Opinion of Mr Advocate General Jacobs delivered on 21 June 2001. - Telefónica de España SA v Administración General del Estado. - Reference for a preliminary ruling: Tribunal Supremo - Spain. - Directive 97/33/EC - Telecommunications - Interconnection of networks - Obligations imposed on network providers. - Case C-79/00.



European Court reports 2001 Page I-10075



Opinion of the Advocate-General

1. In the present case the Spanish Tribunal Supremo (Supreme Court) requests a preliminary ruling on the interpretation of Article 4(2), Article 9(2) and Annex VII of Directive 97/33/EC of the European Parliament and of the Council 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 (ONP) (hereinafter Directive 97/33).

2. The Tribunal Supremo wishes essentially to know whether under those provisions it is permissible for a Member State to adopt rules which oblige a public telecommunications network operator with significant market power

- to offer interconnection at local and higher-level switching centres, and/or

- to provide access to the subscriber loop.

Directive 97/33

3. The current Community legislative framework in the field of telecommunications consists essentially of liberalisation directives adopted by the Commission under Article 86 EC (formerly Article 90 of the EC Treaty) and harmonisation directives adopted by the Parliament and the Council under Article 95 EC (formerly Article 100a of the EC Treaty).

4. The latter group of directives concerns the harmonisation of the conditions for open and efficient access to and use of public telecommunications networks and services. Together they are often referred to as the Open Network Provision (ONP) Directives or as the ONP framework. Directive 97/33 is perhaps the key element of that framework.

5. Article 1 of Directive 97/33 provides under the title Scope and aim:

This Directive establishes a regulatory framework for securing in the Community the interconnection of telecommunications networks and in particular the interoperability of services, and with regard to ensuring provision of universal service in an environment of open and competitive markets.

It concerns the harmonisation of conditions for open and efficient interconnection of and access to public telecommunications networks and publicly available telecommunications services.

6. Interconnection means according to Article 2(1)(a) the physical and logical linking of telecommunications networks used by the same or a different organisation in order to allow the users of one organisation to communicate with users of the same or another organisation, or to access services provided by another organisation. Services may be provided by the parties involved or other parties who have access to the network.

7. Article 4(1) provides:

Organisations authorised to provide public telecommunications networks and/or publicly available telecommunications services as set out in Annex II shall have a right and, when requested by organisations in that category, an obligation to negotiate interconnection with each other ...

8. Annex II refers to four types of organisations (Annex II organisations) which

- provide fixed and/or mobile public telecommunications networks and/or publicly available telecommunications services and in doing so control the means of access to one or more network termination points,

- provide leased lines to users' premises,

- are authorised to provide circuits to third countries, or

- provide telecommunications services and are authorised to interconnect in this category in accordance with relevant national licensing or authorisation schemes.

9. Article 4(2) provides:

Organisations authorised to provide public telecommunications networks and publicly available telecommunications services as set out in Annex I which have significant market power shall meet all reasonable requests for access to the network including access at points other than the network termination points offered to the majority of end-users.

10. Annex I enumerates three special categories of public telecommunications networks and publicly available telecommunications services considered of major importance at European level namely the fixed public telephone network and service (part 1), the leased lines service (part 2) and public mobile networks and services (part 3). I will refer to the organisations providing those networks or services as Annex I organisations.

11. The concept of significant market power referred to in Article 4(2) is defined in Article 4(3): an organisation is as a general rule presumed to have significant market power when it has a share of more than 25% of a particular telecommunications market in the geographical area in which it is authorised to operate. The competent national regulatory authority (NRA) may however determine on the basis of an economic evaluation either that an organisation with a market share below 25% has significant market power or that an organisation with a market share above that threshold does not possess significant market power.

12. Other specific rules for Annex I organisations with significant market power are to be found in Articles 6 to 8. Annex I organisations which provide for example the fixed public telephone network or service and which have been notified by their NRA as having significant market power must

- comply with the principles of non-discrimination and transparency with regard to interconnection offered to others (Article 6),

- comply with the principles of cost-orientation and transparency with regard to interconnection charges (Article 7(2)),

- publish a reference interconnection offer (Article 7(3)),

- unbundle interconnection charges, so that the applicant is not required to pay for anything not strictly related to the service requested (Article 7(4)),

- use cost accounting systems suitable for implementing all those requirements (e.g. separate accounting for interconnection activities and other activities) (Articles 7(5) and 8(2)).

13. Article 9 is entitled General responsibilities of the national regulatory authorities.

14. Under Article 9(1) the NRAs must encourage and secure adequate interconnection in the interests of all users, exercising their responsibility in a way that provides maximum economic efficiency and gives the maximum benefit to end-users. In that regard they must take into account inter alia the need to stimulate a competitive market, the need to ensure the fair and proper development of a harmonised European telecommunication market and the principles of non-discrimination (including equal access) and proportionality.

15. Article 9(2) - the provision at the centre of the present case - provides:

General conditions set down in advance by the national regulatory authority shall be published in accordance with Article 14(1).

In particular, in relation to interconnection between organisations set out in Annex II, national regulatory authorities:

- may set ex ante conditions in the areas listed in Part 1 of Annex VII;

- shall encourage coverage in interconnection agreements of the issues listed in Part 2 of Annex VII.

16. Annex VII is entitled Framework for negotiation of interconnection agreements and provides:

Part 1

Areas where the national regulatory authority may set ex ante conditions

(a) Dispute resolution procedure,

(b) Requirements for publication/access to interconnection agreements and other periodic publication duties,

(c) Requirements for the provision of equal access and number portability,

(d) Requirements to provide facility sharing, including collocation,

(e) Requirements to ensure the maintenance of essential requirements,

(f) Requirements for allocation and use of numbering resources (including access to directory services, emergency services and pan-European numbers),

(g) Requirements concerning the maintenance of end-to-end quality of service,

(h) Where applicable, determination of the unbundled part of the interconnection charge which represents a contribution to the net cost of universal service obligations.

Part 2

Other issues the coverage of which in interconnection agreements is to be encouraged

(a) Description of interconnection services to be provided,

(b) Terms of payment, including billing procedures,

(c) Locations of the points of interconnection,

...

17. Under Article 9(3) to (6) the competent NRA

- may intervene on its own initiative at any time, and must do so if requested by either party, in order to specify issues which must be covered in an interconnection agreement, or to lay down specific conditions to be observed by one or more parties to such an agreement (Article 9(3));

- may, in exceptional cases, require changes to be made to interconnection agreements already concluded, where justified to ensure effective competition and/or interoperability of services for users (Article 9(3));

- may on its own initiative at any time or if requested by either party set time-limits within which negotiations on interconnection are to be completed; if agreement is not reached within the time allowed the authority must take steps to bring about an agreement under procedures laid down by that authority (Article 9(3));

- may inspect all interconnection agreements entered into by organisations authorised to provide public telecommunications networks or services (Article 9(4));

- must, in the event of an interconnection dispute between organisations in a Member State and at the request of either party, take steps to resolve the dispute within six months; the resolution of the dispute must represent a fair balance between the legitimate interests of both parties (Article 9(5));

- may, in cases where organisations authorised to provide public networks or services have not interconnected their facilities, require those organisations in compliance with the principle of proportionality, in the interest of users and as a last resort to interconnect and, where appropriate, set terms of interconnection (Article 9(6)).

18. In 1999 the Commission launched discussions on a new and broader Framework for electronic communications infrastructure and associated services. The envisaged framework is meant to replace the current ONP framework and to cover not only telecommunications but all communications infrastructure and services. In July 2000, and thus after the reference in the present case was made, the Commission submitted six concrete legislative proposals. One of those proposals, namely for a regulation on unbundled access to the local loop, has already been adopted. Another proposal, for a directive designed to replace Directive 97/33, is still under discussion.

The national provisions at issue

19. In order to implement the Community regulatory framework Spain adopted Ley 11/1998 General de Telecomunicaciones (General Telecommunications Law) of 24 April 1998 (Law 11/1998).

20. Article 23 of Law 11/1998 defines a dominant operator as a network or service operator which has acquired - in the previous year and within the municipality, autonomous region, State or other defined geographical area - a market share that is 25% or more.

21. Under Article 24 owners of public telecommunications networks who are deemed to occupy a dominant position in the market must provide access to their networks, under objective, transparent and non-discriminatory conditions, to any users and providers of telecommunications services who request it. Furthermore, they must meet all technically viable and properly justified requests for network access at points other than the network termination points offered to the majority of end-users. Detailed requirements for open access are to be laid down in an implementing regulation.

22. On the basis of the provisions of Law 11/1998 the Spanish Government issued the contested Royal Decree 1651/1998 of 24 July approving the Regulation implementing Title II of Law 11/1998, General de Telecomunicaciones with regard to interconnection and access to the public networks and numbering (Royal Decree 1651/1998). The preamble to that Decree states that it transposes into Spanish law the content of the relevant Community directives and in particular Directive 97/33.

23. Article 9 of Royal Decree 1651/1998 is entitled Obligations of operators deemed to occupy a dominant position in the market and provides in so far as relevant:

Public telecommunications network operators deemed to occupy a dominant position in the market shall be subject to the following obligations:

...

3. To offer interconnection at local and higher-level switching centres.

In the event that, for technical reasons, certain of a dominant operator's switching centres are for the time being unable to provide interconnection, the operator shall indicate a timetable for making the technical adjustments to them which will enable interconnection to take place.

The Comisión del Mercado de las Telecomunicaciones (Telecommunications Market Commission) may require operators to give a technical explanation for their failure to offer interconnection at certain switching centres, and call for the introduction of technical alternatives ...

4. To provide access to the subscriber loop on such date and under such conditions as the Ministerio del Fomento (Ministry of Development) may determine for the purpose, if appropriate, following submission of a report by the Comisión del Mercado de las Telecomunicaciones.

...

The main proceedings

24. In the main proceedings before the Tribunal Supremo, Telefónica de España SA (Telefónica) asks for the annulment of several provisions of Royal Decree 1651/1998. It contests inter alia the compatibility with Community law of

- the obligation for the dominant operator to offer interconnection at local and higher-level switching centres under Article 9(3) of the Decree, and

- the obligation for the dominant operator to provide access to the subscriber loop under Article 9(4) of the Decree.

25. The Tribunal Supremo has doubts about the compatibility of Article 9(3) and Article 9(4) of Royal Decree 1651/1998 with Directive 97/33 and sees in particular two alternative interpretations of Article 4(2), Article 9(2) and Annex VII of the Directive.

26. On the one hand, precise determination of the interconnection points might seem to have been entrusted by the Directive only to negotiation between the operators, because it is not included in the matters which, according to Part 1 of Annex VII, may be subject to ex ante conditions set by NRAs. That appears to be not a mere oversight but a true exclusion since Part 2(c) of Annex VII expressly allocates the matter of interconnection points to the sphere of negotiation.

27. On the other hand, it might be argued that the general provision of Article 4(2), which obliges operators with significant market power to meet all reasonable requests for access to the network, implicitly acknowledges that all interconnection points ought to be open to other operators. The NRAs could therefore impose ex ante on operators with significant market power an obligation to make their local and higher-level switching centres available to other operators and provide access to the local subscriber loop. Those obligations would therefore only represent an embodiment or a clarification of the duty imposed by Article 4(2) of Directive 97/33.

28. The referring court's doubts are reinforced by the fact that during the preparation of Royal Decree 1651/1998 the Telecommunications Market Commission issued a report in which it proposed to delete paragraphs 3 and 4 of Article 9. It felt that the situations envisaged therein were not amongst the spheres in which the NRA was allowed to lay down ex ante conditions under Article 9(2) read in conjunction with Annex VII.

29. By order of 14 February 2000 the Tribunal Supremo decided to refer to the Court the following question:

Does a combined interpretation of Articles 4(2) and 9(2), in conjunction with Annex VII (Part 2(c)) of Directive 97/33/EC of the European Parliament and of the Council 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 (ONP), allow

(a) the national regulatory authorities to impose ex ante on an operator having significant market power the obligation to provide other operators with access to the subscriber loop and to offer interconnection at local and higher-level switching centres;

(b) or, on the contrary, do those authorities have the power - with regard to access and interconnection at those specific network points - only "to promote" agreements negotiated between the various operators, but not to impose such access and interconnection as an ex ante obligation on an operator with significant market power?

Observations submitted to the Court

30. Written observations have been submitted by Telefónica, the Spanish, Italian and Belgian Governments and the Commission. Those submitting written observations (with the exception of the Belgian Government) were also represented at the hearing.

31. According to Telefónica, it follows from the wording and structure of Article 9(2) read in conjunction with Annex VII of Directive 97/33 that NRAs may set ex ante conditions only in the fields enumerated in Part 1 of Annex VII. In the fields enumerated in Part 2 of that Annex the NRAs must limit themselves to encouraging coverage in interconnection agreements. The issue Locations of the points of interconnection is listed in Part 2 of Annex VII at letter (c). It follows that determination of the interconnection points is a matter reserved for negotiation between the parties. The NRAs were therefore prohibited from requiring ex ante that an operator must offer interconnection at his local or higher-level switching centres. If the NRAs could determine the interconnection points ex ante the division between two categories of issues within Article 9(2) and Annex VII would be pointless. That interpretation is confirmed by several provisions of the Directive and recitals of its preamble which show that the Directive favours negotiation between the parties and allows ex ante regulatory intervention only where absolutely necessary.

32. Telefónica maintains that the interpretation which it suggests is not contradicted by Article 4(2). That provision establishes merely a general principle and must be read together with Article 4(1), which gives priority to negotiation between the parties. Furthermore, under Article 4(2) only reasonable requests must be met.

33. As regards access to the subscriber loop, Telefónica argues in essence that in 1998 the Spanish authorities were not yet entitled to oblige operators to provide access to that particular element of the telecommunications network. The fact that the Community legislature only recently adopted specific rules on unbundled access to the local loop shows that Directive 97/33 did not empower the NRAs to set ex ante obligations in that field.

34. The Spanish and Italian Governments and the Commission contend that the provisions of Directive 97/33 do not prohibit NRAs from obliging ex ante an organisation with significant market power to offer interconnection at local and higher-level switching centres and to provide access to the subscriber loop.

35. In their view, on a literal interpretation the understanding of Article 9(2) of the Directive suggested by Telefónica is not the only possible one. Furthermore, even if it is true that the Directive gives in principle priority to negotiation between the parties, it also contains, in order to guarantee open and competitive markets, on the one hand, asymmetric provisions which allow the Member States to impose special obligations on organisations with significant market power, and, on the other hand, provisions which grant the NRAs important powers to intervene in access or interconnection negotiations. The Directive leaves the Member States in that regard a substantial margin of manoeuvre.

36. The national rules in issue are also in line with international obligations and in particular with Spain's and the Community's obligations arising from the Fourth protocol to the General Agreement on Trade in Services concerning basic telecommunications services.

37. Finally, Article 4(2) of Directive 97/33 - which must be read together with Article 16 of Directive 98/10 - covers only shared access to the local loop. Directive 97/33 therefore does not apply to full unbundled access to the local loop. In the absence of applicable Community provisions the Member States were free to establish an obligation for organisations with significant market power to provide access to the subscriber loop.

38. The Belgian Government does not take a definitive position on the question referred, but merely discusses the relationship between full unbundled access to the local loop and the property rights of the incumbent operator.

Assessment

Scope of the question referred

39. The referring court asks whether the Community provisions at issue allow the NRAs to impose ex ante on an organisation with significant market power the obligation to provide other organisations with access to the subscriber loop and to offer interconnection at local and higher-level switching centres, or whether, on the contrary, with regard to those issues, the NRAs have only the power to encourage agreements negotiated between the parties.

40. It should be noted that the question arises in the context of proceedings for the annulment of national regulatory provisions which establish the access and interconnection obligations in question and not in the context of, for example, a concrete interconnection dispute.

41. In essence the Court is therefore only requested to assess whether the Directive prohibits a Member State from adopting provisions such as Article 9(3) and (4) of Royal Decree 1651/1998.

42. That limited negative question must be distinguished from the broader and more difficult question of the positive regulatory action which the Directive actually requires the Member States to adopt.

43. I consider that in the present case the Court should focus on the narrow question referred and need not take a position on the Member States' precise obligations under, for example, Article 4(1) and (2) of the Directive. A narrower approach is more appropriate since it is the first time that the Court is called upon to interpret the provisions of Directive 97/33. The broader issues governed by the Directive are important and sensitive. Moreover, in view of the particular nature of the main proceedings, the observations submitted to the Court have not really addressed those broader issues.

44. It will be recalled that the Court is requested to interpret Articles 4(2) and 9(2) of Directive 97/33.

45. Under Article 4(2) certain organisations providing public telecommunications networks and publicly available telecommunications services with significant market power must meet all reasonable requests for access to the network including at points other than the network termination points offered to the majority of end-users. Although the precise positive content of that provision is not clear (e.g. the meaning of access to the network or reasonable requests), it is clear - and none of those submitting observations contests that interpretation - that it does not prohibit a Member State from adopting rules such as the ones at issue in the present case.

46. Under the narrow approach advocated above I will therefore concentrate on the analysis of Article 9(2) read in conjunction with Annex VII and examine whether that provision prohibits national rules which require an organisation with significant market power to offer interconnection at local and higher-level switching centres and to provide access to the subscriber loop.

Literal interpretation

47. According to the first subparagraph of Article 9(2) [g]eneral conditions set down in advance by national regulatory authorities shall be published in accordance with Article 14(1). It is implicit in that obligation to publish that there must be circumstances in which NRAs have the power to set general ex ante conditions.

48. The second subparagraph of Article 9(2) provides:

In particular, in relation to interconnection between organisations set out in Annex II, national regulatory authorities:

- may set ex ante conditions in the areas listed in Part 1 of Annex VII;

- shall encourage coverage in interconnection agreements of the issues listed in Part 2 of Annex VII.

49. Part 1 of Annex VII enumerates areas where the national regulatory authority may set ex ante conditions. Part 2 contains a list of other issues the coverage of which in interconnection agreements is to be encouraged. Part 2, letter (c) mentions locations of points of interconnection.

50. It is true that the two-part structure at first sight supports Telefónica's argument. However it follows from the wording set out above that the interpretation suggested by Telefónica is not the only possible one. Nothing in those provisions indicates unequivocally that the Part 1 list is exhaustive. There is also no clear indication that with regard to Part 2 issues NRAs are precluded from doing more than encourage their coverage in interconnection agreements. That the Directive requires the authorities to encourage coverage in interconnection agreements of Part 2 issues and permits them to set ex ante conditions in Part 1 areas does not automatically mean that it prohibits a Member State from obliging a dominant operator to provide access to the subscriber loop or to offer interconnection at certain interconnection points.

51. There are moreover doubts whether the provisions of the directive in question are applicable at all.

52. First and foremost, since the second subparagraph of Article 9(2) starts with the phrase in particular and relates to interconnection between organisations set out in Annex II, it would seem that that provision does not apply to the different situation of access to or interconnection of facilities of an organisation which falls under Annex I and enjoys significant market power. In this context it must be recalled that the Spanish rules at issue, namely Article 9(3) and (4) of Royal Decree 1651/1998, apply only to public telecommunications network operators deemed to occupy a dominant position in the market and that under Article 23 of Law 11/1998 the concept of dominant operator is defined in similar terms as the concept of an organisation with significant market power under Community law.

53. Support for the thesis that the second subparagraph of Article 9(2) applies only to interconnection between Annex II organisations can be found in Annex II itself. According to the introductory sentences of Annex II interconnection between organisations with rights and obligations to interconnect with each other under Article 4(1) is subject to additional supervision by national authorities, in accordance with Article 9(2). Annex I, by contrast, does not refer to Article 9(2) and states only that Annex I organisations with significant market power are subject to specific obligations with regard to interconnection and access as specified in Articles 4(2), 6 and 7.

54. Moreover, it might be argued that the term locations of points of interconnection in Part 2(c) of Annex VII refers only to the geographical situation of the interconnection points. National rules which merely define the required level of access or interconnection would thus in any case not be affected by Part 2(c) of Annex VII. It might therefore be argued that an obligation to offer interconnection at local and higher-level switching centres or an obligation to provide access to the local subscriber loop leaves the issue of the precise locations of the interconnection points untouched.

55. It seems therefore that neither Article 9(2) nor Annex VII necessarily implies that the Part 1 list in that Annex is exhaustive and that NRAs may only encourage coverage in interconnection agreements of the issues listed in Part 2. On a literal interpretation there are moreover serious doubts about the applicability of Article 9(2) read in conjunction with Annex VII to the Spanish provisions at issue.

Legislative history

56. In the Commission's legislative proposal for the Directive the rule corresponding to the second subparagraph of Article 9(2) provided that in relation to interconnection between Annex II organisations the NRAs

- were obliged to set ex ante conditions in the areas which are now to be found in Part 1 of Annex VII,

- had to ensure that several issues which are now to be found in Part 2 of Annex VII were covered in interconnection agreements,

- had to encourage the parties to cover in their interconnection agreements other issues which are now to be found in Part 2, letter (m) to (s) of Annex VII.

57. According to the Commission's explanatory memorandum the proposed Directive was to be characterised inter alia by clear responsibilities for national regulatory authorities.

58. Within the legislative procedure it was the Council which introduced the formulation of Article 9(2) and of Annex VII as ultimately adopted. The Council explained in its statement of reasons that in defining its position it was chiefly concerned inter alia to introduce greater flexibility in the planned provisions.

59. It thus appears that the Community legislature intended to create with Article 9(2) and Annex VII an open and flexible framework for the negotiation of interconnection agreements. Nothing in the legislative history indicates that the Part 1 list was designed to be exhaustive or that with regard to Part 2 issues the NRAs could only encourage coverage in interconnection agreements.

Systematic and teleological arguments

60. Directive 97/33 is designed to guarantee the interconnection of telecommunications networks, the interoperability of services and the provision of universal service in an environment of open and competitive markets (Article 1(1)). Its aim is to create conditions for open and efficient interconnection of and access to public telecommunications networks and publicly available telecommunications services (Article 1(2)).

61. In order to achieve that aim - and that is the Directive's first general characteristic - it gives in principle priority to commercial negotiation between the parties.

62. Article 3(1) of the Directive provides for example that technical and commercial arrangements for interconnection shall be a matter for agreement between the parties involved and that Member States must take all necessary measures to remove any restrictions which prevent organisations authorised by Member States to provide public telecommunications networks and publicly available telecommunications services from negotiating interconnection agreements between themselves.

63. According to recital 5 of the preamble organisations authorised to provide public telecommunications networks or publicly available telecommunications services in all or part of the Community should be free to negotiate interconnection agreements on a commercial basis in accordance with Community law.

64. However, the Directive recognises, secondly, that there will be different types of market players in the Member States. For each type it aims to strike a balance between rights and obligations in accordance with their relative position in the market. The Directive seems to distinguish broadly speaking between three categories of players, namely Annex II organisations, organisations which fall outside Annex II and Annex I organisations with significant market power.

65. Annex II organisations are essentially organisations which provide public telecommunications networks or publicly available telecommunications services and control the means of access to one or more network termination points. The boundary of that category does not appear to be fully harmonised since all providers of telecommunications services which are authorised by their Member State to interconnect in that category also form part of it. Under Article 4(1), Annex II organisations have both a right and an obligation to negotiate interconnection with each other. The relationship between Annex II organisations seems to be characterised by strong reciprocal rights and obligations.

66. Organisations which fall outside Annex II and therefore outside Article 4(1) appear to have fewer rights, but also fewer obligations. A data service provider not authorised by its Member State to interconnect under Annex II may for example not have any particular a priori right to be granted interconnection by an Annex II organisation, nor any obligation to accept requests for interconnection by others. However, in case of an access or interconnection dispute all parties appear to have the right to request the NRA to intervene (Article 9(3)).

67. The third group of players, namely organisations which fall under Annex I and/or possess significant market power, is of particular relevance for the present case. In that respect the Community has recently published a table of organisations notified by the Member States under Directive 97/33 as falling under Annex I and/or as possessing significant market power. That table lists in the field of fixed voice telephony mainly the former telecommunications monopolists. Organisations falling under Annex I and/or enjoying significant market power are subject to a form of asymmetric regulation in that they have to comply with specific obligations as regards interconnection and access pursuant to Articles 4(2), 6, 7 and 8(2).

68. The third general characteristic of the framework set up by Directive 97/33 is the important supervisory role with which the NRAs are entrusted. Recital 5 of the preamble states for example that the parties' freedom to negotiate interconnection agreements is subject to supervision and, if necessary, intervention by national regulatory authorities. The extensive powers of NRAs as regards access and interconnection are to be found not only in the general provision of Article 9, but also for example in Article 7(3) according to which the NRAs must have the power to impose changes in the reference interconnection offer of certain organisations with significant market power.

69. The fourth general characteristic is that the Directive leaves the Member States a significant margin of manoeuvre for its implementation.

70. Article 1(1) uses the word framework which is qualified in Recital 2 as general in order to describe the nature of the Directive's rules. The Directive is thus not designed to achieve complete harmonisation.

71. Furthermore, with regard to several key concepts, the Directive uses imprecise definitions (e.g. interconnection ), confers discretion on the Member States as to the scope ratione personae of the applicable rules (e.g. organisations with significant market power, Annex II organisations ) or does not provide any definition at all (access to the network). Indeed the Economic and Social Committee commented on the Commission's proposal that it would be better if a Directive of this importance were clearer and actually defined and delimited the terms used. Its structure should also be more methodical and logical.

72. It appears that in the course of the legislative process the Council, rather than tightening the proposal, introduced even greater flexibility into its provisions.

73. That flexibility is perhaps a necessary corollary of the speed of technological and economic developments in the field of telecommunications and the divergent degrees of liberalisation in the Community. In Member States where as a result of former special or exclusive rights the incumbent has a very strong position in the market, asymmetric regulation and strict supervision of access and interconnection agreements is indispensable in order to create competitive markets. In other countries in which markets are already competitive a heavy-handed regulatory approach might on the contrary have detrimental effects on investments in infrastructure. Member States must thus necessarily enjoy a certain margin of appreciation to adapt their regulatory framework to the evolving economic features of their national telecommunications market.

74. It follows that Directive 97/33 is essentially characterised by

- priority given to commercial negotiations between interconnecting parties,

- asymmetric provisions which impose special obligations on players with a strong position in the market,

- supervision of access and interconnection agreements by NRAs,

- a certain flexibility in its provisions.

75. Under Telefónica's interpretation of Article 9(2) and of Annex VII NRAs can under no circumstances impose ex ante obligations in other areas than those listed in Part 1 of Annex VII.

76. It follows however from the aims and general characteristics of Directive 97/33 identified above that that interpretation cannot be correct; in particular it cannot apply where an Annex I organisation with significant market power is asked to provide access or offer interconnection. In such a case, to impose ex ante conditions only in the areas set out in Part 1 of Annex VII would be insufficient to achieve the general aim of creating conditions for open and efficient interconnection and access. Moreover, the catalogue in Part 1 of Annex VII does not reflect the specific obligations to which an organisation with significant market power must be subjected under Articles 4(2), 6, 7 and 8 of the Directive. That means that at least with regard to Annex I organisations with significant market power the Part 1 list of areas either does not apply at all or cannot be exhaustive.

77. Telefónica's interpretation is also difficult to reconcile with other provisions of the Directive.

78. Under the general rule of Article 9(1) NRAs must not only encourage but also secure adequate interconnection in the interest of all users. At least with regard to dominant operators the setting of certain ex ante conditions which go beyond the catalogue in Part 1 of Annex VII seems indispensable.

79. Under Article 9(3) NRAs may intervene in pursuit of the objectives of Article 9(1) on their own initiative and at any time. That appears to imply that they can intervene already before commercial negotiations begin.

80. Under Article 7(3) NRAs must have the power to impose changes in the reference interconnection offers. An imposed change of the reference interconnection offer, which is general in character and contains standard terms, is therefore similar in its effects to setting ex ante conditions.

81. In the light of the foregoing considerations Article 9(2) read in conjunction with Annex VII of Directive 97/33 cannot be interpreted as prohibiting a Member State from obliging a public telecommunications network operator with significant market power to offer interconnection at local and higher-level switching centres.

Article 16 of Directive 98/10/EC and the Fourth Protocol to the GATS

82. As further support for their contentions that the Spanish provisions are not contrary to Directive 97/33, the Commission refers to Article 16 of Directive 98/10, whilst the Spanish Government refers to the Additional commitment by the European Communities and their Member States annexed to the Fourth protocol to the General Agreement on Trade in Services.

83. Since none of those submitting observations suggests that those rules prohibit a Member State from adopting regulatory provisions such as the ones under scrutiny in the main proceedings, it is not necessary for me to take a position on their interpretation or on their effects in the Community legal order.

Access to the local loop

84. As regards access to the subscriber loop the Commission argues that Directive 97/33 covers shared access to the local loop but not full unbundled access to the local loop within the meaning of Regulation No 2887/2000. The Commission considers therefore that in the absence of Community regulation of the latter issue the Member States were always free to oblige certain organisations to provide full unbundled access to the local loop.

85. I consider that it is again not necessary to take a view and to determine the precise scope of application of Directive 97/33 as regards access to the local loop. The rules of Directive 97/33 do not in any event prohibit a Member State from obliging an organisation with significant market power to offer interconnection or to provide access to its network at certain predetermined points.

86. Furthermore it seems that the issue of the obligation to provide access to the subscriber loop is to a certain extent hypothetical. It will be recalled that under Article 9(4) of Royal Decree 1651/1998 the operator concerned has to provide access to the subscriber loop only on such date and under such conditions as the competent Minister decides. At the hearing the Commission stated that until recently the Spanish Government had not taken such a decision. It appears that it was only on 22 December 2000 and thus four days after the adoption of Regulation No 2887/2000 that the Government adopted a Royal decree requiring unbundled access to the local loop.

Conclusion

87. Accordingly I am of the opinion that the question referred by the Tribunal Supremo should be answered as follows:

Article 4(2) and Article 9(2) read in conjunction with Annex VII of Directive 97/33/EC of the European Parliament and of the Council 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 (ONP) do not prohibit a Member State from obliging a public telecommunications network operator with significant market power

- to offer interconnection at local and higher-level switching centres, and

- to provide access to the subscriber loop.