Commission Directive 95/51/EC of 18 October 1995 amending Directive 90/388/EEC with regard to the abolition of the restrictions on the use of cable television networks for the provision of already liberalized telecommunications services
Date: 1995-10-18
Institutions: European Commission
Subjects: cable distribution, competition, liberalisation of the market, telecommunications, telecommunications equipment













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31995L0051

Commission Directive 95/51/EC of 18 October 1995 amending Directive 90/388/EEC with regard to the abolition of the restrictions on the use of cable television networks for the provision of already liberalized telecommunications services  


Official Journal L 256 , 26/10/1995 P. 0049 - 0054 





COMMISSION DIRECTIVE 95/51/EC of  18 October 1995 amending Directive 90/388/EEC with regard to the abolition of the restrictions on  the use of cable television networks for the provision of already liberalized telecommunications  servicesTHE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, and in particular Article 90 (3)  thereof, Whereas: (1)  Under Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for  telecommunications services  (1), as amended by Directive 94/46/EC  (2), certain telecommunications  services were opened to competition, and the Member States were requested to take the measures  necessary to ensure that any operator was entitled to supply such services; as far as voice  telephony services to the general public are concerned, the Council Resolution of 22 July 1993  (3)  acknowledges that this exception can be terminated by 1 January 1998, with a transitional period  for some Member States; the telex service, mobile communications and radio and television  broadcasting to the public were specifically excluded from the scope of the Directive; satellite  communications were included in the scope of the Directive through Directive 94/46/EC. During the public consultation organized by the Commission in 1992 on the situation in the  telecommunications sector, following the Communication of the Commission of 21 October 1992, the  effectiveness of the measures liberalizing the telecommunications sector and in particular the  liberalization of data communications, value added services and the provision of data and voice  services to corporate users and closed user groups, was questioned by many service providers and  users of such services. (2)  The regulatory restrictions preventing the use of alternative infrastructure for the provision  of liberalized services, and in particular the restrictions on the use of cable TV networks, are  the main cause of this continuing bottleneck situation. Potential service providers must now rely  on transmission capacity - 'leased lines` - provided by the telecommunications organizations, which  are often also competitors in the area of liberalized services. To remedy this problem, the  European Parliament, in its Resolution of 20 April 1993  (4), called upon the Commission to adopt  as soon as possible the necessary measures to take full advantage of the potential of the existing  infrastructure of cable networks for telecommunications services and to abolish without delay the  existing restrictions in the Member States on the use of cable networks for non-reserved services. (3)  Following that resolution the Commission completed two studies on the use of cable TV networks  and alternative infrastructures for the delivery of those telecommunications services which have  already been opened to competition under Community law: 'The effects of liberalization of satellite  infrastructure on the corporate and closed user group market`, Analysis, 1994 and 'L'impact de  l'autorisation de la fourniture de services de télécommunications libéralisés par les  câblo-opérateurs` by Idate, 1994. The basic findings of those studies emphasize the potential role  for, amongst other things, cable TV networks, in meeting the concerns raised about the relatively  slow pace of innovation and delayed development of liberalized services in the European Community.  Opening such networks would help to overcome the problems of high pricing levels and lack of  suitable capacity, which are largely due to current exclusive provision of infrastructure in most  Member States. The networks operated by authorized cable TV providers indeed offer opportunities  for the supply of an increasing number of services, apart from TV broadcasts, if additional  investment is forthcoming. The example of the US market shows that new services combining image and  telecommunications emerge when certain regulatory barriers are removed. (4)  Some Member States have therefore abolished previous restrictions on the provision of some  data services and/or non-reserved telephone services on cable TV networks. One Member State permits  voice telephony. Other Member States have, however, maintained severe restrictions on the provision  of services other than the distribution of TV broadcasts on those networks. (5)  The current restrictions imposed by Member States on the use of cable TV networks for the  provision of services other than the distribution of TV broadcasts aim to prevent the provision of  public voice telephony by means of networks other than the public switched telephone network, to  protect the main source of revenue of the telecommunications organizations. Exclusive rights to provide public voice telephony were granted to most of the telecommunications  organizations of the Community, to guarantee them the financial resources necessary for the  provision and exploitation of a universal network, that is to say, one having general geographical  coverage and provided to any service provider or user upon request within a reasonable period of  time. (6)  Since those restrictions on the use of cable TV networks are brought about by State measures  and seek, in each of the national markets where they exist, to favour telecommunications  organizations, which the Member States own or to which they have granted special or exclusive  rights, the restrictions must be assessed under Article 90 (1) of the EC Treaty. This Article  requires Member States not to enact or maintain in force any measures regarding such undertakings  which defeat the object of Treaty provisions, and in particular of the competition rules. It  includes a prohibition on maintaining measures regarding telecommunications organizations which  result in limiting the free provision of services within the Community or lead to abuses of a  dominant position to the detriment of the users of a given service. (7)  The granting of exclusive rights to the telecommunications organizations to provide  transmission capacity for the provision of telecommunications services to the public and the  consequent regulatory restrictions on the use of cable TV networks for purposes other than the  distribution of radio and television broadcasting programmes, in particular, for new services such  as interactive television and video on demand as well as multimedia-services in the Community,  which otherwise cannot be provided, necessarily limits the freedom to provide such services to or  from other Member States. Such regulatory restrictions cannot be justified for public policy  reasons or in terms of essential requirements, since the latter, and in particular the essential  requirement of interworking networks wherever cable TV networks and telecommunications networks are  interconnected, can be guaranteed by less restrictive measures, such as objective,  non-discriminatory and transparent declaration or licensing conditions. (8)  The measures granting exclusive rights to the telecommunications organizations for the  provision of transmission capacity and the consequent regulatory restrictions on the use of cable  TV infrastructure for the provision of other telecommunications services already open to  competition are therefore a breach of Article 90, read in conjunction with Article 59 of the  Treaty. The fact that the restrictions apply without distinction to all companies other than the  relevant telecommunications organizations is not sufficient to remove the preferential treatment of  the latter from the scope of Article 59 of the Treaty. Indeed it is not necessary for all the  companies of a Member State to be favoured in relation to the foreign companies. It is sufficient  that the preferential treatment should benefit certain national operators. (9)  Article 86 of the Treaty prohibits as incompatible with the common market any conduct by one  or more undertakings holding dominant positions that constitutes an abuse of a dominant position  within the common market or a substantial part of it. (10)  In each relevant national market the telecommunications organizations hold a dominant  position for the provision of transmission capacity for telecommunications services because they  are the only ones with a public telecommunications network covering the whole territory of those  States. Another factor in this dominant position concerns the peculiar characteristics of the  market and in particular its highly capital-intensive nature. Taking account of the amount of  investment needed to duplicate a network, there is a high reliance on use of existing networks.  This enhances the structural dominance of the relevant telecommunications organizations and  constitutes a potential barrier to entry. Thirdly, as a result of their market share, the  telecommunications organizations further benefit from detailed information on telecommunications  flows which is not available to new entrants. It includes information on subscribers' usage  patterns, necessary to target specific groups of users, and on price elasticities of demand in each  market segment and region of the country. Finally, the fact that the relevant telecommunications  organizations enjoy exclusive rights for the provision of voice telephony also contributes to their  dominance in the neighbouring, but distinct, market for telecommunications capacity. (11)  The mere creation of a dominant position within a given market through the grant of an  exclusive right is not, as such, incompatible with Article 86. A Member State is, however, not  allowed to maintain a legal monopoly where the relevant undertaking is compelled or induced to  abuse its dominant position in a way that is liable to affect trade between Member States. (12)  The prohibition of the use of other infrastructure, and in particular CATV networks, for the  provision of telecommunications services has encouraged the telecommunications organizations to  charge high prices in comparison with prices in other countries, whereas innovation in European  corporate networking and competitive service provision as well as the implementation of  applications proposed in the 'Report on Europe and the global information society`, are critically  dependent on the availability of infrastructure, in particular of leased circuits at decreasing  costs. Tariffs for such high-capacity infrastructure are on average 10 times higher in the  Community than equivalent capacity over equivalent distances in North America. In the absence of a  justification, in the form of (for example) higher costs, these tariffs must be considered abusive  within the meaning of point (a) of the second paragraph of Article 86. Those high prices in the Community are a direct consequence of the restrictions imposed by Member  States on the use of infrastructures other than those of the telecommunications organizations, and  in particular of those of the cable TV operators, for the provision of telecommunications services.  Such high prices cannot only be explained by the underlying costs, given the substantial  differences in tariffs between Member States where similar cost structures could be expected. (13)  Moreover, the State measures preventing the CATV operators from offering transmission  capacity in competition with the telecommunications organizations for the provision of liberalized  services restrict the overall supply of capacity in the market and eliminate incentives for  telecommunications organizations to quickly increase the capacity of their networks, to reduce  average costs and to lower tariffs. The resulting high tariffs charged by the telecommunications  organizations for, and the shortage of, the basic infrastructure provided by these organizations  over which liberalized services might be offered by third parties have delayed widespread  development of high-speed corporate networks, remote accessing of databases by both business and  residential users and the deployment of innovative services such as telebanking, distance learning,  computer-aided marketing, etc. (See communication to the European Parliament and the Council of 25  October 1994 'Green Paper on the liberalization of telecommunications infrastructure and cable  television networks: Part One`). The networks of the telecommunications organizations currently  fail to meet all potential market demand for transmission capacity for the provision of these  telecommunications services, as emphasized by users and suppliers of such services ('Communication  to the Council and the European Parliament on the consultation on the review of the situation in  the telecommunications sector` of 28 April 1993, page 5, point 2; the findings made during the  review thus showed that the mere obligation to provide leased lines on demand was not sufficient to  avoid restrictions on access to the markets in telecommunications services and limits on user's  freedom of choice). The current restrictions on the use of CATV networks for the provision of such services therefore  create a situation in which the mere exercise by the telecommunications organization of their  exclusive right to provide transmission capacity for public telecommunications services limits,  within the meaning of point (b) of the second paragraph of Article 86 of the Treaty, the emergence  of, inter alia, new applications such as pay per view, interactive television and video on demand  as well as multimedia-services in the Community, combining both audio-visual and  telecommunications, which often cannot adequately be provided on the networks of the  telecommunications organizations. On the other hand, given the restrictions on the number of services which they may offer, cable TV  operators often postpone investments in their networks and in particular the introduction of  optical-fibre which could be profitable if they were to be spread over a larger number of services  provided. Consequently, restrictions on the use of cable TV networks to provide services other than  broadcasting also have the effect of delaying the development of new telecommunications and  multimedia services, and thus holding back technical progress in this area. (14)  Lastly, as was recalled by the Court of Justice of the European Communities in its Judgment  of 19 March 1991 in Case C-202/88, France v. Commission (1), a system of undistorted competition,  as laid down in the Treaty, can be guaranteed only if equality of opportunity is secured between  the various economic operators. Reserving to one undertaking which markets telecommunications  services the task of supplying the indispensable raw material - transmission capacity - to all  companies offering telecommunications services proved, however, tantamount to conferring upon it  the power to determine at will which service could be offered by its competitors, at which costs  and in which time periods, and to monitor their clients and the traffic generated by its  competitors, thereby putting that undertaking at an obvious advantage over its competitors. (15)  The exclusive rights granted to the telecommunications organization to provide transmission  capacity for telecommunications services to the public and the resulting restrictions on the use of  cable TV networks for the provision of liberalized services are therefore incompatible with Article  90 (1) in conjunction with Article 86 of the Treaty. Article 90 (2) of the Treaty provides for an  exception to Article 86 in cases where the application of the latter would obstruct the  performance, in law or in fact, of the particular tasks assigned to the telecommunications  organizations. Pursuant to that provision, the Commission investigated the impact of liberalizing  the use of the cable networks for the provision of telecommunications and multimedia services. Pursuant to Directive 90/388/EEC, Member States may until a certain date continue to reserve the  provision of voice telephony to their national telecommunications organization so as to guarantee  sufficient revenues for the establishment of a universal telephone network. Voice telephony is  defined in Article 1 of Directive 90/388/EEC as the commercial provision for the public of the  direct transport and switching of speech in real time between public switched network termination  points, enabling any user to use equipment connected to such a network termination point in order  to communicate with another termination point. Where cable TV networks are transformed into  switched networks providing voice telephony to any subscriber, such networks should likewise be  considered to be public switched networks and their termination points as termination points of  such networks. The relevant voice service would then become voice telephony, which according to  Article 2 of Directive 90/388/EEC could further be prohibited on cable TV networks by the Member  States. It appears that such temporary prohibition of the provision of voice telephony on the cable TV  network can be justified on the same grounds as for telecommunications networks. Conversely where  switched voice services for closed user groups, and/or transparent transmission capacity in the  form of leased lines, are provided on cable TV networks, those networks do not represent public  switched networks and Member States should not restrict the relevant services, even when they  involve the use of one connection point with the public switched telephone network. Besides the case of voice telephony, no other restrictions for the provision of liberalized  services is justified under Article 90 (2), particularly if regard is had to the small contribution  made to the turnover of the telecommunications organizations by those services, currently provided  on their own networks, which could be diverted towards the cable TV networks. It is recalled that  the measures liberalizing the provision of voice telephony should take into account the need to  finance a universal service including any development in the concept, see point V.2 in the  Communication from the Commission to the Council and the European Parliament of 3 May 1995. (16)  Notwithstanding the abolition of the current restrictions on the use of cable TV networks,  where the provision of services is concerned, the same licensing or declaration procedures could be  laid down as for the provision of the same services on the public telecommunications networks. (17)  In addition, the distribution of audiovisual programmes intended for the general public via  those networks, and the content of such programmes, will continue to be subject to specific rules  adopted by Member States in accordance with Community law and is not, therefore, subject to the  provisions of this Directive. (18)  Where Member States grant to the same undertaking the right to establish both cable TV and  telecommunications networks, they put the undertaking in a situation whereby it has no incentive to  attract users to the network best suited to the provision of the relevant service, as long as it  has spare capacity on the other network. In that case, the undertaking has, on the contrary, an  interest for overcharging for use of the cable infrastructure for the provision of non-reserved  services, in order to increase the traffic on their telecommunications networks. The introduction  of fair competition will often require specific measures that take into account the specific  circumstances of the relevant markets. Given the disparities between Member States, the national  authorities are best able to assess which measures are the most appropriate, and in particular to  judge whether a separation of the activities is indispensable. In early stages of liberalization,  detailed control of cross-subsidies and accounting transparency are essential. To allow the  monitoring of any improper behaviour, Member States should therefore at least impose a clear  separation of financial records between the two activities, though full structural separation is  preferable. (19)  In order to allow the monitoring of any improper cross-subsidies between the broadcasting  tasks of cable TV operators which are provided under exclusive rights in a given franchise area and  their business as providers of capacity for telecommunications services, Member States should  guarantee transparency as regards the use of resources from one activity which could be used to  extend the dominant position to the other market. Given the complexity of the financial records of  network providers, it is extremely difficult to detect cross-subsidies within it between the  reserved activities and the services provided under competitive conditions. It is thus necessary to  require those cable TV operators to keep separate financial records, and in particular to identify  separately costs and revenues associated with the provision of the services supplied under their  exclusive rights and those provided under competitive conditions once they achieve a significant  turnover in telecommunications activities in the licensed area. For the time being, a turnover of  more than ECU 50 million should be considered a significant turnover. Where such a requirement  would constitute an excessive burden on the relevant undertaking, Member States may grant  deferments for limited periods, subject to prior notification to the Commission of the underlying  justifications. The operators concerned should use an appropriate cost accounting system which can be verified by  accounting experts and which ensures the production of recorded figures. The above separation of accounts should, for this purpose at least, apply the principles set out in  Article 10 (2) of Council Directive 92/44/EEC of 5 June 1992 on the application of open network  provision to leased lines  (1), as amended by Commission Decision 94/439/EC  (2). Hybrid services,  made up of elements falling variously within the reserved and the competitive services, should  distinguish between the costs of each element. (20)  In the event that, in the meantime, no competing home-delivery system is authorized by the  relevant Member State, the Commission will reconsider whether separation of accounts is sufficient  to avoid improper practices and will assess whether such joint provision does not result in a  limitation of the potential supply of transmission capacity at the expense of the services  providers in the relevant area, or whether further measures are warranted. (21)  Member States should refrain from introducing new measures with the purpose or effect of  jeopardizing the aim of this Directive, HAS ADOPTED THIS DIRECTIVE: Article 1 Directive 90/388/EEC is hereby amended as follows: 1.  Article 1 (1) is amended as follows: (a)  the fifth indent is replaced by the following: '-  "telecommunications services" means services whose provision consists wholly or partly in the  transmission and/or routing of signals on a telecommunications network.` (b)  the following is added after the last indent: '-  "cable TV network" means any wire-based infrastructure approved by a Member State for the  delivery or distribution of radio or television signals to the public. This Directive shall be without prejudice to the specific rules adopted by the Member States in  accordance with Community law, governing the distribution of audiovisual programmes intended for  the general public, and the content of such programmes.` 2.  In Article 4, the following is inserted after the second paragraph: 'Member States shall: -  abolish all restrictions on the supply of transmission capacity by cable TV networks and allow  the use of cable networks for the provision of telecommunications services, other than voice  telephony; -  ensure that interconnection of cable TV networks with the public telecommunications network is  authorized for such purpose, in particular interconnection with leased lines, and that the  restrictions on the direct interconnection of cable TV networks by cable TV operators are  abolished.` Article 2 When abolishing restrictions on the use of cable TV networks, Member States shall take  the necessary measures to ensure accounting transparency and to prevent discriminatory behaviour,  where an operator having an exclusive right to provide public telecommunications network  infrastructure also provides cable TV network infrastructure; and in particular to ensure the  separation of financial accounts as concerns the provision of each network and its activity as  provider of telecommunication services. Where an operator has an exclusive right to provide cable television network infrastructure in a  given area Member States shall also ensure that the operator concerned keeps separate financial  accounts regarding its activity as network capacity provider for telecommunications purposes as  soon as it achieves a turnover of more than ECU 50 million in the market for telecommunications  services other than the distribution of radio and broadcasting services in the relevant geographic  area. Where such requirement would constitute an excessive burden on the relevant undertaking,  Member States may grant deferments for limited periods, subject to prior notification to the  Commission of the underlying justification. Where a single operator provides both networks or both services as referred to in the first  paragraph, the Commission shall, before 1 January 1998, carry out an overall assessment of the  imapct of such joint provision in relation to the aims of this Directive. Article 3 Member States shall supply to the Commission, not later than nine months after this  Directive has entered into force, such information as will allow the Commission to confirm that  Articles 1 and 2 have been complied with. Article 4 This Directive shall enter into force on 1 January 1996. Article 5 This Directive is addressed to the Member States. Done at Brussels, 18 October 1995. For the Commission Karel VAN MIERT Member of the Commission (1)  [1991] ECR I-1271, paragraph 51.  (1)  OJ No L 165, 19. 6. 1992, p. 27.  (2)  OJ No L 181, 15. 7. 1994, p. 40.