The EU And Telecoms (Part 2)

Following from part 1 we continue with part 2 where we explore more fully EU telecoms regulations and its current situation especially regarding Flexcit.

As happens in other areas of EU competence, laid down by the treaties, member states must adhere to the telecommunications chapter of the EU acquis and are bound together by network governance and by harmonisation measures as a consequence. These span shared policies and legislation, implementation and regulation, standards and the accreditation of qualifications.

It’s interesting that what is often overlooked is the EU is a project not yet finished. It currently remains a work in progress following the engrenage (gearing) principle the well established method to engineer another leap forward in integration, the slow, salami-slicing approach adopted by Jean Monnet.

This principle has the consequence that while it continues a process of hollowing out member states competences and trying to move them up to EU level that there often occurs a period of absence of any competence at all. In this we are reminded of Booker’s comment on a criticism of evolution:

Years ago…Attenborough himself [claimed] to ‘prove’ Darwin’s theory by showing us a mouse and a bat, explaining how one evolved into the other. He seemed oblivious to the obvious point that, as the mouse’s forelegs evolved by minute variations to wings, there must have been a long period when the creature, no longer with properly functioning legs but as yet unable to fly, was much less ‘adapted to survive’ than it had been before.

For the regulation of network industries there have been delegations of powers by governments of the member states to EU institutions, notably to the European Commission (EC), but also to their own domestic National Regulatory Authorities (NRAs). This was somewhat ad hoc and piecemeal in the 1980s and 1990s, however from the 1999 Electronic Communications Services review (COM(1999) 539 final, 10.11.1999) the intentions and the outcomes increasingly concentrated on a more systematic approach.

Yet there continues to be considerable variations between member states which the European Commission and the European Parliament sought to reduce the disorder and to complete the single market for telecommunications.

As we previously noted the UK regulator Ofcom – determined to breakup BT’s monopoly further – used competition law powers under the Enterprise Act 2002 – itself a result of EU Directives – to come to an agreement with BT over a separate network access division called Openreach which would offer its wholesale products on an equivalent basis to both external customers and itself.

The establishment of Openreach and its relationship to external customers at the time was unique to the UK within the EU and its experience was studied by regulators in other European countries who experienced similar competition problems arising from the presence of a large incumbent telecommunications operator, such as France Telecom.

Viviane Reding, the European Commissioner who in 2006 was in charge of telecommunications regulation, took inspiration from the UK in forcing the “structural separation” of incumbent telecom operators into service and infrastructure divisions across the European Union.

With this in mind Reding unveiled proposals aimed at not only extending competition among telecom operators, but also the the idea of one single EU wide telecom regulator, to act as an umbrella organization for Member States’ national regulators. Reding’s proposals became the “review of EU Telecom rules: Strengthening Competition and Completing the Internal Market” which argued that:

“The most effective way to achieve a real level playing field for telecom operators across the EU would of course be to create an independent European telecom regulator that would work together with national regulators in a system, similar to the European System of Central Banks. In such a system, national regulators would continue to act as direct contact points with operators and could directly analyse the market. At the same time, a light European agency, independent from the Commission and from national governments, could ensure by guidelines and, if necessary, instructions that EU rules are applied consistently in all Member States.”

Here Reding sought to achieve “a real level playing field” by tackling what she called the three issues; Firstly the need for more internal market integration for a more effective use of radio spectrum. Falling back on the traditional EEC/EU arguments of fish, pollution or ‘climate change’ which knows no country boundaries as a reason for extending EU competences Reding relies on this regarding spectrum:

Radio spectrum itself knows no borders, but it is managed at national level, normally in an administrative, bureaucratic way that creates scarcity by prescribing in detail what every part of the spectrum may be used for in that Member State.

I also believe that we need to put the idea of a European spectrum agency on the table…we have to recognise the competitive disadvantage the EU faces because, instead of having one single regime for spectrum management and spectrum licensing, as they do in the US, we have 25 different ones.

Reding also argued that with the “switch from analogue to digital TV there is a one off opportunity to re-use the analogue frequencies for new technologies”. The second issue she addressed was better regulation:

“…a more consistent application of the EU telecom rules”. In the telecom sector, where neither technology nor economic interest nor consumer behaviour know national borders any more, I see a clear, long overdue need to make the internal market a reality also in regulatory terms”.

The third proposal was that there should be no “regulatory holidays” in the face of technological advances and with the liberalisation of the telecoms market should come “structural separation”:

Structural separation means that telecom regulators could require a dominant operator to provide non-discriminatory access to all operators by separating infrastructure provision from service provision to a greater or lesser extent. Today, the EU rules in force do not foresee structural separation as a regulatory remedy on the telecom markets. But I see that the United Kingdom, which has opted for a form of structural separation at national level, has made good experiences with this remedy. 

Her legislative proposal was for a European Electronic Communications Market Authority (EECMA) in which the EC sought a formal cooperation structure to remedy the lack of coherence within the internal market, which included “a fragmentation of European markets” and the absence of mechanisms for authorising cross-border services (e.g., mobile and IP-based services).

This proposal was significantly reshaped by the Parliament (which increased its own influence as a consequence) and the Council and, via Regulation (EC) No 1211/2009, became the Body of European Regulators of Electronic Communications (BEREC):

The main objective of this body is to enhance cooperation among national regulatory authorities (NRAs) and to strengthen the internal market in electronic communications networks.

BEREC consists of NRAs members where each is nominated per Member State. (NRAs from the European Economic Area (EEA) States only have observer status and are represented “at an appropriate level”). Thus BEREC consolidated the “official” status of NRAs despite having no democratic credentials.

BEREC itself conducts its business in secret and it attempts to justify this by claiming that there is often a special requirement to avoid public scrutiny and stakeholder involvement. We can see this secrecy, or ‘independence’ officially laid out under Regulation (EC) No 1211/2009 Article 4: Composition and organisation of BEREC:

The members of the Board of Regulators shall neither seek nor accept any instruction from any government, from the Commission, or from any other public or private entity.

In addition, there is a lack of clarity whether its decisions and opinions can be challenged in the EU courts alongside that it is unaccountable before the EU parliament, giving it a democratic and judicial deficit. Even the mechanism for engagement with BEREC is through consultations on terms determined by the organisation itself.

Aside from BEREC, further complications in European telecoms governance arise from earlier attempts at European harmonisation mechanisms via European Regulatory Networks (ERNs).

ERNs were established particularly with network sectors in mind; designed to respond to the multiplication of regulators and their uneven development. ERNs were an attempt to address by the need for greater co-ordination in implementing  regulation by member states. 

However within the institutional design of ERNs lies their genesis. Their design reflects acutely the difficultly of trying to move from national governance to one of supranational governance. Having been given grandiose tasks, the European Commission and national governments still maintained many powers. Here then we see the creation of double delegation, with powers “delegated up” from the NRAs and “delegated” down from the EU with the inevitable result of dissatisfaction:

The EU’s ‘double delegation’ to IRAs and the EU Commission has led to major and as yet unresolved problems of coordination and implementation.

Thus this means that ERNs can be seen as a ‘second best’ method of dealing with implementation of EU regulation; a compromise between EU ‘colleagues’ pressing for greater European integration and those member states, especially national governments, reluctant to endorse it fully. The compromise inevitably means that while more uniform regulation by coordinating approaches and functions was the intention, there has been little evidence of success in harmonisation and no attempts even to measure the effectiveness of the measures.

But within ERNs remains legacy EU regulatory telecoms governance that sits alongside and is distinct from BEREC, and this is apparent in the various EU bodies such as the Radio Spectrum Committee (RSC);

The Radio Spectrum Committee (RSC) is responsible for specific technical measures required to implement the broader Radio Spectrum Policy. The RSC is composed of Member State representatives and chaired by the European Commission.

Established by the 2002 Radio Spectrum Decision (676/2002/EC), the Radio Spectrum Committee (RSC) is assisting the Commission for the development of technical implementing decisions to ensure harmonised conditions across Europe for the availability and efficient use of radio spectrum.

…and the Radio Spectrum Policy Group (RSPG) which enables Member States, the Commission and stakeholders to coordinate the use of radio spectrum.

Here we can see that unlike the secret nature of BEREC, bodies such as the RSC and the RSPG within ERNs involve extensive consultation amongst all stakeholders, which include “regulatory authorities and the ministries having responsibility for radio spectrum related matters in each Member State”, manufacturers, network operators and users.

RSC and RSPG are also part of the comitology process which allows the Commission to discuss its proposals with national administrations before implementation in order to ensure that any measure is optimised to the various national situations. Thus under these rules the following associations are permitted to be consulted:

Consumers:
The European Consumer Organisation (BEUC) – which brings together 40 European consumer organisations from 31 countries (EU, EEA and applicant countries). 

International Telecommunications Users Group INTUG – an international association of business users of telecommunication.

Operators:
European Communities Trade Mark Association ECTA – which in addition to having close links with the European Commission and the Office for Harmonization in the Internal Market (Trade Marks and Designs) (OHIM), ECTA is recognised by WIPO as a non-Government Organisation (NGO).

European Telecommunications Network Operators’ Association  ETNO – who are pan-European operators and has been the voice of Europe’s telecommunications network operators since 1992

GSM Association GSMA– is an association of mobile operators and related companies devoted to supporting the standardising, deployment and promotion of the GSM mobile telephone system.

Manufacturers:
Digital Europe

We can see therefore that even under EU telecoms governance and the comitology process there is extensive consultation with international associations. A further example can be seen with the European Conference on Posts and Telecoms (CEPT). CEPT extends far beyond the EU, including the countries of the former USSR and currently includes 48 countries in its membership.

And it is with international relationships with the EU we will examine further in part three. But first we will look at the EEA agreement where although there is commitment to adhering to the EU telecommunications acquis there is more flexibility with regard to the implementation as per the EEA agreement.

And it’s with the EEA’s relationship regarding telecoms and the EU where we turn our attention to next.

The EU And Telecoms (Part 1)

With this piece, in part 1, we turn our sights on the EU’s complex role in member state telecommunications regulation, with emphasis on the UK. The above graph gives some indication of the intricate nature of telecommunications regulation within the EU and the partial subservient relationship for a member state such as the UK.

As can be seen above (click to enlarge) the UK’s main regulator Ofcom has direct relationships with EU bodies which bypass UK ones, as well as having interaction domestically. The EU and UK regulatory structures increasingly are indistinguishable from each another.

Yet also the bewildering emergence and relentless progress of technology means we will also see that EU has only become a partial player in what is increasingly a global regulatory industry. This becomes evident when we consider that even within Europe itself where many functions are regulated beyond the EU.

An earlier example can be seen acutely with the establishment of the mobile phone standard GSM in the 1980s. GSM, with very little if at all EEC/EU involvement, was an illustration of European nation state co-operation and subsequently the GSM standard became a global success story.

The GSM agreement was reflected in the long standing establishment of non-EU bodies include the European Telecommunications Standards Institute (ETSI) and the European Conference on Posts and Telecommunications (CEPT).

Despite the existence of non-EU bodies it is with no surprise, due to the inherent cross-border nature of telecommunications, that the EU saw the sector as an opportunity to use the growth of telecoms to try to facilitate ‘ever closer Union’ further.

Pre-Maastricht the EEC had attempted to use the Terminal Equipment Directive (88/301/EEC) – issued under Article 90 of the Treaty of Rome – to force the liberalisation of telecoms including the satellite and mobile markets. Despite Member States objecting on the basis it was outside the EEC’s own competences (satellite communications for example have military implications) the ECJ after 30 months of legal wrangling upheld the Directive.

Naturally the solution for the EEC (EU) to such legal wrangling was to make communications a competence via a Treaty. Thus not long after, we see the clear intentions of the EU’s ambitions when in the Maastricht Treaty (Article 129 D) it for the first time gave the EU competence in the field of telecommunications (my emphasis):

The Maastricht Treaty gave the EU the task of establishing and developing trans-European networks (TENs) in the areas of transport, telecommunications and energy, in order to help develop the internal market, reinforce economic and social cohesion, link island, landlocked and peripheral regions with the central regions of the Union, and bring EU territory within closer reach of neighbouring states.

Even in the early 1990s telecommunications, which for obvious reasons was becoming a globalised industry, increasingly relied on global bodies to set global standards for convenience. The EU though envisaged the sector more as a mechanism and means to facilitate its own political union – despite the example of GSM and mobile technology where nation states had led and the EU had merely followed.

Typically then we saw in the early 1990s the EU arguing in favour of more telecommunications liberalisation with a view to completion of the internal market with an EU wide regulator. Emboldened by new powers in Maastricht led to the EU Commission launching a strong push to adopt a common strategy for the creation of a European information society driven by a European information infrastructure. In 1993, the Council of Ministers (EU) agreed to fully liberalise voice telephony services by 1 January 1998:

[The EU Commission] it is asking the Council to decide  on a number of principles contained in the Commission communication, in particular:

   –  the complete liberalization of services;
   –  a transitional period ending in 1998
   –  a precise schedule  in two main stages with a consolidation
      phase (1993-1995)  and a phase of gradual opening up to
      competition  (1996-1998);
   –  the role of infrastructures.

Following  its discussion,  the Council  instructed the Permanent Representatives Committee to continue work on this dossier with  maximum efficiency,  in order to enable the Telecommunications Council convened for 16 June to arrive at an agreement.

In addition the European Council meeting of December 1993, in its Presidency Conclusions considered a European Commission policy paper – European Commission White Paper, Growth, Competitiveness, Employment – The Challenges and Ways Forward into the 21st Century, 1993 which argued:

The Community needs an adequate frame-work for the developing of new market opportunities. In Europe some sectors are traditionally the exclusive preserve of non-market services or public utilities, in particular when it comes to the fulfillment of public needs. Reforms aiming at separating the different functions of public authorities with regard to the supply of such services as producer, purchaser and regulator, in sectors such as health care, telecommunications, etc. should enable the needs of users to be better served at less cost for public finances and with market creation potential .

The Presidency Conclusion on behalf of Member States accepted the EU Commission White Paper noting:

A more decentralized economy, given the growing importance of the local level; the economy needs to be geared to the possibilities offered by the new technologies…

…the trend towards a decentralized economy, which has been made possible by new information technologies, must be encouraged….The European Council asks the
Commission to examine ways of achieving this objective.

Thus the European Council requested a report be prepared for its 1994 Corfu meeting by a group of prominent persons on the specific measures to be taken into consideration by the Community and the Member States for the infrastructures in the sphere of information.

Such a group ‘of prominent persons’ became known as the ‘High Level Group on the Information Society’ – organized by the Commission and chaired by the then Commissioner for the Internal Market and Industrial Affairs (soon to become the Commissioner for Industrial Affairs, Information and Telecommunications Technologies), Martin Bangemann – a former leader of the German Free Democratic Party (FDP).

By 1994 the High Level Group on the Information Society produced a report for the 1994 European Summit; “Europe and the Global Information Society: Recommendations to the European Council” a report which became widely known as the Bangemann Report and was adopted by the European Council, Corfu, June 1994.

The report urged the European Union “to put its faith in market mechanisms as the motive power to carry [Europe] into the information age. This meant that actions must be taken at the European level and by Member States to strike down entrenched positions which put Europe at a competitive disadvantage.”

The report proposed “fostering an entrepreneurial mentality to enable the emergence of new dynamic sectors of the economy; [a means of developing] a common regulatory approach to bring forth a competitive, Europe-wide, market for information services.”

It then noted:

In addition to its specific recommendations, the group proposes an action plan of concrete initiatives based on a partnership between the private and public sectors to carry Europe forward into the information society.

The Bangemann Report was to have a very significant and lasting influence on the framing of subsequent EU policies for Information and Telecommunications Technologies (ICT) research and communication services. For many years following its publication the report was repeatedly cited as a kind of “Bible” by Commission documents and officials on a very wide spectrum of industrial and social policy initiatives. For example it was explicitly invoked as a framework for an important 1994 document setting out a new strategy for the audio- visual sector in the EU single market context and another paper in 1994 titled ‘Europe’s way to the Information Society: An Action Plan‘.

Yet despite its significance within EU circles the Bangemann report was out of date almost as soon as it was written. It had largely ignored the emergence of the internet and what it did acknowledge was to highlight its basic lack of understanding and knowledge. Consequently it expressed a level of discomfort – page 27 (my emphasis):

Internet is based on a world-wide network of networks that is not centrally planned. In fact nobody owns Internet. There are now some 20 million users in more than 100 countries. The network offers electronic mail, discussion forums, information exchange and much more. Internet is so big, and growing so fast, that it cannot be ignored. Nevertheless, it has flaws notably serious security problems. Rather than remaining merely clients, we in Europe should consider following the evolution of Internet closely, playing a more active role in the development of interlinkages.

In the meantime, while largely failing to anticipate or understand the internet, the liberalisation process in other telecommunications sectors was being extended post 1994, for example in satellite communications.

By 1995 via the American based GPS had became a system that had broken out of realms of science fiction and used as an everyday tool for navigation by private vehicles, ships and aircraft. The EU in response planned to install a rival system called Galileo where it recognised “the value of a space programme, of which Galileo is a part, in completing the process of European integration“.

In contrast to the liberalisation process, and interestingly, the intention to adopt similar criteria to public broadcasting services (PBS) came with a great deal of reluctance – the EU itself noting that “the relationship of European Union policy and Public Broadcasting Services could be summarized as a historic dilemma without a clear answer. The balance between a strong European competition policy and public broadcasting survival has still to be found. Perhaps the text cited below explains the Gordian knot faced by European Union”:

“We need balanced solutions able at the same time to respect two important points. The first is the basic function of Public Broadcasting Services in the most of EU Member States. This fact has been recognised recently in Amsterdam Treaty with the Public Broadcasting Protocol. The second is that European integration is based on free market and equal competition. The future of the dual European TV system depends on how we can be able to combine these two apparently incompatible principles” (The digital age: European Audiovisual Policy. Report from the high level group on audiovisual Policy, 1998).

In essence the EU faced a dilemma; how to make compatible its own competition rules with public state funding of PBS. Article 87 forbids the state aid, which distorts or threatens to distort competition, insofar as it affects trade between Member States but with broadcasting an exception was made which notably meant that PBS could remain publicly funded to ensure the promotion of the “democratic, social and cultural needs of each society and to the need to preserve media pluralism”.

This role of public service broadcasting in promoting cultural diversity was recognised in 2005 by the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions.

The reluctance of the EU was undoubtedly due to its appreciation that member states’ PBS networks would be more sympathetic to its integration project under the guise of the ‘cultural need’ criteria. This becomes especially evident when we consider the BBC receives a substantial amount of money from the EU and possibly related (or not) has long been criticised for pro-EU bias.

Public broadcasting aside, generally from 1994 onwards, in the context of developing the ‘information society’, general liberalisation of telecommunications structures was presented as the way to develop multimedia – cable television networks were ‘liberalised’ in 1996, with mobile communications following on 1st January 1998.

Bangemann’s report thus was hugely influential, and despite failing to anticipate properly or appreciate the approaching dominance of the internet, its vision of telecommunications liberalisation would influence the EU Commission’s thinking regarding the internet.

The EU’s determination to ‘liberalise’ markets resulted in a growth of “regulator watching”, which followed closely the experiences of the privatisation drive in Member States particularly the UK. “Regulator watching”, or a regulatory state, provided a convenient opportunity in extending EU governance across member states via a regulatory body.

By separating out the service provision by companies from sector oversight privatisation, and the creation of markets, allowed conditions to exist for the adoption of common rules by an independent regulatory body and the conditions of access to the market for new operators to be harmonised. All of which naturally increased the call for ‘more Europe’ under one EU regulator.

And in part 2 of the EU’s effect on the telecoms industry we will see how it attempted to facilitate the emergence of an EU regulatory body.