Industry and Commission in for clash over telecommunication review[fr][de] 

The 8 - 9 June 2006 Telecommunication Council defined  the "Future challenges for the electronic communications regulatory framework" as follows:

• the guiding principles of the 2002 regulatory framework for electronic communications should be maintained;
• new revised rules should focus on specific areas that need improvement, be drafted so as to be safe from the requirement for future amendment and aim at enhancing competition, fostering new investments and innovation, while strengthening consumers' interests;
• flexibility of spectrum allocation and the efficient use of spectrum should be further improved, thus ensuring optimum use between competing needs; spectrum regulation should take account of national/local characteristics and facilitate the take-up of innovative and demand-driven services; harmonisation at EU and international level must be further discussed;
• notification and dispute-solving procedures could be simplified, making them more efficient and streamlined as well as less resource-intensive;
• swift implementation of the regulatory framework is a prerequisite for its effectiveness.   

Commission officials say the outcome of the public consultation  held in December 2005 and January 2006 was "that the existing framework is sound and that we should go for an evolution rather than a revolution of it". In a consultation starting on 29 June 2006, the Commission proposes the following main measures: 

• Recommendation on relevant markets: The current list of markets to which the Commission thinks ex ante regulation should apply consists of 18 subsectors of the telecommunication market. The Commission proposes to reduce the list to ten to twelve markets by deleting a number of retail markets from the list. It argues that, since the wholesale level is regulated already, NRAs would have to regulate certain sectors twice. 

The Commission also says that there is sufficient evidence that market powers will take over the role of regulation in those markets. While they are taken out of ex ante regulation, those sectors will of course remain subject to competition law. 

In the consultation starting on 29 June 2006, the Commission seeks the public's views on whether two market should remain in the list, namely 'Access and call origination on public mobile telephone networks' and 'Broadcasting transmission services, to deliver broadcast content to end users'. 

• Spectrum management: This refers to the attribution of certain parts of the radio spectrum to certain kinds of services such as Radio and television broadcasting, mobile telephony, fixed wireless phones and wireless computer networks. While the use of certain parts of the spectrum - e.g the FM spectrum used for radio broadcasting - is subject to a license, other parts - like the 2.4 GHz spectrum used for wireless computer networks - are license-free. 

The Commission wants to implement a more market-based approach to spectrum management by opening more parts of the spectrum to spectrum trading. It says that this would give more choice of technologies and services to users. The current license-based approach would then only apply to "agreed public purposes". 

• Regulatory procedures: Presently, courts of law tend to suspend NRA's decision while a case is ongoing, leaving the case in limbo over years. In order to create more certainty, the Commission would like to limit suspension to cases where 'irreparable harm' to the appellant can be shown. At the same time, it wants to give NRAs more powers to address breaches of licences and authorisations by imposing fines and penalties. 

ETNO, the voice of the incumbent telecom operators in the EU, fiercely criticised the Commission's proposals. ETNO Director Michael Bartholomew went as far as calling Information Society Commissioner Reding "a populist who does not get to the bottom of issues". In particular, ETNO accuses the Commission of not going far enough in deregulating the sector and misinterpreting the presumably positive effect of regulation on investment and growth of the sector. 

The background is the expected spread of fibre-optic cables, which will in most cases be financed by the incumbents. Under the current as well as under the Commission's proposed revised framework,  those would then have to grant access to the new market entrants. One such case currently under discussion is the 'regulatory holiday' Germany plans to grant to its incumbent operator, Deutsche Telekom, for fiber-optic deployment, a plan which the Commission has already said will lead to an infringement procedure. 

Bartholomew accused the Commission of basing its policy on unsound evidence, namely the broadband and regulatory score cards published quarterly by ECTA, which presents ETNO's competitors, the new market entrants. "We see the new entrants not investing but sucking on our investment instead", Bartholomew said.  

ECTA replied by saing that the "proof of success" of the revised framework "will be in reducing incumbent dominance". The association bringing together the new market entrants favours an approach known in the energy and railway sectors and recently applied in the British telecom sector, called 'functional separation'. This would mean to require states to separate network functions from other services - which effectively would result in asset stripping the incumbents. ECTA says it should, "if effectively implemented, result in an environment that encourages competition". 

Consequently, ECTA welcomed "Mrs Reding’s clear position against any 'regulatory holiday', which is a concept invented by incumbent operators to free themselves of any regulation as soon as they upgrade their networks, for example with the move to optic fibre". ECTA Managing Director Steen Clausen said: "Competitive problems in the telecoms sector remain deep-seated across Europe, with patchy implementation of market opening measures and persistent anti-competitive behaviour by incumbents. Regulators have been playing catch-up, with varying degrees of success. A more permanent solution, which addresses the incentives for behaviour at their heart, would pave the way for greater competitiveness in Europe. This would result in lower prices and more dynamic markets."

Information Society Commissioner Viviane Reding backed these ideas: "I believe that the policy option of structural separation could answer many competition problems that Europe’s telecom markets are still facing today. Perhaps we have to be as radical as regulators were in the US in the 1980s to make real progress? Of course, we will have to find our own European solutions, adapted to the needs of our continent. But 'a European way of structural separation' is certainly a policy option that needs to be discussed intensively in the forthcoming months. This option is therefore also raised in the economic Impact Assessment attached to the Communication the Commission will adopt this week." 

The Commissioner also opposed the idea of 'regulatory holidays' to reward investment in fibre-optic infrastructure: "It is my firm belief that “regulatory holidays” are not a policy option for the Review 2006, where we want to pave the way for completing the successful process of market liberalisation. We cannot go into the future in reverse gear."