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MEMO/07/255

Brussels, 27 June 2007

New round of infringement proceedings under the EU telecom rules: What are the issues?

How many infringement proceedings against Member States has the Commission already launched 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 of the "old" 25 EU Member States in some 90 cases due to failures to implement correctly the regulatory framework. Seven cases are actually pending before the European Court of Justice. First proceedings have been launched against Bulgaria and Romania for not having notified all measures necessary to transpose the framework.

What are the issues at stake in the June 2007 round of infringement proceedings?

1. Caller location information to emergency authorities

Principle

Telecommunications operators are obliged, under the EU telecom rules, 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 Recommendation in 2003. In March 2005, the Commission services 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

The Commission had to open various infringement proceedings against Member States concerning the non-availability of caller location information to emergency authorities for calls made from fixed and/or mobile phones following the publication of the 11th Implementation Report.

Commission action

Since caller location information is not effectively available for all calls to 112, the Commission is sending Poland a reasoned opinion.

Meanwhile, the cases against Belgium and Hungary could be closed since the service is now provided.

2. Directories/Directory Enquiry Services

Principle

Availability of a comprehensive directory where all subscribers to publicly available telephone services have the right to have an entry as well as availability of a directory enquiry service can be of great use 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 the EU telecom rules.

Problem

In the United Kingdom and Portugal, there is still no comprehensive directory and directory enquiry service comprising all subscribers and in particular, because not all mobile subscribers, who so wish, are included.

Commission action

The Commission is therefore sending the United Kingdom a reasoned opinion. The Commission is also referring Portugal to the European Court of Justice.

3. 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 EU telecom rules therefore require implementation of number portability for fixed as well as for mobile services. Over 15 million numbers have been ported in the whole EU in 2006.

Problem

Until recently, fixed number portability was lacking in Slovakia.

Commission action

Since fixed number portability is now fully available in Slovakia, the case against Slovakia could be closed. Fixed number portability is therefore fully available in 25 EU countries.

4. Independence of the National Regulatory Authority (NRA)

Principle

It is a basic principle of EC law in general, and of the EU telecom rules in particular, that Member States must ensure that an authority performing regulatory tasks is separate and independent from any operator it regulates. In particular, Member States that own electronic communications operators must clearly separate the regulatory tasks from the state's ownership and/or control activities in order to guarantee the impartiality of the National Regulatory Authority's decisions and consequently to ensure a level playing field for all operators.

Problem

In Poland, following the adoption on 24 August 2006 of the law on state personnel, the President of the Council of Ministers has unlimited discretion to dismiss the head of the National Regulatory Authority. At the same time, a clear term of office (tenure) for the regulator together with the limited list of circumstances in which s/he could be dismissed was removed from the Polish telecommunications law. This undermines the effectiveness of structurally separating the regulatory function from ownership or control activities, considering that the Polish government controls significant shareholdings in a number of telecom companies.

It is the Commission's view that in such circumstances, rules regarding length of service and grounds for dismissal of the regulatory authority are required to dismiss any reasonable doubts regarding the impartiality of the National Regulatory Authority without being influenced by external factors.

Commission action

The Commission is therefore sending Poland a reasoned opinion.

5. Appeals mechanism

Principle

The EU Framework Directive (which is part of the EU telecom rules) 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 Authority. Therefore, general administrative procedural law applies. In the Commission's view, the right to appeal laid down in Article 4 of the EU Framework Directive (which forms part of the EU telecom rules) goes beyond the addressee of the decision. This is confirmed by the opinion of the General Advocate in case C-426/05 (Tele2 UTA Telecommunication). However, Swedish administrative procedural law appears to impose stricter conditions on who has the right to appeal than those stated in Article 4.

Commission Action

As Sweden has not taken action to meet the Commission’s concerns, the Commission is sending a reasoned opinion.

6. Failure to carry out market reviews

Principle

One of the cornerstones of the EU telecom rules is the process of market analysis and review of ex-ante obligations. Analysis and review of 18 relevant markets are required under the EU telecom rules. 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. 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. Conversely, it may also lead to operators that 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, 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, Estonia and Latvia. In March, the Commission decided to refer the case of Estonia to the Court of Justice.

Commission action

Most Member States have substantially completed the market reviews. The Commission has now decided to suspend the application to the Court regarding Estonia’s failure to carry out market reviews following a significant number of further recent notifications. However, the Commission will remain vigilant on the timing of remaining notifications.

7. Incomplete transposition of notification mechanism

Principle
National Regulatory Authorities are required, in consultation with industry, to analyse their national markets for electronic communications and propose appropriate regulatory measures to address market failures, and then notify their findings and proposed measures to the Commission and National Regulatory Authorities in other Member States.

Problem

The Commission’s letter of formal notice of 4 April 2006 pointed out the fact that Latvian law only provided for notification of draft measures to the Commission and national regulatory authorities in other Member States in the case where the National Regulatory Authority intended to define relevant markets different from those foreseen in the Commission Recommendation on relevant markets. The Commission was of the opinion that Latvia had therefore failed to transpose adequately Article 7 of the EU Framework Directive (part of the EU telecom rules) which lays down much broader obligations of the National Regulatory Authorities concerning notification of draft measures. The latest amendments to the Latvian Electronic Communications Law, adopted on 3 May 2007, only provided a partial solution to this transposition problem.

Commission action

The Commission is therefore sending Latvia a reasoned opinion.

8. Broadband retail regulation

Principle

New obligations on operators in principle can only be imposed by National Regulatory Authorities following a proper market analysis which ensures that the lack of competitiveness on the market concerned is properly determined before any remedies are imposed.

Problem

Since May 2006, the Polish telecom regulator has required operators to submit retail tariffs of all services provided, including retail tariffs for specific broadband services. This therefore constitutes a new obligation on the operator imposed without carrying out a proper market analysis.

Commission Action

Since Poland has not fulfilled its obligations under the regulatory framework, the Commission is sending a letter of formal notice.

9. Incomplete reference unbundling offer

Principle

According to Article 3 (1) of EU Regulation 2887/2000, notified operators shall publish from 31 December 2000, and keep updated, a reference offer for unbundled access to their local loops and related facilities. This is a key element in boosting broadband access across Europe.

Since 1 May 2004, this obligation also applies in the case of new Member States as long as no market review has taken place under the new regulatory framework.

Problem

In Estonia, the available unbundling offer, published by the incumbent, did not include two of the minimum and obligatory elements required by the regulatory framework concerning collocation services and information systems.

Commission action

Following market analysis in Estonia, a new reference unbundling offer has finally been imposed. The Commission has therefore closed the case against Estonia. The Commission Services will continue to monitor the situation and development with regard to the incumbent’s publications of the Reference Unbundling Offer.

10. Rights of way

Principle

The EU telecom rules stipulate transparent, timely and non-discriminatory procedures for granting rights to install facilities, on, over or under public property.

Problem

New entrants providing fixed communications networks in Cyprus have not been able to effectively establish their own network with a view to providing e-communication services in competition with the incumbent, due to the failure of the relevant authorities to grant rights of way without delay on, over or under public property, which was necessary for this purpose.

Commission Action

Since the situation has not significantly changed, the Commission has sent Cyprus a reasoned opinion.

11. 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. National Regulatory Authorities must also calculate the net costs of such a service.

Problem

Despite some amendments adopted in Belgium in response to the letter of formal notice, the unfair burden assessment and the calculation of the universal service still do not comply with the requirements of the Directive.

Meanwhile, in Spain, an operator had expressed interest in the provision of one element of the Universal Service but was not considered as fulfilling the necessary conditions. The Spanish authorities therefore seemed to exclude a priori at least one undertaking from the provision of the universal service. The Spanish law also suggests that an unfair burden is not always needed to be established before a compensation mechanism is set-up.

Commission action

The Commission is therefore sending a letter of formal notice to Spain and following up with a reasoned opinion against Belgium.

12."Must-carry" obligations

Principle

“Must-carry” rules mandate that network operators (such as cable companies or telecom operators) 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 (which forms part of the EU telecom rules), 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

Problem

Following a number of complaints and detailed examination, the Commission had started infringement proceedings against several Member States including Belgium and Germany.

The Commission had concluded that general interest objectives are not clearly defined in the legislation of Brussels. The lack of clearly defined general interest objectives and an apparent lack of sufficiently precise, clear and foreseeable criteria for their eventual attainment make the rationale for "must carry" regimes opaque for stakeholders. Network operators and broadcasters are consequently uncertain about their obligations and their rights under these regimes.

Moreover, the Belgian legislation for Brussels does not provide for a limit on the number of "must-carry" channels which may be imposed. This adds a proportionality problem to that of inconsistency.

In Germany, the grievance addressed in this step of the proceeding is the obligation to have 100% of all available cable channels reserved for stations identified by the Federal State. This raises concerns in terms of the proportionality of the applicable regime.

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

Commission action

The Commission is sending Belgium a supplementary letter of formal notice since recent legislation in the bilingual region of Brussels-Capital on the must-carry regime was adopted but does not fully conform to the requirements of the Universal Service Directive.

The Commission is also sending Germany a reasoned opinion for the moment concerning relevant legislation in Lower Saxony.

13. Non-conformity cases

Principle

Member States have to transpose correctly and comprehensively the electronic communications framework into their national legislation.

Problem

The transposition of the EU's Access Directive and the EU's E-Privacy Directive was not fully compliant, and infringement proceedings were initiated against Italy and Slovakia respectively.

In Germany, the EU's Framework Directive and the EU's Access Directive were not fully transposed into national law, leading to a limitation on the National Regulatory Authorities discretion by the criterion of double dominance. Despite amendments to the Telecommunications Law, the problem related to double dominance remained. At the same time, in the same amendments, a ‘regulatory holiday’ could be granted to Deutsche Telekom despite of its dominant position in the broadband market.

In Poland, the Commission had decided to pursue an infringement procedure with regard to the non-conformity of a number of provisions in the Framework directive. Among the issues was the definition regarding subscribers, which is crucial for the scope of several users’ rights.

Commission action

Following new legislation in Italy and Slovakia, the pending cases could be closed.

The Commission is however, referring Poland and Germany to the European Court of Justice. Poland’s case relates to the definition of subscribers. Germany is brought before the European Court of Justice both in the case of double dominance, and over its ‘regulatory holiday’ law that could grant an exemption to the German telecom incumbent from EU competition regulation. (See IP/07/889)

Where can I find further information on pending infringement proceedings concerning the electronic communications sector?
A complete overview of cases under the EU telecom rules 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/

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, etc.

- 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

Where can I find more information on the EU regulatory framework for electronic communications?

A complete overview of the electronic communications framework and policy can be found on the Electronic Communications website of Information Society and Media DG:
http://ec.europa.eu/information_society/policy/ecomm/


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