No regulatory holiday in sight for EU telecoms sector

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EU telecom markets are constantly at risk of re-fragmentation, a report has concluded three months prior to the European Commission’s planned presentation of a draft revised Regulatory Framework that will decide which markets can be let off the hook. 

A Commission report published on 12 July 2007 found that, in most of the relevant markets and throughout the EU, there is no effective competition that would allow regulation of the market to cease. 

Even in the telephony retail sector, only around a fifth of member states’ markets have been found fit to be released from Commission supervision. A review, expected in October, will determine whether ex-ante regulation is still needed. 

The only market in which there is effective competition in all member states that regulate it and no further ex-ante regulation is required is the wholesale national market for international roaming on public mobile networks (market 17). That market has been regulated in only 14 of 27 member states. 

For access and call origination on public mobile telephone networks (market 15), problems remain in only four new member states and in Ireland, which is generally running late on transposing the EU regulatory framework. 

The countries doing best are the Nordics, the Netherlands and Austria, all of which have established at least partially effective competition on around a third of the relevant markets. 

Information Society Commissioner Viviane Reding said: "By overseeing the day-to-day implementation of the EU telecom rules, the Commission has been able to create more legal certainty for companies wishing to invest EU-wide. Although this has improved competition throughout the EU and benefited consumers by lower prices and more choice, we must now remove the remaining inconsistencies to level the playing field in Europe and to promote the development of pan-European operators and services."

Thierry Dieu, spokesman for ETNO,  which brings together incumbent telecoms operators, said that the Commission's report contained one important message: "Due to technological change, there is more and more competition in retail markets." Dieu said that all retail markets, and in particular retail telephony markets (markets three to six) could be taken off the list of relevant markets when the regulatory framework is reveiwed later this year. 

Ilsa Godlovitch, head of regulatory affairs with ECTA, the association of new market-entrant telecommunication operators, said that she had also heard hints from the Commission that markets three to six might be taken off the list and that she was concerned about possible effects of ending ex-ante regulation in those markets. Godlovitch pointed out that there is only one member state - namely Sweden - that had managed to end ex-ante regulation on all of those markets, adding: "If regulation of those markets is ended, we are concerned that incumbents would be in a strong position to abuse their market dominance." 

As telecommunication markets in many member states are still dominated by formerly state-owned (so-called incumbent) telecom operators and, due to the market's key role for other sectors' competitiveness, deregulation in EU countries is subject to a special procedure, in which the Commission assesses decisions made by National Regulatory Authorities (NRAs). 

Under this so-called Article 7 procedure, NRAs have to report back to the Commission in a structured manner concerning 18 relevant telecommuniction markets in their countries. Under the framework, ex-ante regulation can be stopped and normal competition rules apply once effective competition has been achieved. Every year, the Commission drafts a report listing NRAs' achievements to be sent back to Brussels. 

In 2007, this report is receiving particular attention because as it is being published, the Commission is in the process of finalising its draft for the Regulatory Framework on electronic communications, which is the basis of the report. In particular, Information Society Commissioner Viviane Reding has hinted repeatedly that retail markets for telephony (markets three to six) may be taken off the list. This issue is disputed between new market-entrant telecom operators and incumbents (see Positions). 

Autumn 2007: Commission Communication on consultation on Regulatory Framework. 

Oct. 2007: Commission to present draft revised telecommunications framework. 

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