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MEMO/11/321

Brussels, 23 May 2011

Digital Agenda: how new EU rules foster more competition in telecoms markets

New EU telecoms rules to promote a more competitive telecoms sector and better services for customers are due to be implemented in national law by 25th May 2011 (see IP/11/622). This MEMO explains how the new rules will ensure more consistent and effective regulation of competition in EU telecoms markets.

More Commission oversight on competition remedies

As of 25th May 2011, the European Commission has increased powers to oversee the details of remedies proposed by national telecoms regulators to address problems relating to, for example, the conditions of access to the network of a dominant operator or fixed or mobile termination rates. As a result, customers and businesses will be better able to benefit from a fair and competitive single EU telecoms market, and telecoms operators will have the regulatory certainty they need to confidently operate EU-wide.

This will happen through a revised so-called "Article 7" procedure. This consultation and notification mechanism (established originally by Article 7 of the Electronic Communications Framework Directive - 2002/21/EC), requires national telecoms regulators to notify the Commission, BEREC (the Body of European Regulators for Electronic Communications) and telecoms regulators in other EU countries, of measures they plan to introduce to solve market problems. More precisely, national telecoms regulators, in accordance with competition law principles, must define the boundaries of the relevant market, assess whether any one or more players is dominant (or has significant market power, “SMP”) in this market and where operators are found to be dominant, propose appropriate regulatory remedies to ensure effective competition. The objective is to ensure a more consistent, efficient application of those remedies across the EU in a single telecoms market (see MEMO/09/539).

The rules in the new Article 7a of the Framework Directive, as amended by Directive 2009/140/EC, give the Commission additional powers over remedies proposed by national regulators. In practice, should the Commission, in close cooperation with BEREC, consider that a draft remedy notified by a national regulator would create a barrier to the single market, the Commission can begin an in-depth review of the notified measures lasting up to three months, and issue a Recommendation asking the national regulator to amend or withdraw its planned remedy. During that review the Commission, BEREC and the regulator concerned should closely cooperate to identify the most appropriate remedy.

The new rules also enable the Commission to adopt further harmonisation measures in the form of Recommendations or legally binding decisions if divergences in the regulatory approaches of national regulators, including remedies, persist across the EU in the longer term, for example on broadband access conditions or on termination rates.

Greater independence for national telecoms regulators

The new telecoms rules reinforce the independence of national regulatory authorities by outlawing political interference in their day-to-day duties and protecting the heads of national regulators against arbitrary dismissal. They also require Member States to ensure that telecoms regulators have appropriate human and financial resources, including their own budget, which are essential for regulators to perform their functions effectively.

In particular, a new amendment to the Framework Directive requires Member States to ensure that national regulators responsible for market regulation are protected against external intervention or political pressure. This reinforces their authority and the predictability of their decisions. The new rules also oblige Member States to ensure that heads of national telecoms regulatory bodies can only be dismissed on the grounds that they no longer fulfil the conditions required for the performance of their duties.

Monitoring the effective implementation of the rules on independence of regulators has been a priority for the Commission. The Commission closely monitors the institutional arrangements with regard to the independence and effectiveness of national regulatory authorities. Where necessary, the Commission has taken action and has opened infringement proceedings.

Functional separation of network operations from service provision:

Under the new rules, all Member States' telecoms regulators have a new item in their tool box of regulatory remedies to overcome competition problems: functional separation. This enables regulators, where necessary to ensure competition, to oblige a dominant telecoms operator to separate its access network operations from its telecoms services operations, without involving ownership separation or the creation of a separate company.

Under certain circumstances, functional separation is a useful tool to address persistent competition problems in the telecoms markets. In particular, it ensures that alternative operators have fair access to the networks of dominant companies while maintaining incentives for operators to invest in new networks.

The new EU telecoms rules (the new Article 13a of the Access Directive, as amended by Directive 2009/140/EC) stipulate that regulators should only consider functional separation as a last resort when it can be established that other measures have failed. In addition, the new Article 13b of the Access Directive also addresses situations when vertically integrated telecoms operators voluntarily decide to separate their access networks and services activities.

Functional separation and/or other ways of imposing a more stringent 'non-discrimination obligation' have so far been implemented in the UK, Italy and Poland either through voluntary or regulatory measures. The option of imposing a functional separation remedy is also currently being discussed in Sweden.

The new EU rules on functional separation add legal certainty for countries moving towards different forms of separation, while ensuring overall regulatory consistency for the benefit of the single market, effective competition and consumer choice.

Background

The new rules (Directive 2009/140/EC) are part of the package of telecoms reforms adopted by the European Parliament and the Council in late 2009 (see MEMO/09/491). The Parliament and Council agreed that the rules must be implemented into Member States' national laws by 25th May 2011.

See also MEMO/11/319 and MEMO/11/320

Digital Agenda website:

http://ec.europa.eu/information_society/digital-agenda/index_en.htm

Neelie Kroes' website: http://ec.europa.eu/commission_2010-2014/kroes/

Follow Neelie Kroes on Twitter: http://twitter.com/neeliekroeseu


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