Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - European Electronic Communications Regulation and Markets 2003 - Report on the Implementation of the EU Electronic Communications Regulatory Package [SEC(2003) 1342]
Date: 2003-11-19
Institutions: European Commission
Subjects: application of EU law, competition law, liberalisation of the market, national implementing measure, regulation of telecommunications, telecommunications industry, telephone charges, transmission network

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 19.11.2003
COM(2003) 715 final

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

European Electronic Communications Regulation and Markets 2003

Report on the Implementation
of the EU Electronic Communications Regulatory Package

[SEC(2003) 1342]

TABLE OF CONTENTS

SUMMARY AND PRINCIPAL CONCLUSIONS..................................................... 3
Introduction .................................................................................................................. 3
Implementation of the new regulatory framework....................................................... 3
Markets for electronic communications networks and services .................................. 4
Regulatory concerns..................................................................................................... 5
OBJECTIVES AND METHODOLOGY .................................................................... 6
MARKET DEVELOPMENTS .................................................................................... 8
Electronic communications services market ................................................................ 8
Mobile telephony.......................................................................................................... 8
Broadband .................................................................................................................. 10
Fixed telecommunications operators.......................................................................... 14
Fixed voice telephony market share........................................................................... 15
Consumer choice........................................................................................................ 16
Interconnection........................................................................................................... 17
Fixed telephony tariffs ............................................................................................... 20
Numbering.................................................................................................................. 21
Digital TV .................................................................................................................. 22
STATUS OF TRANSPOSITION IN THE MEMBER STATES .............................. 23
Framework Directive ................................................................................................. 24
Authorisation Directive.............................................................................................. 28
Access and Interconnection Directive........................................................................ 31
Universal Service Directive ....................................................................................... 35
e-PRIVACY DIRECTIVE ......................................................................................... 38
Introduction ................................................................................................................ 38
Traffic data retention.................................................................................................. 39
Location data.............................................................................................................. 39
Unsolicited Communications (spam)......................................................................... 39
Cookies....................................................................................................................... 40
COMPETITION DIRECTIVE................................................................................... 40
Introduction ................................................................................................................ 40
Main content of Competition Directive: Abolition of special and exclusive rights .. 40
Notification requirements........................................................................................... 40
ACCESSION COUNTRIES ...................................................................................... 41
PROCEDURE FOR NOTIFICATION OF NATIONAL REGULATORY
MEASURES .............................................................................................................. 42
INFRINGEMENT PROCEEDINGS ......................................................................... 42

1.
1.1.
1.2.
1.3.
1.4.
2.
3.
3.1.
3.2.
3.3.
3.4.
3.5.
3.6.
3.7.
3.8.
3.9.
3.10.
4.
4.1.
4.2.
4.3.
4.4.
5.
5.1.
5.2.
5.3.
5.4.
5.5.
6.
6.1.
6.2.
6.3.
7.
8.

9.

2

1.

SUMMARY AND PRINCIPAL CONCLUSIONS

1.1.

Introduction

In its final report on the implementation of the 1998 regulatory framework1, and subsequently
in its Communication ‘Electronic Communications: the Road to the Knowledge Economy’2,
the Commission stressed the importance of a full, effective and timely transition to the new
EU  framework  for  electronic  communications  networks  and  services  adopted  by  the
Parliament  and  Council  in  March 2002.  This  position  has  been  strongly  endorsed  by  the
European Parliament.3

The  transition  to  the  new  framework  will  support  the  continued  growth  of  the  electronic
communications  sector, and in particular of broadband connections as a  major  factor  con-
tributing  to  the  fulfilment  of  the  Lisbon  objectives.  The  Growth  Initiative4  launched  by  the
Commission in July  2003  underlines  the  importance  of  broadband  for  economic  prosperity,
competitiveness and job creation.

The new  framework is  designed  to  ensure  that  ex  ante  regulation  is  applied  only  where  the
level  of  competition  in  defined  markets  is  considered  to  be  insufficient  on  the  basis  of  an
analysis consistent with competition law methodology. Newly emerging markets also should
in principle be free from regulation. This approach should boost competition at the level of
networks  and  platforms,  while  giving  national  regulatory  authorities  (NRAs)  the  tools  to
mandate  access  to  networks  where  justified  by  a  lack  of  competitive  pressure  on  dominant
operators.

Other key aspects of the framework are designed to support this approach to  regulation  and
the promotion of consumers’ interests. NRAs are given increased powers to promote a sin-
gle European  market for  electronic  communications networks and  services;  players  can  in
principle enter markets on the basis of general authorisation; access and interconnection re-
gimes are based on commercial negotiation, backed by strong NRA powers to ensure end-to-
end  communications  in  Europe;  and  the  citizen  is  protected  by  a  clear  and  comprehensive
framework of universal service and privacy rules, including rules against spamming.

1.2.

Implementation of the new regulatory framework

The European Parliament and Council set a legal deadline of 24 July 2003 for the transposi-
tion of the main provisions of the new framework.

As  of  1 November,  only  eight  countries  had  taken  action  to  incorporate  the  Framework,
Authorisation, Access and Universal Service Directives into national law. These are:

Denmark, Spain, Ireland, Italy, Austria, Finland, Sweden and the United Kingdom.

1

2

3

4

European telecoms regulation and markets 2002: Eighth report on the implementation of the telecom-
munications regulatory package, COM(2002) 695 final, 3 December 2002.
COM(2003) 65, 11 February 2003.
See European Parliament Resolution of [17 November 2003].
An  initiative  for  growth:  Investing  in  Trans-European  Networks  and  major  R&D  projects,
SEC(2003) 813 09, July 2003, which was followed by a further Communication from the Commission
– A European initiative for growth: Investing in networks and knowledge for growth and employment –
Interim Report to the European Council, COM(2003) 579 Final, 1 October 2003.

3

                                                
In some cases, secondary legislation is still required to ensure full transposition.

Of those Member States that have not yet notified the Commission of transposition measures,
there is particular concern that the passage of drafts through the legislative process is likely to
be lengthy (Germany, France); that political uncertainties are causing delays (Belgium); or
simply that despite the existence of drafts the legislative process has not yet been completed
(Greece, Luxembourg, the Netherlands, Portugal).

Infringement  proceedings  against  the  Member  States  that  had  not  then  adopted  legislation
were opened in early October 2003 under Article 226 of the Treaty, for failure to communi-
cate transposition measures to the Commission.

Five countries had adopted measures to transpose the e-Privacy Directive by the deadline of
31 October. They are:

Denmark, Spain, Italy, Austria and Sweden.

In the  United Kingdom  the regulations  transposing  the  e-Privacy  Directive  are  due  to  come
into force on 11 December 2003.

Six  countries  had  notified  measures  transposing  the  Competition  Directive  by  31 October.
They are:

Denmark, Ireland, Italy, Austria, Finland and the United Kingdom.5

1.3.

Markets for electronic communications networks and services

In its last report the Commission referred to the fragile state of the electronic communications
market in the light of a number of factors, including the global economic slowdown and the
level  of  debt  on  the  part  of  some  market  players  due  to  ill-timed  investment  in  backbone
networks, the cost of 3G licenses and the high prices paid for the acquisition of other opera-
tors in other countries.

The situation now appears to be stabilising. As far as the wider economy is concerned, the
Commission’s  Autumn  Economic  Forecasts6  indicate  that  there  are  now  signs  that  the  EU
area is about to embark on a period of recovery. Both business and consumer confidence are
reported  to  be  improving  as  the  world  economy  gathers  momentum,  while  financial  condi-
tions are believed to be supportive of growth.

This renewed confidence is echoed in the electronic communications market.

(cid:1)  The rate of growth in revenues is expected to reach between 3.7%7 and 4.7%8 in nominal

terms in 2003.

(cid:1)  The  number  of  mobile  subscribers  will  grow  at  a  higher  rate  than  in 2002,  even  if  the
penetration rate is close to 90% in a number of EU countries. 3G services are now avail-
able in at least four Member States.

5

6

7

8

Measures  aiming  to  transpose  the  Competition  Directive  were  adopted  by  the  Spanish  Parliament  on
16 October 2003.
http://europa.eu.int/comm/economy_finance/publications/european_economy/2003/ee503en.pdf
Source: EITO (European Information technology Observatory) 2003, Update October.
Source: IDATE.

4

                                                
(cid:1)  The  number  of  fixed  broadband  access  lines  almost  doubled  between  July 2002  and
July 2003. New entrants’ market share is starting to pick up but its impact is  limited  and
competition in the broadband sector is still weak.

(cid:1)  The  number  of  new  unbundled  lines  has  increased  by  828 000  between  July 2002  and
July 2003. This  is double  the  number compared  to the  previous  year  but  is  still  low  as  a
proportion  of  total  subscriber  lines  and  the  development  of  local  loop  unbundling  is  still
rather unbalanced across the EU and has not yet taken off.

(cid:1)  The recent  period of economic  weakness has discouraged new fixed operators from  en-
tering  the  voice  telephony  market:  the  number  of  large  competing  operators  in  each  na-
tional market has remained more or less stable. Many operators have refocused their efforts
on home markets.

(cid:1)  Existing fixed operators now aim mostly at maintaining the position acquired in the market
during the years of market growth, in particular for international and long-distance traffic,
where  there  was  strong  competition  during  the  first  stage  of  liberalisation.  Competitive
pressure  seems  to  have  moved  to  the  local  call  segment,  where  the  incumbents’  fixed
market share has on average decreased by 6% since December 2002.

(cid:1)  This  is  a  consequence  of  the  increasing  use  by  subscribers  of  alternative  operators  for
local calls; this has grown over the past year by 39%, due partly to the more widespread
availability  of  carrier  pre-selection.  Moreover,  despite  a  converging  trend  there  is  still  a
substantial difference between the use of alternative operators  for local  calls (25% of the
total subscribers) and for long distance/international calls (33%).

(cid:1)  Alternative  fixed  operators  actually  competing  in  the  market  are  continuing  to  focus  on
their core markets, through carrier selection or pre-selection (two thirds of active operators)
or through direct access to the users (one third of active operators).

(cid:1)  Since  August 2002,  the  EU  weighted  average  charge  for  call  termination  on  fixed  net-
works  has  decreased  slightly  at  local  and  single  transit  levels  (down 4%  and 6%  respec-
tively), but has remained stable at double transit level.

(cid:1)  The EU weighted average call termination charges on mobile networks have decreased
by 15.3%  for  SMP  mobile  operators,  while  for  non-SMP  operators  they  have  remained
more or less stable. Despite these decreases they remain more than nine times higher than
the average fixed-to-fixed interconnection charge (double transit).

1.4.

Regulatory concerns

The  Commission  recognises  the  enormous  amount  that  has  been  accomplished  by  the
Member States that have transposed the framework in ensuring that the principles on which it
is based are faithfully carried over into national law.

The national measures (and drafts in the case of Member States that have not yet transposed)
however give rise to some concerns that the Commission considers should be addressed if the
objectives of the new framework are to be realised to the full. The Commission will monitor
in particular where the Member States have complied with their obligations as regards:

5

(cid:1)  The wider powers and discretion conferred on NRAs under the new framework in order
to  fulfil  their  specific  objectives  relating  to  the  promotion  of  competition  and  the  de-
velopment of the internal market.

(cid:1)  The assignment of the tasks attributed to NRAs by the framework to competent national
bodies, and the clear attribution of those tasks where they are distributed between differ-
ent bodies.

(cid:1)  The  availability  to  NRAs  of  the  full  range  of  remedies  provided  for  in  the  new  frame-

work, when they find a lack of effective competition in a relevant market.

(cid:1)  The timely completion of the market analyses and review of existing obligations by the
NRAs.  Undue  delays  would  undermine  the  consistent  application  of  the  new  framework
and  postpone  the  attainment  of  a  single  market  for  electronic  communications  networks
and services.

(cid:1)  The principles that must apply to procedures for the  grant of individual rights of use of

frequencies.

(cid:1)  The  scope  of  the  universal  service, which should  be  clearly  defined  in  accordance  with
the  new  framework,  and  the  requirement  that  any  mechanisms  for  designating  universal
service providers and for funding any unfair burden on them be established in a way that
minimises  market  distortion  and  upholds  the  principle  of  non-discrimination.  National
measures which diverge from the Community definition of the universal service or de facto
preclude certain operators from being designated as a universal service provider, will jeop-
ardise the attainment of this objective.

2.

OBJECTIVES AND METHODOLOGY

Between 1997 and 2002 the Commission submitted eight reports on the implementation of the
package  of  directives  liberalising  and  harmonising  the  European  markets  for  telecommu-
nications services.

Following a review, the Commission proposed in 2000 five directives to replace the twenty-
five or so instruments then in force, together with a decision on the use of spectrum for com-
munications services. Four of the directives subsequently adopted by the European Parliament
and Council were required to be transposed into national law by 24 July 2003. They are the
Framework,  Authorisation,  Access  and  Interconnection,  and  Universal  Service  and  Users’
Rights  Directives.9  The  remaining  directive,  known  as  the  e-Privacy  or  Data  Protection
Directive10,  was  due  for  transposition  by  31 October  2003.  In  parallel  with  this  process  the

9

10

Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and
interconnection  of,  electronic  communications  networks  and  facilities;  Directive 2002/20/EC  of  the
European Parliament and of the Council of 7 March 2002 on the authorisation of electronic communi-
cations networks and services; Directive 2002/21/EC of the European Parliament and of the Council of
7 March 2002 on a common regulatory  framework for electronic communications networks and serv-
ices; and Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on uni-
versal service  and  users’  rights  relating  to  electronic  communications  networks  and  services,  all  pub-
lished in OJ L 108, 24.4.2002.
Directive 2002/58/EC  of  the  European  Parliament  and  of  the  Council  of  12 July  2002  concerning  the
processing  of  personal  data  and  the  protection  of  privacy  in  the  electronic  communications  sector,
OJ L 201, 31.7.2002, p. 37.

6

                                                
Commission adopted a directive on the basis of Article 86 of the Treaty (Competition Direc-
tive),  consolidating  previous  directives  liberalising  the  provision  of  services  on  these
markets.11

The  Commission  is  convinced  that  regular  reporting  on  the  status  of  implementation  of  the
former  regulatory  package  and  on  market  developments  contributed  to  the  success  of  this
sector in the European economy. The present report marks the Commission’s determination to
continue this process in the context of the new framework.

The main objective of the report is to identify concerns as to the manner in which the key as-
pects of the new framework are incorporated into national law, or drafts thereof in the case of
Member States that have not yet transposed.12 Where Member States have not yet transposed,
the latest publicly available drafts have been analysed. No draft has been made available by
Portugal.  No  analysis  is  made  of  national  measures  or  drafts  relating  to  the  e-Privacy
Directive, given the later deadline for transposition. However, in view of the importance of
subjects  such  as the  treatment of traffic  data  and unsolicited  faxes  and  e-mails  (spam)
covered by the directive, Section 5 identifies key elements of the e-Privacy Directive which
the Commission will take particular care to ensure are effectively transposed by the Member
States.

The Commission’s assessment of the transposition of the key elements of the new framework
represents its view as at 1 November 2003, in the light of the texts transmitted to it and of
bilateral  contacts  with  national  authorities.  However,  in  the  final  resort  it  is  the  European
Court of Justice that has sole jurisdiction for assessing the compliance of national transposing
measures with the Member States’ Treaty obligations.

Furthermore, since the report has been prepared at a time when the legislative picture across
the Community is still developing, any assessment of conformity can only be of a preliminary
nature and cannot represent a definitive view on the part of the Commission. In view of this
fact, the annexes to this report do not contain country-specific chapters detailing the level of
implementation in each Member State, as was the case in previous reports.

The report also provides key market data, supplemented by further information in Annexes 1
and 2. Market data has been supplied by the NRAs on the basis of a questionnaire compiled
by the Commission’s services. Where tariff data from sources other than the NRAs has been
used,  it  has  been  validated  directly  with  the  latter.  The  market  data  used  in  the  report
shows the situation at 1 August 2003, unless otherwise stated. The annexes are in the form
of a Commission services’ working document.

The data  given in this  report  and  the  assessments  made  of  regulatory  and  market  issues  are
based on a format that has evolved since the first such report was issued in May 1997. In par-
ticular, data is presented in a way that has responded to the need to give an overview of mar-
ket  developments  in  fifteen  Member  States  in  an  easily  accessible  form.  In  some  cases,  in
particular in relation to the rollout of broadband networks, it has been subject to discussion in
the Communications Committee. This presentation is without prejudice to any action the
Commission may decide in the framework of its responsibilities under the Treaty or the
directives adopted pursuant thereto, including Article 7  of the Framework Directive. It

11

12

Commission Directive 2002/77/EC of 16 September 2002 on competition in the markets for electronic
communications networks and services. OJ L 249, 17.9.2002, p. 21.
As regards Spain, the analysis reflects the latest drafts made available to the  Commission prior to the
adoption of the legislation by the Parliament on 16 October 2003.

7

                                                
should also not be considered to carry any implications for the definition of relevant markets
or the market analysis to be carried out by the NRAs.

3.

MARKET DEVELOPMENTS

3.1.

Electronic communications services market

The market will experience a growth of between 3.7% and 4.7% in 2003, in a stabilising
macroeconomic framework.

The  electronic  communications  market  will  grow  this  year  at  an  estimated  rate  of  between
3.7%13 and 4.7%14 in nominal terms. This compares with a forecast rate of EU GDP growth of
0.8%  (3%  in  nominal  terms)  for  2003.  The  combined  national  markets  of  the  15 Member
States will be worth an estimated € 251 billion in 2003.15

260

250

240

230

220

210

200

EU electronic communications market value (€ billion)

242

251

231

211

2000

2001

2002

2003

3.2.

Mobile telephony

Continued success of mobile telephony

There were 305.6 million mobile users in the EU as at 1 August 2003. The number of mobile
subscribers  has  increased  at  a  higher  rate  than  in 2002  (6%),  and  81%  of  EU  citizens  now
have a mobile telephone. For the first time in one EU Member State, Luxembourg, the total
number  of  mobile  telephones  (pre-paid  and  subscribers)  is  higher  than  the  population
(115 telephones per 100 population).

Luxembourg is also the country that has experienced the strongest increase in the number of
subscribers (+16%), followed by Denmark, a country that also shows a high penetration rate
(84%). A number of Member States where the penetration rate is close to 90% have also ex-
perienced  significant  increases  in  this  value  since  last  year,  of  between  7%  and  10%.  This
contrasts  with  the  situation  in  Belgium  and  the  Netherlands,  which  (with  the  exception  of
France, at 66%) present  the  lowest penetration rate (73%  and 74% respectively)  and annual
growth rates among the lowest (2% in the Netherlands, 4% in Belgium).

13

14

15

Source: EITO (European Information technology Observatory) 2003, Update October.
Source: IDATE.
These figures include revenues from CaTV services and are therefore not comparable with the numbers
presented  in  previous  reports.  The  five  segments  included  are  telephone  services,  internet  and  online
services, mobile telephone services, switched data and leased-lines services and CaTV services.

8

                                                
The market share of the subsidiary of the incumbent operator has increased in three Member
States, with reductions in the other twelve. As a result, the market share of the leading16 op-
erators has gone down slightly to 46.7% of subscribers.

There are two clearly defined periods in the development of mobile telephony in the EU in the
period  1998-2003.  The  first  was  characterised  by  very  rapid  penetration,  with  annual  in-
creases  in  the  EU  penetration  rate  of  around  20%.  In  this  same  period  competitors  gained
most  of  their  customers  to  the  detriment  of  the  subsidiary  of  the  incumbent  (or  the  leading
operator in the case of the United Kingdom) and in 2000 there was a 50-50 market share split
between incumbents and new entrants. In the second period, starting in 2000, the subsidiary of
the incumbent continued to lose market share, but at a much slower pace (with shares of 50%
in 2000, 48% in 2001, and 47% in 2002).

In 2003, in line with the trend to maintain positions in the market, the variation in the market
share of the leading operator has been less significant (0.5%).

Work is well under way to bring third generation (‘3G’) mobile technology, applications and
services  to  the  wider  market  and  the  first  commercial  launch  in  Europe  of  3G services  oc-
curred  in  the  first  half  of  2003.  3G subscriptions  are  estimated  at  around  375 000  in  Italy,
195 000 in the United  Kingdom, 12 000  in  Sweden  and  10 000 in Austria. Guidance in this
area was provided by the Commission which adopted two exemption decisions17 in April and
July 2003 which set out how far mobile operators in Germany and the United Kingdom can
cooperate through network sharing.

Data on interconnection for call termination on mobile networks is provided in the section on
interconnection, below. As regards international roaming tariffs, the Commission continues its
enquiry into their compatibility with the EU competition rules.

s
r
e
b
i
r
c
s
b
u
s
f
o
n
o

i
l
l
i

M

350

300

250

200

150

100

50

0

EU mobile subscribers and average penetration, 1998-2003

74,9%

70,4%

51,6%

5
6
2

3
8
2

6
0
3

30,6%

4
9
1

18,3%

5
1
1

9
6

90%

80,9%

80%

e
t
a
r
n
o
i
t
a
r
t
e
n
e
p
e
g
a
r
e
v
a
U
E

70%

60%

50%

40%

30%

20%

10%

0%

1998

1999

2000

2001

2002

2003

Subscribers

Penetration rate

16

17

Apart from  the United Kingdom, the leading operator is a subsidiary  of  the  incumbent  fixed  network
operator.
Commission  Decision  of  30 April  2003  in  Case  No. COMP/38.370  - O2 UK  Limited/T-Mobile UK
Limited  (‘UK  Network  Sharing  Agreement’),  OJ L200,  7.8.2003,  p. 59.  Commission  Decision  of
16 July  2003  in  Case  No. COMP/38.369  T-Mobile  Deutschland/O2  Germany:  Network  Sharing  Rah-
menvertrag, not yet published.

9

 
 
 
 
 
                                                
3.3.

Broadband

Significant increase in the number  of broadband lines  but impact  of new  entrants  still
limited

Broadband roll-out in the EU

There  were  17.5 million  broadband18  connections  in  the  EU  at  the  end  of  June 2003.
12.46 million of these connections were DSL lines (71% of the total), while 4.1 million were
cable modem access lines (24% of the total). The remaining 0.9 million lines (5%) used other
technologies, mostly satellite and fibre.

Broadband connections have almost doubled from the 9 million broadband lines available in
July 2002.  Growth  has  been  more  intensive  in  the  period  from  January  to  July 2003,  when
more than 25 000 new broadband lines were being added daily.

EU broadband lines, July 2002 - July 2003

20 000 000

18 000 000

16 000 000

14 000 000

12 000 000

10 000 000

8 000 000

6 000 000

4 000 000

2 000 000

12 898 260

3.810.967

9.087.293

9 052 497

2 934 172 

6.118.325

17 497 140

5.036.276

12.460.864

July 02

January 03

July 03

DSL lines

Other technologies (cable, satellite, wireless local loop)

Competition on the broadband market

Alternative  operators  can  provide  broadband  services  through  proprietary  alternative  plat-
forms or using the incumbent’s network.

Cable access is at present the main alternative technological platform used by new operators
to provide broadband access, but this option is feasible only in those countries where CATV
networks, which need to be upgraded, are already deployed.

In the countries where alternative technological platforms (cable in particular) are not devel-
oped, the deployment of the DSL technology depends on the use of facilities and networks in
the hands of incumbent operators. The EU regulation on broadband access has therefore fo-
cussed on unbundled access to the local loop19 (fully unbundled local loop and shared access
to the local loop) and on different forms of network  access20 (bitstream and  resale),  in both
cases aiming at facilitating market entry and developing competition in the high speed access

18

19

20

Broadband capacity: capacity equal to or higher than 144 Kbit/s.
Obligation for SMPs to publish a reference offer for unbundled access (RUO) to their local loops and
related facilities. Prices for unbundled access must be cost oriented.
Obligation  for  SMPs  to  provide  special  network  access  facilities  and  information  to  others  under  the
same conditions and of the same quality as they provide for their own services or those of their subsidi-
aries or partners.

10

                                                
market. As indicated in the 8th Implementation Report, the Commission has stressed the com-
plementary role of full unbundling, shared access and bitstream access in the process of over-
coming the limited competition in local access and developing broadband access.

The rise in the number of broadband lines has been boosted by DSL and cable modem lines,
although  the  predominance  of  DSL  technologies  has  increased,  from  67.6%  of  all  lines  in
July 2002 to 71.1% this year. With regard to DSL lines, it appears that new entrants’ market
entry  is  starting  to  pick  up  but  its  impact  is  still  limited.  In  July 2002,  85.6%  of  DSL  lines
were in the hands of the incumbents. In July 2003 this had gone down to 77%. New entrants
market  share  taking  into  account  all  broadband  technologies  is  improving  in  Spain,  France,
Italy,  Finland  and  Sweden.  In  Belgium, Denmark,  the Netherlands, Portugal  and  the  United
Kingdom the incumbent appears to be re-gaining market share and in Germany the incumbent
still retains 93% of total broadband lines. In general, the competitive situation in broadband is
weaker  where  there  is  a  lack  of  competition  from  alternative  platforms  such  as  cable.  The
Commission will actively monitor the development of competition in this sector and will in-
tervene where appropriate to protect competition.

On  16 July 2003,  the Commission adopted a  decision21 relating  to  a  proceeding  under  Arti-
cle 82  of  the  Treaty,  in  which  it  found  that  France  Télécom’s  subsidiary  Wanadoo  was  en-
gaged in predatory pricing for retail ADSL. The abuse ended in October 2002 with the entry
into force of new wholesale prices charged by France Telecom, more than 30% down on the
previous  prices  charged.  Since  then  the  French  high-speed  Internet  access  market  has  been
growing much more rapidly and in a more balanced way.

Total broadband access lines market share by operator

DSL Market share

DSL Market
share:
Incumbents 

DSL Market
share: New
entrants 

22.88%

77.12%

0
1
0
1
8
8
3

41,30%

58,70%

Total
broadband
access lines
market
share:
Incumbents 

Total
broadband
access lines
market
share: New
entrants

EU  broadband lines by M em ber S tate, July 2003

4 500 000

4 000 000

3 500 000

3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

 500 000

6
4
1
2

9
6
4
9

E L

IR L

2
8
2
0
1

L

3
0
5
6
7
6
2

0
4
6
3
1
4
2

1
8
8
5
9
4
1

8
9
7
9
2
6
1

8
1
4
6
7
7
1

0
5
7
8
4
0
1

0
8
3
1
9
8

0
5
8
7
3
5

0
0
6
8
5
5

6
5
7
3
9
2

0
5
9
3
4
3

P

F IN

A

D K

S

B

N L

I

E

F

U K

D

Incu m bents' B roadban d Lines 

O ther O perators B ro adband  Lines

21

Commission Decision of 16 July 2003 in Case No. COMP/38.233 – Wanadoo Interactive. ‘High-speed
Internet: the Commission imposes a fine on Wanadoo for abuse of a dominant position’ - Commission
Press Release IP/03/1025.

11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                
Unbundling of the local loop

With  regard  to  unbundling,  828 000  new  lines  were  taken  up  between  July 2002  and
July 2003, whereas only 400 000 lines had been unbundled between October 2001 and Octo-
ber 2002. This significant increase has not been brought about by full unbundling only, as was
the case in previous years, and the 171 000 shared lines available now represent 6% of all new
entrants’ DSL lines, against 1.5% in October 2002. The development of local loop unbundling
is still rather unbalanced across the EU and is only just starting to take off. Germany accounts
for  more  than  63%  of  the  unbundled  lines22  and  more  than  95%  per  cent  of  the  unbundled
lines  are  concentrated  in  six  countries  (Germany,  Italy,  Denmark,  Finland,  the  Netherlands
and Sweden). In the other Member States local loop unbundling remains at a very low level.

Despite the improvement in the number of fully unbundled lines, only 19% of new entrants’
retail broadband access lines using the incumbent’s network are fully unbundled lines. Resale
is the most commonly used way (51% of new entrants’ DSL lines), followed by bitstream ac-
cess (24.3%). Between July 2002 and July 2003 there were 1 660 000 new resale lines in the
wholesale market, twice as many as the number of fully unbundled lines.

Prices charged for unbundling have decreased over the last year, and the average EU monthly
total cost for full unbundling (monthly rental plus the connection fee amortised over a year) is
now € 19.4, 9.5% cheaper than in 2002. Price reduction has been more significant for shared
access, at 28%, with the EU average monthly price going down from € 15.9 in 2002 to € 11.4
this  year.  This  might  help  to  explain  the  241%  rise  in  the  number  of  shared  access  lines
provided by the new entrants to their customers between January and July, admittedly from a
very  low  base.  This  increase  is  concentrated  in  5 countries  (Denmark,  France,  Netherlands,
Finland  and  Sweden).  Price  reductions  may  have  helped  to  foster  the  spread  of  unbundled
lines.

Despite  price  reductions  for  full  unbundling  in  Germany,  the  Commission  adopted  a  deci-
sion23 on 21 May 2003 under Article 82 of the Treaty regarding Deutsche Telekom’s pricing
strategy  for  local  access  to  the  fixed  telephony  network.  In  that  decision,  the  Commission
found  that  Deutsche  Telekom  was  engaging  in  a  margin  squeeze  by  charging  new  entrants
higher fees for wholesale access to the local loop than what subscribers had to pay for retail
lines.  This  decision  demonstrates  that  the  Commission  will  take  action  under  the  anti-trust
rules, in order to preserve long-term competitiveness on the market.

22

23

It should be noted that not all of the fully unbundled lines are used for the provision of broadband serv-
ices. In Germany, only around 20 per cent of the unbundled lines are used for this purpose.
Commission Decision of 21 May 2003 in cases No. COMP/37.451, 37.578 and 37.579: ‘Price squeeze
for local loop access in Germany’ - Commission Press Release IP/03/717.

12

                                                
Monthly EU average total cost per full unbundled loop and number of full 
unbundled lines, 2002-2003

21,48

1806931

978576

19,43

U
E
e
h
t
n

i

s
e
n

i
l

d
e
l
d
n
u
b
n
u
y
l
l

u
F

2000000

1800000

1600000

1400000

1200000

1000000

800000

600000

400000

200000

0

22

21,5

21

20,5

20

19,5

19

18,5

18

h
t
n
o
m

r
e
p
€

July 2002

July 2003

Total number of unbundled lines

Monthly average total cost per full unbundled loop

Broadband penetration in the EU

Broadband penetration rate in the EU (% of population)

10,03% 10,22%

10,44%

9,36%

6,62% 6,64%

4,43% 4,47% 4,65% 4,72%

4,09%

2,82% 2,87%

2,33%

0,02%

0,25%

12%

10%

8%

6%

4%

2%

0%

EL

IRL

L

I

P

F

E

UK

EU

D

A

FIN

NL

S

B

DK

Data for the US: EC estimates

Ranking the EU countries according to broadband penetration rate, which is measured as the
total number of broadband lines per 100 population, can help to analyse the evolution of the
EU  broadband  market.  Three  countries  are  excluded  from  this  breakdown  due  either  to  the
lack of data for 2002 (Luxembourg) or to the very limited presence of broadband lines in the
market (Greece and Ireland).

a)

Countries with a penetration rate around 10%

As  at  July 2003,  the  Member  States  with  the  highest  penetration  level  were  Belgium,  Den-
mark, the Netherlands and Sweden, with a  penetration  rate  of  around  10%.  These  countries
already topped the league a year ago and they all have had the highest increases (an increase
of 2.7 percentage points on average) in the penetration rates in the past 12 months. The popu-
lation of these countries varies from 5 to10 million.

With the exception of Denmark, where 70% of the broadband lines are DSL lines, in the other
three countries there appears to be facilities-based competition. Alternative operators use pro-
prietary platforms (CATV networks mainly) that were already deployed for the provision of
TV signals. Incumbents’ share of the overall broadband market varies according to the use of
alternative platforms and it is hence lower than the EU average.

It can be observed from the data that in Belgium and the Netherlands, where facilities-based
competition exists, new entrants seem to have fewer incentives to enter the DSL market and

13

 
 
 
 
 
 
 
incumbents’ share of the DSL lines market is higher than the EU average. More than 84% of
DSL lines are in the hands of the incumbent while the EU average is 77%.

b)

Countries with a penetration rate between 4% and 7%

The  second  group  is  made  up  of  Germany,  Spain,  France  and  the  United  Kingdom,  with  a
penetration rate of around 4%, along with  Austria and Finland  where  the penetration rate is
almost 7%. The penetration rate in this second group increased by approximately 2 percentage
points. The rise in the number of broadband lines has been led by DSL connections, with the
exception of Austria and Spain.

In  Austria and  the  United Kingdom there  exists an alternative  platform  and  DSL  represents
40% of the total broadband lines. In these two countries the incumbents have maintained their
overall  broadband market  share,  which is around 30%.  It  is  worth  noting  that  in  the  United
Kingdom the incumbent’s share of DSL lines is the lowest in the EU, while in  Austria  it is
above the EU average.

On the other hand, DSL is the predominant technology in Spain, France and Finland, where it
accounts for 70% to 80% of  all broadband lines,  as  well  as  in  Germany,  where  99%  of  the
broadband  lines  are  DSL.  Alternative  operators  in  the  former  countries  have  gained  some
market  share  (7%  on  average),  while  in  Germany  the  incumbent  has  kept  control  of  the
broadband market (93% of all lines).

c)

Countries with a penetration rate below 3%

The countries  in the  third  group  have  a  penetration  rate  of  around  2.6%.  The  growth  in  the
penetration rate  has been slower  (1.5 percentage points) than in  other countries.  In  Portugal
there is technological competition, although in this country the incumbent provides broadband
access using both DSL and cable. In Italy 88% of all broadband connections are DSL lines. In
line with the rest of the EU, the preponderance of DSL has augmented in the last months and
new operators have gained 4% of the broadband market.

3.4.

Fixed telecommunications operators

Introduction of competition and progressive liberalisation of a former monopoly sector

After  the  massive  entry  into  the  market  that  characterised  the  first  stage  of  liberalisation
(+113%  between  1998  and  2001),  the  number  of  operators  authorised  to  offer  public  tele-
communication services in Europe has started to decrease. In August 2003 there were in the
EU  a  total  of  1 202  operators  authorised  to  offer  public  voice  telephony  (269 local  and
933 national  operators)  and  1 484  public  network  operators  (555 local  and  929 national
operators).

Since August 2002 the number of potential players has remained more or less stable  for the
voice telephony market, while the number of public network operators has decreased by 5%.24

The weakness of the general economy has discouraged new operators from entering the mar-
ket, and has caused some bankruptcies and stimulated intensive merger activity. It should be
underlined that the target of the great majority of new entrants has been the business market,

24

The peak in the number of authorised operators was reached in 2001 with 1 352 operators authorised to
provide voice telephony services and 1 583 public network operators.

14

                                                
notwithstanding  the  fact  that  it  has  suffered  heavily  from  the  consequences  of  the  present
stagnation of the economy. The operators remaining in the market have started to reorganise
their  activities,  streamline  their  operations  and  focus  on  their  core  markets.  Only  the  big
groups, which are usually present in both mobile and fixed markets, have continued to target
the mass fixed market.

The number of authorised operators indicates only the potential for competition in the market,
rather than the current level of competition. Among the 1 202 operators legally authorised to
provide  voice  telephony  in  the  EU  (in  the  sense  that  they  have  an  individual  li-
cence/authorisation or they are subject to a notification/registration procedure), less than half
(around 500) have started operations, the majority only in some local areas or for business us-
ers. It should in particular be noted that one third of operators effectively providing local calls
are local operators only.

The  real  number  of  competitors  in  each  national  fixed  mass  market  is  thus  considerably
lower than both the number of authorised operators and the number of active operators. Gen-
erally speaking there are in the great majority of EU countries no more than 3-4 large com-
peting players for public voice telephony.

3.5.

Fixed voice telephony market share

Dismantling monopolies

The recent period of economic weakness of the market has influenced the commercial strate-
gies of the operators, which now aim mostly at maintaining the positions acquired during past
years  of  market  growth.25  This  is  particularly  evident  for  the  international  voice  telephony
market  which,  experienced  strong  competition  during  the  first  stage  of  liberalisation.  The
incumbent’s  share  of  this  market  decreased  by  15%  in  some  countries  in  the  period
1999-2000, but is now decreasing at a slower pace (on average by 2.5% a year in the EU since
December 2000), and stood at 62% in December 2002.

The EU incumbents’ average26 market share on the long distance  calls market segment now
also appears to have stabilised at around 70%. Between December 2000 and December 2001
there was a reduction of 3.3%, while since last year the reduction has been only 1.6%.27

EU  incumbents’  average  market  share  on  the  calls  to  mobile  segment  (69%  in  December
2002) is also diminishing at a lower rate than in the past, even if competitive pressure is still
present. It decreased in absolute terms by 6.6% for the period December 2000-2001 and only
by 4% for the period December 2001-2002.

Some of the competitive pressure now seems to have moved to the local call market (which
includes  both  local  phone  calls  and  local  calls  to  Internet)  and,  during  the  period  Decem-
ber 2001-2002, there was a reduction in the incumbents’ market share from 87% to 81%. The
reason for this is probably the introduction of carrier pre-selection (CPS) in all the Member
States, and more effective implementation, which has increased the number of customers that

25

26

27

Data are not comparable with the previous reports, due to several factors: (1) figures for the years 2000
and 2001 have been updated to reflect revised data received from Member States; (2) the EU average is
now a weighted, rather than a simple average.
Weighted average on the basis of retail revenues.
Data are not comparable with the previous reports, due to several factors: (1) figures for the years 2000
and 2001 have been updated to reflect revised data received from Member States; (2) the EU average is
now a weighted, rather than a simple average.

15

                                                
have chosen an alternative operator as the default option for all types of calls, including local.
The second reason could be the increasing competition in the Internet market, and the subse-
quent erosion of incumbent’s market share for local calls to Internet.

Moreover,  the  persistent  differences  between  local  and  long-distance/international  market
share show the difficulties new entrants still face in entering the local market, due to the ac-
cess bottleneck.

It should be noted that in those countries where carrier pre-selection was introduced first, the
incumbent is increasing its focus on customer retention and win-back strategies, which limit
new entrants’  ability to  grow their customer base.  In  Ireland,  for  example,  the  initial  strong
growth  in  CPS  which  saw  approximately  10%  of  PSTN  lines  become  CPS  lines  within  the
first 12 months of operation has now stagnated  and  the  incumbent  now  estimates  that  it  has
won back approximately 59% of all customers who had moved.

EU average incumbents' market share by revenues

90%

85%

80%

79,4%

75%

74,6%

67,1%

70%

65%

60%

86,9%

72,8%

71,3%

81,0%

69,6%

68,8%

64,9%

62,2%

Dec. 2000

Dec. 2001

Dec. 2002

Local calls

Long-distance calls

Calls to mobile

International calls

3.6.

Consumer choice

How  consumers  have  benefited  from  the  increased  number  of  operators  in  the  fixed
market

Traditional  incumbents’  customers  are  more  and  more  aware  of  the  possibility  of  using  a
provider  alternative  to  the  incumbent,  either  by  dialling  a  call-by-call  prefix  (carrier  selec-
tion)  or  by  choosing  to  route  all  calls  by  default  to  the  network  of  an  alternative  operator
(carrier pre-selection). Direct access is also available to users through alternative operators’
proprietary wire/wireless access or through unbundled local loops leased from the incumbent.

As at August 2003, 33% of EU subscribers used an alternative provider to route long-distance
and international calls, while only 25% were using  alternative providers for local calls.28 At
the same time, direct access from alternative providers was used by 6% of EU subscribers.

Since last year, the percentage of subscribers using an alternative provider has grown by 16%
for  direct  access,  12%  for  long-distance/international  calls  and  39%  for  local  calls.  The  in-
crease in the use of alternative operators for local calls is partly due to more extensive diffu-
sion of carrier pre-selection. Moreover, despite the tendency to converge there is still a sub-

28

The use of carrier selection does not exclude the possibility of using the incumbent.

16

                                                
stantial  difference  between  the  use  of  alternative  operators  for  local  calls  and  for  long
distance/international calls.

50%

40%

30%

20%

10%

0%

% of subscribers using an alternative provider

29,23%

17,53%

4,87%

2002

Local calls 

Long-dist./ Internat. Calls 

32,66%

24,50%

5,64%

2003
Direct access 

3.7.

Interconnection

Fair use of the incumbent’s network

Fixed-to-fixed interconnection

The  state  of  interconnection  services,  especially  the  level  of  charges,  has  an  overwhelming
effect on the potential for competitive entry in the market and on the sustainability of compe-
tition between undertakings providing electronic communications services. All three segments
detailed here are essential elements for ensuring the continuation of competitive pressure on
undertakings with significant market power, thus indirectly influencing the quality and price
level  of  the  retail  products  provided  on  the  basis  of  these  interconnection  services.
Interconnection therefore remains a focus of regulatory efforts.

Since August 2000, the EU weighted  average charge  for  call  termination  on  fixed  networks
has decreased by 32% for single transit, by 22% at local level, and by 16% for double transit.
This happened mostly in the period up to August 2002; during the past year the level of inter-
connection charges seems to have stabilised (around 5% less  for the retail and single transit
levels; –3% less for double transit). Price differences between countries are still significant, in
particular  at  the  double  transit  level,  and  even  seem  to  have  increased  over  the  past  three
years.

The major changes since last year have been the significant decrease in Luxembourg (–29%
for local and single transit and –20% for double transit), in Denmark (–17% for local transit
and –28% for double transit) and in Italy and Ireland, where there has been a general decrease
of 14% and 10% respectively at all levels of interconnection.

The interconnection  charge  for  double  transit  has  significantly  increased  in  Greece  (+35%),
which bought it up to the second highest position.

17

2,5

2,0

1,5

1,0

0,5

0,0

Fixed-to-fixed interconnection charges
EU weighted average (euro-cents)

1,95

1,42

0,80

1,88

1,26

0,75

1,69

1,03

0,65

1,69

0,97

0,63

2000

2001

2002

2003

Local level

Single transit

Double transit

Interconnection for call termination on mobile networks

In August 2003 the EU weighted average interconnection charge for terminating a call on mo-
bile  networks  was  15.93  euro-cents  for  the  16 European  mobile  operators  declared  by  the
NRA as having significant market power on the national market for interconnection (SMP). It
was  18.98  euro-cents  for  the  remaining  34 mobile  operators  (covering  55%  of  the  EU
market).

The difference in charges between the two  classes of operators has arisen mostly during the
past year as a result of regulatory intervention by NRAs to bring about cost orientated charges
for  SMP  operators.  Since  August 2002,  average  interconnection  charges  for  SMP  operators
has decreased by 15.3%, while for non-SMP operators has increased slightly.

The main decreases in the charges since then have been achieved in Italy (-25% for one SMP
operator), in France and Spain (around –18% for both SMP operators), in  Ireland (-13% for
one SMP operator), in Belgium (-14% for one SMP operator), and in Greece, where charges
have decreased on average by 9% for the four non-SMP operators, after intervention  by the
NRAs.

On  the  other  hand,  fixed–to–mobile  interconnection  charges  have  increased  in  the
Netherlands by 10% for one operator.

The difference between the level of the charges for SMP and non-SMP operators can be ex-
plained by the increased number of SMP operators (which now account for 45% of EU sub-
scribers compared to 41% in 2002), but mostly by the cost orientation requirement for inter-
connection charges on SMP operators. It should be noted that even for non-SMP operators29,
interconnection charges are sometimes set by the NRAs , for example as a result of interven-
tion on the basis of a competition enquiry or to set a price ceiling to avoid excessive tariffs.
Furthermore, in some countries NRAs intervene in setting the charges for non-SMP operators
in  order,  for  example,  to  resolve  a  dispute  between  market  players.It  should  be  noted  that
although  there  has  been  a  decrease  in  the  interconnection  charges,  their  level  remains  on
average  more  than  9 times  higher  than  the  average  fixed–to–fixed  interconnection  charges
(double transit).

29

At the moment there are no operators designated with SMP on the national interconnection market in
6 countries: Germany, Luxembourg, the Netherlands, Austria, Portugal and United Kingdom.

18

                                                
Leased lines interconnection

Leased lines are used by network operators and service providers as the basic transport infra-
structure  upon  which  their  services  are  built,  and  by  large  business  users  as  the  means  of
linking their locations world-wide for the transport of internal voice and data communications
traffic.

New  entrants  are  not  always  able  to  provide  complete  end–to–end  leased  lines  to  meet  all
their customers’ needs, and often have to  rely  on the  incumbent to provide  a short–distance
leased circuit to link the customer’s premises to the new entrant’s network (a ‘leased line part
circuit’).

Under  the  Leased  Lines30  and  Interconnection  Directives31,  national  regulatory  authorities
were  required  to  impose  obligations  for  transparency,  non–discrimination,  and  cost-orienta-
tion  on  certain  services,  including  leased  line  services,  provided  by  operators  notified  as
having significant market power.

Ceilings for  monthly  rental prices of leased line part  circuits  provided  by  notified  operators
have been applied between 1999 and 2002. These prices were defined by comparing the data
of  notified  operators  in  all  Member  States  and  identifying  the  Member  State  with  the  third
lowest price, which determined the value of the ceiling.32

With regard to 64 Kbit/s and 2 Mbit/s, the EU average price has decreased since 2001.  This
reduction has been progressive in the 64 Kbit/s circuits over the period 2001–2003, whilst it
was more significant between 2001  and 2002 in the case  of  2 Mbit/s  circuits.  The  deviation
from the price  ceiling for 2 Mbit/s circuits has dropped from 46.50%  to  7.3%.  In  real terms
this means that the weighted average price for the monthly rental of a 2 Mbit/s leased line part
circuit has gone down from € 512.75 in 2001 to € 375.54.

With reference to 34 Mbit/s circuits, the EU weighted average price in 2002 was at the level
of the third lowest price. This means that there were significant price reductions between 2001
and 2002. These price reductions have continued this year, from an average price of € 2 023
in 2001 to € 1 636 in  2003  for  the  2 km  circuits  and  from  € 2 933  to  € 2 250  in  the  case  of
5 km circuits.

However, considerable concerns with regard to the price level remain. For 64 Kbit/s circuits,
prices in 10 Member States are still above the ceiling established in 1999, for 2 Mbit/s circuits
prices in 7 Member States and for 34 Mbit/s circuits prices in 3 Member States are still above
those ceilings.

Also, the variation of prices for leased line part circuits across Member  States  remains  very
high  when  compared  to  retail  leased  line  prices.  For  the  different  capacities  considered,  the

30

31

32

Council Directive 92/44/EEC of 5 June 1992 on the application of Open Network Provision to leased
lines  (OJ L 165,  19.6.1992,  p.  27),  as  last  amended  by  Commission  Decision  80/98/EC  (OJ L 14,
20.1.1998, p. 27).
Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection
in Telecommunications with regard to ensuring universal service and interoperability through applica-
tion of the principles of Open Network Provision (ONP) (OJ L 199, 26.7.1997, p. 32), as amended by
Directive 98/61/EC (OJ L 268, 3.10.1998, p. 37).
Although the ceiling is not used anymore, it has been a very helpful tool to benchmark progress towards
the reduction of leased lines wholesale interconnection prices. It is therefore used in this report in order
to present progress.

19

                                                
price in the Member State with the highest price is up to 15 times higher than in the Member
State with the lowest price. With regard to delivery times, there are also wide variations be-
tween Member States, as shown in the Leased Lines Report 2002.33

3.8.

Fixed telephony tariffs

Competition in the sector has resulted in lower tariffs for consumers34

The dynamic of fixed voice telephony tariffs highlighted in previous Reports has continued in
2003. While the downward trend has been maintained, the pace in 2003 is significantly slower
than  in  previous  years  and  less  than  half  of  that  reported  in 2002.  This  trend  is  common  to
both national and international calls.

National calls – data from the national basket

This  assessment  is  based  on  data  from  the  Teligen/OECD  basket.35  Reduction  rates  were
higher in the years immediately after the liberalisation of the fixed voice telephony market i.e.
1998; since 2000, the pace of reduction has decreased significantly. Between 2002 and 2003,
the  average  monthly  expenditure  for  national  calls  of  a  residential  and  a  business  user  (this
category  includes  local  and  long  distance  calls  and  fixed  charges)  went  down  by  0.3%  and
0.5% respectively. In the five-year period since the opening of the voice telephony markets,
the  EU  weighted  monthly  expenditure  for  national  calls  by  residential  users  decreased  by
13.5%; over  the same  period,  the  overall reduction in  EU  weighed  monthly  expenditure  for
national calls by business users almost doubled, at 22.7%.

h
t
n
o
m

r
e
p
€

90,0

80,0

70,0

60,0

50,0

40,0

30,0

20,0

10,0

0,0

Estimated average monthly expenditure of a standard EU user

78,5

70,3

64,0

62,7

61,0

60,7

34,0

31,5

29,8

30,0

29,5

29,4

Residential, Incl. VAT
Business, Excl. VAT

1998

1999

2000

2001

2002

2003

33

34

35

COCOM03-42.
Detailed  information  on  fixed  tariffs  (including  line  rental)  and  mobile  tariffs  (including  mobile  to
mobile)  can  be  found  in  Annex 1  and  also  in  the  DG Information  Society  Tariffs  Annual  Report
http://europa.eu.int/information_society/topics/telecoms/regulatory/studies/documents/tariff_report_200
2_12.pdf
The OECD basket methodology allows the calculation of the average monthly expenditure of a standard
European consumer.  The  user  is  assumed  to  be  using  national  PSTN  service  from  the  incumbent  op-
erator. The OECD national PSTN basket structure covers 14 distances (3 km to 490 km) and 6 times of
day  (4 at  weekdays  and  2 at  weekends),  all  with  individual  weights.  Call  duration  is  varied  over  the
distances  and  time  of  day.  Fixed  charges  are  included  with  the  appropriate  annual  rental  charge,  and
1/5 of the installation charge.

20

 
 
                                                
International calls – data from the international basket36

Between  2003  and 2002 there has  been  a decrease of 4% in the  average  cost  of  an  interna-
tional call for  residential users, marginally higher than the reduction reported between  2002
and 2001. The average cost decreased from € 0.7 to € 0.67 (including VAT). As regards the
average cost of an international call for business users, the reduction is similar to that of resi-
dential calls (4%), with an average price of € 0.98 (excluding VAT). The overall reduction for
the period 1998–2003 of the average cost of an international call has been substantial, that is
45% for business users and 42% for residential users.

Estimated average cost of an international call

1,43

1,03

1,31

0,93

1,08

1,03

0,73

0,70

Residential, Incl. VAT
Business, Excl. VAT

0,98

0,67

1,68

1,22

2,00

1,80

1,60

1,40

1,20

€

1,00

0,80

0,60

0,40

0,20

0,00

1998

1999

2000

2001

2002

2003

3.9.

Numbering

Impact of number portability in increasing competition in the fixed and mobile markets

Mobile  number  portability  (MNP)  only  became  compulsory  in  the  EU  with  the  entry  into
force of the new regulatory framework on 25 July 2003. However, most Member States had
already introduced MNP in advance to  develop  competition on  the  mobile market. This  has
proved particularly  successful in  some Member States: as  many as  11%  of  mobile  numbers
are ported in Denmark, 5% in the Netherlands, Sweden and the United Kingdom. In absolute
numbers, around  6 million  numbers  are  ported  in  Europe,  which  represents  about  2%  of  all
mobile numbers. Austria is the only country where MNP is not available: secondary legisla-
tion has recently been adopted, but mobile numbers will probably not be able to be ported -
until some time in 2004.

Mobile number portability is a key tool in fostering competition on a market where the num-
ber of players is limited. Until now, the need to change numbers acted as the biggest deterrent
for consumers to change operator. As a result of the removal of this constraint, prices should
gradually decrease in Member States, benefiting from more intense competition.

36

The international PSTN basket, when used separately, shall reflect the cost of a single call, calculated
according to the weighting method described below. No fixed charges are included.
The  basket  calculates  an  average  charge  for  calls  to  all  OECD  destination  countries.  The  charge  is
calculated as the average of:

Peak time call
Off-peak time call

Call duration
3 minutes
5 minutes

Residential basket weight
25%
75%

Business basket weight
75%
25%

21

                                                
 
Fixed  number  portability  (FNP)  is  a  good  indicator  of  the  intensity  of  competition  in  fixed
telephony  services.  It  is  only  starting  to  make  an  impact  on  the  market  in  some  Member
States.  Again,  Denmark  leads  the  way  with  13%  of  numbers  ported;  Belgium  (11%),  the
Netherlands (7%) and Spain (4%) are also doing well. In Italy and France, FNP has been ap-
plied  to  a  limited  amount  of  numbers,  but  has  picked  up  rapidly  (5 times  more  numbers  in
2003 than in 2002).

The success of FNP seems to be directly linked to the charge imposed by the incumbent op-
erator for porting numbers. In all Member States where FNP is making significant progress,
the charge does not exceed € 10. On the other hand, in Ireland, Austria and Sweden, where the
fee is above € 17, very few numbers are ported.

Fixed ported numbers and price of fixed number portability

5
9
2
8
3
5

4
1
8
3
8
4

 700 000

 600 000

 500 000

 400 000

 300 000

 200 000

 100 000

d
e
t
r
o
p
s
r
e
b
m
u
N

0
7
4
6
4
6

2
0
7
8
2
6

0
8
7
9
4
3

0
0
0
0
4
2

3
3
2

3
0
1

3
6
4

1
2

3
9
5

6
7
7

0
1

0
0
0

5
1

0
3
6

5
2

40

35

30

25

20

15

10

5

0

)
€
(
y
t
i
l
i

b
a
t
r
o
p
r
e
b
m
u
n
f
o
e
c
i
r
P

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN

S

UK

Fixed Numbers 2002

Fixed Numbers 2003

Price Fixed Number Portability 2003

D, GR: No data available. UK: Not known

Digital TV penetration rates in EU (2001 - 2003)

17.3%

18%

21.7%

3.10.

Digital TV

25%

20%

15%

10%

5%

0%

H
H
V
T
f
o
e
g
a
t
n
e
c
r
e
P

2001

2002

2003

Cable DTV Satellite DTV Terrestrial DTV

The EU’s digital TV market has been showing signs of recovery, after the significant slow-
down in growth in the year 2002 (due to the difficult overall situation in the information and
communications sector, characterised by limited availability of capital). Digital TV household
penetration has increased from about 18% to around 22% in the year 2003. The falling price
of  set-top  boxes  (STBs)  has  increased  the  appeal  of  DTTV  (digital  terrestrial  TV)  to

22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
consumers37  and  more  coherent  approaches  to  the  roll-out  of  FTA  (free–to–air)  terrestrial
DTV seem to be proving successful in several Member States (United Kingdom, Finland).

Progress with digital television varies widely across Member States – with penetration levels
that vary from less than 5% to above 50% – although there are still many difficulties in ob-
taining reliable data on growth and penetration rates throughout the EU. Market development
is being delayed for a number of reasons. So far, digital TV has mainly grown on the back of
satellite  pay-TV  (through  the  migration  of  analogue  subscribers  to  digital  services)  which
combines a multi-channel offer with operators’ subsidies for STBs. However, the growth po-
tential for pay-TV in its current form has its limits (especially in cable TV  countries, where
users already have  a  multi-channel  option)  and  generally  the  uptake  of  premium  services  is
slowing.  Financial  problems  are  affecting  all  platforms,  although  this  is  currently  most  evi-
dent  in  the  case  of  cable  operators.  Not  the  least  of  the  problems  is  the  lack  of  a  forward-
looking, harmonised and co-ordinated strategy between market players and Member States for
implementing DTTV across the EU.38

The figures regarding the development of different delivery platforms indicate that digital sat-
ellite TV still remains the main delivery mechanism and represents about 70% of the overall
DTV market, while more than 65% of satellite households are digitised. Satellite DTV pene-
tration is still increasing and FTA (free to air) digital satellite is  now having significant im-
pact.  Digital  cable  TV  represents  less  than  20%  of  the  overall  DTV  market  and  only  about
13%  of  cable  households  are  digitised.  The  current  financial  difficulties  faced  by  cable  op-
erators across Europe, coupled with the fact that their subscribers already enjoy multi-channel
choice  within  the  analogue  medium  and  the  lack  of  a  clearly  identifiable  strategy  for  cable
DTV roll-out, has led to only  modest cable  DTV deployment,  as compared with the United
States where  cable has played a major role.39 The penetration  rate  for DTTV has improved,
doubling to 2.5% of total EU TV households over the past year, mainly thanks to the success-
ful  take-up  of  FTA  DTTV  in  the  United  Kingdom,  following  the  relaunch  of  the  terrestrial
platform  with  an  exclusively  free-to–air  service  offer.  Finland  has  also  achieved  a  strong
launch for FTA DTTV. Although satellite, cable and terrestrial are the main platforms for the
delivery  of  digital  television,  new  technologies  are  evolving,  such  as  digital  television  over
ADSL, which has already been introduced in some Member States. However, the penetration
rates for DSL TV are still very low and do not exceed 1% of total EU TV households.

4.

STATUS OF TRANSPOSITION IN THE MEMBER STATES

The information in this section sets out the main concerns relating to transposition of the key
issues in the new regulatory framework, arising from an initial assessment of the transposition
measures  adopted  so  far  and  the  draft  transposition  measures  available  in  some  Member
States.  It  inevitably  presents  an  incomplete  picture  and  constitutes  only  a  preliminary  and
provisional view on the issues concerned.

37

38

39

Recall that digital terrestrial normally offers around 30 channels against 100 or more channels available
on digital satellite or cable platforms.
For more information on status of digital Television in the EU and some policy options see: Communi-
cation from the Commission to the Council, the European Parliament, the European Economic and So-
cial Committee and the Committee of Regions on the transition from analogue to digital broadcasting
(from digital ‘switchover’ to ‘analogue switch-off’), COM(2003) 541 final, 17 September 2003.
However, the US industry is much more concentrated than the European one; 10 operators control 85%
of cable subscribers.

23

                                                
4.1.

Framework Directive

The Framework Directive40 contains the rules and the principles that apply horizontally to all
the  activities  covered  by  the  other,  specific  directives  which  make  up  the  new  regulatory
framework. It focuses particularly on the responsibilities and powers of the NRAs, since they
are the foundation of the new regulatory system.

Key issues for transposition:

(cid:1)  The objectives for NRA action established at EU level should be fully reflected in national
laws, as should the requirement that NRAs act independently of operators and impartially;

(cid:1)  The full range of powers available to NRAs under the new framework must also be avail-

able to them as a matter of national law;

(cid:1)  It is important that the various tasks attributed to NRAs should be clearly identified, so that

operators and users know who is responsible for dealing with any particular problem;

(cid:1)  Member  States  must  ensure  that  there  are  effective  mechanisms  for  appeal  and  dispute

resolution;

(cid:1)  National  laws  should  ensure  the  timely  completion  of  the  implementation  process,  par-

ticularly as regards the NRAs’ first market reviews;

(cid:1)  National  legislation  should  contribute  to  transparency  in  the  sector  by  ensuring  that  the
requirements of the  framework  regarding the public provision of relevant  information  on
the market and its regulatory conditions are fulfilled.

Main concerns:

–  In  certain  Member  States  there  is  no  explicit  transposition  of  the  requirements  of  the
Framework Directive as to the NRAs’ independence from operators or their impartiality;

–  The attribution of NRA tasks between different national bodies is not always clear;

–  In  some  cases  national  laws  would  appear  to  limit  the  NRA’s  ability  to  exercise  the  full

range of powers contemplated by the framework;

–  The  aims  of  the  framework  could  also  be  put  at  risk  if  the  NRAs  do  not  act  in  a  timely
manner once they have the requisite powers under national law. In some countries the leg-
islation may fail to provide a time limit for carrying out the first market reviews or provide
only a very extended one.

National regulatory authorities

–  Clear attribution of NRA tasks

Each Member State is free to decide which body within its territory is to carry out the tasks
attributed to an NRA  under  the  new  framework. Consequently  there  may  be  more  than  one
designated NRA within a Member State. However, because of the risk of confusion as to who

40

Directive 2002/21/EC: see footnote 9 above.

24

                                                
does what, the Framework Directive requires that each task is assigned to a competent body
and that, where tasks are assigned to more than one body, the tasks undertaken by each must
be published in an easily accessible form.

In some countries the powers accorded to a NRA under the new framework are so widely dis-
persed  between  different  national  bodies  (including  in  some  cases  the  ‘government’  itself),
that the effective exercise and co-ordination of those powers may be in doubt. This can also
give rise to a lack of clarity as to how potentially overlapping responsibilities will be shared.
In some countries the separate treatment of television and radio broadcasting regulation from
the regulation of electronic communications networks and services generally means that there
is a risk that some activities (e.g. cable networks and internet access services) could be subject
to double regulation.

In some Member States which have adopted legislation, there is no clear requirement to pub-
lish in easily accessible form the different tasks of the NRA(s). It is questionable whether the
attribution of tasks within the legislation itself will be sufficient to fulfil this requirement.

–  Independence and impartiality of NRA

In most Member States the independence of the NRA from all organisations providing elec-
tronic  communications  networks,  equipment  or  services  is  now  assured,  since  it  was  also  a
key element of the previous regulatory framework.

With regard to NRAs’  exercise of their  powers,  it  is noteworthy that in the  draft  legislation
under discussion in one Member State, a number of key decisions require the consent of offi-
cials in the NRA appointed by the Ministry.

In some Member States the draft legislation would introduce a mechanism for review of the
NRA’s decisions by the Ministry and certain tasks have also been transferred from the NRA
to the Ministry.

In certain Member States there is no explicit transposition of the requirements of the Frame-
work  Directive  as  to  the  NRAs’  independence  from  operators  or  its  impartiality.  In  some
cases,  however,  such  independence  or  impartiality  may  be  ensured  by  general  principles  of
administrative law or in other pieces of legislation.

–  NRAs’ powers to act

In  some  countries  which  have  transposed  the  framework,  it  appears  that  some  powers  have
not been explicitly conferred on the NRA. For example in one case there is no express power
for  the  NRA  to  impose  publication  of  a  reference  offer  or  transparency  of  internal  transfer
pricing; in another the power for the NRA to intervene on its own initiative to secure the ob-
jectives of the new framework does not seem to be transposed.

In another Member State, the draft law seems to spell out in detail the remedies that can be
imposed by an NRA following its market analysis, potentially limiting its discretion to deter-
mine which is the most appropriate remedy in a particular set of circumstances. The power of
the NRA to apply certain remedies is also restricted in some cases (e.g. transparency and non-
discrimination), even if significant market power has been found in the relevant market.

The  ability  of  NRAs  to  take  proper  account  of  the  comments  of  the  Commission  and  other
NRAs  in  the  Article  7  process  will  also  be  constrained  if  primary  legislation  predetermines

25

the  nature  of  the  remedies  to  be  imposed  as  a  result  of  a  finding  of  SMP  in  a  particular
market.

On the other hand in another Member State which has adopted legislation, the discretionary
powers of the NRA are so widely drafted that in some instances the question arises whether
certain  mandatory  requirements  under  the  new  framework  have  been  fully  transposed  into
law.

–  Regulatory Objectives

The  Directive  requires  Member  States  to  ensure  that,  in  carrying  out  their  regulatory  tasks,
NRAs take account of the objectives enshrined therein, namely that they promote competition
to  the  maximum  benefit  of  users,  contribute  to  the  development  of  the  internal  market  and
promote the interests of EU citizens.

In  some  Member  States  which  have  adopted  legislation,  the  objectives  enshrined  in  the  na-
tional  legislation  do  not  directly  reflect  the  regulatory  objectives  set  out  in  Article 8  of
Framework  Directive.  In  some  cases  this  is  because  the  regulatory  objectives  provided  for
have been significantly reformulated (perhaps to reflect the legislative culture or traditions of
the country concerned) and in others it seems that some objectives have simply been omitted
from the national legislation. As a result it is not always easy to determine whether the neces-
sary objectives have been adequately transposed.

A similar problem arises in some countries which have not used the same definitions in their
national  transposition  measures  as  are  used  in  the  Framework  Directive.  This  makes  an  as-
sessment of the conformity of the national provisions with Community law considerably more
difficult.

Likewise the draft laws of some Member States do not expressly mention certain of the ob-
jectives contained in Article 8.

–  Co-operation between NRA and National Competition Authority

In one country which has adopted legislation, there is no provision in the sector-specific leg-
islation requiring co-operation between NRA and national competition authority, although co-
operation between all authorities is provided for in general administrative legislation.

–  Appeals

In two Member States it is not clear from the transposing legislation whether a proper appeal
mechanism exists from decisions of local authorities that relate to the grant of rights of way.

In some cases decisions stand pending appeal only if there is a specific order by the NRA to
that effect, whereas the Framework Directive requires that decisions should stand unless the
appeal body decides otherwise.

While  Member  States  have  a  discretion  (as  discussed  above)  in  determining  which  national
bodies should carry out the individual tasks of an NRA, the Framework Directive nevertheless
requires that the decisions of those bodies in exercising their assigned tasks should be subject
to appeal, by any user or undertaking providing electronic  communications  networks and/or
services who is affected by  them, to  a  body  that  is independent  of  the  parties  involved.  Al-
though such appeal mechanisms normally exist with respect to the decisions of the authority
which  is  responsible  for  the  day–to–day  supervision  of  the  electronic  communications  mar-

26

kets, it is less clear how this requirement is met when another body has been designated as an
NRA in respect of a particular task, such as a Ministry or even ‘the government’.

Market analysis and review of obligations

–  Timely and effective market reviews

It is in the interests of consistency and fairness that the process of market analysis and review
of  existing  regulatory  obligations  be  completed  across  the  EU  as  soon  as  possible  after  the
date  from  which  the  new  framework  was  due  to  be  applied  by  the  Member  States  (25 July
2003).  This  process  has  already  been  undermined  by  the  failure  of  a  number  of  Member
States to transpose the new framework on time. It could also be further put at risk if the NRAs
do not act in a timely manner once they have the requisite powers under national law. In some
countries  there  is  no  time  limit  provided  by  the  legislation  for  carrying  out  the  first  market
reviews or there is a very extended time limit. This can be contrasted with another Member
State which requires the market reviews to be completed  within  a  specified number of days
after entry into force of the national law.

–  Consistency with Recommendation and Guidelines

It is also important that NRAs act in a co-ordinated manner when exercising their powers un-
der the new framework. This is why the Framework Directive stresses the need for co-opera-
tion and consultation between NRAs across the EU and also requires that they take the utmost
account of guidance issued by the  Commission  in the form of Recommendations (including
the  Recommendation  on  relevant  markets  susceptible  to  ex  ante  regulation)  and  the  Guide-
lines on market analysis.

There is concern  as  to  the  full  transposition  of  these  requirements  in  the  Member  States,  in
particular the requirement to take ‘utmost account’ of the Commission’s recommendations.

In one Member State which has adopted legislation, there is no transposition of the require-
ment  for  the  NRA  to  take  utmost  account  of  Recommendations  issued  by  the  Commission
under  Article 19  of  the  Framework  Directive  or  to  provide  reasons  if  it  does  not  follow  a
Recommendation.

The laws of at least two Member States would appear not to ensure that all markets listed in
the Commission's Recommendation on relevant markets will be analysed by the NRA.

–  National consultation procedures (Article 6 Framework Directive)

In  one  Member  State,  despite  the  adoption  of  transposition  measures,  the  procedures  for
national consultation of interested parties on NRA’s decisions require further clarification.

Management of Radio Frequencies

In one Member State which has adopted legislation there appears to be no explicit transposi-
tion  of  the  requirements  of  Articles 9(1)  and 10  of  the  Framework  Directive  regarding  the
conditions governing the allocation and assignment of frequencies and numbers respectively.

One of the new elements in the Framework Directive is an explicit recognition that Member
States may allow operators to trade the rights they hold to use frequencies, under the supervi-
sion of the national regulatory authority and subject to certain safeguards. To date six out of

27

the eight Member States that have adopted transposition measures have made some provision
in their national law for such secondary trading.

Dispute resolution

In one Member State which has  already  adopted  legislation, it appears that the scope of the
provisions on cross-border dispute resolution (c.f. Article 21 of the Framework Directive) is
limited to matters of access and interconnection, whereas it may be possible that other matters
could be subject to such disputes.

In  another  there  is  no  provision  in  the  legislation  specifically  governing  the  resolution  of
cross-border disputes (Article 21 of the Framework Directive).

In another the transposition of exceptions to the four-month time limit for resolving disputes
is drafted in such a manner as to imply more frequent recourse to it than the ‘exceptional cir-
cumstances’ contemplated by Article 20 of the Framework Directive.

In a Member State, the draft law limits the scope of the matters that can be subject to the dis-
pute resolution mechanisms to specified issues, which could therefore leave some other issues
without access to dispute resolution.

Transparency

In a number of Member States there is no express provision dealing with the publication of
information  relating  to  the  application  of  the  Directives,  as  required  by  Article 24  of  the
Framework  Directive.  It  is  worth  noting  that  the  first  publication  of  a  notice  as  required  by
that  Article,  describing  how  and  where  the  relevant  information  has  been  made  available,
should have been made before 25 July 2003, the date for application of the new framework.

In another Member State the draft law does not clarify the requirements relating to provision
of easily accessible information to the public will be satisfied in practice.

4.2.

Authorisation Directive

One of the key objectives of the new regulatory framework is to reduce the regulatory burdens
on  market  access  and  to  ensure  a  more  consistent  treatment  of  operators,  both  as  between
Member States and as between different, but converging, technologies. The Authorisation Di-
rective41 responds to such a need by creating a legal framework, which ensures the freedom to
provide electronic communications networks and services, subject only to the limited condi-
tions laid down in the Directive.

The  8th Implementation  Report  referred  to  the  existence  of  additional  burdens  on  the  sector
which, inter alia, took the form of specific taxes on telecommunications services. In this re-
gard,  the  European  Court  of  Justice  has  ruled42  that  the  former  Licensing  Direc-
tive 97/13/EC43  (notably  its  Article 11)  prohibited  Member  States  from  imposing  financial
charges  other  than  and  in  addition  to  those  allowed  by  the  directive  on  undertakings  which

41

42

43

Directive 2002/20/EC: see footnote 9 above.
Judgment  of  18 September  2003  in  joined  Cases  C-292/01  (Albacom  SpA)  and  C-293/01  (Infostrada
SpA).
Directive 97/13/EC  of  the  European  Parliament  and  of  the  Council  of  10 April  1997  on  a  common
framework for general authorisations and individual  licences  in  the  field  of  telecommunications  serv-
ices, OJ L 117, 7.5.97, p. 15.

28

                                                
hold individual licences in  the  telecommunications  sector,  solely  because  they  hold  such  li-
cences. Although the  Licensing Directive was repealed on 25 July 2003, the ruling provides
some guidance  for the  interpretation of national measures similar to the contested charge (a
levy  on  the  turnover  of  telecommunications  operators)  under  the  new  framework,  since  the
Authorisation Directive contains similar provisions.

Key issues for transposition:

(cid:1)  The provision of electronic communications networks and services is henceforth subject to
general authorisation only and individual rights should exist only for the use of radio fre-
quencies  and  numbers;  conditions  imposed  must  be  limited  to  those  laid  down  in  the
Directive;

(cid:1)  Individual rights of use should only be granted, or limited in number, where there is a need

to do so;

(cid:1)  Where the number of rights of use needs to be limited, the procedures and selection criteria

must be transparent and respect the underlying principles of Community law;

(cid:1)  The administrative charges imposed on undertakings should be limited to those required to

recover the actual administrative costs of the NRAs’ activities.

Main concerns:

–  It is important that the conditions attached to the general authorisation and to rights of use
are clearly defined and established under national legislation, to ensure legal certainty for
the undertakings as to their rights and obligations;

–  In certain Member States there is a risk that the procedures or the selection criteria for the
grant of rights of use of radio frequencies may not respect the principles established under
the Directive (transparency, non-discrimination, etc.); in other cases, limits on the number
of rights of use may be imposed even when this is not necessary;

–  In  some  cases  the  requirement  that  any  limitation  on  the  number  of  rights  of  use  of  fre-
quencies be reviewed at regular intervals or at the request of affected undertakings may not
be transposed;

–  In some Member States there is uncertainty as to whether the NRA can make adjustments
to  balance  administrative  costs  and  charges  and  no  clear  requirement  to  publish  a  yearly
overview of such costs and charges.

Conditions attached to the general authorisation and to rights of use of radio frequencies and

numbers

In some Member States which have adopted legislation, it is not always clear whether the re-
quirement that the conditions of a general authorisation be limited to those in the Annex to the
Directive is fully met. In one case conditions attached to the authorisation or to rights of use
include additional elements than those provided for by the Directive.

In two Member States the draft measures available to the Commission services do not seem to
define the conditions that may be attached to a general authorisation and to rights to use fre-
quencies  and  numbers.  In  this  regard,  secondary  legislation  would  need  to  be  adopted,  fol-

29

lowing the adoption  of the new  primary  legislation, to provide  for  the  terms  and  conditions
that can be attached to such authorisations and rights of use.

Rights  of  use  of  radio  frequencies  and  numbers,  and  procedures  for  limiting  the  number  of

rights of use to be granted for radio frequencies

In one Member State  the  provisions  of  the  Directive  establishing  the  procedure  for  limiting
the number of rights of use of radio frequencies do not appear to be fully taken into account.
Elements  missing  from  the  transposing  legislation  concern:  i)  the  requirement  that  Member
States shall not limit the number of rights of use to be granted except in cases where this is
necessary to ensure the efficient use of frequencies; and ii) the obligation to review the limi-
tation of the number of rights of use at reasonable intervals or at the reasonable request of af-
fected undertakings.

In some Member States, the principles underlying the selection criteria for the grant of rights
of use of radio frequencies (objectivity, non-discrimination and proportionality) do not seem
to be explicitly and fully reflected in the legislation.

The Authorisation Directive acknowledges the possibility that specific criteria and procedures
may  be  used  for  the  grant  of  rights  of  use  of  radio  frequencies  to  providers  of  radio  or  TV
broadcast content services, with a view to pursuing general interest objectives in conformity
with Community law. However, it appears that transposition measures applying such specific
criteria  and  procedures  do  not  always  make  clear  how  they  relate  to  the  pursuit  of  general
interest objectives. Clarity is needed on this point in order to ensure that the requirements of
the Authorisation  Directive  for  open,  transparent  and  non-discriminatory  procedures  are  not
bypassed in areas where they should apply.

In one Member State, the national legislation contains enabling provisions which would rec-
ognise a particular right of access to spectrum for the purposes of  reception of  signals from
abroad and impose corresponding obligations. These provisions could give rise to the risk of a
fragmented approach to spectrum management across the EU, duplicating and increasing the
burdens  on  affected  operators.  In  assessing  any  future  national  measures  implementing  this
right of access in relation to specific spectrum bands, the Commission would need to consider
the proportionality of the measures concerned. In particular it would need to consider whether
the  principle  in  the  Authorisation  Directive  has  been  respected  that  where  possible,  in  par-
ticular where the risk of harmful interference is negligible, spectrum should not be subject to
individual rights of use.

As  regards  the  time-limits  for  decisions  on  rights  of  use  (both  numbers  and  frequencies),  it
appears that two Member States do not include the relevant deadlines in their adopted or draft
laws. As regards the time limits in the Authorisation Directive  for decisions  on  the  grant of
rights of use of numbers, it appears that in one Member State which has produced draft legis-
lation the relevant deadline will only be set out in forthcoming secondary legislation.

Compliance with the conditions of the general authorisation or of rights of use

In  one  country  the  transposition  measure  seems  to  provide  the  possibility  for  the  granting
authority to  prohibit the provision of services  within  sixty  days  after  the  notification  by  the
undertaking of its intention to commence business. The granting authority can take such  ac-
tion in the event the applicant does not fulfil the conditions required. This seems to call into
question the proper  implementation of the procedural requirements of the  Authorisation  Di-
rective governing compliance with the conditions of an authorisation or a right of use as well

30

as those governing specific obligations regarding access and the provision of universal serv-
ice. Under those provisions NRAs can prohibit an undertaking from providing services only
in cases of serious and repeated breach of the conditions, where measures aimed at ensuring
compliance have failed.

Administrative charges

In  order  to  ensure  transparency  in  relation  to  the  administrative  charges  imposed  on  under-
takings, the Directive introduced a requirement for the national regulatory authority to publish
an annual report on the total sum of charges  collected and the administrative costs incurred,
and to adjust charges accordingly. In some Member States it is not clear whether the NRA can
make adjustments to balance administrative costs and charges. In one case, the requirement to
publish a yearly overview of administrative costs and charges collected does not seem to be
included in the adopted legislation.

It would appear that the draft legislation in one Member State does not refer explicitly to the
principles  which  are  to  govern  administrative  charges  (objectivity,  transparency  and  pro-
portionality).

Existing authorisations

In one Member State the draft law provides that the conditions attached to existing licences
are intended to remain in force until the adoption of a Regulation concerning the modification
of the conditions attached to existing licences.

It is worth noting that in another Member State which has not yet transposed the new frame-
work the NRA has issued  guidance to the  effect  that  in general it  no longer requires  under-
takings  to  obtain  an  individual  licence  for  the  provision  of  electronic  communications  net-
works and services.

4.3.

Access and Interconnection Directive

The Access Directive44 sets out the principles that should govern the exercise by the NRAs of
their powers to oversee and, where necessary, regulate relations between electronic commu-
nications operators, i.e. the wholesale markets in the sector. The purpose of the Access Direc-
tive is to ensure that the relations between operators are left as far as possible to competitive
market  forces,  while  giving  flexible  powers  to  the  NRAs  to  intervene  where  market  forces
alone cannot ensure the fulfilment of the policy objectives set out in the Framework Directive.
There is therefore a clear need for NRAs to justify their decisions to impose regulatory obli-
gations on market players and the market analysis procedures established by the new frame-
work provide the key mechanism by which they can do so.

Given the wide degree of discretion accorded to them, NRAs are under a corresponding duty
to co-ordinate their actions at national and Community level and, in particular, to co-operate
with the Commission and the NRAs of other Member States so as to ensure the consistent ap-
plication of the regulatory principles across the EU.

44

Directive 2002/19/EC: see footnote 9 above.

31

                                                
Key issues for transposition:

(cid:1)  Access and interconnection conditions should be primarily a matter for commercial nego-
tiation, but the NRA must still have power to intervene to ensure the policy objectives of
the framework are met;

(cid:1)  NRAs should be able to apply the full range of remedies with the necessary flexibility to

tailor them to the conditions they find in the relevant market;

(cid:1)  Remedies linked to SMP in the Access Directive should be applied only on the basis of a

market review consistent with competition law;

(cid:1)  NRAs  should  be  empowered  to  impose  other  obligations  than  those  listed  in  the  Access
Directive  only  in  justified  cases  and  in  accordance  with  the  necessary  consultation
procedures.

Main concerns:

–  Some transposition measures would tend to pre-determine the obligations to be imposed on
undertakings with SMP, without regard to the particular competition concerns or circum-
stances found in that market;

–  In  some  cases  legislation  would  limit  the  NRA’s  power  to  impose  particular  obligations
upon a finding of SMP, e.g. requiring an undertaking to have SMP in both a wholesale and
a retail market;

In some Member States there may be a lack of power on the part of the NRA to ensure that
the  minimum  elements  of  reference  offers  are  in  place  and  to  require  changes  where
appropriate.

Powers and responsibilities of the NRAs with regard to access and interconnection

–  Ensuring end to end connectivity

The  Access  Directive  envisages  that  the  responsibility  for  ensuring  end  to  end  connectivity
and  the  accessibility  for  end-users  to  digital  and  radio  television  broadcasting  services,  and
the powers with which to do so, should be conferred on the NRAs. This provision does  not
seem to be transposed in one Member State which has already adopted its transposition meas-
ures. On the other hand, in two Member States which have not yet transposed the new frame-
work the draft transposition measures appear to envisage that obligations in this field be inte-
grated within the legislative measures themselves. In one case the legislator intends to adopt a
general obligation to interconnect in secondary legislation. This approach raises questions as
to  which  body  constitutes  the  NRA  for  the  purposes  of  the  specific  tasks  assigned  by  the
Access Directive and how the safeguards provided by the new framework will be met, such as
the right of persons affected by decisions of the NRA to be consulted and ultimately to appeal
against them. In the other Member State concerned the draft law would provide for a general
non-discrimination obligation imposed on operators that connect end users. Similar concerns
arise in this case, particularly as it appears that the obligations concerned would be fixed in
primary legislation.

–  NRA’s general power to intervene in access and interconnection matters

32

While conditions for access and interconnection should in principle be left to commercial ne-
gotiation, the NRA should have the legal power to intervene – either on its own initiative or at
the request of the parties – in order to secure the policy objectives set out in the Framework
Directive. The power for the NRA to intervene on its own initiative to secure the policy ob-
jectives set out in the Framework Directive  appears to be missing in one Member State that
has already transposed the current framework.

Obligations on operators linked to market review procedures

Principles

–  Periodicity of market analysis

There is one Member State among those that have not transposed the framework in which it is
still not clear from the draft legislation what requirements will be imposed on the NRA as to
the timing of its market analyses and review of obligations.

–  Obligation to impose at least one remedy (if the market is not effectively competitive)

Except for requirements applicable generally under the new framework or under special pro-
cedures referred to in Article 8 of the Access Directive, the possibility of imposing remedies
on a given undertaking only arises if an NRA has found that the relevant market is not effec-
tively  competitive  and  that  consequently  one  or  more  undertakings  have  significant  market
power. Conversely, if an NRA finds that there is a lack of effective competition in a relevant
wholesale market, then it is bound to impose at least one obligation on the operator with SMP
in order to remedy that lack of effective  competition.  In one Member State  that has  already
transposed the framework, it is not clear that this requirement is reflected in the legislation. A
similar  problem  is  likely  to  arise  in  at  least  one  of  those  Member  States  that  have  not  yet
transposed the new framework.

–  Remedy should be linked to the problem identified

In one Member State that has not  yet transposed the new  framework the legislator seems to
intend  to  pre-determine  which  obligations  (namely  cost  orientation  and  the  obligation  to
publish a reference offer) are to be imposed on all undertakings found to have SMP, without
regard to the particular competition concerns in that market. Similarly, the local loop unbun-
dling  obligation  is  intended  to  be  embedded  in  the  law.  These  solutions  risk  removing  the
necessary discretion from the NRA to determine which is the most appropriate remedy based
on the nature of the problem identified.

–  NRAs’ power to apply a full set of remedies

The draft legislation of some Member States does not seem to make available to the NRA the
full range of possible remedies detailed in the Access Directive, thus potentially depriving the
NRA  of  its  ability  to  apply  them.  In  one  of  them,  the  NRA  can  include  cost-orientation  in
access obligations only if the operator has SMP in both the access and the end-user markets.

–  NRA power to impose other obligations

To ensure  maximum  flexibility  the  Access  Directive  provides  for  the  possibility  that  NRAs
may impose obligations other than those set out in the Directive, subject to prior authorisation
by the Commission. In one Member State that has not yet transposed the new framework the
draft legislation envisages that in such an event the NRA must first obtain legislative backing

33

for  the  imposition  of  a  particular  obligation  by  means  of  secondary  legislation.  In  such  a
situation it would appear that the  role of  NRA  is effectively  being shared  between different
institutions and it will be important to ensure that the safeguards provided by the new frame-
work (such as consultation and appeal mechanisms) are assured.

Specific remedies

–  Transparency

The Access Directive provides that in cases where an NRA has imposed an obligation on an
SMP operator to publish a reference offer it should be in a position to order changes to that
offer. Experience of the implementation of the previous regulatory framework shows that this
power is a crucial one for NRAs. However, a number of Member States have not included this
power  for  their  NRA  in  their  adopted  or  draft  legislation,  while  another  Member  State  has
provided the NRA with the power to require that a reference offer be made publicly available,
but has not given it the power to require its publication.

In some Member States, which have adopted transposition measures, the current reference un-
bundling offer does not contain all elements set out in the Access Directive or remains to be
established by secondary  legislation.  On the other  hand,  the  draft  law  of  one  Member  State
does not contain a definition of unbundling, which means that it does not fulfil the transposi-
tion requirements concerning the minimum elements of a reference unbundling offer.

–  Accounting separation

According to the provisions on accounting separation the NRA should have a power to make
transparent  the  internal  transfer  prices  of  a  vertically  integrated  company.  This  power  is
missing in the adopted or draft laws of at least two Member States.

–  Price control and cost accounting

The Access Directive stipulates that in making decisions on cost accounting and pricing mat-
ters NRAs shall take into account the investment made by the operator and allow him a rea-
sonable rate of return  on  adequate  capital employed,  taking into  account  the  risks  involved.
One  Member  State  has  provided  for  an  additional  consideration  to  be  taken  into  account,
namely investments for the development of networks and innovative services.

The directive also provides that where an operator has an obligation regarding the cost orien-
tation of its prices, the burden of proof that charges are derived from costs should lie with the
operator concerned. It would appear that the draft transposing legislation of one Member State
does not incorporate this requirement. In another this principle is not contained in the primary
legislation but remains to be established in the regulatory decisions of the NRA.

The directive stipulates that in the event that a NRA requires a cost accounting system to be
implemented, a description of that cost accounting system should be made publicly available.
Two Member States seem not to have reflected this requirement in their draft laws.

Digital broadcasting

One  Member  State  which  has  not  yet  adopted  legislation  has  excluded  conditional  access
systems from the scope of its draft law and the primary legislation (adopted or draft) of some
others seems only to deal with a part of the requirements of the Directive in this area.

34

4.4.

Universal Service Directive

The Universal Service Directive45 contains a set of rules and principles designed to safeguard
the  interests  of  users  and  to  ensure  that  liberalisation  does  not  occur  at  their  expense.  It  is
founded on  the premise that competition and  market  forces  are  the  most  effective  means  to
satisfy user needs, but  provides  national regulatory  authorities with  the necessary powers to
protect users’ interests where they need to do so.

Key issues for transposition:

(cid:1)  The scope of universal service should be defined in accordance with the Directive;

(cid:1)  Universal service should be implemented in a way that minimises market distortions;

(cid:1)  The  designation  of  undertaking(s)  with  universal  service  obligations  should  ensure  that
universal service is provided in a cost-effective manner. No undertaking should be a priori
excluded from being designated;

(cid:1)  Only  the  net  cost  to  designated  undertakings  of  the  provision  of  those  services  that  are
covered by the universal  service obligation  as defined  in the  Directive may be recovered
through a sharing mechanism or from public funds;

(cid:1)  End-users across the EU should enjoy all of the rights conferred to them in the Directive,

and NRAs should be fully empowered to enforce those rights;

(cid:1)  Obligations should only be imposed on undertakings with SMP in a relevant retail market
where  the  market  is  not  effectively  competitive  and  NRAs  consider  that  obligations  im-
posed at the wholesale level and/or carrier selection and pre-selection are not sufficient to
achieve the objectives of the new framework.

Main concerns:

–  In  some  Member  States  the  scope  of  universal  service  has  not  been  delineated  in  accor-
dance with the Directive. This has implications regarding the calculation of the net cost of
universal service and any funding schemes;

–  The  adopted  and  draft  transposition  measures  of  some  Member  States  seem  to  have  ex-
cluded de facto some operators from being designated with universal service obligations. It
is also not clear as yet whether sufficient account has been taken in all Member States of
the need that the implementation of universal service minimise market distortions;

–  Not all the provisions relating to the rights and facilities to be made available to end-users

appear to be consistently transposed in the Member States;

–  Some national laws (adopted or draft) do not reflect the principle that ex ante obligations
should be imposed on operators as the result of a finding of SMP in a relevant retail market
only if the NRA considers that wholesale remedies and/or carrier selection or pre-selection
are insufficient.

45

Directive 2002/22/EC: see footnote 9 above.

35

                                                
Universal service obligations

–  Scope

The  keystone  of  universal  service  remains  the  provision  on  request  of  a  connection  to  the
public telephone network at a fixed location and access to publicly available telephone serv-
ices, at an affordable price, in the whole territory of the European Union. As compared with
the previous regulatory framework, this requirement has been made more precise in terms of
the technologies which may support such connection (which may be fixed or wireless) and the
data rates that the connection should allow for (they must permit functional Internet access).

Some transposition problems arise in regard to the scope of the services covered by the uni-
versal service obligation: in one Member State, there is no explicit provision in the draft law
that  universal  service  should  be  available  in  the  whole  of  the  national  territory.  In  another
Member State the draft legislation does not require explicitly that the connection to the public
telephone network must permit functional Internet access.

It is not clear whether the obligations relating to specific measures for disabled users or users
with low incomes or special social needs are included within the scope of universal service in
the adopted or draft law of some Member States.

In one Member State certain universal service obligations including social obligations are ap-
plied to all operators as general conditions, rather than as universal service obligations appli-
cable only to the designated universal service provider(s).

–  Designation of undertaking(s) with universal service obligations

In one Member State, universal service obligations are imposed in the law on operators hav-
ing significant market power. Since there is no designation ‘proper’ of universal service op-
erators, many of the relevant provisions of the Directive are not transposed (e.g. relating to the
publication by designated undertakings of information on quality of service).

In another Member State, the draft law also appears to exclude most operators from the possi-
bility of being designated as a universal service provider, at least as regards the provision of
access at a fixed location and telephone booths, since it creates the possibility for designating
an operator for each service, but requires that the operator be able to supply the service on the
whole of the national territory. The objective of the Directive is to ensure that the whole ter-
ritory is covered. To this end Member States may designate one or more operators, and this
designation can be on  a  regional or a national  basis. However, they should use an  efficient,
objective, transparent and non-discriminatory mechanism for designation whereby no under-
taking is a priori excluded from being designated.

This in turn could compound the problems of costing the universal service and the operation
of a funding mechanism: since the net cost of the service may be established either by the cost
accounting method or by the results of a call for tender, there is a risk that if the latter option
is taken the incumbent operator could name its price for the costs that are to be reimbursed by
other  operators,  without  regard  to  the  principles  of  least  market  distortion  or  non-
discrimination.

–  Calculation of the net cost of universal service and its financing

36

Some Member States have availed themselves in their adopted or draft transposition measures
of  the  possibility  foreseen  in  the  Directive  to  determine  the  net  cost  of  universal  service
through a tendering procedure.

Most Member States’ adopted or draft transposition measures contain provisions on a sharing
mechanism for financing of universal service obligations. In one of them, while the draft law
only mentions one financing method, namely that of covering the net cost of universal service
by  levying  contributions  from  market  players,  public  (ERDF)  funds  have  been  requested  to
meet certain universal service obligations. In this case the risk of double financing should be
avoided.

Not  all  the  safeguards  contained  in  the  Universal  Service  Directive  to  ensure  that  a  sharing
mechanism  to  finance  universal  service  obligations  does  not  distort  competition  appear  to
have  been  adequately  transposed.  In  some  Member  States  the  relevant  provisions  are  not
included in the draft law. In another Member State it appears possible for the incumbent op-
erator to recover from other communications providers part of the cost of providing a service
imposed as a universal service obligation, without the use of any sharing mechanism.

It should be recalled that where Member States choose to operate a scheme for the costing and
financing  of  universal  service  obligations,  the  scheme  should  be  communicated  to  the
Commission for verification of compatibility with the Treaty.

End-user rights

Beyond the provisions falling within the category of universal service, the Directive contains
a  number  of  requirements  that  reinforce  end-users’  interests  by  means  of  specific  rights,
ranging from the minimum information to be included in contracts through to the availability
of specific facilities such as directory services and number portability.

Many  national  transposition  measures  fail  as  yet  to  transpose  all  the  relevant  provisions  in
sufficient detail to  allow  their  application  as  from  the  entry  into  force  of  the  primary  trans-
posing legislation.  In particular, it appears that not  all NRAs  are  empowered  to  impose  and
enforce the information and transparency requirements of the Directive.

–  The provision of various facilities

The provision of directory enquiry services and directories is open to competition. The Uni-
versal Service Directive provides that all service providers that assign telephone numbers to
their  subscribers  are  obliged  to  make  relevant  information  available  in  a  fair,  cost-oriented
and non-discriminatory manner. In some Member States, the draft law does not oblige under-
takings to provide relevant information for directory purposes on a cost-oriented basis.

Also, not all Member States which have adopted transposition measures have transposed the
requirements of the Directive relating to the provision of tone dialling and calling line identi-
fication.  It  remains  to  be  established  whether  this  is  because  the  countries  concerned  have
concluded, after taking into account the views of interested parties, that there is sufficient ac-
cess to these facilities.

In  one  Member  State  which  has  adopted  transposition  measures,  the  availability  of  mobile
number portability may be delayed until some time in 2004, following recent adoption of sec-
ondary legislation in addition to the primary law aimed at transposing the new framework.

–  Must carry

37

Most  national  measures  transposing  the  new  regulatory  framework  do  not  introduce  must
carry rules; they are usually embedded in other pieces of national legislation, such as audio-
visual laws. Nevertheless, such must carry rules must comply with the principles set out in the
Universal Service Directive, namely that they should only be imposed where they are neces-
sary  to  meet  clearly  defined  general  interest  objectives  and  shall  be  proportionate  and
transparent.

The  compliance  with  the  Directive  of  existing  and  new  national  must  carry  rules  has  been
called into question by market players in some Member States, particularly in the light of the
proportionality principle.

Regulatory controls on undertakings with SMP in specific retail markets

–  Principles

Not all national laws (adopted or draft) reflect the principle that ex ante obligations should be
imposed on operators as the result of a finding of SMP in a relevant retail market only if the
NRA  considers  that  wholesale  remedies  and/or  carrier  selection  or  pre-selection  are
insufficient.

In  one  Member  State  the  structure  of  the  draft  transposition  measure  does  not  distinguish
clearly between remedies to be applied at the wholesale level and remedies to be  applied  at
the retail level, and the question arises as to whether the NRA has been empowered to adopt
all the possible remedies mentioned in the Directive.

One Member State which has adopted legislation has not transposed the provision that where
retail tariff regulation is imposed appropriate cost accounting systems  must  be  implemented
and verified annually and the NRA shall ensure that an annual statement concerning compli-
ance is published.

–  Leased lines and carrier selection and pre-selection

In  some  Member  States,  the  requirements  of  the  Directive  relating  to  the  provision  of  the
minimum  set  of  leased  lines  are  not  included,  or  are  only  partially  included,  in  the
transposition legislation (adopted or draft), or remain to be completed by means of secondary
legislation.

In other Member States, either the requirement that pricing of interconnection and access re-
lated to carrier selection and pre-selection by SMP operators be cost oriented is not transposed
or it is unclear whether cost orientation is applicable.

5.

E-PRIVACY DIRECTIVE

5.1.

Introduction

The  e-Privacy  Directive  was  required  to  be  transposed  by  the  Member  States  before
31 October  2003.  It  effectively  replaced  the  previous  Telecommunications  Data  Protection
Directive46 from that date. In view of the closeness of this deadline to the date of publication,

46

Directive 97/66/EC of the European Parliament  and  of  the  Council  of  15  December  1997  concerning
the processing of personal data and the protection of privacy in the telecommunications sector, OJ L 24,
30.1.1998, p. 2.

38

                                                
this report does not contain an analysis of national transposition measures or draft laws. How-
ever, the e-Privacy Directive constitutes a vital element in the new regulatory framework, de-
signed  to  protect  the  fundamental  interests  of  end-users,  and  some  of  its  key  requirements
(which the Commission will take particular care are properly reflected in national transposi-
tion measures) are therefore described in this section.

5.2.

Traffic data retention

The  e-Privacy  Directive  requires  that  processed  and  stored  traffic  data  be  erased  or  made
anonymous when no longer needed for transmission of the communication. Traffic data nec-
essary for billing or interconnection payment purposes may be processed, but only up to the
end of the period during which the bill may be lawfully challenged or payment pursued. Data
may be processed for the provision of value added services, but only for the period necessary
and after consent has been given. Withdrawal of this consent should be possible at all times.

It is important that national law requires subscribers to be informed of the purposes behind the
retention of traffic data (before giving consent) and of the types of data retained.

5.3.

Location data

There is a new provision in the directive focusing on the treatment of data indicating the geo-
graphical position of the subscriber’s terminal equipment. A different treatment applies to lo-
cation  data  than  applies  to  traffic  data,  in  that  the  former  may  be  processed  either  anony-
mously or with consent of the user.

It  is  important  that  national  legislation  should  ensure  that,  where  processing  of  the  location
data is allowed with the consent of the user, prior to obtaining such consent the user must be
informed of (1) the type of location data that will be processed, (2) the purposes and duration
of the processing and (3) whether the data will be transmitted to a third party. It is also im-
portant that the user can withdraw its consent at any time.

5.4.

Unsolicited Communications (spam)

The e-Privacy  Directive introduces a  requirement that Member  States  apply  an ‘opt-in’ sys-
tem, as a general rule, to unsolicited communications (or spam) produced by means of auto-
matic calling machines, fax machines and electronic mail (including SMS messages).

While  the  Directive  does  allow  for  the  possibility  of  an  exception  to  the  general  opt-in
principle under which, in the context of a sale of a product or service, contact details may be
used  for  direct  marketing  of  a  company’s  own  similar  products  or  services),  it  is  important
that,  if  such  an  exception  is  provided  by  national  law,  it  is  strictly  drawn,  so  as  to  avoid
effectively undermining the opt-in approach.

For other types of direct marketing practices, the Member States can choose to apply an opt-in
or an opt-out system.

Effective and timely enforcement of compliance with the new opt-in approach will be essen-
tial to ensure that subscribers’ interests are protected. The Commission will therefore look to
confirm that national transposition measures provide for real sanctions in the event of breach
of the relevant requirements by direct marketers, including where appropriate financial penal-
ties. This also means that the competent authorities, be they the NRAs or the Data Protection
Authorities, need to have the requisite investigation and enforcement powers.

39

5.5.

Cookies

The e-Privacy  Directive  contains a  provision, not  in  the  previous  Telecommunications  Data
Protection Directive (97/66/EC), governing the use of devices for storing or retrieving infor-
mation, such as ‘cookies’. Users must be informed of the purposes of such devices and have
the opportunity to refuse their use or installation on their terminal equipment.

6.

COMPETITION DIRECTIVE

6.1.

Introduction

In  order  to  make  the  rules  on  liberalisation  simpler  and  more  transparent,  on  16 September
2002 the Commission adopted Directive 2002/77/EC on competition in the markets for elec-
tronic  communications  networks  and  services  (the  Competition  Directive).  This  Directive
consolidates the previous directives in this area47 and seeks to maintain the necessary coher-
ence with the new Regulatory Framework.

6.2.

Main content of Competition Directive: Abolition of special and exclusive rights

In  line  with  the  provisions  established  under  Directive 90/388/EEC,  the  Competition
Directive requires Member States to abolish special or exclusive rights relating to electronic
communications networks and services (including those involving the use of frequencies) and
to  ensure  that  any  undertaking  is  entitled  to  provide  them.  Moreover,  Member  States  shall
ensure  that  any  general  authorisation  allowing  undertakings  to  provide  such  networks  or
services is based on objective, non-discriminatory, proportionate and transparent criteria.

The scope of the Competition Directive is in line with that of the new regulatory framework:
it applies to all networks and services which are concerned with the conveyance of signals by
wire,  radio,  optical  or  other  electromagnetic  means,  e.g.  fixed,  wireless,  cable  and  satellite
networks. It therefore applies to transmission networks and services used for broadcasting of
radio  and  television  programmes  but  excludes  services  providing  or  exercising  control  over
their  content.  The  Commission  is  currently  investigating  whether  the  regulation  of  the  net-
works and services used  for  the  broadcasting  of  radio  and  television  programmes  and  other
audio-visual services in a number of Member States complies with the Competition Directive.

It  is  worth  noting  that  the  Competition  Directive  also  applies  to  so-called  ‘dark–fibre’  net-
works,  which  are  networks  that  enable  third  parties  to  convey  signals,  using  their  own
switching or routing equipment.

6.3.

Notification requirements

Member States are required to provide the Commission with such information as will allow it
to confirm that the  provisions  of the  Competition  Directive  have  been  complied  with.  They
must also communicate to the Commission their schemes on sharing the net cost of the provi-
sion of universal service. In addition, if a Member State considers that there is sufficient com-
petition in the provision of local loop infrastructure to justify the ending of the obligation of
legal  separation  of  a  cable  television  network  from  other  electronic  communications  net-

47

Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunica-
tions services (OJ L 192, 24.7.1990, p. 10) and its successive amendments.

40

                                                
works, then it must inform the Commission accordingly, so that the Commission can decide
whether the obligation may be ended in that Member State.

7.

ACCESSION COUNTRIES

Ten countries (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland,
Slovakia, Slovenia) will join the European Union on 1 May 2004. These accession countries
agreed, in  the  course  of  the  accession  negotiations,  to  implement  the 1998  telecoms  acquis.
They  must  clearly  also  ensure  compliance  with  the  new  framework  as  from  the  date  of
accession.

Since  the  new  framework  is  a  development,  and  builds  on  the  achievements  of,  the 1998
framework (in particular market liberalisation and ‘open network  provision’  (ONP)), the  ef-
fective  implementation  of  the  old  framework  by  the  existing  EU 15  was  an  essential
pre-requisite for the transition to the new one.

Likewise, it is a prerequisite for the accession countries that the same process of liberalisation
and  regulation  be  effectively  achieved  in  the  run-up  to  the  full  application  of  the  new
framework within their territories. Once the requirements of the old framework have been put
in  place,  the  process  of  market  analysis  and  review  of  obligations  can  be  conducted  effec-
tively as contemplated by the new framework.

This  is  consistent  with  the  provisions  of  Article 27  of  the  Framework  Directive,  which  re-
quires Member States to maintain under national law the regulatory obligations imposed un-
der the old framework provisions referred to in that article (essentially the SMP obligations),
until  those  obligations  are  reviewed  in  accordance  with  the  process  of  market  analysis  and
consultation with the Commission and other NRAs provided for in the new framework (par-
ticularly the Article 7 notification process). In the case of the accession countries, it is possi-
ble for this process to be carried out legally only once they have formally acceded to the EU.

As a result it is anticipated that the accession countries will take the following steps in order
to meet their Community obligations in the electronic communications sector:

(cid:1)  The accession countries will implement in full, and maintain in force until after the date of
accession,  the  requirements of those provisions  of the  old  framework  referred  to  in  Arti-
cle 27  of  the  Framework  Directive.  They  should  then  conduct  (or  complete)  the  market
analysis  and  review  of  obligations  in  full  conformity  with  the  procedures  of  the  new
framework (including notification to the Commission and other NRAs under Article 7), as
soon as possible after accession, so that the obligations concerned can be amended, with-
drawn or maintained as appropriate;

(cid:1)  As far as the other requirements of the  old  framework  are  concerned  (i.e. in broad terms
the general legal framework for telecommunications and the rights and obligations gener-
ally  applicable  in  the  sector),  by  the  date  of  accession  these  will  have  been,  on  the  one
hand, implemented effectively in accordance with the commitments made in the accession
negotiations and, on the other, adapted where necessary to comply with the requirements
of the new framework. As an example, by the date of accession the system of authorisation
of electronic communications networks and services in an accession country would comply
with the new framework by providing for general authorisation and rights of use only.

41

In the next implementation report, which the Commission intends to issue in the fourth quar-
ter of 2004, the status  of  transposition  and application of the electronic  communications  di-
rectives  in  the  newly  acceded  Member  States  will  be  assessed  alongside  that  of  the  current
Member States (EU 15).

8.

PROCEDURE FOR NOTIFICATION OF NATIONAL REGULATORY MEASURES

In order to ensure  the  development  of  a  consistent  regulatory  practice  throughout  the  Com-
munity, Article 7 of the Framework Directive puts in place a new procedure requiring NRAs
to notify to the Commission and all other NRAs inter alia all draft measures defining relevant
markets and designating undertakings as having Significant Market Power (SMP), where the
measures in question would affect trade between Member States. Pursuant to that Article, the
Commission has a power of veto, since it can require an NRA to withdraw and amend the no-
tified measure if it has serious doubts as to its compatibility with Community law.

The Commission has created the structures necessary to enable it to perform its tasks in the
most efficient way from a legal and operational point of view.

The  first  notification  was  received  on  4 August  2003  from  OFTEL,  the  United  Kingdom
regulatory authority. The notifications received so far from that authority concern the follow-
ing  markets:  i)  mobile  access  and  call  origination,  ii)  fixed  geographic  call  termination,  iii)
wholesale unmetered narrowband internet termination, iv) fixed narrowband retail, v) whole-
sale  international  services,  and  vi)  fixed  narrowband  wholesale  exchange  line,  call  origina-
tion, conveyance and transit.

The Commission made comments on the draft regulatory measures pursuant to Article 7(3) of
the Framework Directive.48

An increasing number of notifications is expected in the coming weeks and months. A num-
ber  of  ‘pre-notification’  meetings  with  NRAs  have  been  held,  and  have  proved  extremely
useful. Additional meetings have also taken place with industry players and associations for
the purpose of clarifying the Article 7 procedures.

9.

INFRINGEMENT PROCEEDINGS

As stated above, the Commission has stressed the importance of full, effective and timely im-
plementation of the new regulatory framework for electronic communications. The Commis-
sion’s Internal Market Strategy49 in particular points out that late transposition and ineffective
enforcement  remain  a  serious  problem  for  the  proper  functioning  of  the  single  market  as  a
whole.

The Commission opened around 250 infringement proceedings to support the implementation
of the 1998  regulatory  package, and  will continue  to play  a proactive role  in  relation  to  the
new framework in order to achieve maximum legal certainty for market players and investors
in this highly dynamic sector.

48

49

See Commission website at http://forum.europa.eu.int/Public/irc/infso/ecctf/home.
COM(2003) 238, 7 May 2003.

42

                                                
The Commission is monitoring the transposition process closely, and has already opened pro-
ceedings against those Member States which failed to incorporate the four directives (Frame-
work,  Authorisation,  Access  and  Users’  Rights)  into  national  law  by  24 July  2003.50  It  will
also launch infringement proceedings against Member States that have failed to transpose the
e-Privacy Directive by 31 October 2003.

The  correct  implementation  of  the  Directives  will  be  one  of  the  priorities  to  be  focused  on
when  analysing  national  transposition  measures.  Further,  and  for  the  sake  of  legal  certainty
and transparency, the Commission regards it as a priority to enforce the specific notification
requirements imposed on Member States under the new framework, concerning, for instance,
the  individual  NRAs  and  their  assigned  tasks  and  responsibilities  as  well  as  SMP  operators
and  universal  service  providers.  The  Commission  will  also  monitor  the  fulfilment  of  the
Member States’ obligation to take account of recommendations adopted to ensure the consis-
tent application of the new framework, including the Recommendations on relevant markets
and on procedures under Article 7 of the Framework Directive.

The Commission has also pointed out that it is important to complement formal infringement
proceedings with alternative means of achieving rapid results when monitoring the application
of  Community  law.51  This  may  be  a  more  effective  and  proportionate  method  than  in-
fringement proceedings. In this regard the Commission is working closely  with the Member
States’  authorities,  and  in  particular  with  the  independent  national  regulatory  authorities.  In
addition  to  the  European  Regulators’  Group  (ERG),  co-operation  already  takes  place  in  the
Communications Committee (COCOM), the Radio Spectrum Committee (RSC) and the Ra-
dio Spectrum Policy Group (RSPG), and in bilateral meetings with the Member States.

Finally, regular reporting on the implementation of the regulatory framework and market de-
velopments has proved  to be  an efficient  tool for monitoring  correct implementation,  which
the Commission intends to continue to use in the future.

50

51

See press release IP/03/1356, 8.10.2003.
Commission  Communication  on  better  monitoring  of 
COM(2002) 725, 11 December 2002.

the  application  of  Community 

law

43