Opinion of the European Economic and Social Committee on the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the Review of the EU Regulatory Framework for electronic communications networks and services
Date: 2007-02-16
Institutions: European Economic and Social Committee
Subjects: competition, consumer protection, information society, information technology, regulation of telecommunications, single market, transmission network

28.4.2007

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the Communication from the
Commission to the Council,
the European Economic and Social
Committee and the Committee of the Regions on the Review of the EU Regulatory Framework for
electronic communications networks and services

the European Parliament,

(2007/C 97/10)

On 29 June 2006 the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned
proposal.

The Section for Transport, Infrastructure and the Information Society, which was responsible for preparing
the Committee's work on the subject, adopted its opinion on 11 January 2007. The rapporteur was
Mr McDonogh.

At its 433rd plenary session, held on 15 and 16 February 2007 (meeting of 16 February), the European
Economic and Social Committee adopted the following opinion by 139 votes in favour with 1 abstention.

1. Background

1.1 Summary

The communication reports on the functioning of the directives
of
the regulatory framework for electronic communications
networks and services (1). It explains how the framework has
delivered on its objectives, and identifies areas for change. The
proposed changes are discussed in the associated Commission
Staff Working Document (2). The associated Impact Assess-
ment (3) captures the broader range of options considered prior
to drawing the conclusions presented in the communication.

1.2 Structure of the framework

Creating a single European information space with an open and
competitive internal market is one of the key challenges for
Europe (4), within the broader strategy for growth and jobs. Elec-
tronic communications underpins the whole of the economy,
and at EU level is supported by a regulatory framework that
entered into force in 2003.

The framework provides a single, common set of rules for all
communications that are transmitted electronically, whether
wireless or
Internet-based or circuit
switched, broadcast or personal (5). Its objectives are to encou-
rage competition in the electronic communications markets, to
improve the functioning of the Internal Market and to protect

fixed, data or voice,

(1) Directives 2002/19/EC, 2002/20/EC, 2002/21/EC, 2002/22/EC (OJ L
108, 24.4.2002, p. 7) and 2002/58/EC (OJ L 201, 31.7.2002, p. 37).

(2) SEC(2006) 816.
(3) SEC(2006) 817.
(4) COM(2005) 24, 2.2.2005.
(5) Regulation of commercial content services — such as Information
Society Services and broadcasting — that may be offered over transmis-
sion infrastructures are covered by other Community instruments
(such as the e-Commerce Directive 2000/31/EC and the TV Without
Frontiers Directive 89/552/EEC).
Information society services are
defined in Directive 2000/31/EC laying down a procedure for the
provision of information in the field of technical standards and regula-
tions as ‘any service normally provided for remuneration, at a distance, by
means of electronic equipment for the processing and storage of data, and at the
individual request of a recipient of a service’ (Art. 17).

the interests of European citizens (6).

The main elements of the framework's legislative instru-
ments can be summarised as follows:

— Framework Directive setting out

the main principles,
objectives and procedures for an EU regulatory policy
communications
regarding the provision of
services and networks.

electronic

— Access and Interconnection Directive stipulating proce-
dures and principles for imposing pro-competitive obliga-
tions regarding access to and interconnection of networks
on operators with significant market power.

— Authorisation Directive introducing a system of general
authorisation, instead of individual or class licences, to facili-
tate entry in the market and reduce administrative burdens
on operators.

— Universal Service Directive requiring a minimum level of
availability and affordability of basic electronic communica-
tions services and guaranteeing a set of basic rights for users
and consumers of electronic communications services.

— e-Privacy Directive setting out rules for the protection of
privacy and of personal data processed in relation to
communications over public communication networks.

(6) COM(2003) 784 final.

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— Commission Competition Directive consolidating the legal
measures based on Article 86 of the Treaty that have liberal-
ised the telecommunications sector over
the years (not
covered by this review).

have applied the EU regulatory framework in an effective and
investment (11).
pro-competitive manner have attracted most
Countries with strong competition between incumbents and
cable operators tend to have the highest broadband penetra-
tion (12).

— The Commission recommendation on relevant markets
defining a list of 18 sub-markets to be examined by national
regulatory authorities.

In addition, the Commission has adopted Radio Spectrum
Decision (622/2002/EC) that seeks to ensure availability and
efficient use of spectrum within the Internal Market.

1.3 Assessment of the framework — achievement of objectives

Market development

Since markets were fully opened up to competition in 1998,
users and consumers have benefited from more choice, lower
prices and innovative products and services. In 2005 the ICT
sector was valued at EUR 614bn (7).
ICT also contributes
macro-economically to productivity growth and increased
competitiveness of the European economy as a whole, and thus
is a factor in growth and job creation.

Stakeholder consultation

Responses to the Commission's ‘Call for Input’ (8) were generally
positive about the impact of the regulatory framework. Consu-
mers and industry groups supported the framework's approach,
albeit with criticisms concerning its implementation. Many
called for a simplification of the market review procedures and
generally welcomed the new institutional arrangements for spec-
trum harmonisation (9).

Innovation, investment and competition

Summar y

The Commission considers that more effective management of
to contribute to
spectrum would release its full potential
offering innovative, diverse and affordable services to the Euro-
pean citizen and to strengthen the competitiveness of European
ICT industries. In other respects, the Commission considers that
the principles and flexible tools in the regulatory framework,
when applied fully and effectively, offer the most appropriate
means of encouraging investment, innovation and market devel-
opment.

1.4 Changes proposed overall

The current regulatory framework has produced considerable
benefits, but it needs attention in a number of areas in order to
remain effective for the coming decade. The two main areas for
change are:

— application to electronic communications of the Commis-
sion's policy approach on spectrum management, as set out
in the Communication of September 2005 (13);

— reduction of

the procedural burden associated with the

reviews of markets susceptible to ex-ante regulation.

In addition to these two, the Communication identifies other
changes that seek to:

— consolidate the single market,

— strengthen consumers and user interests,

— improve security and

— remove outdated provisions.

European investment in this sector over recent years has been
higher than in other world regions (EUR 45bn in 2005) (10).
Competition remains the main driving force. Countries that

(7) COM(2006) 68, 20.2.2006.
(8) The responses are available at

http://ec.europa.eu/information_society/policy/ecomm/info_centre/
documentation/public_consult/review/index_en.htm.

(9) The Radio Spectrum Decision 676/2002/EC allows for technical
harmonisation of spectrum usage condition (via the Radio Spectrum
Committee); strategic advice on radio spectrum policy via the Radio
Spectrum Policy Group.

(10) See footnote 6.

This Communication, and the staff working paper which
accompanies it (14), set out
the Commission's analysis and
current ideas for change.

(11) London Economics in association with PricewaterhouseCoopers,
study for DG Information Society and Media of
the European
Commission on ‘An assessment of the Regulatory Framework for Elec-
tronic Communications — Growth and Investment in the EU e-
communications sector’ (to be published).

(12) See associated Commission Staff Working Document, section 2.
(13) COM(2005) 411, 6.9.2005.
(14) SEC(2006) 816.

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2. Introduction

Framework and make recommendations on how the policies for
development and growth of
the electronic communications
sector could be improved (16) to advance the i2010 strategy.

and

services.

networks

communications

2.1
The Committee is mostly supportive of the Commis-
sion's proposals on the review of the Regulatory Framework for
electronic
The
Committee also recognises the comprehensive work carried-out
by the Commission in the review process, where expert studies
and the input of consultations with all vested interests have
been synthesised to arrive at
the recommendations in the
Communication COM(2006) 334 ‘Review of the EU Regulatory
Framework for electronic communications networks and services’ and
the
associated Staff Working Document SEC(206) 816.
However, the Committee would like the Commission to take
note of the reservations in this opinion and the recommenda-
tions listed below.

the Union. Therefore,

The Regulatory Framework must be aligned with the
2.2
strategy for development of the ICT sector and support the
critical contribution that electronic communications make to
the economic and social
the
life of
Committee strongly endorses the objectives of the Framework
review to further the ‘i2010 Initiative: European Information
Society 2010’ (15), which sets out the contribution of the ICT
sector to the Lisbon strategy to stimulate growth, competitive-
ness and employment. Specifically, we recognise the importance
of the Regulatory Framework to the creation of a Single Euro-
pean Information Space offering affordable and secure high
bandwidth communications with rich and diverse content and
digital services; world class performance in research and innova-
tion in ICT by closing the gap with Europe's leading competi-
tors; and an Information Society that is inclusive, provides high
quality public services and promotes quality of life.

2.3
The Committee recognises the success of the framework
since its introduction. We note the emergence of a pan-Euro-
pean telecom industry;
increased competition for services in
many markets; high levels of innovation; and reductions in the
real costs of EU telecommunications services. We also note the
growth in investment in the market in recent years and that the
level of investment in Europe has overtaken investment in the
US and the Asia Pacific Region. The fact that the highest rates of
investment have occurred in those countries that have applied
the framework in a timely and efficient manner is testament to
its beneficial effect. Notwithstanding these positive effects, the
Committee also notes that, across Europe, the problem of the
Digital Divide has continued to grow.

2.4
The Committee directs the attention of the Commission
to previous Opinions by the EESC which support the Regulatory

(15) COM(2005) 229 final, see

http://ec.europa.eu/information_society/eeurope/i2010/i2010/
index_en.htm.

In this opinion, the Committee wants to comment on areas of
specific concern and to make some recommendations.

3. Recommendations

3.1
As a general principle of regulation, the public interest
— the ‘public good’ — should have primacy over private and
business interests. The Committee also believes that the market
alone cannot properly regulate itself for the benefit of the public
good. Therefore, a strong regulatory framework is needed to
promote the interests of
the greater number of citizens, as
intended by the Lisbon strategy.

3.2
Taking due account of the caveat at 3.1, Europe should
move as quickly as possible towards a more market-based
approach to spectrum management, with more empowerment
of market players and the introduction of more widespread
spectrum trading, and with less national bureaucratic prescrip-
tion on bandwidth allocation.

3.3
A European Spectrum Agency should be established to
create a coherent and integrated regime for pan-European spec-
trum management.

(16) Including EESC opinions on:

— Communication from the Commission to the Council, the Euro-
pean Parliament, the European Economic and Social Committee
and the Committee of the Regions — Adapting e-Business poli-
cies in a changing environment: The lessons of the Go Digital
initiative and the challenges ahead — OJ C 108 of 30.4.2004
p. 23.

— Proposal for a decision of the European Parliament and of the
Council on establishing a multi-annual Community programme
on promoting safer use of the Internet and new online technolo-
gies — OJ C 157 of 28.6.2005 p. 136.

— Communication from the Commission to the Council, the Euro-
pean Parliament, the European Economic and Social Committee
and the Committee of the Regions — Connecting Europe at
high speed: recent developments in the sector of electronic
communications — OJ C 120 of 20.5.2005 p. 22.

— Communication from the Commission to the Council, the Euro-
pean Parliament, the European economic and social committee
and the committee of the Regions: i2010 — A European Infor-
mation Society for growth and employment — OJ C 110 of
9.5.2006 p. 83.

— Communication from the Commission to the Council, the Euro-
pean Parliament and the European Economic and Social
Committee and the Committee of the Regions — eAccessibility
— OJ C 110 of 9.5.2006 p. 26.

— Communication from the Commission to the Council, the Euro-
pean Parliament, the European Economic and Social Committee
and the Committee of the Regions — Bridging the Broadband
Gap — CESE 1181/2006.

— Communication from the Commission to the Council, the Euro-
pean Parliament, the European Economic and Social Committee
and the Committee of the Regions — A strategy for a Secure
Information Society — Dialogue, partnership and empowerment
— R/CESE 1474/2006 still ongoing.

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In tandem with relaxing the notification requirements
3.4
under the Article 7 procedure, the Commission should increase
its vigilance re the regulatory measures enforced by National
Regulatory Authorities (NRA)
to encourage the diversity of
supply.

The Committee urges the Commission to work with the
3.12
NRAs on the formulation of a Community-wide penalty regime
for electronic communication security crimes. Consideration
should also be given to mechanisms which would facilitate a
fast-track, EU-wide ‘right of action’ by consumers (an individual
or collective action) against individual perpetrators.

3.5
The Commission should respect the differences in condi-
tions that apply in the various national markets and the special
expertise to deal with those conditions within the NRAs. There-
fore, the Committee has serious reservations about the proposed
veto power for the Commission under the Article 7 procedure,
and it stresses the need for extreme caution before exercising
such power.

3.13
Beyond the scope of the Regulatory Framework, the
Committee urges the Commission to systematically investigate
security offences — such as spam, phishing and hacking —
perpetrated by wrongdoers outside of the EU, and to pursue
remedies at inter-government level.

3.6
The Committee is concerned that undue bias in the
Regulatory Framework towards large multinational service and
network providers could eventually lead to oligopoly. The Regu-
latory Framework should take due cognizance of this concern
and should not unfairly favour pan-national companies.

4. Comments

4.1 Support for the Framework and the Review

To advance the development of the Internal Market, the
3.7
harmonisation of policy and consistency in the regulatory
approach,
the
Communications Committee
Spectrum
Committee, as well as the European Regulators Group and the
Radio Spectrum Group.

the Commission should make greater use of
and

the Radio

3.8
To provide consumers with good information on the
choice of services available to them, the Committee proposes
that NRAs be encouraged to publish web-based tools to facilitate
consumer comparisons of the electronic communication offer-
ings (services and pricing) available from competing providers
in their market.

3.9
The proposed Green Paper in 2007 on universal service
should recognise the need to bridge the widening gap in infra-
structure and services between the most developed and least
developed regions of the EU. If an analysis — based on tools
and an actually specified schedule — shows that this gap is not
addressed by the Universal Service Obligation, then alternative
means must be found; perhaps through national
investment
programmes, supported by EU structural funds.

4.1.1
The creation of a coherent, pan-European market for
electronic communications networks and services requires a
good regulatory framework to knit together the complex poli-
tical, and socio-economic factors that must be harmonised. The
current
framework has proven to be effective at creating a
competitive, innovative and high growth market for communi-
cations services in Europe, while at the same time it has declared
its intention to balance the needs of service providers, consu-
mers and national interests.

The current framework entered into force 3 years ago
4.1.2
and it is time to review its terms in the light of experience and
consideration of future challenges. The expert studies (19) consid-
ered by the Commission and the extensive process of consulta-
tion with all interested parties, have comprehensively informed
the review process and the Commission's proposals show that a
considered view has been taken of all factors.

4.1.3
the
balanced and appropriate changes to the current framework.

The proposals contained in the Communication and
introduces well-

associated Staff Working Document

4.1.4
obsolete provisions in the Framework.

The Committee notes the proposals to remove certain

3.10
The Committee believes that because of the growing
importance of broadband service to economic and social devel-
opment, broadband connectivity should be included within the
scope of the universal service definition (17).

4.2 Spectrum management

Furthermore,

3.11
repeating the recommendation in the
Opinion of the Committee on ‘Bridging the Broadband Gap’ (18),
the Commission should specify the minimum transmission
speeds and quality of service which should apply to the defini-
tion of ‘broadband’.

(17) COM(2005) 203, and EP and Council Directive 2002/22/EC on
universal service and users' rights relating to electronic communica-
tions networks and services.

(18) Communication from the Commission to the Council, the European
Parliament, the European Economic and Social Committee and the
the Regions — Bridging the Broadband Gap —
Committee of
CESE 1181/2006.

4.2.1
The importance of radio spectrum as a production
factor for electronic communications services and networks
(such as mobile, wireless and satellite communications, TV and
radio broadcasting) and other applications (short range devices,
defence,
radio location and GPS/Galileo satellite
system) has increased dramatically during the last decade. It is
estimated that
the total value of radio spectrum dependent
services in the EU is in excess of EUR 200 billion, i.e. between
2 % and 2.5 % of annual European gross product.

transport,

(19) Including Preparing the next steps in regulation of electronic communica-
tions, Analysis (2006); An assessment of the regulatory framework for elec-
tronic communications — growth and investment in the EU e-communica-
tions sector, London Economics in association with Price Waterhouse (2006).

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Since most spectrum in the EU is already allocated to
4.2.2
some usage or users, any new allocation can only be made at
the expense of existing users. Spectrum policy must take into
account not only the needs of electronic communications, but
all other spectrum uses, including research, aeronautical, mari-
time, space, audio visual (content), defence industry, earth obser-
vation, medical,
inclusion, road safety, scientific, etc. Policies
competing for radio spectrum are increasingly developed and
agreed for the European Union as a whole.

The process of creating the Internal Market should
4.3.2
always ensure that the public interest — the ‘public good’ —
will have primacy over private and business interests. The
market alone cannot properly regulate itself for the benefit of
the public good. This is particularly true when dealing with
service quality and in circumstances where competition is weak.
Therefore, a strong regulatory framework is needed to promote
the interests of the greater number of citizens, as intended by
the Lisbon strategy, by providing them with the best technology
at the best price.

4.2.3
Rapid technological development in combination with
the digitalisation of transmission as well as the convergence of
communication services has blurred the link between radio
access platforms and the services on which spectrum manage-
ment was traditionally based.

Technological

innovation is significantly reducing the
4.2.4
risk of interference between different spectrum users, reducing
the need for granting exclusive access to spectrum resources and
allowing a more extensive application of general authorisations
incorporating light technical spectrum usage constraints. The
application of these innovative technologies could thereby lower
access barriers to spectrum and increase its efficient use.

The critical need to provide for the huge demand for
4.2.5
pan-European spectrum by emerging electronic communication
service technologies, and the equally important need to protect
spectrum required for other critical applications, necessitates a
comprehensive overhaul of the spectrum management mechan-
isms in the EU.

4.2.6
It is impractical to expect all the different regulatory
authorities in Europe who currently manage spectrum allocation
to deliver a unified spectrum regime for Europe. It makes sense
to authorise a central authority — a European spectrum Agency
— to coordinate, steer and control the management of this
critical resource. Since the activities of this agency would touch
closely upon the basic public freedoms, it would have to report
on its activities to the European Parliament and to the Council.

4.2.7
Commercial interests should be given greater freedom
to trade spectrum, in a regulated way, so that commercial spec-
trum in the field of electronic communications is efficiently
used for the most economically productive purposes.

4.3.3
The majority of service and network providers operate
within a single national market. But the Committee is concerned
that undue bias in the Regulatory Framework towards large
multinational service and network providers could eventually
lead to oligopoly, with a few large companies dominating the
EU market. The Regulatory Framework should take due cogni-
zance of
this concern and should not unfairly favour pan-
national companies at the expense of the national operators.

4.3.4 Whereas a centralised European Regulator, similar to
that which operates for banking, would possibly be a quicker
and more direct way to bring about the completion of the
Internal Market
is also
possible that
the loss of expertise and judgement currently
provided by the National Regulatory Authorities (NRA) would
be to the detriment of some countries, and national resistance
might actually hinder progress towards the completion of the
Internal Market.

for electronic communications;

it

For the moment,

4.3.5
it is best if the current regime of
decentralised regulation is strengthened by greater use by the
Commission of the committee and policy advisory structures
that currently exist. Better to agree on a common approach
than to try to enforce a ‘one-size-fits-all’.

Although it is beyond the scope of

4.3.6
the Regulatory
Framework, the Committee is concerned that rapid growth in
the availability of international media services through electronic
communications networks could lead to an undesirable prolif-
eration of low quality media content. The Commission should
consider how EU policy might support the production and
dissemination of high quality media content, and especially
content which respects the rich cultural diversity of the EU.

4.3 Internal Market and Competition

4.4 Consumer rights

4.3.1
The creation of the Internal Market is one of the main
driving forces of the growth in prosperity and improving quality
of life in Europe. Through a blending of guidance, direction and
enforcement, the regulatory framework has provided the policy
backbone for the advancement of the Internal Market electronic
communications networks and services. This has been achieved
while simultaneously respecting the different circumstances and
challenges facing each national state; and encouraging both
and
increasing competition and investment
services.

in networks

service quality and price

As the complexity of available services increases, and
4.4.1
new pan-European services emerge, it is important that consu-
mers are properly informed about their choices. Good informa-
tion on competing offers must be made available to consumers
transparency. Also,
to provide
consumer rights legislation must be kept up-to-date to cope
with the new dynamics of the market. The Committee proposes
that NRAs be encouraged to publish web-based tools with stan-
dardised benchmarks to facilitate consumer comparisons of the
electronic communication offerings (services and pricing) avail-
able from competing providers in their market.

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It is recognised that the Universal Service Directive
4.4.2
must be updated and the Commission's proposal to introduce a
Green Paper discussion document next year
is welcomed.
However, it is important that citizens living in less developed
regions are not
further disadvantaged by the removal of
from dominant service
Universal Service Obligations (USO)
providers. The problem of the Digital Divide will become even
more acute when new business models will drive the growth of
WebTV services for those citizens who have high-speed broad-
band connectivity.

4.4.3
In the event that it is decided that USO is no longer a
fair or practical way to guarantee the provision of essential 21st
Century electronic communications services,
like broadband,
then alternative funding mechanisms must be found to bridge
the digital divide — perhaps through EU structural funds

4.5 Security

ment of the services. In addition, security breaches can attack
the rights of EU citizen's to privacy. It is vital to the Commis-
sion act forcibly to protect the security of networks and the
rights of citizens. We welcome measures proposed in the review
of the framework to address these concerns.

The security of electronic communications is vital to
4.5.3
the adoption and growth of
information technologies and
services. Strong penalties are needed across the EU to prevent
this type of crime from undermining consumer confidence and
retarding the development of
the Information society. The
Committee urges the Commission to work with the NRAs on
the formulation of a Community-wide penalty regime for elec-
tronic communication security crimes. Consideration should
also be given to mechanisms which would facilitate a ‘right of
action’ by consumers against perpetrators.

4.5.1
The Committee refers to the Opinion of the EESC on
COM(2006) 251 re the Strategy for a Secure Information
Society, and the Committee's call for an integrated information
security strategy linking European initiatives.

4.5.2
Breaches of security on electronic communications
networks greatly undermine consumer confidence and enjoy-

In addition to security problems caused by persons
4.5.4
inside the EU, the security of European networks and citizen's
are subject to daily attack from outside the Union. Every step
should be taken to pursue the perpetrators of these attacks,
including holding the states from which the attacks occur
accountable for the damage they do.

Brussels, 16 February 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS