How can ComReg best incentivise infrastructure-based competition?

damien

IrelandOffline are currently going through the latest ComReg consultation and before we send in our submission we'd like to hear your views. Over the next few days we'll post the most pertinent questions in the consultation here for you to comment on. We'd encourage you all to send in your own submissions too.

Taken from the ComReg Forward-looking Strategic Review of the Irish Telecoms Sector Consultation

How can ComReg best incentivise infrastructure-based competition?

4.2 Infrastructure-based competition

As stated above, the ideal outcome for telecommunications markets would be one in which operators using a number of different platforms – traditional fixed telephony network, cable TV networks, wireless, power line communications – compete vigorously with each other. This competition could take place either by the network operators providing services to end users themselves, or through the provision of wholesale inputs to other operators who then supply services to customers. In this ideal scenario, the focus of regulation would be likely to shift to ensuring the availability of scarce resources. Thus regulation might concentrate on ensuring the ready availability of spectrum, whether on a licensed or an unlicensed basis, or on resolving issues about the sharing of infrastructure (masts, ducts, manholes etc.). As pointed out above, however, there might still be a necessity for some form of regulation to ensure end-to-end connectivity, to ensure that new entrants are not disadvantaged vis-à-vis existing operators. It might be argued that the current situation is very far from the ideal. But decisions taken by regulators in today’s world can influence the rate of progress towards the ideal scenario. One of the most important issues is how the setting of access prices can influence the build-or-buy decisions of new entrants.

Telecommunications markets are not simple, and regulators are faced with a multitude of inter-related pricing decisions. If they give the wrong signals, they can perpetuate service-based competition at the expense of infrastructure-based competition. If they set access prices too low, new entrants will never have any incentive to build out their own networks, since they could never match the price of buying wholesale inputs from the incumbent instead. If they set access prices too high, they can artificially encourage entrants to build new facilities even where it is not economic to do so – the “inefficient entry” problem. This can damage competition in the long term, since new entrants may go out of business, investment is wasted and the incumbent’s position is further entrenched.

ComReg is conducting a separate consultation on its spectrum strategy (document 05/01a, “Preparing the Radio Spectrum Management Strategy for 2005-2007, available at www.comreg.ie), which proposes a number of methods for making access to spectrum easier and more cost-effective. Current trends in spectrum management are summarised in Section 10, “Spectrum”. Broadly, there are two main trends. The first is to define more precisely the rights and obligations attached to spectrum rights of use, with a view to allowing market mechanisms to operate wherever feasible. This involves creating tradable rights of use, and also allowing greater flexibility so that, for example, a given piece of spectrum is not 51 confined to a single application, such as broadcasting, but could be used for fixed, mobile, broadcasting or other uses, provided that interference is not caused to other users of the spectrum. This approach is intended to allow spectrum to be used for the applications where it is most valued.

The second trend could loosely be described as the “spectrum commons” model. In this approach, spectrum is regarded as a shared, rather than a scarce, resource. Wireless technologies which do not depend on an exclusive use of spectrum are already in the marketplace. Over the next five years, technologies which can intelligently adapt themselves to their spectrum environment – by varying the frequencies and power levels used in response to the level of interference encountered – are likely to emerge in commercial systems. Such systems are often known as agile, smart, cognitive or software-defined systems.

In Section 10, we invite comments specifically on our approach to spectrum
management. We would also appreciate suggestions as to how we can better
promote other forms of infrastructure-based competition.