EC Calls For Telecom Advisory Agency, Veto Power

Under the plan, ETMA will be an independent body charged with advising the EC on issues related to market analyses, competition requirements, and the provision of EU-wide services, the EC said. It will also help national regulators become more independent from their national governments, and take charge of network and information security, the EC said. ETMA is expected to employ around 130 people and to be headquartered wherever the 27 EU countries decide. ENISA is situated in Heraklion, Crete, a location found to be problematic in a recent review of the agency’s operations.

National regulatory authorities currently cooperate through the European Regulators Group (ERG). But the EC said the ERG has “failed, in spite of many efforts and good intentions,” to find concrete, cross-border regulatory solutions and has been panned by industry for a “lowest common denominator” approach. It took intervention by the EC itself to force down international mobile roaming charges, the EC said. ETMA won’t centralize telecommunications regulation in the EC, but will be based on the expertise of national authorities, it said.

The reform package also gives the EC veto power over measures proposed by national regulators to resolve competition problems in particular markets. The EC said it needs that power -- it currently can reject only market definitions or assessments of market dominance -- for situations where national regulators fail to deal with competition concerns.

The ERG opposes “new layers of unnecessary centralism” as well as an EC veto on remedies, it said Tuesday. Proposals to make national regulators more independent and give them stronger enforcement powers are fine, but the ETMA set-up doesn’t mesh with growing cooperation among regulators toward the federal and non-bureaucratic model ERG envisions, it said.

ETMA could be valuable in giving national regulators a stronger say in setting pan-EU best practices, said Ilsa Godlovitch, regulatory affairs director for the European Competitive Telecommunications Association (ECTA). No one welcomes more oversight from whatever body the EC creates, but the question is whether ETMA will be good for European businesses and consumers as a whole, she told us. However, ETMA will only be effective if it’s independent and not associated with the sensitive, highly political area of network security, she said.

The German Competitive Carriers Association (VATM) opposes ETMA, which creates a new lawyer of bureaucracy and undermines the goal of letting member countries themselves provide efficient regulation, attorney Axel Spies said. Boosting the EC’s veto rights would be a better strategy, he said on behalf of VATM. The European Telecommunications Network Operators’ Association (ETNO) didn’t address the new agency directly, but said most of the reform measures focus on increased regulatory intervention that fails to reflect Europe’s rapidly growing competition.

It’s unclear whether any benefits of the proposal are significantly outweighed by concerns over more regulation, a “perverse outcome” given the competitive intensity of most markets, said GSM Europe Chairman Kaisu Karvala. Moreover, ETMA’s power, which is limited to issuing non-binding opinions to the EC, “may add complexity but not accountability,” she said.

Cable Europe cited a disconnect between EC attempts to deregulate sizeable areas of the market while building a large new regulatory body. Continued use of the ERG and national authorities is more efficient than creating a new structure, the group said.

Functional Separation, Next Generation Access

A key battleground between incumbents and alternative providers has been the need for a rule allowing national regulators to impose functional separation on dominant players in cases of intransigent competition problems. The reform package includes the remedy as a new regulatory tool, but requires that any order for a provider to split its service and infrastructure units obtain EC approval and consider the effect on investment by the incumbent as well as by new market entrants.

ETNO, which has consistently spurned the idea of functional separation, noted that the package included a series of conditions on its use. Nevertheless, ETNO said, it’s still concerned that the availability of such a far- reaching and irreversible remedy could hurt investment in next-generation access networks and long-term competition. But ECTA said functional separation could be just what some regulators need to spur broadband competition for existing copper and higher speed access networks of the future.

Functional separation isn’t relevant to mobile networks because they lack the same bottleneck characteristics as fixed networks, GSM Europe’s Karvala said. However, the proposal could set a precedent for “extreme regulatory intervention” in the structure of communications businesses that raises the overall level of perceived risk, she said.

The EC also took a “pretty big step” in extending the definition of local loop access to fiber networks to prevent incumbents from reinstating their monopolies, Godlovitch said. The move gives regulators a very clear signal that they should look at all kinds of access when determining market competitiveness, she said. But ETNO criticized the systematic extension of current rules to new infrastructure, saying it fails to consider the technical specificities and high risks associated with investment in new networks.

Spectrum Reform

The regulatory package encourages countries to harmonize use of common frequency bands for similar applications. Spectrum freed up by digital switchover should be used for new services in all telecommunications areas, including broadcasting, the EC said. It dismissed concerns that broadcasters will lose out under spectrum reform, saying all users will benefit from more efficient use of a scarce resource.

Reform means consumers will have more TV channels to choose from and wireless services available everywhere in the EU, the EC said. However, Information Society and Media Commissioner Viviane Reding sent a “political signal": “If the choice is between the 300th TV channel and a new wireless broadband service, I want member states to decide in the interest of the citizen.”

The EC won’t auction and sell radio spectrum used by broadcasters for analog broadcasting, it said. EU-level rules for secondary spectrum trading will be established but they won’t require those who have acquired spectrum rights to sell them once they no longer need them, the EC said.

ECTA supports the release of unused spectrum for services such as wireless broadband, as well as the introduction of technological neutrality in spectrum allocation and trading, it said. But spectrum must be managed carefully for some real-time applications such as TV or voice telephony that need high quality to avoid having customer services degraded by interference, it said.

Market Deregulation

The package deregulates 11 of 18 markets previously subject to pre-emptive competition rules. Most are retail markets where there is effective competition, the EC said.

VATM accused the EC of “changing its course by 180 degrees.” Only weeks ago, the EC found no sustainable competition in the markets where it now wants to lift regulation, Spies said. The plan will endanger competition and lead to job losses, he added. ECTA also voiced disappointment with the move, citing evidence of potentially serious problems in many mobile markets as well in the provision of high speed broadband to remote areas.

GSM Europe welcomed the removal of the wholesale mobile access and call origination market from the list of regulated markets. Competition law, not pre-emptive regulation, should be viewed as the best way to deal with all but exceptional and enduring economic bottlenecks, it said. ETNO called the reform a positive step but criticized the EC proposal for extending wholesale regulation to new networks. Cable Europe said the decision to lift regulation on the wholesale broadcasting transmission services market highlights the booming competition among new and existing TV distribution platforms.

The package also contains consumer-oriented proposals. The European Consumers’ Organization welcomed its call for greater openness in telecommunications offers, guaranteed number portability within one working day, and more power for national regulators, including ETMA. The consumer group also applauded the requirement that ISPs notify consumers of data security breaches. However, it griped about the EC’s failure to include SMS in the regulations, and its decision to deregulate some markets.

The plan must pass muster with telecommunications ministers and the European Parliament. If it’s approved, all 27 member countries will have to adopt the regulations into national law, which is expected to happen by 2010, the EC said. The recommendation on market deregulation is applicable immediately, it said.