11 The Telecommunications Single Market
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested; drawn to the attention of the Culture, Media and Sport Committee
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| Document details | (a) Commission Communication on the Telecommunications Single Market; (b) Council Regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent
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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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| Document number | (a) (35305), 13562/13, COM(13) 634
(b) (35304), 13555/13 + ADDs 1-2, COM(13) 627
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Summary and Committee's conclusions
11.1 The Commission argues 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. It also states that decisive
further action is needed to prevent any further decline in Europe's
global position in this sector; considers what remaining barriers
exist; and sets out measures that the Commission believes are
needed to change the existing regulatory framework (last revised
in 2009) in order to remedy the situation.
11.2 Recalling the conclusions of the 2013 Spring European Council,
calling for measures to create a Single Telecoms Market as early
as possible, the Commission published on 11 September 2013 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".
11.3 The full background to the Commission Communication and this
draft Regulation is set out 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.[58]
11.4 Our subsequent Reports embody a number of periodic updates
from the Minister. In the most recent, the Minister outlined the
latest position on those areas where there was most disagreement
— particularly regarding the key elements of Spectrum Management
and Net Neutrality. He and his counter-parts from Italy, Spain,
Denmark, Poland and Romania had agreed to take forward an earlier
UK/Germany initiative and work together on producing an alternative
text by shaping the Commission's original proposals to those more
in line with the collective view of Council, so as to form the
basis of a Council Compromise text, which would embody the major
elements of current UK policy on the proposals. He envisaged,
in September/October, being able to provide a comparison with
the UK's negotiating position and an update on wider issues associated
with the proposal. Beyond that, he foresaw "further deliberations"
within the (new) European Parliament (EP) and Council; more negotiations;
possible Trialogue sessions with the EP after the Presidency gains
a mandate from the Council; and the adoption of a General Approach
at the 27 November Telecoms Council.
11.5 Against this background, we asked for that update no later
than 9 October, particularly as we envisaged that a debate might
be appropriate prior to that Telecoms Council.[59]
11.6 Since then, we received the Opinion of the Culture, Media
and Sport Committee (CMS), along with Ofcom's submission to that
Committee. The CMS Committee deemed it clear from Ofcom's submission
that at least some of the proposals lack sufficient grounding
in terms of evidence, analysis and consultation, and that much
work remained to be done to achieve outcomes that were proportionate
and struck an appropriate balance between national and wider European
interests. With regard to what they saw as the four most significant
proposals in the draft Connected Continent Regulation, the CMS
Committee said:
— international
roaming charges: welcome
recognition on the part of the European Parliament (EP) that there
were simpler ways to achieve lower roaming charges than the Commission's
draft Regulation; it should be better recognised that smaller
national mobile network operators significantly contribute to
market competitiveness;
— net
neutrality:[60]
while sharing the Commission's broad objectives of protecting
consumers' access to unrestricted internet access services, there
was insufficient evidence of market failure to justify regulatory
intervention on the scale envisaged by the Commission;
— consumer
protection: while it
agreed with the Commission's ambitions to improve consumer protection
across Europe — for example in relation to making it easier
for consumers to switch between service providers — national
regulators were best placed to judge on what timescales desirable
changes can be achieved, taking into account the market situation
in their individual Member States;
— spectrum
management: while close
cooperation with European partners in the area of spectrum management
was necessary, it agreed with Ofcom that spectrum management,
and spectrum awards in particular, must remain a national competence.
11.7 To illustrate what CMS Committee said, we reproduced
Ofcom's submission at the Annex to our most recent Report. We
noted in particular that "Ofcom does not see a need for prescriptive
and detailed rules on net neutrality, as proposed in the Commission's
draft "Connected Continent Regulation", and that Ofcom
went on to say:
"The internet is an enormously complex and
dynamic ecosystem, where the law of unintended consequences looms
very large and there are real dangers in attempting to regulate
(continually evolving) network engineering practices. In short,
every new rule is a potential new loophole.
"We are therefore concerned that, by seeking
to protect the (widely shared) regulatory objectives to promote
the open Internet into hardwired rules and rights, the Commission's
(and the European Parliament's) proposals risk undermining the
efficient management of network resources, the innovative potential
of the Internet, and ultimately the consumer interest. The European
Parliament's text, in particular, further compounds the very restrictive
language severely constraining operators' ability to manage traffic
on their networks, and raises serious questions of enforceability
and legal certainty. Of particular interest in the UK, the European
Parliament text is so restrictive, it would appear to prevent
the operation of the IWF blocked URL list (which enables the rapid
blocking of images of child sexual abuse).
"It is worth noting that there is no clear
evidence of a market failure warranting this kind of regulatory
intervention."
11.8 Underlining their clarity, we drew our colleagues
and Ofcom's views to the attention of the House because of the
importance of the issues under negotiation, and hoped that they
would fortify the Minister at this crucial juncture.
11.9 We also continued to retain the documents under
scrutiny.[61]
11.10 In his latest update (see paragraph 0.23 below
for full details), the Minister:
— is
generally content with progress thus far on consumer protection;
— says
that while the general travel of direction with spectrum management
is improving "the devil is in the detail and it is the detail
that causes me some concern";
— on
mobile roaming, reports the introduction of a "roam
like at home" (RLAH) solution but also a new "phasing"
mechanism based on a Presidency-proposed version of "fair-use"
that has not been previously discussed, which appears to be based
on a proposal made by an operator based in an EFTA state, and
with regard to which, though not far from the principles that
UK seeks, he cannot agree to the text as proposed;
— says
that net neutrality remains problematic: the text retains
an overly-prescriptive regulatory proposal; but the UK remains
isolated in favouring self-regulation; he is "considering
if the UK could have greater influence if we change our stance."
11.11 Regarding reaction to the text and next
steps, the Minister says:
— there
is some overall agreement to act on both net neutrality
and roaming but no common agreement on "how"
for either;
— only
the consumer protection element enjoys universal support
across Council (as does dropping the proposals noted above);
— as
a result of debate at the recent Informal Telcoms Council, the
Presidency will deprioritise the package and concentrate on the
Network Information Security package, which "places a large
risk on the UK's priority objective of introducing a RLAH mobile
solution by 2016";
— one
possibility for reinvigorating the package would be via further
Conclusions at the upcoming European Council;
— in the interim, he is giving further
consideration to elements of the package where the UK can offer
a compromise in order successfully to secure action on mobile
roaming;
— one possible scenario would be for the
UK "to heavily influence any regulation on net neutrality
using its own Internet Code of Conduct to draw up a principles-based
regulation (either as a directive or recommendation) that would
provide Member States with sufficient bandwidth to take into account
their national markets, as well as provide clarity on existing
powers for national regulatory authorities";
— however, "such a compromise could
only be made should our headline objective of action on mobile
roaming be achieved; I would require clearance from Cabinet colleagues
before doing so";
— the next four weeks will see "if
the package can be progressed in any meaningful way and thus I
suggest that I write again towards the end of October once its
fate has become apparent".
11.12 We are grateful to the Minister for this
further full and helpful update. The picture that the Minister
paints — contemplating a shift in one hitherto "red
line" area, where the UK is isolated, in order to secure
a prize that would be popular with consumers — is understandable
at this stage in a complex negotiation. However, we again draw
the Minister's attention to the views of the Culture, Media and
Sport Committee and Ofcom. If RLAH is the baby that the Minister
wishes to safeguard, then great care will need to be taken about
the nature of the bathwater that may be thrown out in the process.
11.13 Regarding timelines, when the Minister provides
his next update towards the end of this month — which we
would like no later than 30 October — we should be grateful
if he would clarify whether this package is destined for any sort
of General Approach at the 27 November Telecoms Council. We can
then determine whether or not a prior debate is warranted.
11.14 In the meantime, we again draw this update
to the attention of the Culture, Media and Sport Committee, as
well as to the House as a whole.
11.15 The documents remain under scrutiny.
Full details of
the documents: (a)
Communication from the Commission to the European Parliament,
the Council, the European Economic and Social Committee and the
Committee of the Regions on the Telecommunications Single Market:
(35305), 13562/13, COM(13) 634; (b) Draft 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, and amending Directives 2002/20/EC,
2002/21/EC and 2002/22/EC and Regulations (EC) No. 1211/2009 and
(EU) No. 531/2012: (35304), 13555/13 + ADDs 1-2, COM(13) 627.
Background
11.16 Further progress to May — including the
outcomes of the EP First Reading — was reported by us in
June this year.[62]
11.17 The Minister foresaw two major risks to HMG's
desired outcomes:
— the
Commission's spectrum proposals:
notwithstanding the Council's general opposition, EP support meant
that it was becoming increasingly clear that some form of action
would need to be taken that addressed the Commission's concerns
but which did not compromise the current existing balance of competence
between individual Member States and the Commission
— net
neutrality: while his
current negotiating mandate was "to resist the introduction
of regulation specific to net neutrality, whilst exploring the
options around same", the EP First Reading deal now contained
a specific definition of "net neutrality", as well as
a more restrictive approach to "specialised services"
and "traffic management" — this being "in
direct opposition to HMG's current negotiating stance" and
underlining "the contentious nature of this issue as previously
noted in the most recent Commons Committee Report".[63]
11.18 On 10 July the Minister reported that Neelie
Kroes, Vice-President of the European Commission had offered support
for taking action on mobile roaming charges and the European Parliament's
proposal on handling the consumer protection elements, which the
Minister said were in-line with current UK policy. However, she
also stated that she believed the majority of Member States supported
legislative action on net neutrality and spoke in support of the
Commission's spectrum proposals — both current UK Red Lines.
She also stated again that the Regulation was not a la carte
underlining an expectation that each of the major elements would
be retained in any agreed Regulation in some form.
11.19 The Minister then dealt with a number of specific
issues raised by the Committee, as follows:
— Single
authorisation: the outcome
should be a simplification of bureaucracy as operators need to
engage with a single format with standardised content. Those Member
States that do not operate a notification scheme - such as the
UK - would not have to introduce its use; this would address and
mitigate UK's main concerns with this specific element of the
overall proposal and was in line with HMG's general policy aims;
— Spectrum:
the Commission believed that the existing spectrum management
system prevents operators from securing spectrum on a pan-EU basis,
results in a fractured spectrum allocation process and this, in
turn, hampers the roll-out of pan-EU digital services (both current
and potential new services), and that a harmonised approach to
spectrum auctions under their oversight would go some way in rectifying
what it saw as a collective failure to manage the EU's spectrum
in an efficient and effective manner. The changes that the Minister
supported to the existing governance structure concerned the Radio
Spectrum Policy Group,[64]
where the UK proposal was based around evolving the RSPG's current
role to address the concerns of the Commission that drive their
proposals. This approach had the advantage that it would not create
new Commission powers over spectrum management and could easily
be brought in action through amending the RSPG Decision (rather
than negotiating a directive or regulation). Whilst there was
general agreement in Council regarding this proposal, the specifics
had yet to be agreed. Though this ran counter to the known positions
of the Commission and the EP, the desire of the Commission and
the EP to secure agreement on populist measures, in particular
action on mobile roaming and improved consumer protection, provided
scope for securing agreement also on the UK approach to spectrum
management;
— Net
neutrality: this was
rather more finely balanced than that of spectrum. There were
clear supporters for taking regulatory action across Council,
many of them larger Member States with accompanying QMV voting
weights. The Commission proposal had the firm support of the EP,
which tightened-up the original proposals, and had had the effect
of firming-up support of the Commission's text from stakeholders
generally as the "lesser of two evils". The Minister
remained convinced that any regulation might stifle innovation
and that a self-regulatory approach was most appropriate and had
largely worked in the UK. However, he believed it appropriate
to consider other options and outcomes at this stage, as the Compromise
text was worked-up at official level over the next three months;
he suggested a further update at that juncture.[65]
The Minister's letter of 9 October 2014
11.20 The Minister explains that Presidency has now
produced the compromise text referred to above, and seeks to:
provide an analysis of that text in comparison to the original
Commission proposals, highlighting the main points; consider the
impact of same on current UK negotiating policy for this package;
and report on progress since then, before setting out the next
steps in the immediate future.
11.21 In order to aid with the process of comparing
the Presidency text with the text of the original Commission proposal,
the Minister has produced a summary table that is attached to
his letter (and which we reproduce at Annex A of this chapter
of our Report).
11.22 The Minister begins thus:
"Changes to BEREC (Article 38), single authorisation
(Articles 3 to 7) and wholesale access products (Articles 17 &
18 and Annexes I & II) have been dropped from the Regulation,
although there remains scope to take some form of limited action
on the latter two that would be in line with current HMG policy,
as is the outcome generally. As such, I am content with this proposed
action".
11.23 The Minister then says that the remainder of
the package is clustered around four main elements, each of which
presents a series of issues, and each of which he covers as follows:
CONSUMER PROTECTION (ARTICLES 21, 22 AND 25 TO 30)
"On Consumer protection (Articles 21, 22
and 25 to 30), the text addresses the UK's main concern regarding
this element by introducing a 'minimum' harmonised approach achieved
through changes to the existing Universal Service directive. This
is codified through an extensive drafting of existing Article
36. The text also modifies some of the detailed requirements as
a balance is sought between providing consumers with relevant
information without incurring excessive burdens for operators.
I am generally content with this outcome and progress made thus
far as this is in line with UK policy on same.
SPECTRUM (ARTICLES 8 TO 16)
"Regarding spectrum (Articles 8 to 16) the
text represents an improving situation whereby there is a reduced
level of Commission oversight of spectrum auctions and no longer
includes an associated transfer of powers. It is worth noting
that any Commission 'veto' has been dropped. The Presidency text
does propose changes to the role of RSPG to harness potential
benefits from greater coordination of spectrum management at EU-level.
It also adopts UK's proposal for 25-year licence durations. Thus,
the general travel of direction is improving but as is often the
case with spectrum management, the devil is in the detail and
it is the detail that causes me some concern.
"An analysis of the text shows that RSPG's new
role is codified in such a way that it would be, in effect, carrying
out the same role that the Commission had originally proposed
for itself, but without a veto. Further, this action would only
be triggered by Commission 'permission' therefore undermining
the concept of allowing Member State proactivity for managing
spectrum through and amongst peers on the RSPG. There also remain
concerns around risks associated with lack of legal certainty
created by this process.
"Additionally, a new Article 12a allowing
for Member States to enter into joint authorisation agreements
is, in better regulation terms, unnecessary as there is currently
nothing to stop Member States from doing so at this moment.
"Further, despite their retention and minor
alterations, there seems to be little support for Articles 14-16
generally. The subsidiarity concerns with some of these proposals
noted in previous letters remain and with limited Member States
support, it is not clear this text can remain within any overall
agreement.
"As
such, whilst the text is an improvement on the original Commission
proposals, there remain sufficient concerns that would prevent
HMG agreeing this iteration and we would seek to address the above
before being able to do so.
MOBILE ROAMING
"An
interesting development has occurred with the mobile roaming
element. The text does
put forward the introduction of a 'roam like at home' (RLAH) solution
but has introduced a new 'phasing' mechanism based on a Presidency-proposed
version of 'fair-use' that was not present in the joint text put
forward by UK, Germany, The Netherlands and Denmark.
"In
summary, the current text proposes that a phasing-in of a 'RLAH'
solution would begin with a sliding fair use 'allowance' based
on an EU average of mobile usage in 2015 ('Year Zero'). Then,
in Years One to Three, a consumer would be provided with an increasing
allowance of 50%; 75%; and 100%. Current voice usage would see
a consumer having an initial allowance of around two minutes per
day rising to four minutes per day in Year 3. This is based on
assumption of introduction of RLAH in 2016; the Presidency text
is mute on this point. Such a minimal 'allowance' is clearly not
acceptable nor is it a true 'RLAH' solution that I am seeking.
"Further,
this added requirement appears to be introduced not to address
the known risk of 'arbitrage' but to allow operators time to adjust
to an end of roaming. As such, it is highly likely to fail to
address the competitive distortions caused by variations in retail
prices and wholesale costs across the MSs. It is my view that
it is not appropriate to pre-empt discussions on 'fair use' in
this way, which does not allow for qualitative metrics. This proposal
has not featured in prior Council discussions nor in Member States'
written comments and appears to be based on a proposal made by
an operator based in an EFTA state.
"Whilst
the text is not far from the principles that UK seeks, there is
a general view is that the text is not acceptable and UK should
stick with our current policy and associated text and, as such,
I cannot agree to the text as proposed.
NET NEUTRALITY
"The
matter of net neutrality
remains problematic
in both that the text retains a regulatory proposal, as well as
how it is drafted. Whilst the accompanying explanatory memorandum
for the text suggested a move by the Presidency towards a more
principle-based approach, the text is much closer to the proposal
put forward by the European Parliament than expected and remains
overly-prescriptive, could be unworkable in practise and includes
definitions of net neutrality and specialised services that UK
would find it difficult to live with. The exclusions for legitimate
traffic management are also unclear.
"On
the positive side, the text is clearer regarding child protection
measures, including the voluntary filtering of child abuse images
by ISPs and parental control filters, but further work would be
needed to give ISPs the legal certainty for these measures. Stakeholders
have also raised concerns regarding an impact on the existing
UK 'default-on' parental control regime that ISPs are have asked
to implement. It was noting that when this section of the text
was discussed at Council Working Group, it was clear that Council
is still polarised on this issue. There is a danger that unless
there is significant movement, the whole package may be threatened.
In response, the Presidency recognised that the Council wished
to see a more principle-based approach and have committed to address
this.
"Given
how this is developing, UK retains its view that self-regulation
is a viable option but we remain isolated in that position; I
am monitoring developments in this area and am considering if
UK could have greater influence over the outcome if we change
our stance on same.
THE BEREC REGULATION[66]
"There
is one matter arising in that the EEA/EFTA-states have sponsored
an amendment to the BEREC Regulation
that seeks to change
their membership status on BEREC. Its aim appears to try to address
a particular issue around implementation of single market actions
derived from BEREC in their domestic markets. I am currently researching
whether UK can support, or should oppose, this amendment. There
may be single market improvements to be capitalised upon as a
result, but there are also obvious sensitivities around membership
status of non-EU states on EU Agencies. There is little support
from Council for this amendment and thus it is unlikely to make
any final draft.
"In
summary, the Presidency has produced a text that is largely in-line
with UK ambitions for a 'simplified' Regulation and that text
generally codifies some movement in the right policy direction
for the UK overall. However, there still remain concerns regarding
the spectrum element and there are new concerns arising from the
mobile roaming element; these both represent some challenges for
the UK moving forward. In addition, the text retains a proposal
for regulation covering net neutrality and this remains a matter
that is currently a UK red line.
REACTION TO THE TEXT AND NEXT STEPS
"Focusing
on reception to the text overall, Council's initial reactions
expressed through a recent Working Group show that, in terms of
the package overall, Council remains split. There is some overall
agreement to act on both net neutrality and roaming but there
is no common agreement on 'how' for either. Only the consumer
protection element enjoys universal support across Council, as
does the action of dropping the proposals I note above.
"The
text was also the subject to an informal discussion over dinner
by Ministers at the recent Informal Telecoms Council (whose main
focus was internet governance issues). This roundtable again showed
that Council is split regarding the package. There are a core
group of Member States, including the UK, who seek to secure an
agreement by the end of the year. There are a similar number who
have indicated they could reach agreement if a series of issues
are addressed. These two groupings are balanced by those who seek
further discussion, research and generation of new impact assessments
to reflect the new text or those calling for with withdrawal of
the package.
"As
a result of this debate, the Presidency has indicated that they
will deprioritise this package and favour progress on the Network
and Information Security (NIS) package. This places a large risk
on the UK's priority objective of introducing a RLAH mobile solution
by 2016.
"Thus,
it is clear is that the Presidency text still requires some further
development before it will reach a point of universal support
across Council and more widely across the European institutions
and that this may involve further shaping, and possibly, further
simplification of its content. It is also clear that further reinvigoration
of the package is required and officials are currently taking
action to support the Presidency to do so. One possible action
could see this package the subject of Conclusions agreed at the
upcoming October European Council.
"In
the interim, I plan on giving further consideration to what elements
of the package where the UK can offer a compromise in order to
successfully secure action on mobile roaming. One possible scenario
would be for the UK to heavily influence any regulation on net
neutrality using its own Internet Code of Conduct to draw up a
principles-based regulation (either as a directive or recommendation)
that would provide Member States with sufficient bandwidth to
take into account their national markets, as well as provide clarity
on existing powers for national regulatory authorities. However,
such a compromise could only be made should our headline objective
of action on mobile roaming be achieved; I would require clearance
from Cabinet colleagues before doing so.
"Therefore,
I do not intend to seek the lifting of the existing scrutiny reserve
until it becomes clear that the text has sufficiently evolved
and UK's concerns and aims addressed so that an agreement can
be reached across the European institutions. As such, the next
four weeks will see if the package can be progressed in any meaningful
way and thus I suggest that I write again towards the end of October
once its fate has become apparent".
Previous Committee Reports
Ninth Report HC 219-ix (2014-15), chapter 9 (3 September
2014), Eighth Report HC 219-viii (2014-15), chapter 5 (16 July
2014), First Report HC 219-i (2014-15), chapter 5 (4 June 2014),
Thirty-fourth Report HC 83-xxxi (2013-14), chapter 2 (9 February
2014), Twenty-eighth Report HC 83-xxv (2013-14), chapter 4 (18
December 2013) and Eighteenth Report HC 83-xvii (2013-14), chapter
2 (16 October 2013).
58 See Eighteenth Report HC 83-xvii (2013-14), chapter 2
(16 October 2013). Back
59
See Eighth Report HC 219-viii (2014-15), chapter 5 (16 July 2014). Back
60
Net neutrality is the principle that Internet service providers
and governments should treat all data on the Internet equally,
not discriminating or charging differentially by user, content,
site, platform, application, type of attached equipment, and modes
of communication. Proponents often see net neutrality as an important
component of an open internet, where policies such as equal treatment
of data and open web standards allow those on the internet to
easily communicate and conduct business without interference from
a third party. Back
61
See Ninth Report HC 219-ix (2014-15), chapter 9 (3 September 2014). Back
62
See First Report HC 219-i (2014-15), chapter 5 (4 June 2014). Back
63
For full details of the Minister's letter, see First Report HC
219-i (2014-15), chapter 5 (4 June 2014). Back
64
The high-level advisory group assisting the Commission in developing
radio spectrum policy for the EU, which has hitherto played a
pivotal role in driving harmonisation of the technical aspects
of spectrum management in EU. Back
65
See Eighth Report HC 219-viii (2014-15), chapter 5 (16 July 2014)
for full details. Back
66
The Body of European Regulators for Electronic Communications
(BEREC) was established by Regulation (EC) No 1211/2009 of the
European Parliament and of the Council of 25 November 2009, as
part of the Telecom Reform package. It replaced the European Regulators
Group for electronic communications networks and services which
was established as an advisory group to the Commission in 2002.
See http://berec.europa.eu/ for full information. Back
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