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 2004 [SEC(2004)1535]
Date: 2004-12-02
Institutions: European Commission
Subjects: information technology, regulation of telecommunications, telecommunications, telecommunications industry

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 2.12.2004 
COM(2004) 759 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 2004 

[SEC(2004)1535] 

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1. 

INTRODUCTION 

Successive  Commission  Communications  have  built  on  the  Lisbon  vision  of  the  European 
knowledge-based  economy.  The  Commission  has  highlighted  the  vital  role  the  electronic 
communications  sector  plays  in  nearly  all  other  economic  activities,  and  has  identified  the 
role of innovative communications services as a potent driver of labour productivity1.  

One factor for achieving these goals, pinpointed in several European Council conclusions, is 
the  implementation  of  the  new  EU  regulatory  framework  for  electronic  communications2. 
This  provides  technologically  neutral  regulatory  principles  which,  when  fully  operational  in 
the Member States, will assist the market to deliver choice and value for the consumer. The 
optimum timeframe for implementation is short and critical. The effective application of EC 
competition rules also plays a vital role.  

The  Commission  has  promoted  implementation  of  the  EU  framework  vigorously  through 
reporting,  co-operation  with  Member  States’  authorities  and,  where  necessary,  infringement 
proceedings.  The  last  report  on  regulation  and  markets3  concentrated  on  the  Commission’s 
main  concerns  resulting  from  the  transposition  process.  This  Communication  focuses  on 
market developments and the main persisting regulatory issues. It is based on more detailed 
analysis  and  market  data  set  out  in  a  Commission  services’  working  document  adopted  in 
parallel, and covers all twenty-five Member States for the first time. The regulatory situation 
described here is generally that at 1 October 2004. Market data, unless otherwise indicated, 
cover the period up to and including 1 August 2004.4  

2. 

MAIN MARKET DEVELOPMENTS 

The  e-communications  services  sector  is  characterised  by  an  increasingly  positive  outlook. 
Competition  is  intensifying  in  most  markets,  bringing  increased  benefits  in  terms  of  price, 
quality and innovative services to consumers.  

The industry, particularly the fixed sector, is emerging from a period of cost cutting and debt 
reduction. Innovation in mobile and broadband and to some extent traditional fixed services is 
driving the search for growth. Overall growth in the sector, estimated at 4.6%5 for 2004, has 
stabilised and will outpace GDP expansion for the EU 25. The key drivers are fixed data and 
mobile services, which show strong growth of 11.5 % and 7% respectively6.  

1 

2 
3 
4 
5 
6 

See Commission Communication ‘Connecting Europe at high speed: recent developments in the sector 
of  electronic  communications’  COM(2004)  61  final.  See  also  Commission  Communication  ‘Mobile 
broadband services’, 30 June 2004, COM(2004) 447 
http://europa.eu.int/information_society/topics/telecoms/regulatory/new_rf/index_en.htm 
European Electronic Communications Regulation and Markets 2003, COM(2003) 715 
Data is provided by national regulatory authorities unless otherwise stated 
In nominal terms. Source: EITO and IDATE 
Source: estimate by EITO  

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EU25 electronic communications market value (€ billion)

277

265

254

240

11.9%

Yearly growth EU 25

226

6.2%

6.0%

4.4%

4.6%

2000

2001

2002

2003

2004

280

260

240

220

2000

2001

2002

2003

2004

Source: EITO 2004 and Commission services

Underlying these general trends are a number of specific developments. First, traditional fixed 
line telephony has declined in terms of value, as increasing competition forces prices down. 
Second,  broadband  penetration  has  increased  dramatically,  spurred  by  lower  prices  and 
intensifying  infrastructure-based  competition  as  new  entrants  start  climbing  the  investment 
ladder7.  Third,  mobile  penetration  continues  to  increase  and,  while  voice  is  still  dominant, 
there  is  evidence  of  growth  in  mobile  data  services.  3G  networks  and  services  have  been 
launched in most Member States.  

EU25 electronic communications market breakdown (€ billion)

98

92

107

92

114

122

91

90

36

42

45

51

12

13

14

14

Mobile
telephone
services 

Fixed Voice
Telephony
services

Fixed data
services

CaTV
Services

140

120

100

80

60

40

20

0

2001

2002

2003

2004E

Source: EITO 2004 and Commission services

7 

This term relates to a situation where a new entrant benefits initially from access products at different 
levels  of  the  value  chain  in  order  to  build  customer  base,  and  then  progressively  rolls  out  its  own 
infrastructure towards the customer 

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2.1 

Mobile services 

Revenues from mobile services exceed those of fixed voice services. Continued strong growth 
of 7% was achieved in 2004, driven in part by mobile data services. The average penetration 
rate  also  continues  to  grow,  and  is  now  at  83%  for  the  EU  25;  the  rate  for  the  EU  15  has 
increased  by  6  percentage  points  to  87%.  There  are  now  more  than  379  million  mobile 
subscribers. The key driver of future growth in the mobile sector in the EU is likely to be the 
deployment of advanced value added services.  

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

i
l
l
i

M

400

350

300

250

200

150

100

50

0

Mobile subscribers and average penetration in EU25 & EU15, 1998 -  2004

70%

75%

81%

87%

83%

52%

194

31%

115

18%

69

265

283

306

379

329

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

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

1998

1999

2000

2001

2002

2003

2004

Subscribers EU15

Subscribers EU25

Penetration rate EU15

Penetration rate EU25

Source: Commission services based on NRA data and EMC estimates 

A  few  general  trends  suggest  that  competition  in  aspects  of  the  mobile  sector  is  increasing. 
The  average  market  share  of  leading  operators  has  dropped  from  46.6%  last  year  to  43.2% 
this  year,  a  fall  greater  than  that  seen  in  the  last  three  years  combined.  Mobile  number 
portability,  which  allows  subscribers  to  retain  their  number  when  they  move  from  one 
operator  to  another,  has  increased  during  the  year,  significantly  in  some  countries.  This 
service  has  been  most  successful  where  the  charge  for  porting  numbers  has  been  set  at  a 
relatively low level. 

As  shown  in  the  section  on  interconnection  below,  there  has  been  a  welcome  reduction  in 
mobile  termination  rates  in  many  EU  countries  during  the  year,  although  further  reductions 
will undoubtedly follow from intervention by NRAs. Concerns persist as to the high level of 
international  roaming  charges.  The  Commission  is  continuing  its  investigation  under 
competition  rules  into  wholesale  international  roaming  tariffs  charged  between  mobile 
network operators, and in July of this year issued its preliminary position on infringements of 
Art. 82 of the Treaty with regard to the UK market for wholesale international roaming8. The 
European  Regulators  Group  (ERG)  is  also  currently  examining  international  roaming.  The 
Commission  urges  regulators  to  complete  analyses  of  the  markets  for  call  termination  on 
individual mobile networks and wholesale international roaming as quickly as possible. 

8 

Commission Press Release IP/04/994 http://europa.eu.int/rapid 

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Launch of 3G services 

3G launches have accelerated in 2004; of the 75 licensed 3G operators, 30 are now offering 
commercial  services,  and  21  are  in  the  pre-commercial  phase.  It  is  estimated  that  there  are 
around  2.6  million  3G  subscribers  in  the  EU  and  that  on  average  there  will  be  population 
coverage  of  at  least  43%  throughout  the  EU  by  the  end  of  20049.  Full  scale  commercial 
deployment will increase during the course of 2005, and the extent of mass market take-up of 
3G services can be assessed at that stage. 

2.2 

Broadband 

The  broadband  sector  has  seen  continuing  growth  this  year,  with  the  total  number  of 
broadband  access  lines  rising  by  more  than  72%.  Deployment  in  the  EU  25  is  now  at 
29.6 million lines, which represents 6.5% of the population; the figure for the EU 15 is 7.6%, 
which  compares  with  4.5%  last  year.  The  growth  in  broadband  deployment  is  being  driven 
largely  by  intensifying  competitive  pressure  and  by  the  desire  of  fixed  operators  to  offset 
eroding  voice  telephony  revenues.  The  new  entrants’  share  of  the  broadband  market  has 
continued to rise and is now at 43.7%, an increase of 2.2 percentage points on last year. The 
new  entrants’  share  of  the  DSL  market,  a  technology  which  now  accounts  for  78%  of  the 
overall  broadband  sector,  has  also  increased  and  is  now  at  30.2%,  up  almost  8 percentage 
points  in  the  year.  However,  competition  in  broadband  access  is  still  weak  in  certain 
countries,  and  the  Commission  will  actively  monitor  its  development  and  intervene  where 
appropriate. 

Following  a  competition  investigation  on  the  basis  of  Art.  82  of  the  Treaty,  Deutsche 
Telekom  committed  vis-à-vis  the  Commission  to  terminate  a  presumed  margin  squeeze  as 
regards  broadband  access  by  reducing  its  tariffs  for  shared  access  (line  sharing)  with  effect 
from 1 April 2004.10  

EU25

Total broadband fixed access lines

23 298 450

17 220 005

164%

12 914 654

8 836 624

95%

46%

236%

29 660 970

35 000 000

30 000 000

25 000 000

20 000 000

15 000 000

10 000 000

5 000 000

250%

200%

150%

100%

50%

0%

July 2002

January 2003

July 2003

January 2004

July 2004

% variation since July 2002

Total broadband fixed access lines

Source: Commission services based on COCOM data. Figures for July 2002 to July 2003 refer to EU15 only

9 
10 

Based on NRA data 
Commission Press Release IP/04/281 http://europa.eu.int/rapid 

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Broadband penetration varies considerably across Member States and is generally highest in 
those  countries  where  viable  infrastructure-based  competition  exists  via  cable  and  other 
alternative networks and via local loop unbundling.  

EU25 Fixed broadband penetration rate, 1 July 2004

n
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t
a
l
u
p
o
p
0
0
1

r
e
p
s
e
n

i
l

d
n
a
b
d
a
o
r
B

18

16

14

12

10

8

6

4

2

0

3.8

3.5

2.0

2.2

2.5

1.5

1.7

0.2

0.4

0.5

0.7

15.6

14.7

14.0

12.1

11.0

8.7

8.2

7.4

7.6

7.6

6.4

6.1

5.7

6.5

6.6

6.7

EL SK PL CZ

LV

IE CY HU LT MT

SI

LU

IT

PT EU25 DE ES UK EU15 EE FR AT

FI

SE BE NL DK

Source: Commission services based on COCOM data. 

2.3 

Unbundled local loops 

A noteworthy trend has been the increase of 110% in unbundled local loops (fully unbundled 
and shared lines) from 1.8 m in July 2003 to more than 3.8 m in the EU 15 in July 2004. Two 
factors underlie these results: decisive regulatory action, in particular in terms of pricing, has 
yielded positive results, and in certain countries, new entrants are beginning to increase their 
investment in infrastructure. 

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2.4 

Fixed voice services 

Despite the continued slow decline of fixed sector revenues, there has, for the first time in a 
number of years, been an increase in the estimated number of players entering this market. 

Estimated number of fixed operators in EU25 & EU15

 2 500

 2 000

 1 500

 1 000

  500

1239

945

635

900

526

1583

1561

1484

2141

1738

1608

1237

1352

1231

1202

1237

1998

1999

2000

2001

2002

2003

2004

EU15 Public voice telephony
EU25 Public voice telephony

EU15 Public network
EU25 Public network

Source: Commission services based on NRA data.

This fact, combined with a continued general decline in incumbent market share, suggests that 
the  level  of  competition  in  the  fixed  market  in  several  countries  is  increasing.  Prices  have 
declined in some segments during the year and incumbent operators are offering more diverse 
and tailored pricing packages aimed at retaining customers. There has also been a significant 
increase in the take-up of fixed number portability across Member States.  

EU15 incumbents' average market share on the voice telephony market (based on revenues)

95%

85%

75%

65%

55%

79.4%

74.6%

67.2%

86.9%

72.8%

71.3%

64.9%

80.9%

70.0%

62.2%

76.8%

67.4%

66.5%

59.9%

Dec. 2000

Dec. 2001

Dec. 2002

Dec. 2003

Local calls

Long-distance calls

Calls to mobile

International calls

Source: Commission services based on NRA data. 

As  the  graph  above  shows,  the  decline  in  incumbent  market  share  is  continuing  across  all 
fixed call segments. However, in some Member States the incumbent’s share of the local call 
segment in particular remains high. There is also a strong correlation between the timing of 
liberalisation  of  the  market  and  incumbent  market share. This is particularly evident for the 

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new  Member  States,  where  the  incumbents’  share,  again  most  notably  in  the  local  call 
segment, is over 90% in many cases. 

31% of consumers now use an alternative operator for long distance or international calls. For 
local calls the figure is almost 20%. The majority of this access is provided indirectly, using 
for example, carrier selection or pre-selection. Only 6.47% are using direct access11 to another 
operator.  

Given the increase in mobile revenues, the decline in fixed revenues could, in part, be due to 
fixed-to-mobile  substitution.  For  many  of  the  new  Member  States,  where  the  penetration  of 
fixed  infrastructure  is  relatively  low,  new  subscribers  may  well  opt  directly  for  mobile 
telephony.  However,  there  are  indications  that  innovation,  including  the  arrival  of  new 
technologies such as voice over internet protocol and converged fixed-mobile products, may 
arrest the decline in fixed voice revenues over time. 

2.5 

Interconnection  

Interconnection  is  one  of  the  basic  building  blocks  for  a  competitive  market.  In  the  fixed 
sector  the  downward  trend  in  interconnection  tariffs  has  continued,  albeit  at  a  slower  pace, 
and  is  showing  signs  of  stabilising.  In  the  mobile  sector,  on  the  other  hand,  concerns  have 
been expressed for some time that in many cases mobile termination rates bear no relation to 
costs.  In  response  to  regulatory  intervention  there  has  been  a  welcome  downward  trend  in 
these rates over the last year. The average fixed-to-mobile termination rate for SMP operators 
in the EU 15 fell by 14% between July 2003 and July 2004. 

2.6 

Consumers 

The pattern of increasing consumer benefits, in terms of lower prices, greater choice and more 
innovative  services,  that  has  been  evident  since  e-communications  markets  were  first 
liberalised, is continuing as a result of the more competitive environment and the flexibility 
provided by the new regulatory framework. This year has seen increased choice through the 
entry  of  new  operators  into  the  market  and  more  options  for  broadband12.  As  competitive 
pressure intensifies, prices have fallen in some segments13.  

Innovative converged offerings can be seen in the fixed and mobile sectors, 3G is becoming a 
reality,  and  advanced  high-value  data  services,  underpinned  by  increasing  infrastructure 
investment, are widespread. However, many challenges remain. Competition in the local loop 
and  in  broadband  in  certain  countries  is  still  relatively  weak,  and  the  general  competitive 
situation across Member States is mixed. Further progress will depend on the extent to which 
the new regulatory framework is successfully implemented and applied in all Member States, 
as well as the effective application of EC competition rules.  

11 
12 
13 

Services provided over proprietary infrastructure or over fully unbundled lines  
Increasing variety of offerings in terms of price and capacity 
Long distance and international calls 

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3. 

TRANSPOSITION IN THE 25 MEMBER STATES 

Member States were required to transpose the EU regulatory framework by 24 July 2003 (EU 
15) as regards the core directives14 and by 30 October 2003 as regards the ePrivacy Directive; 
it applied in its entirety from 1 May 2004 for the ten new Member States. 

Rapid and correct transposition is of vital importance to the sector. Delay will slow down the 
process  whereby  national  regulatory  authorities  (NRAs)  analyse  markets  and  withdraw, 
amend  or  impose  regulation  in  the  light  of  the  level  of  competition  found  to  exist.  More 
worrying, however, is the negative signal delay sends to consumers and the market. In the five 
years  to  2003,  non-incumbent  fixed  line  operators  invested  70  billion  euros  in  the  EU  15 
alone15.  Incumbent  and  non-incumbent  players  are  looking  to  make  substantial  further 
investments  in  the  coming  years.  An  unsound  legal  framework  could  jeopardise  that 
objective.  

Twenty  Member  States  have  completed  the  adoption  of  primary  legislation  and  notified  the 
Commission  thereof.  This  is  a  major  achievement  which  in  all  cases  has  involved  either  a 
complete  recasting  of  existing  laws  or  the  introduction  of  major  new  legislation.  However, 
five  Member  States,  although  they  have  in  all  cases  carried  out  significant  steps  in  the 
legislative process, still need to adopt primary legislation to transpose the framework: 

Belgium, Czech Republic, Estonia, Greece, Luxembourg. 

infringement  proceedings  for  non-notification,  and 
The  Commission  has 
proceedings  are  pending  before  the  European  Court  of  Justice  against  Belgium,  Greece  and 
Luxembourg. 

launched 

Secondary  legislation  (substantive,  in  some  cases)  is  still  to  be  adopted  in  eight  Member 
States in order to give full effect to primary legislation: 

Spain, France, Cyprus, Latvia, Lithuania, Poland, Slovenia, Slovakia. 

The  Commission  is  currently  assessing  the  conformity  with  the  EU  acquis  of  the 
transpositions carried out in all Member States, and will take appropriate action in accordance 
with the Treaty. 

4. 

ARTICLE 7 PROCEEDINGS 

Under  Article  7  of  the  Framework  Directive  NRAs’  draft  measures  must  be  notified  to  the 
Commission for assessment prior to adoption, to ensure market definition and market analysis 
are carried out in accordance with EU competition rules and to allow for harmonisation within 
the  Single  Market.  The  Commission  may  comment  on  the  draft  measures  and,  should  it 
consider the market definition or SMP designation to be incompatible with Community law or 
to create a barrier to the Single Market, require their withdrawal.  

As  of  1  October  2004,  the  Commission  had  received  101  notifications  from  nine  Member 
States,  the  majority  submitted  by  Austria,  Finland,  Portugal  and  the  United  Kingdom.  The 

14 
15 

Framework, Access, Authorisation, Universal Service and Competition Directives 
Investment by New Entrants in Europe, 2004, Strategy and Policy Consultants Network 

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Commission has since closed 92 cases, providing guidance to NRAs in their market reviews 
whilst  addressing  policy  and  implementation  issues  to  ensure  a  consistent  yet  appropriately 
nuanced approach in all Member States. Furthermore, the Commission services have held 58 
pre-notification meetings with NRAs from 15 Member States to address issues arising from 
proposed measures. To date, there has been at least one notification on each  of the markets 
identified  in  the  Recommendation  on  relevant  markets  except  one,  namely  the  wholesale 
national  market  for  international  roaming  on  public  mobile  networks.  Up  to  1  November 
2004, the Commission used its veto powers on only three occasions 16. 

The  overall  picture  emerging  from  the  assessment  of  notifications  is  that  regulation  has 
become more focussed in addressing market failures. NRAs have tended not to deviate from 
the markets defined in the Recommendation. However, two markets in particular have been 
subject  to  differing  approaches,  the  wholesale  broadband  access  market  (inclusion  of 
broadband  access  via  cable,  which,  in  the  Commission’s  view,  is  only  possible  where  a 
product equivalent to bitstream is actually offered via cable), and the market for broadcasting 
transmission services (split by platform, i.e. terrestrial, cable, satellite).  

The general approach to SMP designation has been to follow the principles set out in the SMP 
Guidelines. While market share remains an important factor, other factors have also proved to 
be  significant  in  the  overall  analysis  (including  market  dynamics,  barriers  to  entry  and 
potential competition).  

In terms of remedies, NRAs in general tend to impose obligations on undertakings designated 
with SMP according to the competition problems identified in the relevant markets. In some 
cases, NRAs have adopted an asymmetric approach, i.e. imposing different remedies on SMP 
undertakings in similar markets in the same Member State. This is possible according to the 
framework, provided such treatment is justified.  

Finally, experience shows that  NRAs have  taken utmost account of the comments issued in 
Commission decisions when adopting their final measures. 

5. 

IMPLEMENTATION OF THE NEW REGULATORY FRAMEWORK IN THE 
EU 25 

While the picture in the market is broadly positive, the Commission has identified a number 
of  key  areas  where  regulation  in  the  Member  States  needs  to  be  improved.  The  following 
section refers to some of the major regulatory issues arising. 

5.1 

National regulatory authorities (NRA) 

The ability of national markets to function well is directly proportionate to the quality of the 
legal framework put in place in the Member States concerning the NRAs. 

16 

These cases concerned the market for international calls (Case FI/2003/0024 and FI/2003/0027) and the 
market  for  access  and  call  origination  on  public  mobile  telephone  networks  (Case  FI/2004/0082)  in 
Finland, and the market for transit services in the fixed public telephone network (Case AT/2004/0090) 
in Austria 

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NRAs  must  be  independent  of  all  commercial  or  other  vested  interests.  They  must  also  be 
entrusted  with  all  of  the  powers  laid  down  in  the  framework,  and  be  able  to  exercise  them 
without outside interference.  

The  Commission  is  strongly  supportive  of  the  work  the  NRAs  have  carried  out  so  far  in 
preparing  or  notifying  market  analyses,  and  in  particular  their  cooperation  in  the  European 
Regulators’  Group  to  seek  common  approaches  to  regulation  in  conformity  with  the 
framework. 

However,  the  Commission  has  substantial  concerns  that  the  principles  of  independence  and 
impartiality are still not fully observed in all twenty five Member States. Some of these arise 
from the fact that full separation between the State’s shareholding and the taking of regulatory 
decisions  is  still  not  ensured  in  all  instances.  There  is  also  concern  that  in  some  countries 
NRAs  may  be  impeded  in  the  application  of  appropriate  regulatory  remedies  in  the  light  of 
their  market  analyses.  This  can  arise  for  example  where  ministries,  which  have  not  been 
notified  as  NRAs  responsible  for  market  analysis,  intervene  by  giving  instructions  or 
directions affecting the NRAs’ regulatory decisions. In certain cases it is rather the national 
legislation  that  is  at  fault  for  limiting  the  discretion  of  the  regulator  to  regulate  the  market. 
This may take the form of a limitation on the regulatory remedies available to the NRA, or the 
imposition  in  the  legislation  of  excessive  criteria  for  the  imposition  of  regulatory 
requirements. Even where national law confers full powers on the NRA, there are cases where 
effective competition is precluded by the lack of enforcement of NRA decisions. 

A  further  issue  of  major  concern  to  the  Commission  is  the  length  of  the  procedures  for 
appeals against NRA decisions. The Commission is examining the situation in this regard in a 
substantial  number  of  Member  States.  This  is,  in  some  cases,  aggravated  by  the  systematic 
suspension of NRA decisions pending appeal. 

Finally, the need for NRAs to undertake market reviews in addition to their work on market 
supervision,  dispute  settlement  and  enforcement  has,  in  some  cases,  caused  severe  resource 
problems for a significant number of regulators. 

5.2 

Charges for authorisation of services 

Charges relating to the management of authorisation systems and the granting of rights of use 
should  be  transparent,  proportionate  and  objectively  justified  and  cover  only  the  actual 
administrative costs incurred. Other charges may not be imposed. 

The Commission is examining the position in a number of Member States where charges are 
relatively  high  and  where  compliance  with  these  principles  needs  to  be  verified.  It  is  also 
scrutinising  various  charges  on  market  players  and  contributions  to  schemes  for  the 
dissemination of broadband for conformity with the directives. 

5.3 

Individual rights of use for radio frequencies 

Where  individual  rights  of  use  of  radio  frequencies  are  granted  by  Member  States,  open, 
transparent  and  non-discriminatory  procedures  should  be  used.  While  this  requirement  has 
been extensively transposed, the Commission is examining whether the practical application 
of these criteria can be observed in practice in a number of Member States, in the absence of a 
national frequency allocation table or because of the licensing procedures. 

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5.4 

Rights of way, colocation and facility sharing  

The Commission notes the persistent problems that have arisen across the Union in particular 
in the granting of rights to install masts and antennas for the provision of mobile services, and 
related  fees.  This  has  in  a  number  of  cases  delayed  the  rollout  of  third  generation  (3G) 
infrastructure,  sometimes  in  the  face  of  strict  rollout  requirements  in  national  licences.  One 
instance  of  best  practice  in  this  regard  is  the  setting  up  by  an  NRA  of  a  publicly  available 
database of current and future locations of masts.  

5.5 

Provision of universal service 

The  provision  of  a  minimum  set  of  services  to  all  end-users  at  an  affordable  price  and 
specified quality is a key principle of the regulatory framework; Member States are required 
to ensure that no undertaking or category of undertaking is precluded a priori from providing 
universal  service.  The  Commission  is  examining  closely  concerns  that  in  a  number  of 
Member  States  the  universal  service  provider  may  be  designated  without  regard  to  this 
principle, or without the necessary transparency.  

5.6 

Must-carry obligations 

Member  States  may  impose  must-carry  obligations  only  where  they  are  necessary  to  meet 
clearly-defined  general  interest  objectives.  The  Commission  is  examining  the  way  in  which 
these  obligations  are  imposed  in  some  countries,  in  particular  to  see  whether  a  clear  link 
between the obligations and objectives has been established, so that the discretionary powers 
of the authorities to grant must-carry status do not give rise to arbitrary decisions. 

5.7 

Unsolicited commercial communications 

The Commission notes that, while the opt-in rules in the ePrivacy Directive have in general 
been  transposed,  there  is  a  tendency  to  move also towards voluntary codes to protect users. 
This development is welcomed. 

5.8 

Traffic data 

The  Commission  will  examine  the  growing  tendency  for  the  authorities  in  a  number  of 
Member States to increase the statutory period during which a requirement for the retention of 
traffic data may be imposed for law enforcement purposes.  

5.9 

Implementation of the transitional provisions in the EU 15 

Member  States from the EU 15 are required under  the  transitional  provisions  to  ensure  that 
existing regulatory obligations on SMP undertakings remain in place until determinations are 
made by regulators in accordance with the new framework. 

The Commission is examining concerns that there are still instances where such obligations, 
relating for example to cost accounting and accounting separation, are not well implemented, 
leading  to  margin  squeezes  on  new  entrants.  Differences  in  the  manner  and  detail  of  the 
regulatory scrutiny to which wholesale, access and retail tariffs have been subjected produces 
similar effects in some cases. 

The  Commission  is  also  concerned  that  the  positive  development  of  investment  by  new 
entrants  and  the  migration  of  customers  to  better-grade  products  via  a  move  from  resale 

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products to bitstream and local loop unbundling may in some cases be frustrated by process-
related  problems.  As  a  result,  developments  for  example  relating  to  rollout  of  local  loop 
unbundling  are  patchy  across  the  Member  States.  In  any  case  market  reviews  need  to  be 
speeded-up  and  application  of  the  transitional  regime  limited  to  a  minimum  in  order  to 
address outstanding issues.  

5.10 

Implementation of the ‘starting conditions’ in the new Member States 

The new Member States were required to ensure that regulatory obligations were in place on 
SMP undertakings by the date of accession. Some of the outstanding problems in the EU 10 
replicate those persisting under the old framework in the EU 15, such as cost accounting and 
tariff  transparency.  The  existence  of  an  appropriate  reference  interconnection  offer  is  also 
questionable in some of the new Member States. A further weakness in a number of them is 
the  absence  of  full  implementation  of  carrier  selection,  carrier  pre-selection  and  number 
portability. 

6. 

CONCLUSION 

Europe is at a critical stage in the development of a new and dynamic economy driven by the 
convergence  of  technologies  and  service  innovation.  While  e-communications  markets  are 
showing signs of resurgence, ground needs to be made up if the benefit to the wider European 
economy is to accrue.  

Full  and  correct  implementation  of  the  e-communications  regulatory  framework  and  the 
effective  application  of  EC  competition  rules  are  essential  prerequisites.  The  potential  for 
competition, innovation and investment will be fully realised only if Member States give high 
priority  to  transposing  and  giving  full  effect  to  the  EU  principles  already  decided.  The 
Commission will continue to report on progress, and will focus in particular on the practical 
application of transposed national provisions. 

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