COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251 (2) of the EC Treaty concerning the common position of the Council on the adoption of a Directive of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services

1. Background

In July 2000 the Commission submitted the proposal for a Directive of the European Parliament and the Council on a common regulatory framework for electronic communications networks and services COM(2000)393 - C5-0428/2000 - 2000/0184 (COD) for adoption by the co-decision procedure laid down in Article 251 of the Treaty establishing the European Community [1].

[1] OJ C 365, 19.12.2000, p. 198.

The Economic and Social Committee delivered its opinion on 24 January 2001 [2].

[2] OJ C 123, 25.4.2001, p. 56.

The Committee of the Regions informed the Council and the European Parliament, by letter dated 16 February 2001 that it would not deliver an opinion on the subject.

On 1 March 2001, the European Parliament adopted a series of amendments at its first reading [3].

[3] OJ C

On 4 July 2001, the Commission adopted its amended proposal incorporating in whole, in part or in principle many of the amendments voted by the European Parliament in its first reading, in accordance with Article 250 of the EC Treaty [4].

[4] OJ C

The Council, in accordance with Article 251 of the EC Treaty, adopted its common position on this proposal for a directive on 17 September 2001 [5].

[5] OJ C

This Communication sets out the Commission's opinion on the common position of the Council, pursuant to the third indent of Article 251(2) of the EC Treaty.

2. Aim of the Commission Proposal

This proposed Directive aims to establish a harmonised regulatory framework for electronic communications networks and services across the EU. It seeks to respond to the convergence phenomenon by covering all electronic communications networks and services within its scope. It sets out a number of principles and objectives for regulators to follow, as well as a series of tasks related for example to the management of radio spectrum and numbering resources and rights of way. Finally, it contains a number of horizontal provisions common to more than one measure in the package, including dispute resolution, market definition and analysis, as well as the provisions establishing the new definition of undertakings which have 'Significant Market Power', based on the competition law concept of dominance.

3. Commentary on the Common position of the Council

3.1. Summary of the position of the Commission

The Commission is unable to support the Council's common position. The common position weakens crucial parts of the Commission's proposal, which were strongly supported by the Parliament in its first reading. The main reason for not accepting the common position was the amendments made by Council to Article 6 (the consultation and transparency mechanism), and related Articles, and the Commission therefore made a Declaration to this effect which is reproduced in the attached Annex. But the Commission also has a number of other reservations about the common position. These points are set out in more detail below.

Nevertheless the Commission notes that several of the Parliament's amendments have been taken on board in part or in principle, and many of the changes introduced by the Council strengthen or clarify the Commission's original proposal, without undermining the principles behind it.

3.2. Amendments adopted by the European Parliament at its first reading

3.2.1. Amendments of the European Parliament

The European Parliament adopted at first reading 77 amendments to the Commission's original proposal (amendments 12 and 14 were withdrawn before the vote).

As a result of the European Parliament's opinion, the Commission introduced several substantive amendments in its amended proposal.

In its amended proposal, the Commission incorporated 47 of the European Parliament's amendments, either in full, in part or in principle: amendments 1, 2, 3, 4, 6, 7, 9, 10, 11, 13, 15, 17, 19, 21, 22, 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 40, 45, 46, 47, 48, 53, 54, 55, 57, 58, 59, 60, 61, 65, 66, 67, 68, 69 and 75.

3.2.2. Amendments of the European Parliament accepted by the Commission and included in the common position

The following amendments, accepted in full, in part or in principle by the Commission in its amended proposal, have been retained by the Council in its common position: amendments 1, 3, 4, 6, 9, 10, 11, 13, 15, 19, 28, 31, 36, 37, 38, 40, 45, 47, 48, 55, 57, 58, 59, 60, 61, 66, 67, 68 and 69.

Of the amendments retained, there have been minimal or partial adjustments to some, while others have been significantly modified, although the underlying objective of the European Parliament's revisions has nevertheless been maintained. Substantive changes are explained below.

3.2.3. Amendments of the European Parliament accepted by the Commission but not included in the common position

The following amendments were accepted in full, in part or in principle by the Commission in its amended proposal but not included by the Council in its common position: amendments 2, 7, 17, 21, 22, 25, 27, 29, 30, 32, 33, 34, 35, 46, 53, 54, 65 and 75. Amendments 2, 27, 29, 32 and 75 were not accepted by the Council because the operative parts of the text to which they related were deleted in the common position. This is dealt with in more detail in section 3.2.4 below.

Amendments 7, 53 & 54 (rights of way)

Parliament's amendments sought to strengthen the rights of undertakings in securing the necessary rights of way for the roll out of infrastructure. The Commission's amended proposal made some modifications to the drafting, in particular to ensure that nothing in the text could be interpreted as contrary to Article 295 of the Treaty on property ownership. The Council was unable to accept any of the European Parliament's amendments here, although the text has been improved in the Commission view in other areas, in particular the enlargement of the scope to cover private networks.

Amendments 17 & 21 (definitions)

The Council did not include powerline systems in the list of examples in the definition of 'electronic communications service', but in any case the Commission considers that such systems are clearly covered. The Council also did not take on board the definition of trans-national markets, but it is clearly defined in Recital 27.

Amendment 22 (NRAs)

The Council did not consider that the Parliament's proposal to add a requirement for a national regulatory authority to be able to act freely was necessary, in view of the general requirement for independence which already exists. The Commission considered the Parliament's text a useful clarification, but does not think it is essential.

Amendment 25 (one-stop shop for consultations)

The Commission had included the principle behind the one-stop shop requirement in Article 6(1), but the Council did not include it in the common position. The Commission considered the Parliament's amendment a useful additional aid for transparency, but agrees with Council that the provisions of Article 3(4) are probably sufficient.

Amendment 30 (provision of information)

Council could not agree to include the far-reaching powers of inspection and penalties proposed by the Parliament and accepted by the Commission, arguing that the provisions of Article 5(1) were sufficient.

Amendment 33 (transparency mechanism)

Council could not accept those parts of this amendment that the Commission included in the amended proposal. Article 6 is one of the principal areas of disagreement between the Commission and the Council and is further discussed below.

Amendments 34 & 35 (objectives)

The Commission considered both these amendments helpful clarifications, but the Council did not consider either necessary, arguing that the provisions of Article 7(1) were sufficient.

Amendment 46 (co-ordination of radio spectrum decisions)

The Commission had accepted the principle of this amendment and had included text in recital 19 to ensure that radio spectrum management was carried out in a co-ordinated fashion (building on its proposal to include radio spectrum decisions within the scope of the transparency mechanism). Council could not accept this text (nor could it accept the scope of the transparency mechanism as proposed; see section 3.2.4 below)

Amendment 65 (standardisation)

The Commission considered this a useful strengthening of the text, but the Council did not accept it. But since compulsory implementation of standards can only take place after public consultation and on the proposal of the Commission, the text of the common position is acceptable to the Commission.

3.2.4. Differences between the Commission's amended proposal and the Council's common position

Recitals

The Council has added new recitals and amended many of the existing recitals in order to increase the clarity of the text, to be consistent with amendments to the Articles of the directive, or to emphasise certain key provisions. In particular the Council has introduced recitals stressing the importance of content regulation, environmental and other policy objectives, as well as public security issues.

Article 1 - Scope and Aim

The Council has added a new paragraph 3 dealing with audiovisual policy and content regulation which is substantially the same as the European Parliament's amendment 15 (an amendment which the Commission accepted in part and in principle by adding similar text to Recital 5). The Commission maintains its position that this new paragraph is unnecessary .

Article 2 - Definitions

The common position leaves the definitions broadly unchanged, although it has included a few further definitions in order to bring greater clarity to the text.

Article 3 - National Regulatory Authorities

The provisions of this Article are not substantially changed, except for some clarification of consultation and co-operation between NRAs and national competition and consumer authorities.

Article 4 - Right of appeal

Member States could not support an explicit provision in the Article to the effect that appeal procedures should consider the merits of the case (and indeed also deleted the corresponding text in the Commission's proposal, on the grounds that this was a matter for subsidiarity and could lead to the appeal body becoming a shadow regulator). Neither could the Council accept the Commission's proposal that the appeal body should be independent of government. Finally the Council could also not accept the Parliament's qualification of the requirement for an NRA's decision to stand pending outcome of the appeal, because this provision has also been deleted. The Commission believes these amendments substantially reduce legal certainty for the sector, and as such cannot support them.

The Council has also deleted paragraphs 2 and 4 in the common position.

Article 5 - Provision of information

The Council's common position seeks to balance two competing concerns, which were already contained in the Commission's original proposal: confidentiality and transparency. Broadly, the principles and substance of the Commission's proposal is maintained and as such the Commission can support the text therein. The Council's common position reinforces the provisions on confidentiality, but does so without undermining the necessary provisions on transparency and exchange of information.

Article 6 - Consultation and transparency mechanism

This Article establishes requirements for NRAs to consult at national level on draft decisions and sets up a so-called 'transparency mechanism' whereby the Commission would have the powers in certain circumstances to require an NRA to amend or withdraw its draft decision. This provision is justified because of the much greater degree of freedom enjoyed by Member States in deciding in which markets regulatory obligations are justified, which obligations to impose and on which market players. The Commission considers this Article to be a critical part of the new framework in terms of ensuring that regulatory action is consistent across the EU. The common position makes substantial changes to this Article, which in the Commission's view significantly weaken the content and reduce the likelihood of consistency of regulation.

First the Council has narrowed the scope of the transparency mechanism by removing radio spectrum matters from the text. Especially in the light of the recent difficulties in the 3rd Generation mobile market, the Commission cannot support such a change. Second the Council has replaced the Commission's binding ex ante power to require a NRA to amend or withdraw a measure with the publication of a non-binding 'detailed opinion'. The Commission does not believe that this non-binding opinion would be effective in preventing national decisions being taken that were contrary to Community law.

Article 7 - Policy Objectives and Regulatory Principles

The common position makes various changes to the Commission's amended proposal. Some amendments add objectives, for example relating to network security and integrity. Several of the changes go in the direction of the amended proposal, for example where part of the text on technological neutrality has been moved to a Recital. The Council also includes a new paragraph which sets an objective for regulators to contribute within their competencies to the achievement of policies aimed at cultural and linguistic diversity and media pluralism, which address the concerns behind certain Parliament amendments (42 and 43) not taken up in the Commission's amended proposal.

The one area where the Commission has some reservations is the change which removes the obligation for the objectives in this Article to be the only objectives for NRAs in areas covered by the new framework. The Commission is concerned that the absence of such a provision is likely to reduce consistency of regulatory action.

Article 8 - Management of radio spectrum for electronic communications services

The key changes to this Article have already been mentioned in the context of Article 6: the removal of radio spectrum matters from the scope of the transparency mechanism. Otherwise the changes made are consistent with the amended proposal.

Article 9 - Numbering, naming and addressing

Council has decided to delete the provisions relating to cross-border access to non-geographic numbers in this directive and include them, with some amendments, in a new Article in the Universal Service directive.

Article 10 - Rights of way

The Council has redrafted the text of this Article in its common position, but in substance it remains broadly the same as in the Commission's original proposal. In addition the scope of the Article has been broadened to include private network operators, which the Commission welcomes.

Article 11 - Co-location and facility sharing

One paragraph has been deleted in this Article, but the Commission is satisfied that its deletion does not affect the effectiveness of the provision.

Article 12 - Accounting separation and financial reports

Similarly, this Article has been modified to clarify the text but not substantially amended. The only change has been to delete one paragraph which the Commission agrees duplicated the text of Article 5.

Article 13 - Undertakings with Significant Market Power

The notion of significant market power is a crucial one in the new framework. The changes made in the common position improve the clarity of the text, while ensuring that it remains based on the competition law concept of dominant position. The Council's main concern was to ensure that regulatory authorities would have sufficient certainty to apply the concept of joint dominance in oligopolistic markets where there were no economic links between the undertakings concerned. The Commission's draft Guidelines [6] were helpful in this regard, but the Council has also added a new Annex II to the directive to set out in more detail the characteristics of markets where joint dominance is likely to be able to be found.

[6] http://europa.eu.int/ISPO/infosoc/telecompolicy/en/com2001-175-5en.pdf

Article 14 & 15 - Market definition procedure & Market Analysis procedure

Article 14 has been split into two separate Articles: Article 14 which deals with market definition, and Article 15 which addresses the analysis of effective competition. Most of the changes made aim at clarifying the text, particularly the relationship with competition jurisprudence, but do not fundamentally change the substance.

But the common position has replaced the Commission Decision on Relevant product and service markets with a Recommendation. Only in pan-European markets (defined in an addition to Recital 27 as 'a trans-national market covering the whole of the Community or a substantial part thereof') is a Commission Decision maintained. The Commission is concerned that this change, taken with the weakening of Article 6, will substantially reduce the Commission's ability to ensure legal certainty for undertakings via consistent regulatory action across the EU.

Article 17 - Harmonisation procedures

The common position clarifies the scope of binding harmonisation measures by referring to 'technical implementing measures' and making clear that they apply only to Article 9(4) of this directive (on numbering harmonisation). The Commission considers that technical implementing measures may be necessary in areas other than those specifically mentioned, in order to ensure consistent application of EU rules by NRAs.

Article 18 - Dispute resolution between undertakings

The timeframe for resolution of disputes has been lengthened to four months. The Council has also introduced a new paragraph to give regulators powers to decide not to resolve disputes if they believe that alternative mechanisms such as mediation would be more effective, but the Article sets clear time limits on such alternative mechanisms and requires the NRA to resolve the dispute should such mechanisms fail.

Additionally, the common position replaces the list of objectives in the original proposal with a reference to Article 7 of this directive, which is a useful clarification from the Commission's perspective.

Article 19 - Resolution of cross-border disputes

The Common position removes the power for the Commission to take decisions resolving disputes, in the light of legal advice that this could cause problems given the legal base for the directive. The Commission can accept this conclusion, although it continues to have doubts about the efficacy of the provisions as drafted.

Article 21 - High Level Communications Group

The Council has deleted the provisions related to the High Level Communications Group, on the advice of the Council Legal Service. The Commission can reluctantly accept this, and will examine the possibility of setting up such a group at its own initiative.

4. Conclusion

Overall, the Council common position takes on board many of the concerns expressed by the European Parliament in its first reading, and in most respects remains close to the principles behind the Commission's original proposal. But in crucial areas concerned with ensuring consistency of regulation and a harmonised single market, which the Parliament has made clear that it also considers essential, the Commission believes the common position is deficient. Consequently the Commission does not support the Common Position of the Council.

Annex

Text of the Commission's Declaration at the 4 April Telecommunications Council

"The Commission takes note of the unanimous decision of the Council. It regrets that the Council was not able to agree to include Member States' decisions on frequency issues within the scope of the transparency and consultation procedure in Article 6 of the Framework directive, particularly in the light of the statement in the conclusions of the Stockholm European Council that "the Commission will work together with the Council towards a supportive policy framework for third-generation mobile communications within the Union, including agreement on a regulatory framework for radio spectrum policy".

The Commission also regrets the changes made to its original proposal for Article 6, that result in the Commission no longer having the possibility to require a national regulatory authority to amend or withdraw a draft national measure that is incompatible with the proposed new regulatory framework for electronic communications."