1 EU Regulatory Framework
for Electronic Communications and Network Services
| (a)
(29172)
15371/07
COM(07) 696
(b)
(29173)
15379/07
COM(07) 697
(c)
(29174)
15387/07
COM(07) 698
(d)
(29176)
15416/07
SEC(07) 1472
(e)
(29177)
15422/07
SEC(07) 1473
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Commission Communication: Report on the outcome of the Review of the EU regulatory framework for electronic communications networks and services in accordance with Directive 2002/21/EC and Summary of the 2007 Reform Proposals
Draft Directive amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of electronic communications networks and services, and 2002/20/EC on the authorisation of electronic communications networks and Services
Draft Directive amending Directive 2002/22/EC on universal service and users' rights relating to electronic communications networks, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on consumer protection cooperation
Commission Staff Working Documents:
Impact Assessment
Summary of the Impact Assessment
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| Legal base | (a) (d) and (e): —; (b) and (c): Article 95 EC; QMV; co-decision
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| Documents originated | 13 November 2007
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| Deposited in Parliament | 22 November 2007
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| Department | Business, Enterprise and Regulatory Reform
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| Basis of consideration | EM of 10 December 2007
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| Previous Committee Report | None; but see (27665)11190/06 + ADD 1-3: HC 34-xxxvii (2005-06), chapter 45 (11 October 2006)
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| Discussed in Council | 29-30 November 2007 Telecoms Council
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| Committee's assessment | Politically and legally important
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| Committee's decision | Document (a) recommended for debate in the European Standing Committee; documents (b) and (c) retained under scrutiny, pending receipt of further information; documents (d) and (e) cleared, and relevant to the debate
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Background
1.1 The regulatory framework for electronic communications networks
and services was agreed in 2002 (and implemented in 2003) to bring
about effective competition in the provision of electronic communications
and services across all Member States. It was also designed to
harmonise approaches to regulating communications providers with
significant market power, and to opening up markets to increased
competition. Separation of Government from day-to-day regulation
and a move away from state ownership of incumbent operators were
among the key objectives. Under the Framework Directive, the effectiveness
of the new regulatory framework was to be reviewed by the end
of 2006.
1.2 The framework comprises five European Directives:
— Directive
2002/21/EC of 7 March 2002 on a common regulatory framework for
electronic communications networks and services (the Framework
Directive);
— Directive 2002/20/EC of 7 March 2002
on the authorisation of electronic communications networks and
services (the Authorisation Directive);
— Directive 2002/19/EC of 7 March 2002
on access to, and interconnection of, electronic communications
networks and associated facilities (the Access and Interconnection
Directive);
— Directive 2002/22/EC of 7 March 2002
on universal service and users' rights relating to electronic
communications networks and services (the Universal Service
Directive); and
— Directive 2002/58/EC of 12 July 2002
concerning the processing of personal data and the protection
of privacy in the electronic communications sector (the Privacy
& Electronic Communications Directive);
and a Recommendation on relevant markets.
1.3 The Communication and two proposed amending Directives
are part of a package of proposals published by the Commission
on 13 November 2007. The publication of the two amending Directives
coincides with the publication of the Commission's proposals for
a Regulation establishing a new EU Authority under this framework
(the Regulation) and a revised Recommendation on relevant markets,
both of which are dealt with elsewhere in this Report.[1]
The Commission has also published an Impact Assessment and Summary
thereof.
1.4 The proposals are helpfully summarised in his
10 December 2007 Explanatory Memorandum by the Minister of State
for Competitiveness at the Department for Business, Enterprise
and Regulatory Reform (Stephen Timms):
SUMMARY OF THE PROPOSALS
- "Ensuring competition
works for consumers by improving the information available to
customers about the service level they are receiving (e.g. real
broadband speed) and transparent prices. Improvements to number
portability delays (reduced to one day) to remove unnecessary
barriers to moving to an alternative operator who offers the customer
a better deal.
- "e-accessibility proposals to improve access
to services and equipment for disabled users, including '112'
(EU emergency services number).
- "EU Authority … comprising: two boards,
one regulatory (the heads of national regulators) and one administrative
(6 members appointed by the Commission and 6 appointed by the
Council); an executive Director; an appeals board for numbering
decisions; and a Chief Network Security Officer.
- "The Authority as currently
drafted would be a Community body, replacing the independent European
Regulators' Group, and would incorporate the existing EU Agency,
ENISA, focussing on network security. It would also have a role
in relation to pan-EU spectrum allocations and telephone numbering
for pan-EU services.
- "Commission power to veto
and impose remedies. On the advice of the Authority, the Commission
would use its veto to stop national regulatory authorities (NRAs)
from imposing remedies that the Commission considers to be incompatible
with the single market or Community law. Where the Commission
is not content with a regulator's response to a veto, the Commission
could go on to impose more appropriate remedies. In addition,
the Commission would be able to impose remedies where a regulator
is late in carrying out a market review or in the case of trans-national
markets.
- "Functional separation to be an option for
NRAs, where it is found to be the most appropriate form of regulation
to manage enduring monopoly network access problems. Functional
separation is where the management of the local access network
of an incumbent operator is put into an independent company within
the parent group, as happened in the UK with the creation of Openreach
within BT Group. This ensures equivalent access to the incumbent's
monopoly network for all retail telecoms and internet providers,
avoiding any real or perceived advantage to the incumbent's retail
arm (e.g. BT Retail in the UK). If combined with the strengthened
veto/imposition powers, the Commission would be able to force
Member States to impose this remedy.
- "e-Privacy proposals aimed at giving consumers
greater confidence to use on-line services through mandatory notifications
to customers when their network or service provider loses their
personal data ("breach notification"). There are also
proposals designed to improve enforcement mechanisms.
- "Network security strengthened to include
mandatory requirements on operators and an obligation on national
regulators to conduct and report on security audits. The Commission
believes that the only way to ensure that networks are secure
and services are not interrupted or lost, is to impose minimum
security standards on network operators and for national regulators
to proactively enforce secure network design and operation. The
Commission's proposals to incorporate ENISA into the new Authority
have been presented as underlining the Commission's commitment
to network security.
- "Spectrum proposals to further liberalise
spectrum authorisations (licences) and allocations and enable
secondary trading and, where technically feasible, change of use,
are presented as the most efficient and effective way of managing
spectrum in a future characterised by fast-changing innovative
services. In addition, there are proposals for the Authority and
Commission to be given the role of allocating spectrum and telephone
numbers in the case of pan-EU services."
1.5 The Minister explains that, as well as his primary
responsibility for the policies covered by the proposals, the
following Departments also have an interest in the proposals:
— Culture,
Media and Sport (broadcasting aspects of the Directives, including
e-accessibility aspects of digital TV);
— Justice (data protection aspects of the
e-Privacy Directive);
— HM Treasury (spectrum authorisations
and EU liberalisation);
— Cabinet Office (coordination of the Government's
EU liberalisation strategy and network security/resilience);
— Home Office (network security/resilience);
and
— Work & Pensions (e-accessibility
aspects of the Directives).
1.6 With regard to the interest of the Devolved
Administrations, the Minister says that, while EU negotiations
and electronic communications regulation are reserved matters,
the Devolved Administrations have an interest in how competition
and the single market impacts on electronic communications infrastructure
development, local investment and the availability of services
(especially broadband) in their regions, and that he will "consult
the Devolved Administrations throughout the process".
Legal and Procedural Issues
1.7 The Minister says that the legal basis of the
proposed legislation is Article 95 of the EC Treaty;[2]
that the co-decision procedure under Article 251 of the EC Treaty
is to apply; and that the voting procedure is qualified majority
voting.
1.8 The Minister then examines the main existing
provisions of UK law which may be affected by these proposals,
namely:
- Office of Communications Act
2002;
- Communications Act 2003;
- Wireless Telegraphy Act 2006;
- Advanced Television Services Regulations 2003
(S.I. 2003/1901); and
- Privacy and Electronic Communications (EC Directive)
Regulations 2003 (S.I. 2003/2426).
1.9 The Minister says that it is these legislative
provisions which largely implement the five existing Directives
amended by these new proposals, attaches Transposition Tables
giving full details[3]
and then looks in more detail at each of the existing Directives
in turn:
"The Framework Directive was implemented principally
by provisions of the Communications Act 2003. Some of the relevant
provisions of that Act are now contained in the Wireless Telegraphy
Act 2006, which consolidated the wireless telegraphy provisions
of a number of Acts going back to 1949 and including the 2003
Act. In addition, some of the Framework Directive's provisions
on national regulatory authorities (Article 3) were implemented
in the Ofcom Act 2002 and Part 9 of the Enterprise Act 2002; some
of the Directive's provisions on rights of way (Article 11) and
on co-location and facility sharing (Article 12) were implemented
in Schedule 2 to the Telecommunications Act 1984; and some of
the Directive's provisions on market analysis procedure (Article
16) were implemented in the Electronic Communications (Market
Analysis) Regulations (S.I. 2003/330).
"The Access and Interconnection Directive was
wholly implemented by provisions of the Communications Act 2003,
except for Articles 2(d) and 4(2) which were implemented in the
Advanced Television Services Regulations 2003 (S.I. 2003/1901).
"The Authorisation Directive was principally
implemented by provisions in the Wireless Telegraphy Act 1949
and the Communications Act 2003. The whole of the 1949 Act is
now contained in the Wireless Telegraphy Act 2006. In addition,
some of the provisions of the Annex to the Directive were implemented
in or under Schedule 2 to the Telecommunications Act 1984, the
Wireless Telegraphy Act 1998 and the Regulation of Investigatory
Powers Act 2000.
"The Universal Services Directive was wholly
implemented by provisions of the Communications Act 2003, except
for part of Article 8 implemented in the Electronic Communications
(Universal Service) Regulations 2003 (S.I.2003/33) and Article
24 and Annex VI which were implemented in the Advanced Television
Services Regulations 2003 (S.I. 2003/1901).
"The Privacy and Electronic Communications Directive
was wholly implemented by The Privacy and Electronic Communications
(EC Directive) Regulations 2003 (S.I.2003/2426), except for Article
5(1) and (2) whose requirements were respectively already met
by the Regulation of Investigatory Powers Act 2000 and by the
Telecommunications (Lawful Business Practice) (Interception of
Communications) Regulations 2000 (S.I.2000/2699). Regulation 26
of the 2003 Regulations has been amended by S.I. 2004/1039."
1.10 He concludes that "at this early stage,
it is only possible to say that we are likely to need to amend
at least some of the Acts and Statutory Instruments identified
above to reflect some of the proposed changes to the five Directives
which would be amended by these proposals", and says that
he will provide more detailed information about this in subsequent
Explanatory Memorandums submitted on these proposals.
1.11 The Minister then examines Compliance with
Fundamental Rights, saying that he will be "undertaking
an analysis of the compliance of these proposals with fundamental
rights (as described by Article 6(2) of the Treaty on European
Union)", and will again give further information about this
in subsequent Explanatory Memorandums submitted on these proposals.
He continues as follows:
"At this initial stage it appears that the right
to property (together with the freedom to contract and to conduct
a business) and the rights to a fair hearing and an effective
remedy will be most relevant.
"In particular, as already noted above, under
these proposals the Commission would be able to require national
regulators to impose particular obligations (remedies) on undertakings
in certain situations (see Articles 7 and 16 of the Framework
Directive). In addition, the Commission would be able [to] take
decisions requiring national regulators to allocate or withdraw
rights of use for spectrum and telephone numbers in the case of
cross-Community services (see Article 6b of the Authorisation
Directive and Articles 12 and 13 of the Regulation). We will need
to review these proposals to ensure that they safeguard the rights
to a fair hearing and an effective remedy of those affected by
the Commission's actions. In the instances where the Commission
has proposed the strengthening of enforcement mechanisms or powers
(see for example, Article 10 of the Authorisation Directive and
Article 15a of the Privacy and Electronic Communications Directive)
we will also need to check compliance with these rights.
"With regard to the right to property (together
with the freedom to contract and to conduct a business), at this
initial stage it seems to us that the following proposals in particular
may affect these rights.
- The proposals in relation to spectrum management
(in particular, in Articles 9, 9a, 9b and 9c of the Framework
Directive and Articles 5 to 7 of the Authorisation Directive).
- The proposed new remedy of functional separation
and the associated provision on voluntary separation by a vertically
integrated undertaking (Articles 13a and 13b of the Access and
Interconnection Directive).
- The proposed power to require the sharing of
facilities or property (Article 12 of the Framework Directive
and Article 12(1)(f) of the Access and Interconnection Directive).
- The proposed requirement on an operator who has
been designated as a provider of universal service to inform the
national regulator of its intention to dispose of its local network
assets (Article 8(3) of the Universal Service Directive).
- Other proposed changes to the Universal Service
Directive including provisions on tariffs/charges (Articles 9,
26 and 27); the use of information on tariffs by third parties
and regulators (Article 21); and contracts (Article 20).
"Lastly the proposals, in particular the proposed
amendments to the Privacy and Electronic Communications Directive,
appear to support the right to privacy and the right to data protection."
1.12 Finally, he says that "consistency with
the principle of subsidiarity has yet to be examined."
The Government's view
1.13 The Minister begins by saying that the Commission's
proposals have been presented as the measures needed to achieve
"a single market for 500 million consumers" and that
it is "in this context that we will review the proposed changes
to the current regulatory regime." He then describes the
"Initial UK position" as follows:
PURSUIT OF THE SINGLE MARKET
"The regulatory framework has been a success
where it has been implemented effectively resulting in increased
competition, lower prices and wider choice of ever-increasing
innovative services. However, one of the biggest barriers remains
effective access regulation of monopoly, or "bottleneck",
parts of incumbent networks in many Member States.
"The top five European countries with the most
effective regulatory environment (in descending order: UK, Netherlands,
Denmark, Norway and France), as determined by the European Competitive
Telecommunications Association, (ECTA), also have the most effective
access regulation compared to other EU and European countries.[4]
"Our view is that fully independent NRAs in
all Member States are essential to enabling the EU to realise
the benefits from fully liberalised network industries. Regulatory
consistency and improving the co-ordination between independent
national regulatory authorities are also important.
CONSUMER BENEFITS
"We welcome the focus on ensuring consumers
and business users benefit from greater competition in electronic
communications markets across the EU (including fixed line telecommunication
and broadband). We believe that improving the price and service
level information available to consumer and business users is
essential for effective competition.
"The focus on e-accessibility and disabled users
is also important, and we agree that, wherever possible, we should
take this opportunity to close and not widen the digital divide.
"e-Privacy is an important issue for consumers
and business. We wish to work with the Commission to find the
best way to evolve the current rules, including looking to ensure
that the exemptions specified in the e-Privacy Directive are still
fit for purpose.
FUNCTIONAL SEPARATION AS A REMEDY
"Functional separation has been successful in
the UK and investment in infrastructure has increased thanks to
the resulting regulatory stability.
"We consider it is important for all NRAs to
have a range of powers to deliver economic and consumer benefits.
We believe this should include Functional Separation, if appropriate
for their market characteristics. We do not believe that the decision
whether or not to impose such a detailed and intrusive remedy
should be subject to Commission approval.
NETWORK SECURITY
"Network security is an important issue. In
reviewing the proposals we will want to assess how the Commission's
proposals compare with our understanding of the minimum regulatory
burden necessary to ensure security of supply in competitively
functioning markets (where we would expect network providers to
have every incentive [to] ensure their customers receive a good
level of service).
COMMISSION VETO AND IMPOSITION OF NATIONAL REMEDIES
"Based on our initial analysis we are not convinced
that the Commission should have a veto on remedies proposed by
NRA's and a power to impose remedies. We believe that national
regulators are best placed to design remedies most appropriate
to local conditions. We do not believe that a 'one size fits all'
approach is the right way forward.
"The Commission already has powers to address
the failure of NRAs to impose adequate remedies (or to act at
all) through infraction proceedings and through its competition
powers under Article 86 of the EU Treaty. Our more detailed analysis
of the effectiveness of the Commission's proposals will include
a review of the Commission's existing powers, to what extent they
can address the problems identified by the Commission and the
options for strengthening regulation in this area, if needed.
SPECTRUM
"We support spectrum liberalisation. We consider
service and technology neutrality are essential if EU consumers
and business are to maximise the benefit from this valuable resource.
We also consider spectrum trading is essential to enable the market
to react to new technologies and services.
"We are not convinced that there is enough supporting
evidence to justify the proposal for the Commission, working with
the Authority, to allocate spectrum in pan-European cases. The
existing co-ordination machinery is, in our view, adequate to
deal with any foreseeable pan EU services. See also our comments
on this in the EM on the Regulation.
UNIVERSAL SERVICE
"The Commission is planning a wider review of
the scope and purpose of universal service obligations in Spring
2008. We expect that the wider review will restart the debate
about if and when to include mobile and broadband access, and
how it should be funded. These proposals concentrate on updating
the text to ensure that it is better suited to future purposes.
"Some of the proposals under users' rights include
the possibility to mandate minimum quality of service levels and
reminding customers of their obligations under copyright law.
It is not clear at this early stage what the impact of these specific
proposals will be on business and whether they will improve customers'
experience of using electronic communications.
"The Commission is committed to improving access
to services for disabled users and we fully support this aim.
One proposal from the Commission is to bring terminal equipment
(e.g. a phone or text device) within the scope of the framework,
which to date has only covered services. This could in theory
help disabled users who might have access to services but can
not get hold of the equipment they need. However, the biggest
barrier to owning accessible equipment is often cost, which this
proposal does not address.
THE INCLUSION OF ENISA (EU INFORMATION SECURITY AGENCY)
"Whilst we welcome objectives to reduce costs
and regulatory burdens, we are surprised at this somewhat premature
conclusion that ENISA should not continue as a separate Agency,
given the views already expressed by the Commission, the ENISA
Management Board and other stakeholders. The future of ENISA is
currently under review by the Commission because its existing
remit does not extend beyond 2009. The ENISA review is looking
at, among other things, whether ENISA remit should be extended
beyond 2009 and whether its focus and scope need refocusing.
"We will need to establish what security functions
the proposed Authority need to perform, the extent to which this
requires skills in house, and whether combining the Agencies (as
suggested) delivers benefits or narrows the ability of the EU
to deal with security issues."
Future Timetable
1.14 Referring to the initial impact assessments
(documents (d) and (e)), the Minister says he is preparing a partial
impact assessment for a formal written consultation in January
2008, and also "analysing the Commission's impact assessment
and the options for best improving EU productivity and competitiveness
through changes to the competitive framework for electronic communications".
At present, while there could, he says, be financial implications
arising from the implementation of this Regulation as drafted,
or as amended through negotiation, "it is too early to determine
the scope or scale of the potential impact".
1.15 The Minister refers to the Telecoms Council
of Ministers on 29 November, at which he "broadly welcomed
the Direction of the Commission's proposals for improving the
liberalisation of this sector and expressed some of the concerns
outlined". Looking ahead, the Minister says that he "will
be consulting stakeholders throughout the process". He refers
to a stakeholder information meeting on Monday 19 November and
to the formal written consultation in January 2008, and will write
to us with the result of the consultation, including a summary
of the responses received, in May 2008.
1.16 He expects the negotiations to begin in earnest
in the New Year, under the Slovenian Presidency, and looks ahead
to the further Telecoms Council planned for June. Beyond that,
he says that the French Presidency for the latter half of 2008
"hopes to achieve political agreement at the autumn 2008
Telecoms Council but it is not clear at this stage how far the
negotiations will have progressed or how the package will be received
by the European Parliament".
1.17 He undertakes to write to the Committee regularly
to update us on the progress of negotiations "and the developing
UK position".
Conclusion
1.18 We are grateful to the Minister for this
full and helpful Explanatory Memorandum, from which it is clear
that we are just embarking upon a major scrutiny exercise.
1.19 It is also clear from the outset that, with
plentiful evidence that the present regulatory framework has been
very successful where it has been effectively implemented by NRAs,
it is at least arguable that the Commission should be concentrating
on recalcitrant or delinquent Member States, to ensure that it
is properly and effectively implemented elsewhere, rather than
seeking major new powers for itself via the proposed new European
Electronic Communications Market Authority (ECMA). This is the
subject of a separate proposed Regulation, which we examine in
chapter 6 of this Report on the basis of a separate Explanatory
Memorandum from the Minister, in which he sets out a number of
concerns about the proposed ECMA that seem to us to be eminently
well-founded.
1.20 We shall therefore retain the draft Regulations
(documents (b) and (c) under scrutiny, and look forward to the
first of the Minister's promised reports on the negotiations and
"developing UK position".
1.21 We also recommend that the scrutiny process
should begin with a debate in the European Standing Committee
on the Commission Communication (document (a)).
1.22 We clear the two Commission Staff Working
Documents (documents (d) and (e)), which we consider relevant
to the debate.
1 1 Chapters 2 and 6. Back
2
The central provision of which is that "The Council shall,
acting in accordance with the procedure referred to in Article
251 and after consulting the Economic and Social Committee, adopt
the measures for the approximation of the provisions laid down
by law, regulation or administrative action in Member States which
have as their object the establishment and functioning of the
internal market." Back
3
See Explanatory Memorandum of 10 December 2007. Back
4
The Minister attaches the executive summary of ECTA's 2007 regulatory
scorecard to amplify his comments. Back
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