipment and supply, for example ADSL by BT.

There has been some concern expressed, for example in the UK sector workshop on 4 February 2000, that the SMP tests are unclear. It is important for the Commission and NRAs to work carefully to define the tests so that all participants are fully aware of the rules.

Clear definitions of markets based on published analysis are needed in order to apply the regulations.

We propose that they include:

• Geographic markets e.g. how many competing suppliers are in rural Leicestershire;

• Service and product markets e.g. pre-pay mobile as distinct from the general mobile market, call origination, call termination, narrowband, and broadband.

Underlying a regime of competition and consumer choice has to be fair competition, without which, we believe; the competitive edge sought for the EU market will not be realised.

To achieve fair competition:

• The regime has to address the major problems associated with
• Leverage across markets
• Leverage of incumbents
• Joint domination
• Vertical integration;
• Strict controls on the leverage of dominance in one market into another are needed by the regulatory authorities e.g. BT in all UK market sectors that it occupies- including Internet transport, ADSL, PSRCP/ BT Airwave;
• The complaints based regulation system has to be changed. The current system is slow and biased against smaller players. UK experience shows that it always favours the incumbent;
• For service providers and others true wholesale cost based pricing and not the currently preferred retail minus pricing has to be in place;
• The instances of joint dominance e.g. BT Cellnet and Vodafone, have to be tackled.

A recent example of collusion among operators has been seen in Hong Kong. While Hong Kong is one of the most liberalised environments anywhere for mobile phone networks, with six operators serving 6.8 million people, this high level of competition did not prevent the operators raising their fees simultaneously, and by the same amount, at the beginning of the year. Amid user indignation, the operators claimed coincidence. An investigation by the regulator unearthed evidence of collusion and the operators withdrew their increases.

Substitution of mobile for fixed telephony is already in place in the UK, for example:

• Among college students for voice;
• Internet access;
• Pre-pay for those who have no fixed phones;
• The "un-phoned " as described by consumer groups;
• There are comparable tariffs at certain times.

Consequently regulations that are currently applied to fixed operators, for example in the RVTD and Interconnection Directives, should also be applied to the mobile operators. Mobile communications is an access mechanism like the local loop where the respective operators are dominant. There is no competition in mobile call termination, which could be overcome at a stroke by mandating MVNOs. Swisscom, for example, has recently announced a brokerage that could be used for national roaming.

We welcome the proposal for a Spectrum Policy Expert Group at EU level, which could well follow the lines of the UK SMAG, an independent advisory body to advise policy makers. Spectrum management is an increasingly complex issue and requires more sophisticated management to accommodate competing requirements.

We welcome proposals for greater continuity at EU level and for the EU to have a more powerful input to the WRC. On a note of caution, we suggest that efforts towards spectrum harmonisation in EU should not be to the detriment of well-established arrangements in individual states, for example the UK private mobile radio industry is thriving, but there are no directly comparable industries elsewhere in Europe.

Administrative pricing, which has been applied in UK will only be effective in seeking the spectrum efficiency gains sought if it is applied to ALL radio spectrum users including the broadcast and military sectors. The benefits of auctions (other than a tax) have yet to be seen. In any case they should be restricted to spectrum tranches for large public systems and not levered into more specialist spectrum uses. We support the Commission’s view that all revenue raised should be directed towards increasing spectrum efficiency.

We suggest that the universal service obligation should be retained for the dominant or jointly dominant operators.

We believe that the Communications Review provides a firm path for future Union telecommunications regulation, which together with a focus on achieving fair and effective competition will achieve the desired benefits for the EU as a whole.

Yours sincerely

Phil Sayer