Documents considered by the Committee on 5 February 2014 - European Scrutiny Committee Contents

2 The Telecommunications Single Market




COM(13) 634




+ ADDs 1-2

COM(13) 627

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

Legal base (a)  —

(b)  Article 114 TFEU; ordinary legislative procedure; QMV

Department Culture, Media and Sport
Basis of consideration Minister's letter of 30 January 2014
Previous Committee Reports HC 83-xxv (2013-14), chapter 4 (18 December 2013) and HC 83-xvii (2013-14), chapter 2 (16 October 2013)
Discussion in Council December 2013
Committee's assessment Politically important
Committee's decision Not cleared; further information requested


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".


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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Prepared 18 February 2014