Expected Court Decision Could Back EC on Next-Generation Access Rules
Europe’s highest court may be poised to reject so-called “regulatory holidays” for telecom providers building new high-speed broadband fiber networks. In a Thursday opinion in a case pitting the European Commission against Germany, European Court of Justice Advocate General Poiares Maduro said provisions exempting “new markets” from regulation and giving special regulatory treatment to promoting investment in infrastructure and innovation violate Community legislation. If upheld by the court, the opinion could strengthen the EC’s hand as it prepares a recommendation on access to next-generation networks and boost the independence of European regulators, officials said.
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The ECJ follows advisory opinions in about 80 percent of cases, said European Competitive Telecommunications Association Chairman Innocenzo Genna. The fact that this isn’t a difficult legal issue makes it likely the court will do so in this matter, he said. The EC will publish a draft recommendation on next-generation access for public input in mid-May, a spokesman said.
Germany’s regulatory holidays restrict the application of rules to new markets, Maduro wrote. The alleged infringements of EU electronic communications rules raise two issues, he said: Whether Germany can exempt new markets from regulation and whether it can limit the discretion of its national authority by giving priority to a particular regulatory objective.
The EC believes exempting new markets from regulation is meant to favor Deutsche Telekom (DT) investment in a broadband network by removing the threat of regulatory action, the opinion said. Normally, Germany would be allowed to make rules in this area for itself, but not when there is already an EU regulation, it said.
Germany’s position regarding the need for regulatory breaks may be correct, but it’s not up to lawmakers to decide, the opinion said. National regulators have certain powers under EU law, one of which is to balance regulatory objectives, it said. Germany can’t limit the discretion of its national authority to intervene in new markets by subjecting it to pre-conditions, it said.
The opinion “concerns the main political issue” in the current debate over reform of EU telecommunications rules -- regulatory treatment of fiber networks, said Genna. There’s “incredible pressure” from Germany and Spain on behalf of incumbents DT and Telefonica to deregulate the sector on the assumption that regulation would harm investment, he told us. The regulatory holiday concept has been temporarily replaced with other notions such as risk-sharing, cooperative agreements and the like, but they all lead to the same end, Genna said.
The opinion says any deregulation of fiber networks can only happen after national authorities carry out the analyses required by EU law to gauge whether a market is effectively competitive, he said. A court decision confirming the opinion will likely come too late for the telecom reform debate but not for the EC’s upcoming statement on regulatory consistency in high-capacity next-generation access networks, Genna said. The EC could face pressure from several countries to enshrine regulatory holidays for fiber infrastructure into the recommendation, he said.
A favorable ECJ ruling will strengthen the independence of national regulators, an issue for many EU states, said German telecommunications lawyer Axel Spies. National authorities have been established and given particular powers in the expectation that they will be insulated from certain interests and reach decisions based only on the regulations, he said.
The European Telecommunications Network Operators’ Association doesn’t comment on infringement cases, a spokesman said. Responding Tuesday to a vote in the European Parliament Industry Committee on the telecom reform package, ETNO Director Michael Bartholomew applauded lawmakers’ decision to include language on investment risk-sharing and other incentives for long-term funding of high-speed networks. The new rules “should now be fully implemented and further strengthened” in the forthcoming next-generation access recommendation, he said.