Annexes to COM(2006)28 - Market Reviews under the EU Regulatory Framework - Consolidating the internal market for electronic communications - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2006)28 - Market Reviews under the EU Regulatory Framework - Consolidating the internal market for electronic communications. |
|---|---|
| document | COM(2006)28  |
| date | February 6, 2006 |
5.1 Fixed networks and services
In all Member States, the incumbent has continued to be dominant on the market for retail “access” – i.e. connection to a fixed telephony network enabling calls and related services to be made and received. However, competition is gradually emerging on both the domestic and international calls markets. This process has been facilitated by the application of appropriate remedies (notably carrier selection/pre-selection[16] and wholesale line rental[17]) and the introduction of competing technologies, in particular VOIP.[18],[19]
Wholesale markets, conversely, have shown few signs of sustainable competition save, in certain limited cases, for the market for transit services.[20] The provision of call origination, which is needed by alternative operators to enable them to provide their own retail telephony and dial-up Internet services, is still an enduring bottleneck for competition. However, where effective remedies are applied at this level, they help to develop sustainable competition in the downstream retail (calls) markets, thereby enabling retail regulation to be phased out. As regards wholesale termination (services which operators buy from each other to enable their customers to make calls to different networks), all operators, irrespective of their size, have been found to be dominant, since, in line with the Recommendation, each operator’s network constitutes a separate market on which it has a monopoly for terminating calls. Regulators have been able to reflect differences in the size of operators by imposing lighter remedies on smaller ones (i.e. by applying “asymmetric” remedies). The Commission has supported this approach where justified. In addition, the Commission has been keen to ensure that remedies in this market are effective: for example, an accounting separation obligation can render internal transfers visible and complement other obligations, while cost controls may provide the necessary transparency and legal certainty for market players, as well as helping to reduce termination rates.
Finally, as regards the “last mile” of the telephony network, connecting it to the end user (otherwise known as the “local loop”), the incumbent has invariably retained its near 100% market share. Effective access (by means of “local loop unbundling”) and price regulation at wholesale level has been essential as a means of fostering the development of competition in the downstream markets, where alternative operators depend on local loop access to provide their services.
5.2 Mobile networks and services
Unlike fixed markets, the markets for mobile networks and services have proven to be generally more competitive and regulation is as such much more limited. There is no regulation at retail level, and wholesale regulation has on the whole been restricted to wholesale termination.
Three wholesale mobile markets have been identified, in accordance with the Recommendation: (1) access and call origination,[21] (2) call termination and (3) international roaming. Mobile call origination enables operators or service providers (sometimes known as “virtual” network operators or “MVNOs”) to supply calls to retail customers by using another mobile operator’s network. Call termination is the mobile equivalent of fixed call termination, and thus similar principles (as regards market analysis and remedies) apply. International roaming enables customers to make and receive calls when travelling abroad.
As regards the market for access and call origination, regulatory intervention has in the main proved unnecessary given the level of competition generally observed. However, a limited number of NRAs have nevertheless considered regulation necessary, where one mobile operator was found to have single dominance or two or more together found to be “collectively” dominant.
As was the case for fixed call termination, all mobile network operators have been found to have SMP in the market for mobile call termination, in accordance with the principle of “one network, one market”. Moreover, where MVNOs have the ability to set their own termination prices independently of the “host” network, they may also be found to be dominant.[22] The regulatory remedies imposed have led to a gradual reduction in mobile call termination charges, although this reduction has not been equally steep in all Member States.
As regards wholesale international roaming, no NRA had as yet notified this market on 30 September 2005. The market analysis requires cross-border data collection, on which NRAs are cooperating in the context of the European Regulators Group. In the meantime, the Commission has also created a website bringing together a sample of already published roaming tariffs of mobile telephony operators across the EU in a bid to contribute further to the transparency of roaming charges.[23]
5.3 Broadband and broadcasting
Wholesale broadband access or “bitstream” access enables alternative operators to provide broadband services to end-users by combining their own backbone network with parts of the incumbent’s network. Bitstream access is generally considered to be an essential stepping stone for new entrants towards investment in full-scale roll-out of their network on the basis of local loop unbundling (first through “shared” and then through “full” unbundled access). In all cases up to 30 September 2005, NRAs have required incumbents to provide bitstream access. This has helped competition, inter alia in the provision of retail broadband services, to flourish. Until now, the wholesale broadband access market has only comprised services based on the traditional telephony network (or “PSTN”) – i.e. ADSL. In order to include competing technologies (such as cable or satellite) within this market, the Commission has insisted both on evidence of a veritable cable or other technology-based wholesale product, and on evidence indicating substitutability between such wholesale product and ADSL.
The wholesale market for broadcasting transmission services is a market where NRAs have most deviated from the Recommendation. Lack of substitution between different platforms (cable, satellite or terrestrial) at wholesale level has led NRAs to subdivide the market by platform used. While the factual circumstances of the market appear to vary substantially across the EU, in most Member States the main bottlenecks for competition seem to arise in national analogue and digital terrestrial transmission systems. Consequently, only terrestrial transmission has so far been subject to market analysis and SMP remedies.
Conclusions and outlook to the future
The Commission considers that the market review process, including the Article 7 consultation mechanism, set up under the Framework Directive has led to more consistent regulation and therefore represents an important step towards the creation of an internal market for electronic communications .
The system of market reviews has ensured that regulation is based on a thorough economic analysis and is strictly limited to markets in which there is persistent market failure. This has resulted in better regulation. As regards the development of a joint European regulatory culture , it is important to point out that all NRAs follow a common methodological approach, based on EC competition law principles. A t ransparent consultation mechanism further contributes to this development.
Consistency has mainly been ensured in relation to where regulation is appropriate (the markets and the market position of players operating in them), but to a lesser extent which regulation (remedies) is appropriate. The Commission is currently working with NRAs to ensure that their discretion with regard to remedies is exercised in a consistent manner. |
Whereas certain markets have exhibited the characteristics of enduring bottlenecks, a number of markets have already become effectively competitive in several Member States, allowing existing regulation to be rolled back. For example, retail calls, mobile access and call origination and trunk segments of leased lines are markets where effective competition has been identified.[24] |
The consultation mechanism has created greater transparency in the regulatory process. The fact that market players are systematically consulted by the NRAs, the Commission takes a position in every case and all final documents are published are just some examples of this transparency.
The system of market reviews established by the regulatory framework has on balance proved to be a success. Even though it necessitated some initial investment in analytical and organisational capacities on the part of the NRAs and the Commission, it has led to an approximation of regulatory approaches and has thereby helped to pave the way towards an internal market for electronic communications. It has also ensured that all regulators base their decisions on sound economic considerations and that regulation of markets for electronic communications has been kept to the minimum necessary.
Although a large number of national markets remain subject to regulation there are signs of sustainable competition in other markets. This is true in particular of retail markets, but it is conditional on the effective enforcement of regulatory remedies at wholesale level or on the existence of alternative infrastructure. The introduction of new technologies may create additional competitive pressure, which can lead to less of a need for regulation.
The Commission will look for ways, in the context of the review, to decrease the administrative burden on companies and NRAs and to streamline procedures even further. The Commission has launched a call for input on the review of the regulatory framework, which also covers the market review procedures.
[1] Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (the “Framework Directive”), OJ L 108, 24.4.2002, p. 33.
[2] These objectives are set out in Article 8 of the Framework Directive and cover promotion of competition, development of the internal market and promotion of EU citizens’ interests.
[3] http://forum.europa.eu.int/Public/irc/infso/ecctf/home.
[4] The Commission now plans to extend the availability of translations to the general public.
[5] Commission Recommendation 2003/311/EC of 11 February 2003 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with the Framework Directive, OJ L 114, 8.5.2003, p. 45 (the ”Recommendation”).
[6] Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services, OJ C 165, 11.7.2002, p. 6.
[7] Namely: (i) the presence of high and non-transitory barriers to entry, (ii) the absence of dynamic market conditions tending towards effective competition and (iii) the insufficiency of competition law alone to address adequately any related market failure. See further Recitals 9 to 16 of the Recommendation.
[8] See cases UK/2003/0035 – 0039 in relation to terminating segments of leased lines.
[9] Pursuant to Article 8(4) of the Access Directive.
[10] As in a case where mobile termination rates were only regulated for calls originating on mobile networks or abroad, but not for calls originating on fixed networks.
[11] As in cases where price regulation was not based on the most appropriate cost model or where choices of cost model and cost accounting rules were left to the undertakings concerned.
[12] As in a case where cost-oriented mobile termination rates based on an LRIC cost model were left to private negotiations between operators first, before the regulator intervened in the context of dispute settlement.
[13] This could be, for example, a benchmark or retail minus-based price control obligation, pending the adoption of a full cost model for cost orientation.
[14] See Commission decisions: COM(2004)527 in cases FI/2003/0024 and FI/2003/0027, COM(2004)3682 in case FI/2004/0082, COM(2004)4070 in case AT/2004/0090, and COM(2005)1442 in case DE/2005/0144.
[15] Pursuant to Article 7(6) of the Framework Directive.
[16] Facilities allowing customers to make calls using an operator other than the access provider either for each individual call (carrier selection) or systematically (carrier pre-selection). Under the Universal Service Directive, where an operator is found to have SMP “for the provision of connection to and use of the public telephone network at a fixed location”, NRAs must require the operator concerned to allow carrier selection and carrier pre-selection.
[17] Permitting alternative operators to offer retail access services together with call services to end customers. As opposed to carrier selection and carrier pre-selection, which must be imposed on operators having SMP on the relevant market, an obligation of wholesale line rental is imposed (where appropriate) at the regulator’s discretion.
[18] Voice over Internet Protocol: the transport of voice traffic using Internet Protocol technology. VoIP traffic can be carried on a privately managed network (“IP telephony”) or the public Internet (“Internet telephony”).
[19] The Commission contributed to the emergence of VOIP technology in 2003 through the financial instrument of the Multi-Annual Programme (MAP) managed by the European Investment Fund.
[20] Conveyance and/or switching or routing of calls.
[21] As compared with fixed telephony, where access and call originations are delineated separately.
[22] The point made above in relation to fixed networks and services on the effectiveness of remedies is equally applicable to mobile call termination.
[23] IP/05/1217, 4 October 2005.
[24] These developments will be taken into account in the review of the current list of 18 markets in the Recommendation. For further details of competitive markets where no SMP regulation is applied see Annex I.