RESULTS OF 1999 COMMUNICATIONS REVIEW
(21189)
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Commission Communication: The results of the public consultation on
the 1999 Communications Review.
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| Legal base:
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| Department: |
Trade and Industry
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| Basis of consideration:
| EM of 9 May 2000
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| Previous Committee Report:
| None; but see (20666): HC 23-i (1999-2000), paragraph 8
(24 November 1999); (20666) 12839/99; HC 23-vii
(1999-2000), paragraph 2 (2 February 2000) and
HC 23-ix (1999-2000), paragraph 7 (16 February 2000)
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| To be discussed in Council:
| Presented at 2 May Telecommunications Council
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| Committee's assessment:
| Politically important
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| Committee's decision:
| Not cleared; further information requested
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Introduction
7.1 The Commission initiated a major review
of the current telecommunications legislation[20],
with its Communication Towards a new framework for electronic
communications infrastructure and associated services. The 1999
Communications Review. This and other related documents were
debated in European Standing Committee C on 16 February[21].
Extensive consultation took place and the Commission has now reported
on the outcome.
The Commission Communication
7.2 An official text of the Communication
has not yet been received but the Minister for Small Business
and E-Commerce (Ms Patricia Hewitt) has submitted an EM on an
unofficial text, providing a comprehensive account of the contents
on which the following is based.
7.3 The Communication is in four sections.
Section 1 is an introduction; Section 2 sets out the results of
the public consultation; Section 3 draws conclusions for the future
regulatory framework. In Section 4 the Commission proposes the
next steps to be taken, some leading to proposals for legislation
which it will put forward.
Broad consensus
7.4 The Commission identifies the areas
where there was a broad consensus as follows:
Regulatory objectives
and principles
- on the objectives and principles set out in the
Communication, and that these should be established in Community
legislation, and possibly prioritised, to guide National Regulatory
Authorities (NRAs) in their decision making;
Design of the regulatory
framework
- on the need for procedures to achieve greater
harmonisation of regulation in Member States, accompanied by action
to promote flexibility and the introduction of self regulation
and co-regulation as a complement to binding legal measures;
Scope of the regulatory
framework
- on the need for a consistent regulatory framework
covering all communications infrastructure and associated services
and, at the same time, recognising the need to ensure the right
balance between transmission and content;
Licensing and authorisations
- on the use of general licences as the basis for
authorising communications networks and services, once appropriate
systems can be put in place for allocating the use of frequencies,
numbers and rights of way;
Access and Interconnection
— for firm
market definition rules where considering obligations for access
and interconnection;
— to maintain specific sectoral regulations
alongside competition rules, but gradually to remove them once
certain regulatory objectives are achieved in the market;
— to ensure availability of local loop
unbundling in all Member States; and
— to maintain the current framework for
standardisation, that is industry-led voluntary standardisation
with the possibility of mandatory rules in the case of public
interest.
Broadcasters saw a need to maintain the obligations
in the TV Standards Directive[22]
for all suppliers of conditional access services to grant access
on fair, reasonable and non-discriminatory terms. Public broadcasters
and consumer groups argued that there remained a need for "must-carry"
rules for certain public interest content in a digital environment.
Regulators and operators agreed that a continuation of "must-carry"
rules would be appropriate;
Management of scarce resources
- on the need to ensure efficient management of
the radio spectrum, and on setting up a Spectrum Policy Expert
Group (SPEG);
Universal Service and
User and consumer rights
— maintaining
the present scope of universal service, that is of voice telephony,
fax and data transmission via modem, while guaranteeing that it
can adapt to market and technological developments;
— updating the current Telecoms Data Protection
Directive[23] to take
account of technological developments;
— repealing the Leased Lines Directive
once there is competitive provision of leased lines for all users;
National Regulatory Authorities
- on the need for strong and independent NRAs to
conclude co-operation agreements with, among others, national
competition authorities.
7.5 The Commission then lists the areas
where there were differing views. The following is a summary:
— Licensing and authorisations
Although there was broad support for the increased
use of general authorisations, there were differing views on the
areas in which specific authorisations continued to be justified.
Some Governments wanted to maintain individual authorisations,
which require prior approval, for rights of way, and to have specific
rights and obligations for network operators investing in infrastructure;
Whilst there was general support that licence fees
should be limited to administrative costs, some telecoms operators
favoured funding NRAs from general taxation. On the other hand,
NRAs argued that funding through licence fees helped guarantee
their independence from government;
— Access and Interconnection
Whilst mobile operators argued that the mobile market
was competitive and that regulated access for service providers
was not justified, this was disputed by service providers. There
was also criticism from new entrants of the proposal to impose
an obligation on operators with Significant Market Power (SMP)
to negotiate access. There was no consensus on the proposal to
mandate carrier selection on mobile operators with Significant
Market Power;
— Management of scarce resources
Market players, users and some governments were divided
over the use of auctions and whether to introduce secondary trading
of spectrum;
— Universal Service and User and consumer
rights
Views were divided on the proposal to define guidelines
on affordability at a European level, with some operators and
Member States arguing that the criteria for guidelines should
be determined at national level. Network operators were generally
against proposals to provide facilities like caller location for
emergency calls, per call tariff transparency, and against intervention
by regulatory authorities on quality of service issues. Conversely,
consumer and user representative organisations and NRAs were generally
in favour;
— Numbering, naming and addressing
The majority but not all mobile operators were against
the proposal for number portability for mobile users, whilst users,
fixed network operators and some NRAs were in favour;
— Specific competition issues
There was no consensus on the Commission's proposal
to introduce two thresholds for obligations in respect of access
and interconnection, with most arguing for either SMP or dominance
but with no consensus on which one. The Commission proposed using
the competition law concept of dominant position as the more appropriate
trigger for certain sector-specific obligations, in particular
cost-orientation and non-discrimination, while maintaining the
lower threshold for other obligations, such as obligations to
negotiate access and transparency;
— Institutional arrangements
While a large majority were in favour of the proposed
new Communications Committee and High Level Group of Regulators,
clarification was sought of their respective rôles.
7.6 On the basis of its assessment of the
areas of broad consensus and differences, the Commission then
sets out its conclusions for the future regulatory framework.
The key conclusions on which the Commission will base its proposals
for legislation are described below.
7.7 The Commission proposes that the principles
and objectives set out in the Review Communication will be incorporated
in the new framework, and regulators would be obliged to follow
them in their decision making at national level. The new framework
would cover all communications infrastructure and associated services
and clarify the link between transmission and content regulation.
7.8 The new regulatory framework would be
composed of a framework directive together with four Directives
covering:
(1) licensing and authorisations;
(2) access and interconnection;
(3) universal service, and consumers' and users'
rights; and
(4) telecoms data protection. This would be accompanied
by non-binding measures in the form of recommendations, guidelines
and co-regulation with industry and consumers to be able to respond
flexibly to changing market conditions.
The new framework would set out the rules for management
of radio spectrum and numbering resources. It would make clear
that Member States are free to use auctions and permit the introduction
of secondary trading of spectrum.
7.9 The Commission proposes to use an approach
more aligned with competition law, under which a single threshold
of "significant market power," redefined to be more
akin to dominance, would trigger certain sector-specific obligations,
including pricing based on cost orientation and non-discrimination.
7.10 The Commission proposes that NRAs should
be able to impose obligations in respect of access and interconnection,
with strong co-ordination procedures at European level. The Commission
also proposes to bring forward a recommendation on the technical
and economic aspects of Local Loop Unbundling[24].
With regard to "must carry" rules, the Commission accepts
that such rules may remain justified in the digital broadcasting
environment.
7.11 The Commission proposes to use general
licences as the basis for authorising communications networks
and services. Specific authorisations would be permitted only
for allocating the use of frequencies and numbers, but not rights
of way as such rights are not specific to an individual organisation.
In respect of licence fees, the Commission considers that guidelines
to benchmark fee levels could be useful in bringing greater consistency
to licence fees across the EU.
7.12 The current scope of universal service
would be maintained, and procedures to review and update the definition
as appropriate in the light of technological and market development
would be introduced. The current option for Member States to introduce
universal funding schemes to compensate the universal service
provider where this is an unfair burden on the operator, would
remain, but the Commission would continue to keep Member States'
funding schemes for universal service under review.
7.13 The new framework would also:
(1) retain provisions
on leased lines but an NRA would be able to choose not to apply
these if it considered that there was competitive provision of
leased lines;
(2) include measures to encourage NRAs to ensure
that consumers have access to information about the price of individual
calls; and
(3) introduce a caller location obligation for
emergency services including to the European Emergency number
"112".
7.14 The existing Telecoms Data Protection
Directive would be updated to take account of technological developments
and ensure that it is technologically neutral.
The Government's view
7.15 The Minister comments that the Communication
gives a useful indication of the Commission's thinking and the
content of the draft proposals it intends to issue soon. There
is relatively little difference between these proposals and the
ones it put forward in November, with the most notable change,
made as a result of consultation, being its approach towards the
trigger for applying sectoral regulation. The Government, therefore,
she says:
"...continues to support
the Commission's overall approach towards the new regulatory framework,
in particular in proposing a regulatory approach which is flexible,
and puts a premium on co-regulation and on avoiding unnecessary
intervention."
7.16 Commenting on some of the key conclusions
in the Communication, the Minister says that:
"Specific Competition
issues including access and interconnection
"The Government welcomes the Commission's more
competition based approach to the future application of sector
specific regulation, but considers that NRAs rather than the Commission
would be better placed to define the product markets where such
regulation could be imposed. The Government would also be concerned
if cost orientation was inviolably linked with 'significant market
power' as this would be disproportionate. The Government also
welcomes the recommendation on Local Loop Unbundling as useful
in providing regulatory certainty for NRAs. OFTEL is currently
taking forward the introduction of Local Loop Unbundling in the
UK;
"The Government welcomes the Commission's proposals
to amend the Licensing Directive to permit — but not to
mandate — the introduction of secondary spectrum trading,
which the Government believes could be a powerful mechanism for
redistributing spectrum in response to rapidly changing patterns
of demand. The Government further agrees that regulatory safeguards
may be desirable in order to ensure that spectrum trading does
not lead to undesirable speculation or abuse of dominance. These
safeguards should, as far as possible, be left to the discretion
of Member States so that they can be tailored to reflect national
conditions;
"... the UK universal service provision is currently
being reviewed by OFTEL and the case for increasing the level
is being examined. OFTEL's initial view, subject to outcome of
consultation, is that extending universal service to include access
to higher-bandwidth services is not appropriate at this time (for
the reasons set out by the Commission). The Government endorses
the Commission's view that funding issues should be kept under
review and decisions to establish funding schemes should be fully
justified;
"The Government would support withdrawal of
the Leased Lines Directive if the Commission's criteria were met.
The Government also supports the proposals on increasing transparency
of tariff information but considers that this should be on a "whole
bill" comparisons, where possible through self-regulatory
initiatives, rather than individual per-call tariff information.
The Government supports enhancement of the emergency call numbers
in principle but considers this would need a careful cost benefit
analysis;
"... the Government broadly welcomes the Commission's
proposals for new institutional arrangements but considers that,
where existing structures, e.g. the Conference of European Posts
and Telecoms and the Independent Regulators' Group, are working
well they should be permitted to carry on doing so;
"... the Government would support updating of
the Telecoms Data Protection Directive5, in particular
in relation to Internet services."
The Scottish Advisory Committee on Telecommunications
(SACOT)[25]
7.17 In March, SACOT sent us a copy of their
response to the 1999 Communications Review. While supporting the
main thrust of the principles and policy objectives, it regretted
that the Commission had failed to ensure a sufficiently high level
of consumer protection. It suggested that there should be a specific
reference to the objective of:
"... ensuring that telecoms
services are available to all citizens at competitive prices which
are free from any elements of monopoly charging."
7.18 In more detailed comments in support
of this point, SACOT says:
- that the Commission should ensure that the conditions
for effective competition are indeed present and being implemented
in practice in the small business and residential telecoms markets,
before relaxing its sector-specific legislation. After fifteen
years of regulatory action aimed at promoting competition, this
situation is "nowhere near being reached in Scotland".
SACOT comments:
"There is a persisting
tendency, both within the Commission and within national regulatory
authorities (such as OFTEL in the UK) to look at the market from
the supply side, in terms of the market share of network operators
or service providers, and to give undue prominence to the competitive
options available to large business users of telecoms. The far
more limited competitive options available to small business and
residential telecoms consumers tend to get overlooked. This is
especially relevant to Scotland ..."
- that it is also sceptical about the scope for
codes of practice. These are all too often, it says, drawn up
and promulgated by industry organisations, ineffectively monitored
or enforced and are "frequently little more than public relations
exercises, designed to show the industry in a good light".
— Access to the local loop
- that there is a danger of new operators being
able to cherry pick the market by competing only in local loops
which have large business users or high net worth residential
consumers. NRAs should ensure that a non-discriminatory approach
is adopted.
— Universal service
- that it strongly supports the principle of universal
service as currently defined in Community legislation and the
Commission's objective of ensuring that all consumers can benefit
from the new information and communications technologies (ICTs).
It stresses the importance to Scotland of telecoms services which
are "available to everybody upon reasonable request in an
appropriate fashion and at an affordable price". For people
living in very remote areas access to a telephone is "a critically
important social and economic lifeline".
— Complaints handling and dispute resolution
- that it supports the Commission's intention to
include in the framework directive a requirement on Member States
to ensure that simple procedures exist for consumers other than
via the formal legal system. However, it fears that if this requirement
is expressed in very general terms, Member States may introduce
complaints handling systems that are wholly inadequate from the
consumer's point of view. It suggests that the new directive should
provide that any scheme should meet certain minimum criteria,
which it enumerates. It comments:
"The need for a set of minimum criteria is emphasised
by the recent lamentable proposals put forward by OFTEL ... for
a complaints handling scheme which fails to meet minimum acceptable
standards in a number of respects and which has attracted universal
criticism from organisations that represent consumer interests."
— Transparency of information including
tariffs
- that it supports the Commission's intention to
strengthen and clarify tariff transparency provisions in the new
framework directive, but comments:
"Tariff transparency
is, regrettably, becoming increasingly important as many telecoms
companies are adopting a 'confusion marketing' approach, making
it difficult for consumers to know exactly what they are paying
and impossible for them to compare different network operators'
charges. It is highly significant that a current well-intentioned
initiative by OFTEL ... to make comparative tariff information
geared to the needs of individual consumers available on a voluntary
basis has been only partially successful, because of the resistance
of some network operators.
"National regulatory authorities should have
the power to require network operators to disclose tariff and
other information to consumers. SACOT does not know whether this
power exists in other Member States, but it is not available to
the national telecoms regulatory authority in the UK, though a
comparable power is available to and actively used by the financial
services regulator in the financial services sector of the economy.
The Commission should at least ensure that there is nothing in
EU telecoms legislation which prevents or inhibits the exercise
of such a power at national level: if possible, this approach
to making competition more effective should be actively promoted."
— Institutional Issues
- that it is concerned that neither the proposed
Communications Committee (COCOM) nor the High Level Communications
Group (HLCG) provides for any representation of the interests
of consumers:
"While it is stated
that the HCLG will co-operate 'intensively' with bodies at European
level, including the Commission's own Consumer Committee, that
Committee has no expertise in telecoms issues and would be completely
overshadowed by industry lobbying."
Conclusion
7.19 The Minister tells us that little
in this Communication differs from the Commission's November Communication.
We note that she says that the Government supports the proposal
on increasing transparency of tariff information, but we regard
her response on the issue of universal service as incomplete.
We ask her to provide us with a further response when OFTEL concludes
its review.
7.20 It is unfortunate that SACOT's response
to the 1999 Communications Review was not completed in time for
it to be taken into account by European Standing Committee C in
February. We ask the Minister whether she expects the points made
by SACOT to be dealt with satisfactorily and to support her response
with an assessment, in so far as she is able, ahead of the adoption
by the Commission of its proposals, of the impact of the reforms
on the issues it identifies including, of course, that of universal
service. We note, for instance, that the Commission proposes to
"encourage" NRAs to ensure that consumers have access
to information about the price of individual calls, whereas SACOT
would prefer NRAs to have the power to require network operators
to disclose tariff and other information to consumers.
7.21 Meanwhile, we shall not clear this
document.
20 Hereinafter referred to as 'telecoms'. Back
21
Official Report, European Standing Committee C, 16
February 2000. Back
22
(17472) 9726/96; see HC 36-iii (1996-97), paragraph 3 (13
November 1996). Back
23
Directive 95/46/EC, OJ No. L 281, 23.11.95, p. 31. Back
24
(21216) 8144/00; see paragraph 19 below. Back
25
Established under the UK Telecommunications Act 1984 to
advise the UK Director General of Telecommmunications. It also
deals with consumer complaints against telecommunications operators
through mediation. Back
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