22 July 2010
Strategic Review of Communications The Isle of Man Approach to Telecommunications Regulation and Spectrum Awards
PERSPECTIVE Part of the Ingenious Consulting Network
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Contents Foreword................................................................................................................................................. 4 1. Summary of the 2009 consultation................................................................................................. 5 Investment .......................................................................................................................................... 5 Competition ........................................................................................................................................ 6 Radio ................................................................................................................................................... 6 A forward-looking regulatory approach ............................................................................................. 6 Options ................................................................................................................................................ 7 Commission’s recommendation ......................................................................................................... 7 2. Summary analysis of the responses received ................................................................................. 8 Off-Island connectivity ...................................................................................................................... 11 Mobile Termination Rates ................................................................................................................ 11 Other issues arising from the consultation ....................................................................................... 12 3. The basis of telecommunications regulation on the Isle of Man.................................................. 13 4. Regulating Manx Telecom’s delivery of wholesale products........................................................ 15 Wholesale services offered ............................................................................................................... 15 Access conditions and price lists ....................................................................................................... 16 Equality of information ..................................................................................................................... 16 Confidentiality of customer information .......................................................................................... 16 Investigations and sanctions ............................................................................................................. 16 5. Regulating Manx Telecom’s delivery of retail products ............................................................... 18 Retail regulation of Manx Telecom ................................................................................................... 19 Investigation and sanctions .............................................................................................................. 20 Low-user measures ........................................................................................................................... 20 6. Other components of the telecommunications sector............................................................... 21 e-llan communications on-Island activity ......................................................................................... 21 The market for off-island connectivity.............................................................................................. 21 Pro-competitive measures in the mobile market ............................................................................. 22 7. Ensuring sufficient investment in the telecommunications infrastructure .................................. 23 Rationale ........................................................................................................................................... 23 Setting the targets ............................................................................................................................ 23 Monitoring the targets...................................................................................................................... 24 Sanctions ........................................................................................................................................... 24 8. Spectrum management on the Isle of Man .................................................................................. 26 Overall regulatory aims in radio spectrum ....................................................................................... 26 Commercial licences ......................................................................................................................... 26 Trial licences...................................................................................................................................... 27 Licence-exempt spectrum................................................................................................................. 27 9. The application of Competition Law to the communications sector on the Isle of Man ............. 29 The current competition regime ....................................................................................................... 29 Competition powers for the Communications Commission ............................................................. 30 10. Areas where details of the approach need to be finalised ....................................................... 32 The Commission’s Authorities .......................................................................................................... 32 2
Wholesale Products .......................................................................................................................... 32 Manx Telecom’s Retail Accounts ...................................................................................................... 32 Other Issues ...................................................................................................................................... 33 11. Next steps ................................................................................................................................. 34 Consultation on draft legislation....................................................................................................... 34 Primary Legislation........................................................................................................................ 34 For development by the Communications Commission ................................................................... 35
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Foreword This document is a follow-up to the consultation issued by the Communications Commission in December last year on proposed changes to the Island’s regulatory framework. The Island’s existing system of telecoms regulation largely dates from an era before the advent of mobile telephony, the internet and competition. As a result, it is increasingly unlikely to be able to deal effectively with disputes and enable the economic growth of tomorrow. In the consultation, the Commission laid out a number of options, including maintaining the status quo, moving to the standard European approach or creating an approach specific to the Isle of Man, based around strengthening competition in the retailing of services and ensuring investment in the Island’s infrastructure. The Commission recommended the latter option as being the one which would be most suited to the Island’s unique position. Most of the respondents agreed, and the Commission has therefore decided to pursue this course. The consultation document and accompanying Perspective Report described in broad outline what an Isle of Man specific approach to communications regulation would look like. Informed by the analysis of responses and the endorsement they offered, Perspective can now proceed to set out the elements of this approach in much greater detail. Specifically, in this document we are laying out the proposed framework for the retail and wholesale telecommunications markets and for the management of radio spectrum. A complementary document to be published at a later date will discuss the Isle of Man’s audio-visual media situation and makes recommendations to the Commission about the Island’s potential digital radio future. Although we describe the Isle of Man specific approach in detail in many areas, there remain some issues where further clarification and information from stakeholders will be required. These issues are also described in this document and we anticipate that the Commission will engage with stakeholders to resolve these issues in due course.
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1.
Summary of the 2009 consultation
Investment is key for the Island’s communications infrastructure to be wealth-creating. Competition is also important, but should be seen in the context of efficient investment.
Long-term visibility of the fixed infrastructure will give confidence to investing businesses, while innovation in fixed retail services and the mobile sector will be driven by competition.
The Island has three choices for regulatory approach: -
Continue with the existing regulatory arrangements Move to a standard EU approach, importing competition law principles Develop an Isle of Man-specific approach to communications regulation
An approach tailored to the Island could: ensure the communications infrastructure remains world-class; allow innovation in services for businesses and residents; and give the Island control in strategic decisions in telecoms and broadcasting
The Isle of Man’s ICT (Information Communications Technology) sector has been fundamental in developing the competitive edge enjoyed by the Island over recent years. The sector continues to grow and remains vital to the Island’s current efforts to further grow and diversify the economy. However, in the context of a global drive towards further development of communications networks, it is clear that for the Island’s infrastructure to remain leading-edge in our existing sectors and to develop new wealth-creating industries, investment is key. Because of this, the Communications Commission undertook a strategic review of communications on the Isle of Man. In this section, we discuss the consultation and the recommendations arrived at in it.
Investment The Isle of Man’s fixed network is unlikely to be able to meet the increasing demands of both consumer and business applications in the way that optical fibre technology could. Extending mobile broadband island-wide would bring these services and their wider economic benefits to residents in areas which do not currently have access. By encouraging investment, the Isle of Man could map out a course to either universal or localised roll-outs of faster fixed and mobile technology. This could offer residents cutting-edge services, and increase the attractiveness of the Island as a place for individuals to work globally.
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Competition In most industries, competition is used to ensure that high quality, innovative services are provided. However, this has often proved difficult with communications. Cost often means that fixed networks are treated as natural monopolies. Regulators, especially in Europe, enforce cost-based pricing on incumbent operators’ networks, opening them up to new entrants in service markets, bringing the economic benefits of innovation. But this can also reduce the incentives for network operators to invest in the vital next-generation networks. Although the mobile sector network costs are much lower, allowing a number of different network operators to be economically viable, some areas of the mobile sector have required regulation, such as the prices charged by operators for terminating calls on their networks. Competition in both retail fixed services and mobile has created tangible benefits for users. However, this competition could be weakened or threatened if the actions of incumbent operators prevent rival entrants from surviving in the market.
Radio There are three Isle of Man FM radio stations: Manx Radio, Energy FM and 3FM. They are funded by advertising, although Manx Radio also receives a substantial government grant. The sector faces a number of short-term and long-term challenges.
The current legislation does not distinguish between radio and television services or between services targeted to the Isle of Man and at a wider audience. There are no provisions for licence renewal. This makes managing the sector unwieldy.
A digital technology must be chosen to replace AM and possibly FM. The Digital Audio Broadcasting (DAB) standard, the UK and EU favourite, has been widely criticised for high network cost and poorer coverage, as well as being unsuitable for local and regional FM broadcasting.
The UK is currently considering criteria for setting a target date for switching national stations to DAB, which could have a material impact on the Island’s approach.
A forward-looking regulatory approach If the Isle of Man wishes to attract businesses that will contribute to its long-term economic potential then it must have a system of regulation that promotes long-term stability and investment. For the fixed infrastructure, long-term visibility will provide confidence to businesses seeking to invest in the Island, and allow a greater stakeholder contribution on the direction the Island should take. Innovation in fixed retail services and development in the mobile infrastructure are likely to be driven by competition, and the Island needs a regulatory approach which allows this.
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The Island would also benefit from using spectrum allocation to encourage businesses to take advantage of the innovative opportunities that result from the Island’s unique position. In summary, the approach should be effective, proportionate, agile and transparent.
Options Three broad approaches to communications regulation in the Isle of Man were provided: 1. Continue with the existing regulatory arrangements, with the Communications Commission using the legislation at its disposal to regulate communications networks and services. 2. Move to a standard EU approach, importing competition law principles to address the incumbent’s prices and behaviour, requiring legislation to create new structures, processes and powers. 3. Develop an Isle of Man approach to communications regulation, modernising the existing approach, around the principles of: developing a communications infrastructure that will maximise the Island’s economic potential, and tackling areas of concern through cooperation, resorting to competition law only if the prior approach fails.
Commission’s recommendation The first option would have been the easiest and cheapest in the short term, but would not have addressed the problems outlined in the consultation document. The second option could have offered lower prices; but it would not have addressed the investment issue that is important for the Island’s future, would have been overly and would have high regulatory and legal costs. The Isle of Man tailored approach, while requiring new legislation to modernise the existing laws, would address competition concerns by obtaining operator assurances on access. With a focus on investment, the Isle of Man’s communications infrastructure would remain world-class and allow for the delivery of innovative services for businesses and residents. The third approach also requires strategic decisions in telecoms and broadcasting. As the future of digital radio is presently uncertain, the Commission proposes to address the strategic issues in wholesale and retail telecoms before moving on to those facing broadcasting. Perspective has produced an assessment of global audio visual developments and the key regulatory challenges for the Isle of Man which the Commission can use to inform its considerations on the future of broadcasting on the Island.
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Summary analysis of the responses received
The Commission’s characterisation of the options was agreed with by almost all respondents.
Almost all respondents supported the idea of a tailored regulatory approach for the Isle of Man.
Respondents were generally in favour of first addressing strategic questions in telecoms regulation before those in broadcasting.
Other matters mentioned by respondents included dispute resolution and appeal procedures; the time and resource implications of the proposals; use of the BBC TV licence fee; and the management of spectrum.
The consultation received 22 responses, from a variety of stakeholders. The main points on the questions posed are summarised below.
Question 1: Do you agree with the Commission’s characterisation of the options available for communications regulation? This was agreed with in almost all responses. However, one respondent believed that the general approach was too centred on cooperation, and that there should be a more distant relationship between licensees. They stated that a more European-style approach, involving a formalised set of rules and obligations, would be a better way to avoid delays in the development of competition and services than the proposed choice of the ‘island-specific’ regulatory solution. It should be noted here that the consultation document, as well as the previous Perspective Report, have already laid out the reasons why the EU-style response is disproportionate to the needs of the Isle of Man. While there would probably be benefits for islanders in terms of some lower prices resulting from the adoption of EU-style regulation, there would be several downsides to such a move:
There would be a substantial increase in regulatory cost from the existing levels, as each EUdefined market would need to be investigated and modelled;
The rules would be substantially more complex to operate;
Incentives for investment in the Island’s future infrastructure would be much lower, in the face of pared-back costs being monitored in the access pricing regime;
The regulatory process would likely be slow, as complex analysis might be needed to resolve even trivial disputes.
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Question 2: Which option outlined above do you think will best serve the Island’s long-term interests? Option 1: Continue with the existing regulatory arrangements
The Communications Commission continues to use the Telecommunications Act 1984, the Broadcasting Act 1993 and the Broadcasting (Amendment) Act 2007.
Option 2: Move to a standard EU approach
Adopt the prevailing European model of regulating communications: the application of competition law to address problems; market entrants are protected through regulatory powers to investigate and act upon the incumbent’s prices and behaviour.
Option 3: Develop a tailored Isle of Man approach to communications regulation
regulation focussed on developing a communications infrastructure that will maximise the Island’s economic potential, and a regulatory approach that emphasises cooperation as the first approach to tackling disputes or areas of concern and resorts to competition law only if the prior approach fails.
Almost all respondents supported the idea of a tailored regulatory approach for the Isle of Man (Option 3). There were two main strands of reasoning for this:
In an age of global communications and trans-national ownership, the Isle of Man should make sure it can retain sufficient control of the direction and characteristics of its communication structure to make certain that the needs of its citizens are met;
The Isle of Man has an opportunity to develop its communications-based industries, and should develop its regulatory regime to benefit from the advantages of distinctiveness, and implement the appropriate regulatory control to do this.
For these reasons, and because of the small size of the Island’s communications markets, the option of importing a European-style ‘market forces’ approach was widely regarded as impracticable: there was a consensus that competitive forces couldn’t be relied upon fully. However, respondents also recognised the need for a realistic understanding of the benefits from competition that could still be retained for the Island.
These were mainly seen to be in retail services, with competition between end-user services’ suppliers differentiating through prices, quality and innovation;
An obligation on network monopolists to offer consistent wholesale pricing, including to their own services, would be needed.
One respondent believed that an EU-based approach (Option 2), applied proportionately to the Isle of Man’s size, would be the best way to ensure the benefits of competition for consumers, and could also be used to ensure a sufficient level of network investment from several licensees. However, the respondent also stated that, if Option 3 were to be chosen, there would need to be some elements put into place:
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There would be a pressing need for codes of practice to be put in place, to ensure elements such as dispute resolution were in place to prevent the incumbent operator from obstructing progress by competitors.
A ‘cooperative’ approach in such circumstances – for example in a pricing dispute between the incumbent and a market entrant – would be inappropriate, as it could be construed as collusive behaviour.
Furthermore, separated accounts would be necessary to prevent wholesale-retail leverage and to allow retail competition.
It should be noted here that these extra areas of detail are addressed in this document.
Question 3: In the context of the limited resources available to the Commission, do you agree with their suggestion that they should first address the strategic questions in telecoms regulation, before moving to those in broadcasting later in the year? Respondents were generally in favour of this proposal. Among the reasons given were:
Broadcasting does not threaten to hamper economic growth in the way that telecoms might, and so it is less imperative to address its regulation;
With communications developments moving as quickly as they are – through the impact of the internet, video on demand, listen-again, podcasting etc. – the broadcasting model is heading towards being out of date, and so it is less important to spend time and resources regulating a model that could be seen as becoming obsolete.
One respondent maintained that, notwithstanding this last point, broadcasting licence renewal timetables should be put in place as soon as possible to ensure transparency.
Although this strategic review prioritises telecommunications issues, this is not to say that important issues in broadcasting, such as the expiration of licences, will not be addressed.
Question 4: Are there any other points you would like to make regarding these matters? A number of other points were made:
The Isle of Man should develop a position on the BBC licence fee and its use on the island.
The proposals set out in the consultation represent considerable legislative and regulatory change, the time and resource implications of which should be fully appreciated. There should also be a timetable for regulatory reform.
Concerning the distribution and use of spectrum, should the Government allow OFCOM to continue the allocation and assignment of spectrum on the island, or should it seek more independence in these matters?
Dispute resolution and appeals
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One respondent called for dispute resolution procedures to be put in place before any other regulatory steps are taken. Another respondent, however, suggested that the dispute resolution process could be streamlined by the Regulator staying out of any such matters until commercial negotiation is agreed to have been exhausted. One respondent called for a clear and explicit appeals process to be created to give confidence in the regulatory system. There was a widespread consensus that both competitive pricing and technological innovation (e.g. universal Wi-Fi, 4G networks) are essential to attract and serve businesses and consumers. However, one respondent also offered the wider perspective that the communications infrastructure is only one of a number of factors that potential investors in the Isle of Man would take into consideration.
Off-Island connectivity The report by Perspective published along with the Consultation included a mention that the entry of e-llan Communications into this market had brought prices down (although they were still very high for Western Europe). One respondent countered, however, that the reduction in off-island prices was due mostly to other factors, such as lower prices for similar BT products and an increase in demand for high capacity connectivity from online gaming and similar activity.
Mobile Termination Rates The report by Perspective proposed the elimination, or reduction to a nominal amount, of mobile termination rates, arguing that large operators could take advantage of network economies to set low on-net retail charges, possibly preventing entry by new players. One respondent said that, while this proposal had intuitive appeal, it would not be in consumers’ best interests:
Zero termination rates would result in over-consumption of call minutes, paid for by increases in other charges (for example, the introduction of charges for receiving calls), penalising low users.
Some sort of distortion would be introduced into the overall telephony pricing scheme (fixed-mobile, on-off-island etc.)
The problem identified in the report was attributed to the commercial models used by the operators and therefore not one that required regulatory intervention.
This document is intended to give more certainty on the exact regulatory change that is being proposed, including detail on the system of dispute handling and the control of spectrum allocation. Establishing regulatory certainty and a measure of protection for businesses seeking to provide new products is essential for spurring innovation on the Island. With regard to mobile termination rates, it is worth noting that the EU Commission’s principle that these should reflect the actual incremental costs of terminating calls has been widely interpreted. In most cases, pressure by incumbent mobile telecommunications firms has led to these rates being set at above the incremental network costs of termination – it is difficult otherwise to see how off-net calls (subject to termination rates supposed to reflect the incremental network costs of termination) 11
are often an order of magnitude more costly than on-net calls (subject to the incremental network costs of termination). It is not necessarily the case that zero termination rates are correct; it may be that nominal rates may be better – this document begins the process of determining the final destination on these rates. Nonetheless, very low termination rates would remove a distortion in the market (the wild disparity between the cost of on-net and off-net calling) and would benefit consumers. Comments by stakeholders that services for low usage customers could be withdrawn seem somewhat unrealistic. The incremental costs for network usage are small enough that any incremental custom is likely to be profitable, especially if no handset subsidy, no telephone customer service and no paper correspondence are involved.
Other issues arising from the consultation Domicilium raised an issue with some wording on page 15 of the Perspective report. It suggested that the wording could be interpreted to mean that the ISPs are simply reselling the services of the MEA or Manx Telecom. However, while service providers on the island purchase wholesale capacity in many instances from Manx Telecom or the MEA, they usually have end to end control over the services they deliver and are not simply re-badging services provided by other operators. The Manx Radio Trust noted that their role in the regulatory affairs of Manx Radio had not been covered in the Perspective Report. It is acknowledged that the Trust, which acts as part of the regulatory regime for Manx Radio, was not specifically mentioned in the Report or Consultation Document. There was no intention to ignore or undermine the important role played by the Trustees in the effective regulation of Manx Radio. However, the major focus of the report and consultation was the role of the Communications Commission and the statutory powers it has to licence and regulate communications on the Island.
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3.
The basis of telecommunications regulation under the proposed Isle of Man Approach to Regulation Telecommunications regulation on the Isle of Man has three goals: o Competition in retail telecommunications o Investment in infrastructure o Maximising the value of spectrum
The size and nature of the communications industry on the Island mean that these can’t all be achieved through a European-style competition-based regulatory approach
The Isle of Man needs a tailored regulatory approach, combining agreed infrastructure investment targets with retail competition, all enforced by backstop competition powers for the regulator
The objective of telecommunications regulation on the Isle of Man will be to ensure three substantive goals:
Competition in the delivery of retail telecommunications to businesses and residents to help ensure high quality and innovative services. Investment in the Island’s telecommunication infrastructure to ensure that it remains worldclass Maximising the value generated by the Island’s radio spectrum
Achieving the first aim, that of competition in the delivery of retail services, will require different regulatory approaches to some areas of the telecommunications infrastructure than to others. In areas where infrastructure construction costs are relatively low, less regulation may be needed as there are fewer barriers to multiple firms possessing this type of infrastructure. For example, rollout of a radio access network can fall into this category. However, some elements of the communications infrastructure can involve very high construction costs, such as a fixed access network. In these high cost areas it may not be economically possible, or even desirable, for competing infrastructures to be rolled out. Therefore, these areas may require regulation to ensure wider access for service providers to these assets. In the Isle of Man, Manx Telecom is the only operator of a comprehensive island-wide fixed network, inherited from when it was the Island’s sole telecoms company. The delivery of a number of services such as fixed voice and data services to consumers and fixed services to most businesses require the use of its network. In some other areas, such as GSM mobile services there are alternative infrastructure operators, such as Sure. However, even in these cases, the delivery of a full consumer service may require the use of some of Manx Telecom’s assets, for uses such as mobile backhaul. Therefore, in order to ensure effective retail competition the Isle of Man specific approach must ensure that Manx Telecom provides necessary products to all service providers on the same terms. These are described further in section 4. Ensuring effective competition in the retail sector is made more complicated by the fact that Manx Telecom is a vertically-integrated operator, and its retail operations will be competing with other 13
service providers. Therefore, in addition to regulation of the market for wholesale telecommunications products, there may also need to be regulation in place in the retail market to ensure fair competition. This regulation will be limited in its scope and will be aimed to ensure that Manx Telecom’s retail arms are not being cross-subsidised by the wholesale operation. These are described further in section 5. Although much of the regulation in the telecoms sector is to ensure that operators can compete on a fair basis in the retail market, there are some other areas where a clear regulatory regime can help ensure open competition and minimise the ongoing regulatory burden. These areas include termination rates in the mobile market, the role of other wholesale providers and monitoring the market for off-island connectivity. These areas are described further in section 6. The second aim, to ensure that investments are made in the infrastructure itself, was also identified by the Commission as an important objective. This is essential to maintaining the long term competitiveness of the Isle of Man. Under the standard European approach, many providers of these necessary intermediate products were recognised to have market dominance, and were restricted to cost-based pricing. Although this reduced the prices faced by end-users in many cases, it also discouraged investment by the entity which controlled the core network elements. The Isle of Man specific approach is different, and as long as Manx Telecom meets agreed infrastructure investment goals (and provides acceptable wholesale products) then it should be exempt from competition investigation that could implement cost-based pricing. This process is described further in section 7. The third aim, of maximising the value generated by the Island’s radio spectrum, is most likely to be achieved if the Island takes on more autonomy in the allocation and management of licences. By creating a range of licences – experimental licences, trial licences and full commercial licences – and being more nimble than larger authorities in their management, the Commission can help to ensure the Island can exploit commercial opportunities that benefit businesses and consumers. This area is described in more detail in section 8. These regulations should, in general, ensure the smooth operation of the Manx telecommunications market. However, in some cases anti-competitive behaviour may transpire which could threaten the well-being of the Island’s residents and its competitiveness. In those cases, the Communications Commission should have back stop competition powers and should share concurrent powers with the Office of Fair Trading. These powers and processes are described in more detail in section 9.
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4.
Regulating Manx Telecom’s delivery of wholesale products
Regulating Manx Telecom’s wholesale products is vital to the effective functioning of a competitive retail market
Manx Telecom must offer wholesale products to other service providers
Price lists for these products must be made available to communications service providers
All retail providers must have equal access to information about these services
Manx Telecom Wholesale must not pass any data it receives in enquiries from service providers to its retail operation
The Communications Commission can investigate any alleged breaches of these conditions
Regulating the delivery of Manx Telecom’s wholesale products is one of the most important elements to ensuring the effective functioning of a competitive retail market. The central aim of this regulation will be to ensure that all retail service providers can compete on the same basis as Manx Telecom’s retail divisions.
Wholesale services offered Manx Telecom must offer products on a wholesale basis which use infrastructure that other service providers cannot economically replicate. This includes any products based on the following infrastructure:
Last mile copper and fibre access to homes and businesses Cross-island fibre links
A number of existing products are based on the above infrastructure and should be offered on wholesale terms:
Voice-call termination on fixed lines Wholesale broadband access Leased lines/private circuits
There may also be a number of future products which retail service providers may not be able to provide without access to appropriate wholesale products from Manx Telecom. These could include:
Video-on-Demand (VOD services based on Internet Protocol (IP) transport or equipment that needs to be installed at the exchange) Wholesale fibre-to-the-home 15
Wholesale line rental products
Access conditions and price lists These products must be detailed on price lists that must be made available to all authorised retail communications service providers on the island, preferably on a password-protected section of Manx Telecom’s website. Any changes to the prices of these listed wholesale products must be notified to the Communications Commission and stakeholders 6 weeks prior to their implementation. It is an important principle that all retail service providers obtain wholesale products from Manx Telecom on the same basis, including Manx Telecom’s retail divisions. Manx Telecom’s pricing must clearly separate fixed costs from variable costs and any volume based discounts to retail service providers must be rigorously justified.
Equality of information All retail providers must be able to access information on an equal basis about the services they sell or may wish to sell. For example, service providers must be able to access information about customer line length, and thus potential ADSL speeds and dates of line upgrades for residential customers. The number of lines already installed and location and ease of extension of private circuits might be areas relevant for the businesses market. The exact cause and status of service disruption, planned or otherwise, must also be made available by Manx Telecom wholesale. Some of this information is available but the exact details of the data that must be made available should be further clarified through a process of discussion with relevant stakeholders.
Confidentiality of customer information In its wholesale guise Manx Telecom will receive enquiries from service providers on prices and details of services they may wish to sell on to potential clients. It is vital to the effective functioning of competition that this data is not passed to Manx Telecom’s retail operation. Manx Telecom must develop a rigorous system to prevent this from happening, and must make the Commission and stakeholders aware of the details of the system. An audited report on the functioning of this system should be included in its annual report each year.
Investigations and sanctions The Communications Commission can launch investigations should it believe that the rules and principles laid out here have been breached. This would usually result from a complaint from another retail operator purchasing wholesale products from Manx Telecom, but could also be undertaken by the Communications Commission on its own initiative. However, in the case of a complaint from another operator, the Commission should not launch an investigation until the complainant can satisfy the Commission that it has brought its complaints to the attention of Manx Telecom and exhausted avenues of commercial negotiation. The Commission, when it begins an investigation, should have the ability to do a number of things:
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Add the investigation to a register of investigations Request documents privately from Manx Telecom Issue interim and final findings of an investigation
The Commission can do these things now under its existing procedures; however the Commission is limited in the actions it can take following an investigation, Should the Communications Commission discover that Manx Telecom has behaved in a way that has breached the wholesale arrangements described here, it should be able to issue fines or demand changes to behaviour or business practices. Should there be repeated failings such that the aim of this system – the ability for all retail providers to compete on an even basis – cannot be achieved using this method, then the Commission may in the future wish to consider stronger measures, including the potential application of competition law.
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5.
Regulating Manx Telecom’s delivery of retail products
Competition in retail services is vital to providing communications service subscribers with a wide range of innovative products and services.
A well-functioning retail sector provides price competition, innovation, service quality and choice
Regulating Manx Telecom Retail should allow other retail service providers to compete on a fair basis
This will involve requiring Manx Telecom to produce separate accounts for its retail business, including all costs incurred in producing the services sold by this arm
The Commission should be able to instigate investigations if it believes that the principles laid out here have not been adhered to
We now turn to how open and equal competition in retail markets (consumer and business) can be ensured, to give subscribers to communications services on the Island a wide range of world-class innovative products and services. The overall regulatory aims that should apply in the retail market are:
A well-functioning retail sector in the Isle of Man will be one that provides a number of elements: o
Firstly, service and product innovations, arising from the ability of independent service providers to compete on an equal footing with the incumbent’s downstream operations. This will be facilitated by the requirement for Manx Telecom to provide wholesale products on a non-discriminatory basis to all retail service providers, including their own retail arm. The target levels of investment from the regulation of the wholesale market should also allow more innovative and leading-edge products and services to be made available by retailers.
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Secondly, there should be a real choice between retail operators for residents and businesses, with a range of products for different needs and user types, including those that might attract new businesses to the Island, or allow existing businesses to bring more investment from outside.
Regulation should be conducted in the most cost-effective manner consistent with these aims, while maintaining adequate resources to facilitate the Island’s plans for the sector, and to enforce their targets and conditions. While the regulatory solution being put forward here would involve less micro-regulation, and therefore regulatory presence, than would be the case under a fuller, more European-style arrangement, there should nonetheless be
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sufficient resources available to the Communications Commission to take credible positions on enforcing this solution.
Retail regulation of Manx Telecom The primary aim in regulating Manx Telecom Retail is to ensure that other retail providers of services are able to compete on a fair basis. While it is not proposed that the Commission undertake extensive (and costly) investigations into, for example, the wholesale network accounts of Manx Telecom, there is nonetheless a minimum level of regulatory oversight that must be applied to Manx Telecom’s business in order to do this. The main feature of this regulation will be requiring Manx Telecom to produce fully separate accounts for their retail businesses. These accounts will have to demonstrate all costs incurred in producing the services sold by these businesses, with all costs shared with intermediate areas of the business separated fully and justifiably. Manx Telecom would be required to produce separate accounts for each of the following activities:
MT Fixed line consumer retail, distinguishing between their fixed voice and fixed data offerings MT Fixed line business retail, again distinguishing between their fixed voice and fixed data offerings MT Mobile division
These accounts must possess the following characteristics:
Transparent cost allocations (including total costs and methods used for cost allocation); Cost and revenue granularity that allows easy comparison against other retail providers; Completeness, in that the sum of amounts across the accounts must be equal to the total customer facing revenues and costs; The categories and methodologies should also be subject to approval by the Communications Commission, which may resort to external advice and assessment; These accounts must be produced annually, independently audited, and made publicly available.
Since we are not proposing price regulation of any wholesale products, the regulatory accounts for these retail businesses must be constructed to include all the costs that should be allocated to them, in order that other such retail businesses can compete fairly and have confidence that they will be doing so on an equal footing. Examples of costs that should be included in Manx Telecom’s retail business include:
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Marketing: All marketing and sales expenditure undertaken by Manx Telecom should therefore be allocated to the retail business, including an appropriate share of central overheads. Customer services and billing: as with marketing, all customer service costs, including call centres, should be allocated to the retail business. This should include all billing costs.1
There may be some exceptions, such as some call centre costs e.g. 999 calls shared with Sure.
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Equipment installation: the cost of all visits to customer homes to install telephony equipment should be allocated to the retail business. This should exclude, however, the cost of line installation and connection itself, as these are part of the wholesale business. Equipment costs: the cost of all retail-supplied customer-home-sited equipment, such as telephones, answering machines, internet routers etc, should be allocated to the retail business.
With these regulatory accounts available to the Commission, and the assurance they give (if compiled correctly) that Manx Telecom’s retail business is competing on the same basis, in terms of wholesale network access, as all other retail communications operators on the Island, the service choice and innovation described above should be able to flourish on the Island.
Investigation and sanctions As with the delivery of wholesale products, the Commission should instigate investigations if it believes that the principles laid out here have not been adhered to. Also as before, the Commission should not launch an investigation until a complainant can show that it has brought its complaint to the attention of Manx Telecom and has exhausted all the customary avenues of negotiation and arbitration. The Commission, when it begins an investigation, should have the ability to do a number of things:
Add the investigation to a register of investigations Request documents privately from Manx Telecom Issue interim and/or final findings of an investigation
Should the Commission discover that Manx Telecom has behaved in a way that has breached the retail arrangements set out here, it should be able to issue fines or demand changes to behaviour or business practices. Provisions should be made for the Commission to do this through the licensing system – i.e. there should be provisions in the legislation, and in licences, under which the Commission can require a licensee to modify its behaviour and fine that licensee if it doesn’t comply. Again, repeated infractions, with the effect that retail providers cannot compete on an even basis, could be met with stronger measures, such as the threat of more formal retail / wholesale separation. If the Commission is given sector-specific competition powers (as well as concurrent powers to those of the OFT – see the section on this), then it can require those involved to submit to undertakings dealing with behaviour believed to be detrimental to competition. With such powers, the Commission could also refer the matter back to the Council of Ministers for further action, as set out in the Fair Trading Act, to be taken.
Low-user measures Manx Telecom provides a light use option for its fixed line customers – Low User Choice – which has a lower line rental charge but higher call costs. It is important for such options to remain available to users, particularly in markets where economies of scale might not be as strong as they are in larger areas, such as the UK, possibly resulting in higher ‘standard’ line rental costs than prevail in these other markets. 20
6. Other components of the telecommunications sector
To aid retail competition, as well as to avoid damaging it, the role of e-llan should be limited to wholesale provision of connectivity to other service providers
The Commission will need the power or support to investigate anti-competitive behaviour in off-island connectivity markets
The Commission could consider regulatory intervention if termination rates in the Island’s mobile market do not decrease over time
e-llan communications on-Island activity e-llan Communications is, ultimately, a Government-owned entity licensed to provide private circuits that could feasibly play one of two roles in the Isle of Man’s communications market, either:
being active in the retail market, by selling island wide-links and off-island connectivity directly to businesses, or limiting its role to a wholesale provider of connectivity to other service providers
The consequences of e-llan successfully pursuing the first role might be that it encroaches on the margins of existing providers of business connectivity. The effects could be potentially damaging to retail competition on the Isle of Man, especially as e-llan is a publicly-owned entity. If e-llan were to limit its role to the second option, then this could prove more advantageous for retail competition on the island, as e-llan would not act on incentives to bypass the retail service providers. This would provide a useful counterpoint to the power of Manx Telecom in the wholesale connectivity market. The Commission should continue to work with colleagues in Government to ensure clarity over ellan’s position in the market.
The market for off-island connectivity At present, through BT and Cable & Wireless Worldwide (which appears to deal with its Isle of Man sister company on an arms-length basis), the Isle of Man has two suppliers of truly resilient off-island connectivity. e-llan provides another source of connectivity; however, its cable is not paired with another and so is less resilient than the services offered by BT and C&W. Reports from stakeholders suggest that there currently appears to be competition in the supply of off-island connectivity; however, some felt that the Commission should carefully monitor this market for any of the following signs: 1. Cable & Wireless International may begin a closer relationship with Cable & Wireless Isle of Man, or 21
2. On-island service providers may report difficulty in purchasing capacity or are notified of sudden price rises. If either of these situations were to occur, the retail sector on-Island could suffer. In the first case, this could be due to a particular service provider potentially getting favourable rates in this vital upstream market. The second case could potentially come about if an exclusivity agreement were agreed between providers and large on-island suppliers. The Commission would need the power, or support of other bodies with the appropriate powers such as the OFT, to investigate anti-competitive behaviour in these markets and take commensurate action.
Pro-competitive measures in the mobile market The mobile sector on the Isle of Man has two strong operators, each operating its own network. However, this level of network competition could be placed at risk if:
Manx Telecom’s leading position in a number of markets allow its mobile business to price at a level below cost through cross-subsidies passed on to it The high mobile termination rates on the Island allow both operators to offer an increasing number of free on-net call/text packages with the effect of locking in subscribers, preventing true consumer choice and stunting competition.
Measures to ensure that Manx Telecom’s mobile division publishes separate accounts will help alleviate the risk of the first point. These accounting measures were described in the previous section. High mobile termination rates can be detrimental to consumers and there is still scope for mobile network termination charges to be reduced on the Island, across all operators. Operators should be encouraged to engage in constructive negotiations to bring about a reduction in these rates. However, this may not happen voluntarily, or at least not without significant Commission pressure If progress is not forthcoming, therefore, the Commission should consider regulatory intervention in this regard. However, the case is not clear that rates for fixed to mobile termination require regulation. This issue is not as pressing as mobile-to-mobile rates but should be investigated by the Commission if necessary.
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7.
Ensuring sufficient investment in the telecommunications infrastructure
This Isle of Man-specific approach to regulation proposes that, given the market’s size, it is better to concentrate on fixed retail competition rather than network competition
The benefits for all retail service providers and customers of investment by Manx Telecom in those networks can be maximised through collaboration on investment targets
Goals should be set for developing the island’s infrastructure, with fulfilment allowing the exemption of Manx Telecom’s wholesale activities from EU based regulation
The Communications Commission will need adequate monitoring and sanctions, including the threat of investigation under competition powers, to make this plan work
Rationale Under the proposals put forward in the Isle of Man approach to regulation, Manx Telecom will retain an advantage in its ownership of the core fixed assets of the Island’s telecommunications network. We are aware that such a position could raise the prospect of consumer harm from high prices created by monopoly control. One way of dealing with such a situation is to apply EU remedies, either introducing competition into these markets or enforcing cost-based price controls. However, in many cases in Europe, governments have begun to recognise that such an approach may be bad for investment into the networks of the future. Manx Telecom has invested considerably in the Isle of Man’s communications networks and is well placed to carry on doing so, just as other operators are keen to invest and innovate using this network. However, it is clearly the case that many of the benefits from upgraded communications will not be wholly captured by Manx Telecom but will benefit the broader Manx economy. This being so, the Island can take a different approach from the standard European one. The Island and Manx Telecom could collaboratively develop and implement goals in terms of developing the island’s infrastructure. Should Manx Telecom successfully deliver these goals then its wholesale activities could be exempt from the application of formal EU style Significant Market Power regulation.
Setting the targets As already stated above, the level of investment that might bring the maximum economic benefit for the Island may be a level that is higher than that Manx Telecom would choose to invest in independently. This is because infrastructure such as telecommunications networks generates large externalities which cannot be adequately captured in pricing2. Therefore, there should be wide 2
See, for example, Waverman, Meschi and Fuss, The Impact of Telecoms on Economic Growth in Developing Countries: http://www.gsm.org/documents/L_Waverman_Telecoms_Growth_in_Dev_Countries.pdf
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input, from stakeholders across the Island, on the additional investment that Manx Telecom could undertake and options for collaboration and public/private partnerships also explored. Some of the potential areas for investment include:
Trials of fibre-to-the-home (ftth) connectivity. A number of nations are beginning the rollout of next generation superfast networks based on optical fibre technology. These networks can deliver dependable symmetrical speeds of 100 Mbps or greater. The cost involved in rolling out an entirely new network can be very high – up to £1000 per home passed – and a substantial roll-out in any country is unlikely to happen without public support. However, there may be substantial benefits in trialling such technology in certain areas on the Isle of Man. This might achieve a number of benefits, including beginning to understand the kinds of value these networks might deliver in smaller, nations; maintaining the Island’s reputation as an innovator in telecommunications and beginning to make the case for a wider roll-out.
Wider roll-out of fibre-to-the-cabinet (fttc) connectivity. A number of nations are using this technology to improve their data networks ahead of moving to full fibre networks. For example, BT in the UK recently announced that it would be rolling out fttc to 40% of the households in the UK by 2012. These networks promise download speeds approaching 40 Mbps. The Isle of Man, which has traditionally led the UK in data connectivity, has announced no such timetables, however Manx Telecom hope to have approximately a quarter of Island premises connected via fibre or FTTC by the end of 2010.
Agreed goals should be long-term efforts, using a time-horizon of five years, with some interim goals achievable after two and a half years. The Commission should work with colleagues in Government and consult with key stakeholders to ascertain the investment priorities of the Island, and then engage in discussions with Manx Telecom to establish the formal investment goals.
Monitoring the targets There could be two stages of assessment, an interim stage and a final assessment. The interim assessment could be conducted by the Commission two and a half years into the agreement. The Commission would assess whether the interim targets have been met and ascertain progress towards the full five-year target. It could publicly release a short document detailing progress so far. The full assessment could be conducted once the full five-year period is complete. This assessment should consist of a detailed report assessing whether the implementation of the spirit and substance of the agreed goals has been achieved by Manx Telecom. The Commission would then, with reference to the report, justify whether the collaborative investment approach has been a success.
Sanctions If the Commission judges that the investment agreement has been a success, then the process of setting goals can begin again.
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If the Commission judges that the investment targets have not been met, then the Commission faces a decision. It can roll over the targets into the next investment settlement, if it receives suitable reassurance from Manx Telecom. In this case it might be appropriate for the missed targets to have been met by the time of the next interim report. If investment targets are repeatedly not met or there is a substantial breach of the targets then the Commission can, as an ultimate resort, consider the application of wholesale competition remedies.
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8.
Spectrum management on the Isle of Man
Spectrum management should be used to get the most out of the resource for citizens of the Isle of Man
This would be best achieved principally through fixed-term, use-it-or-lose-it commercial licences, and short-term licences for research and innovation
However, it is also important that some areas of spectrum be licence-exempt (e.g. that used for WiFi). This has been highly successful in developing consumer benefits through technological developments such as ‘white space’ devices
Overall regulatory aims in radio spectrum As stated in the first Perspective report, the fundamental aim of spectrum management will be to ensure that this resource is used to the maximum benefit of the Isle of Man, and to recognise that the Island’s relatively light use of the spectrum may make it a suitable jurisdiction for trialling and innovating new products.
Commercial licences The award of commercial licences involving spectrum will be to ensure that there is effective competition and investment in particular markets, and that residents and businesses can benefit from the new services enabled. The Commission should consult on possible licences it wishes to award and may wish to award licences through a process of comparative selection taking into account proposed investment and service levels. The Commission should be under no obligation to award licences if it believes that levels of competition and investment are sufficient in a particular industry. Licences should possess the following characteristics:
Licences should be for a fixed term Licences should not be tradable between entities. Licences should not be liberalised, although licensees may apply to the Commission to have their terms of use changed
Renewal should be on the explicit basis of meeting investment commitments and delivering services. Licences should contain clauses which will provide for revocation on any of the following grounds:
Failure to meaningfully use the spectrum for the purpose it was awarded. These are also known as ‘use it or lose it’ clauses. 26
Failure to meet initial commitments on investment and service delivery in either the initial comparative selection process or a subsequent renewal Other serious, pre-specified, breaches of broadcasting or telecommunications code
Future licences should also permit the Commission to levy financial penalties if the breach of a clause in the licence does not warrant revocation.
Trial licences These are short-term licences which facilitate the testing and trialling of new and innovative wireless services These licences should bear the following characteristics:
Allow exclusive use of a particular frequency on a short-term basis Bear minimal cost and regulatory overhead Allow for commercial trials in certain circumstances but forbid the provision of full-scale commercial services Be simple to renew
The Commission should publish information about the Island’s unused spectrum resources. This, combined with an easy system for obtaining a licence, would provide a valuable tool for prospective users. The process of awarding these licences could become a key ‘selling point’ that might provide the Isle of Man an edge in exploiting this area. If this service could be largely automated, including investigating availability, applying for and granting of a licence, and real-time updates of usage and ownership. This might potentially justify the development of a web-based platform. Licences should contain clauses which will provide for revocation on any of the following grounds:
Causing harmful interference to existing legitimate users. The use of the spectrum for commercial purposes
Licences should also permit the Commission to levy financial penalties if the breach of a clause in the licence does not warrant revocation.
Licence-exempt spectrum Licence-exempt spectrum, such as that used for WiFi and certain microwave networks, has been highly successful in developing consumer benefits and new commercial ventures, and the Island should continue to adopt commonly accepted licence-exempt standards and bands. Some new licence-exempt technologies, such as ‘white space’ devices are being trialled and advocated by large corporations such as Microsoft and Google3. As part of its trial-licence
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White Space devices can detect and utilise the vacant radio spectrum in the TV transmission bands and then broadcast long-range high bandwidth signals. They are designed to operate without causing interference to TV reception or wireless microphones.
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programme the Commission should include these novel technologies on a more strictly controlled but contemporaneous use basis.
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9.
The application of Competition Law to the communications sector on the Isle of Man
The Isle of Man Office of Fair Trading monitors commercial activity on the Island and undertakes competition and pricing investigations
The Communications Commission, while intending to regulate the Island’s telecommunications through collaboration on network investment and measures to encourage retail competition, will nonetheless need the credible threat of competition powers as a backstop to enforce this Island-specific strategy
One model that the Tynwald Court could adopt in this is that of the UK communications regulator, OFCOM, which has concurrent competition powers to those of the analogous competition authority in the UK, the OFT
A better option would be to detail the Commission’s sector specific competition powers in new primary communications legislation
The current competition regime Under the Fair Trading Act 1996, the Isle of Man’s Office of Fair Trading (OFT) has powers (when instructed by the Council of Ministers) to deal with anti-competitive practices or pricing by businesses in positions of market power, under the standard definition that the behaviour “has or is intended to have or is likely to have the effect of restricting, distorting or preventing competition”. These powers include requiring the attendance of relevant persons to give evidence, as well as requiring the production of documents or other information such as estimates and returns. The OFT can also accept undertakings from the businesses in question to cease such practices. If such undertakings are accepted, the OFT continues to monitor whether the business can be released from the undertaking or whether it should be revised. If the process fails to result in undertakings from parties found to have acted anti-competitively, the OFT refers back to the Council of Ministers, who then decide if the matter should be referred to a ‘Commission’ (defined by the OFT as “any Department, Statutory Board or such other person or persons as are appropriate and they enjoy the powers previously mentioned”). It is the remit of this Commission to determine whether the practices concerned are anticompetitive and whether they might be expected to operate against the public interest. The Commission reports back to the Council of Ministers on recommended action, including possible remedies. If necessary, the Council of Ministers can task the OFT with obtaining undertaking from the companies concerned to remedy the situation, with the option to reinforce this with an order for the companies to comply.
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Competition powers for the Communications Commission There are no specific duties in either the Island’s Broadcasting Act or Telecommunications Act for the Communications Commission to ensure competition. However, the Isle of Man Fair Trading Act 1996 could be used in a similar way in the broadcasting and telecoms sectors, with the Communications Commission given powers concurrent with those enjoyed by the OFT in the way described above. One model for this would be the UK Competition Act 1998 ss369-372, under the provisions of which OFCOM (the UK communications regulator) has concurrent functions and powers with the UK Office of Fair Trading in the communications industries. Under such an arrangement, the following elements might be added to the Isle of Man Fair Trading Act. 1. A section describing the matters in relation to which the Communications Commission should have competition functions, for example:
the provision of electronic communications networks; the provision of electronic communications services; the provision of services or facilities associated with the first two areas.
There would also need to be explicit inclusion of broadcasting and related matters, and (if desired) a clause including the apparatus used in the functions set out above. There may also be a clause referring to how amendments to this list could be made (e.g. by the Council of Ministers) as appropriate. 2. A section on the Communications Commission’s concurrent functions under the Fair Trading Act 1996, specifying:
the functions of the Isle of Man OFT under the provisions of the Fair Trading Act to be shared by the Communications Commission; what these relate to (i.e. practices, behaviour, pricing etc); where references in the Fair Trading Act to the OFT should be read as including the Communications Commission; exceptions to this; provisions for deciding / allocating between the OFT and Communications Commission who should lead on a particular case; any other duties the Communications Commission should take into account in carrying out the functions given to it in this section.
The inclusion of clauses along the lines set out above would enable the Communications Commission to use the competition powers currently enjoyed by the OFT in reference to the communications industries – i.e. up to and after a reference by the Council of Ministers of the case to a ‘Commission’. Thus, if it were agreed by the Isle of Man Government and Tynwald that the Communications Commission should have backstop competition powers as an important tool to be able to use in implementing the new Framework for Communications Regulation on the island (in the way we have described above), then the best way for this to be done would be to detail the Commission’s statutory responsibilities and powers for sector specific competition in new communications
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legislation. At the same time, the existing Fair Trading Act could also be amended to give the Communications Commission concurrent powers.
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10. Areas where details of the approach need to be finalised What are the areas where further negotiation/clarification with industry/government is required, and how should the Commission expect to approach the process of achieving certainty?
The Commission’s Authorities The powers of the Commission should be changed to allow:
Variations in the licences of all operators so that there is an obligation to follow the Isle of Man specific approach as set out in this document and any future changes. The ability to levy proportionate fines on licensees should these obligations be breached The ability to apply competition law to the communications sectors through new primary communications legislation and through the application of the Fair Trading Act in the communications sector, concurrently with the Office of Fair Trading. The precise way in which this needs to be done – given the differences, for example, between the Isle of Man competition regime and those elsewhere – should be carefully considered by the Government and legal draftsmen.
This would probably require changes in the existing primary legislation (see section 11 below).
Wholesale Products Areas in which further details are required in the delivery of wholesale products include:
The products that Manx Telecom must supply on a wholesale basis. This requires discussion between Manx Telecom and other service providers to ensure that the correct products are made available by Manx Telecom. The provision of network information by Manx Telecom to other service providers. Again, multi-lateral discussion are likely to prove necessary to establish the type of data that other service providers would need and the manner in which Manx Telecom should provide it. The protection of information provided to Manx Telecom by other service providers through wholesale enquiries. The Commission and Manx Telecom would need to work together to construct a system to prevent information acquired by Manx Telecom in its wholesale provision capacity being used by its retail arms.
Manx Telecom’s Retail Accounts Issues on which further details are required in retail regulation include:
Establishing the exact format for the retail accounts that Manx Telecom must publish. This is likely to require negotiations between the Commission and Manx Telecom. Other service providers may also be able to provide useful input into what level of accounting may prove easily comparable. Financial advice, either from within government or an external expert, might be required before the plans are finalised.
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Other Issues Points that need clarification in regulating other telecommunications issues include:
Establishing a framework through which competitiveness in off-island connectivity could be monitored. Working to establish nominal mobile to mobile termination rates. Should operators not voluntarily agree to such a measure, the Commission could seek to implement such a change which would apply to all mobile licensees on the Isle of Man.
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11.
Next steps
What are the areas where further clarification work/negotiations with industry are needed?
Consultation on draft legislation Primary Legislation Firstly, we recommend that the Communications Commission should have its existing powers, as set out in existing legislation (the Telecommunications Act 1984, the Broadcasting Act 1993 and the Broadcasting (Amendment) Act 2007) modified to include measures that can be used to regulate the behaviour of licensees on a day-to-day basis. One model for this would be the UK Communications Act 2003 ss369-372. This would involve defining those matters in relation to which the Communications Commission should have competition functions, for example:
the provision of electronic communications networks; the provision of electronic communications services; the provision of services or facilities associated with the first two areas.
There would also need to be explicit inclusion of broadcasting and related matters, and (if desired) a clause including the apparatus used in the functions set out above. Furthermore, there should also be provision made for how amendments to this list could be made (e.g. by the Council of Ministers) as appropriate.
In addition, there would need to be a description of the necessary powers to regulate licensees in the areas set out above. Operators licensed by the Commission under the existing legislation should have their licences modified to include an obligation to follow the Manx specific approach as set out in this document, and any future changes (made by the Communication Commission or the Council of Ministers). The licences should also be modified to give the Communications Commission the powers to take a range of actions against licensees, including imposing proportionate fines, should these obligations be breached. The Telecommunications Act 1984 should also be modified to give the Communications Commission the power to levy proportionate fines on licensees for nonfulfilment of licence conditions.
Secondly, the Communications Commission should be given specific competition functions for the communications sector specified in new primary legislation and concurrent powers to those enjoyed by the Office of Fair Trading in applying the provisions of the Fair Trading Act 1996. Some of the functions of the Isle of Man OFT under the provisions of the Fair Trading Act should be extended to the Communications Commission. The Commission should be given the powers to deal with anti-competitive behaviour in broadcasting and telecommunications. These functions should include the investigation of possible anti-competitive infringements in the telecommunications or broadcasting sectors, including powers to request information and the ability to issue directions to correct the infringement or abuse. 34
In order to successfully achieve a concurrent arrangement with the OFT on certain issues a number of points will have to be incorporated into the new legislation, including the precise nature of the Communication Commission’s responsibilities in this area. provisions for deciding / allocating between the OFT and Communications Commission who should lead on a particular case; any other duties the Communications Commission should take into account in carrying out the functions given to it in this section.
Areas for development by the Communications Commission In addition to primary legislation there are a number of steps that the Commission itself will have to take. These can broadly be split into: defining details of the wholesale regulation defining details of the retail regulation
There are several areas in which further details are required in the delivery of wholesale products, which should be achieved by the Communications Commission through discussions with stakeholders. Firstly, the products that Manx Telecom must supply on a wholesale basis should be identified through discussions with Manx Telecom and other service providers. These may include wholesale domestic line rental; business exchange line rental; wholesale DSL line rental and backhaul services. We have already recommended that these products should be supplied on an ‘equivalence of inputs’ basis, but further thought must be given to issues around the timescales of offers, terms and conditions (including price and service levels); and the systems and processes, including provision of network information about such products. We have also recommended that Manx Telecom should supply commercial and technical network information to other service providers. This data might include: o o o o o o o
product development; pricing; marketing strategy and intelligence; product launch dates; cost; projected sales volumes; network coverage and capabilities
Again, a list of the data that communications providers can reasonable expect Manx Telecom to supply will best be agreed through discussion between Manx Telecom and other service providers Finally, the Communications Commission and Manx Telecom will need to work together to construct a system to prevent information acquired by Manx Telecom in its wholesale provision capacity being used by its retail arms.
There are some areas in which the Communications Commission and the stakeholders will need to establish further details in retail regulation. Key amongst these is to establishing the exact format for 35
the retail accounts that Manx Telecom must publish. This is likely to require negotiations between the Commission and Manx Telecom. Other service providers may also be able to provide useful input into what level of accounting may prove easily comparable. Financial advice, either from within government or an external expert, might be required before the plans are finalised.
There are also some points that need clarification in regulating other telecommunications issues in which the Commission can take the lead in establishing. These include the following include: Establishing a framework through which competitiveness in off-island connectivity could be monitored. Working to establish nominal mobile to mobile termination rates. Should operators not voluntarily agree to such a measure, the Commission could seek to implement such a change which would apply to all mobile licensees on the Isle of Man.
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