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) —
(b) Article 114 TFEU; ordinary legislative procedure; QMV
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| Department
| Culture, Media and Sport
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| Basis of consideration
| Minister's letter of 30 January 2014
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| Previous Committee Reports
| HC 83-xxv (2013-14), chapter 4 (18 December 2013) and HC 83-xvii (2013-14), chapter 2 (16 October 2013)
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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 The background to the Commission
Communication and this draft Regulation is set out fully in the
first of our previous Reports; likewise the very detailed and
helpful analysis of both documents by the Minister (Mr Edward
Vaizey) in his Explanatory Memorandum of 10 October 2013.
Our assessment
2.2 It was notable that the Minister
challenged the analysis cited by the Commission and described
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 noted that, although a drive for more industry
consolidation underlies some of the proposals, it was not clear
that greater consolidation was the right answer: that, on the
contrary, Ofcom analysis suggested that the market differences
cited by the Commission stemmed 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 tended to drive down prices, margins and revenues, and
also improve the quality of services. He saw competition as already
a clear strength of the EU market, which did not appear to inhibit
investment, with EU operators also investing similar shares of
their revenue as non-EU counterparts. Thus, he said, these measures
were unlikely to radically alter the prospects of those Member
States that already embraced competition in broadband markets.
Set against this, he clearly saw the EU's comparatively slow roll-out
of Next Generation technologies as the area in which it genuinely
lagged behind the US and parts of Asia.
2.3 Moreover, with regard to individual
proposals, the Minister:
· did
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 noted that the administrative burden for operators
in the UK would also increase radically;
·
noted 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;
· underlined
the well-documented value of spectrum to Member States' economies,
and was accordingly concerned that the Commission would be extending
its competence into matters that are currently a national responsibility;
· at
the same time believed 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 had not used
its existing powers to expedite the allocation of spectrum for
4G service in Member States that had not yet done so;
· saw
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;
· believed
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;
· believed
that an open internet can be achieved through self-regulation,
and that transparency of traffic management policies employed
by ISPs is the key;
· was
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; and
· was
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.
2.4 The theme of the Minister's
analysis was familiar to those who had been 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 was a case in point: only this
summer an independent assessment by PWC concluded that its structure
was relevant and efficient and that it had, thus far, successfully
fulfilled its functions.
2.5 It was perhaps therefore not
entirely regrettable that there appeared to be considerable constraints
on the Commission's timeline being met. In the short term, we
asked the Minister to let us know how the Commission's proposals
were received at the October European Council and what sort of
report was likely to be made to the 6 December Telecoms Council.
2.6 In the meantime, we retained
the documents under scrutiny.
2.7 In his letter of 29 November
2013, the Minister reported that that discussions on the Telecoms
Single Market package at the 24-25 October European Council focused
on the digital economy, innovation and services — areas
chosen because Member States believed that they have the potential
to create growth and jobs — and that discussion of the regulation
had been much less than was originally expected. The Council
Conclusions welcomed the presentation on the proposals from the
Commission and encouraged "the legislator to carry out an
intensive examination with a view to timely adoption".
This, the Minister said, was regarded as the "Council indicating
agreement with the aims of the proposals but reflecting concern
about some of the detail"; moreover, the fact that other
measures also covered in the same section of the Conclusions —
those promoting the Digital Single Market — were assigned
specific completion dates could, he said, be seen as a reflection
of the relative importance assigned by Council to the proposal's
agreement.
2.8 With regard to the 5 December
Telecoms Council, the Minister said that the package would be
discussed, rather than reported on: the absence of a report reflecting
the relatively slow progress the package had made thus far. He
referred the Committee to his pre-Council WMS, in the relevant
part of which the Minister said:
"The Council will take part
in an 'orientation debate' guided by a paper and two questions
from the presidency. The first question relates to the proposal
for a regulation of the European Parliament and of the Council
laying down measures concerning the European single market for
electronic communications and to achieve a connected continent
(first reading—EM13562/13 and 13555/13 + ADDs 1-2). It asks
member states to indicate what actions contained in the proposal
they regard as priorities; and whether it is appropriate to carry
out such actions at EU or member state level. The main points
of the UK intervention will include: a view that while UK welcomes
the objectives of the proposal, we remain concerned that the link
between the stated aims and the constituent elements of the package
remain unclear or unproven in a number of circumstances; signal,
our support for action at EU level for the pro-consumer parts
of that package; support for the eventual reduction of the EU
roaming rates to zero; and support for proposals that could accelerate
the roll-out of new technologies across the EU. Finally, we will
state that we do not support the proposals laid out in the package
that would give the Commission further competency over spectrum
management nor those that would result in the introduction of
regulation covering issues relating to net neutrality."
Our assessment
2.9 As well as reporting
this further information to the House, we also again drew it to
the attention of the Culture, Media and Sport Committee.
2.10 We looked forward to hearing
from the Minister in two months time about what subsequent developments
had taken place, and what the prospects then were for this package
prior to the 2014 European Parliamentary elections.
2.11 In the meantime, we continued
to retain the documents under scrutiny.
The Minister's letter of 30 January 2014
2.12 The Minister says that the
discussion that took place at the Telecoms Council was notable
in that, for all that Member States welcomed the aims of the package,
"it was clear that they believed that other current proposals
— such as the eIDAS, Reducing Broadband Costs and Network
& Information Security packages — and should take priority
over this package."
2.13 The Minister continues as
follows:
"The Commission were keen
to stress the urgency of the proposal, whilst Member States were
of a single mind regarding 'right not rushed' and thus flagging
that the nominal deadline of 1st November 2014 was ambitious if
all elements of the package remained.
"The net neutrality and consumer
protection elements were those that gained most support from Council,
whereas the spectrum management and single authorisation elements
were roundly opposed. Further, Council indicated support for the
cessation of mobile roaming charges, but not through the mechanism
proposed in the Regulation.
"There have been no further
discussions at Working Group level beyond those on the Impact
Assessment that took place prior to the Telecoms Council, with
these only taking place as the outgoing Lithuanian Presidency
capitulated to the intense pressure exerted by the Commission
to begin discussions before the Greeks assumed the Presidency."
The position of the European Parliament
"Whilst Council has made little
or no formal progress with the package, that same cannot be said
for the European Parliament who have reached a position whereby
they will be adopting a First Reading position before their elections
in May.
"Based on the assumption that
the lead (ITRE) committee's Report remains largely unchanged and
accepted, along with the Opinion issued by IMCO, the EP's position
can be summarised as:
· "Supporting
and amending: the spectrum management, net neutrality and
consumer protections elements;
· "Supporting:
the cessation of mobile roaming prices but not through the
mechanisms proposed in the Regulation; and
· "Opposition
(amendments that remove from the Regulation): single authorisation,
wholesale access products, costs of international calls and changes
to the BEREC chair.
"There are currently some
1,500 amendments collectively put down by the EP and the final
First Reading position will be clearer once the voting has taken
place; the last of these in April.
"Finally, whilst it is usual
for a new EP to be bound by the decisions of the previous in terms
of First Readings, there is a mechanism whereby the new EP can
trigger a new First Reading process. This is a small risk and
officials are monitoring the situation."
Opportunities and Risks
"The current position presents
a series of opportunities and one major risk to UK's current negotiating
position.
"On the former, it would appear,
based on the current positions of both EP and Council, that some
form of agreement for a 'simplified' Regulation is possible. Such
a Regulation could contain: action achieving the cessation [of]mobile
roaming [charges] by 2016; increased consumer rights as generally
set out in the proposal; and the introduction of wholesale access
products (for the benefit of industry) in what may be a package
very much in the favour of consumers. In addition, it may be possible
to alter the 'single authorisation' proposal to one that harmonises
'notification' processes but without being mandatory in nature.
It should also be possible to prevent the introduction of further
spectrum management functions for the Commission but this will
very much rely on Member States individually and collectively
taking action that addresses Commission's concerns in this area.
This outcome is clearly within the current negotiating mandate
and chimes well with current domestic policy regarding the telecoms
sector.
"The main current risk has
net neutrality as its locus where it is clear that UK is isolated
in its position regarding the need for regulation in this area;
the proposal enjoys strong support from both Council and EP. Whilst
I remain convinced that self-regulation is most appropriate for
the UK, this may not be true in the cases of the remaining 27
national markets. The current negotiating mandate indicates that
whilst UK should resist the introduction of regulation, we are
also required to consider what other options are open to us before
reaching a final decision. Given the strong support for a regulation
across the EP and the Council, I and my officials have begun to
explore whether there are other options that will deliver the
outcomes that the EP and Council are looking for in this area.
"It is clear that there is
much that remains open to negotiation and if the UK can show leadership
by championing a 'simplified' Regulation and help achieve an agreement
by the indicated deadline, there are many benefits to be gained,
along with managing the perceived negative impacts of the proposal.
My officials are currently testing the proposal of a 'simplified'
Regulation in advance of further discussions at Working Group
before other Member States' positions become fixed and to identify
if the EP can support such a proposal, with the content as indicated.
Reaction will inform our on-going negotiating strategy."
Next stages
"It remains unclear when the
Greek Presidency will begin discussions on this package at Working
Group level, although I am aware that the Commission continues
to exert a large amount of pressure on them to begin progress.
UKRep officials have informed me that it is most likely that discussions
at Working Group level will begin either at the end of February
or start of March. If this is the case, it is likely that sufficient
progress will then be made such that a Progress Report can be
anticipated at the Telecoms Council currently scheduled for 6th
June). However, there is a small risk that Commissioner Kroes
may seek to hold an ad-hoc Council before the scheduled Council
if further political agreement on the shape and content of the
proposal is required."
2.14 The Minister concludes by
saying that, given "the current lack of progress and that
the content of the Regulation will remain in a state of flux",
he proposes to provide his next updating letter following the
June Telecoms Council, but would update the Committee sooner were
there "any major changes that I believe will impact on outcomes".
Conclusion
2.15 We thank the Minister for
his very helpful update. We would, however, be grateful if the
Minister would write to us sooner, once the European Parliament
First Reading position has been established; and in any case no
later than 24 April (i.e., in time for our first meeting after
the Easter recess).
2.16 At that time, we would
like to hear more about:
—
the prospects for a "simplified" Regulation, including
more of an explanation of some of the technicalities, e.g., which
consumer rights would be increased and in what ways; what the
"wholesale access products" are to which he refers,
and how they could benefit industry; the ways in which the package
may be "very much in the favour of consumers; what the
"single authorisation" proposal is, and how it might
be altered to one that "harmonises 'notification' processes"
without being mandatory in nature;
— the
contentious issue of "net neutrality": what options
have been explored with the Commission and European Parliament,
and what the consequences would be for UK interests if this aspect
of the draft Regulation remains unmodified;
— more
on the implications of whatever proposals are then in the ascendancy
for the BEREC: at present the Minister refers only to the BEREC
chair, whereas a respected European media source a month ago carried
the headline "MEPs insist Commission should not remove power
from national telecoms regulators"; it refers to IMCO discussions
about which the Minister provides no details, and both refers
to strong opposition to the Commission proposals by the BEREC
and cites the Committee chair and drafter of the European Parliament's
response on the consumer aspects as arguing that national regulators
— through the BEREC — are better placed than the Commission
to regulate national markets.
2.17 In the meantime, we shall
continue to retain the documents under scrutiny.
2.18 We are also again drawing
this chapter of our Report to the attention of the Culture, Media
and Sport Committee.
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