12 Implementation of the telecoms regulatory
package
| (25110)
15186/03
COM(03) 715
+ ADD 1
| Commission Communication: European Electronic Communications Regulation and Markets 2003 — Report on the Implementation of the EU Electronic Communications Regulatory Package
Commission Staff Working Paper: Technical Annexed of the Ninth Report on the Implementation of the Telecommunications Regulatory Package
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| Legal base | — |
| Document originated | 19 November 2003
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| Deposited in Parliament | 3 December 2003
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| Department | Trade and Industry
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| Basis of consideration | EM of 16 December 2003
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| Previous Committee Report | None
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| Discussed in Council | 20 November 2003 Telecommunications Council
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| Committee's assessment | Politically important
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| Committee's decision | Cleared, but further information requested
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The Commission Communication
12.1 The Commission reports on implementation, as at 1 November
2003, by the EU Member States of the new European Community regulatory
framework for electronic communications, and the state of the
market, as at 1 August 2003.[21]
It comes at a moment of transition between the old and the new
regulatory frameworks for electronic communications.
12.2 The main aim of this new legislative package
is to introduce a lighter, but comprehensive and technology-neutral,
framework, based on competition law principles. It also aims
to streamline the entire regulatory process by limiting ex
ante regulation[22]
to what is strictly necessary and by rendering the regulatory
process as transparent as possible. It adapts the existing rules
to take account of the convergence between telecommunications,
information technology and media in evolving markets, where the
same services can be delivered over a variety of platforms and
received via a range of different terminals. Consultation and
cooperation are key features of the package in the light of the
increased flexibility given to national regulatory authorities
(NRAs) to choose the most appropriate tools for dealing with regulatory
concerns as they arise.
12.3 The four main directives of the package,[23]
adopted by Council and Parliament on 7 March 2002, required implementation
on 25 July 2003. Only eight Member States, of which the UK is
one, have met the deadline. In view of this, the usual annex
giving details of the situation in individual Member States has
been omitted, in order to concentrate on key issues which still
need to be addressed in the implementation process. Infringement
proceedings have been opened by the Commission against Belgium,
Germany, Greece, France, Luxembourg, the Netherlands and Portugal,
which have not yet completed the legislative process of transposing
the directives into their national law.
12.4 The Commission is convinced that its previous
regular reports on the status of implementation of the former
regulatory package and on market developments contributed to the
success of this sector in the European economy, and intends to
continue to report similarly on the new framework.
12.5 The two major areas covered by the report are
the general state of the electronic communications market and
the status of implementation in the Member States of the four
main directives of the new regulatory package.
THE ELECTRONIC COMMUNICATIONS MARKET
12.6 The report is mainly positive. The previously
fragile state of the market now appears to be stabilising. The
Commission sees signs of renewed confidence in the sector and
forecasts that the market will grow between 3.7 and 4.7 percent
in 2003. It notes that:
- the mobile market continues
to grow. The Commission calculates that 81% of EU citizens now
own a mobile phone;
- 3G[24]
services are now up and running in four Member States, including
the UK;
- the number of fixed broadband access lines almost
doubled between July 2002 and July 2003;
- subscribers increasingly choose alternative rather
than incumbent (that is, dominant — formerly monopoly) operators
for local calls; and
- the EU weighted average charges for call termination
on mobile networks have decreased by 15.3 percent for mobile operators
with significant market power (SMP). However, these charges are
still nine times higher than average charges for fixed-to-fixed
interconnection. The Commission believes that these changes have
largely been brought about by the interventions of the NRAs.
12.7 Less positive aspects are that in the majority
of countries, although not in the UK, the incumbent is still by
far the dominant supplier in the broadband market, and local loop
unbundling (LLU), despite the number of unbundled lines doubling
since last year, has still not reached critical mass. Indeed,
the number of large competing fixed line operators in each national
market has shown no increase.
OVERVIEW OF THE STATE OF IMPLEMENTATION OF THE NEW
PACKAGE
12.8 The Commission recognises the efforts made by
the eight Member States which have implemented the package to
ensure that the principles on which it is based are faithfully
carried over into national law. It is disappointed, however,
that seven Member States have still not implemented the package,
but notes that all are currently firmly engaged in the process.
The report emphasises that some aspects of implementation are
of vital importance if Member States are to realise, to the full,
the objectives of the new framework. The majority of these relate
to NRAs, including:
- the need for the implementing
legislation to confer wider powers and discretion on NRAs to enable
them to promote competition and the development of the internal
market;
- the availability to NRAs of the full range of
remedies provided for in the framework, so that they can address
a lack of effective competition in a relevant market; and
- the need for timely completion of market analyses
by the NRAs; undue delays would undermine the consistent application
of the new framework.
DETAILED REVIEW OF THE MARKET SITUATION
12.9 More detail than that given above is provided
under the relevant headings:
- Mobile telephony.
The Commission is continuing its enquiry into the compatibility
with EU competition rules of international roaming tariffs.
- Broadband. Growth
in broadband connections across the EU has been intensive during
2003. They have almost doubled since July 2002 and now stand
at 17.5 million. Encouragingly, new entrants are gaining market
share in several Member States. On the other hand, incumbents
seem to be retaining or regaining market share elsewhere, with
Deutsche Telekom still retaining a 93 percent market share in
Germany. High speed internet access in France has been growing
more rapidly, and in a more balanced way, following a Commission
decision under competition law obliged France Telecom to reduce
its wholesale prices by 30 percent. The Commission will continue
to actively monitor the development of competition in this sector,
and will intervene where appropriate.
- Broadband penetration.
The report analyses the evolution of the market by ranking the
Member States according to penetration. The measure is the total
number of broadband lines per 100 population. The UK comes in
the middle group, along with Germany, France, Spain, Austria and
Finland, with a penetration rate of 4-7 percent. The report notes
that in the UK the incumbent, BT, has the lowest share of DSL[25]
lines in the EU.
- Local Loop Unbundling (LLU). 828,000
new lines were taken up between July 2002 and July 2003, double
the number that were taken up between October 2001 and October
2002. This increase includes a large number of shared access
lines which now represent 6% of all new entrants' DSL lines, as
against 1.5% in October 2002. In these cases, the incumbent offers
a traditional telephony service whilst the new entrant offers
broadband services.
LLU is still rather unbalanced across the EU, with
more than 95% of the unbundled lines concentrated in six countries:
Germany, Italy, Denmark, Finland, the Netherlands and Sweden.
The Commission concludes that price reductions for shared access
lines may have stimulated their take up. In May 2003, the Commission
found that Deutsche Telekom was engaging in a margin squeeze by
charging new entrants higher fees for wholesale access to the
local loop than the price subscribers paid for retail lines.
The Commission notes that it is determined to continue to take
anti-trust action in order to preserve long-term competitiveness.
- Fixed lines.
Fixed line voice telephony tariffs have continued their downward
trend for both national and international calls, although at a
significantly slower rate than in previous years.
- Digital Television (DTV).
The DTV market is showing signs of recovery after the significant
slow-down in growth in 2002. Average household penetration increased
from 18% to 22% during 2003, although penetration levels vary
across Member States from 5% to above 50%. The Commission has
experienced difficulties in obtaining reliable data. Satellite
represents about 70% of the overall DTV market. The penetration
rate for digital terrestrial TV (DTTV) has improved, doubling
to 2.5% of total EU TV households over the past year. The report
attributes this largely to the successful take up of free-to-air
DTTV in the UK.
STATUS OF IMPLEMENTATION OF THE NEW REGIME
12.10 The Commission deals in turn with each of the
four main directives due for implementation on 25 July 2003 and
examines various aspects of national law, or in the case of incomplete
or no implementation, draft law, which give rise to concern.
Individual Member States are not identified.
12.11 Points of concern include:
- Directive 2002/21/EC, the
Framework Directive.
This contains the rules and principles which apply horizontally
to all the activities covered by the other, specific, directives.
It focuses particularly on the responsibilities and powers of
the NRAs, the foundation of the new regulatory system. The Commission's
chief concern is about the lack of clear attribution of tasks
when a Member State designates more than one NRA. Also, the independence
and impartiality of an NRA may be in doubt where, for example,
key decisions require the consent of Ministry-appointed officials,
and its powers to act may be constrained where the law does not
explicitly confer them.
- The report notes that the UK has been the only
country so far to notify the Commission under Article 7 of the
Framework Directive of its draft measures defining markets and
designating undertakings as having Significant Market Power.
The Commission expects an increasing number of notifications from
other Member States in the coming weeks and months.
- Directive 2002/20/EC, the Authorisation Directive,
is intended to reduce the regulatory burdens on market access
and to ensure more consistent treatment of operators and different
technologies. The Commission is concerned that in some Member
States the draft measures fail to define clearly the conditions
attached to the general authorisation and to rights of use, thus
creating legal uncertainty for undertakings as to their rights
and obligations. There are also concerns that some measures fail
to specify sufficient objectivity, transparency and proportionality
in relation to grant of rights of use of radio frequencies and
administrative charges.
- The purpose of Directive 2002/19/EC, the Access
and Interconnection Directive, is to ensure that relations
between operators are left as far as possible to competitive market
forces, while giving flexible powers to NRAs to intervene where
necessary. Most of the inadequacies notified to the Commission
relate to the lack of flexibility for the NRA to act without legislative
backing, or to the lack of powers either to apply the full range
of possible remedies available or to impose an obligation on an
operator to publish a reference offer, that is the price at which
it will provide interconnection or access to other operators.
- Directive 2002/22/EC, the Universal Service
Directive, provides national regulatory
authorities with the necessary powers to protect users' interests
in situations where competition and market forces are the most
effective means to satisfy user needs generally. The Commission
identifies some discrepancies in implementation, including the
application of the provisions to the whole of the national territory,
and an attempt to apply the obligations to all operators rather
than to one designated universal service provider.
- Directive 2002/58/EC, the "e-Privacy
Directive". The Commission notes
that it is too soon to comment on the way this Directive is being
transposed, given that the deadline was 30 October 2003. Amongst
the new requirements are that operators using "cookies"
or similar internet tracking devices must offer the customer a
chance to refuse the cookie.[26]
THE ACCESSION STATES
12.12 The Commission sets out briefly the requirements
with which the Accession Countries will be required to comply,
both before and after accession. Their performances will be assessed
alongside those of the existing Member States in the next report,
which will be issued in the fourth quarter of this year.
MONITORING AND ENFORCEMENT
12.13 The Commission says that it is committed to
achieving maximum legal certainty for market players and investors
in this sector. It is monitoring the transposition process closely,
and has already opened proceedings against those Member States
which failed to implement the four main directives by 25 July
2003. It will ensure that all the various provisions of the package
are properly and effectively implemented, and monitor the fulfilment
of Member States' obligations to take account of any recommendations
adopted to ensure the consistent application of the new framework.
12.14 The Commission notes that it is also working
with the European Regulators Group (ERG), the Communications Committee
(COCOM), the Radio Spectrum Committee (RSC) and the Radio Spectrum
Policy Group (RSPG) to develop faster, more effective and more
proportionate methods than infringement proceedings for ensuring
compliance. It considers that regular reporting of implementation
of the regulatory framework and market developments has proved
to be an efficient tool for monitoring correct implementation
and one which it intends to continue to use in the future.
The Government's view
12.15 The Minister for Energy, e-Commerce and Postal
Services at the Department of Trade and Industry (Mr Stephen Timms)
comments:
"The Government welcomes the Commission's positive
assessment of the market, which coincides with the views of the
industry. It is particularly pleased that the report identifies
the UK as one of only four member states where 3G mobile services
have started operation, and notes that proportionately BT hosts
the least share of DSL broadband lines of any incumbent in the
EU.
"The Government is disappointed that so many
Member States have been unable to implement the major part of
the new regime on time and that the Commission still has outstanding
concerns as to the compliance with the directives of many draft
and finalised provisions of national law. One effect of this
may well be to delay investment, particularly in broadband, by
new operators. This would have implications for the ability of
the EU to meet the objective for broadband roll out in the e-Europe
2005 Action Plan of 'widespread availability of broadband access
at competitive prices'. The Government welcomes the fact that
the Commission has lost no time in issuing infringement notices
against those Member States which missed the deadline for implementation,
and strongly supports and encourages the Commission in its commitment
to enforcing full, effective and speedy implementation as soon
as possible. At the same time the Government, and Ofcom, where
applicable, will continue to work closely with the Commission
in the ERG, the RSC, the RSPG and COCOM to develop faster, more
effective and more proportionate methods for achieving a consistent
application of the new regulatory framework throughout the EU.
Conclusion
12.16 We share the Government's disappointment
that so many Member States have not implemented the major part
of the new regime on time. The Minister appears content with
the action being taken by the Commission or, in some cases, which
it signals that it intends to take. We, too, note that it lost
no time in issuing infringement notices. We suspect that these
regular reports do exert useful pressure on Member States to take
action, contributing to improvements in the efficiency of this
sector, and we support the Commission's decision to continue to
produce them.
12.17 Another consideration is that touched on
by the Minister, namely that the effect of delays in compliance
may be to delay investment. This could be to the detriment of
both prospective new operators and customers, though it is not
clear whether all Member States share this analysis.
12.18 The report might have been more influential
if individual Member States had been identified in the report
on the status of implementation of the new regime. We urge the
Government to encourage more transparency in this respect in the
next report.
12.19 We clear the document, but ask the Minister
whether the Government is confident that the action taken by the
Commission so far in its role of ensuring that the various provisions
of the legislative package are properly and effectively implemented,
in a timely manner, is sufficient.
21 We cleared the eighth report on implementation of
the telecoms regulatory package on 29 October 2003. See (24061)
15227/02: HC 63-xxxv (2002-03), para 10 (29 October 2003). Back
22
Under ex ante, prior control is exercised, with the action in
question being reviewed and approved before it is taken, rather
than being examined subsequently. Back
23
Directive 2002/21/EC, known as the Framework Directive; Directive
2002/20/EC the Authorisation Directive; Directive 2002/19/EC
the Access Directive; and Directive 2002/22/EC the Universal
Service Directive. Back
24
Third Generation Mobile Communications. Back
25
High speed internet access using Digital Subscriber Line technology. Back
26
Cookies and similar devices are text files sent out by web-servers
and stored on users' terminals. They are particularly important
in enabling on-line transactions because they can be used to verify
a site visitor's identity. However, cookies and similar devices
do have privacy implications for users and the industry has already
responded by developing cookie identification and rejection options
for users. Back
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