Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on market reviews under the EU Regulatory Framework (2nd Report) Consolidating the internal market for electronic communications {SEC(2007) 962}
Date: 2007-07-11
Institutions: European Commission
Subjects: competition policy, electronic mail, information society, market research, regulation of telecommunications, single market, transmission network

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 11.7.2007 
COM(2007) 401 final 

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

on market reviews under the EU Regulatory Framework (2nd report) 

Consolidating the internal market for electronic communications 

{SEC(2007) 962} 

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

on market reviews under the EU Regulatory Framework (2nd report) 

Consolidating the internal market for electronic communications 

(Text with EEA relevance) 

TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

4.1. 

4.2. 

Introduction .................................................................................................................. 3 

Overview of the Article 7 procedure............................................................................ 3 

Internal market for e-communications ......................................................................... 4 

Experience from the notifications ................................................................................ 5 

Market definition and market analysis......................................................................... 5 

Remedies ...................................................................................................................... 6 

4.2.1.  Fixed access markets.................................................................................................... 6 

4.2.2.  Asymmetries in fixed and mobile termination............................................................. 7 

4.2.3.  Broadband markets....................................................................................................... 8 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

6. 

6.1. 

6.2. 

6.3. 

7. 

Trends in the competitve situation in markets analysed .............................................. 9 

Retail calls and leased lines markets............................................................................ 9 

Transit markets and trunk segment of leased lines .................................................... 10 

Mobile access and call origination............................................................................. 10 

Broadcasting transmission markets............................................................................ 11 

Horizontal issues ........................................................................................................ 11 

Streamlining of procedures ........................................................................................ 11 

Belated adoption of final measures and implementation of remedies ....................... 12 

Application of Article 5 of the Framework Directive................................................ 13 

Conclusions ................................................................................................................ 13 

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1. 

INTRODUCTION 

The  realisation  of  an  open  and  competitive  internal  market  for  electronic 
communications  within  a  single  European  Information  Space  still  remains  a 
challenge for Europe. While the regulatory framework has led to significant benefits 
for citizens and enterprises alike through reduction of prices, increased choices and 
the creation of a level-playing field across the EU, there are still obstacles to the full 
exploitation of the potential of the internal market.1 

This  Communication  gives  an  insight  into  the  experience  gained  from  the  market 
review  process  and  highlights  some  major  trends  and  issues.  It  complements  the 
i2010 Annual report2 and the 12th Implementation Report3. Further, it contributes to 
the  review  of  the  regulatory  framework  that  the  Commission  will  propose  to  the 
Council and the European Parliament in the second half of 2007. It demonstrates that 
the  consultation  mechanism  under  Article  7  of  the  Framework  Directive4  has 
contributed  significantly 
the  regulatory 
framework, in particular with regard to market definition and market analysis. At the 
same time, it illustrates that in certain areas, such as the imposition of remedies, there 
is  still  scope  for  rendering  regulation  more  effective  and  for  increasing  the 
consistency of remedies across the EU in order to work towards an internal market 
for electronic communications. 

implementation  of 

the  coherent 

to 

2. 

OVERVIEW OF THE ARTICLE 7 PROCEDURE  

The  key  objectives  of  the  regulatory  framework  that  entered  into  force  in  2003  are 
the promotion of competition, investment and innovation within the internal market 
for electronic communications in the interest of consumers and competitiveness. The 
consultation mechanism built in the framework plays a vital role in achieving these 
goals.  Regulatory  decisions  are  adopted  by  the  national  regulatory  authorities 
(NRAs) but the review mechanism at EU level safeguards internal market objectives. 
This role of the Commission under Article 7 of the Framework Directive is decisive 
in helping to (i) ensure consistent regulation across the EU; (ii) to limit regulation 
to markets which will not become competitive without regulatory intervention; and 
(iii) to bring more transparency in the regulatory process. 

Pursuant to Article 7 of the Framework Directive draft regulatory measures of NRAs 
concerning the market review process are to be notified to the Commission and the 
NRAs of other Member States. The Commission may request an NRA to withdraw a 
draft regulatory measure if it is found not to be compatible with Community law, in 

1 
2 

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4 

A single market for citizens, COM(2007) 60 final of 21.2.2007 

i2010 - Annual Information Society Report 2007, COM(2007) 146 final of 30.3.2007.  

European Electronic Communications Regulation and Markets 2006 (12th Report), COM(2007) 155 of 
29.3.2007. 

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  services  (the  “Framework 
Directive”), OJ L 108, 24.4.2002, p. 33. 

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particular  as  concerns  market  definition  and/or  SMP  analysis.  Such  a  request  for 
withdrawal has been issued by the Commission in five cases. In addition, NRAs have 
decided to take back their  notifications  in 28 cases. The  Commission and  the  other 
NRAs  may  also  make  comments  on  the  imposition  of  remedies  that  shall  be  taken 
utmost  account  of  by  the  notifying  NRA.  Thus  far,  more  than  600  draft  regulatory 
measures  were  notified  to  the  Commission,  which  means  that  the  first  round  of 
market reviews for the 18 markets referred to in the Commission Recommendation 
2003/311/EC5 is almost complete.  

A  more  detailed  overview  of  the  procedure  can  be  found  in  Annex  I  to  this 
Communication. 

3. 

INTERNAL MARKET FOR E-COMMUNICATIONS 

Whilst  many  operators  are  present  in  several  countries6,  most  markets  in  the 
electronic communications sector are national. Operators which strive to offer similar 
services  across  Europe,  in  particular  for  multinational  corporate  clients,  and  to 
simplify  the  sales  and  marketing  process,  depend  on  reasonably  similar  wholesale 
inputs  across  Member  States7.  The  notifications  received  so  far  show  that  the 
remedies imposed are not always as effective as they could be and that regulation is 
not always consistent across the EU, even in cases where market circumstances are 
similar. Market players wishing to operate in several Member States sometimes face 
a  variety  of  regulatory  environments.  In  order  to  enable  the  European  electronic 
communications industry to exploit the full potential of  the internal market, further 
steps  should  be  taken  to  ensure  effective  regulation  in  all  Member  States  and  to 
remove  unfounded  divergences  in  regulation  across  Member  States.  Without 
consistent ex ante regulation, operators, in particular those who are present in several 
Member States, face difficulties in introducing their offerings on a European basis. 

A lack of regulatory certainty could have detrimental effects on the development of 
the electronic communications sector in the EU8. During the public consultation on 

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Commission  Recommendation  2003/311/EC  of  11  February  2003  on  relevant  product  and  service 
markets  within  the  electronic  communications  sector  susceptible  to  ex  ante  regulation  in  accordance 
with  Directive  2002/21/EC  of  the  European  Parliament  and  of  the  Council  on  a  common  regulatory 
framework  for  electronic  communication  networks  and  services  ("Recommendation  on  relevant 
markets"), OJ L 114, 8.5.2003, p. 45. 

In the fixed telephony and broadband markets, many operators are active in various Member States and 
even  across  the  EU.  Also  in  mobile  markets,  several  undertakings  operate  in  various  Member  States, 
with  one  operator  being  active  in  more  than  half  of  the  EU25.  In  the  satellite  broadcasting  markets, 
operators  already  offer  cross-border  services.  See  the  study  entitled  "Preparing  the  Next  Steps  in 
Regulation  of  Electronic  Communications  -  A  contribution  to  the  review  of  the  electronic 
communications regulatory framework" of July 2006 (the "Hogan & Hartson and Analysys Study"). 

See the Hogan & Hartson and Analysys Study. 

The  electronic  communications  sector  accounts  for  around  44,5%  of  the  whole  ICT  sector  which  is 
valued at 649 billion in 2006 according to the Commission's 12th Implementation Report. 

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the  review  of  the  EU  regulatory  framework9  it  was  suggested  that  the  Commission 
could play a stronger role in the coherent application of remedies.10 

4. 

EXPERIENCE FROM THE NOTIFICATIONS 

The  regulatory  framework  for  electronic  communications  networks  and  services  is 
based  on  regulation  of  markets,  not  regulation  of  technologies.  These  markets  are 
defined and analysed in accordance with competition law principles. Where a given 
market  is  susceptible  to  ex  ante  regulation  and  an  NRA  finds  one  or  more 
undertakings to have significant market power or “SMP” (equivalent to “dominance” 
under  competition  law)  on  that  market,  it  must  impose  appropriate  regulation. 
Conversely,  regulation  must  not  be  imposed,  or  existing  regulation  must  be 
withdrawn on markets where no undertaking is found to have SMP. 

This chapter presents developments in market definition and analysis and highlights 
certain inefficiencies and divergences in the application of remedies that continue to 
exist  and  risk  undermining  the  internal  market.  It  is  complemented  by  the 
Commission staff working document annexed to this Communication which provides 
a detailed overview.  

4.1.  Market definition and market analysis 

The first Communication on market reviews11 underlined that the involvement of the 
Commission  allowed  to  achieve  a  high  degree  of  consistency  regarding  market 
definition  and  market  analysis.  The  experience  from  the  notifications  received 
thereafter shows that this continues to be the case.  

Under the regulatory framework for electronic communications, markets have to be 
defined  according  to  competition  law,  taking  utmost  account  of  the  principle  of 
technology neutrality. Since the first Communication on market reviews, the Article 
7 procedure in combination with the Recommendation on relevant markets ensured 
that  NRAs  define  markets  in  a  consistent  way,  including  those  that  comprise  new 
technologies such as high bandwidth broadband services based on VDSL technology. 
The  Commission  found  that  a  mere  upgrade  of  an  existing  service  delivered  via  a 
new  technology  does  not  in  itself  constitute  a  new  market.12  The  Commission  also 

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10 

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12 

See,  in particular,  the  Communication on  the  Review of the  EU  Regulatory  framework  for  electronic 
communications, COM(2006) 334 final of 28.6.2006.  

See  the  study  by  London  Economics,  in  association  with  PricewaterhouseCoopers,  entitled  "An 
assessment of the regulatory framework for electronic communications: growth and investment in the 
EU e-Communications sector" of July 2006 (the "LE PWC Study"). 

See the Communication on Market reviews under the EU Regulatory Framework, COM(2006) 28 final 
of 7.2.2006. 

The  Commission  sent  a  letter  of  formal  notice  to  Germany  because  of  amendments  in  the  German 
Telecoms Act which would effectively exempt fast internet access networks (VDSL) from competition, 
see the press release IP/07/237 of 26.2.2007.  

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gave  guidance  on  the  inclusion  of  leased  lines  using  alternative  interfaces,  such  as 
Ethernet, in the wholesale leased lines markets13.  

Regarding SMP, NRAs must assess, in line with EU competition law principles and 
taking the utmost account of the SMP guidelines14, whether an undertaking enjoys a 
dominant position on the relevant market. Very high market shares (above 50%) are 
in  themselves,  save  in  exceptional  circumstances,  evidence  of  the  existence  of  a 
dominant  position,  whereas  market  shares  over  40  %  would  normally  raise  SMP 
concerns.  According  to  the  case  law,  the  inclusion  of  captive  sales  in  the  relevant 
market  may  depend  on  whether  the  traffic  generated  by  a  subsidiary  of  an 
undertaking would be made available in the merchant market in case of an increase 
or  decrease  of  market  prices.  Other  factors  relevant  for  the  SMP  analysis  include 
market dynamics, control of infrastructure that cannot be duplicated easily, barriers 
to entry and potential competition. 

4.2. 

Remedies 

When  an  undertaking  enjoys  significant  market  power  on  a  given  market,  the 
relevant NRA has to impose regulatory obligations which are appropriate to remedy 
the identified competition problem. 

Regarding the choice of remedies, the Commission observes less consistency across 
the EU than has been achieved in market definition and SMP analysis. Differences in 
remedies were not always justified by diverging market conditions or other notified 
specificities.  In  addition,  not  always  the  most  efficient  remedy  was  chosen.  The 
following sections highlight the main areas of concern. 

4.2.1.  Retail fixed access markets  

In  the  markets  for  retail  "access"  (i.e.  connection  to  a  fixed  telephony  network 
enabling calls and related services) certain NRAs did not impose cost accounting and 
accounting  separation  obligations  or  failed  to  set  the  appropriate  details  thereof.15 
The  absence  of  such  obligations  in  the  retail  access  markets  make  it  difficult  to 
impose  effective  price  regulation  for  various  related  wholesale  products  (such  as 
wholesale  line  rental  and  local  loop  unbundling)  and  to  monitor  compliance  with 
non-discrimination obligations. It also makes the ex post enforcement of competition 
rules difficult, for example in cases of anticompetitive pricing.  

13 

14 

15 

Leased  lines  with  alternative  interfaces  (including  Ethernet)  must  be  included  in  the  markets  for 
wholesale  leased  lines  if  an  assessment  according  to  the  principles  of  competition  law  indicates  that 
wholesale  leased  lines  with  alternative  interfaces  are  substitutable  for  wholesale  leased  lines  with 
traditional interfaces, in particular if their functionality and price levels are equivalent. 

Commission Guidelines on market analysis and the assessment of significant market power under the 
Community  regulatory  framework  for  electronic  communications  networks  and  services  (the  "SMP 
Guidelines"), OJ C 165 11.7.2002, p. 6. 

The  Commission  pointed  to  the  lack  of  cost  orientation  and  the  missing  accounting  separation  in 
Germany and the missing information of the cost accounting methodology in Slovakia. 

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Furthermore the imposition and implementation of wholesale line rental obligations 
varies significantly across Member. The divergences are not always justified on the 
basis of diverging market conditions.16 Finally, the Commission points out that a lack 
of  effective  competition  in  the  retail  access  markets  must  preferably  be  addressed 
through  effective  wholesale  regulation  (e.g  wholesale  line  rental  or  local  loop 
unbundling). When assessing the need for retail regulation, in particular in a second 
round market analysis, NRAs should first analyse and try to enhance the impact of 
existing wholesale remedies17. 

Remedies  imposed  in  the  retail  access  markets  vary  substantially  across  Member 
States. Such differences are not always justified by diverging market circumstances. 

4.2.2.  Fixed and mobile termination markets 

In  principle  each  operator  enjoys  a  monopoly  position  for  terminating  calls  on  its 
network. Although the measures adopted so far have significantly brought down the 
level of termination rates throughout the European Union, regulation continues to be 
applied unevenly. In particular, the following issues remain of concern. 

Although some form of cost orientation is foreseen in most Member States, a large 
spread  in  average  mobile  termination  rates  still  exists  across  Member  States. 
Divergences  may  be  partly  justified  by  differing  costs,  but  are  also  caused  by  the 
different price setting methodologies that NRAs apply and the different timeframes 
foreseen  for  reducing  mobile  termination  rates  to  the  costs  of  an  efficient  operator. 
High termination rates thus continue to translate into high, albeit diminishing, prices 
for consumers in a number of Member States. 

Additionally,  a  number  of  NRAs  authorised  high  termination  rates  for  smaller 
operators  that  have  not  benefited  from  economies  of  scale  immediately  after  their 
market  entry.  This,  however,  may  constitute  a  disincentive  to  gain  market  share  at 
retail level, as the enlargement of the customer  base would lead to lower regulated 
termination  rates.  Therefore  termination  rates  should,  as  a  principle,  be  symmetric, 
whereas  asymmetry  requires  an  adequate  justification.  The  Commission  recognizes 
that,  in  certain  exceptional  cases,  asymmetry  might  be  justified  by  objective  cost 
differences which are beyond the control of the operators concerned, e.g. unalterable 
differences  in  key  network  elements.  If  asymmetries  in  termination  rates  are  not 
based on objective cost differences, they must be phased out within a reasonable time 
frame. 

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For example, the Commission commented on wholesale line rental in Portugal, Spain, United Kingdom 
and asked Poland to specify its wholesale line rental obligation. 

In particular, the Commission commented on the need to take into account wholesale remedies in the 
case of Hungary, France, Slovenia and Spain and the enforcement of these remedies in France. 

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In the fixed and mobile termination markets, the Commission emphasized the need to 
move,  in  principle,  towards  symmetric  termination  rates  based  on  costs  of  an 
efficient operator and encouraged NRAs to lower rates accordingly, in particular for 
mobile  termination.  As  the  diverging  approaches  across  Member  States  have  a 
negative  effect  of  on  the  internal  market,  the  Commission  invited  NRAs  to  work 
closely with the European Regulators Group (ERG) to arrive at a coherent EU-wide 
approach on cost calculation and on enhancing symmetry.  

4.2.3.  Wholesale broadband markets (bitstream access and local loop unbundling) 

Efficient  regulation  of  the  markets  for  wholesale  broadband  access  ("bitstream 
access") and for unbundled access is a key factor for the competitive development of 
retail  broadband  markets  and  for  the  development  of  triple  play  services  provided 
over  broadband  infrastructure.  Bitstream  access  enables  new  entrants  to  provide 
retail broadband access services to end users. It is therefore an important step for new 
entrants towards investment in a more comprehensive roll out of their own network, 
leading towards local loop unbundling. After a certain time, competitors tend to rely 
on a combination of both forms of access, investing in their own infrastructure up to 
the  incumbent's  local  loop  where  economically  possible,  i.e.  normally  in  more 
densely populated regions, whereas they depend on bitstream access in rural areas.  

Sometimes the belated18 application of remedies in the wholesale broadband access 
markets  impaired  the  effectiveness  of  regulation.  In  several  cases,  the  points  in  the 
network  at  which  bitstream  access  had  to  be  granted  were  either  not  specified  or 
insufficient  to  enable  the  development  of  competition19.  Price  regulation  was  not 
always  effective20  and  based  on  different  price  setting  methods  across  the  EU. 
Ineffective price regulation in some Member States distorts the internal market and 
gives  rise  to  distortions  of  competition,  mainly  through  margin  squeezes.  Not  all 
Member States obliged the incumbent to make available "naked DSL" which enables 
alternative operators to provide broadband to end customers without the obligation to 
rent a telephone line from the incumbent21.  

Due  to  the  high  costs  of  the  duplication  of  the  "last  mile"  of  PSTN  networks,  the 
former  monopolists  still  enjoy  a  very  strong  position  in  the  market  for  wholesale 
unbundled  access.  Therefore  the  market  was  found  to  be  non-competitive  by  all 
NRAs that have notified this market thus far.  

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For example, the German NRA notified final remedies more than one year after the notification of the 
market analysis. 

This was the case in Luxemburg, the Czech Republic and Poland. 

In particular Czech Republic, Germany and Finland. 

The Commission commented on that matter following notifications from Germany and Luxemburg. 

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In  some  Member  States,  parts  of  the  local  loop  are  currently  upgraded  with  fibre 
optic infrastructure between the main distribution frames and the street cabinets. The 
Commission points out that this should not undermine the competitors' ability to gain 
access  to  an  SMP  operators'  network  at  an  appropriate  level  in  order  to  be  able  to 
continue  to  compete  efficiently.  In  view  of  these  developments  the  markets  for 
bitstream  access  and  local  loop  unbundling  should  in  the  future  not  be  analysed  in 
isolation so as to ensure a coherent approach. 

5. 

TRENDS IN THE COMPETITVE SITUATION IN MARKETS ANALYSED 

One of the main objectives of the Article 7 mechanism is to limit regulation to those 
markets which, due to inter alia their structural characteristics, offer no perspective 
of  becoming  effectively  competitive  without  regulatory  intervention.  This  chapter 
deals with certain markets where developments of competition have been observed. 
These developments will be taken into account in the review of the Recommendation 
on  relevant  markets.  The  development  of  all  markets  mentioned 
the 
Recommendation  on  relevant  markets  is  described  in  detail  in  Annex  III  to  this 
Communication.  

in 

5.1. 

Retail calls and leased lines markets  

Across the EU, the retail calls markets show a noticeable trend towards competition. 
In several Member States, the markets for international calls in particular have been 
found  competitive  already  in  the  first  round  of  market  analyses.22  Even  in  those 
markets  which  have  not  been  found  competitive  so  far,  competitive  conditions  are 
improving,  i.e.  prices  are  falling  and  new  entrants  are  gaining  market  share. 
Increased  competitive  pressure  from  neighbouring  markets,  such  as  mobile, 
constrains  the  incumbent's  behaviour.  Wholesale  regulation  (carrier-selection  and 
carrier-pre-selection,  sometimes  in  combination  with  wholesale  line  rental)  reduces 
barriers  to  entry.  Additionally,  the  spread  of  broadband  internet  connections  in 
combination with the emergence of Voice over Broadband (VoB) is expected further 
to enhance competition in the calls markets in the coming years.  

Appropriate  regulation  at  wholesale  level  should  make  retail  regulation  redundant 
once  alternative  operators  have  entered  the  market  and  are  competing  with  the 
incumbent  to  deliver  better  services  and  lower  prices  to  consumers.  NRAs  should 
therefore  focus  on  enforcing  effective  wholesale  regulation.  They  are  invited  to 
monitor the effects of wholesale regulation carefully and, if necessary, to adjust the 
remedies in the wholesale markets accordingly, with a view to ensuring competition 
at retail level. NRAs are also invited to cooperate closely with national competition 
authorities  to  ensure  that  competition  in  the  retail  calls  markets  is  not  distorted 
through anticompetitive behaviour. 

22 

This  was  (partly)  the  case  in  Austria,  Belgium,  Czech  Republic,  Denmark,  Finland,  Germany,  the 
Netherlands, Sweden and the UK. 

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Technological  developments  as  well  as  the  consistent  and  efficient  enforcement  of 
appropriate  wholesale  regulation  has  enhanced  competition  in  the  retail  calls  and 
leased lines markets. 

5.2.  Markets for wholesale transit and trunk segments of leased lines 

Nine  NRAs  found  the  wholesale  market  for  trunk  segments  of  leased  lines  to  be 
effectively competitive.23 In some Member States, the core network infrastructure of 
the  incumbent  operators  has  been  duplicated  and  alternative  operators  started 
offering  trunk  leased  lines  to  third  parties  in  competition  with  the  incumbent. 
Networks  of  alternative  operators  may  not  always  cover  the  entire  territory  of  a 
Member  State,  but  in  many  Member  States  there  is  potential  to  expand  coverage. 
This  may  affect  the  countervailing  buying  power  of  alternative  operators  vis-à-vis 
incumbents.  

Four NRAs found the transit markets to be competitive. Nevertheless, even in some 
of  the  non-competitive  transit  markets,  tendencies  towards  competition  emerged  as 
the market share of SMP operators, while still significant, eroded because alternative 
operators duplicated infrastructure not only for self-supply, but also in order to offer 
transit services to third parties. The core network infrastructure has been duplicated 
and  leased  lines,  which  serve  as  input  to  provide  transit  services  are  generally 
available.  

It is reasonable to expect that the duplication of backbone infrastructure in transit and 
trunk segments will continue in the future although alternative operators in a number 
of  Member  States  may  still  depend  on  the  incumbent's  lines  for  some  less  busy 
routes.  

5.3.  Wholesale mobile access and call origination 

In  the  first  round  of  market  analyses,  five  NRAs  found  the  wholesale  market  for 
mobile  access  and  call  origination  services  not  to  be  effectively  competitive  and 
hence  proposed  regulation.24  In  other  Member  States  the  market  was  found  to  be 
competitive.  In  a  number  of  Member  States,  mobile  access  and  call  origination  is 
being  provided  on  a  commercial  basis.  Once  service  providers  have  entered  the 
market, either through regulated or commercially agreed access arrangements with a 
mobile  network  operator,  the  host  operator  may  have  an  economic  interest  to 
continue the supply relationship.25 

23 

24 

25 

This was the case in Austria, Belgium, the Czech Republic, Finland, Hungary, Latvia, the Netherlands, 
Sweden and Slovenia. 

In  Cyprus  and  Slovenia,  a  single  operator  was  found  to  have  SMP.  In  Ireland,  Spain  and  Malta 
collective dominance was found to exist. In Ireland, the final measure has been withdrawn by the Irish 
regulator following national court procedures.  

In case the host operator would cease supplies, the service provider may switch to another wholesale 
supplier. Alternatively, if the service provider exits the retail market, the host operator may not be able 
to  capture  a  sufficient  part  of  the  service  provider's  retail  customers  to  outbalance  its  lost  wholesale 
income. 

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While the market for wholesale mobile access and call origination services has been 
found  effectively  competitive  in  most  Member  States  it  remains  to  be  assessed 
whether  the  development  of  competition  e.g.  through  the  existence  of  MVNO 
agreements, is already sufficient in the wholesale access and call origination market. 

5.4.  Wholesale broadcasting transmission markets 

All NRAs, with the exception of Cyprus, have so far regulated at least a part of the 
transmission  services.  Regulation  varies 
wholesale  market  for  broadcasting 
substantially  across  Member  States  and  so  do  the  underlying  market  conditions.  In 
most Member States, terrestrial platforms are predominant, whereas in other Member 
States cable is the main platform. The timing of digital switchover varies across the 
EU  and  national  legislation  conferring  "must  carry"  status  on  certain  broadcasters 
also diverges substantially. 

The  broadcasting  transmission  market  is  characterised  by  technological  progress. 
The spread of digital terrestrial television will enable consumers to receive a larger 
number of programmes. Development of internet TV and digital terrestrial TV might 
prospectively  lower  the  switching  costs  between  infrastructures.  The  increased 
number of transmission infrastructures should reduce the dependency of broadcasters 
on  one  particular  transmission  platform  further  and  increase  their  countervailing 
buyer power.  

6. 

HORIZONTAL ISSUES 

In its first Communication on Market Reviews under the EU Regulatory Framework, 
the  Commission  encouraged  NRAs  in  particular  to  obtain  the  views  of  market 
players  and  NCAs  prior  to  the  European  consultation  and  noted  that  a  separate 
notification of different stages of the market review unnecessarily prolongs the 
regulatory  process.  In  addition  to  these  concerns,  which  remain  of  relevance  and 
were  re-inforced  during  the  last  year,  the  Commission  highlights  the  following 
horizontal issues. 

6.1. 

Streamlining of procedures 

In order to ensure efficient decision making within the rigid timescales provided for 
under  Article  7  of  the  Framework  Directive,  the  Commission  has  adopted  a 
Procedural  Recommendation26.  Although  this  Recommendation  contains  clear  but 
flexible  procedures  for  the  cooperation  between  the  Commission  and  NRAs, 
experience shows that additional implementing measures could be useful to increase 
legal  certainty,  to  minimise  the  administrative  burden  for  NRAs,  operators  and  the 
Commission and to simplify the process further.  

The  Commission  will  lay  down  proposals  for  streamlining  the  procedures  in  a 
revised procedural Recommendation, later this year.  

26 

EN 

Commission  Recommendation  of  2003/561/EC  EC  of  23  July  2003  on  notifications,  time  limits  and 
consultations  provided 
(“the  Procedural 
Recommendation”), OJ L 190, 30.7.2003, p. 13. 

the  Framework  Directive 

in  Article  7  of 

for 

11 

   EN 

 
                                                 
6.2. 

Belated adoption of final measures and implementation of remedies  

As electronic communications markets often evolve quickly, regulatory intervention 
can tackle market failures efficiently only if regulatory measures are implemented in 
an expedient manner. 

In certain Member States, NRAs adopted final measures with significant delays after 
the  completion  of  the  market  review  process.  These  delays  should  be  avoided  in 
order to guarantee a timely reaction to market failures identified through the market 
review process.  

Additionally,  delays  continue  to  occur  in  certain  Member  States  because  remedies 
are  notified  separately  from  the  underlying  market  definition  and  analysis.  As  a 
consequence, market failures are not tackled in a timely fashion, which reduces the 
effectiveness  of  regulation  and  thus  creates  risks  for  the  competitiveness  of  the 
sector. 

NRAs are urged to conduct and notify all stages of a market review at the same time 
(market definition, market analysis and the intended regulatory obligations). 

Finally,  in  some  cases  a  significant  period  has  elapsed  without  re-notification  of  a 
draft  measure  that  had  to  be  withdrawn.  The  draft  measure  in  question  should  be 
amended  and  submitted  to  national  consultation  as  soon  as  possible  after  the 
Commission  requires  the  NRA  to  withdraw  the  measure  so  as  to  ensure  that 
competition problems are addressed as quickly as possible.  

Some NRAs have imposed generic measures and have left the details of remedies for 
commercial  negotiations  between  market  players,  e.g.  by  imposing  a  general  cost 
orientation  obligation  without  specifying  price  ceilings  or  detailed  cost  accounting 
obligations. If negotiations between market players failed, the NRA would intervene 
in  a  dispute  settlement  in  order  to  impose  specific  prices  on  the  basis  of  the  cost 
orientation  obligation.  While  in  principle  the  undertakings  should  themselves 
negotiate in good faith their access and interconnection agreements27, the competitive 
problems identified in the context of the regulatory procedures should be tackled as 
soon  and  as  effectively  as  possible.  The  implicit  threat  of  further  regulatory 
intervention, either in the context of a dispute settlement or ex officio, if commercial 
negotiations fail to remedy the competition problem identified, seems insufficient as 
it  might  not  provide  transparency  and  legal  certainty  for  market  players  and  could 
cause unnecessary delays.  

Remedies  should  be  defined  in  a  sufficiently  clear  and  detailed  fashion  in  the  final 
measures  and  should  be  suitable  to  tackle  the  identified  competitive  failures 
efficiently. 

27 

See Recitals 5 and 6 and Article 4 of the 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 
associated facilities 8the "Access Directive"), OJ L 108, 24.4.2002, p.7. 

EN 

12 

   EN 

 
                                                 
6.3. 

Application of Article 5 of the Access Directive 

Member States have used Article 5(1) of the Access Directive in several cases28. It 
allows Member States to impose regulatory measures on non-SMP operators to the 
extent it is necessary to ensure end-to-end connectivity. The Commission has pointed 
out  that  Article  5  must  not  be  used  to  circumvent  the  market  analysis  process  and 
should be used only in cases where end-to end connectivity needs to be guaranteed. 

NRAs should use their powers under Article 5 of the Access Directive only in clearly 
defined circumstances in order to avoid overregulation and insecurity in the markets. 

7. 

CONCLUSIONS  

Almost all NRAs have finalised the first round of market reviews of the 18 markets 
included  in  the  Recommendation,  with  the  exception  of  the  NRAs  in  Bulgaria  and 
Romania  that  joined  the  EU  only  on  1  January  2007.  The  EU  consultation 
mechanism  established  under  Article  7  of  the  Framework  Directive  has  been 
instrumental for the promotion of competition, investment and innovation as well 
as for the consolidation of the internal market for electronic communications. It 
has ensured a consistent approach, in particular regarding market definition and SMP 
analysis  across  Europe,  brought  sound  economic  analysis  to  the  market  review 
process  and  resulted  in  increased  transparency.  Overall,  this  form  of  cooperation 
between  the  Commission  and  NRAs  led  to  better  regulation  based  on  competition 
principles  and  contributed  to  the  development  of  a  common  European  regulatory 
culture.  The  Commission's  comments  on  the  proposed  remedies  gave  guidance 
towards  a  consistent  regulatory  approach  across  Europe,  whilst  taking  into  account 
specific national circumstances. The Commission focussed on ensuring that remedies 
are appropriate, i.e. based on the nature of the problem identified, proportionate and 
justified in the light of the objectives laid down in the Framework Directive.  

However further steps need to be taken to enhance the effectiveness of regulation and 
to achieve greater consistency in the selection and application of remedies. 

Although the regulatory approaches for market definition and market power analysis 
have converged to a large extent, remedies are not always appropriate to resolve 
the  identified  competition  problems  and  sometimes  differ  markedly  amongst 
Member States in spite of similar market situations. 

. 

28 

In  the  case  NL/2003/17,  the  Dutch  Ministry  for  economic  affairs  notified  a  decree  that  contained  a 
general obligation to ensure end-to-end connectivity for all publicly available telephone services in the 
Netherlands. In case UK/2003/19, the British NRA notified an obligation for the only provider of access 
control services for digital TV (Sky Subscriber Services Limited) to provide access to these services on 
fair,  reasonable  and  non-discriminatory  terms.  The  Polish  NRA  imposed  a  non-discrimination  and 
transparency obligation on the incumbent, in particular in order to prevent it from interfering with the 
quality  of  IP  transmission  between  its  customers  and  other  electronic  communications  operators  (see 
case  PL/2006/0382).  In  case  UK/2006/0454,  the  British  NRA  proposed  to  impose  an  access  related 
obligation on BT, according to which BT is required to purchase wholesale narrowband call termination 
services from any operator of a public electronic communications network. 

EN 

13 

   EN 

 
                                                 
The  Commission  will  strive  to  further  streamline  procedures  and  to  minimise  the 
administrative  burden  for  market  players  and  NRAs,  in  line  with  the 
Commission's  strategy  for  better  regulation29..  It  will  make  corresponding 
proposals in the context of the review of the regulatory framework. In addition, the 
Commission  invites  Member  States  to  contribute  to  the  streamlining  of  the 
market review process at the national level. In particular, NRAs should avoid (i) 
delays between the notification of draft measures and the adoption of final measures, 
and (ii) notifying market analysis and intended remedies in different steps.  

is  currently  reviewing 

The  Commission 
the  regulatory  framework  for  e-
communications  and  its  proposal  will  be  put  forward  to  the  Council  and  the 
Parliament in the second half of 2007. The revised regulatory framework however is 
not expected to enter into force before 2009-2010. In the short term the Commission 
is reviewing the Recommendation on relevant markets and the Article 7 procedural 
Recommendation and the new versions of the texts will be adopted in the second half 
of 2007.  

29 

See  in  particular  the  Commission  Communication,  Better  Regulation  for  Growth  and  Jobs  in  the 
European Union, COM(2005) 97 final of 16.3.2005. 

EN 

14 

   EN