Telecom ‘Co-Regulation’ Body Approved by EU Committees

MEPs approved a proposal to create a Body of European Regulators in Telecommunications (BERT), composed of all 27 national regulators. Under the new “co-regulation” procedure, national authorities must consult with the EC and BERT before setting competition conditions in telecom markets, the industry committee said. The EC can require national regulators to amend their draft measures if BERT deems them ineffective or inappropriate, the committee said.

The panel adopted an amendment to finance BERT one-third from Community funds and two-thirds from national regulators. The vote was extremely close, and Pilar del Castillo (European People’s Party/European Democrats, Spain), who authored the industry committee report on the EC proposal for a different authority, said she will try to broker a compromise before the September plenary vote.

Disagreement arose over the funding formula rather than its concept, del Castillo said at a press briefing. In concept BERT must be financed by mixed funding, not solely by the EC, so that the EC doesn’t play a greater role in telecommunications regulation than is consistent with the establishment of BERT, she said. The close vote didn’t undermine the concept, del Castillo said.

The industry committee approved language calling for spectrum coordination and harmonization at the EU level. MEPs want member countries to cooperate with the EC and with one another in strategic planning for spectrum use, and the panel asked the EC to submit a legislative proposal for setting a radio spectrum action program. They asked for a more integrated approach to allocating the digital dividend freed by digital switchover, the committee said.

MEPs want incentives for telecom companies to invest in new high-speed networks. The industry committee asked national regulators to push market investment and innovation in new infrastructure by, among other things, encouraging investment- and risk-sharing among investors and users of the new facilities.

The industry committee approved compromise language allowing national regulators, as an “exceptional measure,” to order functional separation, in which operators split their network and service units. The adopted provision permits this only if the EC and BERT confirm that other competition conditions have failed and there’s little prospect of future network-based competition, the committee said.

One fraught issue in telecom reform is the risk that consumer protection reform could affect net neutrality, mandate ISP filtering or a three-strikes approach to online copyright infringement, or bar use of Internet Protocol addresses for network security purposes.

But Malcolm Harbour (EPP/ED, U.K.) said Tuesday that while net neutrality isn’t a major issue in Europe yet, the adopted provisions clarify that national regulators can intervene if service providers restrict network use for commercial -- but not traffic regulatory -- purposes. Harbour, author of a report on consumer protection aspects of telecommunications reform, stressed that it lacks provisions for copyright enforcement or even its possibility.

Provisions that digital rights activists claim will open the door to the three-strikes approach to copyright enforcement and require ISP filtering are actually more innocent, Harbour told the BBC. They will allow creation of consumer price and service comparison Web sites, force regulators to give disabled users equivalent access and enhance emergency services with caller location, he said at the press briefing.

Industry Reaction Mixed

Many industry committee amendments favor major players at rivals’ expense, the European Competitive Telecommunications Association said. If adopted by the parliament and endorsed by the EC and Council, the advantages gained by dominant players could harm competition in high- speed broadband services, ECTA said.

Alternate providers want local loop unbundling rules to apply to fiber and copper networks, and ECTA is pleased that access to next-generation networks is reflected in the parliamentary proposals, it said. But “the devil is in the details,” said Chairman Innocenzo Genna. Unless price and access conditions are reasonable, the change won’t work and incumbents will regain their monopolies, he sad.

ECTA fears that lawmakers’ call for risk-sharing will cut the risk for major players while increasing competitors’ costs and risk with substantially lower revenue and profit, they said. Besides introducing the concept of “risk- sharing,” incumbents managed to water down the functional separation remedy strongly backed by alternative providers, ECTA said.

Parliament rejected some MEPs’ calls to junk functional separation, calling it the “result of trying to reach a compromise with hardliners.” The remedy is tougher to use than the original EC proposal, said ECTA Regulatory Affairs Director Ilsa Godlovitch. Proposed changes require three to five months’ automatic delay to revise an existing regime, and are limited to fixed networks in exceptional circumstances, she told us. ECTA has seen “no empirical evidence” that functional separation has any of the negative effects dominant companies assign to it, she said.

Incumbents were less than enthusiastic about some of the measures adopted. The European Telecommunications Network Operators’ Association welcomed MEPs’ approach to risk- and investment-sharing but said it’s contradicted by other amendments allowing regulation of markets that are already competitive. ETNO particularly opposes functional separation, saying it deters investment and is the wrong way to spur infrastructure-based competition. It criticized amendments mandating broad access obligations to new fiber networks, saying such access should be required only where network-based competition isn’t feasible and then only case by case.

The net neutrality provisions passed by the internal market committee improve on earlier versions but could hurt innovation, ETNO said. Next-generation networks providers should not be barred from offering different levels of quality and speed tailored to customers’ needs, it said, as long as consumers know about the difference.

Providers worry about including content-related provisions outside the regulatory framework’s scope, ETNO said. Its members want to fight piracy but can’t be asked to act against users or judge the validity of rights owners’ complaints outside of a court order, it said.

The plenary vote on the e-communications reform package is expected in September.