Examination of Witness (Questions 275-279)
Dr Paul Rübig
27 FEBRUARY 2007
Present:
Eccles of Moulton, B
Freeman, L (Chairman)
Geddes, LLee of Trafford, L
Mitchell, L
Q275 Chairman:
We are very grateful to you, Dr Rübig, for helping us. We
are planning to produce our report by 27 March, before any formal
and final decisions are taken by Council and Parliament. We have
taken evidence from our own Minister and from the Commissioner,
and we would much appreciate your guidance and advice. Could you
help us to begin with, with some kind of opening statement as
to where you are in the Parliament?
Dr Rübig: First of all, many thanks for
the invitation. I am very proud and glad to be with you. As parliamentarians,
we know that it is necessary to see problems and to develop solutions.
I apologise not only for being a little late, but the weather
conditions are not the best! I am from Austria. There could be
heavy snow! I have to apologise also that my mother tongue is
not English but German, and I am Austrian—so it is a little
complicated! Overall, however, I think that the principle of the
internal market and transparency are two main issues where we
have to look to see how we can improve the existing situation.
I always use an example to explain why a framework is necessary
in this area. We have seen that within the Europe of the 27, on
the national markets in most of the countries, there is very good
competition going on. In my country, Austria, we have brought
down prices to 4.9¢ per minute; if you stay in your own network
it is zero cents. So you pay nothing for having a nice, long call,
1,000 kilometres from one end of the country to the other. However,
if you go across the border, if you go to Germany and phone Austria—which
is only two kilometres—you pay a minimum of €2. How
do we explain to our citizens that for a distance of 1,000 kilometres
you pay 4.9¢, so let us say 5¢, and if you cross the
border you pay more than €2? There are costs which arise,
of course, and there is the infrastructure; but, if you look at
the geographical border, it is such a tremendous difference that
something must be wrong. If you look at the European situation,
we have a problem in the telecom area. We have a north-south conflict.
If British people fly to Greece, Austria or Italy and if they
take phone calls there, it is very good for the Greek and Austrian
authorities. They make a wonderful margin with the tourists who
fly in, and therefore they are not interested in changing the
roaming only in favour of tourists. I have come from a small business.
Of course, there are a lot of small businesses around and the
costs which arise from roaming can be dramatic. A German journalist
covered the Tour de France. He was there for one month—to
me, that is too long, but journalists have special requirements!—and
at the end of that month he received a bill for €9,000. Not
everyone can afford these dramatic bills, and we have a lot of
problems with young people being bankrupted. They spend three
nights looking for the best flight from London to Athens; they
book it for £67; and, having made their first phone call
from Athens to their boyfriend or girlfriend, they find that it
is much more than the cost of the flight. That is not the way
that we should accept that the market develops. So the Commission,
over a long period of time, has asked for self-regulation. We
have seen that it works quite well in national markets, but in
roaming it has not developed to an acceptable standard. Commissioner
Reding therefore came up with a very tight proposal. First, it
is only for telephony. Secondly, it is only for roaming. So it
is not for our British or Austrian market; it is only if you roam
from one country to another country. Roaming means that if you
are going on holiday or on business to another country and, if
you phone, you pay and the other person pays. Receiving phone
calls and making phone calls, both sides pay. If I asked you how
much you would be charged if you were to phone London from Belgium,
would you be able to tell me? I think that no one can in real
time. Big companies have a special rebate system and exchange
of invoicing, but also the big guys cannot tell you exactly how
much it is at the time. It is like going into a restaurant and
being told, "I will find you the best wine, but I will tell
you the price afterwards". No one can accept that, if you
order a service, you are only told afterwards or you see in your
invoice what the charge is. This was the principal, very crucial
understanding. The Commission therefore concentrated on telephony,
only in the 27 Member States, only for cross-border calls. The
calculation is done by the termination rate. The old monopolists
had their own regulation in this field and, over many years, we
know exactly what fee was charged or calculated. With this fee,
we can build an average through Europe. With this average and
with this multiplier, we can reach a good solution in the wholesale
business. I am out of business. In economic terms, I am a liberal.
So I thought that we should also give the opportunity for self-regulation.
Industry always blames politicians for doing something that they
could do better. I agree. I want to open the door for the industry
to develop a stock exchange model. I have had talks with some
people in this area and they have told me that it is possible.
The stock exchange has certain rules and conditions which have
to be met, but I am not a specialist. Telecoms are much more knowledgeable,
and the specialists on the stock exchange should tell us what
they think could happen. This opening of the door is at least
a sunset clause: that if the industry is not satisfied with the
regulation at the political level, we have an open door through
which they can escape into the stock exchange model; then it is
purely market price. I always tell them, "Don't ask me how
this model should work. It is just what you have told us: that
self-regulation is the best thing that can happen. If you are
doing better, it is okay by us". Another very important point
at the wholesale level is the multiplier. What would be the real
cap on the wholesale level? What is the maximum which should be
paid? That is a purely political decision. There is not a real
model behind it. If you judge on a very low area—let us
say the multiplier is two—it will of course have a big impact
on competition at the wholesale level. The question is what are
you doing at the retail level and which multiplier you take there.
That is a political decision. I am the Rapporteur of the European
Parliament. I have not made the decision, because I have to represent
the people of Europe and therefore I have to find a good compromise.
I think that we should look for a compromise in how it can be
achieved between the Council and the European Parliament. We are
therefore very eager that the regulatory authorities stay on board.
They should maintain transparency; they should see that it is
going in the right way in the different countries. At the retail
level my idea—opposing the Commission's opinion—was
that we should keep all existing tariff models and all existing
contracts. Many people do not need to roam. We have approximately
500 million people in Europe; 150 million people are in roaming
procedures. It should therefore be the free choice of the customer
to opt out of the existing tariff. More than 300 million people
do not need it, and we should not force the telecoms to change
old contracts. Also, we are frightening people that their national
tariffs could be changed. My idea, therefore, is to keep the customer
tariffs and if someone is not satisfied with the roaming regulation
he can opt in to the regulated Euro tariff. In addition, I also
wanted a sunset clause at the retail level. Thinking of the future,
data transfer will be more and more important—SMS, MMS,
data transfer, mobile, TV, Internet use. From our TV and also
from Internet use, we are used to getting flat rates where you
pay per month for using the infrastructure. My advice to the Parliament
would be to ask for an all-inclusive flat rate, so that you know
that if you use your mobile phone, either by voice or data or
whatever, the maximum fee is, for the German journalist, €9,000
and for normal people hopefully only €19—like Vodafone
now has this Passport tariff. I think that it is therefore possible
to create a future-orientated situation, where we can compare
the different prices in a transparent way. We therefore have both.
On one hand, we have the Commission model for voice telephony;
on the other hand, we have a free market, where the industry can
develop and the customers can decide. Finally, one of the main
points is transparency. For me, it would be perfect if we could
have price information in real time, so that if you crossed a
border you would automatically receive a push SMS, where the prices
quoted are what you have to pay. That would also be a very good
instrument to educate people to be sensible on pricing. I think
that those are the main points. You have the European Commission
with a price cap model, and you have my idea with open doors to
the customers, so that they can keep their existing tariffs. If
they have no problems, why should we trigger them with new models
and new ideas? Those who are not satisfied can change to the Euro
tariff; those who really want to use the future and use all these
"bits and bytes" can change to the all-inclusive flat
rate. We therefore have a balanced system, where I think that
we could have a good solution for the future.
Q276 Chairman: Thank you very much indeed.
That is very helpful. Perhaps we ought to start by asking you
to develop a little further how you see the regulated European
tariff which individuals would have the right to opt in to, in
alternatives to the whole range of different tariffs and different
operators. Where would you set that? How would you set it?
Dr Rübig: At present we have the Commission
proposal and we have the idea from the Council. The Council told
us that the multiplier should be two, up to three; the Commission
is more at the level of three. The European Parliament is more
at the level of two. Of course, customer-orientated is more at
the level of two. If you go to industry, it is more at the level
of three. The Council came up with the proposal that we should
deduct five per cent every year. I think that it is not the most
important thing, because the termination rate by the regulator
is deducted every year. The old monopolists of course have to
have some time to get rid of stuff they do not need any more,
to get a better infrastructure. There are normally good relations
between the regulation authority and the companies, and so over
many years we have seen the price deduction slowly coming down.
That is also possible with the MTR rate, which is calculated on
a legal basis from the regulatory authority. My idea was that
we should give a chance to the regulatory authority to debate
the multiplier, because the multiplier is very easy to handle.
If you see that the market still does not work—after two
years, after six months, after three years—you can deduct
the multiplier. Maybe the best idea—I do not know what the
Parliament will decide—will be to start at a higher level
and make a breakdown in a certain time period and, of course,
to have a sunset clause that, if industry comes up with a stock
exchange model, they are free to charge whatever they like. I
am satisfied with the Commission's agreement that it should be
only a one-cap model. In the first instance, they came up with
two caps. I think one is sufficient, because it does not make
a lot of difference if you are phoning somewhere or if you are
receiving a call. We had a nice debate in my office. I wanted
also to have the principle of only the calling party pays, as
we had with fixed-line telephony. If you phone, you pay; if you
receive, you do not pay. A lot of people came to me and said,
"That's too dangerous. It's too far-reaching". I will
now ask the Commission to see if a further regulation is necessary.
I think it is a small step, but an important step in going forward.
Q277 Chairman: In order to get to the
retail, all-inclusive flat rate tariff, you would have to add
a percentage to what would effectively be what the Commission
calls the wholesale rate. If it is a multiple of two times the
mobile termination rate, you would come to about 25¢ a minute.
You would probably have to have a bit more for a retail cap.
Dr Rübig: That is only for the voice telephony
in the Commission model. The Commission came up with an idea of
a multiplier of 130 plus 30 per cent. It depends—and that
was the reason why I did not quote figures in my report—how
much the multiplier is at the wholesale level. If you have a very
small multiplier at the wholesale level, you have to have a higher
multiplier at the retail level. Let us see what the parliamentarians
will decide, and then we are flexible in negotiating what the
real figures might be. The all-inclusive flat rate, where you
can use your mobile, TV, Internet, any kind of data transfer,
and voice telephony, is a free tariff. It is not a regulated tariff;
it is all free. Companies can charge whatever they think in order
to stay competitive. Competition between a lot of companies will
show in which area—just as you go in a shop and you see
milk for this or that price, it is the same with telephones. You
will have an exact pricing and then you can choose whichever company
you wish. It is a model where the whole industry can escape price
regulation from the European Commission. If they follow my model
they can, within a short time, organise this stock exchange; they
can quote the flat rate; and they are totally free and independent
from European regulation.
Q278 Chairman: It is a sunset model that
you favour? In other words, after three years or whatever, this
freedom from regulation?
Dr Rübig: Yes, it is also in a negotiation.
The stock exchange could be much quicker, if they develop it and
it is well made. The all-inclusive flat rate could be done within
a very short time. We are negotiating with the Council, as you
have said, a three-year, two-year or five-year sunset clause.
That is still in negotiation. I am open to this debate. I do not
think that is the real question for me.
Q279 Chairman: By the "stock exchange"
we mean a wholesale stock exchange, similar to oil trading?
Dr Rübig: Yes, only wholesale, qualified
telecoms, certificated. A stock exchange is a very professional
business. Everybody knows the rules. We have the authorities checking
what is going on; it is transparent. Of course, the industry has
to develop a model which fits the individual needs of this part
of the administration. However, I think that, as politicians,
we should not present a model of how we think that it should be
done. The London Stock Exchange has enough qualified people who
can present a model which works. So it is a new business model
which could also have influence on the global stage, because this
trading is not simply a European question. If we do it for our
500 million people, you will see the New York Stock Exchange,
with half that number of people—Europe now having the biggest
buying power in the world. We are therefore in the lead in creating
this industry and to get them at the right level. I think that
our people in the stock exchange are clever enough to see that
there is a chance. Regulation is not always a matter of putting
pressure on the industry; it is also to set them free, to give
them the chance to develop in a new direction and to gain world
market. I think that we should give them the opportunity to gain
world market.
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