2 The Telecommunications Single Market
| (a)
(35305)
13562/13
COM(13) 634
(b)
(35304)
13555/13
+ ADDs 1-2
COM(13) 627
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Commission Communication: "On the telecommunications single market"
Council Regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No. 1211/2009 and (EU) No. 531/2012
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| Legal base | (a) —
Article 114 TFEU; ordinary legislative procedure; QMV
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| Documents originated | 11 September 2013
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| Deposited in Parliament | 23 September 2013
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| Department | Culture, Media and Sport
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| Basis of consideration | EM of 10 October 2013
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| Previous Committee Report | None
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| Discussion in Council | December 2013
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
2.1 On its "Digital Agenda for Europe" website,
the Commission says
that, from landlines to mobiles to broadband, telecommunications
networks and services are the backbone of our information society;
and that the EU's policy framework improves competition, drives
innovation, and boosts consumer rights within the European single
market. It states that, in decades, EU action for telecommunications
has led to greater consumer choice, falling call costs, and higher
standards of service, through:
- "A sound regulatory framework
for electronic communications, promoting competition and consumer
rights;
- "Promoting investment in broadband networks
supporting high-speed Internet;
- "Supporting wireless technologies, such
as 3G and LTE, through the radio spectrum policy programme;
- "Protecting mobile users from high roaming
charges when travelling in the EU or internationally;
- "Taking a leading role in international
discussions on Internet development and governance."[4]
2.2 The EU regulatory framework consists of the
following instruments:
- the Framework Directive, setting
out the main principles, objectives and procedures for an EU regulatory
policy regarding the provision of electronic communications services
and networks;
- the Access and Interconnection Directive, stipulating
procedures and principles for imposing pro-competitive obligations
regarding access to and interconnection of networks on operators
with significant market power;
- the Authorisation Directive, introducing a system
of general authorisation, instead of individual or class licences,
to facilitate entry in the market and reduce administrative burdens
on operators;
- the Universal Service Directive, requiring a
minimum level of availability and affordability of basic electronic
communications services and guaranteeing a set of basic rights
for users and consumers of electronic communications services;
- the Privacy and Electronic Communications Directive,
setting out rules for the protection of privacy and of personal
data processed in relation to communications over public communication
networks;
- Regulation (EC) No. 1211/2009 on the Body of
European Regulators for Electronic Communications (BEREC);
- Regulation (EU) No. 531/2012 on public mobile
communication networks;
- the Radio Spectrum Decision, which establishes
principles and procedures for the development and implementation
of an internal and external EU radio spectrum policy.[5]
2.3 Against this background, the Commission says
that, as the world moves rapidly towards an Internet-based economy,
Europe lacks a genuine single market for electronic communications,
and is consequently losing out on a major source of potential
growth. Recalling the conclusions of the 2013 Spring European
Council, calling for measures to create a Single Telecoms Market
as early as possible, the Commission accordingly published, on
11 September, a legislative package for a "Connected Continent:
Building a Telecoms Single Market", which it says is aimed
at building a connected, competitive continent and enabling sustainable
digital jobs and industries; with proposed legislative changes
to several regulations that (the Commission says) would "make
a reality of two key EU Treaty Principles: the freedom to provide
and to consume (digital) services wherever one is in the EU."
The Commission says that its proposal "does this by pushing
the telecoms sector fully into the internet age (incentives for
new business models and more investment) and removing barriers
so the European Union's 28 national telecoms markets become a
single market, building on the 2009 Telecoms Framework Directive,
and more than a quarter century of work to create that single
market."[6]
2.4 The Commission describes the legislative
proposal in short, as:
- "Simplification of regulation
for companies;
- "More coordination of spectrum use, so that
we see more wireless broadband, more 4G investment, and the emergence
of pan-EU mobile companies with integrated networks;
- "Standardised fixed access products, encourages
more competition between more companies and facilitates increasing
provision of pan-EU services;
- "Protection of Open Internet, guarantees
for net neutrality, innovation and consumer rights;
- "Pushing roaming premiums out of the market
through a carrot and stick approach to say goodbye to roaming
premiums by 2016 or earlier;
- "Consumer protection: plain language contracts,
with more comparable information, and greater rights to switch
provider or contract."[7]
The Commission Communication
2.5 The Communication begins by setting out the
political and economic importance of a fully functioning telecommunications
single market and notes that the European Council of March 2013
placed a commitment on the Commission to bring forward proposals
to establish such a single market and that these proposals seek
to meet that commitment.
2.6 It then provides a summary of the impacts
of the liberalising measures that began in the 1980s and considers
the importance of specific developments, such as the Global System
for Mobile Communications (GSM) and Universal Mobile Telecommunications
System (UMTS) standards, along with the existing telecommunications
framework that was put in place in 2002 and reviewed in 2009.
It then states the importance of this sector in driving not only
Europe's competitiveness but also wider economic growth that is
important in the current economic situation. It then states that
decisive further action is needed to prevent any further decline
in this market and Europe's global position.
2.7 It then considers what remaining barriers
exist, citing a study that claims that completion of the single
market in this sector could add up to £92 billion (110 billion)
or 0.9% to the EU's GDP.[8]
It notes that despite the existing regulatory framework,
many operators and networks operate on a national basis, with
those who have a presence in more than one Member State continuing
to operate as several 'national' operators rather than a single
'European' operator. The Commission claims that such behaviour
was not only having a negative effect of pricing, but also on
consumer behaviour (though it does not adduce evidence of either).
It also asserts that differences in national procedures for the
management of spectrum have a negative effect on investment and
the roll-out of new technologies, before considering the benefits
that could arise from greater harmonisation of the application
of the existing regulatory framework and procedures.
2.8 The Communication then sets out what the
Commission believes are the characteristics of a true single market
and what measures are needed to change the existing regulatory
framework in order to drive the market to begin to exhibit those
features. It then notes a commitment made by the Commission at
the conclusion of the 2009 review of the regulatory framework
to act on the issue of open internet access before setting out
four reasons why action is now needed and noting the proposals
within the Regulation seek to address these.
2.9 The Communication then considers matters
relating to investment and competition, with the recently agreed
Recommendation on Costing Methodologies and Non-discrimination
playing a role in providing a framework that will help drive investment
in new broadband infrastructure by providing legal certainty on
the prices associated with network access.[9]
2.10 It then notes that the medium-term effects
of the proposals will be greater freedom and opportunities for
market participants and a trend towards consolidation within the
sector, with the market developing in such a way that ex post
application of competition law will be sufficient to ensure market
functioning. This situation will be addressed by the Commission
further developing the existing Recommendation on relevant markets,
with an expected reduction of ex-ante regulation. There
is also an indication that the Commission will begin to consider
what actions are needed to drive further coordination of regulatory
remedies and once again raises the possibility of the creation
of a single EU telecoms regulator, through conducting a review
that will also seek to address issues relating to the perceived
lack of a level playing-field for "over-the-top" services[10]
compared to telecoms services, as well as matters relating to
the convergence of audio-visual and telecommunication services
and markets.
2.11 The Communication concludes by reiterating
the potential benefits to the EU, its businesses and its citizens
from a completed telecommunications market and calling upon the
Council and the European Parliament to examine and adopt the proposed
Regulation as a matter of the highest political priority.
The draft Regulation
2.12 In his Explanatory Memorandum of 10 October
2013, the Parliamentary Under-Secretary of State for Culture,
Communications and Creative Industries at the Department for Culture,
Media and Sport (Edward Vaizey) provides a helpful a summary of
the Articles, as well as an outline of the effect of each: he
notes that there are seven groupings of articles, each presented
as a chapter, and that his Explanatory Memorandum follows the
same format.
CHAPTER I — GENERAL PROVISIONS (ARTICLES 1-
2)
"These Articles are self-explanatory and reiterate
elements of the preceding Commission EM and associated Communication,
as well as provide definitions for terms associated with the Regulation.
CHAPTER II — SINGLE EU AUTHORISATION (ARTICLES
3-7)
"These articles seek to create a system whereby
any provider of electronic communication services would require
a single authorisation from the Member State's national regulatory
authority (NRA) in which they are based in order to be able to
provide their services across the EU28; parallels to this scheme
are the single banking licence and the CE-marking scheme.
"The articles also set out provisions regarding
the responsibilities of the authorising NRA and, in effect, gives
responsibility to that NRA to take action, even if the activities
that require intervention are conducted in another Member State,
as well as placing an obligation on that NRA to behave in the
same way as if the negative behaviour was occurring in its home
Member State.
CHAPTER III — EUROPEAN INPUTS
Section 1 — Coordination of use of radio
spectrum within the single market (Articles 8-16)
"This group of articles sets out a number of
proposals related to the management of spectrum within the EU.
They are:
- "An obligation on Member
States to notify the Commission whenever a general authorisation
or individual rights to spectrum is being granted. This decision
would be subject to approval or amendment by the Commission in
a process that mirrors existing provisions with the current Framework
for market measures;
- "Harmonised procedures for broadband
spectrum assignments that would cover not only new bands that
would be harmonised (such as 700MHz) but also existing harmonised
bands. Such actions would include common timetables for granting
rights, harmonisation of licence durations (both new and existing),
setting dates for the termination of existing uses of spectrum
to enable the spectrum to be used for broadband and actions that
the Commission can take to ensure Member State compliance with
such measures.
SECTION 2 — EUROPEAN VIRTUAL ACCESS PRODUCTS
(ARTICLES 17-20)
"These Articles place on obligation on operators
to provide two forms of wholesale access products for Next Generation
Access (NGA) networks; the aim of which is to drive harmonisation
of existing wholesale products which are subject to a variety
of technical requirements.
"The first is an access product that should
be provided by operators who have significant market power (SMP):
the European virtual access product and the second to be provided
by all NGA networks: the Assured service quality (ASQ) connectivity
product.
CHAPTER IV — HARMONISED RIGHTS OF END-USERS
Costs of international calls and SMS (Article
21)
"The Regulation proposes that all intra-EU calls
from fixed lines should not be charged higher than domestic call
rates unless higher rates can be objectively justified, eg by
reference to reasonable extra costs associated with routing such
calls. Rates for mobile calls and texts are similarly limited
by reference to the Euro-tariffs set out in the Mobile Roaming
Regulation (No 531/2012)
CROSS-BORDER DISPUTE RESOLUTION (ARTICLE 22)
"The Regulation extends the requirement in the
Universal Services directive (2002/22/EC) to provide out-of-court
procedures to resolve disputes between consumers and providers
to include cross-border disputes.
OPEN INTERNET ACCESS, TRAFFIC MANAGEMENT, SAFEGUARDS
FOR QUALITY OF SERVICE, AND TRANSPARENCY AND PUBLICATION OF INFORMATION
(ARTICLES 23-25)
"The
Regulation proposes to introduce a form of 'Net Neutrality' that
would allow users to freely access and distribute content, information,
run applications and use services of their choice. Whilst mirroring
the text that is already contained the Framework, it places a
new obligation on NRAs to ensure that this is the case.
"It also seeks to prohibit blocking, slowing
down or otherwise degrading access to any services and content,
except in instances where there is a genuine need to do so for
traffic-management and network-management reasons. It does, however,
allow providers to charge extra for different data volumes and
speeds, as well as allowing for charges associated with enhanced
quality of service, as well as imposing a requirement to ensure
that consumers are aware of any specific restrictions or similar
by requiring operators to publish specific information regarding
speeds, traffic volumes, impact on services and any traffic management
policies in place.
INFORMATION REQUIREMENTS FOR CONTRACTS, CONTROL OF
CONSUMPTION AND CONTRACT TERMINATION (ARTICLES 26-39)
"The proposals in these articles contain several
provisions that are aimed at increasing consumer protection.
"The first (Article 26) sets out a series of
specific minimum information requirements that need to be contained
in a contract and, amongst other things, include: tariff plans
and costs; any after-sales services provisions; any restrictions
on the use of terminal equipment; payment methods; charges for
early contract termination or switching/porting; and compensation.
"The following Article sets out anti-Bill Shock
measures that ensure that a consumer is made aware that they reaching
their tariff's limits and ensures that consumers are still able
to access the emergency services through the European emergency
number once limits are reached and provides for free-of-charge
itemised bills.
"Articles 28 sets out new requirements covering
contract termination by adding to the existing maximum contract
term of 24 months and the requirement to provide 12-month contracts
by granting consumers a right to terminate contracts after 6 months
with one month's notice. However, end-users may need to reimburse
the service provider for the residual value of subsidised equipment.
CHAPTER V — FACILITATING CHANGE OF PROVIDERS
Switching & portability of numbers (Article
30)
"This Article sets out the requirements aimed
at facilitating consumers switching between providers.
"It contains new
provisions that place an obligation on service providers to forward
any emails to the consumer's new email account for a period of
12 months, as well as obligations on operators to reimburse any
unused pre-paid credit. It also includes an obligation that all
switching be gaining-provider-led.
CHAPTER VI
Penalties, Delegation of Powers, Committee
Procedure and Amendments to Directive 2002/20/EC (Articles 31-36)
"These Articles set out the mechanism for penalties
that can be imposed by NRAs, deals with powers of the Commission
to bring forward delegating acts and indicates that the Communication
Committee will play a comitological role for the management of
the Regulation's provisions. This section concludes by deleting
provisions within the Authorisation, Framework and Universal Service
directives that would be superseded by the Regulation.
AMENDMENTS TO REGULATION (EU) NO 531/2012 (ARTICLE
37)
"This Article contains two elements that would
change the recently agreed third EU Mobile Roaming Regulation.
"The first is that, from 1st July
2014, consumers would not be charged to receive voice-calls.
"The second element provides an exemption for
operators from the obligation to decouple roaming ie the third
Regulation allows consumers to choice separate providers for their
domestic and roaming provisions (from 1st July 2014).
In order to gain this exemption, service providers must form
a commercial or technical agreement with other operators that
create a 'virtual' cross-border network that covers at least 17
Member States and 70% of the EU population and offer at least
one retail package that offers a roaming service charged at domestic
rates.
"The Article also provides for a transitional
period of three years and makes allowance for reasonable use provisions.
AMENDMENTS TO REGULATION (EC) NO 1211/2009 (ARTICLE
38)
"This Article proposes changes to the Regulation
that established the Body of European Regulators of Electronic
Communications (BEREC).[11]
The first change proposes that the term of the Administrative
Manager of the BEREC office be extended from three to five years,
renewable once.
"The second change proposes that the role of
BEREC Chair be filled by a 'full-time independent professional'
to be appointed for a three-year term. The Chair is currently
drawn from BEREC members i.e., the heads of NRAs, and serves a
one-year term.
REVIEW CLAUSE AND ENTRY INTO FORCE (ARTICLES 39-40)
"The first Article sets down a requirement that
a review and report on the Regulation take place no later than
1st July 2018, and the final Article provides that
the Regulation will come into force on 1st July 2014, except for
Articles 21 to 30, which will come into force on 1st July 2016."
2.13 The Minister also notes that the draft Regulation
is accompanied by two Commission Staff Working Documents: a 130
page Impact Assessment and a executive summary sheet.
Subsidiarity
2.14 The Minister comments as follows:
"In the accompanying Impact Assessment (para
6.1) it is noted that the general objective of the Regulation
is "to complete the Single Market for electronic communication
services to ensure that: citizens and businesses have the right
to access electronic communications services irrespective of from
where they are provided in the Union, without being hampered by
cross-border restrictions and unjustified additional costs; and
providers of electronic communications services and networks have
the right to operate their networks and provide services irrespective
of where the company is established or its customers are situated
in the Union." It would seem correct that this objective
could not be sufficiently achieved other than action by the EU,
rather than Member States, and therefore the proposal complies
legally with the subsidiarity requirement in Article 5(3) TEU.
We are nevertheless concerned that the harmonisation involved
with certain elements of the proposals, specifically in relation
to regulation of providers and spectrum, is excessive. This is
discussed in the following sections."
The Government's view
2.15 The Minister begins by saying that the
package's aims "generally align with UK's in terms of completing
the telecoms single market and how this would contribute towards
the creation of the digital single market", and by noting
"an alignment in terms of aims" and "some opportunities
in terms of the spreading of good practice from the UK across
the EU".
2.16 He then says:
"the issue of any net economic benefits to the
EU market from both the package in its entirety and each individual
element remains unproven. This situation requires further analysis
and this nuance [sic] HMG's position as negotiations progress
and elements of the package evolve."
2.17 The Minister then continues his comments
as follows, beginning by noting that the following paragraphs
cover the policy implications for each strand of the Regulation,
with each heading cross referencing where in the Regulation each
proposal sits:
SINGLE EU AUTHORISATION & REGULATION OF PROVIDERS
(CHAPTER II — ARTICLES 3-7)
"Despite the existing Authorisation Directive
(adopted in November 2009) not allowing NRAs to require authorisations
as a condition of operation, all Member States require such notification
(with two exceptions: Denmark and the UK). The main value of
the single authorisation is stated as encouraging investment in
the provision of pan-European services and reducing the unnecessary
additional costs that providers of such services may currently
bear, compared to local operators.
"Nevertheless, HMG does not believe that the
resource currently associated with national notification and compliance
has hitherto been a material obstacle to pan-European operations.
The single authorisation cannot substitute for addressing ineffective
or inconsistent regulation. Industry, while expressing a positive
view in terms of costs reduction, does not see this as a complete
answer to pan-European working. Ironically, the administrative
burden for operators in the UK and Denmark would increase radically.
"Additionally, the introduction of a pan-European
enforcement regime would require a fundamental change to Ofcom's
legal duties and powers, currently focused on the interests of
UK consumers, raising issues of jurisdiction and competence.
"Whilst HMG supports the goal of eliminating
unreasonable obstacles to pan-European service provision, there
are risks that such a change could introduce delays in the monitoring,
assessment, and enforcement of compliance with regulatory obligations,
to the detriment to consumers and competing operators. There
is a clear risk that any savings from changes to the notification
process will be minimal and might be out-weighed by the potential
negative outcomes and so full support cannot be given until these
concerns are addressed.
COORDINATION OF USE OF RADIO SPECTRUM (CHAPTER III
— ARTICLES 8-16)
"The proposals on spectrum do pose some serious
concerns for HMG, in particular the idea of the Commission supervision
of national plans for spectrum assignments, including the timing.
This would represent a shift in competence from national regulators,
which we would not want to see. The Commission would be able to
mandate the (re-) assignment of spectrum for wireless broadband
through EU harmonised procedures and timetables. Quite how this
would work is not clear as spectrum is not solely "wireless
broadband spectrum". The Commission proposals give a power
of veto over national draft decisions on spectrum assignment procedures
and licence conditions if it considers they would damage the internal
market.
"HMG is therefore concerned about the proposals
as drafted. The value of spectrum to Member States' economy, and
ability to manage the process of allocation within a coordinated
framework is well documented. A recent study put the value to
the UK economy at over £50bn. We are concerned that the
Commission would be extending its competence into matters that
are currently a national responsibility. At the same time we believe
that there are tools open to the Commission to deliver a more
effective single market that are not being deployed. A pan-EU
rollout of 4G mobile broadband services would have an immediate
positive impact on the European economy and would be more effective
than further harmonisation of rules on spectrum auctions. The
Commission has not taken action with its existing powers to expedite
the allocation of spectrum for 4G service in Member States that
have not yet done so.
"There are also alternatives to the proposal
which could work without the need to take control, such as the
wider use of the Radio Spectrum Policy Group to develop harmonised
technical conditions and issue guidance on licence fees and durations.
If the RSPG were invited to develop best practice guidelines of
which Member States could be required to take utmost account,
the poor auction design we have seen in other Member States might
be addressed, without affecting Member States whose auctions are
sufficiently well designed.
EUROPEAN VIRTUAL ACCESS PRODUCTS (CHAPTER III —
ARTICLES 17-20)
"Access services to enable pan-European provision
for business customers are variable across the EU and HMG believes
this issue should be addressed. However, it is important to ensure
that the scope of the proposals reflect the scope of the problem
identified.
"With this proposal, the Commission is seeking
to encourage the availability of standardised European access
products to be offered by SMP operators; in the UK's instance
BT. The Commission is also prescribing the minimum parameters
of such products in an annex to the Regulation. In addition, the
Commission is proposing to have a veto over NRA decisions on access
remedies for pan-European operators.
"UK operators will have a potential advantage
when engaging in the new measures since they already operate in
the UK. Ofcom was the first NRA to introduce Virtual Unbundled
Local Access (VULA) and, in principle, welcomes the Commission's
adoption of VULA.
"However, HMG believes that the Commission will
not succeed in ensuring the provision of harmonised products merely
by prescribing the key parameters, as in the current proposal.
HMG considers that the parameters are too high level to guarantee
harmonised products. A solution would be for BEREC to develop
minimum reference offers in greater detail, in close consultation
with industry, in order to ensure they reflect operators' commercial
needs.
"A veto on remedies constitutes a significant
transfer of power from NRAs to the Commission, and we do not believe
that the Commission has not made a case for this power. One real
risk of a veto on remedies is that NRAs will be prevented from
being innovative. HMG therefore does not support this element
of the proposal.
COSTS OF 'INTERNATIONAL' (INTRA-EU) VOICE-CALLS AND
SMS (CHAPTER IV — ARTICLE 21(3))
"Significant price differences continue to exist,
both for fixed and mobile communications, between domestic voice
and SMS communications and those terminating in another Member
State. While there are variations between countries, operators
and tariff packages, and between mobile and fixed services.
"HMG is generally supportive of this measure,
provided any significant retail tariff differences between domestic
fixed long-distance communications and fixed communications terminating
in another Member State are justified by reference to objective
criteria. Retail tariffs for international mobile communications
should not exceed the euro-voice and euro-SMS tariffs for regulated
roaming calls and SMS messages, respectively, provided for in
Regulation (EU) No 531/2012; unless justified by reference to
objective criteria. Such criteria may include additional costs
and a reasonable related margin.
OPEN INTERNET ACCESS, TRAFFIC MANAGEMENT, SAFEGUARDS
FOR QUALITY OF SERVICE, AND TRANSPARENCY AND PUBLICATION OF INFORMATION
(CHAPTER IV — ARTICLES 23-25)
"Traffic management is often necessary in order
for Internet Service Providers (ISP) to manage congestion on its
network and ensure all users receive a good level of service.
HMG supports an open Internet, and to that end, agrees with the
aims and objectives of the proposals. However, HMG believes that
this can be achieved through self-regulation, and that transparency
of traffic management policies employed by ISPs is the key driver
for this. There is no evidence to date of consumer harm caused
by traffic management policies, as market forces have been effective
in ensuring consumers have choice.
"Regarding Quality of Service, specialised services
are not prevalent in the UK market currently, although these are
developing. We have concerns with the current proposals, as whilst
the type of traffic management described is technically feasible,
as yet there are no agreed standards and we have concerns that
the Commission are proposing to regulate in this area until there
is an evidence of need or agreed technical standards.
INFORMATION REQUIREMENTS FOR CONTRACTS (CHAPTER IV
— ARTICLE 26)
"The Consumer Rights Directive (CRD) currently
seeks to provide clarity and consistency in terms of information
to be provided to consumers and the available rights and remedies
where the services are not satisfactory or problematic.
"That Directive also requires that the trader
sets out the main characteristics. However, the proposed Regulation
is prescriptive about what must be given. Further, the CRD is
still being implemented so this raises the question of whether
such a prescriptive approach is needed at this stage.
"As such, HMG fully supports the principle of
consumers being enabled to make informed choices about goods and
services and believes this is an indicator of a healthy and properly
functioning market. However, HMG would seek to avoid onerous requirements
being place on businesses and consumers being provided with information
that is not relevant to their needs.
CONTROL OF CONSUMPTION (ANTI-BILL SHOCK MEASURES)
(CHAPTER IV — ARTICLE 27)
"Following
publication of its strategy paper,[12]
HMG has, at this stage, opted not to legislate to require telecommunications
providers to reduce the instances and impact of bill shock on
consumers. However, we are very keen to see industry do more to
prevent this increasing harm.
CONTRACT TERMINATION (CHAPTER IV — ARTICLE
28)
"The proposals are in line with the Unfair Terms
in Consumer Contracts Directive (CRD), but are more detailed in
nature. As such, the proposed text would effectively set out
in legislation the principles of the CRD that binds the service
provider to the quality of the services advertised.
"Whilst HMG supports the principle behind the
proposal, it may be necessary to examine the interplay between
the proposal and the CRD before full support can be given.
SWITCHING AND PORTABILITY OF NUMBERS (CHAPTER V —
ARTICLE 30)
"For the most part the proposals mirror existing
mechanisms. However, Article 30 (4) of the proposed Regulation
also proposes that 'The receiving provider of electronic communications
to the public shall lead the switching and porting process.' That
is not how switching currently works universally in the UK, and
particularly not so in the mobile sector.
"In its strategy paper,[13]
the Government set out its objectives to move to Gaining Provider
Led (GPL — the same as the 'receiving provider' system referenced
in the Regulation) processes for switching 'across the board',
and to ensure consistent and effective experiences for consumers
switching between bundles. Further, Ofcom undertook a strategic
review of switching and porting in September 2010. This was aimed
at identifying the key issues and problems with switching processes
across fixed and mobile telecommunications, broadband and the
pay TV sector. That review concluded 'in principle, GPL systems
are preferable to losing providing-led (LPL) systems when no legacy
systems are in place'. However, switching and porting of mobile
networks numbers is heavily dependent on legacy systems.
"Therefore, HMG supports this proposal in principle
but would seek to ensure that any changes do not disrupt our current
plans for change nor introduce any further complexity or administrative
burden.
MARKET ANALYSIS PROCEDURES AND HARMONISATION (CHAPTER
VI — ARTICLE 35)
"Regarding market analysis procedures, the Commission
is proposing to change the scope of the current 'Three Criteria
test' to include consideration of the global competitiveness of
the EU economy. However, this is currently not a policy or regulatory
objective of the current Framework. Nor is it a NRA duty to ascertain
how the Three Criteria test is applied and would therefore represent
a fundamental change of direction of the Framework.
"HMG believes that, at the least, this proposal
requires full discussion; though ideally it would be removed and
the issue saved for the next review of the Framework as a whole.
AMENDMENTS TO REGULATION (EU) NO. 531/2102 —
THE THIRD EU MOBILE ROAMING REGULATION (CHAPTER VI — ARTICLE
37)
"The government is concerned that the full effect
and success of the recently agreed Roaming Regulation remains
untested. While the unspecified benefits to the consumer of the
new proposals will appeal to consumers and business users, such
a quick return to further regulation is unpopular with industry
and may introduce costly and unnecessary burdens and encourage
an anti-competitive market environment. The Roaming III Regulation
was negotiated as a ten-year Regulation.
"HMG has recently announced that it believes
that roaming charges have no place in a true single market and
our preference would be for an eventual phasing out of all roaming
charges under the current Regulation and within that regulatory
framework rather than adding to the current existing Regulation.
AMENDMENTS TO REGULATION (EC) NO. 1211/2209 —
ESTABLISHING THE BODY OF EUROPEAN REGULATORS FOR ELECTRONIC COMMUNICATIONS
(BEREC) AND THE OFFICE (CHAPTER VI — ARTICLE 38)
"The case for changing the role of the Chair
of BEREC to that proposed is based around the argument that BEREC
should drive greater harmonisation of market remedies and provide
strategic direction that is perceived by the Commission to be
lacking under the current system.
"Ofcom has expressed some serious concerns that
the change may endanger the way in which BEREC operates; that
being independently and rooted in its member NRAs. It carries
the risk BEREC may no longer be able to act independently of the
Commission and may represent the first step towards a centralisation
of BEREC's functions to Brussels and the erosion of national regulators'
discretion. HMG shares these concerns."
2.18 The Minister then comments on the Impact
Assessment thus:
"A full Impact Assessment has yet to be conducted
on this series of proposals. Based upon a study conducted by Ecorys
et al in 2011[14] it
is estimated that the measures could add between 0.52% and 0.89%
to European GDP each year. This study embodies the difficulties
of quantifying the efficiency and welfare gains resulting from
enhanced competition and is heavily reliant upon assumptions made.
"However, an initial market assessment was conducted
as the proposals were first trailed by the Commission and this
provides a useful foundation. It showed that there is some evidence
that: the EU market is fragmented and involves smaller players;
the market capitalisation of EU telecoms firms is lower than,
for example, Verizon or AT&T in the US and China Mobile; and
overall, revenue growth is weaker for EU telecoms companies, as
are their operating margins.
"There is a drive for more industry consolidation
that underlying some of the proposals but it is not clear that
greater consolidation is the right answer. Initial market analysis
from Ofcom suggests that these market differences stem from lower
competition and greater pricing-power of incumbents in the US,
rather than scale effects. Further, fierce retail competition
in domestic markets across the EU tends to drive down prices,
margins and revenues but it also improves the quality of services.
"Therefore, competition is already a clear strength
of the EU market and does not appear to inhibit investment, with
EU operators also investing similar shares of their revenue as
non-EU counterparts. These measures are unlikely to radically
alter the prospects of those MS that already embrace competition
in broadband markets. However, the EU is comparatively slow to
roll out next generation technologies, in which it genuinely lags
behind the US and parts of Asia. This results partly from uncertainty
over demand, complex technical problems on co-existence and interference
within spectrum, and poor coordination of spectrum allocation
across Member States.
"It is also worth remarking that much of the
growth found by Ecorys, et al stemmed from developments such as
e Health, e Learning and e Government which are subject to other
factors than the suggested measures. It is also worth noting that
the Commission's internal mechanisms initially expressed some
concerns with the Impact Assessment, although these were later
withdrawn.
"It, therefore, remained unclear whether the
likely gains from the proposals are greater than the likely costs
and whether the proposals themselves will address the issues the
associated Communication identifies."
2.19 With regard to Consultation, the
Minister says:
"This package was widely leaked to governments
and stakeholders, with consultation of major stakeholders taking
place to drive HMG's initial reactions to the proposals. It is
intended that further consultation of stakeholders will take place
as negotiations commence."
2.20 Finally, on the Timetable, the Minister
says:
"It is the stated ambition of the Commission
for this package to be approved in time for the elections of the
European Parliament ie end-May 2014.
"It is anticipated that the October European
Council (24th/25th October 2013) will discuss
this package as part of a wider debate on the digital single market
and it is expected that Council Conclusions will be agreed that
contain an element covering this package and negotiations at
Working Group level to begin in November 2013. A Progress Report
may be considered at the Telecommunications Council (6th
December 2013). It is worth noting that the European Parliament
has indicated severe concerns regarding the timing of this package
and a mismatch with its parliamentary timetable with any plenary
vote needing to take place by April 2014."
Conclusion
2.21 It is notable that the Minister challenges
the analysis cited by the Commission and describes the issue of
any net economic benefits to the EU market from both the package
in its entirety and each individual element as unproven. In particular,
he notes that, although a drive for more industry consolidation
underlies some of the proposals, it is not clear that greater
consolidation is the right answer: that, on the contrary, Ofcom
analysis suggests that the market differences cited by the Commission
stem from lower competition and greater pricing-power of incumbents
in the US, rather than scale effects; and that fierce retail competition
in domestic markets across the EU tends to drive down prices,
margins and revenues, and also improve the quality of services.
He sees competition as already a clear strength of the EU market,
which does not appear to inhibit investment, with EU operators
also investing similar shares of their revenue as non-EU counterparts.
Thus, he says, these measures are unlikely to radically alter
the prospects of those Member States that already embrace competition
in broadband markets. Set against this, he clearly sees the EU's
comparatively slow roll out of Next Generation technologies as
the area in which it genuinely lags behind the US and parts of
Asia.
2.22 Moreover, with regard to individual proposals,
the Minister:
— does
not believe that national notification and compliance has hitherto
been a material obstacle to pan-European operations, or see single
authorisation as a substitute for addressing ineffective or inconsistent
regulation, and notes that the administrative burden for operators
in the UK would also increase radically;
— notes that the proposals on Coordination
of Use of Radio Spectrum would involve "a shift in competence
from national regulators, which we would not want to see",
with the Commission acquiring a power of veto over national draft
decisions on spectrum assignment procedures and licence conditions
if it considers they would damage the internal market;
— underlines the well-documented value
of spectrum to Member States' economies, and is accordingly concerned
that the Commission would be extending its competence into matters
that are currently a national responsibility;
— at the same time believes that a pan-EU
rollout of 4G mobile broadband services would have an immediate
positive impact on the European economy and be more effective
than further harmonisation of rules on spectrum auctions, noting
that the Commission has not used its existing powers to expedite
the allocation of spectrum for 4G service in Member States that
have not yet done so;
— sees the wider use of the Radio Spectrum
Policy Group to develop harmonised technical conditions and issue
guidance on licence fees and durations as a better alternative
to the Commission's proposal;
— believes that a better approach in
the area of Virtual Unbundled Local Access (VULA) would be for
BEREC to develop minimum reference offers in greater detail, in
close consultation with industry; and notes that the proposal
would constitute a significant transfer of power from NRAs to
the Commission, which would risk NRAs being prevented from being
innovative;
— believes that an open Internet can
be achieved through self-regulation, and that transparency of
traffic management policies employed by ISPs is the key;
— is concerned that such a quick return
to further regulation may introduce costly and unnecessary burdens
and encourage an anti-competitive market environment; noting that
the recently agreed Roaming III Regulation was negotiated as a
ten-year Regulation;
— is also concerned that the proposal
to change the role of its Chair carries the risk that BEREC may
no longer be able to act independently of the Commission, and
may represent the first step towards a centralisation of BEREC's
functions to Brussels and the erosion of national regulators'
discretion.[15]
2.23 The theme of the Minister's analysis
is familiar to those who have engaged in this area over the years:
an apparent determination by the Commission to undervalue the
established process of taking this highly complex and fast-moving
area forward in close coordination with NRAs and the industry,
and instead to press for the enhancement of the Commission's
direct control. BEREC is a case in point: only this summer an
independent assessment by PWC concluded that the structure of
BEREC was relevant and efficient and that it had, thus far, successfully
fulfilled its functions.
2.24 It is perhaps therefore not entirely
regrettable that there appear to be considerable constraints on
the Commission's timeline being met. In the short term, we should
be grateful if the Minister would write to us in a month's time,
to let us know how the Commission's proposals were received at
the October European Council and what sort of report is likely
to be made to the 6 December Telecoms Council.
2.25 In the meantime, we shall retain the
documents under scrutiny.
4 See http://ec.europa.eu/digital-agenda/en/about-telecoms. Back
5
See http://ec.europa.eu/digital-agenda/en/telecoms-rules. Back
6
See http://ec.europa.eu/digital-agenda/en/connected-continent-single-telecom-market-growth-jobs. Back
7
See http://ec.europa.eu/digital-agenda/en/connected-continent-legislative-package. Back
8
Ecorys, TU Delft et al.,"Steps Towards a Truly Internal Market
for e-Communications, 2013". Back
9
See (35312) C(13) 5761 at chapter 9 of this Report for the Committee's
consideration of this Recommendation. Back
10
Over-The-Top Content (OTT) is a system for the broadband internet
delivery of video and audio without a multiple system operator
being involved in the control or distribution of the content.
The provider may be aware of the contents of the IP packets but
is not responsible for, nor able to control, the viewing abilities,
copyrights, and/or other redistribution of the content. This
is in contrast to purchase or rental of video or audio content
from an Internet provider, such as pay television video on demand.
OTT in particular refers to content that arrives from a third
party, such as Netflix, and is delivered to an end user device,
leaving the ISP responsible only for transporting IP packets.
Consumers can access OTT content through internet-connected devices
such as desktop and laptop computers, tablets, smartphones, set-top boxes,
smart TVs and gaming consoles. Back
11
BEREC replaced the European Regulators' Group (ERG) in January
2010, following the adoption of the BEREC regulation in November
2009 (this being part of the major revamping of the telecoms regulatory
framework in that year). The ERG, which was set up as part of
the original 2002 framework, was simply a network of EU NRAs (national
regulatory authorities; in the UK, Ofcom), and had no formal role
in the regulatory framework: BEREC, however, does, and is supported
by a small administrative office in Riga. Back
12
"Connectivity, Content, and Consumers: Britain's digital
platform for growth" published on 30th July 2013. This is
available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/225783/Connectivity_Content_and_Consumers_2013.pdf. Back
13
Ibid Back
14
Ecorys, TUDelft and TNO: "Steps towards a truly Internal
Market for e-communications In the run-up to 2020", Client:
DG Information Society and Media, European Commission, Rotterdam,
14 November 2011. Back
15
See (34917) 9291/13: HC 83-v (2012-13), chapter 12 (12 June 2013). Back
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