1 Reducing the cost of deploying
high-speed electronic communications networks
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7999/13
+ ADDS 1-6
COM(13) 147
| Draft Council Regulation on measures to reduce the cost of deploying high-speed electronic communications networks
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| Legal base | Article 114 TFEU; QMV; ordinary legislative procedure
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| Document originated | 26 March 2013
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| Deposited in Parliament | 3 April 2013
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| Department | Culture, Media and Sport
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| Basis of consideration | EM of 22 April 2013
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| Previous Committee Report | None
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| Discussion in Council | Early June
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; recommended for a Floor of the House debate on the Reasoned Opinion before 31 May.
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Background
1.1 The Digital Agenda for Europe (DAE) is a flagship initiative
under the Europe 2020 Strategy aimed at delivering sustainable
economic and social benefits from a digital single market based
on fast and ultra-fast Internet and interoperable applications.
1.2 It identified in particular the need to lower
the costs of broadband deployment in the entire Union territory,
including by achieving proper planning and coordination and by
reducing administrative burdens.[1]
1.3 The March 2012 European Council called for
action at the Union level to provide better broadband coverage,
including by reducing the cost of high-speed broadband infrastructure.[2]
The draft Council Regulation
1.4 With reference to the DAE, the Commission
notes in its Explanatory Memorandum two specific targets:
— by
2013, basic broadband for all Europeans;
— by 2020,
- access to speeds of above 30
Mbps for all Europeans; and
- subscription of internet connection above 100
Mbps for 50% or more of European households;
and says that these goals will only be achieved if
the infrastructure deployment costs are lowered across the EU.
1.5 The Commission notes that: EU telecommunications
services and infrastructures are still highly fragmented along
national borders; the untapped Single Market potential corresponds
to a yearly amount of 0.9% GDP, or 110 billion; and a significant
fraction of this untapped potential can be found at the level
of network infrastructures. Different regulatory approaches to
network roll-out increase the cost of access to national markets,
prevent the exploitation of economies of scale at services and
equipment level and hinder the development of innovative services
which could emerge on very high-speed networks running in a seamless
fashion across borders. The deployment of access networks often
involves provisions and procedures administered at local level;
such measures, including local secondary legislation may indirectly
affect the freedom to provide services and justify Union intervention.
1.6 In Spring 2012, the Commission invited interested
parties to give their views on five sets of questions, covering
the entire chain of network deployment, from the planning phase
to the connection of end-users: it says that a majority of respondents
confirmed existing inefficiencies and bottlenecks as well as the
potential for cost reduction and the need for action. The Commission
also established an Internet discussion platform for "crowd
sourcing" ideas of interested parties; and has, it says,
maintained regular contacts with major stakeholders, both public
and private, across the sectors concerned.
1.7 The Commission's extensive impact assessment
focused in particular on the costs and benefits incurred by direct
stakeholders, the expected effects on network investment and broadband
rollout, and broader macro-economic analysis of effects on consumer
welfare, growth, competitiveness, and the Single Market. Of the
four options examined, it concluded that a Council Regulation
was the best, "given its effectiveness towards the identified
objects, costs-benefits analysis, efficiency and coherence of
exploiting the cost reduction potential with general EU policy
objectives, in accordance with proportionality and subsidiarity
principles".
1.8 Against this background,
the objectives of the proposed Regulation are to reduce the cost
and enhance the efficiency of deploying high-speed electronic
communications infrastructure by scaling up existing best practices
across the EU. It seeks to address four main problem areas:
i) inefficiencies or bottlenecks concerning the
use of existing physical infrastructure (such as, for example,
ducts, conduits, manholes, cabinets, poles, masts, antennae, towers
and other supporting constructions);
ii) bottlenecks related to co-deployment;
iii) inefficiencies regarding administrative
permit granting; and
iv) bottlenecks concerning in-building deployment.
1.9 The Commission explains in its explanatory
memorandum that, in order to maximise synergies across networks,
the Regulation is addressed not only to electronic communications
network providers but to any owner of physical infrastructures,
such as electricity, gas, water and sewage, heating and transport
services, suitable to host electronic communications network elements.
Structure of the proposal and main rights and
obligations
1.10 The Regulation aims to facilitate and incentivise
the roll-out of high-speed electronic communications networks
by promoting joint use of existing infrastructures and enabling
more efficient deployment of new physical infrastructure so that
such networks can be rolled out at lower cost. It shall apply
to all civil works and physical infrastructure.
1.11 In addition to those contained in the EU
regulatory framework for electronic communications,[3]
the definitions in Article 2 include "network operator",
"physical infrastructure", "high-speed electronic
communication network", "civil works", "public
sector body", "body governed by public law", "in-building
physical infrastructure", high-speed-ready in-building physical
infrastructure", "major renovation works" and "permit".
1.12 Member States may maintain or introduce
measures in conformity with Union law which contain more detailed
provisions than those set out in the Regulation.
1.13 Article 3 establishes a general obligation
on network operators to meet reasonable requests for access to
existing physical infrastructure(s) as well as planned civil works
in relation to the deployment of electronic communications networks,
under fair terms and conditions. It includes a right to access
a set of minimum information and an obligation on network operators
to meet reasonable requests for in-site surveys of specific elements
of their physical infrastructure.
1.14 The Regulation envisages a right to negotiate
coordination of civil works, and places an obligation on undertakings
performing civil works financed by public means to meet reasonable
requests for civil works coordination agreements on transparent
and non-discriminatory terms.
1.15 Article 6 contains a right to access, by
electronic means and via a single information point (which facilitates
and coordinates the permit granting process and monitors compliance
with deadlines) any information concerning the conditions and
procedures applicable to specific civil works as well as a right
to submit applications for permits by electronic means via that
single information point.
1.16 Article 7 establishes an obligation to equip
new buildings, as well as buildings that undergo extensive renovation,
with high-speed-ready in-building physical infrastructure, and
an obligation to provide new multi-dwelling buildings, as well
as old ones that undergo extensive renovation, with a concentration
point located in or outside the building.
1.17 Article 8 constitutes a right for electronic
communications network providers to terminate their network equipment
at the concentration point of buildings, a right for electronic
communication operators to negotiate access to any existing high-speed-ready
in-building physical infrastructure and, in the absence of high-speed-ready
in-house infrastructure, a right to terminate their network equipment
in the private premise of the subscriber, provided that it minimises
the impact on the private property and at its own costs.
1.18 The Regulation would be reviewed within
three years after its entry into force.
Legal issues
1.19 The Commission argues that the use of Article
114 TFEU is justified by the objectives of the proposal, which
seek to improve the conditions for the establishment and functioning
of the internal market.[4]
It cites case law confirming that this article confers on the
Union legislature discretion, "depending on the general context
and the specific circumstances of the matter to be harmonised,
as regards the harmonisation technique most appropriate for achieving
the desired result, in particular, in fields that are characterised
by complex technical features".[5]
The Commission also notes that, based on Article 114 TFEU, the
Union has previously legislated, in order to foster local network
infrastructure deployment, through unbundling of the local loop.[6]
Subsidiarity
1.20 The envisaged measures build on existing
best practice in several Member States (including the UK). They
are judged necessary at the level of the Union, by removing barriers
to the functioning of the Single Market caused by "the patchwork
of rules and administrative practices at national and sub-national
levels", which the Commission says: impedes the development
and growth of European companies; has a negative impact on European
competitiveness; and creates barriers to invest and operate cross-border;
and thus obstructs the freedom to provide electronic communications
services and networks as guaranteed under existing EU legislation.
1.21 Action at the EU level is also required
to:
— stimulate
ubiquitous broadband coverage, which will only be achieved if
the infrastructure deployment costs are lowered across the EU;
— realise
the significant untapped potential of cost-reduction and facilitation
of broadband rollout, including by scaling up existing best practices
across the EU whenever available;
— streamline the efficient planning and
investment processes on a large scale, thus facilitating the development
of pan-European operators;
— ensure equal treatment and non-discrimination
of undertakings as well as of investors, in particular concerning
the electronic communications sector but
also concerning other sectors (e.g. utility companies seeking
to make profit from their physical infrastructure, synergies in
setting up smart grids).
Proportionality
1.22 The Commission says that, while the proposed
measures aim at reducing barriers to access to physical infrastructures,
they do not unduly impair ownership rights and preserve commercial
negotiation, nor impose any specific business models. The Regulation
complements rather than affects on-going national initiatives.
It also allows Member States to provide for general exemptions
for infrastructures which are technically unsuitable. It seeks
to enable commercial co-deployment arrangements, by enabling a
better dissemination of information on future civil engineering
works. The obligation to equip buildings with high-speed-ready
physical infrastructure is limited to new buildings and major
renovations necessitating a building permit.
Choice of instrument
1.23 The Commission argues that a directly applicable
Regulation, unlike a Directive that requires national transposition,
better guarantees the immediate impact needed in order to contribute
to the Digital Agenda objectives on broadband availability by
2020; and says that "the considerable advantages of the cost
reduction measures, both in terms of economic benefit as in societal
advantages, far outweigh any administrative burden".
The Government's view
1.24 The Minister for Culture, Communications
and Creative Industries at the Department of Culture, Media and
Sport (Mr Edward Vaizey) begins his Explanatory Memorandum of
22 April 2013 by expressing the Government's concerns that the
Regulation is not justified in accordance with the subsidiarity
principle:
"The measures supported by the Regulation —
infrastructure sharing, information provision, street works coordination
and in-built broadband equipment in buildings — would all
be implemented at a local level. There is little prospect of
these measures having a cross-border market effect, as the issues
the Regulation seeks to address are not applicable to the core
network that crosses Member State borders. The Government believes
that the Regulation's intended aim — to support superfast
broadband rollout by lowering the cost of civil engineering works
— would be best achieved by action at Member State level."
1.25 The Minister continues his comments as follows:
"The Government is committed to achieving the
European Digital Agenda targets on broadband, and is supportive
of measures at different levels which streamline and lower the
cost of superfast broadband deployment. The Government is currently
implementing a package of measures in the UK to sweep away red
tape around planning, street works, access to land, and power
supplies. The proposed Regulation does, in fact, contain a number
of elements that reflect current UK priorities to promote broadband
rollout, for example encouraging infrastructure sharing between
telecoms providers and electricity suppliers, and streamlining
the permit scheme process when carrying out street works. Many
of the policy objectives behind the Regulation could, in theory,
be supported at the EU level if they were proposed in a different
way using a different legal instrument.
"We are, however, concerned that the proposed
Regulation will not achieve its goals to lower the cost of civil
engineering works, but instead place burdens on business, government
and regulators, and potentially stifle progress while it is being
implemented."
1.26 The Minister then says that his key concern
is the use of a Regulation as the vehicle to implement these measures:
"The Regulation would be applicable in all Member
States and would enforce a prescriptive approach, no matter what
the current policies, regulations and structures are in a particular
location. On infrastructure sharing, for example, network operators
would be required, not just encouraged, to meet requests from
telecoms providers to provide access to their infrastructure.
In addition, there is a risk that mandated infrastructure sharing
underpinned by law could in fact act as a disincentive to network
investment in the most hard-to-reach areas — precisely the
places currently lacking in superfast broadband access —
because of the risk of 'free riding' on existing infrastructure."
1.27 The Minister then notes concerns regarding
some of the specific policy proposals, particularly around the
effect of the measures on wayleaves, which he explains as follows:
" — the payments made by utilities companies
to landowners to install and maintain equipment on private property.
The wayleave regimes in the UK for communications and electricity,
for example, are different to some other European countries where
landowners do not enjoy rights of compensation for allowing infrastructure.
It is unclear how this issue would be resolved if sharing were
mandated, without major legislative changes to the regime for
electric line wayleaves and the likely increase in burdens on
the public and private sectors. Issues around wayleaves and private
property rights would also arise when implementing the plans for
in-built broadband infrastructure in new buildings.
1.28 More generally, the Minister says:
"While the current drafting of the Regulation
advocates a commercially-led approach, the language does not provide
any certainty on a number of issues, for example broadband infrastructure
in new buildings. Introducing uncertainty into a market where
return on investment is already precarious is unlikely to lead
to additional investment."
1.29 The Minister then discusses the Commission's
Impact Assessment as follows:
"The Commission has produced a detailed impact
assessment alongside the proposed Regulation. The impact assessment
estimates that savings of 20%-30% on the civil engineering costs
of superfast broadband deployment could be achieved by adopting
the measures proposed in the Regulation.
"Specifically, the impact assessment identifies
for the proposed policy option (see paragraph 6 above) significant
capital savings for communications providers thanks to infrastructure
sharing, co-deployment and faster rollout. It also cites the
potential additional revenues for network operators who share
their infrastructure, arguing that this would outweigh costs.
"The Commission's estimate is predicated on
assumptions about the level of network deployment that would occur
in shared passive infrastructure — namely that 25% of new
deployment would occur in shared infrastructure and that 75% of
the civil engineering costs would be saved. We will need to understand
these assumptions better and in more detail.
"The Government feels that, while infrastructure
sharing could potentially lead to some capital expenditure savings,
the impact assessment does not fully take into account the knock-on
effects of the measure. On the issue of implementation and administrative
costs incurred by Member States, for example, the impact assessment
acknowledges that they are difficult to quantify and would vary
significantly between different Member States; however, it then
argues that the costs would be outweighed by the wider capital
savings and potential synergies. We will need to understand in
more detail what these administrative costs will be and to what
extent they would be one-off setup costs, in both the UK and in
other Member States.
"The Regulation would require all telecoms companies
to make their passive infrastructure available for sharing on
request. Ofcom already has the power to require passive infrastructure
sharing on specific request, but subject to a proportionality
test — i.e. whether the request is objectively justified
and would not distort competition. The new Regulation reverses
this presumption, in that small telecoms providers would be required
to open their infrastructure to larger competitors. Under the
Regulation, adverse effect on competition would not be a permitted
ground for refused access.
"Other impacts would include increased wayleave
payments imposed on network operators whose infrastructure becomes
shared by telecoms providers (paragraph 22 above), and the additional
burdens around providing network information to the single point
of contact in Article 4.
"There is also a risk that co-operation and
investment in broadband infrastructure would stall while the legal
instrument was being drafted, and that the measures could ultimately
disincentivise investment in the hardest to reach areas.
"We have not, as yet, been able canvass the
views of the various industries — gas, electricity, water
etc. — who would be affected by the Regulation, but we will
be seeking their views. When the Government consulted on infrastructure
sharing in 2010, industry concerns included responsibility for
installation and maintenance, and liability."
1.30 In this regard, the Minister notes that
the Commission did consult last year on a series of measures to
reduce the cost of communications infrastructure deployment, but
not on a proposed Regulation.
1.31 With regard to the Financial Implications,
the Minister says:
"The proposal notes that the Regulation would
have no impact on the Commission's budget. However, the impact
assessment does identify significant costs. In addition to the
possible burdens on business outlined above, the measures would
also have a financial effect on individual Member States and their
national regulatory authorities. In the vast majority of Member
States, a new body to oversee dispute resolution and set up and
manage the single point of contact for information provision would
have to be created, or an existing body (like the national telecoms
regulator) greatly expanded. The setup and running costs for
such a body could be significant for individual Member States."
1.32 Finally, the Minister notes that the proposal
is expected to be formally discussed at the Telecoms Council in
early June, with the Commission's ambition being to conclude negotiations
by the end of 2013 and for the Regulation to come into force soon
afterwards.
Conclusion
1.33 This is clearly a case where, notwithstanding
the Commission's ambition, "better right than rapid"
should be the guiding principle. The UK consultation has not
yet begun. Given this and his many concerns, we are surprised
that the Minister says nothing about resisting the Commission's
precipitate timetable. And though he says that many of the policy
objectives behind the Regulation could, in theory, be supported
at the EU level if they were proposed in a different way using
a different legal instrument, he proposes no alternative.
1.34 We share the Government's concern that
the actions proposed by the Commission raise significant subsidiarity
concerns. This is because we consider that the Commission has
failed to satisfy both limbs of the subsidiarity test.
1.35 The first limb of the subsidiarity test
provides that the EU may only act "if and insofar as the
objectives of the proposed action cannot be sufficiently achieved
by the Member States".[7]
While the Commission accepts that some Member States have adopted
measures to reduce the costs of broadband roll-out, it says that
these are too few in number, are divergent, are not cross-sectoral
and do not address all stages of the roll-out process. Action
by Member States alone would not significantly reduce the cost
of broadband roll-out nor encourage investment, but hinder the
single market.
1.36 We disagree and share the Government's
view that the measures supported by the Regulation such as infrastructure
sharing and civil works co-ordination would all be implemented
at local level and not have transnational market effects. We
remain unconvinced that full account has been taken of current
and prospective national action on superfast broadband deployment,
including actions to meet EU targets. We therefore consider that
the proposed measures would be better achieved at national level.
1.37 The second limb of the subsidiarity test
requires evidence that action at EU level would be more effective
in achieving the draft Regulation's objectives. To meet this
test, the Commission principally relies on the 20%-30% savings
in the civil engineering costs of superfast broadband which it
says will result from the measures. We share the Government's
concerns about some of the assumptions on which those estimated
savings are based and the failure to take into account consequential
effects of the measures. Far from achieving savings, we consider
that the proposed Regulation could increase burdens on business.
We agree with the Government that burdens on SMEs in particular
could increase under the Regulation as small telecoms providers
would be required to open up their infrastructure to larger competitors.
1.38 The draft Regulation, in the view of
the Commission, is necessary to achieve broadband roll-out targets
set out in the Digital Agenda 2010 Communication and the Conclusions
of the European Council of 13/14 December 2012.[8]
However, we are not persuaded that the European Council contemplated
that legislation of this form (a Regulation) or nature would be
necessary to reach those targets.
1.39 Moreover, we question the choice of a
Regulation as the appropriate legal instrument to achieve the
objectives envisaged, since this would impose a prescriptive approach
to broadband deployment, no matter what the current policies,
regulations and structures are in a particular location. Mandatory
infrastructure sharing would increase costs to business and disincentivise
broadband roll-out in remote areas. A mandatory regime also risks
confusion with existing local requirements and we share the Government's
concern about the impact on underlying UK wayleave and private
property rights.
1.40 In summary, we believe that the measures
proposed should be taken at national level, but that if the Commission
persists with EU-level action, the measures should be modified
and contained in a Directive rather than a Regulation. We therefore
recommend that the House sends the attached Reasoned Opinion to
the Presidents of the EU institutions before 31 May 2013, following
a debate on the Floor of the House.
1.41 We note that the Government underlines
its commitment to achieving the DAE broadband targets and support
for measures at different levels which streamline and lower the
cost of broadband deployment. Many of those living in rural communities
might well take issue with this upbeat picture. We are drawing
this chapter of our Report to the attention of our colleagues
on the Culture, Media and Sport Committee, not only so that they
are aware of the issues raised by the proposed Regulation but
also of the Government's positive assessment of its performance
in this crucial area.
1.42 In the meantime, we shall retain the
document under scrutiny.
1 See http://ec.europa.eu/digital-agenda/ for full
background on the Digital Agenda for Europe. Back
2
See the second tiret of para 15 of the Council Conclusions; available
at http://register.consilium.europa.eu/pdf/en/12/st00/st00004-re02.en12.pdf. Back
3
Full details available at http://europa.eu/legislation_summaries/information_society/legislative_framework/l24216a_en.htm. Back
4
The European Union is empowered to adopt measures with the aim
of establishing or ensuring the functioning of the Internal Market,
in accordance with the relevant provisions of the Treaties (Article
26 of the Treaty on the Functioning of the European Union - TFEU).
Under Article 114 TFEU, the European Parliament and the Council
shall, acting in accordance with the ordinary legislative procedure
and after consulting the Economic and Social Committee, adopt
the measures for the approximation of the provisions laid down
by law, regulation or administrative action in Member States which
have as their object the establishment and functioning of the
internal market. See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E114:EN:HTML
for the full text of Article 114 TFEU. Back
5
Case C-66/04, para 45, and Case C-217/04, para 43. Back
6
Local loop unbundling (LLU or LLUB) is the regulatory process
of allowing multiple telecommunications operators to use connections
from the telephone exchange to the customer's premises. The physical
wire connection between the local exchange and the customer is
known as a "local loop", and is owned by the incumbent
local exchange carrier. To increase competition, other providers
are granted unbundled access. Back
7
Article 5(3) TEU. Back
8
Conclusions of the European Council, EU CO 205/12 Back
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