Select Committee on European Scrutiny Twenty-Seventh Report





COM(01) 175

Commission working document on proposed new regulatory framework for electronic communications networks and services.

Legal base:



Trade and Industry

Basis of consideration:

SEM of 23 April 2002

Previous Committee Report:

HC 152-i (2001-02), paragraph 17 (18 July 2001)

Discussed in Council:

Not applicable

Committee's assessment:

Politically important

Committee's decision:





  15.1  In March 2001, the Commission issued draft guidelines on market analysis and the assessment of significant market power. These set out the principles to be followed by national regulatory authorities (NRAs) in analysing whether there is effective competition in the provision of electronic communications products and services, or if there are operators with significant market power (SMP) and, therefore, a need for sector-specific regulation in the markets concerned.

  15.2  The then Minister for Small Business and eCommerce (Ms Patricia Hewitt) submitted an Explanatory Memorandum in which she gave a detailed account of refinements to the guidelines which the Government would be asking the Commission to make. We asked the Government to submit a Supplementary Explanatory Memorandum on the final version before the Commission issued it.

  15.3  The guidelines form an important part of the new regulatory framework for electronic communications networks and services, established under the Framework, Access, Authorisation and Universal Service Directives, which were adopted on 14 February 2002[17].

The revised draft guidelines

  15.4  The Minister for E-Commerce and Competitiveness (Mr Douglas Alexander) tells us that the Commission made a revised version available to national regulatory and competition authorities for discussion at a meeting on 5 March. Although it has not been issued for general circulation, he has made a copy of the text available to us. This version, subject to any final amendments, is expected to be issued as the definitive document later this month. The Minister comments that the guidelines will be subject to regular review thereafter by the Commission to ensure that they remain appropriate in a rapidly developing market.

  15.5  The Minister also says that NRAs will be required to undertake market reviews, taking account of the principles set out in the final version of these guidelines, and the relevant product and service markets listed in a separate Commission Recommendation[18], as part of the preparations for implementation of the new framework in the summer of 2003.

The Government's view

  15.6  The Minister says:

"The Government broadly welcomes the draft guidelines, which will give both NRAs and market players greater certainty about the application of key provisions of the new regulatory framework. The latest version of guidelines reflects the changes agreed to the Framework, Access, Authorisation and Universal Service Directives before they were adopted and also addresses some of the points made by the UK and others during the public consultation on the first draft.

"In particular, it is welcome that the draft guidelines:

distinguish between ex ante and ex post application of the concept of dominance;

detail the definition of dominance (for example, they recognise that decreasing market shares do not automatically imply loss of dominance, and the importance of barriers to entry in electronic communications markets); and

clarify the 'hypothetical monopolist' test used to assess the impact of a price rise in circumstances in which the market is already characterised by a lack of effective competition (the original draft was not very clear on this).

"Areas where the draft guidelines could still be improved include:

the application of the concept of collective or joint dominance to ex ante regulation of electronic communications markets, where further clarification and examples would be helpful;

the emphasis on the forward-looking element of NRAs' market analyses (OFTEL argues that it is important to take past evidence as well as future prospects into account in assessing the need for ex ante regulation); and

the conclusion in the guidelines that designation of operators as having SMP without imposing some form of regulatory obligation is meaningless (the Framework Directive seems to envisage situations, for example, newly emerging markets, where there is not yet effective competition but where the market leader should not be subjected to inappropriate obligations). The UK has submitted comments on these aspects of the latest draft to the Commission".


  15.7  We thank the Minister for providing us with this update on the draft guidelines, as we requested, and we clear the document. However, we ask the Minister to write to us again after the final document has been issued by the Commission, commenting on those aspects of the draft on which the Government has outstanding concerns.


17  (23262) 6297/02, (23263) 6298/02, (23283) 6300/02 and (23314) 6313/02; see HC 152-xxiii (2001-02), paragraphs 15 - 18 (10 April 2002). Back

18  Expected to be issued by the end of April. Back

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