Opinion of the Economic and Social Committee on the 'Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Towards a new framework for Electronic Communications infrastructure and associated services - The 1999 Communications Review'
Date: 2000-05-24
Institutions: European Economic and Social Committee
Subjects: EU law, communications industry, competitiveness, public awareness campaign, single market, telecommunications

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Opinion of the Economic and Social Committee on the ‘Communication from the Commission
to the Council, the European Parliament, the Economic and Social Committee and the Committee
of the Regions — Towards a new framework for Electronic Communications infrastructure and
associated services — The 1999 Communications Review’

(2000/C 204/03)

On 15 November 1999 the European Commission decided to consult the Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the above-
mentioned communication.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 4 May 2000. The rapporteur was
Mr Lagerholm.

At its 373rd plenary session of 24 and 25 May 2000 (meeting of 24 May 2000) the Committee adopted
the following opinion by 94 votes to 1, with 4 abstentions.

1.

Introduction

1.1.
Since 1990 the Commission has progressively put
in place a comprehensive regulatory framework for the
liberalisation of the telecommunications market. This has
been vital to the EU’s global competitiveness. An advanced
communications industry is a pre-condition of Europe’s tran-
sition to the Information Society. Without efficient, high-
quality communications, European industry, and in particular
SMEs, are at a heavy disadvantage in relation to their global
competitors. The introduction and take-up of new communi-
cations services can offer possibilities to reduce regional
disparities by reducing the significance of distance. Sharper
competition will continue to have a major impact on the
development of telecommunication services and the economy
as a whole.

Technological and market change in the communi-
1.2.
cations sector is proceeding at an ever-increasing pace. The
Internet is to a large extent overturning traditional market
structures.
Improvements in processing, access and basic
transmission technologies are reducing the cost and increasing
the capacity of communications infrastructure. Wireless appli-
cations are increasingly important in all segments of the
market. Furthermore, the development of technologies within
the media sector, in particular digital television is providing
transactional ‘on demand’ services and new services such as
data, Internet and e-commerce, thereby boosting competition
in the converging communications sector.

on the Convergence Green Paper (2); the results of consultation
on the Radio Spectrum Green Paper (3), the conclusions of the
report on the development of the market for Digital Television
in the European Union (4) and the Report on a possible
European regulatory authority.

2.2. While the existing legislative framework for the liberal-
isation of the telecommunications market was designed to
manage the transition to competition, the new framework for
communications infrastructure and associated services would
focus on promoting and sustaining an open and competitive
European market for communications services, to benefit the
European citizen and consolidating the internal market.

In addition to a consolidated and simplified Liberalis-
2.3.
ation Directive (in accordance with Article 86), this framework
would consist of a sector-specific Framework Directive; four
sector-specific directives (Licensing and Authorisations Direc-
tive (inc. Scarce resources), Access and Interconnection Direc-
tive, Universal Service Directive and Telecoms Data Protection
Directive) (all
in accordance with Article 95); non-binding
sector-specific measures; and competition law.

2. The Commission’s Communication

The present Communication initiates a review of
2.1.
the current telecommunications regulatory framework. It is
essentially based on the Fifth Report on the Implementation of
the Telecom Regulatory Package (1); the results of consultation

(1) COM(1999) 537.

(2) Green Paper on the convergence of the telecommunications,
media and information technology sectors, and the implications
for Regulation — Towards an information society approach —
COM(97) 623; ESC opinion — OJ C 214, 10.7.1998.

(3) COM(1999) 538; see also ESC opinion on the Green Paper on
radio spectrum policy in the context of European Community
policies such as telecommunications, broadcasting, transport, and
R&D — COM(1998) 596 final, OJ C 169, 16.6.1999.

(4) The development of the market for digital television in the
European Union — Report in the context of Directive 95/47/EC
of the European Parliament and of the Council of 24th October
1995 on the use of standards for the transmission of television
signals — COM(1999) 540.

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2.4.
The Framework Directive would identify specific policy
objectives for Member States; require Member States to act in
accordance with the five regulatory principles; guarantee
specific consumers’ rights and an appropriate level of interop-
erability; set out the rights, responsibilities, decision-making
powers and procedures of national regulatory authorities
(NRAs); establish rules for the new Communications Com-
mittee and High Level Communications Group; and make
provisions for recommendations, best practice guides, codes
of conduct developed by interested parties, and other comp-
lementary measures.

2.5.
The new framework could apply to all communications
infrastructure and associated services. Within this framework:

— Internet transmission services would be treated in the same

way as other transmission services;

— operators would be required to obtain licences under
general authorisations instead of individual licences;

— common principles would be established for regulation of
access and interconnection across all communications
infrastructure;

— a Spectrum Policy Expert Group would ensure that political
and not just technical considerations drive Community
policy in this area;

— affordable access for all to communications services necess-
ary for participation in the Information Society would
remain a key priority;

— in addition to funding public access from State budgets,
Member States would retain the option of establishing
financing schemes for universal service;

— competition would be increased in the local loop;

— consistent legal measures at EU-level would encourage the
development of effective competition and the deployment
of pan-European services; and

— co-operation between NRAs and the Commission would

be improved.

2.6.
The future principles of regulatory action should be
based on clearly defined policy objectives; be the minimum
necessary to meet those objectives; enhance legal certainty; be
technologically neutral and be regulated as closely as practi-
cable to the relevant activities.

3. General Comments

In general, the Economic and Social Committee sup-

3.1.
ports the Commission’s Communication.

It particularly welcomes the commitment to base the

3.2.
proposed regulatory evolution on:

— the promotion and sustaining of an open and competitive

European market;

— the consolidation of the internal market;

— greater reliance on competition law and simplification and
reduction of sector-specific legislation accompanied by
recommendations, guidelines and interbranch agreements.
Apart from the need to regulate access to scarce resources,
sector-specific regulation should be employed only in areas
where sufficient competition is lacking and only for a
transitional period;

— technology neutrality,

including no Internet-specific
measures. Technologically neutral regulation should not,
however, lead to stronger regulation of new services but
rather to the roll back of existing specific regulation of
traditional services.

As the Commission further develops its detailed pos-
3.3.
itions, care will be required to ensure that these principles
remain at the forefront. Care may also be required to ensure
that the implementation of the proposals does not proceed at
instead that
the slowest Member State but
the pace of
sector-specific regulation is replaced by general competition
legislation on the various markets (geographical and services),
as competition arises. This could become more of a problem
with the enlargement of the EU. The enlargement can also be
expected to make it necessary to provide appropriate support
to some new entrants.

3.4.
Transition from sector-specific telecommunications
regulation to general competition law is frequently discussed
on the basis of ‘sun-set’ and forbearance clauses. For use of
such regulatory techniques, however, it is necessary to apply
criteria. Such criteria should be few and defined as soon as
possible.

3.5.
The Committee lays stress on the global character
of the converging communication markets. The proposed
European regulatory framework must not be seen in isolation.
It is essential that the competitiveness of European players is
maintained and allowed to thrive. There can be a risk that
regional regulation could lead to the European regional
market becoming isolated from the global market, especially if
extensive regulation is allowed to curb the operation of market
forces. The Committee therefore urges the Commission to take
into account the impact of any measures on the global
competitiveness of European industry.

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it

However,

the Committee would stress that

3.6.
is
important for the Commission not to confine its attention
solely to the beneficial effects of increased competition, now
and in the future. It cannot be ruled out that the dramatic
development of electronic communications infrastructure and
related services in some areas could threaten public health or
the environment. The Communication makes no mention of
such risks — perhaps quite naturally in view of its aims — but
the Committee would anyway urge the Commission to
monitor the health and environmental impact closely.

4. Specific Comments

4.1. Licensing and Authorisations

4.1.1.
The Committee agrees that harmonisation of licens-
ing conditions in both formal and practical terms is needed.
The system should be based on general authorisations except
where the issue concerns access to frequencies and numbers.
Accordingly, harmonisation should not lead to the introduc-
tion of a more burdensome regulatory regime in markets
where, for example, general authorisations do not require any
pre-registration.

4.1.2.
The Commission proposes to cover Internet-based
communications services by the authorisation system. As a
general rule, technology neutrality should prevail. Thus Inter-
net as a technical platform to deliver communications services
should not be subject to special rules. The Committee feels
however that new technologies, especially in their start-up
phases, should be left unregulated as far as possible, subject to
respecting the required technical neutrality. Yet this is only
acceptable as long as fundamental demands for consumer
protection are met.

across the Member States. The development of alternative
access options needs to be monitored very closely and any
recommendations to NRAs on access should include avoidance
of regulatory intervention whenever alternative means of
access are available.

4.3. Management of radio spectrum (1)

4.3.1.
The use of radio spectrum is increasingly important
for telecommunications systems. The only way to solve the
problem of band availability is to use modern technology to
increase the efficiency of radio spectrum use for all users, not
only in the telecommunication area. In the Committee’s view
spectrum policies must be integrated between areas such as
broadcasting, telecommunications, radio location and military
use. The methods for enabling several users and services to
share the same spectrum band must be improved.

4.3.2.
One way of improving spectrum efficiency is for
allocations to be harmonised at international level. This is
especially important in areas with many national borders, such
as Europe.

4.3.3.
Spectrum pricing is for the Committee an acceptable
instrument for spectrum efficiency as long as the price levels
are moderate and do not adversely affect the deployment of
systems, and as long as they create a level playing field for all
actors in the market, telecom operators as well as broadcasters.

4.3.4.
The Committee agrees with the Commission that the
Member States should be encouraged to use income from
radio spectrum charges, auctions and pricing to improve
spectrum efficiency.

4.2. Access and Interconnection

4.4. Universal service (2)

4.2.1.
In the Committee’s view regulatory intervention is
justified only to redress market failures in providing effective
and healthy infrastructure competition. Where there is market
failure the regulatory response needs to be specific to the
problem, appropriate and temporary.

4.4.1.
Universal service as currently defined in Community
legislation includes the provision of voice telephony, fax and
voice band data transmission via modems (i.e. access to the
Internet). Users must have access at a fixed location to

If it is deemed necessary to take short term action on
4.2.2.
regulating access conditions (such as in the case of local loop
unbundling), attention should focus mainly on achieving
business to business agreements. If this is not feasible, the
approach to pricing unbundled access should create incentives
for infrastructure investments (e.g., by time limits on specific
costing mechanisms) and be applied in a consistent manner

(1) See ESC opinion on the Green Paper on Radio Spectrum Policy in
the context of European Community policies such as telecom-
munications, broadcasting, transport, and R&D (COM(1998) 596
final); OJ C 169, 16.6.1999.

(2) See ESC own-initiative opinion on Services of general interest; OJ
C 368, 20.12.1999 and ESC opinion on Universal service for
telecommunications in the perspective of a fully liberalised
environment (COM(96) 73 final); OJ C 30, 30.1.1997.

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international and national calls, as well as emergency services
(via national numbers or the European emergency number —
112). The definition also covers the provision of operator
assistance, directory services, public pay phones and special
facilities for customers with disabilities or with special social
needs.

definition of universal service. This is essential in order to be
consistent with the guidelines adopted by the Lisbon European
Council, to guarantee an ‘information society for all’ and to
minimise the risks of social exclusion and strengthen social
cohesion, in line with Article 2 of the EC Treaty.

4.4.2.
The current regulatory framework requires NRAs to
place obligations on network operators to ensure that the
minimum set of services of specified quality as defined above
are available to all, independent of their geographical location,
at an affordable price.

4.4.5.
The current regulatory framework requires NRAs to
place obligations on network operators to ensure that the
minimum set of services of specified quality as defined above
are available to all, independent of their geographical location,
at an affordable price. This framework gives NRAs the option
of establishing a universal service fund so as to ensure a level
playing field between the different operators.

4.4.3.
The deregulation of the telecommunications sector
accompanied by technological developments has meant major
advantages for most consumers in the shape of more reliable,
higher quality and less expensive services. The variety of
services continues to expand. New broadband networks are
now being rolled out as commercial offerings. This creates
opportunities for faster Internet access, making existing infor-
mation society services more attractive, and could allow for
new services requiring high band-width such as video on
demand. The availability of broadband services will be a key
factor in ensuring that the EU can make the transition to the
Information Society. One could argue that the definition and
scope of universal service should be expanded to include also
e.g. broadband services.

4.4.4.
As regards extending the scope of universal service
obligations (USO) the Committee rests on the Commission
Communication dating back to 1996. This identifies the
essential criteria for extending the scope of universal service
as: ‘an analysis of the demand for and the availability of the
service concerned based on the market and a political evalu-
ation of its social and economic usefulness’. The ESC considers
that these criteria remain valid.

4.4.4.1.
However the Committee endorses the position of
the Commission which wishes to preserve at this stage the
definition and the current scope of the universal service insofar
as it commits itself ‘to proposing criteria for its possible
extension in the Community legislation, as well as of the
periodic review machinery owing to the dynamic and evol-
utionary character’ of this concept.

4.4.5.1.
The Committee approves this principle. It had in
fact suggested it in its opinion on the communication from
the Commission (COM(96) 73 final) entitled ‘the universal
service of telecommunications with a view to a fully liberalised
environment’. In this opinion, the ESC said that: ‘all telecom-
munication service suppliers must contribute — according to
equitable and suitable distribution — a share to this service,
including the financial aspects’. Thus for the sake of equity,
both for consumers and for the various operators, the Com-
mittee was in favour of the universal service being financed by
all operators.

4.4.6.
Despite technological and possibly environmental
developments, it is not necessary to reconsider this principle
without running the risk of accepting that whole areas of the
geographical coverage of European space are excluded from
technological progress. That would amount, in fact, to refusing
to some citizens legitimate access to new information tech-
nology and, in so doing, to the jobs which will result from
this (teleworking etc.), thus creating de facto inequality of
treatment.

4.4.7.
The fact that the Committee considers it unwise to
extend the scope of universal services to broadband services
while waiting for the Commission to propose criteria for its
possible extension now, does not mean that it would not
welcome Member State and Community initiatives to speed
up the roll-out of broadband services.

4.4.4.2. While bearing in mind the conclusions of the
Lisbon Summit, and in particular the section on ‘An infor-
mation society for all’ in the ESC Opinion on ‘Employment,
economic reform and social cohesion — Towards a Europe of
innovation and knowledge’ (CES 1053/99), which highlights
the extent to which the explosion of the information society
and the related new economy can generate social exclusion,
the Committee hopes that the Commission will define, as
speedily as possible, the criteria to govern an extended legal

Though the Committee therefore feels that

4.4.8.
the
subsidiarity principle should apply for the funding of universal
services and ‘public access’ in electronic communications, it
would stress that EU competitiveness hinges on a continued
drive to improve quality and bring prices down in this sector.
The Member States should therefore also select the most
efficient and least distorting means in connection with provid-
ing and/or funding both universal services and ‘public access’.
In its view, public procurement should be considered in the
first instance.

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4.4.9.
In this connection, the Committee would stress that
it can also be necessary on other grounds for Community or
national policy initiatives to promote the information society.
Such initiatives should pay particular attention to the extremely
important issue of educating users to avoid creating a gap
between information ‘haves’ and ‘have-nots’.

4.4.10.
As the Section for Transport, Energy, Infrastructure
and the Information Society underlined in its Oulu Declar-
ation (1) it calls on the Commission to include more infor-
mation society activities among the areas covered by the
structural funds, especially the European Social Fund, including
both training and the integration of people from ‘excluded’
categories of society.

4.5. The interests of users and consumers

4.5.1.
In its Communication, when dealing with consumer
protection and information, the Commission puts forward,
amongst others, the following proposals:

— the maintenance of existing obligations with regard to
complaint handling, quality of services and dispute settle-
ment and exploration of the need for further measures;

4.5.3.
In the light of the dramatic pace of change in the
telecom sector, with a ceaseless stream of new services and
— on most markets — many new operators, many customers
obviously feel confused and insecure. Successful development
depends on inculcating a feeling of trust in the consumer.
Hence the Committee feels that it is justified, at the present
juncture, to place special demands on telecom operators in
respect of consumer information. The Committee further
considers it beneficial that simple and inexpensive complaint
handling and dispute settlement procedures exist for users and
consumers, other than via national courts, encouraging the
use of the Commissions’
‘European consumer complaints
form’.

The Committee agrees with the Commission that the
4.5.4.
Telecoms Data Protection (TDP) Directive has been outdated
due to the technological developments and should be reviewed.
In this connection,
it should be considered whether data
protection requirements in the Directive can be safeguarded
by amending the umbrella directive governing data protection
in the EU instead of updating the TDP Directive as such. That
solution would be more consistent with the drive to reduce
sector-specific legislation and the conditions generated by
convergence in the communications sector. Yet this must not
be allowed to lead to delay in updating data protection in the
telecom sector.

— requiring suppliers to publish information for their cus-

tomers on quality of service;

4.6. Numbering, naming and addressing

— making information on the quality and price of services

more intelligible to consumers.

— update and clarify the Telecoms Data Protection Directive
to take account of technological developments and to
ensure it is appropriate for a converging market

4.6.1.
The regulatory framework should stimulate inno-
vations in new services. In the Committee’s view the proposal
to consider mandating interoperability of Intelligent Network
(I/N) databases in order to facilitate pan-European service
provision might be incompatible with the principle of tech-
nology neutrality and should be re-examined.

4.5.2.
The Committee supports the above proposals. It
seems obvious that the interests of users and consumers are
generally best met through competition in an open market
— and that it is in the interests of all telecom operators
competing over pricing to ensure that existing or potential
customers are fully informed about the price and quality of
their services. Transparency of the costs and the various price
components is essential. The authorities already responsible in
the Member States for controlling, with the backing of general
consumer legislation, that consumer information provided by
operators is accurate and not misleading, are the obvious
bodies to be charged with the proper and continuous monitor-
ing of consumer information in the telecom sector.

(1) CES 829/1999, Appendix iii to the Minutes of the 11th meeting
of the Section for Transport, Energy,
Infrastructure and the
Information Society on 6 and 7 September 1999 in Oulu, Finland.

4.6.2.
If on a particular occasion there is a recognised need
for regulatory intervention then the regulator should only
specify requirements and leave it to the industry to find the
most cost-effective technology to meet them.

4.7. Specific competition issues

The Commission seeks to contain the strong argu-
4.7.1.
ments for use of broader competition regulation in preference
to sector specific regulation by proposing that the competition
law concept ‘dominance’ be used as a trigger for stronger ex-
ante sector-specific obligations (to meet reasonable requests
for access, cost-orientation, non-discrimination). The Com-
mittee is not convinced of the advantages of such an approach.

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4.7.2.
Introducing yet another market dominance concept
without removing the existing concept ‘Significant Market
Power’ (SMP) interferes with the principle of keeping regulation
to the minimum necessary.

4.8.2.
The increased cooperation between the Commission
and the national authorities should suffice to secure more
consistent application of telecom legislation throughout the
EU. The Committee therefore supports the Commission’s
position in not proposing a European Regulatory Authority.

4.7.3.
Using competition law criteria for dominance in
order to impose ex-ante regulation is not a step towards
stronger reliance on competition law principles, as the Com-
mission seems to suggest. On the contrary, the Committee
finds it likely that adoption of such an approach will prolong
the transition period to full reliance on competition law, and
may in fact impede the operation of competition law in the
sector.

4.8.3.
In order to support a general improvement in the
efficiency of use of radio spectrum governmental spectrum
policies must become more flexible and open for innovation.
The Committee welcomes the proposal to create a Spectrum
Policy Experts Group, where proper means to achieve such a
goal can be discussed.

4.7.4.
This contradiction between the stated aims of the
Review, and the effect its proposals would have in practice,
seems to arise from a confusion between the application of
competition law to the sector, on the one hand, and the
inappropriate use of certain competition law terminology to
create new regulation on the other. In competition law, a
finding of dominance per se is not problematic: only if
that dominance is abused, competition law is breached.
Competition law is an ex post rather than an ex ante tool; its
great benefit is that there are real and substantial penalties
attached to its breach. Imposing ex-ante obligations on under-
takings found to be dominant is not applying competition law.
It is regulation by another name.

4.7.5.
Ex-ante regulation should only apply where there is
no effective competition. For this to happen, it is necessary to
study each case in order to determine whether administrative
intervention is necessary to substitute mechanisms inherent in
the market itself; therefore, there should be a rigorous analysis
of each relevant market. This will confirm whether the level of
competition is unacceptable to the authorities and if it is due
to a market failure or an undue behaviour of the players, that
can justify administrative regulation of the operators in the
market.

4.8.

Institutional issues

The Committee

supports deeper

4.8.1.
co-operation
between the Commission and National Authorities and, in line
herewith, supports the proposed setting up of a High Level
Communications Group of National Regulatory Authorities
and the Commission. The decision-making process of this
group must be fully transparent.

4.9. Non-binding rules and self-regulation

4.9.1.
In its Communication the Commission sets out the
new regulatory framework, which has three components:
binding, sector-specific legislation consisting of a framework
directive and four specific directives, related non-binding
sector-specific measures, and general competition law. The
Committee recognises the increased need for non-legislative
target actions and supports the greater reliance on sector-
specific agreements and memorandums of understanding.
Other (formally) non-binding provisions, such as Commission
and NRA recommendations and guidelines, should be used
with great caution since in practice they can become as binding
as formal directives, yet without being subject to democratic
control procedures. It is necessary to further harmonise the
pan-European regulatory regime and to establish rapid and
flexible procedures to ensure consistent application of Com-
munity law throughout the EU. The lack of harmonisation is a
concern to all key actors on the telecommunications market:
telecom operators, service suppliers, manufacturers, etc. Every-
one in the sector therefore has a genuine interest in achieving
harmonisation.

4.9.1.1.
The Committee believes that non-binding codes of
conduct could be a useful instrument at pan-European and
Member State level once binding law has been implemented.
Such codes can be used as a flexible and rapid method of
regulation but, in order to ensure legal certainty and clarity,
they must be based on binding norms. In order to ensure a
consistent regulatory approach throughout the Union while
also allowing for national adjustments, non-binding codes
may be used to illustrate how certain norms should be applied.

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4.9.1.2.
However, it is important to be aware of the risk
that non-binding codes in the form of Commission-produced
recommendations and guidelines may undermine the scope
for participation by the European Parliament and the Member
States in the legislative process. Particularly in the case of an
increased use of non-binding instruments such as Commission
recommendations, care must be taken to ensure that the
decision process is sufficiently transparent and comprehen-
sible, that the Member States are included in decision-making
from the outset, and above all that industry as well as other
players in the sector, such as users and workers’ representatives
are adequately consulted.

4.9.1.3.
Furthermore, non-binding codes must not open
the way for Member States or NRAs to oversee re-introduction
of sector-specific regulation. Flexibility has to be balanced with

legal certainty and clarity. Therefore any new flexibility tool
will have to be accompanied by precise guidelines and clear
principles for interpretation so as to ensure a consistent
approach throughout the EU and to avoid any arbitrary
decisions.

4.9.2.
In the Committee’s view ‘self-regulation’ has the
potential to assist the telecoms sector in Europe to make the
transition from a regulated ex-monopoly sector to a truly
competitive industry governed by the normal laws of competi-
tive business. Rules negotiated, applied and enforced by the
industry itself may require little or no recourse to regulators
other than application of normal competition law require-
ments. If applied across the EU such rules could also result in
significant advances in harmonisation. Clearly it is essential for
users to be represented properly when the sector frames its
self-regulation arrangements.

Brussels, 24 May 2000.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI