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Reding Wants 'European FCC'

Michelle Donegan
News Analysis
Michelle Donegan
10/15/2007
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European Commissioner Viviane Reding lifted the skirts on her regulatory reform package in a speech last week and has revealed that she is, true-to-form, ready to ride into a storm of political controversy with plans for a European regulator.

Reding told the European Regulators Group (ERG) that she wants to create a "European FCC," a European Telecom Market Authority. This new authority would have a "small, but permanent" staff and be accountable to the European Parliament.

The European super regulator idea has already drawn fire from incumbent operators as well as other European Commission officials. Some have dismissed the idea as saber rattling by the Commission in an attempt to increase its veto powers over national regulatory decisions. (See Reding Faces Resistance, Watchdog Dreaming, EC Reports on Regulation, and Reding Rattles Regulatory Saber.)

In her address to the ERG, a group that the European Telecom Market Authority could replace, she insisted that national regulators will continue to have a critical role and described the ERG as the "most important laboratory" for the new authority.

Reding said the new authority's role will be much like the European Medicines Agency in London, and that the Commission's relationship to the new authority will be one of partnership between itself and the national regulators.

This radical overhaul is clearly designed to prevent national regulators and governments from diverging from European telecom rules when it suits them. The highest-profile example of this is Germany's new telecom law, which allows a so-called "regulatory holiday" for Deutsche Telekom AG (NYSE: DT)'s VDSL network. (See EC Warns Germany, EC Sues Germany, and EC Challenges BNetzA.)

But Reding's reform doesn't stop with the super regulator plan. She also wants to give national regulators the power to split up incumbent operators into infrastructure and service companies when such a move is justified. This is called "functional" or "structural separation," whereby an operator's fixed-line access network business is hived off into a separate legal entity.

BT Group plc (NYSE: BT; London: BTA), at the urging of U.K. regulator Ofcom , was the first operator to implement structural separation with the creation of Openreach in September 2005. Now, Telia Company and Telecom Italia (TIM) are heading in this direction, and the Polish regulator is also considering this approach. (See Swedish Standoff, Telcos Consider the Splits, PTS Proposes Access Separation, and BT Opens Up Access.)

"Functional separation should be added to the remedies tool box of national telecom regulators, to be available for the stubborn cases where other remedies have been tried, but have failed to deliver the desired regulatory outcome," Reding said.

Functional separation and the creation of a European regulator are two of the most controversial plans in Reding's package, which will be published on November 13. But Reding is no stranger to controversy, and she has a recent track record of getting her way, particularly with her moves to cut mobile roaming charges and set the European standard for mobile TV. (See EU Adds Mobile Law and Reding Riles Mobile TV Players.)

Reding's plans promise a further shakeup for mobile operators. The new telecom package will include proposals to reform radio spectrum management so that spectrum can be allocated and regulated in a more uniform way across the European Union. (See Spectrum up for Grabs in Europe and EC Standardizes Spectrum Info.)

She is also not happy with the disparity in mobile termination rates across Europe and supports French regulator Arcep 's proposals for further cuts. (See EC Supports ARCEP and Reding's At It Again.)

Reding's reform proposals won't come into force until about 2010. Given the controversy involved, it looks as if telecom eurocrats will have a lot to argue about for the next couple of years.

— Michelle Donegan, European Editor, Light Reading

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rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:00:45 PM
re: Reding Wants 'European FCC'
What is the logic in adopting a messy half measure like functional separation?

Looking at previous communication network build outs the outcome without structural separation has been purpose built or application specific networks, e.g. one-way broadcast networks for video and two-way, bandwidth challenged circuits for voice calls. This is extremely limiting with respect to future innovations in a digital and compute intensive world.

With that said there is no existence proof, at least none that I've heard of, that structural separation will solve the fundamental deployment problem which is a lack of investment towards modern infrastructures. Maybe it's because separation does little towards mitigating the political attributes of the problem but rather increases them, and the vast majority of political solutions reinforce an entrenched status quo (despite the rhetoric.) The FCC behaviors are an example of this. So FCC enforced structural separation is likely another dog that will never hunt.
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:00:45 PM
re: Reding Wants 'European FCC'
One more thing. A regulator proposing structural separation without addressing the ROI needs of a wholesaler who puts large amounts of capital at risk is offering no solution at all. It seems to be more of an attempt at obtaining political power than it does an attempt towards solving the problem at hand.
hills@lightreading.com
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[email protected],
User Rank: Light Beer
12/5/2012 | 3:00:45 PM
re: Reding Wants 'European FCC'
Anyone have views on whether/when someone is going to bite the bullet and insist on full separation -- that is, split the incumbent into two separate companies for infrastructure and retail services? What is the logic in adopting a messy half measure like functional separation?
hills@lightreading.com
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[email protected],
User Rank: Light Beer
12/5/2012 | 3:00:42 PM
re: Reding Wants 'European FCC'
Suppose the incumbent were fully separated -- that is, the infrastructure/wholesale business and the end-services business were totally separate companies with different ownership and listings (which is not the case with the halfway house of functional separation, as they still remain under the incumbent's corporate umbrella). Suppose further that the incumbent's main service-provider competitors became major shareholders of the infrastructure/wholesale business, with board representation. Would that help the investment problems?
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:00:40 PM
re: Reding Wants 'European FCC'
Most likely not. Too much ideology and blind faith in markets. The real world is messier than that.
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