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MEMO/08/551

Brussels, 2 September 2008

EU Telecoms Reform: the 6 Most Important Issues Still Open

Today, the European Parliament will debate, in plenary session, the so-called EU Telecoms Reform. On 13 November 2007, the European Commission had proposed to the European Parliament and the Council of Telecoms Ministers to reform the EU Telecoms rules (in place since 2003) to reinforce competition and investment and to create a Single Telecoms Market in the EU with innovative cross-border services and wireless high-speed broadband for all (IP/07/1677). Following an intense debate and many hearings, the European Parliament's Industry, Research and Energy Committee (ITRE) and the Internal Market and Consumer Protection Committee (IMCO) voted on amendments on 7 July (MEMO/08/491). The debate in the European Parliament's plenary with its 785 members is expected to pave the way for a vote on the Commission's entire EU Telecoms reform proposals in first reading on 23 September. Depending on the outcome of the vote and the discussions in the Council of Telecoms Ministers of 27 November, a political agreement on the final legislative texts could be achieved between the three institutions by the end of the year. The new regulatory framework would then become the law in all 27 EU Member States by 2010.

The following is an overview of the 6 most important reform proposals still under discussion between the European Parliament and the Council:

1. Independence of national telecoms regulators

What has the Commission proposed? For the Commission, independent national regulators are the indispensable backbone of an efficient, fair and competition-oriented system for telecoms regulation in Europe. To improve the application of telecoms rules, the European Commission therefore wants to strengthen the independence of national telecoms regulators (such as CMT in Spain, Bundesnetzagentur in Germany, AGCOM in Italy, Ofcom in the UK, or ARCEP in France).

In the Commission's view, national telecoms regulators should not take instructions from any other body in relation to the day-to-day performance of their tasks, and should enjoy financial and operational independence both from governments and from operators. Moreover, to strengthen the independence of the regulator, dismissal of the head of the national regulator should only be possible if certain criteria are met, such as serious misconduct.

What is the position in Parliament and Council? The proposal for stronger independence of national telecoms is supported by the European Parliament while the Council is more hesitant. The Council especially indicated that it could only accept a stronger independence of national regulators in the context of market-related regulation, but not in politically sensitive areas such as spectrum management or security.

2. Functional separation

What has the Commission proposed? The Commission wants to give national telecoms regulators the additional tool of imposing functional separation when it can be demonstrated that other remedies have failed or are likely to fail to achieve effective competition. This should increase the effectiveness of national regulators, allowing them to tackle remaining competition bottlenecks more effectively.

The implementation of functional separation aims to give all market players, including the incumbent operator's service division and new market entrants, the same network access under equivalent conditions. Functional separation, which (unlike ownership unbundling proposed in the debate on energy markets (IP/07/1361)) does not require divestiture of assets, has already been implemented with success in the UK and several other Member States have taken steps in that direction, most recently Sweden.

Common EU rules on functional separation will ensure better regulatory convergence in the Single Market and avoid distortions of competition that could result from a divergent understanding and application of this regulatory tool.

What is the position in Parliament and Council? The Commission's proposal has received a lot of support in the European Parliament's lead committees, and is supported by a majority of ministers in the Telecoms Council. Furthermore, national telecoms regulators have unanimously welcomed this proposal. However, in view of the strong opposition of several incumbent operators to the introduction of the tool of functional separation, the final outcome of this debate is still uncertain.

3. Spectrum: The digital dividend and "broadband for all"

What has the Commission proposed? The Commission's proposal for radio spectrum reform aims to achieve a more efficient and consistent management of spectrum to promote innovation and achieve high-speed "broadband for all" Internet access in Europe. The Commission also proposes a coordination of approaches in the EU to optimise the overall benefits of the digital dividend (the radio spectrum freed as a result of the switchover from analogue to digital TV), particularly by encouraging new wireless services and also new TV channels in high definition quality.

A more efficient use of this scarce public resource of a high economic and societal value, while ensuring protection against harmful interference, would be a major boost to competitiveness and innovation in Europe. The Commission expects additional economic benefits from better spectrum management in the EU to be in the region of €10 billion/year.

What is the position in Parliament and Council? The European Parliament and the Council support several of the main Commission proposals, such as a more flexible use and harmonised spectrum tradability. The European Parliament's lead committee also has shown a legitimate interest in a stronger European coordination, inter alia by advocating the creation of a new expert committee to advise the EU institutions on spectrum-related matters. However, the Council, continues to be rather reluctant to accept any coordination of spectrum management across borders or a stronger say of the European Parliament.

In this context, the European Parliament will debate today a specific motion for a resolution on the digital dividend, prepared by MEP Mrs. Patrizia Toia. The decisive issue here is whether the Parliament will support the Commission's proposal for a common roadmap on the digital dividend to coordinate Member States' approaches. A positive vote would allow the Commission to launch the required preparatory work – including the launch of a socio-economic study to quantify the benefits of various options for coordination at EU level – by the end of this year.

4. Investment into new networks

What has the Commission proposed? The Commission believes that legal certainty and effective, fair regulation of network bottlenecks are the best recipe for competition and investment in the telecoms markets. In addition, the Commission's proposal for a better management of radio spectrum (see point 3.) aims at freeing this very valuable source for new wireless services, thereby triggering more competition and attracting significant investment into these services. Furthermore, measures have been proposed by the Commission in order to improve the rules for facility sharing, by introducing in the EU's regulatory framework provisions that allow national regulators to impose entries to building, to ducts, manholes and street cabinets.

The Commission is also working on providing further guidance to national regulators (by means of a Recommendation under the existing EU telecoms rules) with regard to the conditions under which access to so-called "next generation networks" should be granted. The need for a fair return on investment is already written into today's telecoms rules, but a more coordinated approach of national regulators on this important matter could enhance legal certainty and the necessary level playing field for operators.

What is the position in Parliament and Council? There is a broad consensus in the Parliament and the Council about the need to maintain and strengthen competition, in particular to continue access regulation. Both Parliament and Council also support the promotion of investment into new networks as long as competition is effective. The European Parliament's lead committee is favouring in particular clear regulatory guidance on the return on investment for new networks to which access needs to be given to ensure effective competition. In the area of spectrum, the European Parliament and the Council support several of the main Commission proposals, such as a more flexible use and harmonised spectrum tradability, but there is a certain reluctance, especially in the Council, to accept any coordination of spectrum management across borders.

5. Number portability for European consumers

What has the Commission proposed? Consumers should be able to change their fixed or mobile operator while keeping their phone number – number portability – within 1 working day. For the Commission, this is a key facilitator of consumer choice and effective competition. At the moment, it takes 8 days on average to switch a fixed or mobile operator in the EU while keeping one's number. Europe's best performers are France for the fixed market and, for the mobile market, Ireland and Malta. It still can take up to 30 days to switch fixed operators in Estonia and up to 20 days to switch mobile operators in Italy and Slovakia.

What is the position in Parliament and Council? The European Parliament is generally favourable to the Commission's proposal, even though amendments have been tabled to allow a maximum of 3 days for number portability. The Council is so far hesitant to follow the Commission's proposal, in view of the additional cost it could entail for operators.

EU Telecoms Commissioner Viviane Reding says on the issue of number portability: "In Australia, it is possible to switch operator within 2 hours – we should really be able to get this done in 1 day in Europe."

6. European Telecoms Regulator

What has the Commission proposed? To deliver more coherent and consistent rules across the EU, the Commission proposes to create a European telecoms authority, called "European Telecoms Market Authority". The idea behind this new authority is to create a level playing field for both telecoms operators and consumers in the EU's emerging Single Telecoms Market. This new body would not replace national regulators, but would allow them to play a stronger and more effective role at European level, vis-à-vis both the Commission and individual regulators. It would therefore build on the experience of national regulators, and thus be close to the market.

Tools proposed by the Commission to make the new body more efficient than today's loose cooperation among national regulators in the "European Regulators Group" (ERG) include: the move to majority voting; a small, but efficient permanent and independent staff enabling the body to swiftly and efficiently analyse and give opinions on proposals of national regulators for market analyses and remedies from 27 EU Member States; a stronger accountability of national regulators to the European Parliament; and a permanent and independent Director appointed, after a hearing by the competent European Parliament's committee, for a term of 5 years. In order not to create a new administration at EU level, the Commission proposed to merge the new European Telecoms Authority with the already existing European Network and Information Security Agency ENISA, which already has a staff of 50.

What is the position in Parliament and Council? The European Parliament's lead committee is keen to strengthen cooperation between national telecoms regulators and make it more effective. For this purpose the Industry Committee has proposed to create a "Body of European Regulators in Telecoms" (BERT), a Community body that would replace today's ERG and advise the Commission, national telecoms regulators, and the European Parliament. The body would take decisions by majority and have a small, permanent staff at its disposal. If the body were to vote against a national regulators' proposal, the Commission would request the proposal's withdrawal.

However, in contrast to the Commission's proposal, the new body would not be dealing with network security issues and therefore not be merged with ENISA, the mandate of which the European Parliament wants to prolong for 3 years. The Parliament's lead committee also appears to favour having two-thirds of the new body's budget financed by the EU Member States. The Commission instead advocates financing it from the EU budget to bolster the independence of the body and to ensure equality among the 27 national regulators within the body.

In the Council, a number of Member States agree with the need to strengthen the Single Market and cooperation among national regulators. However, many in the Council have serious reservations about the creation of a new Community body. The Council of Ministers is also against combining telecoms regulation and network security responsibilities and would like to prolong ENISA's mandate for 3 years.

With regard to ENISA, EU Telecoms Commissioner Reding said today: "I have to accept that Parliament and Council at this moment in time do not want to reform ENISA. However, I seriously believe that network security challenges will require soon a strong, coordinated European response. Recent cyber attacks in Estonia and now again in Georgia have shown that one country alone can be very vulnerable. I call therefore on the European Parliament and the Council to start early in 2009, an intense debate on Europe's approach to network security and on how to deal with cyber attacks and also to include the future of ENISA into these reflections. Also the new tools made available by the Lisbon Treaty should be seriously taken into account in this debate. Europe cannot afford to lose time when it comes to the security of our networks. Network security is identical to the security of our public administrations, our economy and our citizens."

Background:

The European Commission tabled its proposals for the reform of EU Telecoms rules on 13 November 2007 (IP/07/1677, MEMO/07/458). Since then, the Council of Telecoms Ministers has debated the Commission proposals on two occasions at ministerial level (MEMO/07/522, MEMO/08/384). It is now time for the European Parliament, in full plenary session (after its Committees voted this July, (MEMO/08/491), to give its view.

Next steps:

23 September 2008: Vote on the EU Telecoms Reform Proposals in the European Parliament's plenary.

27 November 2008: the Council of Telecoms Ministers could pave the way for a political agreement under the French Presidency.

For more information:

Parliament's Press Release on July's vote:

http://www.europarl.europa.eu/news/expert/infopress_page/058-33580-189-07-28-909-20080707IPR33578-07-07-2008-2008-false/default_en.htm

European Commission reaction to the vote in the European Parliament's lead Committees on 7 July: MEMO/08/491

"Progress Made on the EU Telecoms Reform Package", Statement by EU Commissioner Reding after the Council of EU Telecoms Ministers on 12 June:
http://ec.europa.eu/information_society/newsroom/cf/itemlongdetail.cfm?item_id=4181

See also MEMO/08/552: EU Telecoms Reform: 7 Concrete Improvements for European Consumers


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