New Regulatory Framework for Electronic Communications

The new regulatory framework recognizes the developing convergence among the telecommunications, broadcasting, and IT sectors, which is increasingly leading to a situation where it is possible to use any kind of terminal (PCs, mobile phones, TVs, handheld devices) on any kind of network (wireless, satellite, cable, fixed-line) for any kind of service (voice telephony, data, broadcasting). The proposed legislation consequently would subject electronic communications services, electronic communications networks, and associated facilities to a single harmonized regulatory framework. The package would apply to any paid transmission of signals on any network -- including wireline, wireless, satellite, broadcast, and cable TV networks. The proposed legislation does not apply to content.

The proposed measures would consist of eight legislative acts: five harmonization directives concerning (i) the General Framework; (ii) Authorisation (licensing rules); (iii) Access & Interconnection; (iv) Universal Service and Users’ Rights; and (v) Data Protection; (vi) a regulation on Unbundled Access to the Local Loop; (vii) a directive on Liberalisation (consolidating the existing liberalisation measures); and (viii) a decision on Radio Spectrum Policy.

The package requires approval of the European Parliament and the European Council, with the exception of the Liberalisation Directive, which will be adopted by the Commission.

All directives will then require implementation by the EU-Member States, which the Commission hopes will take place by the end of next year. The Unbundled Local Loop Regulation will apply without further implementation as soon as it is adopted, planned for the end of this year.

The Unbundled Local Loop Regulation would impose the following key obligations on fixed public telephone network operators that have been designated by the National Regulatory Authorities (NRAs) as having significant market power ("notified operators"):

1. Notified operators would have to make available to third parties, by 31 December 2000, unbundled access to the local loop (i.e., the "last mile" of the network into the customer’s premises, defined as the physical copper line circuit connecting the customer’s premises to the operator’s local switch, concentrator or equivalent facility) under transparent, fair and non-discriminatory conditions;
2. Notified operators would also be required to provide new entrants physical access to their facilities to allow them to collocate and connect their network equipment and facilities; and
3. Notified operators would be obliged to publish, by 31 December 2000, a reference offer for unbundled access to local loops, including prices.

Unbundled access to the local loop would include both full unbundled access (i.e., the new entrant takes over the circuit) and shared access (e.g., the incumbent provides telephone services, and the new entrant provides data services over the same circuit). This would broaden the types of unbundled access available even in the minority of Member States that already have an unbundling requirement (e.g., Germany, which mandates full but not shared unbundled access). The prices for access would have to be based on cost. NRAs would have authority to impose changes to the reference offer, including prices, and would also be granted authority to resolve disputes between undertakings concerning the issues covered in the Regulation in a prompt, fair, and transparent manner. In practice, NRAs will play a major role on and have the final say in unbundling issues.

The Access & Interconnection Directive would significantly change the rules governing access to and interconnection of electronic communications networks. The scope of sector specific ex-ante regulation would be reduced, while at the same time the impact of general competition law would be increased.

Three scenarios for ex-ante obligations. The Directive would allow the imposition of obligations on operators and undertakings in three sets of circumstances:

1. In order to avoid distortions of competition, NRAs could impose one or several of the following ex-ante obligations on operators with significant market power (SMP): transparency; non-discrimination; accounting separation; access to, and use of, specific network facilities; and price control and cost accounting;
2. In exceptional circumstances, NRAs, with the prior agreement of the Commission, could impose further obligations on operators with SMP, provided they are justified in the light of the objectives of the Access & Interconnection Directive and the Framework Directive and are proportionate to the aim pursued;
3. In order to comply with international commitments, NRAs could impose interconnection obligations even on operators without SMP.

Revised concept of Significant Market Power. The second and third of these three situations are expected to occur only in exceptional circumstances. In the first case, an NRA would have authority to impose specific ex-ante access and interconnection obligations after having notified the Commission that an operator has SMP on one or several relevant markets (as defined by the Commission in a decision to the Member States that still needs to be adopted). The concept of SMP would be considerably modified: the 25% threshold would be completely abolished. Under the proposed directive, companies could be found to have SMP where they are considered to have a dominant position under competition law principles and where either there are problems of incumbency and/or problems of vertical integration, such that the ex-post remedies of competition law would not be adequate to address those market problems. The SMP concept would embrace single company dominance, joint dominance, and leveraging a dominant position onto an associated market.

Regular review of ex-ante obligations. The obligations currently in place under the existing rules would continue for an initial period. All current and future obligations would be reviewed on a regular basis.

The Data Protection Directive would extend existing rules preventing unsolicited telephone calls for direct marketing purposes to all forms of communications. This would mean that unsolicited e-mails for direct marketing purposes would be prohibited, except with respect to subscribers who have agreed to receive such e-mails. This endorsement of an opt-in model as opposed to an opt-out approach (allowing unsolicited e-mails unless the user requests not to receive them) is expected to be very controversial.