Annex: Reasoned Opinion
Draft Reasoned Opinion of the House of Commons
Submitted to the Presidents of the European Parliament,
the Council and the Commission, pursuant to Article 6 of Protocol
(No 2) on the Application of the Principles of Subsidiarity and
Proportionality.
a Proposal for a Draft
Regulation of the European Parliament and of the Council on measures
to reduce the cost of deploying high-speed electronic communications
networks[9]
TREATY FRAMEWORK FOR APPRAISING COMPLIANCE WITH SUBSIDIARITY
1. The principle of subsidiarity is born of the wish
to ensure that decisions are taken as closely as possible to the
citizens of the EU. It is defined in Article 5(3) TEU:
"Under the principle of subsidiarity, in areas
which do not fall within its exclusive competence, the Union shall
act only if and in so far as the objectives of the proposed action
cannot be sufficiently achieved by the Member States, either at
central level or at regional and local level, but can rather,
by reason of the scale or effects of the proposed action, be better
achieved at Union level."
2. The EU institutions must ensure "constant
respect"[10] for
the principle of subsidiarity as laid down in Protocol (No. 2)
on the Application of the Principles of Subsidiarity and Proportionality.
3. Accordingly, the Commission must consult widely
before proposing legislative acts; and such consultations are
to take into account regional and local dimensions where necessary.[11]
4. By virtue of Article 5 of Protocol (No. 2), "any
draft legislative act should contain a detailed statement"
making it possible to appraise its compliance with the principles
of subsidiarity and proportionality. This statement should contain:
- some assessment of the proposal's
financial impact;
- in the case of a Directive, some assessment of
the proposal's implications for national and, where necessary,
regional legislation; and
- qualitative and, wherever possible, quantitative
substantiation of the reasons "for concluding that a Union
objective can be better achieved at Union level".
The detailed statement should also demonstrate an
awareness of the need for any burden, whether financial or administrative,
falling upon the EU, national governments, regional or local authorities,
economic operators and citizens, to be minimised and to be commensurate
with the objective to be achieved.
5. By virtue of Articles 5(3) and 12(b) TEU national
parliaments ensure compliance with the principle of subsidiarity
in accordance with the procedure set out in Protocol (No. 2),
namely the reasoned opinion procedure.
PREVIOUS PROTOCOL ON THE APPLICATION OF THE PRINCIPLE
OF SUBSIDIARITY AND PROPORTIONALITY
6. The previous Protocol on the application of the
principle of subsidiarity and proportionality, attached to the
Treaty of Amsterdam, provided helpful guidance on how the principle
of subsidiarity was to be applied. This guidance remains a relevant
indicator of compliance with subsidiarity. The Commission has
confirmed it continues to use the Amsterdam Protocol as a guideline
for assessing conformity and recommends that others do.[12]
"For Community action to be justified, both
aspects of the subsidiarity principle shall be met: the objectives
of the proposed action cannot be sufficiently achieved by Member
States' action in the framework of their national constitutional
system and can therefore be better achieved by action on the part
of the Community.
"The following guidelines should be used in
examining whether the abovementioned condition is fulfilled:
- the issue under consideration has transnational
aspects which cannot be satisfactorily regulated by action by
Member States;
- actions by Member States alone or lack of Community
action would conflict with the requirements of the Treaty (such
as the need to correct distortion of competition or avoid disguised
restrictions on trade or strengthen economic and social cohesion)
or would otherwise significantly damage Member States' interests;
- action at Community level would produce clear
benefits by reason of its scale or effects compared with action
at the level of the Member States."[13]
"The form of Community action shall be as simple
as possible, consistent with satisfactory achievement of the objective
of the measure and the need for effective enforcement. The Community
shall legislate only to the extent necessary. Other things being
equal, directives should be preferred to regulations and framework
directives to detailed measures".
PROPOSED LEGISLATION
Purpose
7. The purpose of the draft Regulation is to reduce
the cost and enhance the efficiency of deploying high-speed electronic
communications networks (defined as being capable of delivering
broadband speeds of at least 30 Mbps)[14]
to improve the conditions for the functioning of the digital internal
market.[15]
8. It aims to incentivise the roll-out of high-speed
broadband by reducing network deployment inefficiencies and costs
(mainly of civil engineering works) through four main actions:
- more intensive usage of existing
physical infrastructures (for example, ducts, conduits, manholes,
cabinets, poles, masts, antennae, towers and other supporting
constructions);
- enhanced cross-sector co-operation and transparency
in relation to planned civil works, enabling co-deployment and
increasing legal and investment certainty;
- streamlining permit granting procedures; and
- removing obstacles to high-speedy-ready in-building
infrastructure (newly constructed buildings and major renovations).[16]
OPERATION
9. The draft Regulation is based on Article 114 TFEU
which creates a competence for the EU to adopt 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".[17]
10. It proposes that:
- network operators (which extends
to undertakings providing electricity, gas, water, sewage and
transport networks) should meet reasonable requests for access
to their physical infrastructure for the deployment of high-speed
broadband and to provide such access under fair terms and conditions.[18]
This is subject to certain permitted grounds of refusal and a
dispute resolution process;[19]
- minimum information (on location, size and ownership
of infrastructure and planned civil works) should be provided
to network operators from a single information point by public
bodies and other operators in accordance with a prescribed process,
including dispute resolution;[20]
- network operators must accede to reasonable requests
from other operators for the coordination of civil works, partially
or fully funded by public money, on transparent, non-discriminatory
terms;[21]
- network providers should be able to access a
single information point for the viewing, submitting and granting
of permits and that "competent authorities" should make
timely decisions on permits subject to a maximum six-month limit
(if a deadline is not provided in national or EU legislation);[22]
- newly constructed buildings, as well as those
undergoing major renovation, should be equipped with in-built
superfast broadband infrastructure, and that newly constructed
multi-dwelling units (i.e. flats or office blocks) must also have
a single access point connecting to the in-built infrastructure;[23]
and
- network providers should be able to terminate
their infrastructure at the access point (referred to in Article
7) and then to access the in-built network.[24]
SUBSIDIARITY
11. The Commission advances three main reasons to
justify EU action.[25]
It says EU action is necessary to:
- remove barriers to the functioning
of the Single Market caused by the patchwork of rules at national
and sub-national levels, which impedes the further 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;
- stimulate ubiquitous broadband coverage, which
is a pre-condition for the development of the Digital Single Market,
thus contributing to the removal of an important obstacle to the
completion of the Single Market; and
- realise the significant untapped potential of
cost-reduction and facilitation of broadband rollout.
ASPECTS OF THE REGULATION WHICH DO NOT COMPLY WITH
THE PRINCIPLE OF SUBSIDIARITY
12. The House of Commons considers that the draft
Regulation of the European Parliament and of the Council on
measures to reduce the cost
of deploying high speed electronic communications networks does
not comply either with the procedural obligations imposed on the
Commission by Protocol (No 2) or with the substantive principle
of subsidiarity in the following respects.
I) FAILURE TO COMPLY WITH ESSENTIAL PROCEDURAL REQUIREMENTS
13. By virtue of Article 2 of Protocol (No. 2) "Before
proposing legislative acts, the Commission shall consult widely".
The House of Commons considers that this requirement has not
been met; although the Commission consulted last year on a number
of measures to reduce the cost of communications infrastructure
deployment, it did not consult on the option of a Regulation.
14. By virtue of Article 5 of Protocol (No 2) "any
draft legislative act should contain a detailed statement making
it possible to appraise compliance with the principles of subsidiarity
and proportionality". The requirement for the detailed statement
to be within the draft legislative act implies that it should
be contained in the Commission's explanatory memorandum, which
forms part of the draft legislative act and which, importantly,
is translated into all official languages of the EU. The fact
that it is translated into all official languages of the EU allows
the detailed statement to be appraised for compliance with subsidiarity
(and proportionality) in all Member States of the EU, in conformity
with Article 5 of Protocol (No 2). This is to be contrasted with
the Commission's impact assessment, which is not contained within
a draft legislative act, and which is not translated into all
the official languages of the EU.
15. The presumption in the Treaty on European Union[26]
is that decisions should be taken as closely as possible to the
EU citizen. A departure from this presumption should not be taken
for granted but justified with sufficient detail and clarity that
EU citizens and their elected representatives can understand the
qualitative and quantitative reasons leading to a conclusion that
"a Union objective can be better achieved at union level",
as required by Article 5 of Protocol (No 2). The onus rests on
the EU institution which proposes the legislation to satisfy these
requirements.
16. The Commission's explanatory memorandum and the
recitals to the draft Regulation do set out the justification
for EU action. However, for the reasons given below, we do not
consider that the Commission has provided sufficient qualitative
and quantitative substantiation in the explanatory memorandum
of the necessity for action at EU level. This omission, the House
of Commons submits, is a failure on behalf of the Commission to
comply with essential procedural requirements in Article 5 of
Protocol (No 2).
II) FAILURE TO COMPLY WITH THE PRINCIPLE OF SUBSIDIARITY
17. 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".[27]
The Commission asserts that "the objectives of the proposed
action aiming at facilitating the deployment of physical infrastructures
suitable for high-speed electronic communications networks across
the Union cannot be sufficiently achieved by Member States".[28]
18. The Commission accepts that some Member States
have adopted measures intended to reduce the costs of broadband
roll-out, but that those practices remain "scarce and scattered",
are divergent and so hinder the development of a single market
for the deployment of physical infrastructures for high-speed
broadband. These Member State initiatives are not considered
by the Commission to be "holistic" they are
not cross-sectoral, nor do they address all stages of the broadband
roll-out process.[29]
The Commission further comments, that if action were left to
Member States (the so-called "business as usual" option",
paragraph 24 below) it would not "significantly reduce the
costs of broadband roll-out all over Europe" nor "have
a strong effect on investment".[30]
The Commission continues: "As only a very limited impact
on investment is anticipated throughout the EU, its spill-over
effects would also be limited. In addition, it is very likely
that the current fragmentation of rules in the EU will increase.
Given the limited impact on investment, the social and environmental
effects would be marginal, too".[31]
19. The House of Commons considers, however, that
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. It considers 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.
20. The Commission's assertion of the necessity of
EU-level action does not, in the House of Commons' view, take
full account of current and prospective national action to streamline
and lower the cost of superfast broadband deployment and achieve
EU high-speed broadband coverage targets (see paragraph 22 below).
In the UK,
a package of measures is currently being implemented 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.
21. The second limb of the subsidiarity test requires
evidence that the objective of reducing the cost of deploying
high-speed electronic communications networks can be better achieved,
by reason of its scale or effects, by action at EU level. The
Commission suggests that EU action is justified because different
regulatory approaches may give rise to regulatory and administrative
fragmentation which can have a negative impact on the internal
market.
22. The Commission also suggests that the proposed
Regulation is necessary to achieve fast and extensive roll-out
of broadband in line with targets set out in the Digital Agenda
2010 Communication endorsed by Member States:
- by 2013, 100% basic broadband
coverage for all EU households by 2013; and
- by 2020, access to speeds of above 30Mbps for
all households and internet connection of above 100Mbps for 50%
of households.[32]
23. It also cites the Conclusions of the European
Council of 13-14 December 2012[33]
as calling for EU-level action to provide better high-speed broadband
coverage, including reducing its cost.[34]
However, the House of Commons considers that it is far from clear
that the European Council contemplated that legislation of this
nature would be necessary or desirable to meet the headline target.
The Conclusions simply state "As regards the Single Market
Act II, the European Council calls on the Commission to present
all key proposals by the spring of 2013" and the Single Market
Act II Communication[35]
itself only refers to the Commission proposing "common rules
which would enable operators to exploit fully the cost-reduction
potential in employing broadband". Moreover, as indicated
above, we think it is too soon to conclude that EU level action
by way of Regulation is necessarily the only, or the best, way
of achieving the headline targets.
24. The Commission's impact assessment discusses
a number of options in considering which would best achieve these
targets. The first option leaves action entirely to Member States
("the business as usual option") with the other four
involving increasing degrees of EU-level action, ranging from
guidance and recommendations through to harmonising legislation.
After further analysis in the impact assessment, the Commission
has chosen option 3, a Regulation, arguing that it is best placed
to deliver a comprehensive solution across different Member States
relatively quickly.[36]
25. The House of Commons questions the Commission's
choice of a Regulation as the appropriate legal instrument, as
this would enforce a prescriptive approach to broadband deployment,
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. We examine in more detail below (paragraphs
26 and 30) the undesirable consequences of such inflexible, mandated
infrastructure sharing in relation to both costs of business and
disincentivising broadband coverage in remote areas.
26. The Commission is proposing the option of a Regulation
principally on the grounds that the measures in the Regulation
could achieve 20%-30% savings in the civil engineering costs of
superfast broadband deployment.[37]
Specifically, the Commission states that these savings will be
mainly due to significant capital expenditure savings on network
investments (through 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. We are concerned that 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. These
assumptions need to be explained better and justified in more
detail. 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. The nature and extent of these administrative
costs, in both the UK and in other Member States, also needs to
be better substantiated. For example, it is not clear whether
these would be "one-off" or repeated.
27. To summarise on this issue of costs, the House
of Commons considers the proposed Regulation will not achieve
its goals to lower the cost of civil engineering works, but instead
place burdens on business. These burdens are apparent particularly
as regards wayleave regimes (as discussed below) and information
requirements in respect of civil works and infrastructure sharing.
We are also concerned about burdens on government and regulators.
In our view, the prospect of such burdens will potentially stifle
progress while the Regulation is being implemented.
28. The House of Commons is also concerned about
other disadvantages of EU-level action. Far from a desire to
create an environment of legal, and, therefore, investment certainty,
conflicts with local level requirements could cause confusion
in Member States. For example, the current language of the Regulation
does not provide certainty on a number of issues, such as the
references to broadband infrastructure in new buildings. Introducing
uncertainty into a market where return on investment is already
precarious is unlikely to lead to additional investment. The
effect of the measures on the UK wayleave regime is another area
of uncertainty. "Wayleaves" are payments made by utilities
companies to landowners to install and maintain equipment on private
property. UK wayleave regimes 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 and
costs 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.
29. The Commission also argues that the Regulation's
harmonisation measures would be of particular benefit to smaller
operators (SMEs) by lowering barriers to entry, increasing competitiveness
and productivity and reducing fragmentation in the Digital Single
Market.[38] However,
the House of Commons notes that the proposed Regulation would
require all telecoms companies to make their passive infrastructure
available for sharing on request. Ofcom, the UK national telecoms
regulator, 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. This would override the benefits claimed
of increased "competitiveness" and access for SMEs to
the market.
30. The House of Commons questions a further benefit
of EU-level action identified by the Commission: that a higher
broadband coverage would be achieved through the measures proposed
in the Regulation. We consider that 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. There is also a risk that co-operation
and investment in broadband infrastructure would stall while the
Regulation was being drafted, and implemented in Member States,
and that the measures could ultimately disincentivise investment
in the hardest to reach areas.
31. The Commission maintains that compliance with
subsidiarity has been ensured by drafting measures in the Regulation
in a way that sufficiently respects Member States' autonomy and
their need for flexibility.[39]
One example given is how Members States may designate whatever
bodies they choose as "competent bodies" for the tasks
assigned in Articles 3, 4 and 6; the National Regulatory Authority
being only a "default" suggestion.
However, this approach, in our view, would
entail significant costs for individual Member States and their
national regulatory authorities. In the vast majority of Member
States, a new body to oversee dispute resolution 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 Commission does not sufficiently recognise
the significance of the setup and running costs for such a body.
32. In summary, the House of Commons believes that
the measures proposed should be taken at national level but that
if the Commission persists in EU-level action, the measures should
be modified and contained in a Directive rather than a Regulation.
CONCLUSION
33. For these reasons the House of Commons considers
this proposal does not comply with the principle of subsidiarity.
9 COM(13) 147. Back
10
Article 1 of Protocol (No. 2). Back
11
Article 2 of Protocol (No. 2). Back
12
See, respectively, pp.2 and 3 of the 2010 and 2011 Reports on
Subsidiarity and Proportionality (COM(10) 547 and COM(11) 344). Back
13
Article 5. Back
14
Article 2 of the draft Directive, see note 1. Back
15
The Commission's explanatory memorandum, p.2, para 1.1, "Objections
of the Proposal". Also, the draft Regulation, page 14, Recital
1 and Article 1 and the Commission's impact assessment, p.2, para
1. Back
16
The Commission's explanatory memorandum, p.2, para 1.1 "Objectives
of the Proposal"; see also "Objectives", p.3 of
the Commission's summary of the impact assessment. Back
17
The Commission relies on previous case law confirming that this
Article confers on EU legislature the discretion as to the harmonisation
technique to be used (explanatory memorandum, p.6, para 3.1 "Legal
Basis"). The EU has previously legislated to "foster
local network infrastructure deployment, through unbundling the
local loop" (explanatory memorandum, p.4, "General Context"). Back
18
Draft Regulation, p.24, Article 3, "Access to physical infrastructure";
explanatory memorandum, p.12 "Structure of proposal". Back
19
The National Regulatory Authority (OFCOM, in the case of the UK)
will act as the dispute resolution body for the purposes of Article
3 and 4 and also the single information point for the purposes
of Articles 4 and 6, unless the Member States appoint another
body. Back
20
Draft Regulation, p.25 and 26, Article 4; explanatory memorandum,
p.12 "Structure of Proposal". Back
21
Draft Regulation, p.27, Article 5, "Co-ordination of civil
works"; explanatory memorandum, p.13. Back
22
Draft Regulation, pp.27 and 28 Article 6 "Permit granting";
explanatory memorandum, p.13. Back
23
Draft Regulation, p.28, Article 7 "In-building equipment";
explanatory memorandum, p.13. Back
24
Draft Regulation, pp.28 and 29; explanatory memorandum, p.13. Back
25
Explanatory memorandum, p.7, para 3.2."Subsidiarity";
summary of the impact assessment, para 2. Back
26
Article 5. Back
27
See Article 5(3) TEU. Back
28
Recital 32 of the proposed Regulation. Back
29
Proposed Regulation, p.15, Recital 8. Back
30
The summary of the impact assessment, p.5. Back
31
As above. Back
32
Proposed Regulation, p.15, Recital 2. Back
33
Conclusions of the European Council, EU CO 205/12
http://register.consilium.europa.eu/pdf/en/12/st00/st00205.en12.pdf Back
34
Proposed Regulation, p.15, Recital 2 and impact assessment, p.2. Back
35
Communication From The Commission To The European Parliament,
The Council, The European Economic And Social Committee And The
Committee Of The Regions :Single Market Act II http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52012DC0573:EN:NOT Back
36
Summary of the impact assessment, p.7. Back
37
Summary of the impact assessment, pp.5 and 6. Back
38
Summary of the impact assessment, pp.5 and 6. Back
39
Explanatory memorandum, pp.8 and 9, para 3.2 "Subsidiarity". Back
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