the eu regulatory framework for electronic communications one size fits all richard harris

This talk was given by Richard Harris (an independent consultant) under contract to Intellect,

the trade association that represents the UK Technology Industry. More information about

Intellect can be found at their web-site:

http://www.intellectuk.org/

http://www.intellectuk.org/

The EU regulatory framework for

electronic communications

One size fits all

Richard HarrisIndependent EU telecommunications consultant

ICTtrain workshopIstanbul, 27 February 2009

The views expressed here do not necessarily represent those of the European Commission

This project is funded by the European Union

Aim

To summarise the origin,

principles and scope of the EU

regulatory framework for

electronic communications

services

25th February 2009 3

Agenda

1. the basis of policy for this sector2. the common approach3. the global dimension4. the wider EU regulatory space5. the present EU legislation6. points to watch and summary7. epilogue

3rd November 2008 4

1 The basis of the policy

The convergence of technologies and industries:

• Telecommunications - monopoly

• Broadcasting – some competition

• Data processing - competition

3rd November 2008 5

Data

Fixed

PC

Broadcasting

CableSatellite

Terrestrial

Television

Voicetelephony

Fixed Mobile

Telephone/Handset

Service

Network

Terminal

Convergence is a reality

Wireless Satellite Cable Telecoms

3rd November 2008 6

2 The common approach Competition law and policy

– In the USA – anti-trust court decisions from the 1950s onwards

• Communications Law unchanged from 1934 to 1995

– In the EU – the Treaty of Rome• “British Telecom” case in 1982/5

showed that the treaty’s competition rules apply to telecommunications

• EU obliged to develop a policy for telecommunications – adopted 1987

3rd November 2008 7

The sequence in Europe

• The UK opened its telecoms market between 1981 and 1990

• EU decided in 1987 to abolish telecoms monopolies in stages

• The first stage was in 1988• The last stage was 1998

• Review in 2000 led to 2002 framework

• Further EU review in progress today

3rd November 2008 8

The competition rules

Articles 81-89 of the EU Treaty .81 Anti-competitive agreements82 Abuse of a dominant position83 Making of laws for enforcement of 81-8284 Until which time MSs are responsible85 Commission to police principles of 81-8286 Rules apply also even where there are

special or exclusive rights87-89 No state aid which distorts the market

3rd November 2008 9

Liberalisation

In 1990 an article 86 Commission Directive was adopted that required member states to abolish exclusive and special rights for providing telecommunications services.

At first, certain activities were exempted from this but the Directive was later amended five times so that all exemptions were progressively removed.

Directive 2002/77/EC explains all this in the recitals and then consolidates the remaining articles.

3rd November 2008 10

Why is it so important?

• EU telecom revenue is 3% of GDP• The sector is vital to most economic

sectors and social groups• Mobile penetration very high (112%)

but prices vary too much (6:1)• Broadband penetration now growing

(EU average 20%) but highest is 5 x lowest

• The Internet is bringing new risks


3 The global dimension• The WTO decided in 1997 to open the

market for telecoms services• 95 signatories initially, now many more

• The ITU sought a solution for the mainly smaller 3rd world countries

• The EBRD will finance telecoms only where modern policy is pursued

• The World Bank adapted its lending policy for telecoms because of competition

• The OECD reports on this sector as an important indicator of economic strength


4 EU regulatory space

The framework spreads beyond the EU• Non-EU Balkan countries have

perspective of EU membership• Treaty relationship• Approximate national laws to the acquis• Principles of EU competition rules apply• Cooperation regarding telecoms• Committee structure


For EU candidates

• The pace intensifies for accession candidates

• Accession negotiations ask for action• The EU Council and MSs are involved• Bilateral meetings are more frequent• The Commission monitors the markets

more closely• Aid funds are focused more on the acquis• Observer status in groups and committees


For EU neighbours

• Membership of the EU internal market is

offered (without membership of the EU)

• This means, treaty relationships• Adoption of EU telecoms acquis• Monitoring of the markets• Consistency arrangements - non EU

candidates not yet covered by these



EU Neighbourhood policy – 16 countries

5 EU telecommunications legislation

• Almost entirely in the form of Directives• First one in 1983• Mostly Council and Parliament Directives• Underpinned with Commission

Directives• A series of Directives which opened the

market gradually• 1998 package – complete market

opening3rd November 2008 17

2002 regulatory framework

- for all electronic communications

Privacy Directive SpectrumDecision(Art. 95)

LiberalisationDirective(Art. 86)

Framework Directive(Art. 95)

Authorisation Directive

Access & Interconnection Directive

Universal service Directive


2002 regulatory framework

Key principles:• Independent national regulators• Minimise regulation• Technological neutrality• Consistency across the EU market• Level playing field for new

entrants• Universal service


2002 regulatory framework - laws Framework Directive: outlines general principles,

objectives and proceduresAuthorisation Directive: replaces individual licences

with general authorisationsAccess and interconnection Directive: sets out rules

for a multi-carrier market place, ensuring access to networks and services, interoperability etc

Universal service Directive: guarantees basic rights for consumers and minimum levels of availability and affordability

Privacy Directive: covers protection of privacy and personal data protection communicated over public networks

Liberalisation Directive: prohibits special or exclusive rights in this sector

Radio spectrum Decision: principles and procedures for developing a EU radio spectrum policy


Vocabulary 2

– Significant market power: This phrase is not defined in the Directive but it is very important and occurs 5 times in the recitals and 10 times in the text

– It is always used in relation to “undertaking” – this term embraces operators and companies


What’s the difference

Between the 2002 rules and the previous rules?

In essence the previous rules divided the world into incumbents and new entrants. A fixed set of rather heavy ex ante rules were imposed on incumbents and very few rules on new entrants. Ex poste rules apply to everyone automatically.


What’s the difference 2

The 2002 rules divide the world into markets and assess each operator in respect of each market. The aim is to decide where and whether ex ante rules should be applied and, if so, what particular rules are needed. These are called remedies


Who decides?

National regulatory authoritiesWho is this?See definitions in Article 2. “national regulatory authority”

means the body or bodies charged by a Member State with any of the regulatory tasks assigned in this Directive and the Specific Directives


How do they decide?

See recital 28

In determining whether an undertaking has significant market power in a specific market, national regulatory authorities should act in accordance with Community law and take into the utmost account the Commission guidelines.


Access - Vocabulary 1• Access means the making available of facilities and/or

services, to another undertaking, under defined conditions, on either an exclusive or non-exclusive basis, for the purpose of providing electronic communications services. It covers inter alia: access to network elements and associated facilities, which may involve the connection of equipment, by fixed or non-fixed means (in particular this includes access to the local loop and to facilities and services necessary to provide services over the local loop), access to physical infrastructure including buildings, ducts and masts; access to relevant software systems including operational support systems, access to number translation or systems offering equivalent functionality, access to fixed and mobile networks, in particular for roaming, access to conditional access systems for digital television services; access to virtual network services;


Access - Vocabulary 2• Interconnection means the physical and

logical linking of public communications networks used by the same or a different undertaking in order to allow the users of one undertaking to communicate with users of the same or another undertaking, or to access services provided by another undertaking. Services may be provided by the parties involved or other parties who have access to the network. Interconnection is a specific type of access implemented between public network operators;


Access - Vocabulary 3

• Local loop means the physical circuit connecting the network termination point at the subscriber's premises to the main distribution frame or equivalent facility in the fixed public telephone network.

• Reference offer is not defined but this vital phrase is used in article 9.2 and 9.4 to describe the standard terms and conditions that SMP operators can be obliged to publish for its wholesale customers.


Summary of AccessThis Directive strongly encourages operators

to conclude all of their access agreements by negotiation and, as far as possible to standardise their terms in published “reference offers”. The aim is to minimise the aspects where agreement cannot be reached and where regulatory intervention might be needed.

The NRAs are however given strong powers and operators are reminded about the competition rules (which have heavy penalties)


Universal service 1

– Before liberalisation, most countries had some kind of obligations as to universal provision of service but there was great diversity in results and in how it was paid for.

– There was concern that liberalisation might undermine the achievement of universal access.


Universal service 2

– The 2002 rules are designed to ensure that universal service is maintained

– Any unfair financial burden arising from supplying it is compensated in a way that does not distort competition

– If it is compensated, all potential suppliers must be eligible


EC’s Implementation tasks

Under the heading of implementation, the European Commission has several

roles1. Monitoring and publishing2. Active day to day regulation3. Chairmanship of the

Communications Committee4. Review and report to the EP5. Police the EU Treaty


Monitoring and publishing• A series of implementation reports began in 1997• 13th (relating to 2007) covered 27 Member States.• A short formal summary report plus two volumes.• The first volume contains:

– About 70 pages on the regulatory regime as a whole.– About 250 pages reporting on all 27 Member States

individually.

• The second volume contains:– About 140 pages of data about the market, including

volumes and prices in relation to all manner of services and presented in a comparative format.


Active regulation


Since the 2002 Framework came into effect, the EC has made over 500 decisions relating to

notifications under Article 7:

Year Decisions

2003 13

2004 63

2005 117

2006 161

2007 119

2008 54

The Communications Committee

• 5 or 6 meetings a year since 2003See: http://circa.europa.eu/Public/irc/infso/cocom1/library

• 41 committee papers so far in 2008• Not all papers are published.• Committee business includes some

mandatory items and some items of regular interest.

• Regulatory developments are discussed


The Communications Committee 2008• Broadband access 1• Article 7 cases 3• List of standards 1• Mobiles on aircraft 2• 112, 116, numbering, addressing 7• Creation of Working Groups 2• Termination rates 2• Next Generation Access 2• Roaming 1• Mobile Satellite services 2• WAPECS 1• Digital TV 1


Review

Each of the Directives contains a review clause. As three years have elapsed, the initial reviews have already happened and an important set of changes has been proposed by the Commission.This can be found at:

http://ec.europa.eu/information_society/policy/ecomm/tomorrow/index_en.htm


Policing role 1

Legal action for infringement against a Member State is the main weapon the Commission has to enforce EU law.– First the EC sends an initial legal assessment

and invites the MS to present its views.– If not resolved the EC issues a “reasoned

opinion” that an infringement exists giving a deadline.

– If not resolved EC may then refer the case to the Court of Justice.


Policing role 2 By end of 2007, the EC had opened proceedings in

c.100 cases of failure to implement correctlyBelgium5 France 2 Austria 3Bulgaria 2 Italy 3 Poland 11Czech Rep 4 Cyprus 6 Portugal 4Denmark 1 Latvia 7 Romania 1Germany 6 Lithuania 4 Slovenia 3Estonia 4 Luxembg 4 Slovakia 7Ireland 1 Hungary 2 Finland 5Greece 2 Malta 5 Sweden 3Spain 3 Netherlds 3 UK 1


Policing role 3Results

• Of the cases started• 61 were closed without reaching the ECJ• 12 were closed after referral to the ECJ• 14 have been referred to the ECJ but are not

yet closed• 14 have not yet reached the stage of referral

to the ECJ****

Each case clarifies the law and leads to better decisions elsewhere. They can also lead to improvements in the law.


2002 regulatory framework - minimise

• Regulation is limited to situations where an operators has “significant market power” - SMP

• SMP status is determined by NRAs on the basis of market analysis

• These decisions are based on competition law principles

• Status under 1998 framework is unchanged until analysis has been done


2002 regulatory framework - consistency

Communications Committee: regulatory and advisory functions on implementation of the Directives

European Regulators Group: helps consistent application of the regime throughout the EU

Radio Spectrum Policy Group: high level platform where member states and the Commission coordinate use of the spectrum

Radio Spectrum Committee: deals with technical issues around harmonisation of frequency allocation across Europe and develops an external EU policy

Notification procedures: “Article 7” procedure

Independent EU Advisory Body on Data Protection and Privacy (Article 29 working party)


6 Points to watch• Investors draw confidence from knowing that

regulation is fair and reasonable

• The NRAs should have powerful tools and not be

open to pressure from operators or investors

• GSM operators beyond the EU15 have greater

market power

• EU universal service model not such a good fit

beyond the EU15

• Convergence with broadcasting is unfinished

business - who regulates four-play?6 February 2009 43

From Virgin Media

Great value bundlesThe more services you get with us, the better the deal!

TRIPLE DEAL = £14 a month Broadband + TV + PhoneUp to 10Mb Over 45 digital Unlimited weekend fibre optic channels calls to UK landlines

6 February 2009 44

From uSwitch web siteFor my address in London, Uswitch identifies:

• 49 bundled offers from 11 different suppliers.

Cheapest £104 in the first yearDearest £573 in the first year

• 35 broadband only offers all 8 Mega bits or faster from 10 different suppliers.

Cheapest £88 in the first yearDearest £650 in the first year

6 February 2009 45

See: http://www.uswitch.com/

Summary

• Regulation is needed only where policy aims cannot be achieved without it

• Competition is intended to stimulate incumbents

• Industry should take the lead in finding solutions

• Ministers regard this sector as an aspect of the IS

• They discuss cartels, abusive practices, spam, IPRs, the digital divide, universal service, eGovernment, promoting broadband and security


7 Epilogue

USA in 1985 - direct cost of regulation was very high, perhaps 15,000 people employed in total

• Rate of return regulation of profits

• Separation of state and federal powers

• Separation of anti-trust and regulators

• Appeals and rules of evidence

Allowing competition was called “deregulation”


In Europe at that time?Only the UK had a regulator by 1985

UK in 1985 - direct cost of regulation was very low, perhaps 150 people employed in total

• Price cap regulation

• EU (ie federal) powers prevail over national

• Competition authorities and sector regulators obliged to cooperate

• Little recourse to the courts

Allowing competition was called “liberalisation”.3rd November 2008 48

How is the EU doing today?

• Regime is intended to be minimalist and this has started to happen

• Convergence with broadcasting makes comparison more difficult

• Some disturbing signs

• Some national regulators are very large

• Increasing recourse to the courts

• No study done yet – waiting for a PhD


Thank you for your attention

For more information:See - Europa web-site, especially:

http://ec.europa.eu/information_society/policy/ecomm/index_en.htm


the eu regulatory framework for electronic communications one size fits all richard harris

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