Draft Commission Directive amending Directive 90/388/EEC in order to ensure that telecommunications networks and cable TV networks owned by a single operator are separate legal entities
Date: 1998-03-07
Institutions: European Commission
Subjects: cable distribution, competition law, liberalisation of the market, single market, telecommunications, transmission network

7.3.98

EN

Official  Journal  of  the  European  Communities

C  71/23

Draft  Commission  Directive  amending  Directive  90/388/EEC  in  order  to  ensure  that  telecom(cid:220)
munications  networks  and  cable  TV  networks  owned  by  a  single  operator  are  separate  legal
entities

(98/C  71/05)

(Text  with  EEA  relevance)

THE  COMMISSION  OF  THE  EUROPEAN
COMMUNITIES,

Having  regard  to  the  Treaty  establishing  the  European
Community,  and  in  particular  Article  90(3)  thereof,

Whereas:

(1)(cid:217)Pursuant  to  Commission  Directive  90/388/EEC  of
28  June  1990  on  competition  in  the  markets  for
telecommunications  services(cid:216)(˛),  as  last  amended  by
Directive  96/19/EC(cid:216)(ˇ),  the  Member  States  were
required  to  lift  special  and  exclusive  rights  for  tele(cid:220)
communications 
infrastructures  by
services  and 
1  January  1998,  subject  to  additional  transition
periods  for  some  Member  States.  In  particular,
Article  4,  as  amended  by  Commission  Directive
95/51/EC(cid:216)(—),  required  Member  States  to  "abolish
all  restrictions  on 
transmission
capacity  by  cable  TV  networks  and  allow  the  use  of
cable  networks  for  the  provision  of  telecommuni(cid:220)
cations  services,  other  than  voice  telephony’,  and  to
"ensure  that  interconnection  of  cable  TV  networks
with 
is
authorised  for  such  purpose,  in  particular  intercon(cid:220)
nection  with  leased  lines,  and  that  the  restrictions
on  the  direct  interconnection  of  cable  TV  networks
by  cable  TV  operators  are  abolished’.

telecommunications  network 

the  public 

supply  of 

the 

(2)(cid:217)Directive  95/51/EC 

addressed 

two  problems
concerning  undertakings  to  which  Member  States
have  granted  the  right  to  establish  both  cable  TV
and  telecommunications  networks.  First,  it  stated
that  these  undertakings  are  in  a  situation  whereby
they  have  no 
incentive  to  attract  users  to  the
network  best  suited  to  the  provision  of  the  relevant
service.  It  was  pointed  out  that  the  introduction  of
fair  competition  will  often  require  specific  measures
that  take  into  account  the  specific  circumstances  of
the  relevant  markets.  At  the  time  of  the  adoption  of

(˛)(cid:217)OJ  L  192,  24.7.1990,  p.  10.
(ˇ)(cid:217)OJ  L  74,  22.3.1996,  p.  13.
(—)(cid:217)OJ  L  256,  26.10.1995,  p.  49.

Secondly, 

Directive  95/51/EC,  the  Commission  concluded
that,  given  the  disparities  between  Member  States,
the  national  authorities  were  best  able  to  assess
which  measures  were  most  appropriate,  and 
in
particular  to  judge  whether  a  separation  of  these
activities  was 
the
indispensable. 
Commission  concluded  that  detailed  control  of
cross(cid:220)subsidies  and  accounting 
transparency  are
essential  in  the  early  stages  of  liberalisation  of  the
telecommunications  sector.  Article  2  of  Directive
95/51/EC  therefore  required  Member  States  to
telecommunications
ensure 
particular 
organisations  providing  cable  TV 
infrastructures
kept  separate  financial  accounts  as  concerns  the
provision  of  public  telecommunications  networks
and  cable  TV  networks  as  well  as  their  activities  as
telecommunications  service  providers.  It  was  also
stated  that  while  Member  States  should  at  least
financial  records
impose  a  clear  separation  of 
between  two  activities,  full  structural  separation  was
preferable.

that 

in 

systems 

it  would  have 

(3)(cid:217)At  the  same  time  the  Commission  stated  that  in  the
absence  of  the  emergence  of  competing  home(cid:220)
to  reconsider
delivery 
whether  a  separation  of  accounts  was  sufficient  to
avoid  improper  practices  and  would  assess  whether
such  joint  provision  did  not  result  in  a  limitation  of
the  potential  supply  of  transmission  capacity  at  the
expense  of  the  service  providers  in  the  relevant
area,  or  whether  further  measures  were  warranted.
In  this  context  the  third  paragraph  of  Article  2  of
Directive  95/51/EC  required  the  Commission  to
carry  out,  before  1  January  1998,  an  overall
assessment  of  the  impact,  in  relation  to  the  aims  of
that  Directive,  of  the  joint  provision  of  cable  TV
networks  and  public  telecommunications  networks
through  a  single  operator.

(4)(cid:217)This  Directive  is  based  on  the  assessment  carried
out  by  the  Commission  as  required  by  Article  2  of
Directive  95/51/EC.  In  preparing  that  assessment,
two  studies  were  commissioned  on  the  competition
implications  in  telecommunications  and  multimedia
markets  of,  on  the  one  hand,  joint  provision  of
cable  and  telecommunications  networks  by  a  single
dominant  operator  and,  on  the  other,  restrictions
on  the  use  of  telecommunications  networks  for  the

C  71/24

EN

Official  Journal  of  the  European  Communities

7.3.98

services.  The 

provision  of  cable  TV 
studies
concluded  in  particular  that  the  joint  ownership  of
telecommunications 
cable  TV
networks 
networks  by  a  single  enterprise,  without  a  high
degree  of  competition  in  the  local  access  markets,
slows  down 
full
multimedia 
the  detriment  of
consumers,  service  providers  and  the  European
economy  as  a  whole.

the  development 

infrastructure 

towards  a 

and 

to 

(5)(cid:217)The  Commission  has  adopted  a  communication  on
the  assessment  carried  out  as  required  by  Directives
95/51/EC  and  96/19/EC(cid:216)(˛).  In 
its  review  the
Commission  found  that  the  optimal  development
telecommunications  and  multimedia  markets
of 
depends  on  four  factors:  service  competition,  infra(cid:220)
structure  competition, 
infrastructure  upgrade,  as
well  as  other  types  of  innovation.  It  found  that  in
the  Community,  the  joint  provision  of  telecom(cid:220)
munications  and  cable  TV  services  by  a  single
operator  creates  an  asymmetric  starting  position  for
dominant  telecommunications  operators  compared
with  new  entrants.  This  will  act  as  a  significant
constraint  on  the  optimal  development  of  telecom(cid:220)
munications  markets.

(6)(cid:217)The  Treaty,  and  in  particular  Article  90  thereof,
entrusts  the  Commission  with  the  task  of  ensuring
that  Member  States,  in  the  case  of  public  under(cid:220)
special  or
takings  and  undertakings  enjoying 
exclusive  rights,  comply  with 
their  obligations
under  Community  law.  Pursuant  to  Article  90(3)
the  Commission  can  specify  and  clarify  the  obli(cid:220)
that
gations  arising  from 
that  Article,  and 
framework, 
the  conditions  which  are
set  out 
necessary  to  allow  the  Commission  to  perform
effectively  the  duty  of  surveillance  imposed  upon  it
by  that  paragraph.

in 

(7)(cid:217)Most  European  telecommunications  organisations
are  still  State(cid:220)controlled  companies.  In  addition,
whilst  Community  law  provides  for  the  withdrawal
of  special  and  exclusive  rights  for  the  provision  of
tele(cid:220)
telecommunications  networks  and  services, 
communications  organisations  will  continue 
to
rights  as  defined  by  Directive
enjoy 
special 
by  Directive
as 
90/388/EEC, 

amended 

94/46/EC(cid:216)(ˇ),  beyond  the  date  of  full  liberalisation,
in  the  area  of  radio  frequencies  used  for  the
provision  of 
telecommunications  networks  and
broadcasting  transmission  capacity.  That  is  because
telecommunications  organisations  continue  to  enjoy
rights  to  use  radio  frequencies  which  they  have
historically  been  granted  otherwise  than  according
to  objective,  proportional  and  non(cid:220)discriminatory
regulatory
authorisations 
criteria.  Those 
advantages  that  strengthen  the  position  of  those
operators  and  continue  to  have  a  substantial  effect
on  the  ability  of  other  undertakings  to  compete
with 
in
infrastructure.
telecommunications 
the  area  of 
Therefore  those  telecommunications  operators  are
undertakings  covered  by  Article  90(1)  of 
the
Treaty.

telecommunications  organisations 

are 

the 

(8)(cid:217)Most  Member  States  have  adopted  measures
granting  to  the  telecommunications  organisations
special  or  exclusive  rights  for  the  provision  of  cable
television  networks.  The  rights  can  take  the  form
either  of  an  exclusive  licence  or  of  a  non(cid:220)exclusive
licence  where  the  number  of  licences  is  restricted
otherwise  than  according  to  objective,  proportional
and  non(cid:220)discriminatory  criteria.

(9)(cid:217)Article  86  of  the  Treaty  prohibits  one  or  more
undertakings  holding  a  dominant  position  from
abusing  that  dominant  position  within  the  common
market  or  a  substantial  part  of  it.

to  a 

(10)(cid:217)Where  Member  States  have  granted  a  special  or
exclusive  right  to  build  and  operate  cable  TV
telecommunications  organisation
networks 
which  is  dominant  on  the  market  for  services  using
telecom(cid:220)
telecommunications 
munications  organisation  has  no 
to
upgrade  both  its  public  narrowband  telecommuni(cid:220)
cations  network  or  its  broadband  cable  TV  network
communications
to 
an 
of
network 
capable 
delivering 
at  high
bandwidth.

("full(cid:220)service 
voice,  data 

network’) 
and 

infrastructure, 

broadband 

integrated 

incentive 

images 

that 

In  other  words,  such  an  organisation  is  placed  in  a
situation  where  it  has  a  conflict  of  interests  because
any  substantial  improvement  in  either  its  telecom(cid:220)
munications  network  or  its  cable  TV  network  may
lead  to  a  loss  of  business  for  the  other  network.

(˛)(cid:217)OJ  C  .(cid:216).(cid:216).,  .(cid:216).(cid:216).,  p.  .(cid:216)..

(ˇ)(cid:217)OJ  L  268,  19.10.1994,  p.  15.

7.3.98

EN

Official  Journal  of  the  European  Communities

C  71/25

It  would  be  desirable  in  those  circumstances  to
separate  the  ownership  of  the  two  networks  into
two  distinct  companies  since  the  joint  ownership  of
the  networks  leads  those  organisations  to  delay  the
communications
emergence  of  new  advanced 
services  and  thus  restricts  technical  progress  at  the
expense  of  the  users,  contrary  to  Article  90(1)  of
the  Treaty,  in  conjunction  with  point  (b)  of  the
second  paragraph  of  Article  86.

As  a  minimum,  all  Member  States  should,  however,
ensure  that  telecommunications  organisations  which
have  special  or  exclusive  rights  for  the  provision  of
cable  TV  networks  operate  cable  TV  networks  in  a
separate  legal  entity.

the 

special  or  exclusive  right 

(11)(cid:217)Such  a  conclusion  is  reinforced  by  the  following
considerations.  Where  Member  States  grant  to  an
to
undertaking 
establish 
same
geographical  area  where  it  already  provides  public
telecommunications  networks,  different  forms  of
anti(cid:220)competitive  behaviour  are 
to  occur
unless  sufficient  transparency  of  the  operations  of
the  undertakings  is  ensured.

cable  TV  networks 

likely 

the 

in 

transparent,  whereas  a 
legal  entities  will 

Notwithstanding  the  requirements  of  Community
law  with  regard  to  accounting  separation,  some  of
which  only  entered  into  force  with  the  implemen(cid:220)
tation  of  the  package  of  general  measures  opening
up  the  Community’s  telecommunications  markets  in
in
most  Member  States  from  1  January  1998, 
situations  where  serious  conflicts  of  interest  exist  as
a  result  of  joint  ownership,  such  separation  has  not
provided  the  necessary  safeguards  against  all  forms
of  anti(cid:220)competitive  behaviour.  In  addition,  the  sep(cid:220)
aration  of  accounts  will  only  render  financial  flows
more 
for
requirement 
separate 
lead  to  more  trans(cid:220)
parency  of  assets  and  costs  will  facilitate  monitoring
of  the  profitability  and  the  management  of  the
cable  network  operations.  The  provision  of  tele(cid:220)
communications  networks  and  cable  TV  networks
are  related  activities.  The  position  of  an  operator
on  one  of  those  markets  has  an  impact  on  its
position  on  the  other,  and  the  supervision  of  its
is  more  difficult.  In
activities  on  those  markets 
addition,  where  a  dominant 
telecommunications
organisation  has  any  cable  TV  interests,  this  has  a
discouraging  effect  on  any  other  company  because
of  the  financial  strength  of  the  telecommunications
operator.  Also,  the  future  financial  prospects  of  a
cable  TV  network  which  has  not  yet  been  built  are
uncertain  for  a  company  that  is  not  yet  already

established  on  the  telecommunications  or  pay  TV
services  markets.

legal 

separation  between 

Therefore,  it  is  essential  that  a  dominant  telecom(cid:220)
munications  organisation  organises 
its  cable  TV
network  activities  in  such  a  way  that  it  can  be
monitored  in  order  to  ensure  that  it  does  not  use  its
resources  so  as  to  abuse  its  position.  During  the
crucial  phase  of  the  full  opening  of  the  sector  to
competition,  a 
the
operation  of 
telecommuni(cid:220)
the  public  switched 
cations  network  and  the  cable  TV  network  of  the
telecommunications  organisations  is  the  minimum
requirement  in  order  to  ensure  compliance  with
Article  90.  In  order  to  achieve  this  transparency,  it
is  necessary  that  the  networks  be  operated  by
separate 
in
principle  be 
jointly  owned.  The  requirement  of
legal  separation  would  therefore  be  complied  with
if  the  cable  TV  operations  of  a  telecommunications
to  a  fully(cid:220)owned
transferred 
organisation  were 
subsidiary  of  the  telecommunications  organisation.

legal  entities  which  may,  however, 

(12)(cid:217)The  Commission  will  examine  on  a  case(cid:220)by(cid:220)case
it  would  be  compatible  with  the
individual

basis  whether 
principle  of  proportionality  to  require 
Member  States  to  take  further  measures.

The  decisions  to  be  taken  in  respect  of  specific
including  the
cases  could  provide  for  measures 
opening  of  the  cable  operator  to  participation  of
third  parties,  or  the  requirement  to  sell(cid:220)off  that
entity  altogether.

(13)(cid:217)The  distribution  of 

audio(cid:220)visual  programmes
intended  for  the  general  public  via  telecommuni(cid:220)
such
cations  networks,  and 
programmes,  will  continue  to  be  subject  to  specific
rules  adopted  by  Member  States  in  accordance  with
Community 
law  and  should  not,  therefore,  be
subject  to  the  provisions  of  this  Directive.

content  of 

the 

(14)(cid:217)Directive 

90/388/EEC 

should 

therefore 

be

amended  accordingly.

(15)(cid:217)Member  States  should  refrain  from 

introducing
new  measures  with  the  purpose  or  effect  of  jeop(cid:220)
ardising  the  aim  of  this  Directive,

C  71/26

EN

Official  Journal  of  the  European  Communities

7.3.98

HAS  ADOPTED  THIS  DIRECTIVE:

Article  2

Article  1

Article  9  of  Directive  90/388/EEC  is  hereby  replaced  by
the  following:

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 
this  Directive  has  been
complied  with.

that  Article  1  of 

"Article  9

Member  States  shall  ensure  that  any  telecommunications
organisation  to  which  they  grant  special  or  exclusive
rights  in  the  areas  of  relevant  radio  frequencies  or  which
they  control,  which,  in  a  substantial  part  of  the  common
market,  has  a  dominant  position  and  operates  a  cable  TV
network  under  special  or  exclusive  rights  does  not  do  so
using  the  same  legal  entity  as  it  uses  for  its  public  tele(cid:220)
communications  network.’

Article  3

This  Directive  shall  enter  into  force  on  the  20th  day
following  its  publication  in  the  Official  Journal  of  the
European  Communities.

Article  4

This  Directive  is  addressed  to  the  Member  States.

Non(cid:220)opposition  to  a  notified  concentration

(Case  No  IV/M.1078  -  BP/H(cid:190)ls)

(98/C  71/06)

(Text  with  EEA  relevance)

On  13  February  1998,  the  Commission  decided  not  to  oppose  the  above  notified  concentration
and  to  declare  it  compatible  with  the  common  market.  This  decision  is  based  on  Article  6(1)(b)
of  Council  Regulation  (EEC)  No  4064/89.  The  full  text  of  the  decision  is  available  only  in
English  and  will  be  made  public  after  it  is  cleared  of  any  business  secrets  it  may  contain.  It  will
be  available:

-(cid:217)as  a  paper  version  through  the  sales  offices  of  the  Office  for  Official  Publications  of  the

European  Communities  (see  list  on  the  last  page),

-(cid:217)in  electronic  form  in  the  "CEN’  version  of  the  CELEX  database,  under  document  number
398M1078.  CELEX  is  the  computerised  documentation  system  of  European  Community
law;  for  more  information  concerning  subscriptions  please  contact:

EUR(cid:220)OP,
Information,  Marketing  and  Public  Relations  (OP/4B),
2,  rue  Mercier,
L(cid:220)2985  Luxembourg;
telephone:  (352)  2929  4(cid:216)24(cid:216)55,  fax:  (352)  2929  4(cid:216)27(cid:216)63.