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Member of the European Commission responsible for Enterprise and the Information Society

Unbundling of the Local Loop in the EU

Remarks at the European Parliament ITRE Committee

Strasbourg, 12 June 2001

I am very glad to have this opportunity to bring you up to date on the implementation of the local loop unbundling Regulation.

As you know, since telecoms liberalisation in 1998, competition has taken off in most areas, but only to a limited extent in the local access network. Local loop unbundling is one important means to achieve high-speed Internet access for European users and consumers under competitive conditions. We were grateful for the rapid and decisive action by the Parliament in the process of adopting the Regulation on unbundling. We also welcome ITRE's continuing interest and support.

Since the Regulation is directly applicable in the Member States and does not require transposition, it should be possible to cut down the time taken to implement. The Regulation also provides for dispute resolution procedures through the NRAs, which are close to the market and are therefore able to respond quickly.

The Commission nonetheless retains the full right under the Treaty to bring infringement proceedings where national remedies fall short of EU requirements.

What are the results so far?

When we look at the numbers of unbundled and shared lines available, it is clear that the Regulation has not yet achieved its full objective:

  • Relatively few unbundled lines have actually been made available, something approaching 500 000

  • The lack of shared lines is holding up the supply of competitive Internet access

    • Regulators are still embroiled in relatively complex tasks relating to pricing and collocation; these are the difficult, detailed questions that take up regulatory resources, but which must be resolved rapidly for the Regulation to be fully implemented.

    In addition to these regulatory delays, we do not underestimate the ability of the incumbent operators to drag their feet as much as possible in order to postpone competition. In particular we have received reports from new entrant operators that incumbents are delaying provisioning, that is the actual delivery of ordered lines, usually by insisting on cumbersome procedures or rejecting orders on the basis of minor technicalities.

    In these circumstances we can understand that new entrant operators may be beginning to get impatient. However, they are aware that unbundling is not a "big bang", but a complex process: this involves difficult negotiations, ordering procedures, building operations, software modifications and other problems. In our view, the national regulatory authorities have been genuinely very active in coming to grips with these issues:

  • Reference offers have been published in eleven Member States

    • Full unbundled access is available in nine Member States, and prices have been determined by the NRAs, or their cost orientation verified, in ten

    • Shared access, while available in only two Member States, is likely to come on-stream in most Member States between now and the Autumn, and prices have already been approved in four.

    We believe this compares well with the situation in the United States. In the US market only 8% of lines have been unbundled, five years after the legislation was adopted. We understand that the number of shared lines is also low. In our view this is because regulators at State level have allowed some of the complex issues I have referred to, in particular the cost of collocation facilities, to slow market entry. There are also enormous differences in the way the State regulators have approached this problem. This is an area where Europe has adopted a more coordinated approach.

    While there are some encouraging signs, what is the Commission doing to move things ahead in Europe? The answer is that we have been pushing the Member States hard.

    First, I gave a report on the evolving situation to the Telecommunications Council in April. This provides a very effective incentive to Ministers - it gives them an opportunity for 'peer review', and I can point out some of the principal deficiencies, as well as successes, of implementation.

    Second, we reported to the Stockholm High Level Meeting of Regulators and Administrations (NARA) on 15 May. This also gave those most intimately concerned with the practicalities of implementation in the Member States, the heads of the national regulatory authorities, an opportunity for peer review.

    Third, we have had very detailed discussions on implementation in meetings of the Open Network Provision Committee in February and early May. In particular we asked detailed questions relating to the implementation of the Regulation. These covered conditions for access, collocation services, information systems, supply conditions and pricing. Member States responded in writing, and an updated document has been sent to your Committee and is on our website.

    The Commission's services have also, as in other aspects of implementation of the regulatory framework, maintained an "open door" policy towards new entrants they know they can come to us at any time with their problems, and this has been welcomed by ISPs and operators. So far we have received only one formal complaint.

    We aim to continue this process. I will give an oral report to the end-June Telecoms Council; the ONP Committee in July will examine pricing issues; we will report again to the High-Level Regulators' meeting in the Autumn. Then towards the end of the year, the Seventh Implementation Report will provide updated and more extensive information on unbundling of the local loop and competition in the whole access network.

    So much for reporting; what of the Commission's legal powers?

    I have said that the Commission can bring infringement proceedings where necessary. In theory we could do so now in a number of cases. However, in practice we are convinced that, at the moment when NRAs are working hard to ensure implementation and resolve disputes, this could be counter-productive. A number of determinations and decisions have been made by NRAs, on pricing and non-discriminatory access to facilities in particular, that we regard as very encouraging. As I mentioned, to date only one complaint has been lodged with the Commission. In our view, proceedings would at this point provide a distraction without bringing material benefits to new entrants.

    To complete the picture, let me mention another instrument at the Commission's disposal for ensuring unbundling, namely its powers under the competition rules. My colleague Mr Monti carried out the first phase of a sector enquiry on unbundling last year. His services are looking to launch the second phase over the summer period. We regard the monitoring of the ex ante regulation and the ex post controls under the competition rules as complementary exercises to achieve the same objective.

    In summary, our strategy now is

    • To continue to urge regulators to act resolutely to resolve problems related to collocation, pricing and provisioning

  • To pursue the intensive follow-up already begun

    • To report extensively, not least in the annual implementation report due towards the end of the year

    • To bring infringement proceedings if the preparations for the Seventh Implementation Report in October show failure on the part of the national regulatory authorities to give effect to the Regulation.

    Finally, let me say how much I appreciate the support the Parliament has given and continues to give in this regard. I am particularly grateful for the opportunity to provide this update, not least because it helps reinforce the messages we have directed to the regulators and Member States.

    The most recent data collected by the Commission on the state of play in the implementation of local loop unbundling are available at:

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