Delivering on its Digital Single Market strategy, the Commission today adopted a set of initiatives and legislative proposals to place the EU at the forefront of internet connectivity, a pre-condition for the Digital Single Market to thrive.
As part of today's connectivity package, the Commission proposed:
- a set of new, non-binding connectivity targets for a competitive Digital Single Market by 2025;
- a new European Electronic Communications Code which merges four existing telecoms Directives (Framework, Authorisation, Access and Universal Service Directive);
- an updated Regulation on the Body of European Regulators of Electronic Communications (BEREC);
- a Regulation to support local communities in providing free public Wi-Fi to their citizens;
- an Action Plan to deploy 5G in the EU.
Who will benefit from the new connectivity package presented today?
Citizens: 80% of Europeans have a mobile phone and 50% a smartphone. 315 million Europeans use the internet every day. These figures are constantly growing. In the future, higher quality fixed and mobile broadband coverage will be needed to make sure many users can use online services in the same location – for example in airports or stadiums, business parks and public administrations, and to connect billions of objects, from cars to home appliances. It can also enable children to learn in a new way at school with virtual reality and allow doctors to perform remote surgery. It will improve the everyday life of all citizens and help develop innovative applications we do not even imagine yet. Today's package aims at making sure that the EU offers all Europeans - from farmers, teachers and researchers to entrepreneurs and creators – the best digital opportunities and lays the ground for Europe's digital future. The Commission proposes:
- Better connectivity everywhere: The current EU telecoms framework has contributed to cover the whole EU with basic broadband at constantly decreasing prices. It is now time to take the next step: the Commission has set the connectivity target that, by 2025, all households, whether in the country side or in cities, have access to connectivity offering a download speed of at least 100 Mbps, that can be upgraded to Gbps. This also means more job opportunities in areas which currently do not benefit from top infrastructures.
Europeans should benefit from even better networks (online hubs) in key places where people gather and where many users rely on one single connection. The Commission estimates that almost 100 million pupils and students, more than 70 million workers as well as almost 2 million doctors and more than 2.5 million patients in hospitals across Europe will benefit directly from the new objective of 1 Gbps connections for entreprises, all schools, transport hubs and main providers of public services by 2025. The Commission also presented today an action plan to deploy 5G, the fifth generation of wireless communication systems, across the EU starting from 2018.
First class mobile and fixed connectivity will make new digital applications – like virtual and augmented reality, connected and autonomous driving, remote surgery, artificial intelligence, smart manufacturing, precision farming – available for the benefits of all Europeans.
To achieve better connectivity, including for current non-users of the internet, the Commission proposes to provide direct support under the Connecting Europe Facility for any public authority, in big or small communities, to offer free public Wi-Fi access points to citizens. With the initial operational budget proposed, 40 to 50 million Wi-Fi connections per day could take place thanks to the initiative.
- Affordable internet and right to contract for those who need them: For the first time in EU law basic broadband access is considered as a universal service. It means everybody should be able to get access to basic internet and voice communications at an affordable price. Member States should make sure this is the case and can require special tariff options for or provide vouchers to people with low incomes or special needs (such as disabled or elderly people) and ensure they can contract such services.
- Strengthened rights for consumers: The new European Electronic Communications Code foresees that contracts should be clearer for consumers (through a short form summarising the essential contract information). In addition, consumers will be able to make informed choices thanks to price and quality comparison tools and consumption control tools. Moreover, in view of the increasing importance of bundles (subscriptions to a set of services, including internet, voice communication and television), the transparency and switching rules applicable to such bundles will be improved. For instance, consumers cannot be locked-in in longer contracts because their subscriptions are included in a broader package - the maximum duration for contracts (2 years) remains.
- Smaller businesses and startups: Enterprises outside central business districts (including small businesses in rural areas) will be significant beneficiaries of wider availability of high quality connectivity, as these companies may today be under-served compared with larger corporations which may already have top connectivity installed to their premises. Likewise, by accelerating 4G and 5G coverage across Europe, the reform will facilitate innovation and entrepreneurship, which benefits heavily startups and smaller companies. The Commission and investors in the telecoms sector also consider providing venture capital to startups developing 5G solutions for innovative applications and services across industrial sectors. This would take the form of a specialised venture financing facility helping them to bring new services to market such as in the area of automated driving, goods delivered by drones, or virtual reality for specific professional collaboration.
- Investors: The new legal framework gives more predictability and provides significantly stronger incentives for them, to reward risk-taking and long-term investments in very high capacity electronic communications networks. The proposal offers a better combination of the different EU funding schemes so that they can back private investment in a more efficient way. A Broadband Fund will be launched and the Commission, in cooperation with the Committee of the Regions, will set up a platform to encourage public-private cooperation at local level. Both initiatives will be in place by the end of this year. The Commission also calls on Member States and regions to establish and support an EU network of Broadband Competence Offices at regional/national level that will provide guidance to investors.
- Industry: This connectivity package supports the digitisation of the European industry and is complementary to the measures presented by the Commission in this area in April 2016 (press release). A wide range of sectors, from the automotive to the manufacturing industry, will benefit from today's measures and from a more investment-friendly environment. More particularly, the 5G action plan presents a series of coordinated voluntary actions for the Commission, Member States and industry to reach a common objective. It is a key initiative to lead the global race towards 5G and to compete with other regions such as the US, South Korea and Japan. 5G is essential to foster innovation across the whole digital economy.
I. The new European Electronic Communications Code
How does the new Electronic Communications Code encourage investment, especially in rural areas?
Access regulation to networks owned by operators with significant market power remains an important part of the new European Electronic Communications Code. This means that these operators will continue providing access to their networks to other operators against payment, and that regulators can intervene if this is not the case. However, the conditions under which such access is granted are simplified and adapted to stimulate the deployment of new high capacity networks. Additionally, based on current best practices across the European Union, the Commission proposes a more focused approach to ensure that access obligations are imposed only when and where necessary to address the shortcomings of the market. The Commission also extends the current maximum three-year market review period to five years, giving operators more stability as to the regulatory environment.
In order to better target regulation and to stimulate investment in under-served areas, the Code requires national regulators to map network investment intentions and to organise calls for interest for network deployment in areas where no very high capacity network is planned. For improving investment certainty, the rules empower regulators to act against operators who deviate from their declared intention in these areas. In this way, the Code encourages alternative network operators who focus on smaller geographical areas and contribute to bring high quality connectivity to citizens outside cities.
Furthermore, two models are proposed that allow operators to reduce their burden of regulation, in particular:
1) Co-investment: Competition drives investment, in particular where infrastructure competition is possible (e.g. in dense areas). In other areas, co-investment can help to pool resources and lower deployment costs. It gives alternative operators who wish to invest a more realistic possibility to do so, and could allow dominant operators who upgrade their networks to differentiate themselves from those who do not invest. Such an approach encourages a wide range of market players to join their forces from the beginning to deploy high capacity networks and fully benefit from them. It also has the potential to stimulate new commercial access agreements as the network capacity increases. Furthermore, people living in the less dense areas will benefit from the more rapid deployment of very high capacity networks which these models support.
2) Wholesale-only: market players who realise privately-funded investments in networks and then only deal with selling or renting access to them without offering services to end-users will also benefit from lighter access obligations if they are still deemed dominant players in the market. By offering access to several service providers, the investor can pool revenues and ensure better returns on capital needed to build infrastructure.
Rules for greater coordination of the assignment of radio spectrum will also make it easier for investors, especially to scale up across borders. The Code proposes long licence durations to incentivise investments accompanied by rigorous requirements to use spectrum effectively and efficiently. It also proposes to coordinate in particular the timing of spectrum assignments and those licence conditions which most impact the market structure and business strategies to ensure spectrum is timely delivered to the EU market. The new rules will reduce the costs for telecoms operators of operating in multiple countries thus contributing in creating internal market.
Will such new rules lead to less competition?
No, on the contrary, competition remains at the heart of the Commission’s approach. It is the best way to stimulate innovation and bring maximum benefits to consumers. Today’s connectivity package supports a competitive telecoms market in the EU. It is adapted to new realities and players in the market.
In the EU, ex-ante regulation was first introduced to support the 1990s liberalisation of the telecom markets and to open former national monopolies' networks to competitors thereby spurring competition. It complements competition policy which is based on ex-post control of actual market behaviour. The threshold for ex ante intervention by national regulators within the telecoms rules requires a finding of individual or joint significant market power. De-regulation is possible when competition has increased in a given telecoms market in which case only competition policy is used to monitor specific market behaviour and preserve effective competition. This regulatory approach based on competition principles will remain at the heart of the regulatory framework. As explained above, operators with significant market power will continue to be obliged to provide access to their networks to other operators, where this is necessary for retail competition and where commercial wholesale access is not offered on reasonable terms. The proposal will also reinforce end-users' rights in relation to switching and number portability, which are key to the exercise of choice in a competitive market.
Does the EU specifically encourage fibre technology?
Optical fibre offers better quality parameters than copper wires. There is a consensus, both in the private and public sectors, that in the medium and long run connectivity providers will have to rely on fibre infrastructures coming very close to users' premises to support their business, as well as to connect very high speed cellular base stations for wireless services. This is particularly important to avoid digital exclusion in rural areas, where copper-enhanced technologies tend to perform worse than in urban areas. In light of this industry consensus, the performance of fibre networks running very close to end-user can be taken as the benchmark for a very high capacity network, but it does not exclude any other physical or technology which can assure equivalent performance (in terms of speed but also other performance characteristics).
- In Sweden, following an early boost by the central government, one out of every two municipalities is involved in fibre-to-the-building (FTTB) and fibre-to-the-home (FTTH) deployments. This has led to very high take-up by consumers: as of July 2015, 68% of the broadband connections in Sweden are fast ones (next-generation access – more than 30 Mbps), achieved predominantly through FTTB and FTTH connections. This has also boosted mobile connectivity, illustrated by the example of 4G in Stockholm where the world’s first 4G deployment took place helped by the virtually 100% fibre coverage (Sweden is ranked 3rd in the EU Digital Economy and Society Index).
- This evidence of higher usage being associated with the availability of advanced networks is supported by the case study of Palaiseau in France, which has been the subject of a pilot trial for the switch-off of Orange copper networks and replacement by FTTH networks. In this case it was observed that the average internet traffic of Orange’s broadband customers as well as their consumption of video-on-demand was multiplied by a factor of three. Importantly, this trial also resulted in fibre clients’ usage of upload bandwidth being increased 8 times, due to changes in internet usage and an increased usage of cloud-based services.
Overall, supply stimulates demand in the telecoms sector. Low speeds limit the types of usage and applications that might otherwise emerge, slowing down growth and innovation.
Will EU funding also support investment in new very high capacity networks?
The EU is already supporting investment in broadband networks through different funding schemes, for example:
- Investment Plan for Europe: Out of the transactions approved by the European Investment Bank so far, 12% are in the digital sector. This represents EUR 935 million in EU funding, expected to trigger EUR 3.2 billion in total investments (more information).
- European structural and investment funds: Over the period 2014-2020, the European Regional Development Fund (ERDF) will connect almost 15 million households to high-speed broadband (more information).
- Connecting Europe Facility (CEF): The telecommunications part of CEF has a budget of approximately EUR 150 million to support broadband networks over the period 2014-2020. This will include a budget of EUR 40 million which will be invested in the WIFI4EU initiative, a public Wi-Fi voucher scheme for public authorities to offer free Wi-Fi connections in the main centres of community life (the total budget of WIFI4EU is EUR 120 million).
Building on these instruments, the Commission will launch by the end of this year a European Broadband Fund which will combine private and public investments and support network deployment projects throughout the European Union.
In the context of the mid-term review of the current EU financial framework (2014-2020), the Commission is proposing measures to leverage private investment in a more efficient way by combining existing instruments. It calls on Member States to do the same at national level, and offer an appropriate funding mix of grants and financial instruments complementary to EU schemes.
The Commission also proposes to further support digital transformation of the EU under the financial programming post 2020.
Why is the Universal Service Directive revised as part of the Code?
The way citizens use communication networks has evolved over time and some obligations do not appear relevant for the new European Electronic Communications Code. The Commission therefore proposes to remove the EU mandatory inclusion of older universal services (such as for example public payphones – which can remain an obligation at national level, if the needs are demonstrated by the Member State) and to focus on the affordable provision of voice communications and universal service broadband, which would be defined by way of a dynamic list of online services usable over the broadband connection. This list includes email, search engines, news, basic training and education online tools, job searching tools, professional networking, social media, e-government service use, buying services, internet banking, calls and video calls (standard quality). The new Electronic Communications Code requires Member States to make sure that vulnerable citizens have a right to contract an affordable broadband connectivity.
Are any changes brought to the current rule which foresees that the duration of contracts with telecoms provider cannot exceed two years?
The maximum duration of two years for telecoms service contracts is retained and also applies to bundles which link telecoms services with other goods or services such as TV content.
The proposal is to clarify, in the interest of consumers, that this does not apply to instalment payments for a one-off physical investment in a connection to which a household contributes (quite common in Sweden, for example). As the investment might be important for the household, they could reimburse the connection during a longer period. In such a case affordability for the householder is increased, and there is no effect on freedom of the householder to seek an alternative service provider after two years.
This can benefit individual users who have no fixed internet connection close to their house, and also accelerate roll out of fibre to a whole area through what is called a demand aggregation scheme. The commitment by a sufficient number of households to a connection (to be paid for over x years) could help a project promoter to raise finance for the fibre build. It facilitates financing of smaller, community-based projects in areas that may not be a priority for traditional telecoms operators.
How are over-the-top communications services (OTT) covered by the new Code?
The new Code proposes that new online players who provide equivalent communications services to those provided by traditional telecoms operators are covered by similar rules, in the interest of end-user protection. However, the Commission has been careful that such regulation is not extended unduly. Communications services which use numbers to enable all end users to reach each other (i.e. to call phone numbers/be reachable via a phone number) are very similar to traditional telephony and SMS services. The new Code clarifies that such services will have to provide contractual information to their customers, and also the switching and emergency call rules apply. End-users will also be able to call harmonised numbers with an important social value (e.g. missing children helplines).
On the other hand, over-the-top (OTT) services that do not use numbers (e.g. WhatsApp) will be subject to more focused obligations. They will have to make sure that:
- their servers and networks are secure
- disabled users have equivalent access to their services
- their users can reach the EU emergency number 112 if there is evidence it is needed for public safety reasons and that the technical standards are available.
Why does the EU need a better coordination of radio spectrum and why is it important?
Demand for spectrum is growing significantly due to the increase of wireless traffic driven by both existing and new wireless services and applications. It is estimated that up to 56 GHz of spectrum will be needed to meet the demand of 5G users and applications (e.g. the connected car, health related services, smart cities). In order to meet the connectivity requirements of 5G, a timely access to spectrum is crucial and needs to be assured.
The EU was the first to develop the fourth generation of communication networks (4G) but was late and slow in deploying it compared to other regions such as the USA and South Korea. A delayed and fragmented assignment of radio spectrum had a negative impact on wireless network coverage and penetration in Europe.
The EU cannot repeat this mistake with the next generation of communication networks, 5G. The result of the slow availability of spectrum resources in Europe is that it affects possibilities and incentives for operators to invest in the development of their networks and, consequently, it causes a lengthy delay in the launch of innovative services.
The Commission’s proposal to allocate fresh mobile spectrum within the 700 MHz band for wireless broadband is a major step towards further and better coordination of spectrum use (press release). But more needs to be done.
The new Code will ensure swift, efficient and transparent processes for the assignment of spectrum to electronic communications, and more coordinated mechanisms to make that spectrum timely available to the market. The Code establishes common principles and EU instruments to fix assignments deadlines and a minimum 25-year licence duration to ensure return on investment and predictability for all market players. While some guidelines are provided for auctions, the revenues from auctions remain exclusively with Member States. The Code also includes a European approach in pursuing full wireless coverage across the EU, as a principle embedded in spectrum policy and high level criteria for defining spectrum coverage obligations and empowers regulators to enforce related obligations.
II. New rules for the Body of European Regulators of Electronic Communications (BEREC)
What does the Commission propose?
The proposal for transforming BEREC into a fully-fledged agency goes hand in hand with the new European Communications Code, which identifies areas where BEREC should contribute to achieve the connectivity and regulatory consistency objectives (such as cross-border matters, guidance for national regulatory authorities, etc.). Also last year the EU assigned BEREC additional tasks as regards open internet access and roaming. The governance structure of BEREC has been adapted in order to reflect the significantly enhanced role to be played by BEREC in the future as well as the need to reflect the common principles for EU agencies which were agreed by the European Parliament, the Council and the Commission in 2012.
The proposal aims at making BEREC fit for the purpose of carrying out its future tasks, ensuring that a single management board is capable of taking regulatory decisions as well as the corresponding administrative and financial decisions. The revamped agency should count with some additional resources, while maintaining the pooling of valuable technical expertise from national regulatory authorities (NRAs). Thus, the creation of an agency is fully consistent with the continued existence and independence, guaranteed and reinforced by the EU framework, of the national regulators.
The proposal entrusts BEREC with new tasks, including some legally binding powers, which would help to ensure that the regulatory framework is applied consistently, such as providing guidelines for NRAs on geographical surveys, developing common approaches to meeting transnational end-user demand (e.g. from business users) delivering opinions on draft national measures on radio spectrum assignments (radio spectrum ‘peer review’) as well as on cross-border disputes, playing a greater role in the EU consultation mechanism for market regulatory remedies and setting up a register of numbers with extraterritorial use.
What is the impact of the new rules for national regulators?
The new rules will reinforce the independence, regulatory capacity and accountability of national regulatory authorities (NRAs). Inter alia, they establish a minimum duration for the mandate of the members of the board, and minimum appointment criteria. A minimum set of competences that Member States may assign only to a NRA is defined, mirroring those of BEREC, thus ensuring that all NRAs can work together with BEREC in all areas related to the regulation of electronic communications markets. Lastly, the accountability of NRAs is also reinforced, with the establishment of annual reporting obligations.
What is the Commission’s plan to ensure Wi-Fi in every European community?
Wireless local area networks (Wi-Fi) are increasingly set up by providers of public services – from administrations to libraries, universities and hospitals – for their internal use, but also very often for visitors.
Building on this practice, the Commission encourages each community - from villages to cities - to provide at least one public and free Wi-Fi access points for its citizens. This is complementary to the proposal to consider broadband access as a universal service under the new European Communications Code (more information here).
Who can apply, as of when, and how can the vouchers be used?
Any local authority can apply for a voucher, provided that is it able to cover the running costs of this service with the operator. The grant can be used to purchase state-of-the art equipment, i.e. a local wireless access point. A total budget of €120 million is foreseen until 2019, which is expected to be available quickly, after adoption of the scheme by the European Parliament and Member States.
IV. The 5G Action Plan
What does the EU do to support 5G?
The 5G Action Plan presented today by the European Commission is a key initiative to tackle the market and investment challenges to launch commercial 5G services everywhere in Europe by 2020. In particular, the Commission will address with stakeholders the policy and regulatory obstacles for deployment such as for the timely availability of radio spectrum, more favourable conditions for small cell deployment or sectorial issues preventing the deployment of particular services. This action will complement the overall positive effect of the review of the Regulatory Framework. The key of its success relies on the voluntary and mutually beneficial coordination of all players.
The Plan also foresees to accelerate the development of new connectivity-based innovation ecosystems by bringing together all European partners, public and private actors across all relevant sectors from telecoms to logistics, transport, energy, health and manufacturing, around a common agenda towards 5G.
In addition, the Plan bridges ongoing efforts in research and development for 5G and future market take-up. It will include advanced 5G demonstration and large scale pre-commercial trial activities as well as a consistent EU strategy for 5G standardisation. Finally, the Plan aims at establishing a clear roadmap for public and private investment in 5G infrastructure in the EU, in line with the strategic importance of 5G connectivity for the economy and society.
The Plan builds on the many efforts of the Commission so far to ensure that the EU is in a global leader for the development of 5G. As early as in 2013, the Commission launched a Public-Private Partnership on 5G, endowed with an EU funding of €700 million under Horizon 2020, spanning over a period extending up to 2020. The EU industry is set to match this investment by up to 5 times, to more than €3.5 billion euros.
The EU has also concluded several bilateral international agreements with strategic partners for the joint development of 5G, namely South Korea, Japan, China and Brazil. The EU is also in close contact with key organisations in the US.
For more information:
- Press release:State of the Union 2016: Commission paves the way for more and better internet connectivity for all citizens and businesses
- Factsheet on telecoms; Factsheet on WiFi4EU
- Digital Economy and Society Index (DESI) including data on connectivity per country
- More on telecoms
Documents adopted today:
- Communication and Staff Working Document – Connectivity for a Competitive Digital Single Market – towards a European Gigabit Society
- Action Plan and Staff Working Document Communication – 5G for Europe