Opinion of the Economic and Social Committee on the "Proposal for a Directive of the European Parliament and of the Council on access to, and interconnection of, electronic communications networks and associated facilities"

(2001/C 123/10)

On 25 October 2000 the Council decided to consult the Economic and Social Committee, under Article 95 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 7 December 2000. The rapporteur was Mr Lagerholm.

At its 378th plenary session on 24 and 25 January 2001 (meeting of 24 January) the Economic and Social Committee adopted the following opinion with 82 votes in favour and two abstentions.

1. The Commission's Proposal

1.1. Against the background of the draft Directive on a common regulatory framework for electronic communications networks and services(1) the proposed Directive is intended to harmonise the way in which access to, and interconnection of, electronic communications networks and associated facilities are regulated. The aim is to establish a regulatory framework for relations between suppliers of networks and services so as to ensure sustainable competition and interoperability of services to the benefit of consumers.

1.2. The Directive provides legal certainty by establishing clear criteria for regulatory intervention and clear limitations on what obligations can be imposed, and in which circumstances, whilst at the same time allowing for sufficient flexibility.

1.3. All operators of electronic communications networks will have a right and - when requested by other authorised undertakings - an obligation to conclude interconnection agreements with each other for the purpose of providing the services in question, in order to ensure access to, and interoperability of, services throughout the Community.

1.4. Member States have to maintain all previous obligations concerning access and interconnection under Directives 97/33/EC(2), 98/10/EC(3) and 92/44/EC(4), as well as under the proposed Regulation on unbundled access to the local loop(5), until such time as indicated otherwise by the findings of a market analysis(6).

1.5. The competent national regulatory authorities (NRAs) are to encourage and secure adequate network access and interconnection, and interoperability of services. Following a market analysis they may impose obligations on operators with significant market power as regards transparency, accounting separation, non-discrimination and lastly, publication of a sufficiently unbundled reference offer. The NRAs may also require operators to grant access to, and use of, specific facilities and/or associated services. In conclusion, they may (with due consideration of operators' investment risks) impose price controls, including cost orientation of prices, and obligations concerning cost accounting systems.

2. Comments

2.1. On the subject of access and interconnection, the Committee, in its Opinion on the 1999 Communications Review, stated that "regulatory intervention is justified only to redress market failures in providing effective and healthy infrastructure competition. Where there is market failure the regulatory response needs to be specific to the problem, appropriate and temporary".

2.2. It also took the view that "if it is deemed necessary to take short term action on regulating access conditions (such as in the case of local loop unbundling), attention should mainly focus on achieving commerce-based agreements. If this is not feasible, the methodology used for pricing unbundled access should create incentives for infrastructure investments (e.g., by time limits on specific costing mechanisms) and be applied in a consistent manner across the Member States. The development of alternative access possibilities needs to be monitored very closely and any recommendations to NRAs on access should include an obligation to forbear from regulatory interventions when alternative means of access are available".

2.3. The ESC notes that the Commission's proposal is generally in line with the views expressed in the above Opinion.

2.4. The proposed Directive on access and interconnection is possibly the most decisive proposal as regards competition and investment propensity. The fundamental reliance on competition legislation also in this part of the new regime is, in the Committee's view, likely to generate a sound balance between regulation and market opportunities, for both customers and suppliers.

2.5. The proposal indicates that the interconnection concept is likely to vary considerably between applications and therefore might not lend itself to traditional regulatory intervention. However, it seems to be a considerable leap from this general observation to practical conclusions about when interconnection is still relevant and if it needs to be regulated.

2.5.1. In its opinion (point 4.10.5) on the proposal for a Framework Directive, the Committee stressed that there was likely to be a rapid establishment of modern communications networks competing in parallel. Transparency is likely to be the dominant trend here, in order to maximise network traffic. As is already the case with the Internet, any practical problems are either solved between the parties where they arise, or the traffic seeks out another route. The latter was seldom possible with the traditional telephony network, and this was behind a potentially interventionist regulation of interconnection. The Committee believes it would be wise to refrain from any similar attempts to regulate the new networks until it has been shown that their alternative solutions would not operate satisfactorily. Furthermore, any IP regulation would need to be considerably more complex than that for telephony, and risk causing serious market disruption. Unlike the traditional telephony sector, the IP sector does not have a fixed set of services which can be defined using narrow quality standards.

2.6. The Internet, for example, is based on technical availability for anybody with the necessary end-user capacity. Universal accessibility is the basic principle for the net. If an operator fails to fulfil this criterion, he will have no net customers and be unable to sell advertising space. The Committee therefore feels there is scant reason to include the Internet in an interconnection regulation. In addition, end-users have several inexpensive alternatives for accessing the net in their own country or internationally. Usually access is provided through universal telephony service, making it possible to connect with the net by modem.

2.7. The Committee would have welcomed more detailed examples which could have made it easier to understand where the Commission believes that new interconnection regulation might be applied.

2.8. The Committee harbours no doubts that the new approach - namely, to refrain as far as possible from sector-specific regulation and instead rely on increased application of general competition law - is fully endorsed, in principle, by the Commission itself. However, the wording of a couple of points in the proposed Directive on access and interconnection could be understood to imply that the Commission is not fully prepared to rely on this strategy.

2.8.1. For instance the strategy section of the explanatory memorandum to the proposed directive states that continued monopoly advantages may still adversely influence competition. Few would dispute that, but in the next sentence a similar assumption is presented to motivate ex-ante sector regulation for mobile markets with only four or five operators. The ESC believes that until an evaluation of effective competition has been carried out under the new regime no such general assumption can be made. It should also be observed that the limitation of the number of licences in some countries seems to be due to administrative deficiencies rather than real spectrum scarcity.

2.8.2. There also seems to be a risk that legal certainty could be undermined by the statement in Article 8 that the Commission, in exceptional cases, can mandate the NRAs to apply more stringent obligations than those of Articles 9 to 13, provided such an expansion is "justified in the light of the objectives laid down in Article 1 of this Directive". In the Committee's view, it is doubtful whether it can be considered acceptable to generate such uncertainty regarding which ex-ante measures can be relevant. If an operator exercising a dominant position abuses his influence, the general competition legislation comes into play.

Brussels, 24 January 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) COM(2000) 393 final; ESC opinion CES 50/2001; see also ESC opinion in OJ C 204, 18.7.2000 on "Towards a new framework for electronic communications infrastructure and associated services. The 1999 communications review" (COM(1999) 539 final).

(2) European Parliament and Council Directive 97/33/EC of 30 June 1997 on interconnection in telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision, OJ L 199 of 26.7.1997, as amended by European Parliament and Council Directive 98/61/EC of 24 September 1998 with regard to operator number portability and carrier pre-selection, OJ L 268, 3.10.1998.

(3) European Parliament and Council Directive 98/10/EC of 26 February 1998 on the application of open network provision to voice telephony and on universal service for telecommunications in a competitive environment, OJ L 101, 1.4.1998.

(4) Directive of 5 June 1992 on the application of open network provision to leased lines, OJ L 165, 19.6.1992, as amended by Directive 97/51/EC, OJ L 295, 29.10.1997 and Commission Decision No 80/98/EC of 7 January 1998.

(5) COM(2000) 394 final; ESC opinion in OJ C 14, 16.1.2001.

(6) In accordance with Article 14 of the proposed Directive COM(2000) 393 final.