Chairman of the Congress,
Chairman of APDC,
Mr. Bernd Langeheine,
My dear Professor Aníbal Santos,
Ladies and Gentlemen,
1. Introduction
A year ago, I made the promise in this very same place to give to this congress the account of ANACOM?s regulatory activities in 2005. Choosing this place to make the evaluation of a year of sectoral regulation is naturally justified by the fact that APDC is a mandatory reference point for the debate of ideas in this sector.
The regulator?s intervention in 2005 was guided by two main purposes: to strengthen competition conditions on one hand and, on the other, to reduce some prices to consumers that were unbalanced with average European patterns.
Very special reference should be made, in these last twelve months, to the development of market analyses, which was made in accordance with a previously publicized schedule. This process involves three different phases ? markets definition, evaluation of existing significant market power situations and definition of obligations ? having included narrow band retail and wholesale markets, broadband wholesale markets, leased lines retail and wholesale markets and the market of call terminations in mobile networks.
Portugal is in a clearly advanced phase of this process, when compared with the remaining countries of the European Union. One should also underline that the notifications made by ANACOM practically did not receive any comments from the Commission, which stands for their technical and formal accuracy.
The implementation of the obligations defined in these market analyses had, as I will further detail, a very visible impact on the functioning of markets, by promoting competition and benefits to final consumers.
2. Creation of competitive conditions
Throughout 2005, ANACOM implemented a wide range of regulatory measures ? at the level of the incumbent operator?s wholesale offers ? in order to ensure level-playing field conditions for all market operators:
a) Firstly ? and because it is a strategic priority for the sectoral regulator ? conditions were created for an effective use of the Local Loop Unbundling by alternative operators. ANACOM focused gradually on deadlines, prices, compensations and procedures, i.e., on the items that are relevant for this offer?s success.
The regulator?s intervention had quite visible effects on the market. On the third quarter of this year, according to data released today by ANACOM, the number of unbundled accesses reached around 43,000 ? which, being a small fraction of the market, is 7 times higher than that of the same quarter of 2004 ? and an increase has also been registered in the number of operators using this offer.
b) Secondly, the set of interventions on the ?Rede ADSL PT? (PT ADSL Network) offer should be highlighted, namely the obligation of a 2 Mbps download class offer and the mandatory termination of any 1 and 2 Mbps broadband retail offers over cable before the entry into force of the corresponding wholesale conditions in the ?Rede ADSL PT? offer.
ANACOM ensured the existence of several complementary wholesale offers that are coherent amongst themselves ? IP, ATM and LLU ? thereby helping operators to climb the ?investment ladder? by investing in their own infrastructure, and giving way to increasing levels of diversity in the offers made available to final users.
c) It maintained relatively balanced wholesale conditions for interconnection and leased lines, at values slightly below the European Union?s averages;
d) It made the public hearings needed for the development of new wholesale offers that will strengthen the market?s competitive conditions:
- the Subscriber Line Resale Offer (SLRO) which will be on the market still in 2005;
- the interconnection flat rate, which implementation should occur at the end of the first quarter of 2006;
- and finally, the Reference Conduit Access Offer (RCAO) which probable implementation date is also the first quarter of next year.
e) It strongly reduced the termination prices of mobile operators ? which were amongst the highest in the European Union ? and defined a gradual reduction trajectory until October 2006.
3. Clear benefits for consumers
Although ANACOM?s intervention is primarily at the level of the wholesale offers, the final aim is naturally to translate the regulation activity into clear benefits for the final users. From this point of view, 2005 was an extremely positive year for consumers.
a) regarding voice, the price of local calls decreased around 6 per cent, while the price of regional, national and fixed-mobile calls decreased between 20 and 30 per cent;
b) the introduction of extremely competitive voice and broadband offers ? based on the LLU wholesale offer ? which in certain cases meant consumer price reductions of around 50 per cent;
c) at the debit level, the 2 Mbps class became the mostly used one ? already standing for about 50 per cent of all ADSL accesses ? which translates into very important consumer benefits;
The activity of the regulator ? naturally in parallel with the initiatives of operators and of other public entities ? gave way to a very fast growth of the broadband market. According to data today released by ANACOM, the total number of broadband clients increased 8.0 per cent in the third quarter of this year, regarding the previous quarter, and 51.4 per cent regarding the same quarter of the previous year. About 80 per cent of the new broadband clients chose ADSL technology accesses.
The broadband access penetration rate1 kept levels close to the European average (EU-25), and are even higher than those of countries such as Germany, Spain and Italy.
d) lastly, in the mobile segment, same on-net/off-net call tariffs were introduced, as a result of the size of the mobile-mobile termination decrease and also of the predictability introduced with the decreasing path that ANACOM imposed on mobile operators;
On this matter, it should be stressed that the final consumer prices of electronic communication services are practically the only ones ? if not the only ones in the whole of the economy ? with systematic reductions, particularly strong in 2005, which translates into important productivity gains in one of the most dynamic sector of the Portuguese economy.
Among several other measures in the scope of information to consumer2, the release by ANACOM of a Tariff Observatory at the end of July specially stands out. It was developed in close cooperation with the three mobile operators ? to whom I extend my public appreciation for their voluntary participation ? and it gives consumers the possibility of consultation, analysis and comparison of the tariffs available on the market. I am very pleased to announce the released today of the second phase of this project, widening the options available to users, namely the inclusion of SMS and MMS prices, which will strengthen, I am sure, the high acceptance that this initiative has already received.
4. Evaluation of the present conditions
The regulator?s intervention in 2005 was guided by two main purposes: the reinforcement of competitive conditions and the reduction of some of the prices paid by the consumer, which were unbalanced with European average standards.
In this scope, the adjustments of the wholesale offers ? a priority area for the sectoral regulator?s intervention ? were extremely accentuated: the installation of the local loop was reduced in about 60 per cent, its monthly fee in about 20 per cent, the price of the aggregated access in about 50 per cent, the monthly fee for a 2 Mbps local access in about 35 per cent, the interconnection prices in about 10 per cent and finally the mobile operators? terminations in about 30 per cent.
The size of these reductions clearly illustrate that previous competitive conditions were far from being the desirable ones; but it also indicates that the regulator chose a fast adjustment to the wanted levels, and thus it is not reasonable to predict reductions of this size in the future.
As already disclosed, ANACOM will launch a public consultation, predictably during the month of November, on the new wholesale conditions that will be in force after 1 January next year. We will thus know with an unprecedented anticipation all the prices of the wholesale offers to be in force in 2006, which will allow operators to prepare their offers with the needed anticipation. The degree of predictability of market conditions becomes therefore very high, with all the benefits entailed therein for operators and the financial markets.
The way the regulator evaluates them, the available wholesale offers are very rapidly getting close to the levels that are adequate to the specific characteristics of the Portuguese reality ? in terms of prices and deadlines. We now have the conditions to live in an environment of generalized competition in 2006 ? maybe as never before in the sector ? with the consequent benefits for consumers, in terms of prices, quality and diversity.
We may this way conclude that the regulator used the non-structural regulation tools which it considered adequate in face of the market flaws identified and of the specific characteristics of the Portuguese reality. Since regulatory measures take time to have effect on the functioning of markets, it is now justified that we take some time to analyse the extension of the benefits to consumers resulting from the regulator?s choices.
5. Main chalenges to the regulator
To ensure equal access and an efficient use of infrastructures
Under the present circumstances, it is important for the regulator to deepen the monitoring and supervision of its decisions? execution. The regulator has thus an important challenge in ensuring conditions ? reaching beyond prices and deadlines ? of equal treatment and access to the incumbent operator?s network by alternative operators. This means that the incumbent operator?s wholesale offers should be exactly the same whether they apply to its retail activity or to that of the new operators?, since uneven terms entail important costs to consumers.
The regulatory model foreseen by ANACOM favours an efficient use of the existing infrastructures. This efficient use ? which also stems from the promotion and checking of the conditions of access to the ducts of the public service concessionaire and to those of other public entities - is an extremely important item when promoting competitive conditions, creating externalities for the economics of investments made by several economic agents.
To foster innovation and the introduction of new technology
The regulator should create a framework promoting innovation and the introduction of new technology, thereby enticing the development of sustainable business models which translate into value added offers to consumers. It is its duty to ensure a regulatory framework that encourages convergence and the development of new infrastructures, new services and new equipment, but also with a high level of predictability.
Yesterday ANACOM submitted to public consultation a set of draft positions on voice services supported by IP technology (VoIP), with highlight to the opening of a new numbering range to host the nomadic use services, issues related with interconnection, quality of service and information to provide to final consumers. VoIP services already exist in Portugal and contribute to greater competition and diversity of services.
The development of VoIP services will pressure traditional voice operators ? by pressuring costs and decreasing barriers to the entry of new operators ? and will inevitably lead to reduction in consumer prices. In addition, it will be an issue to most common tariff systems, based on duration and distance. Anticipating these trends, ANACOM submitted several draft decisions to public consultation. I am particularly referring to the interconnection flat rate, to the subscriber line resale offer and to the conditions associated to the provision, by the incumbent operator, of offers aggregating under a sole price, network line and traffic ? which contribute to a gradual transition to new technological solutions.
Regulation has to follow and adjust to market evolution. It is in this sense that the process leading to the revision of the current regulatory framework in the European Union will be initiated, by the end of this year. This process ? which ANACOM is actively following-up in the scope of IRG in order to ensure adequate solutions to the Portuguese reality ? will naturally require the participation of all interested parties.
To ensure an efficient use of the radio spectrum
It is the regulator?s mission to manage spectrum in a way that fosters an effective and efficient use of bands ? which is a scarce economic resource ? based on objective, transparent, non discriminatory and proportional criteria. The efficient use of the spectrum is, besides, a privileged tool to promote competition and innovation.
ANACOM will promote in due time public consultations pondering a re-evaluation of the current radio spectrum tariff system and also a framework applicable to the transmissibility of the spectrum rights of use.
To foster knowledge in the sector
In its 2006-2008 Plan, ANACOM stated the purpose of actively contributing to a greater knowledge in the communications sector, namely by releasing studies on the sector, rethinking the institution?s publications and promoting seminars.
In this context I am pleased to announce the 1st ANACOM Conference, to be held in May of next year. Besides thematic panels with the participation of sector specialists ? national and international ? an invitation was addressed to the academy for papers on a wide range of issues, which also reinforces the bonds between the regulatory entity and the Portuguese scientific community.
As I said before, regulatory measures take time to impact the market, which means that some time should be given to evaluate the effect of the measures undertaken in the last 12 months. I promise today to make a new evaluation of the results of the regulation adopted by ANACOM in the conference of May 2006, which should be made in connection with the strategic purposes of the institution: to promote open and competitive markets; to foster benefits to consumers; to encourage innovation and investment in infrastructure.
Thank you very much.
1 The ratio between the total number of broadband accesses and the total population.
2 Three other measures are also noteworthy in connection with this area ? the approval of the quality of service regulation applying to the companies that provide the services of access to the public telephone network on a fixed location and of telephone on a fixed location; the setting of the guide-lines on minimum contents for electronic communications service contracts; the setting of the object and the way how the offer and use of electronic communication services are made publicised.
