EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 16.3.2006 
COM(2006) 28 final/2 
Corrigendum  
COM(2006) 28 final 6.2.2006 concerning version EN, pages 1 and 6 ; and versions FR/DE, pages 1 and 7 
(footnote No. 14)
 
COMMUNICATION FROM THE COMMISSI ON TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EU ROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
on Market Reviews under th e EU Regulatory Framework 
  
Consolidating the internal mark et for electronic communications 
  
{SEC(2006) 86} 
 
EN 2   EN COMMUNICATION FROM THE COMMISSI ON TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EU ROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
on Market Reviews under th e EU Regulatory Framework 
  
Consolidating the internal mark et for electronic communications 
1. I
NTRODUCTION  
The regulatory framework for electronic comm unications set up in 2002 involved a major 
overhaul in regulatory approach, linking sector -specific regulation and competition law in a 
novel way. The previous, more mechanistic a pproach to regulation was replaced by an 
economic approach where regulation is based on competition law principles . It requires 
national regulators to conduct “market reviews” in order to determine whether a particular 
market should be regulated. Where a given market  is susceptible to ex ante regulation and a 
regulator finds one or more undertakings to  have significant market power or “SMP” 
(equivalent to “dominance” under competit ion law) on that market, it must impose 
appropriate regulation. Convers ely, regulation must not be imposed, or existing regulation 
must be withdrawn, where no undertaking is found to have SMP. The market review process 
is subject to scrutiny by the Commission unde r the Community consultation mechanism 
established under Article 7 of  the Framework Directive. 
The aim of the regulatory framework, with th e Community consultation mechanism at the 
heart of it, is to foster competition, invest ment and innovation and hence help meet the 
objectives laid down in the i2010 Agenda, the Commission’s strategy to boost growth and 
jobs in the communications sector, and th e relaunched Lisbon agenda on growth and 
employment. 
This Communication assesses the functioning of  the Community consultation mechanism for 
electronic communications and the experience gained  so far in its application. In its first two 
years, the consultation mechanism under Arti cle 7 has given the Commission deep insight 
into developments on e-communication markets acr oss the EU. This pro cess is unfortunately 
not yet complete, but the Commission nonetheless considers it appropriate to share this 
knowledge with a wider audience. The conclusions  set out in this Communication are a first 
assessment of the procedures and findings of th is new instrument. They  provide input for the 
forthcoming review of the regulatory framework, including the Commission’s 
Recommendation on relevant markets, in 2006. 
2. ARTICLE 7 PROCEDURES : OVERVIEW  
The Article 7 consultation mechanism has three main aims: (i) ensuring consistent regulation  
across the EU on the basis of co mpetition law principles; (ii) limiting regulation  to markets 
where there is a persistent market failure; and (iii) bringing more transparency  in the 
regulatory process. These procedur es are thus instrumental in consolidating the internal 
market  for electronic communications.  
 
EN 3   EN Article 7 of the Framework Directive1 requires national regulator y authorities (NRAs) to 
notify the Commission and other NRAs of thei r findings as to market definition and SMP 
analysis and the regulatory obligations they in tend to impose (or remove) (their “proposed 
measures”). The Commission then has one month in which to assess the notification of the 
proposed measures (the “phase  one” procedure). The vast ma jority of cases  are handled 
within this one month period by a letter  to the NRA concerned, which may contain 
Commission comments as to how the measures in question could be further improved. In 
cases where the Commission considers that, in te rms of market definiti on or SMP analysis, 
the proposed measures would create a barrier to the single market or if it has serious doubts as 
to the measures’ compatibility with Community law (and in particular the common policy objectives that all NRAs should pursue),
2 it can conduct a more detail ed investigation lasting 
a further two months (“phase two”). Following th is in-depth investigat ion, should its concerns 
be confirmed, the Commission may require the NR A to withdraw the draft measures (“veto” 
decision) and possibly resubmit the market analysis in quest ion at a later stage. For 
transparency reasons, the Commission has so fa r adopted a decision in every case, even where 
it has no comments. 
3. ENHANCED COOPERATION AND TRANSPARENCY  
3.1. Commission and national regulatory authorities 
The Article 7 consultation mechanism require s close cooperation between the Commission 
and NRAs, and between the NRAs themselves. 
Before submitting a notification, NRAs may meet  informally with the Commission to present 
the key elements of their analysis. Such pre-notification meetings  allow the Commission and 
NRAs to identify and discuss issues of particul ar concern at an early stage. The Commission 
also uses these occasions to provide guidance to  the NRAs as to the information and level of 
analysis required to su pport their conclusions. 
Notifications from NRAs normally comprise all elements of their proposed measures 
together, although some NRAs notify in two stag es, remedies following market analyses. The 
Commission notes that the latt er approach unnecessarily prolongs the regulatory process. 
Once a notification has been received, the Commission can make written requests for 
further factual information  to the NRA concerned. NRAs have the right to withdraw a 
notification  at any time during the procedure. 
3.2. The role of other interested parties 
The regulatory framework provides for “national” consultation , during which all interested 
parties are given an opportuni ty to comment on the NRA’s analysis and proposals for 
regulation. As the primary interlocutor for a ll stakeholders, the NRA informs the Commission 
of the view of third parties. Only occasiona lly, when circumstances so require, does the 
                                                 
1 Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common 
regulatory framework for electr onic 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. 
 
EN 4   EN Commission directly receive s ubmissions from or meet with  stakeholders (normally on 
request). As a matter of standard practice in second phase invest igations, the Commission 
invites interested third parties to comment directly. 
Although the Community consulta tion mechanism formally involves the Commission and the 
NRAs only, it seeks to ensure transparency for all interested parties . Such transparency 
helps to ensure greater quality and objectivity in the NRAs’ analysis. Non-confidential versions of all notifications, and the NRAs’ final measures, are published on the 
Commission’s dedicated website
3 within a few days of receipt.4 The Commission also 
publishes non-confidential versions of co mments, no comments and veto decisions. 
Most NRAs conduct the national consultation prior to Community consultation . This 
allows them to reflect the views of market players in the Community notification and to avoid 
the need for a second Community notification wh ere the results of th e national consultation 
lead the NRA to amend its draft measure. Th e Commission strongly supports this approach. 
3.3. The role of national competition authorities 
Market definition and analysis under the regul atory framework are based on competition law 
principles. Consultation between NRAs and th e national competition authorities (“NCAs”) is 
therefore essential. Sector-specific regul ation and competition law enforcement are 
complementary instruments to promote the deve lopment of effectively competitive electronic 
communications markets to the benefit of users. 
In most instances, the NRAs have consulted th e NCA in advance and this has often improved 
the market analysis. The Commission therefore encourages NRAs to obtain the NCAs’ views 
prior to notification. 
4. INSIGHT GAINED FROM NOTIFICATIONS RECEIVED SO FAR  
4.1. Definition of the relevant markets 
NRAs must define relevant markets based on national circumstances, taking into account the 
Recommendation on relevant markets5 and the SMP guidelines.6 Markets that could be 
subject to regulation are selected on the basi s of EC competition law principles. In its 
Recommendation, the Commission de veloped the “three criteria” te st to assist the Member 
States in this regard.7 For the markets contained in the Recommendation, it is presumed that 
these requirements have been satisfied.  
                                                 
3 http://forum.europa.eu.int/P ublic/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 comm unications 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 an alysis and the assessment of si gnificant 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 barr iers 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. 
 
EN 5   EN So far, NRAs have defined the majority of ma rkets in line with the Recommendation, but in a 
number of instances they have defined markets more narrowly  or more broadly . The 
Commission has not objected to such diverg ing market definitions  provided that each 
individual market definition and SMP analysis is  in line with EC comp etition law principles. 
The Commission has also verified whether the sum of markets analysed  by NRAs covers the 
entire scope of the corresponding markets of the Recommendation. 
Overall, the market definitions included in  the Recommendation a nd explained in the 
Explanatory Memorandum have enabled NRAs to  carry out their analyses of electronic 
communications markets as required by the legal framework. It has been argued that where 
markets have been further refined this may lead to over-regulation and amount to an 
unnecessary administrative burde n. However, in the Commission’s experience to date, such 
refinement has actually helped  to deregulate the sector, as it has allowed regulation to be 
rolled back in those markets where sustainable competition has developed. For example, the 
delineation of wholesale leased lines by ba ndwidth has permitted existing regulation in 
respect of very high bandwidth to be lifted.8 
4.2. Analysis of significant market power 
The EU regulatory framework aligned the th reshold for SMP on the competition law concept 
of “dominance”, replacing the previous threshol d for intervention, which was based on a fixed 
market share (25%). The competition law-base d assessment of SMP often involves a thorough 
examination of legal and economic issues, in cluding questions such as the presence of 
countervailing buyer power and the criteria  for establishing collective dominance. 
In assessing SMP, NRAs look at  whether a given market is or will become effectively 
competitive within the lifetime of the market review. The Commission essentially verifies 
whether the NRA’s assessment is in line with  EC competition law principles and takes 
theutmost account of the SMP guidelines and is sufficiently supported by evidence. While 
market shares remain one indicator, other f actors (including market dynamics, barriers to 
entry and potential competition) are just  as relevant to the overall analysis. 
4.3. Imposition and withdrawal  of regulatory remedies 
Where SMP is found, NRAs must impose re medies on the operator(s) concerned. The 
Commission considers whether these remedies are appropriate , i.e. whether they are based 
on the nature of the problem identified, proportiona te and justified in th e light of the policy 
objectives set out in the Framework Directive.9 While the Commission has no power of veto 
over remedies, it may make comments which NR As must take utmost into account. The 
Commission must be notified of the measures adopted; it monitors how Member States have 
taken account of the comments made, and acts accordingly. 
A significant proportion of th e Commission’s comments so far have related to the 
appropriateness of the remedies proposed . The Commission has commented on remedies 
                                                 
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. 
 
EN 6   EN which solved only part of the competition problem identified,10 appeared to be inadequate11 or 
might have produced eff ective results too late.12  
In addition to taking the utmost account of  the comments made by the Commission, NRAs 
should ensure full and effective enforcement of the remedies proposed within the shortest 
possible timeframe.  
If the enforcement of a proposed remedy require s additional time (e.g. because an appropriate 
cost model is still to be developed), NRAs  should already provide in the notified draft 
measure for temporary remedies addressing the competition failure identified.13 
Generally, NRAs have applied sim ilar sets of remedies to similar market failures. However, 
the detail and implementation of thos e remedies have differed considerably  from one 
Member State to another. Such differences are manifest, for example, in pricing (e.g. 
methodologies for cost orientation), which has si gnificant implications fo r the internal market. 
The question thus arises as to whether, and if so how, greater consistenc y in the application of 
remedies can be achieved. The question will be  addressed in the upcoming review of the 
regulatory framework. 
4.4. Requests for withdrawal of measures (‘veto’ decisions) 
The Commission has adopted a decision requiring NRAs to withdraw their proposed 
measures in four cases out of 229 (assessed by 30 September 2005).14 Such “veto” decisions 
ensure that no measures are taken at national level that would be incompatible with Community law and in particular the common pol icy objectives that al l NRAs should pursue. 
So far, the Commission has vetoed draft m easures where it has found the evidence supporting 
a market definition or SMP anal ysis not to be sufficient. 
In all these cases the Commission exercised its pow er of veto to ensure coherent application 
of competition law principles across the EU.  
4.5. Horizontal issues 
The consultation mechanism occasionally reveal s failures in the transposition of the EC 
regulatory framework into national law. By putting such implementation issues under the 
spotlight, the consultation mechanism may provide additional impetus to resolve these issues 
as a complement to the Commission’s other powers , particularly its power to start 
infringement proceedings.  
                                                 
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 terminati on 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: C(2004) 527 in cases FI/2003/0024 and FI/2003/0027, C(2004) 3682 in case FI/2004/0082, C(2004) 4070 in case AT/2004/0090, and C(2005) 1442 in case DE/2005/0144. 
 
EN 7   EN To ensure continuity of th e regulatory framework, all existing SMP obligations must remain 
in force until an appropriate market review is completed . In cases where no regulation is 
currently imposed, NRAs can only impose new regulation fo llowing the completion of an 
appropriate market review. In exceptional circumst ances, where there is an urgent need to act, 
NRAs may adopt provisional measures.15 The validity of the provisi onal measures must be 
limited in time and the related market analysis s hould be notified as quic kly as possible. This 
horizontal approach contributes to one of the main objectives of the consultation mechanism, 
namely ensuring consistent regulation across the EU.  
5. MARKETS OVERVIEW  
This section provides a brief overview of the ma in trends and conclusi ons that can be drawn 
from the market review process, notwithstanding that the first round of market analysis is not 
yet complete. It is complemented by the Co mmission Staff Working Documents annexed to 
this Communication, which provide a more detaile d overview, in tabular form, of all cases 
assessed by 30 September 2005.  
5.1 Fixed networks and services 
In all Member States, the incumbent has conti nued to be dominant on the market for retail 
“access” – i.e. connection to a fixed telephony ne twork 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-selection16 and wholesale line rental17) and the 
introduction of competing tec hnologies, in particular VOIP.18,19 
Wholesale markets, conversely, have shown fe w 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 en able them to provide their own retail telephony 
and dial-up Internet services, is still an e nduring bottleneck for competition. However, where 
effective remedies are applied at this level, they  help to develop sustai nable competition in the 
downstream retail (calls) markets, thereby en abling 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 w ith the Recommendation, ea ch operator’s network 
                                                 
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 systemat ically (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 an d carrier pre-selection. 
17 Permitting alternative operators to offer retail acce ss 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 re gulator’s discretion. 
18 Voice over Internet Protocol: the transport of voi ce 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. 
 
EN 8   EN constitutes a separate market on which it ha s a monopoly for terminating calls. Regulators 
have been able to reflect differences in the si ze of operators by imposi ng lighter remedies on 
smaller ones (i.e. by applying “asymmetric” reme dies). 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 othe r 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 te lephony network, connecting it to the end user 
(otherwise known as the “local  loop”), the incumben t has invariably reta ined its near 100% 
market share. Effective access (by means of “l ocal loop unbundling”) a nd price regulation at 
wholesale level has been essential as a means of  fostering the development of competition in 
the downstream markets, where alternative opera tors 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 regul ation has on the whole been restricted to 
wholesale termination. 
Three wholesale mobile markets have be en 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 su pply calls to retail cu stomers 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 origina tion, regulatory intervention has in the main 
proved unnecessary given the level of compe tition generally observed. However, a limited 
number of NRAs have nevertheless consid ered regulation necessary, where one mobile 
operator was found to have si ngle dominance or two or mo re together found to be 
“collectively” dominant. 
As was the case for fixed call te rmination, all mobile network operators have been found to 
have SMP in the market for mobile call terminat ion, 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” networ k, they may also be found to be dominant.22 The 
regulatory remedies imposed ha ve led to a gradual reduction in mobile call termination 
charges, although this reducti on 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 contex t of the European Regulators Group. In the meantime, the 
                                                 
21 As compared with fixed telephon y, 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. 
 
EN 9   EN Commission has also created a website bringi ng together a sample of already published 
roaming tariffs of mobile tele phony operators across the EU in a bid to contribut e 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 th eir 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 fu ll-scale roll-out of th eir network on the basis 
of local loop unbundling (first through “shared” and then th rough “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 sate llite) 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 transmi ssion 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 terr estrial transmission systems. C onsequently, only terrestrial 
transmission has so far been subject to  market analysis and SMP remedies.  
6. C
ONCLUSIONS 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 importa nt step towards the creation of an internal 
market for electronic communications . 
The system of market reviews has ensured that regulation is ba sed 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 transparent 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 ope rating in them), but to a lesser extent which  
regulation (remedies) is appr opriate. The Commission is curre ntly working with NRAs to 
ensure that their discretion with regard to re medies is exercised in a consistent manner. 
 
                                                 
23 IP/05/1217, 4 October 2005. 
 
EN 10   EN Whereas certain markets have exhibited the ch aracteristics 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 fi nal documents are published are ju st some examples of this 
transparency. 
The system of market review s established by the regulatory framework has on balance proved 
to be a success. Even though it necessitated so me 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 regulati on there are signs of 
sustainable competition in other markets. This is tr ue in particular of retail markets, but it is 
conditional on the effective enforcement of regula tory remedies at wholesale level or on the 
existence of alternative infrastructure. Th e introduction of new t echnologies may create 
additional competitive pressure, which can lead to less of a need for regulation. 
The Commission will look for ways, in the c ontext of the review, to decrease the 
administrative burden on companies and NRAs a nd 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. 
                                                 
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.