3 Mar 2008
Viviane Reding, Member of the European Commission responsible for Information Society and Media spoke about 'The Wireless Growth Potential: the Economic Case for an Ambitious Reform of Spectrum Management' at the Joint dinner of the European Regulators Group (ERG) and the Radio Spectrum Policy Group (RSPG) in Gothenburg, at the end of last week.
This is what she said:
"Let me first thank Minister Torstensson for her kind welcome words, as well as Mrs Treschow and the Swedish regulator PTS for hosting this event which brings together for the first time the European Regulators Group and the Radio Spectrum Policy Group. This is a timely and worthwhile initiative to create synergies between the two groups in areas of prime importance such as future broadband infrastructures or the convergence of mobile and fixed communications.
I am particularly pleased to be with you today in a country which is at the forefront of the wireless economy, with an impressive 32% penetration rate for the take-up of broadband access. In Sweden today, 400,000 consumers have also a mobile access to the Internet at "megabit speeds" comparable to ADSL connections, for approximately the same price as the ADSL tariff. This is a form of convergence in practice! It illustrates the potential for mobile to complement, if not partially replace, fixed broadband access, and heralds the blurring of boundaries between markets for electronic communications services. This is why a closer cooperation between spectrum regulators and telecom regulators is becoming so important, and this is why a dialogue between the ERG and the RSPG can be so beneficial.
The growing economic importance of the wireless sector
I do not have to convince you of the economic importance of the wireless sector. I know that most of you already know the statistics I am going to highlight, but it is always instructive to reflect on what they mean for our everyday future.
The worldwide telecom market represents nearly one trillion euro or 3% of the gross world product. In this market, wireless services have, or are about to ? depending how it is measured ? overtake wired services in terms of worldwide revenue. According to several sources, wireless revenues are expected to reach 55 percent of worldwide telecom revenues in 2010, growing about five times faster than wired service in terms of broadband revenues (10% per year versus 2%).
Consumers can also feel the growing importance of wireless services. According to a large survey, ninety percent of home computer users worldwide believe wireless networks will become more important, or even critical, for their everyday life over the next five years. The market for wireless e-mails, now essentially limited to the business environment, should soon become a mass market, growing from 20 million accounts today, or 2% of all email accounts, to an estimated 350 million accounts by 2010, or about 20 percent!
We also know that the total value of services that depend on radio spectrum in the EU amounts already today to about ?250 billion, roughly 2.2% of our annual GDP.
But more important will be the overall impact of the upcoming mobile Internet.
Earlier this month, Google announced that it had seen 50 times more searches on Apple's iPhone than on any other mobile handset. This shows that if you can do it right for consumers already on a 2G technology, the future is limitless on the more advanced technologies that are being deployed. Our studies show that the share of private consumer use of mobile communications versus business use will increase dramatically. It is expected to reach almost 50% of the volume of business traffic by 2010 and will largely exceed it by 2015, probably by a factor of 1.5 to 2 in volume. All this will be the result of the public demand for mobile access to the internet!
However, the take-up of mobile data services in Europe is still hampered by high access prices. This is why I issued a challenge to the sector at the GSMA Mobile World Congress in Barcelona to see if the operators can deliver a competitive single market for data roaming services by 1 July this year. Otherwise, as Ed Richards from OFCOM has rightly stressed recently, we would have no other choice than to propose regulatory intervention again.
Finally, let me underline that mobile Internet has also another important potential, it is the potential to bring social networking to the next level ? mobile social networking! I believe that this phenomenon could "amplify" the influence of ICT on the society as a whole, and could affect profoundly the way social and business communications will evolve.
The next main telecom battlefield is therefore clearly mobile Internet, and "spectrum" is the critical ammunition!
The need for an ambitious reform of spectrum management
A competitive wireless economy is one of the main foundations of our Lisbon strategy as it will create more economic growth and jobs in Europe. This wireless economy must be driven by permanent innovation which generates fast-growing mass-market applications, and in turn by an effective internal market for wireless and wired electronic communications. Wireless solutions also promise to help reduce the digital divide, to increase mobility, to help emerging economies to deploy faster connections with lower infrastructure costs and even to reduce the price of communications by increasing competition.
It is therefore imperative to provide our society with the spectrum "fuel" it needs. Today, the scarcity of spectrum is, in my view, largely generated by inefficient management due to over-regulation and geographical and technical fragmentation. We need to establish an environment where the access to this rare resource will not constitute an obstacle to future developments and future innovation.
I hope that we can all agree on this diagnosis. The fact that we are all here this evening ? regulators as well as spectrum experts from all around Europe ? considering together common challenges is a good start for a more European approach. But the really difficult part is translating this into concrete steps.
If I were to sum up the essence of the Reform proposals concerning spectrum that the Commission put on the table last November, I would do so using just two words: better regulation. The proposals in different ways embed and reinforce a "better regulation" approach, so that when national authorities manage spectrum, they do so in an open, objective and rigorous way.
This reinforced "better regulation" approach is not about removing from national authorities fundamental prerogatives fixing how spectrum is used, but about ensuring that when these prerogatives are exercised, the openness and thoroughness of the process will serve as a guarantee that the spectrum is being used effectively, so that the social and economic benefits of spectrum can be maximised.
I am sure that many national authorities will see this as a challenge. It means leaving behind some of the comfortable arrangements of the past. It means more frequent reviews of how spectrum is used, for one thing, and of being open to claims that new techniques offer up new possibilities for rethinking how to manage the spectrum. But, and I think that this is often overlooked, it also means empowering national authorities to act more effectively in the public interest, and for economic growth.
This is not only because a more transparent and objective system opens up the prospect of a proper political debate, but because it clearly recognises the underlying public value of the spectrum in question. A system based on "better regulation" principles will ensure that there are incentives to use spectrum to offer the most valuable services to citizens and businesses. Most "valuable" does not mean only the most "profitable" services. We need to think in terms of optimisation of spectrum in a wider sense, integrating social, cultural and economic aspects. As the European Commission also stressed in our recent Communication on the Digital Dividend, there is a necessity to shift our focus from technical spectrum efficiency to an optimisation in terms of the value to society of the services underpinned by the spectrum.
One of the key objectives of the Commission's Reform proposals has therefore been to remove unnecessary rigidity in the system. Wherever we can, we need to remove the inflexibilities of the existing approach. We need to be able to identify spectrum bands where freedom of choice in technology and services, moves from being a principle, a statement of ideals, to a legal reality. This is what we are proposing in the context of the Reform. Of course, we are not creating a wireless "wild west" without rules or controls: the freedom of technology and services will have to be exercised within clear and strict pre-set limits, and respect essential technical rules to mitigate interference. We, the Commission will have to work long and hard with you, the national regulators, to arrive at such a result. But I am convinced that it will be worth all that effort. The technology is now ripe to allow a lot more of sharing of valuable spectrum without regulatory intervention. Such a reform would shift most of the responsibility of assessing the risks and opportunities of future investments from regulators back to the actors who are actually taking the risk, the investors and the users of spectrum.
In the same spirit, there is the general authorisation approach, the status of which, as you know, has already been recognised under our existing legislation. This approach, also commonly called the "collective use" model, has its advantages: it helps innovators to have rapid access to spectrum with few administrative modalities and without making long-term financial commitments, and it has also been shown to work well in the case of WiFi and other mass market applications. In addition, it seems to be considered by many experts as potentially conducive to the emergence of "breakthrough" technologies, for example in the field of Ultra Wide Band (UWB) applications, and also when moving towards systems beyond 3G which are expected to include hybrid solutions using a mix of network infrastructures.
Flexibility also needs nurturing where individual licences are required by Member States. One of the tools that might be used is the possibility for Member States to choose to make particular spectrum bands tradable, and where there is agreement among Member States to do this at EU level. We do not propose to force anybody to buy or sell spectrum, but where spectrum trading (including spectrum leasing) is applied, it has the potential to allow a more dynamic redistribution of spectrum to the most valuable uses as well as to act as an efficient incentive mechanism to release unused or under-used spectrum. In addition, it increases opportunities for all, including newcomers, to have access to spectrum, thereby promoting effective competition on the market. The initial Commission study conducted in 2004 showed potential benefits of up to 8 or 9 billion ? in annual consumer surplus if spectrum trading and flexibility could be introduced in a consistent way across Europe. 30% of the potential benefit was estimated to be due to a common introduction of spectrum trading in Europe and that is why we introduced in the telecom Reform proposals some provisions to encourage coordinated approaches between Member States.
We are conscious that trading may create competition challenges and this is certainly one of the topics where joint advice by the ERG and the RSPG would be very welcome.
Let me address upfront a traditional objection to the introduction of spectrum trading that I often hear. Some critics say that spectrum trading means "mega auctions", which turn mainly into revenue-raising exercises for governments and leave the weaker market participants and the innovators, out of the game. I know that fierce controversy surrounds the earlier use of the auction-based assignment approach. We will not resolve that controversy tonight, but I would like to contribute some thoughts. In fact, it is the inflexibility of the spectrum distribution system itself which caused most of the anomalies and wild swings in price in previous auctions. In the case of the 3G auctions in 2000 and 2001, the auctions themselves were not the problem. It was the fact that there was no clear perspective given to investors on the future availability of additional spectrum. This may well have encouraged wishful thinking among many investors, who therefore implicitly assumed that the awarded 3G licences would give them some kind of "oligopoly rent" in the long term. Some bidders may also have felt that they were in a "do or die" situation, needing to acquire a licence or ultimately go out of business. All these elements have nothing to do with the intrinsic value of spectrum.
In any case, as you will know having studied closely the Commission's Reform proposals of last November, we draw a distinction between primary assignment of spectrum licences and secondary trading of licences. Our proposals do not address the issue of primary assignment, with the exception of agreed cases of coordinated selection procedures for pan-European services. In other words, unless Member States agree otherwise, it is up to individual Member States to determine the mechanisms used, for example, a beauty parade or an auction, to assign licences at national level.
A vision for "Wireless Europe"
I would like to share with you my vision of a "Wireless Europe"; a Europe whose sophisticated mobile market drives the Mobile Internet, the next big infrastructure development in the race for the "future broadband". For this to happen, our industry needs to innovate and identify the most attractive business propositions in a truly competitive internal market.
For this vision to become reality, our regulatory framework and licensing regimes have to be capable of evolving. I already mentioned how we have to put in place a more flexible system delivering easier access to spectrum.
But we should not stop there. We need to consider whether an approach based on uncoordinated national licensing systems always acts in our common best interests. Let me explain.
At present, all terrestrial networks in Europe are focussed on "home" markets. Four or five operators have multinational operations but they essentially operate in national markets, rather than as integral parts of truly pan-European networks. If you compare this situation to the US mobile market where there are 4 national carriers covering all states, you can immediately see the difference. The reason is of course rather straightforward, namely that the licensing procedures in Europe are still very much national.
This would be fine if it weren't for the fact that technologies that promise mobility tend to be used by consumers and businesses in precisely that way. Not surprisingly, they travel, they cross borders between Member States and they do so with ever increasing frequency. Regulation in Europe should not stand in the way of such mobility but accommodate it and facilitate it. Otherwise we will never be able to realise the true potential offered by new technologies and we shall needlessly hamper the competitiveness of the EU's economy. That is why we need to think carefully how we can deliver a European regulatory framework that is fit for purpose. If we fail, our businesses and especially consumers will not thank us.
Uncoordinated national licensing procedures mean different individual rights holders in different Member States subject to varying conditions, holding rights of different duration, granted under different procedures, some using auctions others not. The resulting patchwork has a negative influence on both internal competition and our ability to compete on a global basis. National licensing regimes in other words play a big part in fossilising national market structures.
And as you know one thing tends to lead to another. National market structures underlay the problems we all faced in dealing with the problems of international voice roaming.
In this vision of "Wireless Europe", it would pay to think outside the box. It would pay to look forwards, to look to the potential of a technology to be utilised on a cross-border basis. Where this would be the case, it would be appropriate to ensure a smoother and more timely EU coordination of the introduction of innovative wireless services. The two aspects, competition/de-regulation and EU coordination, are not incompatible, they are complementary.
Let me take a few examples where we have some concrete experience now. The first is the case of Mobile Satellite Systems in the so-called 2GHz band. I am confident that we will reach soon a solution but it will have taken two years of preparatory work and negotiations, before even starting the selection procedure. Do we really have to go through these lengthy procedures? There must be a better way of doing this in the future and our reform proposals are showing the way.
Another example of a service with a pan-European dimension is that of Mobile Communication services on Aircrafts. I believe that we are nearing an acceptable solution to allow this service, even though this is very cumbersome and time consuming with the current set of tools at our disposal at EU level.
These two cases demonstrate that there is already a vision for cross-border or pan-European services. In my view, however we could achieve more certainty for investors, more innovation by industry and more benefits for citizens if we had more efficient regulatory coordination mechanisms in place, in particular for authorisations.
It is also important for the future of "Wireless Europe" to recognise that economic operators may have an interest in a wider geographic scope to their licences. More flexibility in this sense would allow different business models to evolve. The recent 700 MHz auctions on the Digital Dividend in the US have clearly shown that there is an added value in offering packages of spectrum including both national lots and regional or local lots and also in some cases the possibility to combine those. It has also confirmed the view that more flexible access conditions increase the attractiveness of spectrum.
So, an ambitious spectrum reform in Europe should ensure that economic operators have more freedom to both use spectrum in a more flexible way but also to assemble spectrum in geographical packages - this means local, regional, national or across borders - to compete and innovate in a genuine internal market without borders
On a more general level, the vision of "Wireless Europe" will be needlessly impeded without more effective coordination of the EU position in international spectrum negotiations. I have to say that, as Commissioner concerned with European interests, I was disappointed by the experience of Europe's performance in the two recent major ITU international treaty-making conferences, the RRC-06 and the WRC-07. While European delegates in CEPT proved very competent to develop technical issues, Europe failed in my view to anchor sufficiently the policy and economic dimensions in these negotiations, as we did not really manage to adopt and defend clear common political positions at EU level on very sensitive topics. The results are therefore reflecting this lack of consensus! This is also an area where I would wish that Europe would work better to promote its own economic and social interests.
As you can see, a lot of work remains to be done. Spectrum is too important to leave it underused due to regulatory inertia or unduly fragmented national approaches. This is a clear example where we really can not afford the cost of "non Europe"!
The Digital Dividend as the next opportunity for Europe
The next concrete opportunity to provide our industry with the much needed wireless bandwidth is offered by the digital dividend. The 700 MHz spectrum auctions in the US have provided yet more evidence that the "digital dividend" spectrum is a very coveted substance. Traditional mobile operators have understandably shown a high level of interest by bidding substantial amounts but newcomers were notably also involved. The US has had the merit of showing the way to open up the digital dividend.
In Europe, we have however a more complex situation and we should be more circumspect, especially concerning the risks of indiscriminate use of auctions. We should recall the shortcomings of the 3G auctions as I mentioned, and consider the full mix of distribution methods available in order to maximise the overall societal, cultural and commercial value of this spectrum.
In November 2007, the European Commission set out our main objectives for the digital dividend. We believe a win/win situation is possible between the broadcasting and the wireless sectors if Europe adopts a coherent framework with shared objectives between Member States. Again, Sweden is exemplary and has just shown us concretely how such a win/win situation can be achieved. I understand that the broadcasters will receive additional transmission capacity, by accepting to reorganise slightly their frequencies to give room to a new spectrum "grouping" or "cluster" optimised for mobile communications services. This is very much along the lines of what we propose to do at EU level.
I am however still concerned about the apparent lack of ambition for tackling of the digital dividend in many Member States. I do not believe that the results obtained by Europe at the ITU conferences are ambitious enough. We could, I believe, go much further, also in terms of keeping pace with other parts of the world including emerging markets in Asia, Latin America and Africa that have are already taken much stronger and more open stands than Europe.
We cannot wait until 2015 to make a mobile allocation in the digital dividend spectrum if we do not want to be sidelined in our quest for Mobile Internet. I therefore call on you to help me convince national governments that faster and more ambitious action on the digital dividend is urgently required if we want to maintain and strengthen the competitiveness of our continent.
Ladies and Gentlemen,
I hope that I have been able to convince you that an ambitious spectrum reform undertaken together in Europe is essential. It should be based on a more economic and social perspective than the traditional technical and legal arguments that often prevail in spectrum discussions.
We all have an important mission to ensure the success of this ambitious reform. At the moment, the reform of spectrum management in Europe is a cornerstone of the Commission's proposal for the Reform of the Regulatory Framework. This single EU legislative action alone could add an estimated 0.1% to the EU GDP, a small increase in relative terms but representing a sizeable ?12 billion annually on a recurrent basis. "
 About 4.4% of total population in Sweden.
 E.g. The Insight Research Corporation
 Lexmark, Ipsos research survey involving 9000 home computer users worldwide, main markets.
 Based on the IPTS study on "the Demand for Future Mobile Communications Markets and Services in Europe", April 2005
 European Parliament study on "A common European Spectrum Policy: barriers and prospects"