Glenn Fleishman has an excellent analysis of the recent 700MHz auction rules for "open platforms". For those of us who've been fighting for opening up access to the public airwaves, these rules offer a teeny-tiny baby step in the right direction. Unfortunately, there are loopholes large enough to drive the Titanic through, and even this incredibly modest proposal only covers a tiny section of one of the block of what is going to be auctioned. Meanwhile, as the analog TV frequencies are switched to their digital TV frequencies, we have (quite literally) a once-in-a-lifetime opportunity to open up the public airwaves that is being squandered at the altar of quick money (e.g., license auctions) while ignoring solutions that may maximize public utility.

Viviane Reding, Member of the European Commission responsible for Information Society and Media, gave a talk this past Summer, The Review 2006 of EU Telecom rules: Strengthening Competition and Completing the Internal Market.

James Enck wrote of Viviane's talk, "Little did I know at that time that Viviane Reding was about to drop the structural separation bomb" yet pointed to the seeming disconnect between current EU practices and support for the US telecom model:

I am puzzled, however, by the extent to which she seems to be enamored of the AT&T breakup (failing to mention that it has all but recoagulated over the past year) and the dual-infrastructure (DSL/cable) nature of facilities-based competition in the US. In my experience, none of the brighter minds in industry in the US are anywhere near as sanguine about the situation on the ground there, and many would argue that the entire access formula needs to be rethought from scratch.

Jim Kayne pointed to some extremely interesting highlights from the speech:

• First, at 45 billion Euro in 2005, European investment in the sector has overtaken investment in the US and the Asia Pacific Region.
• Second, a pan-European telecom industry is emerging. The search for economies of scale and the implementation of pan-European strategies, cross-border investment has driven merger and acquisition activity to above 70 billion Euros in 2005, the highest level since 2000. Incumbents today are receiving between 5 and 27% of their income from European business outside their home country. Some are becoming challengers in other EU markets even while remaining incumbents at home. This development is changing the market position, business orientation and also policy view of many operators.
• Third, good implementation of the EU regulatory framework is paying off. EU countries that have applied the EU rules in a timely and efficient manner, following the principle of competition, have clearly achieved the best results in terms of investment in new networks and take-up of new innovative services. The regulatory reform index of the OECD shows that those countries with a poor record of regulatory reform have less investment. While investment in the electronic communications sector is rather high in the UK (0.42% of GDP), Denmark (0.72 % of GDP) and the Netherlands (0.79% of GDP) -- in all these countries we observe, in principle, a very effective application of EU rules -- investment made in the German market reaches only 0.27%. The correlation between investment and competition in infrastructure in the EU is particularly visible in the broadband markets. Countries with strong competition between incumbents and cable operators tend to have the highest broadband penetration. Thus, broadband penetration levels in Denmark, Finland, Sweden and the Netherlands are all above 20% and have already left behind the broadband penetration level in the US.

  Europe's lesson from the liberalisation of the telecom markets is therefore: Competition has been a key driver for investment and innovation. This is a very important lesson also for other network-based markets, inparticular for the energy markets.

In Viviane's talk, she points out that "It is our aim to create a Single European Information Space in the field of electronic communications and media services by 2010. The main objective of the Commission’s strategy is to strengthen the forces of competition in the internal market, notably by modernising EU rules where needed." which would have similar purview as the US FCC, but is also empowered with governmental funding and a history of forcing common carriage and competition among incumbents and newcomers. She goes on to state:

In the Review 2006, I want to tackle three issues:
• First, spectrum – historically a rare public good – has become economically strategic in the wireless society. We urgently need to look at how we can use it more efficiently in the EU.
  • to strengthen the application of the principles of technological neutrality and service neutrality to spectrum allocation, where possible;
  • to introduce spectrum trading across the EU in selected bands agreed at EU level; and
  • to improve the coherence and consistency of authorisations for applications with a pan-European or a significant internal market dimension. Those who develop wireless services with a wider reach than a single country should be able to obtain a market entry authorisation as easily as those who offer services only in one Member State.
• Second, what concrete steps can we take towards better regulation? Liberalisation of markets has led to many remarkable successes in this sector. Now we have the chance to regulate less in some markets where competition is already effective, and regulate in a more focussed and more consistent way in markets where competition still has not yet developed.
  • The most effective way to achieve a real level playing field for telecom operators across the EU would of course be to create an independent European telecom regulator that would work together with national regulators in a system, similar to the European System of Central Banks. In such a system, national regulators would continue to act as direct contact points with operators and could directly analyse the market. At the same time, a light European agency, independent from the Commission and from national governments, could ensure by guidelines and, if necessary, instructions that EU rules are applied consistently in all Member States. I have personally insisted that the idea of creating a European telecom regulator is also included as a policy option in the impact assessment of the Commission Communication that I will present this week to allow a broad debate on all these issues.<
• Third, how can we best achieve competition and investment in Europe’s internal market? This will lead me to say a few words on the present debate on “regulatory holidays” and on structural separation in some EU Member States.
  • I understand of course that some incumbent operators are under a lot of pressure because of economic challenges and technological developments such as Voice over IP. However, I firmly believe that the response to these challenges must be new and more successful business models, and certainly not protection, by regulators, from competition. I simply do not buy the argument that investment will only happen if we stop regulating monopolies. In particular in network-based economies, effective competition does not prevent, but drives investment. The EU rules do not permit “regulatory holidays” precisely to prevent the re-monopolisation of markets. Any move in that direction would be a step backwards. It would open the door to higher prices and less choice for consumers. It is my firm belief that “regulatory holidays” are not a policy option for the Review 2006, where we want to pave the way for completing the successful process of market liberalisation. We cannot go into the future in reverse gear.
  • I believe that the policy option of structural separation could answer many competition problems that Europe’s telecom markets are still facing today. Perhaps we have to be as radical as regulators were in the US in the 1980s to make real progress? Of course, we will have to find our own European solutions, adapted to the needs of our continent. But “a European way of structural separation” is certainly a policy option that needs to be discussed intensively in the forthcoming months. This option is therefore also raised in the economic Impact Assessment attached to the Communication the Commission will adopt this week.

More info here, here, and here.