# EUR-Lex - 52013DC0634 - EN

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# 52013DC0634

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the Telecommunications Single Market /* COM/2013/0634 final */**

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COMMUNICATION FROM THE COMMISSION TO
THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

on the Telecommunications Single Market

1.           Political and economic
context

Substantial
progress towards a European single market for telecoms is essential for Europe’s strategic interests, and economic progress; for the telecoms sector itself; and
for citizens who are frustrated that they do not have full and fair access to
telecoms services such as internet and mobile services.

The importance
of reliable and fast access to the internet will increase with the prevalence
of cloud computing. This requires the availability of high quality networks,
which can only be provided by a healthy telecoms sector, making this a
strategic interest for Europe.

Similarly Europe’s strategic interest is served by having its own capacity to deliver secure cloud
computing services to citizens and by retaining significant telecoms equipment
production capacity. Both depend on a dynamic telecommunication sector willing
to invest in 4G mobile and high-speed fixed access networks.

The
overwhelming majority of citizens, business, government and entrepreneurs are
increasingly dependent on telecoms connectivity. Today in Europe, however, they
are subject to something of a lottery when it comes to access to these
services, despite 26 years of progress in reforming Europe’s national telecoms
markets and creating the foundation for a telecoms single market.

The internet
economy itself occupies an increasing share of GDP, while effective
connectivity and internet innovations are now essential for productivity growth
in all economic sectors — from healthcare, to energy, to public services.
Fixing the telecoms sector is therefore no longer about this one sector (which
makes up just 9% of Europe’s digital economy), but about supporting the
sustainable development of all sectors.

A further
significant step forward in the development of the telecoms single market would
provide a much-needed boost to the economy, by helping promote new sources of
economic growth (such as the app economy, which has generated 794,000 new jobs
– nearly half as software developers – since 2008), drive innovation, create
new and sustainable jobs, and restore Europe’s competitiveness.

It is with
this in mind that the European Council of March 2013 asked the Commission to
present concrete measures to establish the single market in information and
telecommunications technology as early as possible. Today's proposals address that
commitment by the Commission.

The electronic
communications sector operates at a global scale, with the web (and the services
that trade on it) going beyond the EU's borders. It is important that the
present initiatives be seen in the context of developments elsewhere; and that
electronic communications and digital services delivery be given due attention
in specific sectoral agreements or in trade and investment negotiations with
our main partners.

2.           26 years of telecoms
regulatory reform

In just over a
generation, thanks to the EU legal framework, Europe's telecommunications
landscape has liberalised from static public service monopolies to a dynamic
and competitive sector. Starting from the 1980s, successive packages of
European legislation have unbundled networks, promoted competition and choice,
capped the cost of mobile roaming, given consumers important new rights, and
encouraged convergent and coherent application of the common framework.

Moreover, the
application of EU competition law has been instrumental in ensuring that
markets operate competitively, bringing lower prices and better quality of
service to consumers throughout the EU.

These changes
in EU telecoms legislation have sought to adapt to the breakthrough shifts in ICT:
first mobile telephony, and then the Internet. Today, the telecommunications
sector is the backbone of digital products and services which have the
potential to support all aspects of our lives, and drive Europe's economic
recovery.

The EU's
efforts to promote a sound regulatory environment and to support competition have
long underpinned changes in the sector. With breakthroughs like the GSM and
UMTS standards, the EU created the terrain for Europe and its industrial
players to lead the world. Over time, liberalisation has brought competition,
fairer prices and real choices to citizens and businesses within national
markets. As markets become more competitive, European and global, the
regulatory framework needs to evolve as well.

The existing
regulatory framework, put forward by the Commission in 2007 and focused on strengthening
European oversight and consistency of national market regulation, has served
its objectives well. However, more recently, and looking beyond Europe's
borders, strong operators in the USA, Japan and South Korea have invested
heavily in providing fast broadband connections (fixed and wireless). In such a
global context, it is important that Europe does not fall behind. Also, a
changing economic and technological climate and the impact of the economic and
financial crisis have led to fast and accelerating changes in the global
telecoms sector, including significant restructuring. And new demands and new
applications for data-driven services are strengthening the single market
imperative, as a strong position of the European ICT sector (especially
telecoms), and broadband coverage, in comparison to other countries, are key
for the competitiveness of the European economy. This is felt particularly at
this moment in time when Europe is seeking new ways to grow out of the crisis.

The telecoms
sector should prosper by enabling the whole economy to prosper; it is
unsustainable that it seeks to prosper by frustrating the connectivity needs of
the wider economy, with business models that thrive on scarcity rather than
plenty. Therefore decisive action is needed now to allow a restructuring of the
sector, to avoid being confronted by its inevitable further decline.
Maintaining the status quo is not an option.

3.           Barriers to the single
market

The European
Commission is determined to maintain and further expand the benefits of
telecommunications for business and citizens. But despite all the progress made
so far, the sector continues to face a range of obstacles, barriers and
challenges which together mean that the full benefit of the single market is
far from realised. A recent study showed that, if the internal market for
electronic communications were completed, the EU's gross domestic product (GDP)
could grow by up to 110 billion euros a year.[1]

Overall, the
telecoms sector still bears the legacy of former, national monopolies, largely
operating on national lines. Some large telecommunications companies are
present in several Member States; but none is present in all. For the most part
mobile operators have merely a national footprint; for many fixed operators it
is even more localised. Those who do operate in several Member States must work
under separate rules, according to the sometimes diverging requirements and
remedies of different regulators, and needing distinct authorisations in each
Member State. In addition, often operators active across several Member States
do not behave as truly European operators, and appear content to run their
activities separately in each Member State. The market includes over one
thousand fixed operators, and several hundred mobile operators, which, despite
often belonging in larger groups, operate on a national basis. At the same time
the sector is increasingly global in nature and depends on scale to be
profitable.

The lack of a
single market also shows itself distinctly in pricing. For example the cost of
calling another EU country, or of using a mobile device in another EU country,
is often much higher than domestic rates, owing to voice and data roaming
charges and "international" (intra-EU) call rates. Such charges are seen
as unfair by many citizens, and also constitute a practical impediment to
exercising single market freedoms.

Furthermore, consumers
are likely to feel more confident to take up offers from operators established
in other Member States, if they know that they can rely on the same set of
rules: for example rules on transparency, contractual terms, facilitating
"switching" of operators, and rules to prevent the blocking or
throttling of online services, as part of measures to ensure access to the open
internet. Dispersed national efforts to safeguard consumer rights may be a
cause for further single market fragmentation.

Meanwhile differences
in the timing, the conditions and the costs of procedures for acquiring
spectrum chill investment, and make it hard to develop integrated wireless
networks between countries. More timely and predictable spectrum availability would
allow more widespread and affordable broadband connections in Europe, but
remains too often locked into regulatory structures at national level.

And divergent
regulation of fixed networks often means overregulation, or regulatory uncertainty
and unpredictability, making it hard to plan investment in fast, "next
generation" broadband networks.

With more
harmonisation within the Single Market, Europeans would benefit from more
extensive fast broadband coverage, and more innovative new digital services.
These fast telecommunications networks are also essential inputs for many other
sectors, public and private. A strong and dynamic telecoms sector is essential
if Europe is to exploit new innovations such as cloud computing, new tools that
use "big data", connected cars, smart manufacturing, the Internet of
Things, smart cities, modernised public administrations, e-Health, e-Education,
and so on. As such, high-speed networks could become the foundation of a
thriving European digital ecosystem.

In short, the
sector suffers from fragmentation along national borders; a lack of regulatory
consistency and predictability across the Union; unfairly high prices for
specific services; and a lack of investment. Addressing these problems is
essential to ensuring European jobs, productivity and growth. A competitive telecoms
single market would help resolve such problems.

4.           Towards a single market
in telecommunications

A genuine
single market in telecommunications means a market where:

- Consumers can
obtain services from any EU operator, without discrimination, regardless of
where they are based;

- Operators are
able to competitively offer services outside of their home Member State, and market to consumers based throughout the EU;

- Excessive
charges for intra-EU calls, or when using a mobile elsewhere in the EU, are
removed.

This is the
end goal towards which the European Commission has for some time been working,
resulting in the regulatory framework of today. It ultimately implies the
gradual removal of national barriers to cross-border competition, including
different national sector regulations, different national consumer laws
relating to telecommunications contracts, and different national conditions for
allocating and assigning spectrum. It also implies a framework that is more
consistent, stable, legally certain, competitive, with a greater degree of harmonisation,
and more conducive to investment: ensuring more choice, faster broadband, and
better cross border services.

The Commission
remains of the view that a genuine single market in line with this vision will require
a single EU regulator responsible for interpreting and implementing a
harmonised legal framework. It would also require a single system for imposing
regulatory remedies, and possible further harmonisation of spectrum allocation
and assignment.

It is clear
however that the process of building a single market in telecoms – as in other
sectors – is a gradual process depending just as much on the behaviour of market participants as on the intervention of
regulators.

The proposals
put forward today represent an important intermediate step towards that
ultimate goal of a fully integrated single market by addressing some of the
barriers whose removal can help ensure the sector plays its full part in the
urgent quest for growth. The approach is grounded in the existing
telecommunications framework and focuses on the cross-border issues faced by
operators and consumers, and tackling obstacles to investment. This approach
involves identifying specific changes to the current framework, as intermediate
steps that jointly create a "tipping point" to allow the market to
evolve towards a pan-European single market.

In practice,
this involves:

· 
addressing some of the divergences of
interpretation between national regulators, increasing cooperation among them
and continuity in governance, and strengthening the Commission's role;

· 
addressing the problems consumers face in a
fragmented European market by introducing certain common consumer standards;
removing charges for incoming calls while roaming, as well as unjustified surcharges
for intra-EU calls; incentivising the market conditions that can lead to a
rapid phasing out of roaming charges in Europe altogether; and introducing new,
common consumer protections, including to safeguard access to the open internet;

· 
Offering new business opportunities to the telecom
sector, making it less complex to invest in networks and provide and guarantee
services across borders; and harmonising essential technical "inputs"
(e.g. spectrum for wireless networks, access to networks for fixed broadband);

· 
Strengthening the European dimension of the current
system of national regulators. The Commission proposes as an intermediate step
to strengthen the role of the Chair of the Body of European Regulators (BEREC),
creating a 3-year full time post, to ensure more strategic planning and greater
continuity.

At the end of
the negotiations on the 2009 review of the regulatory framework, the Commission
made a formal commitment to act in the area of open internet access. Even since
then, and certainly since the framework was originally designed, the importance
of internet access has grown enormously, to the extent that it has become a key
part of economic, social and cultural activity. As such it has also become the
central and most valuable service provided by network operators and internet
service providers. There are four reasons why action on open internet access is
needed now. First, as it stands there are no effective EU-wide guarantees of
open access; and there is clear and ample evidence of services being blocked or
"throttled" (degraded), harming the interests of consumers and of
those content and application providers that face the risk of being blocked. Second,
telecoms operators and content and applications providers are developing
"specialised services" whose social and economic value depends on
guaranteed quality – for IPTV, for eHealth applications such as high-resolution
medical imaging, for videoconferencing, for business-critical data-intensive
cloud applications. These innovations offer opportunities for new economic
activities, but they require a European regulatory framework which provides
clear conditions for the development of these services, in conjunction with a
thriving internet ecosystem. Third, national regulators do not currently have
sufficient powers under the European telecoms framework to intervene to
sanction blocking or other unreasonable traffic-management practices, or to
maintain the vitality of the open Internet. Fourth, national policy makers are
starting to address this issue with a range of divergent approaches, opening a
new risk of fragmentation within the single market and a new challenge for
integrated network management. The draft Regulation seeks to address these
issues in a balanced and effective manner.

5.           Addressing investment and
competition

The
Recommendation on Costing Methodologies and Non-Discrimination is the second
element of this package, which complements the proposed regulation and is
intrinsically linked with it. It focuses more directly on investment, and on
further harmonisation of costing methodologies. The objective is for Europe to step up its investments in broadband. This objective is essential to maintain
global competitiveness, but investment is held back by legal uncertainty, and
divergences between regulators. More consistent and predictable regulation and a
more stable regulatory environment can be reached by (1) further harmonising the
costs that incumbents may charge for giving others access to their copper networks;
and (2) ensuring that "access seekers" have truly equivalent access
to networks. Where such competitive constraints and non-discrimination are
ensured, the prices for "next generation" products would be
determined by the market rather than being regulated; while the prices for
access to copper networks would remain broadly stable, and would not
artificially undercut those for the networks of the future.

As it stands, inconsistent
application of rules creates legal uncertainty for all market players, and
barriers to the internal market. Legal certainty is particularly important given
that investment in fast broadband networks incurs significant costs, while demand
for the end product remains uncertain.

The
clarifications provided in the Recommendation will therefore be pivotal to lift
uncertainty: incumbent operators and access seekers alike will have clarity on
the prices charged for network access.

6.         Roadmap to the completion of the single telecoms
market in the medium term

It is expected
that the medium term effects of the proposed legislation will be increased
freedom and opportunities for market participants, and a trend towards greater
consolidation of the sector. Intensified competition as Europe moves further
towards a real single market could be expected to lead, over time, to a
reduction in sector-specific regulation based on market analysis. Indeed, one
of the results of developing the Single Market should be a greater tendency
towards effective competition on relevant markets, with ex post application of
competition law increasingly being seen as sufficient to ensure market
functioning. Over time, as a genuine single market for electronic
communications emerges, the geographical scope of markets will also need to
evolve, for the purposes of both sector-specific regulation based on
competition principles and the application of competition law itself.

As a further
contribution, the Commission will work on a revision of the Recommendation on
relevant markets to ensure that, as competition develops, the ex-ante
regulatory burden on operators is reduced appropriately.

Further steps
will be needed to complete the single telecoms market, notably through a
greater coordination of regulatory remedies. To this end, the Commission will
take the necessary steps to prepare the ground for the next Commission mandate,
both utilising the existing tools provided by the regulatory framework, and by
preparing a review of how the existing mechanisms for ensuring regulatory
consistency might be further enhanced. This review, which will involve a broad
public consultation in due time, should also examine the utility of a single EU
telecoms regulator. The review could also address the level playing field
between the rules that apply to "over-the-top" online services
compared to telecoms services; and emerging issues around convergence between
audio-visual and telecommunication services and markets.

7.           Conclusion

The
Commission's vision is for the EU to enjoy a dynamic and competitive telecoms
sector. This would feature a number of strong operators, active across several
Member States and also outside the EU, alongside a larger number of smaller,
more local companies: all of them offering state-of-the-art infrastructure or
services. It will provide the infrastructure and services needed for a thriving,
open digital economy, boosting European digital growth, jobs and opportunities.

With this set
of measures, the Commission reiterates its commitment to the broadband targets
of the Digital Agenda for Europe, which could be provided by a mix of operators
(incumbent and alternative, fixed-line and wireless), offering a wide and
competitive range of choices of high-quality services and content. Such
broadband coverage is essential for new online services to gain critical mass:
from smart grids and smart cities to universal cloud computing, or the Internet
of Things. It would also position Europe in the digital forefront, with the
modern digital infrastructure for its citizens to exploit the full potential of
the internet, and for its businesses to compete globally.

Given the
above context, the Commission calls upon the European Parliament and the
Council to examine and adopt the proposed carefully targeted Regulation as a
matter of highest political priority.

[1]               Ecorys, TU Delft et al., Steps
Towards a Truly Internal Market for e-Communications, 2013.