CELEX: 62003CJ0334
Language: en
Date: 2005-10-20 00:00:00
Title: Judgment of the Court (First Chamber) of 20 October 2005.#Commission of the European Communities v Portuguese Republic.#Failure of a Member State to fulfil obligations - Directive 90/388/EEC - Telecommunications - Article 4d - Rights of way - Lack of a guarantee of non-discrimination in the grant of rights of way - Non-transposition.#Case C-334/03.

Case C-334/03
      Commission of the European Communities
      v
      Portuguese Republic
      (Failure to fulfil obligations – Directive 90/388/EEC – Telecommunications – Article 4d – Rights of way – Lack of a guarantee of non-discrimination in the grant of rights of way – Non-transposition)
      Opinion of Advocate General Geelhoed delivered on 2 June 2005 
      Judgment of the Court (First Chamber), 20 October 2005 
      Summary of the Judgment
      1.     Approximation of laws — Measures for the establishment of a competitive market in the telecommunications sector — Directive
            90/388 — Prohibition on Member States discriminating between the providers of public telecommunications networks in the grant
            of rights of way for the provision of those networks — Differences in circumstances irrelevant with regard to a finding of
            discrimination
      (Commission Directive 90/388, as amended by Directive 96/19, Art. 4d)
      2.     Approximation of laws — Telecommunications sector — Directive 90/388 — Discrimination between operators in the grant of rights
            of way — Justification — None 
      (Commission Directives 90/388, as amended by Directive 96/19, and 97/33, Art. 5(3) and Annex III)
      1.     Article 4d of Directive 90/388 on competition in the markets for telecommunications services, as amended by Directive 96/19,
         which requires that Member States do not discriminate between the providers of public telecommunications networks in the grant
         of rights of way for the provision of those networks, is a specific application of the general principle of equality. The
         prohibition of discrimination, which is one of the fundamental principles of Community law, requires that comparable situations
         should not be treated in a different manner unless such a distinction can be objectively justified.
      
      It is not conclusive in this regard whether the exemption from payment of the taxes and charges connected with the installation
         of the telecommunications infrastructure, the access to the various parts of the installation and the apparatus necessary
         for the operation of the transferred network stems from legislation or whether, instead, it follows from case‑law. In both
         cases, the existence of the exemption is attributable to the domestic legal position in the Member State concerned. 
      
      In addition, the comparison between the circumstances of undertakings in the telecommunications sector should not be confined
         to a comparison between only those undertakings with public service obligations. The position of the provider of a public
         telecommunications network must be compared with that of all its competitors, which also carry out their activities in the
         telecommunications market and intend to put in place alternative networks. Failing this, the objective of the Community legislation,
         namely the establishment of a competitive market in the telecommunications sector, would be seriously jeopardised.
      
      (see paras 23-26, 28-29)
      2.     Compensation for the costs resulting from the obligation on the existing telecommunications operator for maintaining the infrastructure
         in good condition with regard to its functioning, its security and its maintenance, as well as for expanding the network,
         both qualitatively and quantitatively, so as to ensure the provision of telecommunications services for general use, as a
         universal service, throughout the national territory, is not capable of justifying, having regard to Directive 90/388 on competition
         in the markets for telecommunications services, as amended by Directive 96/19, discrimination between operators as regards
         the grant of rights of way. Where such compensation falls to be granted, it is the net cost of implementing a universal service
         which should be taken into consideration, in accordance with Article 5(3) of Directive 97/33/EC on interconnection in telecommunications
         with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision
         (ONP), read in conjunction with Annex III thereto. The fact that the existing operator is required to give competing operators
         access to the basic telecommunications network in a transparent and non-discriminatory manner also cannot provide justification
         for such a difference in treatment. 
      
      (see paras 30-34)

      JUDGMENT OF THE COURT (First Chamber)
      20 October 2005 (*)
      
      (Failure of a Member State to fulfil obligations – Directive 90/388/EEC – Telecommunications – Article 4d – Rights of way – Lack of a guarantee of non-discrimination in the grant of rights of way – Non-transposition)
      In Case C-334/03,
      ACTION under Article 226 EC for failure to fulfil obligations, brought on 30 July 2003,
      Commission of the European Communities, represented by A. Alves Vieira, S. Rating and G. Braga da Cruz, acting as Agents, with an address for service in Luxembourg,
      
      applicant,
      v
      Portuguese Republic, represented by L. Fernandes and P. de Pitta e Cunha, acting as Agents, with an address for service in Luxembourg,
      
      defendant,
      THE COURT (First Chamber),
      composed of P. Jann, President of the Chamber, K. Schiemann, N. Colneric (Rapporteur), J.N. Cunha Rodrigues, and E. Levits,
         Judges,
      
      Advocate General: L.A. Geelhoed,
      Registrar: R. Grass,
      having regard to the written procedure,
      after hearing the Opinion of the Advocate General at the sitting of 2 June 2005,
      gives the following
      Judgment
      1       By its application, the Commission of the European Communities requests the Court to declare that, by failing to ensure, in
         practice, the transposition of Article 4d of Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets
         for telecommunication services (OJ 1990 L 192, p. 10), as amended by Commission Directive 96/19/EC of 13 March 1996 (OJ 1996
         L 74, p. 13) (‘Directive 90/388’), the Portuguese Republic has failed to fulfil its obligations.
      
        Legal context
       Community law
      2       According to recital 23 in the preamble to Directive 96/19, ‘the telecommunications organisations in many Member States enjoy
         legal privileges to install their network on public and private land, without charge or at charges set simply to recover incurred
         costs’ and ‘if Member States do not grant similar possibilities to new licensed operators to enable them to roll out their
         network, this would delay them and in certain areas be tantamount to maintaining exclusive rights in favour of the telecommunications
         organisation’.
      
      3       Article 2 of Directive 90/388 provides:
      ‘1.      Member States shall withdraw all those measures which grant:
      a)      exclusive rights for the provision of telecommunications services, including the establishment and the provision of telecommunications
         networks required for the provision of such services; or
      
      b)      special rights which limit to two or more the number of undertakings authorised to provide such telecommunications services
         or to establish or provide such networks, otherwise than according to objective, proportional and non-discriminatory criteria;
         or 
      
      c)      special rights which designate, otherwise than according to objective, proportional and non-discriminatory criteria, several
         competing undertakings to provide such telecommunications services or to establish or provide such networks.
      
      2.      Member States shall take the measures necessary to ensure that any undertaking is entitled to provide the telecommunications
         services referred to in paragraph 1 or to establish or provide the networks referred to in paragraph 1.
      
               …’
      4       Under Article 4d of Directive 90/388: 
      ‘Member States shall not discriminate between providers of public telecommunications networks with regard to the granting
         of rights of way for the provision of such networks. 
      
      Where the granting of additional rights of way to undertakings wishing to provide public telecommunications networks is not
         possible due to applicable essential requirements, Member States shall ensure access to existing facilities established under
         rights of way which may not be duplicated, at reasonable terms.’ 
      
      5       Article 5(3) of Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications,
         with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision
         (ONP) (OJ 1997 L 199, p. 32) provides that, in order to determine the burden which the provision of universal service represents,
         organisations with universal service obligations are required, at the request of their national regulatory authority, to calculate
         the net cost of such obligations. 
      
       National law 
      6       Article 12(1) of Law No 91/97 of 1 August 1997 (Diário da República I, Series A, No 176, of 1 August 1997, p. 4010) defines the ‘basic telecommunications network’ as a public network which
         meets the telecommunications needs of citizens and of economic and social activities throughout the national territory, and
         which ensures international connections.
      
      7       Article 12(2), as amended by Law No 29/2002 of 6 December 2002 (Diário da República I, Series A, No 282, of 6 December 2002, p. 7556), defines the basic telecommunications network as being comprised of all
         of the parts of the network which are necessary in order to provide a universal telecommunications service.
      
      8       Under Article 13 of Law No 91/97, operators of basic telecommunications networks are exempted from the payment of tax or charges
         for the installation of the telecommunications infrastructure, for access to the various parts of the installation and for
         the apparatus necessary for the operation of the network concerned. 
      
      9       On 20 March 1994 the Portuguese State and PT Comunicações, a subsidiary of Portugal Telecom SA in the area of fixed telephony
         services, signed a concession contract for the supply of communication services that are regarded as public services, authorising
         PT Comunicações to use and operate the telecommunications infrastructures for an initial period of 30 years. 
      
      10     Under the basic rules of this concession of the public telecommunications service, approved by Decree-Law No 40/95 of 15 February
         1995 (Diário da República  I, Series A, No 39, of 15 February 1995, p. 969), PT Comunicações was granted the exclusive right to install, manage and operate
         the infrastructure comprising the ‘basic telecommunications network’. As set out in Article 2(1)(a) of those basic rules annexed
         to Decree-Law No 40/95, the purpose of the concession in question was the ‘establishment, management and operation of the
         infrastructure comprising the basic telecommunications network’. The concession also entrusted the property of the infrastructure
         to PT Comunicações, with the obligation to maintain it in good working condition, particularly with regard to the functioning,
         security and maintenance of the network, and to expand the infrastructure qualitatively and quantitatively so as to ensure
         the provision of telecommunications services for general use, as a universal service, throughout the national territory. 
      
      11     As consideration for the concession, PT Comunicações was obliged, under Articles 24, 25 and 32 of the basic concession rules,
         to pay the State, as the grantor, a fee equivalent to 1% of the gross operating income earned from providing the services
         transferred. The concessionaire was provided with a right to compensation if it incurred a loss as a result of performing
         its universal service obligations. 
      
      12     The infrastructure comprising the basic telecommunications network belonged to the Portuguese State until the transfer of
         the network to PT Comunicações at the end of 2002. The transfer was made for a value equivalent to the total amount of the
         royalty owed to the State at that time under the concession contract from 1995 to the end of its initial period of validity.
         
      
      13     On 17 February 2003, by means of Decree-Law No 31/2003 of 17 February 2003 (Diário da República  I, Series A, No 40, of 17 February 2003, p. 1044) a new concession contract was approved which modified the basic rules of the concession. It did not effectively change the
         basic network operator’s obligations. Article 6(b) of the annex to that decree-law provides that, as the concessionaire, PT
         Communicações is required to provide the services which form the subject-matter of the public telecommunications service concession,
         and to guarantee the interoperability, continuity, availability, durability and quality of those services. 
      
       Pre-litigation procedure
      14     On 2 May 2002 the Commission sent the Portuguese authorities a letter of formal notice, requesting them to submit their observations
         on the circumstance that PT Comunicações, as the sole company responsible for the management and operation of the basic telecommunications
         network, was exempted from the payment of any tax on the installation of its network under Article 13 of Law No 91/97, thus
         constituting an infringement of the principle of non-discrimination in the grant of rights of way, as laid down in Article
         4d of Directive 90/388.
      
      15     In a letter of 2 July 2002, the Portuguese Government stated its intention to remedy the alleged discriminatory treatment.
         However, after receiving no further reply, the Commission sent out a reasoned opinion in a letter of 19 December 2002 requesting
         the Portuguese Republic to take the measures necessary to comply with that opinion within two months of its notification.
         
      
      16     As the Portuguese Government did not reply to that reasoned opinion, the Commission decided to bring the present action. 
         
      
       The action
       Arguments of the parties
      17     According to the Commission, through the exemption provided for in Article 13 of Law No 91/97, read in conjunction with Decree-Law
         No 31/2003 and Decree-Law No 40/95, which preceded it, which establish that PT Comunicações is responsible for the installation
         and operation of the basic network, the Portuguese Republic treated the company differently from other operators. As there
         is no specific justification for that different treatment, it breaches Article 4d of Directive 90/388.
      
      18     Since PT Comunicações provides services through its basic telecommunications network which compete directly with the services
         provided by other operators, the privileges in question give PT Comunicações a direct advantage over its competitors. The
         fact that the new operators incur higher costs than the existing operator may mean that the development of their networks
         is delayed. 
      
      19     The Commission takes the view that this difference in treatment cannot be justified.
      20     In contrast, the Portuguese Government argues that it is not reasonable to characterise disparate treatment of different situations
         as discrimination. Any undertaking which is responsible for providing the universal service has obligations to develop and
         maintain the network which are not imposed on competing operators. 
      
      21     The Portuguese Government argues that its sole aim in exempting PT Comunicações from any tax owed for utilisation of the public
         domain and allowing it to carry out work on the latter without municipal consent was to eliminate obstacles to the development
         of the basic network infrastructure and to make it easier to complete the works necessary for the installation, preservation
         and maintenance of that infrastructure. It did not intend to give PT Comunicações any advantage over its competitors. 
      
      22     The Portuguese Government draws attention to the fact that PT Comunicações is required to give competing operators access
         to the basic network in a transparent and non-discriminatory manner. In other words, it may not derive any advantage, in connection
         with the provision of telecommunications services, from the tax exemption granted to it for the expansion and maintenance
         of the network. 
      
       Findings of the Court
      23     Article 4d of Directive 90/388 which requires that Member States do not discriminate between the providers of public telecommunications
         networks in the grant of rights of way for the provision of those networks, is a specific application of the general principle
         of equality (see, by analogy, in regard to Article 7(5) of Directive 96/92/EC of the European Parliament and of the Council
         of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20), Case C-17/03 VEMW and Others [2005] ECR I-0000, paragraph 47).
      
      24     The prohibition of discrimination, which is one of the fundamental principles of Community law, requires that comparable situations
         should not be treated in a different manner unless such a distinction can be objectively justified (see, inter alia, Case
         C-280/93 Germany v Council [1994] ECR I-4973, paragraph 67). 
      
      25     In this case, it is common ground that PT Comunicações is exempted from payment of the taxes and charges connected with the
         installation of the telecommunications infrastructure, the access to the various parts of the installation and the apparatus
         necessary for the operation of the transferred network.
      
      26     The first point to be noted is that it is not conclusive in this regard whether this exemption stems from Article 13 of Law
         No 91/97, read in conjunction with Decree-Law No 31/2003 and Decree-Law No 40/95, which preceded it, as the Commission maintains,
         or whether, instead, it follows, as the Portuguese Government argues, from the case-law of the Portuguese administrative tribunals
         providing that utilisation of the public domain for the provision of a public service may give rise to taxation only if there
         is a private use of semi-public assets in order to meet needs that are private, in addition to those that are collective.
         In both cases the existence of the exemption is attributable to the domestic legal position in the Member State concerned.
         
      
      27     Furthermore, it is not inconceivable that the position of an undertaking responsible for providing the universal service,
         which is under obligations to develop and maintain the network, might be compared with that of other telecommunications operators
         which provide the services of their choice under the terms that they consider to be the most profitable.
      
      28     Admittedly, utilisation of the public domain for private purposes may be differentiated from utilisation of the public domain
         for purposes meeting collective needs. However, in contrast to what the Portuguese Government argues, the comparison between
         the circumstances of undertakings in the telecommunications sector should not be confined to a comparison between only those
         undertakings with public service obligations. 
      
      29     The position of PT Comunicações, as the provider of a public network, must be compared with that of its competitors, which
         also carry out their activities in the telecommunications market and intend to put in place alternative networks. Failing
         this, the objective of the Community legislation, namely the establishment of a competitive market in the telecommunications
         sector, would be seriously jeopardised. As is apparent from recital 23 in the preamble to Directive 96/19, if Member States
         do not grant new licensed operators the same legal rights and privileges to install their networks on public and private land
         as were granted to existing telecommunications organisations, the rolling-out of the new operators’ networks would be delayed,
         which would, in certain sectors, be tantamount to maintaining exclusive rights for the existing organisations.
      
      30     It is necessary, therefore, to determine whether the disparate treatment established here, consisting of exemption from the
         payment of tax and charges under the national provisions at issue, is justified in the light of Directive 90/388.
      
      31     Firstly, under Article 9, read in conjunction with Article 8(1)(a), of the basic rules of the public telecommunications service
         concession, the Portuguese State made PT Comunicações responsible for maintaining the infrastructure concerned in good condition
         with regard to its functioning, its security and its maintenance, as well as for expanding the network, both qualitatively
         and quantitatively, so as to ensure the provision of telecommunications services for general use, as a universal service,
         throughout the national territory.
      
      32     However, compensation for the costs resulting from that obligation is not, in this case, capable of justifying discrimination
         between operators as regards the grant of rights of way. 
      
      33     The net cost of implementing a universal service should have been assessed in accordance with Article 5(3) of Directive 97/33,
         read in conjunction with Annex III thereto. No such assessment of net costs was carried out in this case. Consequently, there
         is no need to determine whether the exemption from municipal taxes constitutes a means of financing the provision of the universal
         service or whether, as the Portuguese Government maintains, this exemption does not go beyond what is necessary to cover the
         cost of the service in accordance with the decision in Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg [2003] ECR I‑7747).
      
      34     Secondly, the fact that  PT Comunicações is required to give competing operators access to the basic telecommunications network
         in a transparent and non-discriminatory manner also cannot provide justification for the different treatment at issue. It
         is true that sharing or coordination arrangements and the establishment of rules apportioning the costs of facility- or property-sharing
         are encouraged in Article 12(2) of 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 (Framework Directive) (OJ 2002 L 108, p. 33).
         However, the fact that other operators have access to the network does not justify disparate treatment in regard to the costs
         arising from the implementation of a new network. 
      
      35     Thirdly, no account may be taken of the fact that the Portuguese Government proposes, when transposing Directive 2002/21,
         to ensure the imposition of a transparent and non-discriminatory municipal tax on rights of way, since the assessment of whether
         or not a Member State has failed to fulfil its obligations must be made in the light of the situation in that Member State
         at the expiry of the period laid down in the reasoned opinion. 
      
      36     On the basis of all of the foregoing, it must be held that, by failing to ensure the transposition of Article 4d of Directive
         90/388, the Portuguese Republic has failed to fulfil its obligations.
      
       Costs
      37     Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Portuguese Republic has
         been unsuccessful, the latter must be ordered to pay the costs. 
      
      On those grounds, the Court (First Chamber) hereby:
      1.      Declares that, by failing to ensure the transposition of Article 4d of Commission Directive 90/388/EEC of 28 June 1990 on
            competition in the markets for telecommunications services, as amended by Commission Directive 96/19/EC of 13 March 1996,
            the Portuguese Republic has failed to fulfil its obligations;
      2.      Orders the Portuguese Republic to pay the costs. 
      [Signatures]
      * Language of the case: Portuguese.