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Infringement proceedings in the field of electronic communications: What are the issues at stake?

European Commission - MEMO/05/372   13/10/2005

Other available languages: none

MEMO/05/372

Brussels, 13 October 2005

Infringement proceedings in the field of electronic communications: What are the issues at stake?

(see also IP/05/1269)

What is the EU regulatory framework for electronic communications?

The EU regulatory framework for electronic communications came into force in 2002 and consists of five Directives:

  • Framework Directive: outlines the general principles, objectives and procedures;
  • Authorisation Directive: replaces individual licences by general authorisations to provide communications services;
  • Access and Interconnection Directive: sets out rules for a multi-carrier marketplace, ensuring access to networks & services, interoperability, and so on;
  • Universal Service Directive: guarantees basic rights for consumers and minimum levels of availability and affordability;
  • e-Privacy or Data Protection: covers protection of privacy and personal data communicated over public networks.

What are the regulatory principles of the EU regulatory framework for electronic communications?

The liberalisation of telecommunications, completed in 1998, was generally considered a marked success. Opening up formerly monopolistic markets led to dramatically lowered prices and improved services for both consumers and business, boosting Europe’s communications industry and creating economic growth.

Continuous technological innovation, however, overtook the telecoms regulatory regime. Digitisation now allows many kinds of content to be delivered over different networks. The Internet has become a global infrastructure for a range of electronic communications services. Information and communications technologies are converging, opening up considerable possibilities for new industries and services.

The EU regulatory framework for electronic communications tackles this technological convergence and extends and adapts the benefits of liberalisation to electronic communications in general.

Based on the experience of telecoms liberalisation, policy makers believe that extending competition and ensuring opportunity and reward for innovative companies is the key to promoting technological advance. So why regulate? Why not let market forces alone generate growth in the e-communications sector?

The difficulty is that Europe’s telecommunications industry originated in state-run monopolies, leaving a legacy of imperfect competitive conditions.

Continued regulation is therefore essential for as long as these former monopolists have market power, to ensure a level playing field for new market entrants.

Another reason is that market forces alone may lead to the exclusion of some social groups from essential public services. The new regulatory system therefore recognises a universal service obligation to ensure basic services at affordable prices to all in cases where the market alone does not provide.

There are therefore a number of key principles underlying the Directives of the EU regulatory framework for electronic communications:

  • Cutting red tape: A general authorisation procedure for operators to enter new markets replaces individual licences. This drastically cuts red tape for enterprises, which no longer face frustrating delays as national regulators check compliance with licence conditions.
  • Light regulation: The framework builds upon general concepts of competition law, as applied to normally functioning markets. Regulation is seen as essentially a temporary phenomenon, required to make the transition from the formerly monopolistic telecommunications industry to a fully functioning market system. To develop in the short term, new market entrants need regulatory support to gain access to the networks of incumbent operators and to provide the benefits to end users which the market would offer if it were effectively competitive. However, as the sector evolves, operators will increasingly build their own infrastructures and compete more effectively. As normal market conditions develop, regulation can be rolled back, and competition law, as applied to industry in general, will replace sector-specific intervention.
  • Technological neutrality: Regulation now refers to "electronic communications” - not “telecommunications". The same principles now apply regardless of which kind of existing or potentially new technology is involved. This “technological neutrality” is essential to provide the necessary flexibility to deal with emerging technologies and their convergence in fields such as media, internet and mobile communications.
  • Consistency across the European market: Operators need to be assured that their investments can be planned in a stable regulatory environment, consistent and predictable throughout the EU’s Single Market. Such a regime allows companies to operate on a scale which only a European-wide market can provide. The regulatory framework establishes new processes permitting collaboration among the national regulatory authorities of the Member States and between national authorities and the Commission. This extensive collaboration plays a key role in achieving the necessary coherence within the regulatory process at European level. In key areas, each Member State submits their draft national measures to the Commission and to other national authorities for consideration, and discusses common approaches in the European Regulator’s Group, established by the Commission in 2002. In this way, a consistent approach is developed throughout the single market while permitting maximum flexibility to deal with national markets and conditions.

What are the issues at stake in the October 2005 round of infringement procedures?

1. Market reviews

Principle

One of the cornerstones of the regulatory package on electronic communications that entered into force on 23 July 2003 is the process of market analysis and review of ex ante obligations[1]. If the market analysis of the national regulatory authority shows that there is no, or only limited, competition on certain electronic communications markets, then appropriate regulation should be imposed. National regulatory authorities must notify their findings for assessment to the Commission before implementing the proposed measures[2].

Without timely notification of the proposed measures by national regulatory authorities, there is a risk that the rules applicable to operators in the electronic communications sector will no longer be appropriate to the level of competition in the relevant markets. This may result, in some cases, in operators being subject to regulatory obligations that are no longer justified by market conditions or consumer needs or, conversely, in operators who are dominant in a relevant market not being subject to obligations that would ensure effective competition.

Problem

Belgium, the Czech Republic, Estonia, Cyprus, Latvia, Luxembourg and Poland have so far failed to notify the Commission of electronic communications market reviews required by the EU regulatory framework for electronic communications.

Commission action

The Commission has sent these seven Member States letters of formal notice, which is the first stage of an infringement proceeding under Article 226 of the EC Treaty (failure of a Member State to fulfil an obligation). The Member States concerned now have two months to respond to the Commission’s concerns.

2. Market definition

Principle

Obligation to adopt decisions to define relevant markets, which differ from those identified by the Commission, if national circumstances so require, is one of the key prerogatives of the National Regulator in its attempt to safeguard competition and protect consumers.

Problem

By defining the list of markets to be analysed for possible ex ante regulation in national law, and providing that this list can only be amended by legislative procedure initiated by the government, Estonia has failed to ensure that the Estonian National Communications Board, the national regulatory authority of Estonia, is not restricted in its capacity to exercise effectively its responsibility to define markets in line with the EU directives on electronic communications. In particular, a decision to define a relevant market which differs from those identified by the Commission in accordance with the EU framework on electronic communications is not within the power of the national regulatory authority.

Commission action

The Commission has sent a letter of formal notice, which is the first stage of an infringement proceeding under Article 226 of the EC Treaty (failure of a Member State to fulfil an obligation). Estonia now has two months to respond to the Commission’s concerns.

3. Maintenance of SMP (= significant market power) obligations under a transitional regime

Problem

Estonia has failed to fulfil its obligations under a transitional regime of the EU framework aimed at maintaining legal certainty and avoiding a legal vacuum while market reviews are carried out. These require that the obligations for operators with significant market power in force upon Estonia’s accession to the EU continue to apply until determinations regarding these obligations have been made following a market review. Estonian law, on the other hand, states that existing obligations will cease to apply by the end of 2005, irrespective of whether new determinations regarding them have been made.

Commission action

Following the same approach taken earlier this year against other Member States, the Commission is now addressing the fact that in Estonia obligations imposed on operators under the previous regulatory framework will cease to exist without a relevant determination being made in accordance with the framework.

Further details of the previous stages in this process can be found in press releases IP/05/875 and MEMO/05/242.

4. Independence of national telecommunications regulators

Principle

It is a basic principle of EC law in general and of the 2002 regulatory framework in particular that Member States must make sure that an authority performing regulatory tasks is separate to and independent of any electronic communications operator. In particular, Member States that own electronic communications operators must clearly separate the regulatory tasks from the state's ownership activities.

Problem

Slovenia has failed to put in place adequate safeguards to ensure that a body charged with a regulatory task is legally distinct from and functionally independent of all operators of electronic communication networks and services. Specifically, the Ministry, which has some regulatory tasks, is also involved in the managing of the fixed-line incumbent, which itself controls the largest mobile operator. Slovenia has therefore failed to ensure effective structural separation of the regulatory function from activities associated with ownership or control.

Cyprus has failed to put in place adequate safeguards to ensure that bodies retaining regulatory functions are legally distinct from and functionally independent of all operators of electronic communications networks and/or services. More precisely, the Minister of Communications and Works as well as the Council of Ministers retain regulatory functions but also retain responsibilities relating to the control of the incumbent. Therefore Cyprus has failed to ensure effective structural separation of the regulatory function from activities associated with ownership or control.

Commission action

The Commission has opened infringement proceedings against Slovenia because the fact that a body that retains regulatory functions also has responsibilities concerning the control of an electronic communications operator infringes the requirement for clear structural separation of regulatory functions from ownership functions, and could weaken market players’ confidence in the independence and impartiality of regulation.

The Commission has also opened infringement proceedings against Cyprus because the fact that a body that retains regulatory functions also has responsibilities concerning the control of an electronic communications operator infringes the requirement for clear structural separation of regulatory functions from ownership functions.

5. Number Portability

Principle

Number portability is a key facilitator of consumer choice and effective competition. It ensures that subscribers of one operator can retain their telephone number when they change to a different operator. The 2002 EU regulatory framework requires implementation of number portability for fixed services as well as for mobile services.

Problem

Malta has failed to ensure that number portability is available for all subscribers of publicly available telephony services, as required by the Universal Service Directive. It appears that number portability will not be available in Malta before the second quarter of 2006.

Commission action

As the Commission considers number portability to be a very important consumer right and a key facilitator of consumer choice and effective competition in electronic communications, it has decided to continue the proceeding in this regard (started in March 2005) by sending a reasoned opinion to the Maltese authorities.

Where can I find further information on pending infringement proceedings concerning the electronic communications sector?
A complete overview of the state of non-conformity and incorrect application cases can be found on the implementation and enforcement website of the Information Society and Media DG:

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


[1] Cf. Article16 of the Electronic Communications Framework Directive (2002/21/EC) and the related provisions in Article 7 of the Access Directive (2002/19/EC), and Article 16 of the Universal Service Directive (2002/22/EC).

[2] Article 7 of the Framework Directive.


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