Member of the European Commission responsible for Information Society and
Realising the potential of Europe's single market in telecoms for consumers and business
CER breakfast seminar
Brussels, 16 September 2008
Main messages of this speech:
Ladies and Gentlemen,
I would like to thank CER for their kind invitation to introduce this breakfast seminar here in Brussels.
We are entering a critical period for the telecoms regulatory reform. In one week's time the European Parliament will vote on the Commission's proposals at first reading and in a little over two months the Council will have to reach political agreement.
This reform has a number of different aspects but one over-arching goal: finally completing the single market in telecoms, a work under way for more than a decade, but still unfinished business.
I can't stress enough the very significant contribution telecoms make to growth and job creation in Europe. For this reason, the telecoms policy of the European Commission has been one of the cornerstones of the EU's Lisbon strategy since its launch in 2000. From a macroeconomic perspective, telecoms contribute to achieving policy objectives which go far beyond the telecoms sector. That is why the reform of Europe's telecoms framework is so important.
The opening-up of telecommunications markets in the EU was a major policy achievement, as is shown by the explosion in new services, the significant price decreases it has generated, and also the creation of value and productivity gains which have spilt over into the whole EU economy.
However, there remains one area which has not effectively delivered yet: the single market. While it is a tangible reality for EU workers, students and citizens who can use a common currency, the single market has failed to become a concrete experience in telecommunications. In regulatory terms, Europe is still not one economic area for telecoms operators and consumers, but fragmented into 27 regulatory systems. And this in spite of the fact that the underlying technologies of the telecoms industry – radio waves, the Internet protocol – by definition do not know national borders.
The cost of non-Europe in telecoms is heavy: this shows up, for instance, in wireless services. It is very difficult today to set up a service that seamlessly crosses borders, although the same airwaves are used from Tallinn to Athens. I do not dispute that spectrum is a national resource and that each Member State controls access to it. The outcome is, however, that of the 100 plus mobile companies in Europe, maybe five compete in every national market!
The failure of the single market today is particularly visible as regards the 27 very divergent regulatory approaches chosen by national regulators for key issues in the telecoms sector:
An illustrative example of the type of asymmetric and inconsistent regulation can be observed in call termination markets. Here, regulated mobile termination rates differ widely among the 27 EU Member States, ranging from an average rate of 2 eurocents per minute imposed by the national telecoms regulator in Cyprus to over 18 cents allowed by the national telecoms regulator in Bulgaria.
These wide differences in rates cannot be explained solely by differences in costs and differing national circumstances. They rather stem more fundamentally from the costing models, benchmarks and glide paths chosen by the regulators. Thus, the considerable variations in wholesale and consumer prices which we observe across the EU today derive from inconsistencies in regulatory approaches. Given that the competition problems being identified in these markets are similar across all Member States, I see no reason why the means used to remedy that single market failure should diverge so considerably across Member States.
This fragmentation in an economic sector that knows no technological borders and increasingly seeks to establish a pan-European footprint risks undermining the single market in electronic communications. It has the potential to hurt Europe's competitiveness and it thus needs to be addressed.
To this end, the Commission services are currently working on an EU Recommendation on the consistent regulatory treatment of mobile and fixed termination rates, which will be released, following a public consultation that came to an end last week, before the end of the year.
We are also currently working an a similar Recommendation on a consistent regulatory approach to next generation networks – again, a crucial field for competition and investment, but where European regulators so far have not managed to agree even on first steps to a more consistent regulatory response. While testing different regulatory approaches for a while can have its merits, this comes at a price, by creating a regulatory patchwork and in the long run doubts about the existence of a regulatory level playing field. This in turn raises uncertainties for investors, and especially for cross-border operators. Uncertainty is of course a serious obstacle for new investment.
But addressing regulatory divergence through non-binding Commission Guidelines and Recommendations is not enough. Tackling this problem requires a much more systemic approach, whereby coordination and coherence are hard-wired into the Regulatory Framework from the beginning of the process.
It is therefore necessary to adapt the mechanisms governing the current regulatory system to deliver timely, robust and coherent remedies to competition problems in the telecoms markets. This is what the reform proposed by the Commission to the European Parliament and the Council is all about.
Both Parliament and Council have now had the opportunity to reflect deeply on the Commission's proposals and the underlying problems. Both share the Commission's concerns on the single market. I was encouraged by the recognition given to Europe's single market challenge by the Council at the end of the Slovenian Presidency.
But what of the solutions? The European Parliament and also several Member States have rightly seen that there is just one debate, not two, when it comes to the institutional debate about the new Community body to enhance cooperation between national regulators and the design of procedural mechanisms for improving the functioning of the single market. These two issues are two sides to the same single market coin.
There appears now to be a consensus that existing arrangements for cooperation between national regulators within the Community framework – and by this I mean the ERG, the European Regulators Group – have to be improved.
The ERG has helped to create a forum for regulatory exchange among regulators, and there is almost nobody who would believe today that setting up the ERG – which, by the way, was done by means of a Commission decision – was a mistake. However, experience has shown the ERG is institutionally not able to achieve the goal for which it was created: regulatory consistency in the single telecoms market. The ERG has only a weak foundation in European law, as it has not been granted any legal authority under the EU framework adopted by the European Parliament and the Council. In addition, the ERG operates under a culture of consensus, which has a tendency towards a lowest common denominator output. And finally, the ERG does not have its own resources. Unlike expert regulators in the fields of pharmaceuticals, aviation security, network security, food safety, trade marks or environmental protection, the ERG does not have a minimum staff at its disposal to work on single market issues in telecoms.
This is why the Commission has proposed to upgrade the ERG institutionally and to transform it into an independent, effective and transparent Community body of European Telecoms Regulators. Having a Community body, with all that entails, provides the guarantees that the new body can be fit for purpose. It means that it can operate above the suspicion that it is perhaps closer to some regulators than to others.
That is why the new Body of European Telecoms Regulators must also be financed from the EU budget. National financing, in whatever proportion, can only place the new body's credibility into question and opens the possibility for all kinds of administrative uncertainty. In contrast to this, Community financing guarantees equality of treatment of regulators from smaller and bigger Member States. Only this will allow the new body to be fully trusted as acting in the Community interest and to ensure fair regulation for operators and consumers from all EU Member States.
In the current legislative process, an alternative road has been suggested. This is the idea of strengthening the current IRG, the Independent Regulators Group, which is a private-law association created recently under Belgian law by the national regulators. I understand that some Member States may have a preference for such an informal private "club of regulators", but I seriously believe that this would be taking the wrong direction. Private law solutions can be appropriate for agreeing industry standards or for cooperation among companies. However, to coordinate the work of public authorities, entrusted with public tasks, cannot work by means of a private law organization. How could we explain to a telecoms operator that his termination rates have to be at this or that level if the basis for this is the opinion of an organization that has the same status as a Belgian football club or a Brussels-based lobby organization?
Telecoms regulation is a public task that has to be dealt with by public authorities, in full transparency and in full respect of the rule of law. For this, we need a body that, at EU level, can speak and act with authority and is credible towards regulators, operators and consumers. I recall well the famous Meroni-ruling of the Court of Justice that declared illegal the delegation of powers to private law organizations. So I will fiercely oppose any move to transfer responsibility for EU Telecoms Regulation to a private law body.
But, I must also stress that in this debate about the new body is the means to an "end", not an end in itself. Setting up a new body on its own is not enough to achieve a single market in telecoms. It has to play its part in a reinforced system for improving regulatory consistency. That is why the other side of the single market coin is so important and why there is a need to reinforce the "Article 7" consistency procedure between national regulators and the Commission.
What I see from the position being taken by the European Parliament is that it shares the same logic as that taken by the Commission. This is to find the right balance between the interests of subsidiarity and those of the single market, and then to draw clear operational conclusions. Thanks to the peer-review carried out through the new body, we will be able to benefit from the pooled expertise of the national regulators alongside their sensitivity to what are legitimate local differences. It surely makes sense that where the new Body of European Telecoms Regulators says that there is a single market problem, in conjunction with the concerns raised by the Commission, which is the guardian of the Treaty, then there should be real consequences. In the interests of the single market, and of legal (and that means business) certainty, there must be an obligation for the notifying national regulator to change its approach in such a case.
What we cannot accept is the following. If, having been through the whole lengthy Article 7 review process, the notifying national regulator can just say "Thank you very much for your point of view, but I prefer my approach" and simply go his or her own separate way.
Industry, consumers and tax payers will not thank us if we build a sophisticated and time-consuming regulatory edifice that in the end will not be capable of making a difference. So let us be ambitious in this respect, in the interest of legal certainty.
Ambition is also needed in the area of spectrum. In this respect, the Commission is working closely with the Member States to create harmonised technical conditions such as a framework for avoiding interference, creating regulatory certainty and achieving the single market. Within this framework we strongly promote flexibility to enable spectrum users to build new services that can cross borders, and to introduce new technologies when the opportunity arises. I am not going to prejudge the popularity of such services or what the increase in competition will be. That is a task for the marketplace. What we can do is to create a situation where a company is never protected from competition and where every company has the same access to the market also when it comes to spectrum. This could become a powerful driver for investment into wireless services and enhance the free movement of services in the EU.
We are now entering a very important stage in the negotiations on the telecoms reform package. Parliament is about to have its say, at next week's plenary vote. The Council will then be able to finalise its reflections on how to move to a balanced position at the Telecoms Council in November, allowing it to conclude its negotiations with Parliament.
I am confident that the co-legislators will seize this opportunity to open up the true potential of Europe's single telecoms market. Europe's operators and citizens have been waiting a long time for this, so we have to be ambitious when it comes to the mechanisms to bring it about. Europe and its 500 million citizens deserve nothing less.
Ladies and Gentlemen, thank you very much for your attention.