14. We consider that the
following raises questions of political importance,but make no
recommendation for its further consideration:-
DEPARTMENT OF TRADE AND INDUSTRY
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(17782)
12883/96
COM(96)608
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Commission Communication on assessment criteria for national schemes for the costing and financing of universal service in telecommunications and guidelines for the Member States on operation of such schemes.
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Legal base:
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The document
14.1 There is no requirement
on Member States to set up National Schemes for sharing between
competing telecommunications operators any financial burden arising
from the provision of a universal service. However, where there
are such schemes, they must be compatible with Community law,
in particular "the Full Competition Directive"[43]
and "the Interconnection Directive".[44]
This Communication is intended to inform the Member States about
the criteria which the Commission will use to assess the relevant
provisions in any such Schemes.
14.2 The Commission says
that National Schemes should be consistent with certain basic
objectives of European Union policies and must, as far as possible:
-- "minimise
market entry barriers, whilst providing adequate guarantees for
the financing of universal service;
-- respect
the need for neutrality (e.g. between particular market players/particular
technologies or between integrated or unbundled provision of services)
in order to avoid distorting the pattern of market entry or subsequent
investment decisions and/or market activity;
-- keep
any administrative burden and related costs to a minimum;
-- be
based on objective, transparent, proportional and non-discriminatory
procedures, and
-- create
an environment which stimulates greater efficiency and innovation
in order to ensure the delivery of universal service at a lower
cost over time."
14.3 Having looked at
the costs of the universal service obligations, Member States
may, however, conclude that:
"(i) the
obligations do not result in a net cost to the operator charged
with its delivery or that such a cost is so negligible that it
does not justify the setting up of a scheme, or that they
(ii) do result
in a net cost but that this will be funded directly by the State
(any arrangements to give effect to this must respect Community
State Aids provisions)."
14.4 The Communication
sets out in some detail the costs that can or cannot be recovered
via a National Scheme. The main points are summarised and amplified
by the Parliamentary Under-Secretary of State for Science and
Technology at the Department of Trade and Industry (Mr Ian Taylor)
in his Explanatory Memorandum (dated 3 February). They are that:
-- "costs
should be 'net costs' i.e. they should be incremental costs less
associated revenues in servicing both existing and new 'unviable'
customers with account also being taken of the intangible benefits
(e.g. prestige, ubiquity) of being the universal service provider.
They should be calculated according to objective and transparent
criteria;
-- "an
operator seeking compensation should clearly identify which customers
or groups it formally refuses to serve or intends to disconnect,
unless the burden associated with offering service to them is
shared via a National Scheme;
-- "compensation
must not be given in respect of providing service to residential
customers at tariffs which, for historical reasons, have been
held at artificially low levels. This might sometimes be termed
an 'access deficit contribution' and the overall problem is usually
referred to as 'tariff re-balancing'. The Full Competition Directive
commits incumbent operators to adjust to the transition from a
public utility to a commercial concern as quickly as possible
i.e. to re-balance their tariffs, and provides suitable support
for them in pursuing this objective. Schemes which may hamper
this process should therefore not be allowed;
-- "compensation
must not be given in respect of costs which are beyond the legitimate
bounds of universal service as defined at the time in question;
-- "operators
must not claim for refunds to customers arising from failures
to meet undertakings on quality of service or for costs incurred
in the course of normal upgrading of the network including upgrading
to deliver services such as itemised billing or calling line identification
which are imposed, or will be imposed, as obligations on such
operators (e.g. by the amended Voice Telephony Directive)."
14.5 Those operators
which Member States might legitimately request to contribute to
the cost of universal service are also stipulated. The terms
of the National Scheme must include provisions to identify such
operators who must in turn be voice telephony providers and the
contributions required from them must bear a proportional relation
to their usage of public telecommunications networks.
The Government's view
14.6 On subsidiarity
the Minister notes that
"the Communication
makes it clear that both the administration of the various schemes
and the precise way in which certain central concepts are defined,
for example 'affordability', will remain under the control of
the National Regulatory Authorities in each Member State. The
Commission expects there to be some diversity between Member States
which it considers acceptable provided that consistency with Community
law is maintained. In particular, the Commission emphasises that
the national approaches should be proportional, non-discriminatory,
transparent and based on objective criteria and procedures."
14.7 The Minister goes
on to say that
"the Government
considers that Commission guidelines in this area will serve a
useful purpose in assisting Member States to calculate the cost
of universal service in telecommunications, and therefore welcomes
the Communication. Unless national schemes for funding universal
service are properly calculated they risk acting as formidable
barriers to new entrants. This is particularly important where
competition in basic voice telephony to the general public is
being established for the first time (as in a majority of the
markets in the EU). The Communication should reduce the risk
of the already powerful positions of formal national monopolists
(who would be the most likely operators to be given a universal
service obligation) being bolstered by their receiving excessive
payments out of such funds from their competitors.
"In the UK Oftel
is consulting widely on universal service issues and its provisional
view is that the cost to BT and Kingston Communications of meeting
their universal service obligations is likely to very low or of
a de minimis nature. As a result it is possible that the
UK may choose not to set up a universal service funding scheme
in the immediate future. In any case, however, Oftel will keep
the situation under close review, and any funding mechanism which
may be established in the UK would have due regard to this Communication".
Scrutiny handling
14.8 We decided on 5
February that we would not consider this document until we had
received an explanation from the Minister for the delay between
the date when the Commission sent the document to the Council
Secretariat (27 November 1996) and the Minister's Explanatory
Memorandum of 3 February 1997. In a letter (dated 18 February)
the Minister explains that:
"....Commissioner
Bangemann merely gave a brief oral presentation to the 28 November
Telecommunications Council of the document which the Commission
had adopted the previous day. However, the Commission did not
make copies available at the Council and there was no discussion
of it in the Council. Subsequently, the document was transmitted
to the Council and deposited in the usual way. I understand that
the Dutch Presidency do not plan to discuss the Communication
at either of the forthcoming Telecommunications Councils in March
or May."
Conclusion
14.9 The Commission's
assessment criteria are of political importance, not just in relation
to the UK, but also because the conditions of operation in other
Member States will affect any UK-based competitors seeking to
extend their operations within the Single Market. So far as the
UK is concerned, the Minister tells us that the costing methodology
outlined by the Commission is very close to that used by Oftel.
The Communication is not contentious and we now clear it.
14.10 We thank the
Minister for his explanation, from which it is clear that there
was no question of the document being agreed in Council before
we had been given the opportunity to consider it.
43 (16138) COM(95) 113; see HC 70-xviii (1994-95), paragraph 12 (7 June 1995). Back
44 (16431) 9705/95; see HC 70-xxv (1994-95), paragraph 50 (18 October 1995) and (17113)-; see HC 51-xvii (1995-96), paragraph 10 (24 April 1996) and (17659) 11679/96; see HC 36-viii (1996-97), paragraph 2 (17 December 1996). Back
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