Europe’s über regulator may be difficult to forestall
Monday, July 30th, 2007Moves within the European Commission (EC) to develop a more harmonised approach to national regulators (NRAs) have been brooding since at least October 2006, when the European Regulators Group (ERG), the EC’s principal advisory body which comprises representatives from the EC and each of the 27 national regulators, proposed a number of steps aimed at delivering a more harmonised approach to regulating the telecoms markets in the EU.
In May 2007 the ERG started work on this project, identifying priority markets where a common regulatory approach might benefit consumers, and developing a guide for NRAs to remedy shortcomings and to advise other NRAs in areas where they have gained experience. Much of this work is the result of the challenges faced by regulators from market developments, including VoIP, international roaming retail tariffs, wholesale broadband access, and how the evolution from legacy to next generation, IP-based networks will affect the regulatory approach to IP interconnection and interoperability issues.
The EU’s telecoms commissioner has successfully tackled some of the issues: in the face of opposition from mobile operators and the Global Mobile Suppliers Association (GSA), the EC has managed to deal with exorbitant international roaming charges, placing a sliding scale of tariff caps for the next three years. Yet difficulties remain as a result of the residual interest which national governments have in the incumbents. A case in point is Portugal: in April 2006 the EC sent Portugal a formal request to abandon the special rights held by the state in Portugal Telecom, believing that the special powers held acted as a disincentive to investment from other member states in violation of EC Treaty rules. Despite continuing EC concerns over the golden share, in March 2007 the government reiterated its desire to keep its golden share in the national operator.
Secondly, the EC is aware that not all NRAs are particularly efficient. The EC’s annual reports of the state-of-play of Europe’s telecom industry rely heavily on contributions from NRAs, and lacunae in the required market analyses are numerous. Although the EC makes the rules, the NRAs enforce them, to a greater or lesser extant and through different processes and approaches. Harmonising these approaches will be particularly important in coming years as operators and incumbents progress with their Next Generation Networks (NGNs). Already there is some diversity in NRA approaches to NGNs, with the German example (including a three-year regulatory holiday for Deutsche Telecom, locking out competitors from wholesale access to its hybrid fibre/VDSL network) representing the most inimical to the EC’s vision..
Under-performing regulators have also been viewed as a fundamental obstacle to the European telecoms market, worth some €290 billion in 2006, reaching its full potential. Thus it is that the Commissioner, Viviane Reding, in October 2007, will elucidate plans to overhaul EU telecoms legislation, take control of some regulatory powers currently held at a national level, and push through the break-up some incumbents to increase competition in the industry. The proposed measures would come into force in 2010.
One of the areas where the EC wants to expand its powers relates to remedies − currently, NRA decisions on remedies (in areas such as wholesale product obligations) can be commented on by the EC, but not vetoed, and this is one of the limitations which the EC aims to address. However, the ERG is opposed to the veto power over remedies, arguing that NRAs would have a clearer picture of the national markets and environments. Similarly, the European Telecommunications Network Operators’ Association (ETNO), which represents European incumbent operators, believes that better harmonisation can be achieved with existing systems, and does not require another bureaucratic layer.
The proposals have worried Europe’s incumbents, which fear the EC’s enthusiasm for structural separation. Yet this last measure has had some notable success: after BT hived off its network access division from its consumer operations in 2005, setting up Openreach in the process, the company has gone from strength to strength, while fair competitor access to the local loop has made the UK’s broadband market among the most competitive in Europe. Opposition to these plans from companies such as France Telecom, both on the regulatory aspects as well as on functional separation, is as much due to national pride as to preserving the status quo, but a über regulator covering the E27 is perhaps inevitable, given the extraordinary inconsistencies which frustrate the Brussels’ bureaucrats.
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