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 universal services and users' rights relating to 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 universal services and users' rights relating to electronic communications networks and services COM(2000) 392 final - C5-0429/2000 - 2000/0183 (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. 238.

The Economic and Social Committee delivered its opinion on 1 March 2001 [2].

[2] OJ C 139, 11.5.2001, p. 15.

The Committee of the Regions delivered its opinion on 14 December 2000 [3].

[3] OJ C 144, 16.5.2001, p. 18.

On 13 June 2001, the European Parliament adopted a series of amendments at its first reading [4].

[4] OJ C ...

The Council reached political agreement on a common position at the Telecoms Council meeting of 27 June. 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 second subparagraph of Article 251(2) of the EC Treaty.

2. Aim of the Commission Proposal

The universal service and users' rights directive aims to ensure the provision of universal service for public telephony services in an environment of greater overall competitivity, with provisions for financing the cost of providing universal service in the most competitively neutral manner. It also establishes rights of users and consumers of electronic communications services, with corresponding obligations on undertakings. It aims to ensure interoperability of digital consumer television equipment and to ensure the provision of certain mandatory services, such as leased lines. It recognises Member States' rights to designate specified radio and television broadcasts as having a 'must carry' status for distribution over certain networks in order to ensure universal availability of specified programming. The directive also ensures that network operators will handle calls to the new European regional code of +'3883' which has been assigned by the ITU to the European Telephony Numbering Space and requires operators to pass on location information to national emergency services.

3. Commentary on the Common position of the Council as compared with the opinion of the European parliament

3.1. Summary of the position of the Commission

The Commission can support the common position of the Council. There are no fundamental differences in the Council text from that proposed initially by the Commission. As was the case with the opinion of the European Parliament, the Council introduced many changes of detail and drafting. The original intentions of the directive, the scope of universal service, the level of protection of end-users, the regulatory measures and the major policy provisions remain, often re-formulated as an improvement and a clarification over the original proposal. The article numbers referred to in section 3.2.2 below have been modified to take account of new articles introduced into the directive, starting from article 17.

3.2. Modifications introduced by the Common Position of the Council as compared to the opinion of the European Parliament in 1st reading

3.2.1 Recitals

Recital 5a new (Network security)

Parliament's amendment 1 introduced a new recital, duplicating provisions from the Data Protection Directive, related to measures to safeguard security of networks and services. The Council's common position does not address these concerns in the universal service directive.

Recital 26 [ex-19]

Parliament's amendment 2 and the Council common position deleted identical text referring to undertakings with previous exclusive rights. The text proposed to be added by Parliament at the end of the recital and the text of the Council common position are similar in intent and objective albeit the Parliamentary amendment is more prescriptive and a specific mention is made of regulatory forbearance in emerging markets.

Recital 39 (ex-27)

The additional text proposed by Parliament's amendment 4 is fully reflected in the Council common position.

Recital 47 (ex-32)

The Parliament's amendment addressed the issue of co-regulation as an appropriate alternative to sector specific regulation. It mentioned that where co-regulation applied, the sector specific rules should be withdrawn and that such co-regulatory measures should be based on the same policy objectives as formal regulation. The Council common position did not mention co-regulation.

3.2.2 Articles

Chapter I: Scope, Aims and Definitions

Article 1 (Scope and Aims)

The common position text and the Parliament's amendments to Article 1 are compatible and mutually coherent. Commission considers that the Parliament's modifications to Article 1, to define clearly the scope and aims of the directive are parallel to the common position text. The common position text has substituted 'end-users' for users and consumers which the Commission considers is a better description of the coverage of the directive.

Article 2 (Definitions)

The common position text for article 2 clarifies the definitions used in the directive ensuring greater transparency of the coverage of the directive. Parliament's amendments to Article 2 would modify text that has now been deleted from the common position and propose a new term 'associated service' and its definition. The Commission considers the addition is not necessary. Article 2 of the common position text includes those definitions that are required for the directive.

Chapter II: Universal Service Obligations Including Social Obligations

The common position text modified the title of Chapter II to add the words 'including social obligations'. The Commission considers this change acceptable.

Article 3 (Availability of Universal Service)

Parliament's amendment introduced 'competitive neutrality' to the criteria for determination of how best to ensure implementation of universal service. The common position text for Article 3 added the word 'proportionality' to the criteria, while maintaining the principle of "least market distortion" in Article 3(2) and "without distorting competition" in Article 1. Universal service can impact both on competition between undertakings and on market prices to end-users, and the Commission considers that both aspects are covered in the common position text.

Article 4 (Provision of access at a fixed location)

The European Parliament proposed to add 'effective' to Internet access in the context of universal service obligations. The Commission prefers the common position text which requires 'functional' Internet access, and also introduced a detailed explanatory recital for this term. Parliament's second amendment to the article required Member States to take account of prevailing technologies in determining data rates. The Commission agreed that this is a relevant consideration for data rates and this is also reflected in the common position text. The Parliament also prescribed the principle that Member States shall not determine data rates in excess of those available to the general public. The Commission considers that the correct notion is that of rates actually used by the general public, which is reflected in the common position text.

Article 6 (Public pay telephones)

The Council text in Article 6 refers to 'reasonable needs' of end-users and clarifies the principle carried forward from existing legislation that Member States need not take specific action if public pay phones are already widely available, while introducing the requirement for a public consultation, all of which the Commission considered acceptable. Parliament's amendment was a drafting modification that has been overtaken by the re-formulation of the common position text, which the Commission considers to be a better reflection of the relevant principle.

Article 7 (Special measures for disabled users)

The common position text of Article 7 deals solely with disabled users while users with special social needs are addressed in Article 9. The re-arrangement of Articles 7 and 9 in the common position in no way changed the substantive provisions of the directive. Parliament's amendment 11 on users with special social needs now relates to the provisions of Article 9.

Article 8 (Designation of Undertakings)

The common position text and the European Parliament's proposal are identical in relation to the possibility for Member States to assign responsibility for coverage of universal service by services provided and by geographical coverage. Commission had welcomed the Parliamentary amendment introducing a public consultation procedure to the national process of designating undertakings to fulfil universal service obligations. Common position text does not contain any consultation procedure.

Article 9 (Affordability of tariffs)

European Parliament's amendment 11 proposed that Member States define users with special social needs following a consultation procedure, which the Commission welcomed as a useful measure for specifying the coverage of consumers with special social needs. The common position text does not provide for a consultation prior to defining users with special social needs.

Article 10 (Control of expenditure)

The texts of the European Parliament and common position of the Council for the first and second paragraphs of the article are very similar and compatible. The common position text added a new third paragraph to create flexibility for NRAs where the relevant facilities are widely available in the Member State whereas the European Parliament's opinion did not address the issue. The Commission supports the Council common position.

Article 11 (Quality of service of designated operators)

The Parliament's amendment to article 11 broadened the scope of quality of service information to measures for monitoring the quality of services for disabled users which the Commission accepted. The common position text does not include any specific mention of quality of service information for disabled users. However, Article 35 allows the related Annex on quality of service parameters to be adapted by comitology procedure. The Commission considers that the procedure for introducing adaptations to this annex could take account of the Parliament's proposed amendment.

Article 12 (Costing of universal service obligations)

The changes to the first paragraph of article 12 by both the European Parliament's opinion and the common position text are similar in effect although the Parliament's amendment imposes an obligation explicitly on national regulators to determine if the provision of universal service constitutes an unfair burden. Paragraph 2 has also been modified by both the European Parliament and the Council in similar ways with a clarification that national authorities bear the responsibility to ensure that calculations of net cost are transparent. The Commission considers that the Council common position text is clearer in defining the responsibilities and obligations of the national regulatory authorities.

Article 13 (Financing of universal service obligations)

Parliament's amendment to paragraph 1, to create an obligation to compensate operators if an unfair burden is imposed in fulfilling universal service obligations, is also reflected in the common position. The Parliament's explicit reference to examples of other specific funding has been included in a recital. The Parliament's suggestion to clarify that a combination of the two possible financing schemes may be used is reflected in the use of "and/or" in Article 13.1(a) of the common position text. Parliamentary and Council common position texts for paragraph 2 are identical.

Article 15 (Review of the scope of universal service)

Both the Parliament's amendment to paragraph 2 and the common position of the Council refer to specific factors to be considered in reviewing the scope of universal service; the Parliament mentions mobility and high output while the common position mentions mobility and data rates in the light of prevailing technologies used by a majority of subscribers. These criteria are equivalent although the Commission considers the common position text to be clearer. Both texts call upon the Commission to submit a report to the European Parliament and to the Council after conducting its review. The Parliament amendment additionally requires the review to be conducted with utmost transparency and consultation of all the parties concerned.

Chapter III - Regulatory Controls on Undertakings with Significant Market Power in Specific Markets

The principle of creating a new chapter III that deals solely with regulation of SMP operators in specific markets takes account of Parliament's amendment 25, 27 and 29 in which the Parliament called for a more general article covering retail regulation and which should also include leased lines, and where Parliament deleted 'tariff' from 'retail tariff controls' in several places.

Article 16 (Review of Obligations)

The common position of the Council restructured several provisions of the directive related to SMP obligations into a single chapter on regulatory controls. Paragraph 1 provides for review and carriage forward, until review by NRAs, of existing obligations relating to: retail tariffs for access to and use of the public telephone network; carrier selection and pre-selection; and the minimum set of leased lines defined under current legislation. These changes fully accord with Parliament's amendment 25. Parliament's amendment had called for the market failure to be 'durable' but this aspect is part of the evaluation conducted by NRAs under the procedure of article 14 of the Framework Directive.

Parliament's amendment to paragraph 2 to require NRAs to consult the public on any prospective regulation of retail tariffs was acceptable in principle to the Commission but is not included in Article 16.

Article 17 (Regulatory controls on retail services)

Parliament's amendment 25 related to what is now article 17 of the directive. Parliament's amendments and the common position of the Council are largely comparable, in that the NRA must first examine whether the obligations that may be imposed on SMP operators under the Access Directive would resolve the problems with competition prior to imposing obligations at retail level.

Parliament's amendment 26 introduced a new paragraph to the provisions on regulatory controls on retail services by requiring NRAs to impose wholesale regulatory controls in response to justified complaints demonstrating that users and consumers' requirements are not being met on a persistent basis. The Commission, while accepting the amendment in principle, considers that this amendment is already catered for in the common position text wherein national regulatory authorities must systematically examine whether competition is effective on retail markets and give preference to wholesale regulation where significant market power is identified. Assessments of retail markets under article 14 of the Framework directive necessarily include an evaluation of the position of consumers in those markets.

Amendment 27's addition of 'where appropriate' has been added to paragraph 3. Parliament's amendment 28, albeit more prescriptive, is comparable to the common position text of paragraph 4 that prescribes that NRAs may specify the relevant format and methodology and that NRAs should ensure that compliance statements are published annually.

Parliament's amendment 30 required a publication of details of discount schemes for SMP-designated undertakings that are obliged to practice cost-oriented prices which the Commission accepted in principle. Article 17 of the Council common position, together with the relevant recitals, enables national regulatory authorities to require transparency on tariffs for undertakings designated as having significant market power. Article 21 of the common position requires transparency on tariffs generally.

Article 18 (Regulatory controls on minimum set of leased lines)

Parliament's amendment to the original article 27, that has now been incorporated as article 18 into chapter III, was to require NRAs to carry out their review of retail markets on 'at least' an annual basis, while the common position text of article 16.3 requires such analyses to be performed 'periodically' after entry into force of the Directive. The Commission considers that the common position text provides the necessary flexibility without unduly constraining NRAs when evaluating competition in national markets.

Chapter IV - End-User Interests and Rights

Article 20 (Contracts)

The provisions of Parliament's amendment 31 are in part reflected in the common position text. The requirement for information to be specified before a contract is concluded is inherent in the common position text, while the requirement that prevailing prices and tariffs be included at the moment of concluding the contract is not one of the prescribed contractual items. Parliamentary amendment 32 changed 'users or consumers' to 'subscribers' while the common position text continues to refer to consumers until a contract has been concluded. In this respect, the common position text is coherent with the definition of subscriber in the Framework Directive. The common position text has added 'electronic' as inserted by amendment 32 but the common position text has not taken on the text referring to intermediaries which are already included within the scope of the article as originally drafted. Paragraph 3 has been amended to take account of amendment 33 to specify that, not only does a subscriber have a right to be informed of his/her right to withdraw from a contract upon notification of contractual changes, but has a right to be so informed at the same time as receiving the proposed contractual modifications. Amendment 34 is catered for by paragraph 1 of the common position text that recognises that, in addition to the provisions of the article, horizontal Community consumer protection measures for fair and transparent contract terms on behalf of all consumers are fully applicable.

Article 21 (Transparency and publication of information)

Parliamentary amendment 35 introduced a requirement for NRAs to ensure that 'accurate and up-to-date' information on applicable prices and tariffs is available to the public, 'particularly to all consumers and users'. The common position text refers to 'transparent and up-to-date' information, 'particularly to all consumers'. The Commission considers that the two texts are identical in effect and in scope. The reference to 'consumers' rather than to 'consumers and users' is merely a question of emphasis and does not reduce the scope of the article. Likewise, the use of 'transparent' in the common position and the Parliament's use of 'accurate' are similar in intention. The common position text contains no provision to require NRAs to publish regular reports on tariffs nor does it impose a requirement for NRAs to facilitate the development of interactive guides to permit consumers to compare tariff packages, both of which the Commission considered to be over-regulation.

Article 22 (Quality of service)

The common position text incorporated the provision of paragraph 2 requiring NRAs to take account of the views of interested parties prior to imposing publication of information. The Parliament's amendment 36 is therefore reflected in the common position.

Article 23 (Integrity of the network)

Both the common position of the Council and the European Parliament introduced new articles into the chapter to deal with network continuity and integrity. Parliament's additional provisions on security do not appear in the article, but rather in the data protection directive.

Article 24 (Interoperability of consumer digital television equipment)

Both the European Parliament and the common position text deleted the duplicative second paragraph of the article.

Article 25 (Operator assistance and directory enquiry services)

Parliament's amendment to the article required that all users should be able to access operator assistance services and directory enquiry services free of charge or for a minimal charge, which is compatible with the common position text that ensures, in article 3 in the chapter on universal service, that the operator assistance and directory enquiry services that make up universal service must be affordable. Any other directory services should be provided on commercial terms.

Article 26 (The Single European emergency call number)

The amendment by Parliament to paragraph 1 of this article mentioned 'textphones'. The common position text addressed this concern by a new provision of recital 13 that explicitly mentions the possibility for Member States to make use of textphones when taking specific measures for those with hearing problems or speech impairment.

Parliament's amendment 42 introduced two prior conditions in paragraph 3 before imposing an obligation on network operators to provide caller location information to national authorities that handle emergencies. The common position text reflects the 'where technically feasible' condition but not the 'where it does not require disproportionate economic effort' which the Commission considered to be unnecessary and covered by general principles of Community law. However, the Commission considers that the absence of any reference to economic feasibility does not mean that civil protection authorities must incur high investment costs to implement the obligation of article 26. Given the manual nature of the present facilities, some investment will necessarily be incurred to put automatic systems into place. The Commission services will work closely with CGALIES (Co-ordination Group on Access to Location Information by Emergency Services) to agree a common interface for the transmission of location data. This will facilitate the development of standard software packages for use by PSAPs (Public Safety Answering Points), thus minimising the infrastructure investment required to implement this obligation by PSAPs. In practice, therefore, the operation of this provision will be co-ordinated with the development of infrastructure provisions by the relevant national emergency service to receive and utilise the location information.

Amendment 42 also prescribed detailed aspects of implementation of the single European emergency call number, including a provision for standardising the format of data, on the basis of a standard yet to be adopted. The common position text does not lay down detailed aspects of implementation. The Commission considers that detailed implementation measures are better left to supplementary measures agreed between national authorities and network operators, with issues having a European dimension dealt with through the use of appropriate ETSI standards where available. The Commission considers that, in order to avoid any ambiguity, as between operators and civil protection authorities, it would nonetheless be useful to mention explicitly in Article 26 that operators would not only 'make caller location available to authorities handling emergencies', but would also do so 'at no cost' to the national authorities. Amendment 42 also called for a reference to compliance with article 9 of the Data Protection Directive. No mention is made in the common position text to the provisions of the Data Protection Directive, which is fully applicable. The Commission considers that it is sufficient to recall that the present directive forms part of a single package for a new comprehensive legal framework for electronic communications and the limits imposed by the provisions of Article 9 of the Data Protection Directive in respect of the lawful processing of caller location information by network operators would be fully applicable in the context of Article 26 of the Universal Service Directive.

Article 27 and Recital 37 (European telephone access codes)

Parliament's amendments 3 and 43 imposed an obligation on the Commission to conduct a study demonstrating the economic and commercial benefits and technical feasibility of the regional code '3883' prior to imposing an obligation on network operators to handle calls to the European Telephony Numbering Space. The common position text catered for the concerns implicit in the Parliamentary amendment by recognising the need for network operators to recover their costs in originating and forwarding such calls. The Commission considers that the underlying concern behind the Parliamentary amendment has been met in the Council common position.

Article 29 (Provision of additional facilities)

Parliament's amendment 44 mandated certain additional telephone facilities that are currently not mandated, nor are they proposed to be mandated, but which, if not widely available, may be mandated by NRAs. The common position text retained the original level of flexibility in the provision but included the Parliament's suggested 'subject to technical feasibility and economic viability'. With respect to Parliament's proposal to ensure that these facilities must be operable across national boundaries, which the Commission supported, the common position text does not reflect this.

Article 30 (Number portability)

The amendment proposed by the Parliament on number portability was that the costs associated with porting numbers should not act as a disincentive to using this facility and this is fully reflected in the common position text of this article. Parliament also introduced a requirement for users to be informed regularly of this facility that has no counterpart in the common position text. The Commission considers the common position text acceptable.

Article 31 ('Must carry' obligations)

Parliament introduced several amendments to this article and to the associated recital, the first of which was to limit the scope of possible 'must carry' obligations to 'broadcasts in pursuit of a public service broadcasting remit'. The common position text does not impose this pre-condition on Member States' ability to identify programming to benefit from 'must carry' status. The common position text imposes a limitation on the burden to be imposed by qualifying that obligations must be 'reasonable'; the common position text also recognises the possibility for such obligations to extend to any network where a substantial number of its subscribers use it as their primary means of receiving television or radio programming.

Another amendment introduced by Parliament was to recognise that 'must carry' obligations may include services intended for disabled users and users with special needs. The Commission considers that paragraph 1 of the common position text provides for this amendment by covering not only channels but also broadcast services, which could include services for disabled users and users with special needs. Parliament's textual amendment to paragraph 1 replacing 'limited in time' with 'subject to periodic review' is closely comparable to the common position text for this paragraph.

An amendment proposed by the European Parliament was to require that operators of conditional access services and associated facilities could be required to grant access to their services and facilities to broadcasters. Under article 6 of the common position text of the Access and Interconnection Directive, broadcasters are given access to conditional access services and associated facilities on fair, reasonable and non-discriminatory terms. Under article 5 of the Access Directive, Member States may provide on a national basis that broadcasters are given access to other facilities such as electronic programme guides and application programme interfaces, while article 6 also provides that access to other facilities may in due course be mandated at the EU level, in the light of technological developments.

Another proposed amendment ensured that the 'must carry' broadcasts were prominently displayed on navigators and electronic programming guides (EPGs). The Commission considers that regulation of the due prominence aspects of EPGs and navigators forms part of content regulation and this is now recognised in the common position text of article 6.5 of the Access Directive.

In respect of compensation for network operators, the common position and the European Parliament opinion are similar in approach, allowing Member State discretion in determining whether or not to remunerate network operators for imposing 'must carry' obligations. The European Parliament enumerated criteria in the event that Member States decide to remunerate their network operators whereas the common position text contains no criteria for determining remuneration but requires that there be no discrimination of treatment between network operators and that any remuneration must be applied in a proportionate and transparent manner.

Article 32 (Additional mandatory services)

Parliament's amendment to this article endorsed the principle that undertakings on which obligations to provide additional mandatory service fall should be compensated by Member States for the cost of providing such services. The common position text stipulated that no compensation mechanism involving specific undertakings, as is permitted for funding universal service, can be imposed in respect of obligations imposed under this article. The Commission considers that legal certainty would be enhanced if the principle were established, as proposed by Parliament, that any net costs on undertakings resulting from measures taken under this article must be compensated, provided that such compensation accords with Community law.

Article 33 (Consultation with interested parties)

The Parliament amendment to this article introduced in paragraph 1 an emphasis on consultation with disabled users that the common position text does not contain. Parliament also suggested a new paragraph that Member States should encourage co-regulatory mechanisms to fulfil some services falling within universal service, to satisfy disabled consumers' needs, to control tariffs, to allow control of expenditure, to achieve quality of service levels, to provide transparent financing of the net cost of universal service, to provide a minimum level of consumer protection, to ensure publication of prices and tariff information, to provide operator services, number portability and carrier selection and pre-selection, to ensure consultation with interested parties and to achieve out of court dispute resolution. The common position does not mention any specific areas to be destined for co-regulatory measures. The Commission considers nonetheless that a number of articles in the Council common position provide flexibility in the means that Member States may use to achieve the objectives of the directive. The Commission prefers the approach of the Council common position for built-in flexibility rather than specifying certain articles for future co-regulation.

Article 34 (Out of court dispute resolution)

Parliament's amendment 55 called for the creation of a national complaints office while the common position text remains closer to the original in providing for transparent, simple, and in-expensive out-of-court dispute resolution procedures. The common position allowed Member States to limit these procedures to consumers if Member States so desired whereas the Parliamentary amendment retains the original scope covering both users and consumers. The Commission considers the common position text to be acceptable.

3.2.3 Annexes

Annex I (Description of facilities referred to in Article 10 and Article 29)

Parliament's amendment 56 to the annex required rather than allowed soft disconnection for non-payment of bills while the common position text retains flexibility.

Annex II (Information to be published in accordance with Article 21

Amendment 57 explained the consumer protection reasons for requiring publication of information which has no counterpart in the common position text. A new paragraph required Member States to inform consumers of their rights under universal service, explicitly mentioning the facilities in Annex I. No counterpart exists in the common position text.

Annex IV (Calculating the net cost, if any, of universal service obligations and establishing any recovery or sharing mechanism in accordance with Articles 12 and 13)

Both Parliament's amendment 59 and the common position of the Council have deleted the paragraph on giving consideration to a VAT type mechanism for cost recovery. The Commission would prefer to retain this provision.

Annex V (Process for reviewing the scope of universal service in accordance with Article 15)

Both Parliament's amendment 60 and the common position of the Council have deleted the provisions of the annex describing Commission options in the context of review of the scope of universal service.

Annex VI (Interoperability of digital consumer equipment)

Parliament's amendments were partially duplicative of other provisions in the annex or were explicitly prescriptive, as to the deployment of the MHP standard for television sets to be used with interactive services. The Council common position did not address the issue of the MHP standard.

4. Conclusion

The Council common position incorporated many of the amendments put forward by the European Parliament in its first reading. Both the Council common position and the Parliament's final texts remain faithful in essence to the Commission's original proposal. However, the Commission considers that the text would benefit from additional specific measures relating to disabled users and to public consultations for certain aspects of implementing universal service, for example, to define users with special social needs. The Commission nonetheless considers the overall balance achieved in the common position acceptable.