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MEMO/06/371

Brussels, 12 October 2006

New round of infringement proceedings in electronic communications: What are the issues?

How often has the Commission already launched infringement proceedings against Member States under the 2002 regulatory framework for electronic communications?

In total, since the entry into force of the regulatory framework for electronic communications, the Commission has opened proceedings under Article 226 of the EC Treaty against all 25 EU Member States in over 80 cases due to failures to implement correctly the regulatory framework.

What are the issues at stake in the October 2006 round of infringement proceedings?

1. Failure to carry out market reviews

Principle

One of the cornerstones of the regulatory package on electronic communications is the process of market analysis and review of ex-ante obligations. Analysis and review of 18 relevant markets are required. If the market analysis of the national regulatory authority (NRA) shows that there is no, or only limited, competition on certain electronic communications markets, then appropriate regulation should be imposed. If the market is effectively competitive, existing regulation should be withdrawn. National regulatory authorities must notify their findings for assessment to the Commission before implementing the proposed measures.

Without timely notification of the proposed measures by national regulatory authorities, there is a risk that the rules applicable to operators will no longer be appropriate for 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

In October 2005, the Commission sent letters of formal notice to Belgium, the Czech Republic, Estonia, Cyprus, Latvia, Luxembourg and Poland for failing to notify the Commission of electronic communications market reviews as required by the regulatory framework. Reasoned opinions, the second stage of infringement proceedings, were subsequently sent to Belgium, Latvia and Poland.

The Czech Republic has now completed the review of all 18 relevant markets. However, other Member States did not finalise the reviews in time.

Commission action

The Commission is sending a letter of formal notice to Denmark, Germany, Malta and Portugal for failure to carry out all the reviews on time.

In the case of Estonia and Luxembourg, progress has been very slow, therefore the Commission is sending a reasoned opinion. These Member States now have two months to reply.

Meanwhile, the Commission has closed the case against the Czech Republic since it completed the review of all 18 relevant markets.

2. Caller location information to emergency authorities

Principle

Telecommunications operators are obliged to provide, upon receipt of emergency calls via both fixed and mobile phones, caller location information to emergency services, if this is technically feasible. This is to ensure that public safety answering points receive the most accurate information available about the caller's location. To guide the Member States in implementing this requirement, the Commission issued a Recommendatio[n]11 Commission Recommendation of the processing of caller location information in electronic communication networks for the purpose of location-enhanced emergency call services, C(2003)2657, 25 July 2003 in 2003. In March 200[5]22 Working document of the Commission services COCOM05-07, “Implementation of the single European emergency number 112: follow-up”, 18 March 2005 the Commission noted that as from then onwards, they would regard the provision of caller location as technically feasible, since it was available in the majority of Member States.

Problem

Following the publication of the 11th Implementation Report (see IP/06/188), 12 cases have been opened against Member States concerning the non-availability of caller location information. These concern Greece, Ireland, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, The Netherlands, Portugal, Slovakia and Belgium.

Commission action

The Commission is now sending reasoned opinions to Greece and Slovakia for fixed and mobile phones, and to Italy, Lithuania, The Netherlands and Portugal for mobile phones.

The pending proceedings against Ireland, Cyprus and Luxembourg have been closed since national authorities have confirmed that caller location information is now available.

Investigations are still pending in Belgium, Latvia and Hungary.

3. Directories/Directory enquiry services

Principle

Comprehensive directories and directory enquiry services comprising all listed telephone subscribers and their numbers (fixed and mobile) are clearly indispensable in everyday life. In view of this, these services form part of the universal service and their provision in all Member States is mandatory under European Community law.

Problem

The Commission opened a number of infringement proceedings against Member States including France, Portugal and the United Kingdom for failing to ensure the provision of a comprehensive directory and a comprehensive directory enquiry service (see IP/05/875). In the case of Portugal, the Commission sent a reasoned opinion in July.

Commission action

Since a comprehensive directory in France is now available, the case can now be closed.

Investigations in Portugal and the United Kingdom are still pending.

4. Number portability

Principle

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

Problem

The Commission opened proceedings against several Member States including Malta, Poland and Slovenia, since number portability was not available in these Member States (see IP/05/875).

In Slovakia, fixed number portability is still lacking despite the fact that new legislation has been introduced.

Commission action

Following the introduction of number portability in three Member States, the Commission has now closed proceedings against Malta, Poland and Slovenia.

The Commission is sending a letter of formal notice to Slovakia, the last Member State lacking fixed number portability.

5. "Must-carry" obligations

Principle

“Must-carry” rules mandate that network operators (in particular cable companies) carry specified radio and TV broadcast channels and services where a significant number of end-users of such infrastructure use them as their principal means to receive radio and TV broadcasts.

Member States may, under the EU’s Universal Service Directive, lay down reasonable "must-carry" obligations for the transmission of specified broadcast channels and services on the network operators under their jurisdiction, for legitimate public policy reasons. However, such obligations should only be imposed where they are:

  • strictly necessary to meet clearly defined general interest objectives,
  • proportionate and transparent, and
  • subject to periodic review.

In view of emerging competition between different delivery platforms for broadcasting content, making "must-carry" rules proportional to the need that they intend to meet would also ensure that end-users have more freedom of choice between channels, since network operators would base their choice on channels on end-user demands and not because of "must-carry" rules.

Problem

Following a number of complaints and detailed examination, in June 2006 the Commission decided, as a first step, to initiate infringement proceedings against Belgium (Wallonia and Brussels Region), Finland and The Netherlands (IP/06/948).

A similar complaint is pending against Germany.

Commission action

The Commission has sent a letter of formal notice to Germany because the "must carry" rules in the various federal states (Länder) do not conform with the requirements of the Universal Service Directive.

The Commission continues to examine the “must-carry” rules in the other Member States.

6. Appeals mechanism

Principle

The Framework Directive stipulates that Member States should ensure effective mechanisms under which any user undertaking or providing electronic communications networks and/or services that is affected by a decision of a national regulatory authority has the right to appeal against the decision to an independent appeals body.

Problem

The Swedish Communications Act does not explicitly state who has the right to appeal decisions of the national regulator. Therefore, general administrative procedural law applies. In the Commission's view, the right to appeal laid down in Article 4 of the Framework Directive goes beyond the addressee of the decision. However, Swedish administrative procedural law appears to impose stricter conditions on who has the right to appeal than those in Article 4

Commission Action

The Commission is therefore sending Sweden a letter of formal notice.

7. Universal Service Financing

Principle

The Universal Service Directive stipulates that National Regulatory Authorities may consider financing of the universal service, on request, if the provision of this service represents an unfair burden on undertakings designated to provide universal service. NRAs must also calculate the net costs of such a service.

Problem
By not allowing the NRA to assess and to calculate the net costs so as to determine whether or not an unfair burden for designated undertakings arises, and by providing automatic compensation instead, the Belgian law does not comply with the requirements of the Directive.

Commission action
The Commission is therefore sending a letter of formal notice to Belgium.

8. Transition to the new regulatory framework for electronic communications

Principle

To avoid any kind of legal vacuum, the Framework Directive on electronic communications provided that obligations imposed on operators under the previous regulatory framework should be maintained until the relevant markets have been reviewed under the new framework (see MEMO/06/271). Such legal certainty is crucial for private investment decisions and for creating competition.

Problem

In Luxembourg, the NRA never verified the incumbent’s cost accounting system or published an annual statement of compliance, although this obligation is covered by the transitional regime.

Commission action

Therefore the Commission is sending Luxembourg a letter of formal notice.

What happened to earlier cases the Commission had opened for non-communication of national implementing legislation?

At earlier stages, the Commission launched proceedings against those Member States that had not adopted legislation necessary to transpose the new framework into national law on time.

Following the adoption of measures transposing the ePrivacy Directive into national law in Greece on 20 June 2006, this case has been closed in the current infringements round. The EU regulatory framework for electronic communications has therefore been transposed into the national laws of all Member States.

Where can I find further information on pending infringement proceedings concerning the electronic communications sector?
A complete overview of 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

ANNEX

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 and 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 Directive: 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 notable 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, policymakers 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 significant 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 in all cases where the market alone does not provide them.

There are therefore a number of key principles underlying the Directives of the EU regulatory framework for electronic communications. These are summarised below.

  • 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 access 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 Member States' national regulatory authorities 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 national regulatory authority submits its 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, permitting maximum flexibility to deal with national markets and conditions.

The EU regulatory framework for electronic communications of 2002 is currently under review. On this review, see IP/06/874 and

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


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