MEPs to give telecoms regulators new muscle to police big firms

The European Commission has proposed a change to a controversial measure on investment rules in a draft EU telecoms bill. [Andrew Hart/Flickr]

MEPs in charge of a sweeping new telecoms reform want to give national watchdogs new powers to control operators in countries where there is not enough competition.

Regulators would be able to rein in big firms for a broader range of reasons, according to a draft compromise brokered between MEPs who are steering the legislation through the European Parliament. MEPs who have pushed for the rule hope it could boost competition in countries like Belgium and the Netherlands, which they call duopolies, meaning they are dominated by two firms.

“I hope that it can tackle the issues that several countries have. If I look at the Belgian market, it is outrageous what kind of service quality they have and the prices they have here. You have nowhere to go because you are stuck with these two firms,” said Estonian Reform Party MEP Kaja Kallas (ALDE), one of the Parliament’s lead authors on the reform.

The agreement can only go into effect after it is formally sealed between the lead MEPs and if it survives three-way negotiations with national governments and the European Commission later this year. The Commission’s original proposal, which was published last September, did not include any measure to regulate oligopolies.

Several sources involved in the Parliament discussions said MEPs from different political camps have settled their disagreements over the issue, putting to bed one of the more divisive fights in their discussions. Other details including investment rules are still holding up a final agreement between the lead MEPs, which is the last step before the bill can be voted on in the Parliament’s Industry Committee (ITRE) this autumn.

But the compromise deal on competition has set off alarm bells in Brussels. Big telecoms operators are up in arms over the measure, which they say would give regulators a new legal tool that could have unpredictable consequences. Smaller competing firms are hoping the agreement survives—they want regulators to be muscled up so they can wield stronger control over companies and force them to share their networks with competitors.

The draft deal would give telecoms watchdogs the power to regulate two or more firms that have a “joint dominant position” if the market in that country has a “high degree of concentration” or barriers keeping out competitors, according to the text seen by The proposal lists characteristics that could justify regulation.

A recent change shows the word “cumulative” crossed out to describe the list of criteria that should apply, meaning watchdogs could potentially intervene even if they see some but not all of the points mentioned to describe an oligopoly. That could open up more possibilities for regulators to intervene.

The question many telecoms observers in Brussels are asking is whether this will come with a totally new set of rules for the sector—or if watchdogs will follow what’s already laid down in competition law.

Member states want to change investment rules in telecoms overhaul

EU countries have changed measures on network investment in a major telecoms bill and are kicking negotiations into the second half of this year.

Disagreement over new powers

Some lawyers argue the change would give regulators too much free reign.

“It’s potentially a very powerful tool,” said Alexandre Verheyden, a partner at the law firm Jones Day.

Verheyden said there’s a risk that telecoms regulators could apply the rule too broadly and veer away from competition law.

It’s a battle that divides big and small operators.

“The message that NRAs [national regulators] would have too much power and be able to do whatever they want is exaggerated” because they’re scrutinised by other regulators and the Commission, said Lux Hindryckx, the executive director of ECTA, an association representing smaller alternative telecoms operators.

“If there’s an oligopoly with an outcome that’s not competitive, it’s important that regulators can intervene,” he added.

Larger firms warn that strict rules would chill investment in the telecoms business. Credit Suisse published a research note last month that said around one-third of investors it surveyed would be less encouraged to invest in new network infrastructure if there is fresh regulation on oligopolies.

The Parliament deal comes after a drawn-out back-and-forth between MEPs who wanted even stricter regulation and others who wanted to stick to the Commission’s looser competition proposals.

BEREC criticism

Sebastien Soriano, the chair of BEREC, the group of national telecoms regulators, told last month that he advised MEPs about possible changes they could make to tightened competition rules in the telecoms bill. He originally suggested a change that would have been more drastic, including a measure on so-called unilateral market power.

“It’s a concept from competition law that we have proposed to put into the ex-ante framework […] It’s exactly the same. It’s a serious position. It is effective. I am sure it will work,” Soriano said in an interview.

He rejected criticism from some MEPs that he overstepped his role as a regulator by advising the Parliament.

“We are a technical body, people have been asking us for technical input. We did this, we’re transparent,” Soriano said in the interview.

Now, German CDU MEP Werner Langen (EPP) took his criticism to the European Commission.

“It’s understandable that BEREC takes a concrete position on this dossier. But with this behaviour BEREC seems to be overstepping its boundaries by attempting to become another member of the decision-making process,” Langen wrote in a question to the Commission, according to a draft dated 10 July that was obtained by EURACTIV. The Commission will be required to respond to Langen’s question after it’s made public.

BEREC itself is at the centre of the EU telecoms reforms. On top of the broad telecoms rules, the executive proposed a separate bill last September to turn BEREC into a full-blown EU agency. But the regulators say that would chain them to Brussels and make them less independent.

Evzen Tosenovsky, the Czech ODS lawmaker (ECR) who is guiding the rules on BEREC through the Parliament, said his draft of the bill asks the group “to be even more engaged in its assisting and advisory role”, which might explain “BEREC’s ‘activistic’ approach toward the negotiations”.

“The question then is whether it has been done in the most adequate way,” he said.

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