Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Seventh Report on the Implementation of the Telecommunications Regulatory Package [SEC(2001)1922]
Date: 2001-11-26
Institutions: European Commission
Subjects: liberalisation of the market, telecommunications, telephone, trade licence, trade regulations

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 26.11.2001
COM(2001) 706 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE
EUROPEAN PARLIAMENT, THE ECONOMIC AND SOCIAL COMMITTEE AND
THE COMMITTEE OF THE REGIONS

Seventh Report on the Implementation of the Telecommunications Regulatory Package

{SEC(2001)1922}

1. 

SUMMARY AND PRINCIPAL CONCLUSIONS

The Lisbon European Council was a landmark for the converging European electronic com-
munications  sector.  The  Heads  of  State  and  of  Government  stamped  their  authority  on  the
shift  to  a  digital,  knowledge-based  economy  for  Europe,  subsequently  embodied  in  the
eEurope  Action  Plan.  An  important  milestone  is  now  approaching,  the  adoption  by  the
European Parliament and Council of the new regulatory framework. This  report follows the
precept  that  the  new  framework,  which  is  designed  for  increasingly  competitive  and
converging  markets,  should  be  founded  on  the  full  and  coherent  implementation  of  the
current EU regulation. Indeed, the new framework has mechanisms to ensure that competitive
safeguards remain in place until they are shown to be unnecessary. The report:

–  presents some of the key indicators from the market

–  examines  some  of  the  essential  prerequisites  for  transition  in  terms  of

implementation of the current framework 

–  focuses on outstanding regulatory issues.

The  main  message  is  that,  against  a  generally  pessimistic  macroeconomic  background,  the
telecommunications services sector is remarkably buoyant, the national regulatory authori-
ties  continue  to  progress  implementation,  but  that,  on  the  eve  of  adoption  of  the  new
framework, a number of regulatory bottlenecks remain.

1.1.  Market developments

The telecommunications services sector  continues to  represent a substantial  growth factor
in the European economy. The combined national markets of the fifteen Member States will
expand to an estimated €218 billion in terms of revenue by end 2001, representing growth of
9.5%.  This  is  a  fall  of  three  percentage  points  over  actual  growth  in  2000,  but  a  slight
increase over the rate of 9% forecast in the last implementation report. Since then, users and
consumers  have  continued  to  enjoy  an  increased  choice  of  operators  accompanied  by
declining  tariffs  overall.  At  the  same  time,  incumbents’  market  shares  continued  to
decrease in all fixed call markets.

The main developments are the following:

1.1.1.  Growth1

The  fastest  expanding  segment  in  revenue  terms  is  again  mobile  services,  where  revenue
growth is expected to reach around 22.3%, from €67 billion to €82 billion by end 2001. This
is down on the actual growth rate of 38.1% for 2000 but up on the forecast of 20%. By end
2001  the  mobile  services  market  is  expected  to  account  for  38%  of  the  combined  EU
telecommunications  markets  in  terms  of  revenue.  Mobile  penetration  continues  to  rise
dramatically, with substantially higher rates in every single Member State since last year and
36%  more  mobile  subscribers  in  Europe.  The  average  penetration  rate  is  now  73%,  with
rates at 75% or higher in seven Member States. 

1

Growth estimates are based on European Information Technology Observatory (EITO) 2001

2

                                                
The fixed voice telephony segment, including internet dial-up services, continues to represent
the  largest  share  of  the  EU  market  at  an  estimated  51%  in  terms  of  revenue,  but  estimated
growth remains  at the 2000  level  of  2.7%.  However,  this  figure  hides  continuing  growth  in
voice and in particular dial-up internet traffic in terms of minutes, as prices for these calls fall.

The  data  and  leased  lines  segment  represents  11%  of  the  market  and  is  estimated  to  be
growing at 3.8% in 2001.

1.1.2.  Price developments

Competition  is  bringing  prices  for  consumers  down  overall.  Incumbents’  long  distance
calls  are  down  11%  in  price  since  last  year  and  45%  down  since  1998.  Overall  average
monthly expenditure for national calls (local and long distance calls and fixed charges) went
down from €37.02 in 1998 to €32.75 in 2001 for residential users, and from €85.57 to €68.54
for business users over the same period2. Incumbents’ international calls are also further down
in price, by 17% since 2000 for residential users and by 21% for business users.

New  entrants’  prices  are  in  most  cases  considerably  lower,  with  one  new  entrant  in
Germany offering prices 75% lower than the incumbent’s for long-distance, for example, and
reductions  for  local  calls  of  up  to  29%.  New  entrants  in  Belgium,  France,  Spain  and  the
United  Kingdom  charge  between  36%  and  56%  less  than  the  incumbent  for  long-distance
calls.

Within  Member  States  there  is  a  tendency  to  reduce  or  eliminate  price  differences  for  calls
over  different  distances,  that  is,  the  prices  of  local,  regional  and  long  distance  calls  are
converging.  This  is  a  positive  trend,  as  it  indicates  that  prices  are  starting  to  reflect  the
actual cost of providing the service.

Accompanying these reductions is an increase in the monthly rental charge since last year of
7% for residential users and 3% for business  users.  This  is in  line with the need to remove
price distortions in access charges, and will encourage new market entry as anti-competitive
cross-subsidies  by  incumbent  operators  are  eliminated.  Overall,  the  cost  of  local  calls
remained stable in Europe.

1.1.3.  Choice

The strength of  competition  in the telecoms  sector is evident  from  the  fact  that  the  whole
population  of  twelve  Member  States  can  choose  between  more  than  five  operators  for  long
distance  and  international  calls.  For  local  calls,  six  Member  States  report  that  the  whole
population has a choice of more than five operators.

There has been a rapid increase in the use of carrier pre-selection, in addition to the heavy
use already made of  carrier selection via access codes. Around 110 operators in Europe  can
now  be  accessed  for  local  calls  without  the  use  of  codes,  and  214  for  long  distance  and
international calls.

1.1.4.  Market structure

Incumbent operators’ market shares by  retail revenues have fallen since liberalisation  on
average by 10% for local calls and by around 20% for long distance and 30% for international

2

All PSTN prices are expressed in € PPP (purchasing power parity)

3

                                                
calls.  The  incumbent’s  share  of  retail  revenues  for  international  calls  is  below  50%  in  one
Member State, around 60% in four Member States and between 70% and 75% in three more.
However,  while  incumbents’  market  shares  for  local  calls  are  around  70%  in  two  Member
States, they remain at between 90% and 100% of the market in at least ten.

At the same time the market share of leading mobile operators has decreased since 2000
and is now below 50% in two thirds of Member States.

1.1.5. 

Internet penetration

The  average  level  of  internet  penetration  in  EU  households  was  around  36%  in
June 2001. Sweden had the highest penetration, with around 64%, compared  with  a  level in
Greece of just under 12%. 

Eight Member States have exceeded the figure of 41.5% penetration in households achieved
in the US in August 20003.

1.2. 

Regulatory developments 

As regards transposition of the framework, national legislation that removes major concerns
on  the  part  of  the  Commission  has  been  notified  by  three  Member  States  (France,  Italy,
Luxembourg).  The  national  framework  has  been  consolidated  in  a  further  Member  State
(Greece), bringing increased clarity and legal certainty.

At the heart of the regulatory process are the national regulatory authorities (NRAs), which
provide the necessary interface for implementing Community principles in line with national
legal  frameworks  and  market  conditions.  They  have  over  the  reference  period  deployed
increasing  expertise  and  authority  in  regulating  the  sector.  The  results  are  evident  in  the
market, where the choice of services and suppliers continues to expand and prices to decrease.

In some Member States work is already under way to adapt the regulatory authorities to the
converged electronic communications environment, in some cases by increasing coordination
with  the  national  competition  authorities  or  assigning  competition  powers  to  the  NRAs.
Increased  cooperation  between  NRAs  at  European  level  is  an  encouraging  precursor  to
coordination under the new framework. 

The  hearings  held  to  prepare  this  report  showed  clearly  that  the  most  crucial  issues  facing
regulators,  apart  from  the  need  to  refine  and  clarify  their  own  methods  of  operation,  are
currently competition in local access in particular for broadband, call termination charges in
mobile networks, flat rate interconnection for internet access, the pricing and provisioning of
leased lines, general tariff and cost accounting principles, and the roll-out of third generation
mobile  networks.  Questions  also  continue  to  revolve  around  numbering,  universal  service,
rights of way and the transposition of the data protection directive. 

1.3. 

Principal conclusions

On  balance,  while  the  market  remains  dynamic  and  there  has  been  continuing  progress  in
implementation,  a  number  of  regulatory  bottlenecks  persist  at  European  level.  These  arise
from several factors. The current framework is not yet applied fully in all Member States,

3

Based on latest data published September 2001 by the US Department of Commerce (US Census
Bureau)

4

                                                
nor  is  it  applied  consistently  across  the  Community.  Further,  certain  of  the  implementing
measures  adopted  at  national  level  are  not  necessarily  coherent  with  one  another.  The
framework itself also leaves a margin of manoeuvre to the implementing authorities in certain
areas, which has led to regulatory divergences in the Member States. 

The most important concerns are the following: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

Competition  in  local  broadband  access,  in  particular  the  implementation  of  the
Regulation  on  local  loop  unbundling  to  permit  high  speed  internet  access:  the
Commission believes that progress is not satisfactory, and should be speeded up on
the basis of hands-on monitoring by NRAs, binding deadlines and credible penalties.
The  Commission  also  believes  that  regulators  need  to  act  to  ensure  that  wholesale
DSL is offered to entrants on non-discriminatory terms.

Interconnection, including the cost of terminating calls in mobile networks and the
provision  of  flat  rate  interconnection  for  calls  to  the  internet:  the  Commission
considers  that  the  wide  range  of  peak  time  call  termination  charges  in  mobile
networks as between Member States cannot be justified in terms of the actual costs
of terminating calls, nor in terms of their level  in  relation to average fixed  to  fixed
tariffs. Moreover, the Commission believes that flat rate interconnection for internet
calls should be encouraged, and that in any case it must be provided to new entrants
where it is supplied to an incumbent’s downstream arm.

Continuing  high  prices,  lengthy  delivery  times  and  absence  of  cost  orientation  for
leased lines, particularly at speeds designed to allow broadband and e-commerce
roll-out:  the  Commission  considers  that  the  wide  range  of  prices  across  the
Community  and  remarkably  different  lead  times  for  supply  cannot  be  justified  in
terms of differing costs or conditions.

Persisting  tariff  distortions  and  price  squeezes:  the  Commission  believes  that
NRAs  need  in  some  cases  to  apply  greater  rigour  in  verifying  regulatory  accounts
rapidly  after  they  are  closed,  and  in  supplying  statements  of  compliance  for  the
benefit of the market.

The  full  functioning  of  numbering  policy:  the  Commission  considers  that  the  full
range  of  carrier  selection  and  pre-selection  services  should  be  available  now  in  all
Member States.

The disparate roll-out of rights of way: the Commission believes more work needs
to  be  done  to  remove  uncertainties  relating  to  the  role  assigned  to  local  and
municipal  authorities,  and  to  facilitate  the  roll-out  of  third  generation  mobile
services.

Consumer  protection:  the  Commission  believes  that  the  monitoring  of  consumer
issues  should  be  strengthened  and  that  consumers  should  benefit  from  equivalent
protection  of  their  interests  throughout  the  Community,  in  particular  as  regards  the
monitoring  of  service  quality,  price  transparency  and  contract  issues  and  the
provision of redress mechanisms.

5

There are also concerns relating to the organisation of the national regulatory authorities, in
particular  as  regards  the  assignment  of  powers  and  the  ability  to  resolve  disputes  rapidly.
Lengthy appeal procedures in virtually all Member States lead to regulatory uncertainty, and
can be  exploited  by incumbents. Many NRAs consider themselves under-resourced, or  staff
numbers do not yet match the establishment plan. The new framework will place additional
responsibilities  on  regulators,  and  further  work  needs  to  be  done  now  to  remove  these
concerns. 

Finally,  while  reference  is  made  in  the  report  to  disparities  in  the  licensing  and  roll-out
conditions for third generation mobile services, the Commission’s substantive views are set
out in its March 2001 Communication. As regards international roaming, the Commission
has  carried  out  investigations  pursuant  to  Regulation  17/62,  in  particular  in  relation  to
concerns  as  to  collusion  and  excessive  pricing.  Pending  completion  of  this  proceeding,  the
Commission is not in a position to make its findings public.

6

Seventh Report on the Implementation of the Telecommunications
Regulatory Package

TABLE OF CONTENTS

SUMMARY AND PRINCIPAL CONCLUSIONS................................................................... 2

METHODOLOGY AND OBJECTIVES................................................................................... 8

MARKET OVERVIEW........................................................................................................... 10

REGULATORY OVERVIEW ................................................................................................ 13

Regulation in Europe prior to the transition to the new framework .............. 13

Main regulatory bottlenecks in Europe ......................................................... 14

FURTHER REPORTING ........................................................................................................ 28

ANNEXES {SEC(2001)1922}

1. TELECOMMUNICATIONS MARKET DATA

2. REGULATORY DATA, INCLUDING IMPLEMENTATION OF THE TV
SIGNALS DIRECTIVE

3. OVERVIEW OF IMPLEMENTATION IN THE MEMBER STATES

4. LIST OF OPERATORS, ASSOCIATIONS, ORGANISATIONS INVOLVED IN
THE PREPARATION AND HEARINGS FOR THE SEVENTH REPORT

7

2. 

METHODOLOGY AND OBJECTIVES

2.1.  Methodology

The Commission, in a series of implementation reports submitted to the European Parliament
and Council, has sought to examine successively the transposition of the directives making up
the current telecommunications package and the effective application of the rules transposed
into national law. The reports have also set out data which have enabled trends in key aspects
of the market such as growth, tariffs for retail services, leased lines and interconnection, local
access and incumbents’ market shares to be established.

The fifth and sixth reports focussed in particular on progress in implementing key regulatory
requirements  relating  to  national  regulatory  authorities  (NRAs),  licensing,  interconnection,
local  access,  universal  service,  mobile  services,  tariffs,  cost  accounting,  leased  lines,
numbering, data protection and rights of way. They were prepared on the basis of a series of
bilateral meetings between the Commission’s services and market players (new entrants and
incumbents),  users’  and  consumers’  representatives,  NRAs  and  ministries,  together  with
market data provided by the NRAs.

In order to compile this, the seventh implementation report, the Commission’s services held
preparatory  bilateral  meetings  with  the  same  actors  in  the  national  capitals  of  the  fifteen
Member  States,  supplemented  by  hearings  in  Brussels  to  which  representative  bodies  of
market  players,  users  and  consumers,  and  the  national  authorities,  including  the  national
competition  authorities,  were  invited.  The  hearings  took  place  during  September  and
October 2001.  The  Member  States  were  invited  to  make  written  submissions  to  the
Commission as a basis for discussion in the hearings, and these were placed in advance on the
Commission’s  website4.  A  number  of  submissions  were  also  made  in  writing  by  market
players and associations.

Market and regulatory data were supplied by the national regulatory authorities on the basis of
a questionnaire compiled by the Commission’s services. They are  the  source of most of the
data given in the Report and show the situation at 1 August 2001, unless otherwise stated.

The regulatory situation described is that at 31 October 2001, unless otherwise stated.

2.2. 

Objectives

In July 2000  the Commission submitted to  the European Parliament and Council proposals
for five directives laying down a framework for the regulation of electronic communications
markets and measures relating to access and interconnection, authorisations, universal service
and users’ rights, and data protection in the telecommunications sector. These will replace the
regulatory  framework  set  up  by  the  current  package  of  directives.  A  further  proposal  for  a
decision covers the coordination of action by the Member States in relation to radio spectrum.
A proposal for a regulation on the unbundling of the local loop was adopted by the European
Parliament  and  Council  in  December  2000  and  entered  into  force  at  the  beginning  of
January 2001.

4

http://europa.eu.int/information_society/topics/telecoms/implementation/index
http://europa.eu.int/comm/competition/liberalization/others

8

                                                
Common positions  on four of the directives were  adopted by  the  Council  on  17 September.
Full  adoption  of  the  whole  of  the  new  regulatory  framework  can  therefore  be  expected
shortly, with transposition scheduled not later than fifteen months from that date.

The  Commission  has  consistently  taken  the  position  that  a  prerequisite  for  successful
transposition of the new regulatory framework in national legislation and its implementation
in the Member States is the full and effective functioning of the current framework. On the
eve of the adoption of the new framework, therefore, the Commission is seeking to pinpoint,
both horizontally at European level and as regards each of the Member States, those aspects
of the current framework that are not sufficiently well-implemented to  provide  a  solid  basis
for implementation of the new.

This report provides an overview of market developments, as previously, then sets out some
considerations  relating  to  implementation  in  the  context  of  the  transition  to  the  new
framework  together  with  a  summary  of  the  main  regulatory  bottlenecks  in  Europe.  The
annexes  to  the  report  provide  detailed  market  analysis  and  regulatory  data  and  country
chapters  giving  more  extensive  information  on  the  regulatory  situation  in  each.  The  aim
throughout  is  to  avoid,  where  possible,  repeating  references  to  developments  already
summarised in the Sixth Report, which can be consulted on the Commission’s website.

In  1999  the  Commission submitted a report to the European Parliament  and  Council on  the
operation of Directive 95/47/EC5 (the TV Signals Directive). The Commission now provides
in Annex 2.3 an updated assessment of implementation and market developments, as required
by the directive.

The last report contained in the Annex a chapter on WTO implementation in third countries.
The Commission is holding hearings on this subject during November 2001, and will report
separately to the Member States in the appropriate Council forum.

It  should  be  noted  that  the  Commission  is  currently  carrying  out  sector  enquiries  under
Regulation 17/62 in the leased lines, local loop and roaming markets.

5

Directive 95/47/EC of the European Parliament and of the Council on the use of standards for the
transmission of television signals

9

                                                
3. 

MARKET OVERVIEW

3.1.  Market growth

The  telecommunications  services  market  continues,  despite  the  negative  indicators  from
financial markets, to represent a substantial growth factor in the European economy. The
combined national markets of the  fifteen  Member  States  were  worth  around  €199  billion  at
the end of 2000, and will grow to an estimated €218 billion by end 2001, representing growth
of 9.5%. While this represents a fall of three percentage points over actual growth in 2000, it
constitutes  a  slight  increase  over  the  rate  forecast  in  the  last  implementation  report  of  9%.
Over  the  period  August  2000  to  August  2001  users  and  consumers  continued  to  enjoy  an
increased choice of operators accompanied by declining tariffs overall. At the same time,
incumbents’ markets shares continued to decrease in all fixed call markets.

The fastest expanding segment is again the mobile services market, where growth is expected
to reach around 22.3%, from €67 billion at end 2000 to €82 billion by end 2001. In 2000 the
actual  rate  of  growth  was  38.1%  as  against  a  forecast  of  20%.  By  end  2001  the  mobile
services  market  is  expected  to  account  for  38%  of  the  combined  EU  telecommunications
markets. While the voice telephony market, including internet dial-up  services,  continues to
represent the largest share of the EU market at an estimated 51%, growth remains at the 2000
level (2.7%), and in some Member States, in particular Spain, Italy, Austria and Finland, its
value is either matched or slightly overtaken by the mobile market.

EU residents spent an average of €762 per capita on telecommunications services (including
cable  TV)  in  2000,  up  14%.  Higher  than  average  per  capita  expenditure  was  recorded  in
Denmark, Ireland, the Netherlands, Austria, Finland, Sweden and the United Kingdom, with
the figure for Spain in particular increasing rapidly.

3.2.  Mobile market

Mobile  penetration  continues  to  rise  dramatically,  with  substantially  higher  rates  in  every
single Member State since last year. In August 2001 there were 36% more mobile subscribers
in Europe than one year ago. The average penetration rate is now 73%, with rates at 75% or
higher in Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland and Sweden.

The average market share of leading mobile operators has decreased since 2000 and is now
below  50%  in  two  thirds  of  Member  States.  The  redistribution  of  market  shares  in  the  last
year has benefited in particular the smaller competitors in Belgium, the Netherlands, Austria,
Finland and the United Kingdom.

3.3. 

Choice of operators

For  long  distance  and  international  calls  there  is  a  choice  of  more  than  five  alternative
operators for the whole population in twelve Member States. The choice in two (Belgium and
Luxembourg) is slightly more restricted. New licensed operators had not yet started operation
in Greece at 1 July 2001.

The situation is more complex for local call services. Six Member States (Denmark, Ireland,
Austria,  Portugal,  Sweden  and  the  United  Kingdom)  report  that  the  whole  population  can
choose  from  more  than  five  alternative  providers,  whereas  in  Spain  and  Luxembourg  the
choice  is  between  3  and  5  operators.  In  other  Member  States  a  choice  between  3  to
5 operators is available to 85% (Italy), 40% (Belgium) and 22% (Germany) of the population

10

respectively. Finally, only 1% of the French population can actually choose not to route local
calls  through  the  incumbent  operator.  The  situation  in  Belgium,  Spain  and  Italy  represents
significant progress in comparison to the situation one year ago.

The alternative provision of direct access services is less developed: some degree of choice is
recorded in Belgium, Germany, France, the Netherlands, Austria and the United Kingdom

There has been a rapid increase in the use of carrier pre-selection, with about 110 operators
using it for the provision of local calls to residential users, i.e. 58% more than last year, and
214 for long-distance and international calls.  In addition carrier selection, which is already
heavily used for the provision  of  long-distance  and  international  calls,  is  increasingly  being
used for the provision of local calls. More than one thousand new entrants have been allocated
an access code in the EU.

3.4. 

Overall reduction of tariffs

As part of the ongoing rebalancing of tariffs which saw average monthly rentals increase by
12% over the period 1997 to 2000, average EU monthly rental charges have increased by 7%
for  residential  users  and  by  3%  for  business  users  since  last  year.  Tariffs  charged  by
incumbents  for  local  calls  have  remained  overall  stable  since  last  year  at  cent 42  for  a  ten-
minute call and cent 14, as compared to last year’s cent 13, for a three-minute call. However,
significant increases occurred in Portugal (by 100% for short local calls and by 30% for ten-
minute calls), and in Belgium and France (respectively 33% and 25% for three-minute calls).
The  most  expensive  local  calls  are  in  Belgium,  Austria,  the  United  Kingdom,  Portugal  and
Ireland,  which  all  charge  prices  higher  than  the  EU  average  for  both  three-minute  and  ten-
minute calls.

At  the  same  time  incumbents’  tariffs  for  long  distance  calls  continue  to  fall,  with  a  three-
minute long-distance call costing on average cent 40 as compared to last year’s cent 45 (11%
down  since  last  year  and  45%  down  since  1998).  The  cost  of  a  ten-minute  call  went  down
from cent 144 to cent 124 (14% down since last year and 47% since 1998). Major reductions
over 2000 took place in  Belgium  (60%  to70%  depending on  the  length of  the  call),  Austria
(58%)  and  Greece  (about  30%).  Price  decreases  also  occurred  in  Portugal,  Italy  and  Spain
which, however, remain above the EU average.

Overall EU average monthly expenditure for national calls (local and long distance calls and
fixed charges) has consistently gone down over recent years, from €37.02 to €32.75 between
August 1998 and 2001  for  residential users, including  VAT,  and from €85.57 to €68.54  for
business  users,  excluding  VAT.  However,  some  Member  States  recorded  an  increase  in  the
overall cost of national calls for residential users, especially over the last year.

As  far  as  local  and  long-distance  calls  are  concerned,  last  year  saw  a  consolidation  of  the
tendency towards the reduction or elimination of price differences for calls over different
distances.  As  of  1  August  2001  tariffs  for  calls  at  peak  times  are  no  longer  differentiated
according to distance (local, regional and national calls of respectively 3, 50 and 200 km) in
smaller  Member  States  such  as  Belgium  and  Denmark  (this  was  already  the  case  in
Luxembourg),  while  in  Austria  existing  differences  are  now  negligible.  In  Greece  the
incumbent  has  eliminated  tariff  differences  for  local  and  regional  calls.  The  process  of
eliminating  differences  between  calls  of  50  and  200  km,  which  was  already  established  in
Ireland,  Italy,  the  Netherlands,  Finland  and  the  United  Kingdom,  and  was  more  recently
introduced  in  Belgium,  Denmark,  Germany,  France  and  Sweden,  has  been  consolidated.
Differentiation of call charges according to distance still occurs in Spain and Portugal.

11

There has been an overall decrease in the cost of international calls via incumbents since last
year  from  €1.43  to  €1.18  (17%  down  since  2000)  for  residential  users  and  €1.02  to  €0.81
(21% down since 2000) for business users;  this  represents  a  decrease from  €1.84 and €1.33
respectively for residential and business users in 1998.

In August 2001 the EU average monthly expenditure for a composite basket of national and
international calls decreased overall with respect to last year by 4% for residential and 4.6%
for  business  expenditure.  On  average,  one  third  of  monthly  expenditure  is  due  to  fixed
charges  (including  rentals  and  a  portion  of  installation  charges)  and  two-thirds  to  usage
charges  for  local,  long-distance,  international  calls  and  calls  to  mobile  networks.  However,
the proportion differs across Member States, with fixed charges in Luxembourg representing
58% of monthly expenditure and in Greece only 23%.

New entrants usually charge considerably lower  rates than  incumbent operators, depending
on  the  type  and  duration  of  the  call.  The  following  examples  are  given  on  the  basis  of  a
limited sample of alternative operators’ offerings (see Annex 1.3).

For  long-distance  calls,  one  alternative  operator  in  Germany  charges  75%  less  than  the
incumbent, while new entrant operators in Belgium, France (for longer calls), Spain and the
United Kingdom charge between 36% and 56% less than the respective incumbent operators.
On the other hand the major new entrant in Sweden applies tariffs only 10% below those of
the incumbent, which are, however, among the cheapest in the EU.

For local calls, new entrant operators offer smaller, but still substantial, reductions in tariffs,
of between 25% and 29% in Germany, 12% and 18% in France and the United Kingdom, and
about 8% in Sweden.

3.5. 

Reduction in incumbents’ market shares

The  market  shares  of  incumbent  operators  by  retail  revenue  continued  to  decrease  in  all
fixed  call  service  segments  over  the  last  year.  It  is  estimated  that  on  average  incumbent
operators have lost approximately 10% of local call markets (all local calls) and around 20%
of the long-distance and 30% of the international calls markets since liberalisation.

The  incumbent’s  share  of  retail  revenues  from  international  calls  is  below  50%  in  one
Member State (the United Kingdom), and is estimated at around 60% in three Member States
(Germany, Italy and Sweden) and approximately 70% to 75% in three more (France, Ireland
and  the  Netherlands).  The  fall  in  market  share  has  been  particularly  remarkable  in  those
countries such as Germany, France, Italy and the Netherlands which liberalised on 1 January
1998, and Ireland, which opened its market almost one  year later. Decreasing market shares
are also evident in the local calls segment (e.g. incumbents hold about 70% of the market in
Germany and the United Kingdom in terms of retail revenues), although incumbent operators
in at least ten Member States retain shares of between 90 and 100% of the market.

Detailed  graphs  and  tables  illustrating  all  of  the  points  made  above,  supplemented  by
additional data on market values, penetration rates, market shares, retail tariffs and tariffs for
interconnection and leased lines, are set out in Annexes 1 and 2.

12

4. 

REGULATORY OVERVIEW

This  section  sets  out  some  general  considerations  that  arose  during  the  preparation  of  the
report  in  relation  to  the  current  framework  and  the  transition  to  the  new.  It  then  gives  an
overview of the main concerns raised in relation to the practical implementation of the current
regulatory framework at European level.

In  this  context  the  national  regulatory  authorities  have  without  exception  made
considerable progress in supervising the implementation process in the period since the Sixth
Report, and have continued a pattern of cooperation with the other European regulators that
prefigures  future  coordination 
the  European  Regulators’  Group  for  Electronic
Communications Networks and Services.

in 

4.1. 

Regulation in Europe prior to the transition to the new framework

As far as new entrants are concerned, the challenges posed by the current financial and market
situation  militate  in  favour  of  a  measured  transition  to  the  more  flexible  regulatory
environment  set  up  by  the  new  framework.  This  will  clearly  be  a  matter  for  the  Member
States to consider in particular under the arrangements in the new Access Directive relating to
the  review  by  NRAs  of  existing  obligations  for  access  and  interconnection  under  the
Interconnection, Voice Telephony and Leased Lines Directives.

In  this  perspective,  any  relaxation  of  existing  obligations  that  will  be  possible  under  a  new
regulatory  framework  adapted  to  a  competitive  environment  will  only  be  appropriate  when
the current framework has been fully implemented. As regards local loop unbundling and the
pricing of leased lines, for example, measures to ensure cost orientation still need to be taken
in  a  number  of  Member  States,  and  would  under  the  new  framework  not  be  removed  until
justified by the market analysis to be carried out by the NRAs. The candidate countries will
similarly  not  be  in  a  position  to  implement  the  new  framework  without  having  laid  the
foundations on the basis of the current framework.

It  is  also  clear  that  the  current  framework  needs  to  be  applied  consistently  across  the
Community before the new framework is implemented, if the objective of a level competitive
playing  field  for  all  market  players  throughout  Europe  is  to  be  achieved  under  the  new
directives.  Great  care  will  have  to  be  exercised  to  ensure  that  single  market  rules  are
respected,  in  particular  if  a  number  of  new  services  are  to  be  viable.  Continuing  regulatory
fragmentation  will  clearly  deter  the  emergence  of  pan-European  operators  capable  of
providing  pan-European  services.  Pan-European  players  are  currently  dismayed  at  those
regulatory  divergences  that  continue  to  exist  and  to  which  they  are  exposed  because  of  the
nature of their operations, including incumbent operators that are also new entrant operators
in the markets of other Member States.

It is also important that the various aspects of the current regulatory framework are applied
coherently  within  each  Member  State.  The  principles  relating  for  example  to  tariffs,  cost
accounting  and  non-discrimination  are  interlinked,  and  require  a  consistent  implementation
strategy  by  NRAs  armed  with  the  appropriate  powers  and  procedures  in  order  to  prevent
market foreclosure through tariff distortions. This also requires a clear separation of the roles
of  the  various  bodies  with  regulatory  functions.  An  overly  complex  distribution  of
responsibilities,  or  any  overlapping  of  competences,  not  only  damages  regulatory  certainty
and consistency but tends to be inefficient in terms of resources. It is also vital that political
considerations are not allowed to justify intervention in the regulatory and market process, for

13

example  by  imposing  or  supporting  retail  tariffs  that  are  set  at  artificially  low  levels.  The
dangers  of  this  to  competition  are  clear:  in  the  market  for  local  broadband  access,  for
example, the combination of a high price for local loop unbundling and collocation, a lack of
shared access, failure to provide a wholesale DSL service by the incumbent, and authorisation
by the regulator for the incumbent to provide its  own DSL  services  at  low  retail prices will
conspire to keep entrants out of the market.

Most  Member  States  have  transposed  the  concept  of  non-discrimination  in  line  with  the
Directives  (in  particular  the  Interconnection  and  Leased  Lines  Directives),  but  many  have
failed  to  ensure  implementation  of  the  principle  in  detail.  Non-discrimination  means  that
incumbents must treat new entrants in the same way as their downstream arms; NRAs must
therefore  act  to  ensure  that  this  treatment  extends  in  particular  to  the  communication  of
information on the launching of retail products. Indeed, what appears to be equal treatment by
making  available  wholesale  offerings  at  the  same  time  as  retail  offerings  must  not  be
undermined by the provision of notice of the offering to the incumbent’s downstream arm in
advance  of  notice  to  competitors.  Some  incumbents  are  in  the  process  of  restructuring,  and
where this leads to transparency and the avoidance of discrimination, this is to be welcomed.

There is demand, in particular from new entrants and users’/consumers’ bodies, for continued
benchmarking  and  best  practice  guidance.  Benchmarks  have  proved  very  useful  in  the
transition  to  full  verification  of  costs  of  regulated  services.  However,  the  continuation  of
formal  benchmarking  in  relation  for  example  to  interconnection  through  recommendations
could be counter-productive, since it sends the signal that cost oriented tariffs can to a certain
extent  be  achieved  without  imposing  cost  accounting  principles.  Continued  publication  of
data on interconnection and on leased line pricing, in particular deviations from the ceilings in
the 1999 Recommendation6, together with provisioning, is however clearly important, and is
ensured  through  successive  implementation  reports  and  publicly  available  ONP  Committee
documents. Reporting on best practice for example in relation to dispute resolution by NRAs
or consumer price guides is also clearly important.

It should be pointed out that certain pro-competitive measures under the new framework as
it exists in the common positions adopted on 17 September 2001 are already being applied in
a number of Member States. One example is number portability in mobile networks, which is
effective in Denmark, Spain and the United Kingdom and will enter into force in Italy in early
2002 and Germany and Ireland in late 2002 to open up competition in  a sector  regarded  by
some  regulators  as  being  uncompetitive.  This  move  towards  advance  application  of
competitive safeguards, as opposed to premature lightening of regulation, is to be welcomed.

4.2.  Main regulatory bottlenecks in Europe

The  following  is  an  overview  of  significant  horizontal  regulatory  problems  in  the  Member
States. The most crucial issues facing regulators, apart from the need to refine and clarify their
own methods of operation, are currently call termination charges in mobile networks, flat
rate  interconnection  for  internet  access,  competition  in  local  access  in  particular  for
broadband,  the  pricing  and  provisioning  of  leased  lines,  and  general  tariff  and  cost
accounting principles. The roll-out of third generation mobile networks is also referred to
given  its  importance  to  the  future  development  of  the  market;  this  was  the  subject  of  a

6

Commission Recommendation on leased lines interconnection pricing in a liberalised
telecommunications market, C(1999) 3863, November 1999

14

                                                
Commission  Communication  in  March  20017.  Questions  also  continue  to  revolve  around
the
numbering,  universal 
telecommunications-specific data protection directive.

transposition 

of  way 

service, 

rights 

and 

of 

4.2.1.  National regulatory authorities and appeal mechanisms

To ensure effective market entry and regulatory certainty, there is a need for clearly defined
decision-making  powers  on  the  part  of  NRAs,  swift  procedures  and  deterrent  sanctions  to
control the incumbents’ behaviour. This is often not the case, and new entrants in the market
request increased proactivity and ex ante action by the regulators. An area where the lack of
proactivity and/or powers on the part of NRAs was highlighted in nearly all Member States
was the implementation of local loop unbundling. Regarding the functioning of the regulators,
there  is  concern  as  to  the  division  of  powers  between  the  relevant  ministries  and  the
independent  regulators which is  often unclear  and delays  regulatory  intervention. This  is  an
issue  in  particular  in  Italy  as  regards  licensing  and  Austria  concerning  spectrum  and
numbering  management.  In  Spain  the  wide  division  of  tasks  leads  to  complexity  in
coordinating regulatory decisions.

In  a  fast-moving  market,  players  look  to  the  NRA  to  resolve  disputes  rapidly.  There  is,
however,  clearly  a  trade-off  between  the  quality  of  decisions  on  the  one  hand  and  rapid
decision-making in line with market developments on the other. In some Member States the
incumbent (and in some cases its subsidiaries) has been able to seize a first mover advantage
in the roll-out of DSL services while entrants have been engaged in lengthy proceedings with
regulators and the courts. There is clearly also a difficulty in that the authorities are loath to
suspend the introduction of new services by incumbents, in particular broadband, if it leaves
them  open  to  accusations  of  ‘blocking  the  roll-out  of  the  Information  Society’.  Political
encouragement  of  the  roll-out  of  high  speed  services  must  take  account  of  the  need  to
facilitate market entry in this important new market.

Concerns exist in a number of cases regarding the lack of enforcement powers, in particular to
ensure  that  incumbents  apply  NRA  decisions.  Enforcement  appears  to  be  hampered  by
lengthy and cumbersome procedures in France, Italy, Austria, Portugal, and by low penalties
in Ireland and Germany in particular.

In  a  related  matter,  it  appears  that  incumbents  have,  as  a  matter  of  strategy,  continued  the
practice of appealing systematically against NRA decisions (Germany, Greece, Spain, Italy,
Ireland, Austria, Finland, Sweden in particular) despite the fact that in most cases the appeals
have not been successful. While due process is a fundamental legal principle, NRAs need to
put in place disincentives for excessive delaying measures. Operators are concerned at lengthy
appeal procedures in Belgium, Germany,  the  Netherlands,  Austria  and  Finland.  In Germany
the NRA has suspended its decisions relating to the roll-out of DSL services, pending rulings
by the courts on the issue of suspension, and in Sweden the courts have suspended the NRA’s
decision in regard to the lowering of mobile interconnection charges.

The  new  regulatory  framework  will  impose  new  and  complex  tasks  on  NRAs,  relating  in
particular  to  market  analysis  and  the  designation  of  undertakings  with  significant  market
power using the dominance test. It is therefore crucial that they should be fully functioning in
accordance with the current framework in terms of powers, assignment of tasks, resources and
operational  skills.  Certain  of  the  NRAs  themselves  made  clear  in  the  hearings  that  they

7

Communication on the introduction of third generation mobile communications in the European Union:
state of play and the way forward, COM(2001)141 of 20 March 2001

15

                                                
require an increase in budgetary and human resources; some have not yet reached the level of
staffing set out  in their  establishment plans. Table 1 in Annex 2.4 gives  an overview  of  the
financing and staffing of the NRAs.

4.2.2. 

Interconnection – call termination in mobile networks

There is concern in  a number of Member States as to whether the  mobile  call termination
market  is  competitive.  While  the  average  peak  time  charge  in  Europe  for  mobile  call
termination decreased by around 10% over the last year, it is, at cent 18.16, about ten times as
high as the average charge for fixed to fixed interconnection at double transit level. While it is
clear that the cost drivers in mobile networks are different from those in fixed, this represents
a difference of an order of magnitude that is difficult to explain.

As regards  the  range  of  prices  between  the  Member  States,  the  peak  time  charges  in  three
Member States (Greece, Italy and Portugal) are around twice as high as in the Member State
with the lowest tariffs (United Kingdom); in three others (Spain, France and Finland) they are
close to the highest, while in three others (Luxembourg, Austria and Sweden) they are close
to the lowest (see Annex 2.2). The tariffs for mobile call termination referred to here do not
take account of the United Kingdom NRA’s most recent price control review.

Regulators generally agree that the problem  arises from the fact that it is the calling rather
than the called party who in effect pays the termination charge. Fixed operators argue that
an  indication  of  the  level  of  mobile  termination  charges  in  a  competitive  market  can  be
gauged by halving the level of the cost of an on-net call in the mobile network concerned, and
that this test reveals discriminatory levels of charging.

Mobile operators on the other hand argue that there are inherent cost-savings on on-net calls,
that competition exists by virtue of the number of methods of making a call to the called party
(fixed, mobile, VoIP etc), and that reductions in mobile termination charges will tend to lead
to  an  increase  in  the  retention  charges,  and  therefore  the  margins,  of  fixed  operators,  in
particular  the  incumbent.  Furthermore,  competitive  pressure  is  exerted  by  the  fact  that
business  users  of  mobile  services  will  tend  to  gravitate  to  the  operator  with  the  lowest
termination  charges  in  cases  where  they,  the  business  users,  make  a  large  number  of  calls
from  fixed  to  mobile  networks  in  the  form,  for  example,  of  calls  from  headquarters  to  a
mobile sales force. However, it is argued in response that mobile operators address the price
sensitivity  of  business  users  by  offering  targeted  packages  (i.e.  by  applying  price
discrimination);  moreover,  lack  of  mobile  number  portability  and  integration  of  fixed  and
mobile services impose high costs on business users wishing to switch mobile operator.

Regulators have at their disposal the ONP rules in the directives, including  cost  orientation
principles  for  operators  with  significant  market  power  (SMP)  in  the  national  market  for
interconnection,  together  with,  in  a  number  of  cases,  competition  or  other  regulatory
powers under  national rules. The Commission  is  currently investigating  a  formal  complaint
under Article 82 of the Treaty (abuse of a dominant position) concerning a number of mobile
network operators. 

16

There are currently nine regulatory scenarios in Europe:

Table 1 – Regulation of termination charges in mobile networks in Europe

France, Ireland,
Sweden; Austria until
October 20018

NRA designates one or more mobile operators as having SMP
in  the  national  interconnection  market,  and  imposes  cost
orientation obligations (currently under review in Austria)

Belgium

Italy

Spain

Portugal, UK

Denmark,
Luxembourg, the
Netherlands

Germany

Greece

Finland

NRA designates one or more mobile operators as having SMP
in  the  national  interconnection  market,  but  imposes  tariff
reductions based on European comparisons

NRA designates one or more mobile operators as having SMP
in  the  national  interconnection  market,  but  the  tariff  control
measures applied have not been updated

NRA designates  one or  more operators  as  having  SMP  in  the
national  interconnection  market,  but  has  not  finalised  the
verification of their regulatory accounts

the  national
NRA  makes  no  SMP  designation 
interconnection market, but uses competition powers to impose
‘appropriate’  or  ‘proportionate’  tariff  controls  on  all  mobile
operators 

in 

NRA  makes  no  SMP  designation 
interconnection  market, 
interconnection tariff controls 

in 
accordingly 

and 

the  national
imposes  no

NRA  makes  no  SMP  designation 
interconnection market or mobile market

in 

the  national

NRA  makes  SMP  designation  in  the  mobile  market,  but  no
mobile  operator  is  designated  as  having  SMP  in  the  national
interconnection market

NRA  makes  SMP  designation  in  the  mobile  market.  Mobile
operators 
to  an
interconnection  charge)  for  terminating  calls  originating  in  a
fixed network

levy  an  end-user  charge  (as  opposed 

The  Commission  considers  that  a  range  of  peak  time  call  termination  charges  in  mobile  of
cent 12.44 to cent 23.69 as between Member States cannot be justified in terms of the actual
costs  of  terminating  calls,  nor  in  terms  of  its  level  in  relation  to  the  average  fixed  to  fixed
tariff. Regulators therefore need to act to remedy excessive prices, either on the basis of the
Interconnection Directive or by virtue of their competition powers. However, while the power
of mobile operators in the national mobile markets and the national interconnection markets
clearly varies from Member State to Member State, the range of regulatory solutions adopted,

8

By decision of 5 November 2001 the NRA no longer applies cost orientation to any of the mobile
operators (since there are now no SMP designations as regards the national market for interconnection)
but applies the principle of ‘appropriate prices’ under dispute resolution powers

17

                                                
and the spread of peak call termination prices as set out in Chart 8 of Annex 2.2, illustrate the
divergences possible under the current regulation.

4.2.3. 

Interconnection – flat rate Internet access call origination (FRIACO)

The  vast  majority  of  users  in  Europe  currently  obtain  access  to  the  internet  over  ordinary
telephone or ISDN lines, known as ‘narrowband’ access. One deterrent to greater use of the
internet  is  the  customer’s  awareness  that,  in  the  absence  of  flat  rate  or  unmetered  usage
charges,  the  bill  is  mounting  with  every  minute  spent  on  line.  Many  market  players  regard
increased  narrowband  access  as  the  gateway  to  the  higher  quality  services  available  over
‘broadband’ solutions, notably DSL/ADSL (digital subscriber lines/asymmetric DSL) and TV
cable. Where incumbents offer retail internet access services on an unmetered basis they are
bound  under  the  non-discrimination  principle  to  offer  the  same  interconnection  to  their
competitors to enable them to offer the same services.

Following its decision to require the incumbent operator to provide flat rate interconnection
in  May  2000,  the  United  Kingdom  regulator  determined  in  February  2001  that  FRIACO
should be provided at a higher level in the network rather than at local exchanges, making it
easier  for  new  entrants  to  offer  flat  rate  services  because  it  removes  the  need  for  them  to
invest in capacity to reach local exchanges. The retail price of unmetered narrowband internet
access currently starts at €21, and 40% of the ten million homes in the United Kingdom with
internet use unmetered packages.

Progress  in  the  other  Member  States  has  been  slower  as  a  result  of  various  factors.  In
Germany  the  NRA  ruled  in  November  2000  that  the  incumbent,  whose  subsidiary  was
offering  a  flat  rate  product,  should  make  a  flat  rate  interconnect  offer  to  competitors;  the
incumbent’s  subsidiary’s  flat  rate  retail  offer  was  scrapped  in  March  2001  and  the
incumbent’s  appeal against the ruling  subsequently  upheld  in  the  courts.  In  the  Netherlands
the NRA determined in November 2000 that a flat rate interconnect offer should be made by
the  incumbent.  This  was  at  first  limited  to  ISDN,  but  a  consultation  is  now  under  way  on
extending  the  offer.  The  price  set  by  the  NRA  in  April  2001  has  been  appealed  by  the
incumbent. Flat rate tariffs  were introduced  for the incumbent’s own services in Portugal in
December  2000,  but  the  NRA’s  determination  of  interconnect  tariffs  has  been  appealed
against, although without suspensory effect.

The incumbent in France has made flat rate interconnect offers to new entrants at both local
and regional level, and the service is expected to begin operation in the autumn. In Spain the
NRA has set flat rate interconnection prices for internet call origination. Reviews of internet
access pricing are under way or have been announced in Belgium, Ireland, Italy and Sweden.

An  analysis  of  dial-up  internet  access  prices  is  set  out  in  Annex  1.6  for  residential  and
business profiles based on internet packages available in the Member States.

4.2.4.  Competition in the local access market

The  Lisbon  European  Council  recognised,  in  the  light  of  the  conclusions  of  previous
implementation  reports,  that  one  of  the  keys  to  competitive  broadband  access  was  the
opening  up  of  the  local  access  network.  One  important  element  is  local  loop  unbundling

18

(LLU), including shared access9, as part of a range of methods of access including TV cable,
wireless local loop and access to the incumbent’s bitstream10.

The implementation of local loop unbundling, which became mandatory from January 2001
pursuant  to  Regulation  2887/200011,  has  been  very  disappointing.  Reference  unbundling
offers covering both unbundling and collocation12 have been published in all Member States,
but do not cover shared access in Germany, Greece, Italy, Luxembourg or Portugal (see table
1 in Annex 2.1 for the dates of publication of reference offers). Full unbundling agreements
have been concluded in ten Member States and involve more than two hundred operators, half
of  them  in  Germany,  where  unbundling  was  mandated  under  national  law  in  1998.  The
numbers of lines that have actually been unbundled varies greatly (see table in this section),
from  a  handful  to  a  substantial  quantity.  No  lines  have  been  unbundled  in  Ireland  or
Luxembourg.  Shared  access  is  actually  operational  only  in  Belgium,  Denmark,  Finland  and
Sweden,  although the number of  lines  is  limited  to  a  few  hundred.  Trials  are  proceeding  in
France.

Translation of the political imperative into operational reality has been complex for all parties
and subject to a number of delays. The NRAs and operators have had to ride a steep learning
curve  to  overcome  practical  difficulties  relating  in  particular  to  collocation  and  pricing.
Further,  LLU  is  subject  to  precisely  the  same  factors  that  have  slowed  the  provision  for
example of leased lines at competitive prices and with non-discriminatory provisioning times,
such as poor supervision of cost accounting systems and slow dispute resolution procedures.
To this must be added the reluctance or inability of some incumbents to open this service fully
to  non-discriminatory  and  effective  access  by  competitors,  and  the  ability  afforded  by  their
relative size, and in some cases State holdings, to ‘sit out’ the current financial situation. High
one-off  costs  (collocation,  line  connection,  investment  in  equipment  or  backhaul  links)  are
difficult to amortise and have to  a large extent deterred  entry into the market. However, the
financial downturn  should  not  give cause to incumbents to  delay  unbundling in the  hope  or
expectation that it will force competitors out of the market. In the current climate NRAs will
need to be particularly alert to this factor.

The collocation of new entrants’ equipment at incumbents’ premises or under arrangements
allowing ‘virtual’ or ‘distant’ collocation has proved a complex and time-consuming issue. In
the  United  Kingdom,  for  example,  new  entrants  designed  the  specification  for  collocation,
which  had  to  be  revised  in  the  light  of  practical  experience.  The  Italian  regulator  opted  to
conclude  collocation  work  before  actually  unbundling  lines.  Collocation  is  estimated  to  be
operational  at  more  than  20%  of  all  main  distribution  frames  (MDFs)  in  Germany  and  at
12.5% in Denmark, and at lower levels in other Member States. Graph 2 in Annex 2.1 shows
the percentage of MDFs for which collocation was operational as at July 2001.

Nonetheless,  while  the  number  of  fully  unbundled  lines  currently  represents  a  small
percentage  of  the  total  access  lines  in  Europe,  the  number  is  growing  in  Denmark
(40 000 lines),  Germany  (550 000),  Italy  (about  1 000,  including  those  delivered  in  the  test
phase),  the  Netherlands  (6 650),  Austria  (2 900)  and  Finland  (40 000).  Unbundled  lines  are

9

10

11

12

Access to the non-voiceband frequency spectrum of the twisted copper pair
The incumbent installs a high speed access link to the customer’s premises and then makes this access
link available to third parties to enable them to provide high speed services to customers
Regulation 2887/2000 of the European Parliament and of the Council of 18 December 2000 on
unbundled access to the local loop
Collocation means the provision of physical space and technical facilities necessary to accommodate
and connect the new entrant’s equipment

19

                                                
also operational in Sweden (1 605) and to a limited extent the United Kingdom (137). Trials
are being carried out in France and Portugal.

In spite of the progress made, the pace of implementation of the new Regulation is overall
not satisfactory, and should be speeded up to open local networks to competition, particularly
in the new market for retail broadband services. This requires hands-on monitoring by NRAs,
the  setting  of  binding  deadlines  and  the  imposition  of  credible  financial  penalties  on
incumbents not complying with the requirements imposed.

The  incumbent  operator  offers  its  own  high  speed  internet  access  retail  service  in
13 Member  States.  The  incumbent’s  service  has  been  developing  rapidly  in  Belgium,
Denmark,  Germany,  Spain,  Italy,  the  Netherlands,  Austria,  Finland  and  Sweden  (as  a
percentage  of  the  incumbent’s  total  subscriber  lines).  Under  the  non-discrimination
principle13,  retail  offerings  by  incumbents  should  be  matched  by  wholesale  offerings  to
competitors. Agreements relating to the provision of wholesale services by the incumbent to
new entrants have been concluded in Denmark, Spain, Italy, Austria, Sweden and the United
Kingdom, with trials under way in France. A wholesale service is also provided in Belgium,
the  Netherlands  and  Portugal,  and  has  recently  become  available  in  Sweden  but  is  not  yet,
apparently, taken up by entrants. However, only in two Member States (Denmark, the United
Kingdom) is the number of high speed  access lines  held  by  new  entrants comparable  to  the
number of the incumbent’s retail access lines (see Chart 5 in Annex 2.1).  In seven Member
States (Belgium, Germany – where new entrants claim the incumbent’s service is below cost,
France, Luxembourg, the Netherlands, Portugal, and Sweden) the incumbent (in some cases
with its subsidiaries) holds all or virtually all DSL access lines. This first mover advantage
is  exacerbated  where  shared  access  to  the  local  loop  is  not  offered.  In  Germany,  where  the
incumbent currently has 1.2 million customers for his high-speed service and aims to connect
a further million before end 2001, neither wholesale DSL nor shared access is offered. Where
wholesale  DSL  services  are  on  offer,  new  entrants  indicate  that  such  offers  usually  provide
ADSL  services  which  do  not  enable  them  to  address  their  SME  customers  with  VDSL
services more suited for business needs.

All  Member  States  have  taken  on  board  the  message  from  Lisbon  concerning  the  need  to
ensure cheap internet access as a stepping stone to the information economy, but some have
not taken sufficient measures to ensure that low-cost DSL access is provided on a competitive
basis.  Where  artificially  low  access  prices  are  provided  by  incumbents  they  may  constitute
predatory pricing; where imposed by government or regulatory action they may constitute an
infringement  of  the  tariff  principles  in  the  ONP  framework.  In  either  case  they  tend  to
strengthen the dominant  position  of  the incumbent  player  and  foreclose  entry  by  competing
players. In addition, questions of price squeeze arise where unbundled local loop and shared
access tariffs are set too high to allow entrants  a margin on  their  own retail  offerings;  price
squeeze may also exist between the wholesale price of bitstream access and the incumbent’s
DSL offering.

13

Article 16(7) of Directive 98/10/EC (New Voice Telephony); Article 1(3) of Regulation 2887/2000
(Local Loop Unbundling)

20

                                                
Table 2 – Availability of unbundled and shared loops and bitstream access in Europe

Refer-
ence
offer for
full un-
bundling

Refer-
ence
offer for
shared
access

Incumbent’s
subscriber
lines
(millions)

Fully
unbundled
lines

Shared
access lines

Incumbent’s
retail DSL
lines

Wholesale
DSL lines
supplied
by the
incumbent14

n.a. 16
0 17

n.a.

0

n.a.

n.a.

0

0

n.a.
8 000 17

0
0 19
38 000 18
45 000 15

24 15
0  17

140 000 15
45 000 18

0 

1 200 000

0 
0 19

0 

0 

0 

0 

350

0 

0 

0

158 345 20

257 000

0

1 000

125 000
60 800 17

1 000
35 000 19
134 000 18

165 000

135 000 21

40 00019 500-1 000 19
160  18
1 60518

137

0 

54 000

5015
40 00018
549 16718

76
719

20

0

1 000

0

6 650 22

2 900

3023

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN

S

UK

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

No

No

Yes

Yes

No

Yes

Yes

Yes

5.0
2.817

39.6

5.6
17.919

34.0

1.6

27.2

0.3

9.9

3.2

4.3
2.819
6.018

35.0

n.a. : not available
Source: NRAs
Situation as at 31 October 2001

Views on the role of wireless local loop (WLL) in opening local access competition diverge
widely in the Member States. In some the takeup has been extremely slow, whereas in others,
in  particular  Italy,  WLL  is  regarded  as  a  potential  alternative  to  local  loop  unbundling  and
certain  leased  line  applications,  although  entrants  have  complained  regarding  uncertainty  of
licensing terms and delays. Large numbers of local licences in particular have been granted in

14

15

16

17

18

19

20

21

22

23

Not including the incumbent’s high speed services offered to new entrants on the basis of unbundling,
shared access and resale
Estimate
32 000 lines are supplied via resale
As of 30 June 2001
As of 30 September 2001
As of 15 October 2001
As of 15 October 2001. This figure corresponds to the companies of the Telefónica Group 
However, the number of retail DSL lines of the new entrants is significantly lower (estimated in
approximately 14 000) because wholesale lines are sold in lots
In addition 116 000 lines are supplied to KPN’s business unit broadband
Delivered under trial conditions

21

                                                
Germany, France, Finland and the  United Kingdom. National licences  have  been  granted in
Belgium,  Denmark,  Greece,  Spain,  France,  Ireland,  Luxembourg,  Austria,  Portugal  and  the
United Kingdom. A full overview is given in table 3 in Annex 2.1.

Regulatory  approaches  to  WLL  have  also  varied  widely,  with  some  NRAs  excluding
participation by the incumbent operator in the licensing process (the Netherlands; Italy for a
period  of  four  years)  in  view  of  its  dominant  position  in  the  local  access  market.  Overall,
WLL seems, because of its cost, to be more suited to serving the needs of business customers
rather than a broad residential clientele.

In eight Member States (Belgium, Germany, Spain, France, the Netherlands, Portugal, Austria
and the United Kingdom – see graph 8 in Annex 2.1), cable TV infrastructure is currently
used  to  provide  voice  telephony  services,  and  in  eleven  Member  States  between  60%  and
100%  of  households  are  passed  by  cable  networks  (see  graph  7  in  Annex  2.1).  These
networks also provide competition or the potential for competition in broadband access. This
will have an effect on the take-up of other means of access such as unbundled local loop and
on the way in which regulators balance infrastructure and service competition.

Data on penetration and prices for broadband services are set out in Annex 1.6.

4.2.5.  Leased lines

There  is  considerable  concern  on  the  part  of  new  entrant  operators  and  corporate  users  in
relation to the pricing and provisioning of leased lines. As regards short ‘tail’ lines used for
access to corporate networks, broadband and e-commerce there is particular concern in regard
to the 2 Megabit per second (Mbit/s) lines most in demand.

As regards national leased lines, tariffs for 2 Mbit/s still show significant variations across
Member  States,  with  rental  charges  per  annum  for  2  km  lines  ranging  from  €13 360  in  the
Netherlands  to  €1 950  in  Denmark,  for  50  km  lines  ranging  from  €35  300  and  €33  500
respectively in Spain and the Netherlands to about €9 200 in Sweden, and for 200 km lines
from as high as €63 500 in Spain and over €50 000 in Italy, Portugal and the United Kingdom
to about €12 700 in Sweden.

However,  between  August  2000  and  August  2001  average  EU  charges  decreased  by
about 16% for all lengths of 2Mbit/s circuits, with significant reductions in Belgium, Spain,
Italy and Luxembourg.

From August 2001,  average  EU  charges  for  2 km  and  50  km  lines  have  achieved  parity
with  the  standard  charges  of  two  US  reference  companies,  Verizon  and  Pacific  Bell,
which remained stable overall during the last year. Furthermore, EU average rates appear to
be about half the standard charges set in the US for long-distance lines, although it should be
borne in mind that this analysis does not take account of any discounts applied.

As  far  as  international  leased  lines  are  concerned,  for  64 Kbit/s  circuits,  Greece  and  the
United Kingdom stand out as having standard rates significantly higher than average for lines
to near EU destinations and to the US. For 2 Mbit/s half-circuits to near EU Member States,
distant EU Member States and the USA, Belgium, Greece, Spain, Austria, Finland and United
Kingdom charge, depending on the route, standard rates more than 50% above average.

However,  overall,  average  annual  rentals  for  international  half-circuits  continued  to
decrease in the EU over the last year, with lines to near EU destinations, regardless of bit
rates, showing the biggest price reductions. Reductions ranged over the last year from 13% to

22

over  30%  and  with  respect  to  previous  years  from  approximately  40  %  for  64 Kbit/s  and
2 Mbit/s  lines  since  1998  to  50%  for  34  Mbit/s  lines  since  1999,  although  last  year  price
reductions for lines to other destinations appear more modest (about 7%) with respect to those
over  the  past  two  years.  For  instance,  in  the  case  of  2  Mbit/s  half-circuits  to  the  US,  while
price  decreases  took  place  in  five  Member  States  (Denmark,  Greece,  Luxembourg,  the
Netherlands  and  Portugal),  standard  rates  remained  at  August  2000  levels  in  the  remaining
Member States.

Leased line interconnection charges usually relate to lines connecting customers’ premises
(SMEs, large corporate customers) to new entrants’ networks, and are used predominantly for
Internet  and  e-commerce  traffic.  They  are  normally  included  in  the  incumbent’s  reference
interconnection  offer,  with  the  exception  of  three  Member  States  (France,  Finland  and
Sweden).

Monthly  rental  charges  for  leased  line  interconnection  of  2  and  5  km  vary  significantly
between  Member  States.  As  regards  64  Kbit/s  circuits,  in  the  majority  of  Member  States,
charges for 5 km circuits appear to be higher than the price ceiling of €80 per month indicated
in the 1999  Commission Recommendation,  whereas  in  six  Member  States  prices  are  higher
than  the  €350  ceiling  for  2  Mbit/s  circuits.  Deviation  from  the  ceilings  is  particularly
noteworthy  in  five  Member  States  (Belgium,  Spain,  France,  Ireland  and  Luxembourg)  for
both types of line. No data are available for Finland.

In four Member States (Spain, France, Ireland and Austria), charges for 34 Mbit/s circuits are
above  the  ceilings  (up  to  four  times  higher  in  the  case  of  Ireland)  for  both  2 km  and  5  km
local ends, whereas in two (Portugal and Luxembourg, the latter on the basis of estimates) the
ceiling is exceeded in the case of 2 km circuits. No data or estimates based on retail rates are
available for the Netherlands or Finland.

For 155 Mbit/s lines, Greece stands out as having charges four times as high as the average
EU rate. Higher than average rentals also appear  to  be  charged in France,  Ireland  and  Italy.
Data are not available for Belgium, Luxembourg, the Netherlands and Portugal.

As regards lead times for the provisioning of leased lines, the latest Leased Lines Report24
submitted  to  the  ONP  Committee  on  10  October  2001  shows  wide  variations  as  between
Member States25. The typical delivery time for 64 Kbit/s lines is more than  5 months  in  the
Netherlands,  almost  4  months  in  Ireland,  more  than  3  months  in  Austria  and  more  than
2 months  in  Denmark,  compared  to  10  days  in  Portugal  and  Finland.  For  2  Mbit/s  lines,
delivery  times  range  from  around  7  months  in  the  Netherlands  and  Austria,  3  months  in
Ireland, 2.5  months  in Spain, 2 months or  slightly  less  in  Germany,  France  and  Sweden,  to
2-3 weeks in  Portugal and the United  Kingdom.  For 34  Mbit/s  lines,  delays  of  more  than  a
year  are  experienced  in  Austria,  4.5  months  in  Germany,  and  3.5  months  in  the  United
Kingdom. Portugal reported delivery periods of 2-3 days. Finally, as regards 155Mbit/s lines,
delivery  times  vary  between  3-4  months  in  Germany  and  France,  2.5  months  in  Denmark,
Greece, the Netherlands and Austria, down to 20 days in the United Kingdom.

While  prices  are  coming  down  for  lines  at  all  speeds  and  distances,  and  while  there  are  no
glaring  anomalies  in  relation  to  standard  US  prices,  the  wide  range  of  prices  between
Member  States  is  hard  to  justify  on  the  basis  of  differing  costs.  Similarly,  it  is  difficult  to

24

25

Available on Commission website, see footnote 4
Note  that  the  Leased  Lines  Report  indicated  methodological  anomalies  that  limited  the  scope  of  the
analysis and of the comparisons between countries

23

                                                
understand the remarkably different lead times for the delivery of lines over the range of
speeds  demanded.  Furthermore,  while  it  is  notoriously  difficult  for  new  entrants  to  provide
evidence  that  the  lead  times  to  which  they  are  subject  are  discriminatory  in  comparison  to
those  applicable  to  the  incumbent’s  downstream  arm,  it  is  clear,  first,  that  even  non-
discriminatory lead times will be more disadvantageous to new entrants than to incumbents,
since customers will tend to stay with their original supplier, the incumbent; and second, that
discrimination may reside not only in lead times, but also in all of the conditions and penalties
in the contracts imposed by the dominant supplier. New entrants continue to demand a more
pro-active stance by NRAs to enforce the non-discrimination principle, and have proposed the
imposition  of  more  stringent  reporting  obligations  and  transparency.  Regulators  should  also
consider imposing service level agreements and credible penalties for failure to comply with
regulatory requirements.

Finally, discounts are usually applied to very large users such as mobile operators, and may
be  justified  by  reductions  in  the  cost  of  providing  large  product  volumes.  However,  the
application  of  discounts  in  other  circumstances  may  be  discriminatory  and  thereby  anti
competitive.

4.2.6.  Mobile services - 3G licensing and roll-out

The  last  implementation  report  expressed  concerns  that  the  licensing  process  for  third
generation  (3G)  mobile  services  might  not  be  completed  on  time  in  all  Member  States  to
allow roll-out of the service from January 2002. It should be noted that the UMTS Decision
does not mandate the launch of 3G from 1 January 2002, but was rather designed to ensure
that  licensing  procedures  did  not  act  as  an  impediment  to  roll-out  from  that  date.  The
objective  of  issuing  licences  to  allow  roll-out  from  that  date  has  been  met  in  nearly  all
Member States but not yet in two (Ireland, Luxembourg). A detailed overview of the current
status of 3G licensing and of fees and charges is given in tables 1 and 3 of Annex 1.5.

Roll-out  and  coverage  conditions  vary  considerably  between  Member  States,  with  some
licences  envisaging  the  launch  of  services  from  1  January  2002,  while  others  only  set
requirements  by  reference  to  population  coverage  some  years  in  the  future.  Some  Member
States (Spain, Portugal) have, in the light of market conditions and the relative unavailability
of terminal equipment, taken a formal decision to defer the deadline for roll-out as provided
under the deployment obligations in the original licensing conditions. Operators in others, in
particular  Sweden  and  the  United  Kingdom,  are  confident  that  roll-out  will  commence  in
2002 according to schedule, that is, in accordance with the roll-out obligations in the national
licences.  Details  of  the  roll-out  obligations  in  the  Member  States  are  set  out  in  table  2  of
Annex 1.5.

There has been considerable criticism of the differences in approach between the NRAs to
the  licensing  and  roll-out  of  3G  mobile  services.  These  differences  are  the  result  of  the
relatively  wide  margin  for  individual  action  by  NRAs  inherent  in  the  current  licensing
framework.  They  are  also  the  product  of  different  market  structures  and  conditions,
geographies, demographies and administrative cultures in the Member States, and the detailed
assessment of these factors by the NRAs. However, these very contrasted situations risk, in
practice, preventing the emergence of a level playing field for third generation services.
The  Commission  has  set  out  a  number  of  considerations  relating  to  the  deployment  of
3G networks  under  current  legislation  in  its  March  2001  Communication26.  Difficulties  in

26

See footnote 7

24

                                                
rolling  out  3G  networks  arising  from  the  imposition  of  lower  limits  for  electromagnetic
radiation than those laid down in the  relevant Council Recommendation27 were reported in
Belgium and  Italy,  as well as in  Luxembourg,  where limits are imposed on  mobile  services
but  not  on  other  radio  emitters  such  as  broadcasting  transmitters.  Concerns  have  also  been
raised in a number of Member States regarding the difficulties of obtaining sites for antennae
in the light of planning and environmental constraints.

4.2.7.  Tariffs and cost accounting

The  tariff  principles  and  cost  accounting  requirements  in  the  liberalisation  and  ONP
directives are intended to fulfil two primary functions: to ensure that users and consumers pay
prices  that,  in  the  transition  to  a  fully  competitive  market,  are  related  to  their  cost,  and  to
prevent  dominant  suppliers  from  foreclosing  market  entry  in  certain  segments  by  cross
subsidising  prices  from  other,  less  competitive,  segments.  Following  the  Sixth  Report,
infringement  proceedings  were  opened  in  respect  of  eight  Member  States  for  failure  to
implement correctly the provisions of the Interconnection and Voice Telephony Directives on
cost  accounting  principles28.  According  to  the  NRAs’  own  assessments,  tariffs  are  not  yet
fully  rebalanced  in  eight  Member  States,  although  in  most  cases  there  are  no  regulatory
barriers  to full rebalancing.  In certain cases, however, the Commission considers  either  that
there are regulatory/political barriers to rebalancing or that price  distortions  are  present as a
result of failure to implement tariff principles. 

Price squeeze in various segments of the market is still also claimed  by  new  entrants  to  be
relatively  widespread,  and  is  considered  by  them  to  be  one  of  the  most  potent  factors  in
foreclosing entry in the markets for high speed internet access and for voice telephony. In this
connection the lack of effective supervision and the publication of statements of compliance
was documented in the Sixth Report, and infringement proceedings subsequently opened in a
number of cases. New entrants also complain that they have limited access to information on
the  parameters  used  in  cost  models,  such  as  the  cost  of  capital,  without  which  they  cannot
have  confidence  in  the  suitability  of  the  incumbents’  accounting  systems  for  the  regulatory
purposes for which they are required.

In the case of the provision of leased lines, new entrants are concerned that incumbents’ cost
accounting  methodologies  are  not  suitable  for  the  economic  pricing  of  products  for  the
broadband and e-commerce markets, and that disparities in pricing indicate lack of adequate
supervision by the NRAs.

Tables 2, 3 and 4 in Annex 2.4 give an overview of the assessments provided by NRAs of the
level of tariff rebalancing and the  tariff regulation in place,  the cost  methodologies used
for calculating interconnection charges, whether compliance with the cost accounting systems
is verified, and when a statement of compliance was last published.

Four Member States, Belgium for voice telephony, Greece,  Luxembourg,  and Finland, have
not  ensured  compliance  with  the  cost  accounting  system,  although  in  the  case  of  Finland
some verifications have taken place on an ad hoc basis, with cost orientation not required for
international or long-distance calls or for certain local calls because there is considered to be
effective competition in these markets. In two Member States, Germany and Austria, costing

27

28

Council Recommendation 1999/519/EC of 12 July 1999 on the limitation of exposure of the general
public to electromagnetic fields (0 Hz to 300 GHz), OJ L 199, 30 July 1999, p59
The current status of proceedings can be checked at
http://europa.eu.int/comm/secretariat_general/sgb/droit_com

25

                                                
data  is  verified  by  the  NRA  in  the  context  of  individual  proceedings  for  approval  of  the
incumbent’s  tariffs  and  interconnection  dispute  settlement  proceedings;  however,  no
verification is done on an  annual basis. In three Member  States (France,  Italy  and Portugal)
the last accounts to be verified were those for years preceding the year 2000.

4.2.8.  Numbering

The requirements relating to carrier selection, carrier pre-selection and number portability are
widely regarded by new entrant operators as being among the most pro-competitive measures
introduced  in  the  regulatory  package.  Following  the  Fifth  Report,  infringement  proceedings
were  opened  in  regard  to  nine  Member  States  in  the  absence  of  the  full  provision  of  these
services. Their current availability in the different Member States is indicated in tables 5 and
6 in Annex 2.4.

Carrier selection and pre-selection are considered by the NRAs to be available for all call
types (local, long-distance and international calls, calls to mobile networks and calls to non-
geographic  numbers)  in  eight  Member  States  (Belgium,  Denmark,  Spain,  Ireland,  Italy,
Luxembourg  –  not  long-distance,  Austria  and  the  United  Kingdom).  Carrier  selection  and
carrier  pre-selection  are  not  available  for  calls  to  local  or  non-geographic  numbers  in
Germany  and  France,  and  for  calls  to  non-geographic  numbers  in  the  Netherlands,  Finland
and  Sweden.  Portugal  has  a  derogation  until  end  2001,  but  has  implemented  all  forms  of
number selection except calls to non-geographic numbers, while Greece’s derogation extends
to end 2002.

Number  portability  is  available  for  both  geographic  and  non-geographic29  numbers  in
twelve Member States (Belgium, Denmark, Germany, Spain,  Ireland,  Italy, the Netherlands,
Austria,  Portugal,  Finland,  Sweden  and  the  United  Kingdom),  but  is  not  available  for  non-
geographic  numbers  in  France  or  Luxembourg.  Greece’s  derogation  again  extends  until
end 2002.

Carrier  pre-selection  procedures  are  still  regarded  as  being  cumbersome  in  two  Member
States (Germany, Luxembourg). The misuse by incumbents in a number of Member States of
information  relating  to  customers  who  have  opted  to  take  the  pre-selected  services  of  a
competing  operator  has  in  many  cases  led  to  attempts  by  incumbents  to  ‘poach’  business
back.

The  cost  of  number  portability  is  an  issue  in  Ireland,  Finland  and  Sweden,  and  as  regards
carrier pre-selection in Finland.

4.2.9.  Universal service and consumers

New entrants in the only two Member States that have so far implemented a universal service
funding mechanism (France, Italy) continue to favour the funding of universal service through
the  general  system  of  taxation.  Failing  that,  they  would  prefer  a  'pay  or  play'  mechanism
whereby they contributed directly to provision of the universal service instead of or as part-
contribution to its provision by the designated provider, usually the incumbent.

In one other Member State (Spain), the relevant regulatory body has rejected the incumbent's
estimate of a net cost of universal service provision of €1.15bn for 1999 and has determined
that  the  company  did  not  suffer  a  competitive  disadvantage.  Furthermore  the  relevant

29

For example, emergency, free-phone and premium rate numbers

26

                                                
regulatory body has issued guidelines on how the determination of net cost is to be carried out
for subsequent years.

Incumbent  operators  in  only  three  Member  States  (France,  Italy,  United  Kingdom)  appear
regularly  to  measure  the  quality  of  the  voice  telephony  service  and  to  make  the  results
publicly available. The NRAs in Belgium, Austria and Finland publish this information, and
those in Germany,  Ireland  and  the Netherlands are to do  so this  year  for  the first  time.  The
table 7 in Annex 2.4 provides a fuller picture of the  action taken by the Member States and
the use of ETSI30 standards.

Following  the  publication  in  the  Sixth  Report  of  information  concerning  the  lack  of
availability  of  an  adequate  level  of  itemised  billing,  the  Commission  opened  infringement
proceedings  against  six  Member  States.  Of  these,  three  have  indicated  that  they  are  now
examining the introduction of itemised billing on request and free of charge.

There  are  continuing  consumer  complaints  about  the  lack  of  transparency  concerning  the
pricing  of  services,  the  terms  and  conditions  for  contracts  and  invoicing.  In  Denmark  the
regulator has set up an on-line system for comparing tariff offerings, which could constitute
best  practice  for  other  Member  States.  The  NRAs  in  Spain  and  Austria  also  provide
comparative price data on their websites.

All  Member  States  except  Greece  and  Luxembourg  publish  reports  on  tariff  developments
(see Table 2 in Annex 2.4) in accordance with the Voice Telephony Directive.

4.2.10.  Rights of way

There  are  still  problems  in  a  number  of  Member  States  relating  to  the  granting  of  rights  of
way arising from the multiplicity of local and regional authorities with powers in this area.
In some Member States (Belgium, Spain, Italy, Luxembourg and Austria), obtaining rights to
erect  mobile  masts  has  become  more  difficult.  Further,  NRAs  do  not  always  ensure  that
facility-sharing is offered in the absence of the granting of new rights of way.

As  far  as  the  central  authorities  in  many  Member  States  are  concerned,  rights  of  way  are
beyond  their  competence.  In  such  cases  Member  States  must  ensure  that  the  obligations
flowing from the telecoms package are respected at local and regional level.

Additional  burdens  are  imposed  in  a  number  of  countries,  either  directly,  as  in  Belgium,
where  additional  taxes  are  imposed  on  the  erection  of  mobile  antennae,  or  indirectly,
through high digging fees (Italy) and above-cost reinstatement of highways. In some cases (in
particular Italy) there is concern as regards the application of the non-discrimination principle
where exclusive or privileged digging rights are granted to companies in which municipalities
have direct or indirect holdings.

4.2.11.  Data protection

A  directive  on  data  protection  in  the  telecommunications  sector  to  replace  the  current
directive is under negotiation in the European Parliament and Council. Neither the current nor
future directive prevents Member States from taking measures to safeguard national or public
security  or  defence,  to  enforce  criminal  law  or  to  prevent  unauthorised  use  of  the

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European Telecommunications Standards Institute

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telecommunications  system.  However,  such measures  are  by  definition  outside  the  scope  of
this report. 

The report accordingly sets out updated information on matters falling within the scope of the
current directive, in particular unsolicited calls and electronic mail, the storage of traffic data
and calling line identification, in Annex 2.4.

Infringement  proceedings  have  been  opened  in  a  number  of  cases  in  relation  to  the
transposition of the current directive. Corrective action has been taken by the Member States
concerned in nine cases, but five proceedings remain open.

5. 

FURTHER REPORTING

The Commission will  continue  to  report  on  market  developments  and  implementation,  with
increasing  focus  on  progress  in  the  Member  States  in  transposing  the  new  regulatory
framework into national law.

The  Commission  will  also  continue  to  encourage  the  use  of  the  Open  Network  Provision
(ONP) and Licensing Committees as fora for examining completion of the current framework,
as it has done in relation to the Regulation on local loop unbundling. Where appropriate, out-
put from the Committees will be made public on the Commission’s website.

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