Explanatory Memorandum to COM(2000)384 - Access to, and interconnection of, electronic communications networks and associated facilities - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2000)384 - Access to, and interconnection of, electronic communications networks and associated facilities. |
|---|---|
| source | COM(2000)384  |
| date | 12-07-2000 |
This Directive will establish a new regulatory framework for dealing with issues of access to, and interconnection of, electronic communications networks in the Community. It will ensure that, during a period of converging technologies and services and strong market growth, the market for electronic communications services continues to develop in a manner that stimulates innovation, competition and user choice.
The Directive builds on the premise that competition rules will be the prime vehicle for regulating the electronic communications market once the market becomes effectively competitive. However some sector specific ex-ante rules will continue to be appropriate during the transitional phase, in particular where former monopoly operators continue to benefit from inherited market power, such as in local access networks, or where firms are vertically integrated.
In such cases, the regulatory response should be specific to the problem, proportionate and maintained only for as long as necessary. This calls for transparent decision-making processes, with national regulatory authorities having to justify all decisions against the objectives of Community policy, and using ex-ante rules only where they are more effective than competition law remedies to address the market problems identified. The Directive requires ex-ante rules to be withdrawn once the desired objectives are met by the market.
The Directive lays down a framework of rules that are technologically neutral, but which may be applied to specific product or service markets in particular geographical areas, to address identified market problems.
In the area of digital television, the Directive maintains the approach set out in the TV Standards Directive 95/47/EC i, and carries over the obligation to provide conditional access on fair reasonable and non-discriminatory terms. However, given the broad consensus that treatment of digital television gateways needs to take into account recent technological developments, provision is made in the new Directive to adapt the current obligations. It is anticipated that preliminary work in this area could begin in the near future, in order to prepare the ground for formal decisions that could be taken once the new regulatory framework is adopted.
The Directive provides legal certainty for market players by establishing clear criteria for regulatory intervention, and clear limitations on what obligations concerning access and interconnection can be imposed in which circumstances, whilst at the same time allowing for sufficient flexibility to allow regulatory authorities to deal effectively with new market problems that hinder effective competition.
Contents
- 2. Scope and context
- 3. The proposed new regulatory framework for access and interconnection
- Thresholds for ex-ante obligations
- Continuity with current regulatory framework
- 4. Summary of the contents of the proposed Directive
- Chapter II - General framework and principles
- Chapter III - Continuity with former obligations and market review procedures
- Chapter IV - Procedural provisions
- 5. Conclusion
The proposal for a Directive on Access to, and Interconnection of, Electronic Communications Networks harmonises the way in which Member States regulate the market between suppliers of communications networks and services in the Community. It applies to all forms of communications networks carrying publicly available communications services, whether used for voice, fax, data or images, including fixed and mobile telecommunications networks, cable TV networks, networks used for terrestrial broadcasting, satellite networks, networks using Internet protocol (IP). The proposed Directive is designed to provide a pro-competitive framework that will stimulate competing network infrastructures and the interoperability of services provided over those infrastructures, while ensuring that bottlenecks in the market do not constrain the emergence and growth of innovative services that benefit users and consumers.
The electronic communications sector is characterised by strong inter-dependencies between market players. Networks need to be interconnected either directly or indirectly to each other in order to allow customers to call each other and to complete transactions. Those providing communications services or broadcast services need access to network infrastructures in order to reach their customers. The owner or operator of the communications infrastructure stands in a critical position, either as provider of services to end users, or as provider of transmission service to others, or both.
The rules for access to and interconnection of networks, including emerging broadband networks, will affect the business models of all companies operating in the sector, and thereby the competitive dynamics of the future marketplace. Next generation communications services - fixed and mobile - will increasingly build on broadband delivery platforms or transport networks using the Internet Protocol (IP) for the delivery of multimedia services. This new broadband environment will be fundamentally different from the current narrow-band voice-centred market. The traditional simple value chain based on a limited number of products is evolving into a complex and highly intertwined set of commercial relationships between companies - operators, service providers, content providers, advertisers and broadcasters - delivering an ever-growing variety of services to users.
Approach
The general objectives of regulation in this sector are to foster a dynamic marketplace with sustainable competition at network and services level, providing incentives for investments, guaranteeing user choice and maintaining public policy objectives in areas such as broadcasting and consumer protection. At Community level it is also important to ensure that Member States do not implement different patterns of regulation which lead to market variation, increasing cost to end-users and a fragmentation of the single market.
With the pace of change in markets and technologies today, it would not be appropriate to base the regulatory framework on predictions of the future marketplace. Instead, the proposed Directive lays down the processes by which market problems can be addressed, and where necessary regulated, to ensure pro-competitive outcomes.
In a competitive market, interconnection of and access to networks should in principle be agreed on the basis of commercial negotiation between the companies concerned. However, a number of factors constrain the competitiveness of the market at present. One is the existence of former monopolists that still provide the majority of connections, giving them a degree of bargaining power significantly greater than that of their competitors; another is the existence of bottleneck resources controlled by one or a few operators, such as the local access network in the telecommunications environment and conditional access systems in the digital television environment; and yet another is the existence of legal barriers to market entry that exist in the mobile sector, where currently the availability of spectrum means that the number of players is limited to four or five, which has not been enough to ensure competitive pricing in all segments of the mobile market, in particular for call termination services.
For these reasons there is a consensus that ex-ante sector specific rules will continue to be needed alongside competition rules to regulate access and interconnection, until such time as there is full and effective competition in all segments of the market.
The proposed Directive establishes clear criteria for regulatory intervention on access and interconnection issues, which will allow hitherto undefined issues to be addressed as they occur. It does not provide a set of ready-made solutions to pre-defined problems; instead it lays down the criteria for regulatory intervention, a maximum list of obligations that a national regulatory authority can impose, and identifies those undertakings upon which obligations can be placed. The whole procedure is transparent, with the regulator having to justify all its decisions against the objectives of Community policy for the sector.
In this way the Directive maintains a balance between providing legal certainty for market players and providing sufficient flexibility to allow regulatory authorities to adapt the rules in the light of changing circumstances.
In its November Communication i, the Commission had proposed two thresholds for the imposition of ex-ante rules. As a result of the public consultation, the Commission now proposes to have only one threshold for ex-ante obligations, called significant market power, but re-defined on the basis of the competition law concept of dominance. The new form of significant market power will embrace single company dominance, joint dominance and the leverage of a dominant position onto an associated market. National regulatory authorities will be able to notify companies as having significant market power and to impose ex-ante obligations where such firms would be considered to have a dominant position under competition law and where either there are problems of incumbency and/or problems of vertical integration, such that the ex-post remedies of competition law are not adequate to meet the market problems identified.
In a rapidly changing world, the process of defining the markets upon which the market power of an undertaking is assessed has to be a dynamic and responsive process. This process is set out in the Framework Directive, and involves the Commission publishing a Decision on the product and service markets susceptible to ex-ante regulation. National regulatory authorities in the Member States have the responsibility to determine which undertakings have significant market power on those markets, and to impose obligations that are designed to counter the potential distortion of competition that could arise through misuse of that market power. The Framework Directive requires this to be done in a objective and transparent manner.
Access and interconnection obligations imposed under the current Interconnection Directive 97/33/EC i, obligations on special access under Directive 98/10/EC i, obligations for the provision of leased transmission capacity under Directive 92/44/EC i as well as on full local loop unbundling will be carried forward into the new framework, and kept under regular review in accordance with the above-mentioned market analysis procedure. In this way, obligations can be progressively relaxed as the market becomes more competitive. If and when new market situations arise justifying new ex-ante obligations, eg new bottlenecks linked to new technologies, the same market analysis procedure allows new obligations to be introduced, provided they are fully justified and focused on remedying the market problem identified.
In the case of digital television services, the existing ex-ante obligations on access serve a somewhat different purpose. The TV standards Directive 95/47/EC was designed to provide an initial regulatory framework for the nascent digital television industry. Its main focus was on behavioural rules for conditional access providers, in order to ensure market entry for other broadcasters. The intention was to provide certainty for investors in digital television while assuring market entry and safeguarding key public interests such as interoperability of consumer equipment, in a proportionate manner. The digital television market has made reasonable progress, driven in its first phase by substantial pay TV investments, and there remains broad support for the approach taken in Directive 95/47/EC, although some urge its extension to new gateways that have emerged since 1995, notably electronic programme guides (EPGs) and applications program interfaces (APIs). The proposed directive therefore carries over the main provisions of Directive 95/47/EC, notably the obligation to provide conditional access on fair reasonable and non-discriminatory terms, and will allow extension of these obligations, eg in relation to new gateways, to be imposed by NRAs where justified, following a regulatory committee procedure.
Chapter I - Scope, aim and definitions
Article 1 (Scope and aim) establishes that the Directive covers access to and interconnection of electronic communications networks and associated facilities, including networks used for broadcast services. The aim is to establish a regulatory framework for the market between suppliers of networks and services, in accordance with internal market principles, that will result in sustainable competition, interoperability of services and consumer benefits.
Article 2 (Definitions) defines terms which are specific to this Directive, in particular the terms access and interconnection.
Article 3 (General framework for access and interconnection) carries over the provisions from the existing Directives establishing the freedom for parties to interconnect within and between Member States. It requires Member States to remove measures that link the interconnection charges paid by a new entrant to their level of investment in infrastructure.
Article 4 (Rights and obligations for undertakings) sets out the primary interconnection rule i.e. that all network operators have a right and an obligation to negotiate interconnection with each other, taking as a principle a commercial basis. It also carries over obligations from the TV standards Directive 95/47/EC concerning network operators' responsibilities with regard to distribution of wide screen television services and guarantees the confidentiality of information.
Article 5 (Powers and responsibilities of the national regulatory authorities) sets out the general role of the NRA with respect to access, interconnection and interoperability and its powers to intervene, in particular to impose obligations on market players and to resolve disputes.
Article 6 (Conditional access systems and other associated facilities) maintains the obligations from the TV standards Directive 95/47/EC for all operators of conditional access systems to provide access to broadcasters on fair, reasonable and non-discriminatory terms. Provision is made for reviewing these obligations in the light of market and technological developments and, if justified, extending them to cover similar facilities like application program interfaces (APIs) or electronic programme guides (EPGs).
Article 7 (Review of former obligations for access and interconnection) carries over the obligations imposed under the current ONP Directives 97/33/EC, 98/10/EC and 92/44/EC as well as the newly proposed Regulation on unbundled access to the local loop, in order to provide continuity in the transition from old to new regulatory framework, but requires national regulatory authorities to review all obligations on a regular basis, and in the light of the new definition of significant market power; national regulatory authorities have to decide whether to maintain, modify or withdraw them, following an analysis of the market.
Article 8 (Imposition, amendment or withdrawal of obligations) defines the conditions under which obligations can be imposed, and identifies the obligations that can be applied.
Article 9 (Obligation of transparency) allows national regulatory authorities to impose obligations for transparency, covering for example prices, terms and conditions for access or interconnection or interoperability, technical interfaces.
Article 10 (Obligation of non-discrimination) allows national regulatory authorities to impose obligations for non-discrimination, in situations where a market analysis indicates that discriminatory behaviour by the operator(s) concerned could lead to distortion of competition, with consequent disadvantages for end users.
Article 11 (Obligation of accounting separation) allows national regulatory authorities to impose obligations for accounting separation, in order to make transparent wholesale prices and internal cross transfers within a vertically integrated company, in situations where the operator concerned provides input facilities that are essential to other service providers, while competing with them on the same downstream market itself.
Article 12 (Obligations of access to, and use of, specific network facilities) allows national regulatory authorities to impose obligations on operators to grant access to, and use of, specific network elements and/or associated services or facilities, in situations where denial of access by the operator(s) concerned would hinder the development of a sustainable competitive market at the retail level, or would not be in the consumer interest.
Article 13 (Price control and cost accounting obligation) allows national regulatory authorities to impose price controls and cost accounting, and in particular obligations for cost orientation of prices for interconnection and/or access, in situations where lack of effective competition means that the operator concerned is capable of sustaining prices at an excessively high level, to the detriment of end users.
Article 14 (Committee) describes the procedure to be used by the Communication Committee (set up under the Framework directive) when dealing with modifications of annex to this Directive.
Article 15 (Publication of and access to information) requires national regulatory authorities to ensure that adequate and up-to-date information is published, and to indicate where it is published.
Article 16 (Notification) requires Member States to notify to the Commission the authorities responsible for implementing the provisions of the Directive. It also requires national regulatory authorities to notify to the Commission the names of operators with specific obligations.
Article 17 (Review), Article 18 (Transposition), Article 19 (Entry into Force) and Article 20 (Addressees) are procedural measures.
The proposed EP and Council Directive on access and interconnection is considered to be the most effective way of laying down a harmonised framework for dealing with issues of access and interconnection in Member States, at the same time defining the role of the national regulatory authorities in this context, consistent with the principle of subsidiarity.
In summary, the regulatory framework set out in the proposed Directive for access and interconnection will be characterised by:
- priority given to full commercial negotiations between parties to agree on the terms and conditions for access and interconnection, subject to compliance with Community law;
- a defined framework for national regulatory authorities to address issues of access and interconnection;
- continuity with the current regulatory framework, with obligations for national regulatory authorities to review and when possible roll back certain obligations on operators with significant market power;
- possibility for national regulatory authorities to intervene to address identified market failures, acting in accordance with the principles of transparency, objectivity, and proportionality.
It will ensure that the communications market can develop along the lines of a healthy business-driven economic model that is self-sustainable, rewards investment risks and creates the competitive dynamics and entrepreneurial behaviour to the benefit of the users.