Competition: the missing element of the European Parliament’s draft report on the proposed EECC
Brussels, 22 March 2017: Today, the European Parliament’s Committee on Industry, Research and Energy (ITRE) discussed the draft report of MEP Pilar Del Castillo Vera (European People’s Party), on the Proposal for a Directive establishing the European Electronic Communications Code (EECC).
ECTA has identified positive elements, such as:
- The removal of a mandatory three-year deployment forecast for network operators, which would have created a huge administrative burden in particular for smaller operators i;
- A proposed new right for network operators to access physical infrastructure controlled by public authorities (public buildings, street furniture, such as light poles, street signs, traffic lights, billboards, bus, tramway stops, metro stations)ii .
ECTA also welcomes the fact that the European Parliament Rapporteur has endorsed the approach of the European Commission with regard to the Code’s fundamental policy objectives, i.e. the introduction of a new objective of access to, and take-up of, very high capacity networks, whilst at the same time retaining the existing objectives of promoting competition, contributing to the development of the internal market and promoting the interest of the European citizens.
The approach to the fundamental policy objectives is undoubtedly the right one. However, ECTA is concerned by the fact that competition seems to have been forgotten along the way in the detailed amendments put forward by the European Parliament Rapporteur. Indeed the promotion of competition is side-lined and unjustified regulatory concessions are made to dominant network operators. ECTA considers that side-lining the promotion of competition will result in harming end-user interests.
For example, the European Parliament Rapporteur’s proposaliii would require National Regulatory Authorities, when considering the regulatory obligation of wholesale network access to dominant operators’ very high capacity networks, to focus their assessment in particular on investments, with no reference made to the need to promote competition. The same proposed article seeks to prevent the imposition of wholesale price controls on the very high capacity networks of dominant operators. It is crucial in this context to understand that the European Parliament Rapporteur’s draft report also proposes to redefine ‘very high capacity networks’ in a manner which amounts to encompassing the incremental network upgrades that dominant operators have already been performing for over a decadeiv, whereas the European Commission’s legislative proposal sought to incentivise the deployment of networks with truly transformative capabilities.
Full toolbox of regulatory obligations ("remedies”) should be available to regulators
The legislative proposal of the European Commission established a strong hierarchy in the regulatory obligations that can be applied to dominant network operators, tying the hands of the National Regulatory Authorities even though they are best placed to define the most appropriate regulatory obligations according to the specificities of the markets they regulate.
ECTA did not support that aspect of the EC legislative proposal, although ECTA always stressed the importance of civil engineering access, physical/shared network access, and the complementary - but non-substitutable - nature of virtual/active access and other essential regulatory obligations on dominant operators.
The approach taken by the European Parliament Rapporteur falls short of correcting this issue, and in fact further restricts the toolbox available to National Regulatory Authorities. If this proposed amendment were come to pass, it would result in a further weakening of the possibility for National Regulatory Authorities to address the lack of effective competition in the EU Member States, wherein the least onerous obligationv on the dominant operators would be preferred, over the imposition of the specific appropriate set of regulatory obligations that is necessary to effectively address and correct dominant operators’ market power, as is the case under the currently applicable EU regulatory framework.
Market analysis cycles broken, creating uncertainty
Another worrisome element of the European Parliament Rapporteur’s draft report is that it proposes to amend the market analysis process, resulting in potential associated unwarranted deregulation.
In the currently applicable EU regulatory framework:
- full deregulation can only and legitimately occur as and when the market analysis conducted by the National Regulatory Authority results in a finding of absence of Significant Market Power (= no dominant operators);
- selective deregulation can only legitimately occur as and when, as part of a market analysis, the National Regulatory Authority considers it justified to withdraw specific regulatory obligations imposed on the operator(s) found to hold Significant Market Power.
This is an approach that stands at the core of the EU regulatory framework, and which ECTA has always supported, because it is based on a requirement to conduct a detailed and specific economic assessment.
Whilst the European Commission’s legislative proposal essentially maintained the requirement of conducting a detailed and specific economic assessment, the European Parliament Rapporteur’s draft report does not. Indeed, it paves the way, by means of a proposed new provision, where regulatory obligations on operators found to have Significant Market Power would automatically vanish in case a market analysis is not completed within the specified timeframevi. This creates huge regulatory uncertainty for operators relying on regulated wholesale access products underpinning their activity and therefore their investments. Regulatory certainty is further undermined by the European Parliament Rapporteur’s proposal to require National Regulatory Authorities to review their market analyses upon reasoned request, including the possibility to "decide that no, fewer or less onerous obligations shall be imposed with respect to a planned development” vii.
Expiry date on regulation should only be determined by absence of dominance
Regulation is, and continues to be, an important safeguard to enable competition, innovation and investments by all market players and to ensure that end-users can still benefit from choice at affordable prices. Today, in the 28 Member States, National Regulatory Authorities still find dominant operators on the relevant markets. Deregulation of dominant operators should not be politically driven, should not result from pressure by the most powerful companies at EU and/or at national level, or, from undue pressure put on National Regulatory Authorities to depart from proper and detailed economic analysis. The only expiry date which should be put on wholesale network access regulation and related regulatory obligations is the existence of effective competition characterised by the absence of dominance on the relevant market(s).
Radio Spectrum Policy: pro-competitive provisions are missing
Finally, on radio frequency spectrum, the European Parliament Rapporteur’s proposalviii suggests to repeal Article 5 of the Radio Spectrum Policy Programme which addresses competition, on the grounds that it is reproduced in amended Art 52(2). The amendments provided clearly do not institute the same regulatory safeguards for competition. On the contrary, the European Parliament Rapporteur’s proposal de facto amounts to removing the possibility for spectrum management authorities to take pro-competitive measures at key industry-structuring points in time for spectrum assignment. In addition, the European Parliament Rapporteur’s proposal, requiring the prior agreement of the right holder for changes to spectrum assignmentsx , amounts to excluding spectrum re-farming and re-assignment, as they would only be possible following the agreement of the spectrum holders. ECTA would like to re-emphasise that spectrum is a scarce resource and that it should not be used as a tool to pick winners. Instead, it should be used in a way which promotes effective and efficient use and maximises social and economic utility.
Against this background, ECTA stands ready to elaborate on these elements, to discuss other aspects of the draft Code, and to work with the European Parliament, the Member States and the European Commission, to guarantee the best policy outcome for all market participants, in the interest of European consumers, businesses and the entire European economy.
ECTA (the European Competitive Telecommunications Association - www.ectaportal.com) is the pan-European pro-competitive trade association that represents more than 100 of the leading challenger telecoms operators across Europe. For over a decade, ECTA has been supporting the regulatory and commercial interests of telecoms operators, ISPs & equipment manufacturers in pursuit of a fair regulatory environment that allows all electronic communications providers to compete on level terms. Our members have been the leading innovators in Internet services, broadband, business communications, entertainment and mobile.
Aurélie Bladocha, Senior Public Affairs Manager (+32 478 78 61 00/ email@example.com).
i Article 22 – paragraph 1 – subparagraph 2 – point b deleted (amendment 48), Article 22, paragraphs 2-3-4 deleted (Am 49, 50, 51), Article 22 – paragraph 5 and paragraph 6 amended (Am 52 and 53). Article 78 d (new) (Am 137).
ii Article 56 – paragraph 2 a (new) - (Am 109)
iii Article 78 e (new) - (Am 138)
iv Article 78 c (new) – (Am 1 and 136)
v Article 66, Paragraph 6 – main article - (Am 23, 120, 121)
vi Article 65 – paragraph 5 a (new) – (Am 25 and 119)
vii Article 66, Paragraph 6, (b) – (Am 25, 121 and 122)
viii Article 116 (new) - (Am 144)
ix Article 18, Paragraph 1 - (Am 45)