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09/12/2016

Think tankers: Skype and telcos should be regulated in the same way

Digital

Think tankers: Skype and telcos should be regulated in the same way

From left to right: Pierre Larouche, Bruno Liebhaberg and Alexandre de Streel, from the Centre for Regulation in Europe (CERRE).

[CERRE]

The EU should have just two sets of rules for telecoms: one for infrastructure, and one for services, argue Alexandre de Streel and Bruno Liebhaberg. When similar services are on offer, the same rules should apply regardless of the technology, they contend.

Alexandre de Streel and Bruno Liebhaberg are respectively academic director and director general of the Centre for Regulation in Europe (CERRE), a Brussels-based think tank specialised in network industries.

They spoke to EurActiv’s Publisher and Editor, Frédéric Simon.

CERRE recently published a policy report on future regulation for digital networks, entitled An integrated regulatory framework for digital network and services.

The European Commission is considering regulating “online platforms” such as Facebook or Google Search. Do you see this as a protectionist move or, on the contrary, something which is long overdue due to the market dominance of some of these players?

Alexandre de Streel (AdS): So far, the Commission has just completed an online consultation. It is not yet clear which direction it is going to go. Our position on platforms, taken by my colleague Pierre Larouche and me in a recent CERRE policy report, is twofold.

First, it is not true to state that online platforms are not regulated. All digital services including online platforms are subject to competition law, consumer protection and data protection. The latter has even been recently strengthened. Therefore, what should be ensured today is that existing regulations are fully implemented and, in particular, that national institutions implement those rules.

Bruno Liebhaberg (BL): Second, the competitive dynamics of online platforms are not yet fully comprehended. The current level of technological and market development does not allow us to demonstrate convincingly whether or not there is, at this stage, a need for specific rules for online platforms.

Developing additional regulation on platforms today could be premature and slow down innovation. We are, however, not closing the door. The issue will certainly have to be revisited in a few years when we have a better understanding of the platforms’ competitive dynamics.

Some would argue that online services like Google Search or Facebook should be considered like public utilities. You don’t agree with that?

AdS: Again, for the reasons we just mentioned, it is too early to tell.

So where do you draw the line? From what moment can you consider that a platform has become big enough to deserve regulation in its own right?

AdS: The issue is not size, but understanding how the market functions.  And the market looks to us as quite dynamic at this stage. There is clearly competition between platforms and we are not sure that any of them is overly dominant.

Not even on search?

AdS: If there is a problem with search, then it should be addressed with the existing tools of competition law, which has been in place for more than fifty years and has been able to deal with big players. So let us wait for the outcome of the current competition cases led by the European Commission.

Platforms such as Uber have been criticised for disrupting the labour market and bypassing legislation on taxation or social policy. Is that not in itself a sufficient reason to regulate?

AdS: Regarding Uber and other sharing economy platforms, existing regulations have to be fully implemented. Unfair labour market disruption or tax avoidance can be addressed with current labour and tax regulations. It would not be acceptable that the non-application, or more lenient application of such legislation, provide sharing economy platforms with a competitive advantage.

I note, however, that because of the transparency of their use (i.e. payment by credit cards) that platforms should make the law more easily applicable than with current practices.

In a recent study, CERRE recommends regulating telecom networks separately from the services which run on them. This is very similar to what has been done in other areas, for example in railways, which has not been a success. So what makes you think it could work for telecoms?

AdS: First, we are not calling for a structural separation in telecoms such as what has been done with energy and, to a lesser degree, railways.

What we are saying is that a voice call through a traditional telecom operator should now be treated in the same way as one through an over-the-top player such as Skype or WhatsApp, if the latter fulfills the same functionality as the telco. Our motto is simple: same functionality, same regulation.

So to take a well-known example in Belgium, you are saying that Proximus and Skype should be regulated in the same way?

AdS: No, because Proximus is also operating a network infrastructure. And this network may have to be regulated. But on the service part, if the functionality is the same and the consumer expectations are the same, then yes, we think the same rules should apply.

So let’s assume this gets adopted today. Keeping the same Belgian example of Proximus and Skype, how would I feel the difference as a consumer?

AdS: One of the consequences may be that consumer protection regulations which apply to Proximus will also have to be applicable to Skype if the latter provides similar functionalities.

Skype would call this red tape, I guess…

AdS: No because we are not calling for a regulatory regime which is the same as the one Proximus is currently subject to. For us, calls through Skype or Proximus should be treated in the same way.

But we also argue that the current regulatory regime for telco services should be streamlined because the latter are now under strong competition from new services such as Skype or WhatsApp among others.

So what we are calling for is a streamlining of regulation for services which are identical in nature.

Big telcos would surely support such an initiative. Do you see any appetite at the European Commission or among the member states for doing something like this?

BL: The Commission is still currently in a listening mode. I have no doubt that at both services and cabinet levels, it is fully realised that the competitive landscape has changed. Consumers have a choice which is now significantly wider than when the current regulatory regime of 2002-2009 was developed. And choice is also now wider than it was only a few years ago.

Still, member states are keen to protect consumers. Do you believe such a deregulation agenda will be acceptable for member states?

AdS: Consumers will not be less protected than 20 years ago. At that time, regulation was needed because there was no competition.

Today, consumers are able to switch from their telco to Skype, WhatsApp, Viber or others, and therefore, one cannot deny that there is stronger or at least more vibrant competition than 20 years ago. In the new regulatory framework that we are calling for, consumers will not be less protected; they will be protected differently―and probably even better.

BL: We are convinced that the objective for EU regulators should now become the optimisation of the long term needs of end users and consumers. Today, when I want to look at a movie or make a call, I can indistinctively use my smart phone, my tablet, my desktop or laptop computer or my TV set.

So we recommend to the EU institutions to abandon the silo approach with one set of regulation for telecom services, another one for cable, a third one set for platforms, for e-commerce, etc. Let us have a clearer, more homogeneous paradigm with just two sets of regulatory frameworks: one for the infrastructure and another one for services, with limited, additional provisions for segments such as audio-visual media.

So you believe such an approach is met with a positive reception?

BL: We presented our recommendations at a stakeholder seminar last January, which was attended by EU Commissioner Gunther Oettinger and Belgian Deputy Prime Minister Alexander De Croo. All participants agreed that our proposals were making a lot of sense.

However, some questioned their feasibility, mainly for institutional or “realpolitik” reasons. For example, we were told, different directorates within the European Commission deal with the regulation of media, electronic communications, e-commerce, etc.  And in Parliament, there are different committees responsible – ITRE, IMCO, etc. Same in the Council, where you have the ministers in charge of competitiveness and others in charge of culture.

Therefore, some participants believed that our approach was too revolutionary to be feasible.

If those were the reasons, then we should really be concerned about Europe! Everyone agrees that the digital sector is the backbone of the EU’s future development. I hope that policy makers will get their act together and adapt the (micro-institutional) set-up if and as needed.

Over the last ten years, regulation of telecoms has centred around access to network infrastructure for new competitors. And conversely, ensuring incumbents who invest in the network get properly rewarded for doing so. With the technology fast evolving, is this debate still relevant today?

AdS: The debate is still very relevant and maybe even more relevant than before, because we need to invest in new infrastructures. Twenty years ago, when the liberalisation programme was launched, the idea was to open existing infrastructures to create more competition and be sure that the monopoly rent of the incumbents would disappear. That was the challenge twenty years ago―and it has now been met.

Is this really an achievement? Big telcos keep complaining that they were forced to share their network with competitors and that this acted as a disincentive for them to invest. So you disagree with them?

AdS: The programme of opening networks has been completed. The challenge now is to invest in the new generation networks, fibre, etc. For that, we need incentives to invest. The question is how to finance that. Is it through competition or through some kind of monopoly?

Our position is to say that if an operator is in a monopoly situation, it has to be regulated. But if there is competition, the operator does not need to be regulated. Our point is to focus on the long-term because more investment is needed than in the past.

BL: The regulatory framework that EU institutions will hopefully adopt within the next 18 months should bring clarity, stability and transparency for investment in the new networks. If that is not the case, then it will be very difficult to get those investments and meet the long-term interests of end-users.

Pascal Lamy recommended freeing up the 700 MHz band currently used by broadcasters for wireless broadband services of telecoms, in particular 5G. Could 5G spell the end of physical networks?

AdS: No, because what we see more and more is a ‘hybridisation’ between mobile and fixed networks. If you have 5G, data go ‘on air’ to an antenna and are then offloaded on a fixed infrastructure. So part of the network will be mobile and the other part will be fixed.

And you think the same set of rules can apply to these different networks? Satellites are quite different from fibre or cable networks, but you seem to suggest they can be treated in the same way.

AdS: If there are objective differences between networks, the latter must to be treated differently. For mobile networks, you need spectrum which is a scarce resource that needs to be allocated. This is not the case for fixed networks, which require a different type of regulation. It is not because networks become hybrid that each part cannot be regulated in its own way, according to its specificities and competitive conditions.

On spectrum, we are also in favour of enhancing policy coordination at the EU level. At a time when Europe is preparing for 5G which is a major industrial policy objective, mobile broadband development is essential.

One political question to conclude: the Juncker Commission has been in place for more than a year now.  Regarding the digital sector, do you think it is on the right track?

BL: Before the Juncker Commission arrived, we said loudly that there was a need within the EU institutions for more coordination in the regulation of network industries, not least because there is a growing convergence between those sectors.

So we were very happy when President Juncker announced the nomination of Vice-Presidents to coordinate key policy areas, including the Digital Agenda. In addition, the Digital Single Market (DSM) strategy presented in May 2015 is robust. We will now have to see what proposals will follow in the course of this year.

The Commission has just made a series of public consultations. As you will understand in the light of our recommendations, we regret, however, that those consultations have not taken place in a more integrated framework: there was one for electronic communications, one for media, one for e-commerce, etc. That is not necessarily a positive signal…

AdS: Let us not forget that one additional challenge for achieving the DSM is to enhance the coordination among the national authorities in charge of regulating the digital value chain. In many countries ―with the exception of the UK and Italy among others ― you have separate telecom and media regulators. In addition, you have a data protection regulator whose powers have been reinforced recently with the General Data Protection Directive. You also have a competition authority, sometimes a consumer authority, etc.

It is therefore important that all those national authorities coordinate with each other to ensure that regulation is consistent. And then similarly, at the European level, you also need to coordinate the different regulatory authorities.

BL: The real question is whether the Commission, and then the Parliament and the Council will be up to the challenge and regulate for the long term, as they did during the 1985-2000 period. Back then, the Commission was very much forward looking in its proposals. With the emergence of the Internet, it understood for example that for e-commerce services and the media, you needed to have home country control system to facilitate cross-border trade and establish the single market.

President Juncker said that if Europe misses the opportunity of the Digital Single Market, it will find itself in a very difficult position for the future. We can only agree with him.