22 The Universal Services Directive
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8485/06
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COM(06) 163
| Commission Communication: Outcome of the Review of the Scope of Universal Service in accordance with Article 15 of Directive 2002/22/EC and Commission Staff Working Document
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| Legal base | — |
| Document originated | 7 April 2006
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| Deposited in Parliament | 24 April 2006
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| Department | Trade and Industry
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| Basis of consideration | EM of 22 May 2006
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| Previous Committee Report | None; but see HC 34-iv (2005-06), para 8 (20 July 2005)
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| To be discussed in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
22.1 The 2002 Universal Service Directive lays down the basic
principles on universal service (i.e. for telecommunications and
information) and addresses other specific user and consumer rights,
and the corresponding obligations on undertakings. It provides
National Regulatory Authorities (NRAs) with the necessary powers
to protect users' interests in situations where competition and
market forces are generally the most effective means to satisfy
users' needs. The Universal Service Directive is part of the overall
regulatory framework, whose other components are:
- the Framework Directive: containing rules and principles
which apply horizontally to all the activities covered by the
other, specific, directives, focussing on the responsibilities
and powers of the National Regulatory Authorities (NRAs) as the
foundation of the new system;
- the Authorisation Directive:
intended to reduce the regulatory burdens on market access and
to ensure more consistent treatment of operators and different
technologies;
- the Access and Interconnection Directive:
aimed at ensuring that relations between operators are left as
far as possible to competitive market forces, while giving flexible
powers to NRAs to intervene where necessary; and
- the E-Privacy Directive:
aimed at controlling unsolicited direct marketing communications
by email, SMS,[69] fax
and automated calling machines; the use of cookies[70]
by website operators; and data.
22.2 The Directive defines universal service as the
"minimum set of services, of specified quality to which all
end-users have access, at an affordable price in the light of
national conditions, without distorting competition" (Article
1.2). The current scope of universal service includes:
Connection to the public telephone network at
a fixed location
"All reasonable requests for connection at a
fixed location to the public telephone network and for access
to publicly available telephone services at a fixed location must
be met by at least one undertaking." (Article 4.1). The connection
to the network is limited to a single narrowband connection to
the end-user's primary location/residence. The principle of technological
neutrality allows universal service providers to use any technology,
whether wired or wireless, capable of delivering that service
at a fixed location (Rec. 8).
Access to publicly available telephone services
According to Article 4.2, end-users must be able
to make and receive local, national and international telephone
calls, facsimile communications and data communications. In addition,
the Directive incorporates a number of services that are closely
associated with basic telephony: the provision of directories
and directory enquiry services (Article 5), public pay telephones
(Article 6) and special measures for disabled users (Article 7).
22.3 Member States must ensure that the defined set
of services is made available to all users, independently of geographical
location, upon reasonable request, giving undertakings an opportunity
to fulfil them and imposing obligations on them only if the market
fails to deliver the defined services (Articles 3, 4 and 8).
22.4 Article 15 of the Directive requires the Commission
to review the scope of universal service "in the light of
social, economic and technological developments, taking into account,
inter alia, mobility and data rates in the light of the prevailing
technologies used by the majority of subscribers". Any change
of scope is subject to criteria that the Commission summarises
as follows:
"a) A minority of consumers would be excluded
from society by not being able to afford specific services that
are both available to and used by the majority; and
b) Inclusion of these services within the scope
would convey a general net benefit to all consumers in case they
are not provided to the public under normal commercial circumstances."
22.5 The results of the review were set out in Commission
Communication 9592/05, which we considered on 20 July 2005. There,
the Commission noted that competitive markets are the main route
to an "inclusive knowledge society": "universal
service is not a mechanism whereby the roll-out of new technologies
and services is financed by increasing the costs for all existing
(telephone) users. Rather, it is the safety net that allows a
minority of consumers to catch up with the majority who already
enjoy basic services."
22.6 The Communication (and the associated, more
detailed Commission Staff Working Document) noted that competition
and technological progress had resulted in 97% of households in
the EU 15 (the pre-accession States) having fixed or mobile telephones,
with at least 95% of the total EU population being covered by
mobile networks. In many Member States (including several of the
new ones) mobile had exceeded fixed-line penetration. Mobile technology
had already become "mass market". Whilst there had been
rapid growth on Broadband Internet Access, only a minority of
the public (6.5% for the EU 25, 7.6% for the EU 15) had currently
taken up such services at home. The Communication concluded that
there was no social or economic reason for including either service
within the scope of universal services at this stage, but that
the broadband issue in particular needed to be kept under active
review. The then Minister agreed and believed other Member States
would do likewise.
22.7 Given the rapid changes in communications, the
Commission also judged it timely "to provoke a forward-looking
policy debate on universal service provision that allows input
from all interested stakeholders and can contribute to the general
regulatory review in 2006".
22.8 As it was not clear how the outcome of this
process would be taken forward, we kept the document under scrutiny
pending the receipt of information from the Minister about these
further consultations.[71]
The Commission Communication
22.9 The Communication starts by outlining the conclusion
it reached in the May Review — that neither mobile communications
nor broadband internet access should be included within scope
— and then the views received during its consultation of
interested parties. 76 contributions were received from governments
(16 of 25 Member States), regulatory authorities, consumer bodies,
businesses, manufacturers, charities and citizens. It is helpfully
summarised by the Minister of State for Industry and the Regions
(Margaret Hodge) in her 22 May 2006 Explanatory Memorandum as
follows:
"The Communication notes the overall broad
consensus in favour of the Commission's assessment regarding scope,
though there was a much more diverse response on the longer-term
issues posed. There was, however, some concern (notably from consumer
groups) that the Review itself (in other words restricting the
question to one of scope) was too narrow.
Mobile Communications
"It is noted, that while 70% of respondents
agreed with the Commission view that the conditions for inclusion
of mobile communications within scope of universal service were
not fulfilled, some said that there were still problems of mobile
reception in remote areas. In addition concerns were raised on
the cost of pre-paid cards and the difficulty of use of mobile
devices for some disabled users. Others, however, commented on
the real success story, noting the real competition that exists
in most EU markets and consequential lower tariffs.
Broadband Internet Access
"The Communication points out that 80% of
the respondents agreed with the Commission assessment that the
current broadband market in the EU did not meet the criteria (for
inclusion in the scope of Universal Service) that the service
was being used by the "majority of consumers".
[72] It noted,
however, the comment by several respondents that broadband was
becoming an almost "must have" service for participation
in society and that there was a real danger in the future of a
(further) "digital divide" arising if there was not
proactive action by governments. It also noted, however, that
some thought the market still in its infancy and that it would
be difficult to predict whether market failures will persist.
Longer Term Questions
"The previous Communication ((Com(05)203)
as submitted by EM 9592/05) had asked views from stakeholders
on a number of longer-term questions that were wider than the
questions relating to the scope of Universal Service. In this
Communication the Commission notes that stakeholders who responded
broadly agreed that the issues raised warrant policy debate on
how the universal service provision should evolve in the converging
and competitive communications environment. There were, however,
divergent views with some calling for the abolition and some for
the strengthening of the universal service provision.
"The Communication then notes more specific
responses to the following questions that were raised:
Should universal service address only access
to the communications infrastructure, and not to the telephone
service?
"Several stakeholders, particularly regulators
and industry representatives, considered that there may be a case,
though not necessarily at present, for separating the access to
infrastructure from the service provision especially as the customer
can increasingly choose between different suppliers for both access
and services. Some, however, including consumer and user representatives
did not see that access to infrastructure alone would be sufficient
to secure essential services to more vulnerable consumers. It
was noted that in the short-term, separating access from services
might be not be practical given that access regimes are still
in the process of being established in the EU with incumbents
often with a monopoly at retail level. There was also some concern
amongst operators of creating complex regulatory and contractual
arrangements if the access and service provisions were to be separated.
Should universal service address access at
any location?
"The Communication notes (without irony)
how stakeholders were somewhat confused by this question! We were
as well. Essentially it notes that some saw that the Directive
allowing universal service to be supplied by mobile/wireless service
providers already meets this requirement. Others, however, took
the question to mean provision though mobile communications, which
(they pointed out) would be very expensive and onerous for operators
to meet. A more thoughtful consideration was that new forms of
access technologies (especially through wireless) might make the
obligation to provide services at fixed locations easier to meet
in the future.
Is it still appropriate to include provisions
on public payphones within the scope of universal service?
"Here the response of stakeholders was more
clear-cut. Several noted that given the near ubiquity of mobile
phones (which the Commission had commented on in their deliberations
on scope) a reduction in the number of payphones would not be
harmful and that they could be removed from the scope. Others,
however, argued that payphones were still valued (and indeed essential
in some circumstances) by the most vulnerable members of society.
A midway response would be to mandate a minimum of an emergency
contact point (eg for 112 calls only)[73]
in areas where payphones are removed.
For how long will there be a need to keep
directories and directory enquiry services within the scope of
universal service?
"Here those responding were keen to point
out the fact that there is a considerable distinction between
the requirement on an operator to collect and pass on directory
data (at wholesale level) and the obligations to provide access
to directory services (at retail level); the former being seen
as significantly more important. Several member States, including
the UK, saw that directory enquiry services could be removed from
the scope though there were concerns from some countries that
had not liberalised their directory enquiry markets. The directory
services industry saw universal service obligation in the retail
market as unnecessary while calling for the effective enforcement
of access requirements at the wholesale level.
Should special measures for users with disabilities
be further harmonised at EU level in the context of universal
service provision?
"Here again there were differing views.
Many respondents noted that given the pace of transition to Next
Generation Networks (NGNs) it might be premature to introduce
further harmonisation at EU level. Those in industry also noted
the variety of products and services that take into account specific
user needs and how a transition to an IP environment could indeed
further choice. Several disability user organizations were less
confident of the market continuing to deliver solutions and though
that further harmonisation may be required, an example being access
to emergency services when using IP networks.
Should universal service funding from general
taxation be an objective?
"The Communication records that the views
on this issue differed considerably between those respondents
from government and those from industry. In general, the former
did not see reasons to change the current system of funding (that
allows a choice between the use of public funds or by setting
up a sector-specific fund) and indeed some governments wished
to exclude any possibility of tax-based funding. The latter, meanwhile,
thought that sector specific funding creates market distortions
and raises overall communications costs.
Commission Position
"The Commission concludes that the responses
to their earlier Communication (of May 2005) provide support for
their view that neither mobile nor broadband communications fulfil
the necessary conditions for inclusion in the scope of Universal
Service. They do, however, concede that the review was limited
in scope — given the criteria in the Directive — and
that given the widespread interest from stakeholders, they will
revisit the wider issues discussed above when considering their
proposals in the overall Review of the eCommunications regulatory
framework.
Conclusion
"Here the Communication simply notes the
Commission conclusion that, as a result of the review, they will
not propose any change in the scope of universal service at the
present time, but that the contributions received (especially
on the longer-term issues) will provide a good basis to continue
a forward-looking policy discussion on the universal service provision."
The Government's view
22.10 The Minister continues as follows:
"Whilst the Communication itself does not
have any direct policy implications for the UK (given that it
concludes that no changes to legislation are required at this
point) it is important in that it exposes Commission thinking
(and also the views of a diverse range of Stakeholders) ahead
of the 2006 Review of the eCommunications regulatory framework.
We are expecting a Communication from the Commission in July that
will outline the main changes they are minded to make to the current
framework (which includes the directive in universal service provision).
The changes proposed will be subject to public consultation over
the summer leading to the adoption of specific directive amendments
in December or January.
"The prime conclusion of the Commission,
in relation to the extension of scope in the provision of Universal
Service, was as expected. Given the existing criteria in the Directive,
against which any extension of scope has to be justified, it was
clear that neither mobile communications nor broadband Internet
access would pass the test. For the former it was difficult to
justify that the "lack of availability or non-use by a
minority of customers resulted in social exclusion" while
for the latter one could not really argue that broadband services
"were used by a majority of consumers". The Commission
were, though, able to report that the majority of respondents,
including the UK authorities, supported their analysis. Importantly,
and as we had suggested in our response, the Commission agreed
that changes to scope should be further considered in the overall
2006 Review process. We are happy with this.
"The more interesting part of the Communication
deals with the responses the Commission received on the questions
they posed on longer-term questions. Here there were, as is recorded
above, a variety of (and at times contradictory) views from stakeholders.
How the Commission may take these views forward into actual proposals
(in the Review) will be interesting and, potentially important
for the UK. We do not think (from informal contacts with Commission)
that they will propose any dramatic changes but we will study
the forthcoming Communication carefully.
"Specifically, as a result of the comments
made in response to the question on 'access to infrastructure
or service' we would not expect any significant changes. It
is probably too early in the convergence process for universal
service obligations to apply to the infrastructure rather than
the provider of services. The same is also probably true on the
issue of 'universal service at any location'. We do not
think that a generic requirement can be made, yet, for the provision
of a service wherever a person might be.
"On the question of the provision of 'public
payphones' and 'directory and directory enquiry services'
we are pleased that the Commission have indicated that further
study is required. We also believe a debate is required, both
on the role that public payphones have in relation to the widespread
use of mobile phones, and also on the mandating of directory enquiry
services in light of the competitive nature of the market, in
many EU countries.
"We were also pleased that the Commission
initiated a debate on 'special measures for users with disabilities'
as we believe that this is an important issue for consideration
during the Review of the Framework. We are currently having a
dialogue with interested parties on the most appropriate way of
ensuring those with disabilities have access to current and emerging
services.
"Finally, on 'universal service funding'
we believe that the current arrangements, whereby the member
State can decide on the appropriate mechanism, should be retained.
We are confident that the Commission, in light of the varying
responses they received, will not wish to alter this situation."
22.11 Looking ahead, the Minister notes that the
DTI have established a Stakeholder Group, which has been discussing
the Review, and that she "will continue, and enhance, the
consultation process (with both the supply and the user community),
as more detailed proposals from the Commission are forthcoming".
Conclusion
22.12 The issues are clearly set out. As the
Minister notes, it may not be easy to reconcile some of the views
put forward. But the emerging sense of the outcome of these consultations
is that, despite the continuing convergence of Information and
Communication Technologies and the increasing competitiveness
of the ICT market place, major changes to the scope of the Directive
would be premature, particularly with regard to users with disabilities
and other vulnerable members of society.
22.13 We now clear the document, which we are
reporting to the House because of its intrinsic importance.
22.14 We also clear the earlier Communication
held under scrutiny, as this present document contains the information
we were seeking, and look forward to the further Communication
containing the Commission's proposals.
69 Short Message Service - a text message service that
enables short messages to be sent to and transmitted from mobile
phones. Back
70
A small data file created by a Web server and stored on the recipient
computer, which provides a way for the Web site to identify users
and keep track of their preferences. Back
71
See headnote. Back
72
The Minister comments thus: "As the average EU usage figure
is around 12% this is not surprising." Back
73
The common European emergency telephone number is 112. It can
be used in the UK as an alternative to 999. Back
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