Commission mulls telecoms veto

Date: 01/06/06

The possibility of an extended European Commission veto over national regulatory decisions could be raised in a review of telecoms regulation later this month.

Stakeholders across the board are speculating as to whether Viviane Reding, the information society commissioner, will include a proposal recommending the drastic measure in a forthcoming review of the regulatory framework for e-communications networks and services, which is set for publication on 28 June.

The framework, introduced in 2002 to encourage market competitiveness, is in line for a radical overhaul at the end of this year when recommendations contained in June's review will be translated into legislative proposals for future regulation of the sector. Increased EU power over the sector is a bone of contention with national regulators, the vast majority of whom are still completing individual market reviews on the effectiveness of the existing framework.

Some regulators have been criticised for applying the EU rules differently from their counterparts elsewhere in Europe and for failing to tackle the power of incumbent operators.

"As we near the point where the Commission publishes its White Paper, people are starting to ask: 'What's the big ticket issue here?' Some are saying 'Let's rip it up and start again'," said Alex Blowers, international director of UK regulator Ofcom. "But, the framework has promoted investment and competition, and has strengthened the market structure for technologies like broadband...it's too early to conclude there is a problem concerning harmonisation of regulatory remedies."

Currently the Commission can veto national decisions on market definitions and findings on the existence of significant market power. The extended veto would cover remedies imposed by national regulators.

Remedies applied by national regulators cover areas such as price control and accounting obligations. National regulators believe that they are best placed to evaluate areas where remedies are needed.

"Local regulators will always be best placed to understand and appreciate the vagaries of local markets," said Kip Meek, chairman of the European Regulators' Group (ERG), an advisory group comprising national regulators which advises the Commission on development of the internal telecoms market. "The Commission has no practical experience in the application of regulatory remedies," he said.

Ilsa Godlovitch, head of regulatory affairs at the European Competitive Telecommunications Association (ECTA), which represents so-called non-incumbents competing with dominant telecoms players, shares this view. "The Commission has lots of expertise on technical areas, but...applying remedies requires an understanding of individual markets," she said. "We'd like to see if the ERG can come up with solutions. If they can't do that, then we'd look to the Commission. But that would be a second choice," she said.

A Commission source would not confirm rumours of an extended veto ahead of June's review, but said that several different options were being looked at, with the aim of making remedies more efficient. He stressed the need to create mechanisms to deal with cases where national regulators bowed to political pressure. The reluctance of national governments to hand over real power to regulators is often cited as a failing of the system. Some regulators such as Ofcom in the UK were able to flex a substantial amount of muscle to prevent competition abuses, but in countries such as Germany and Ireland there have been instances where regulators failed to square up to dominant players.

In Germany, the national regulator sought to shield Deutsche Telekom's planned fibre-optic broadband network from EU intervention on price regulation last month. In Ireland, market leader Eircom has proven itself adept at thwarting national regulator Comreg at every turn, using the appeals process and judicial review procedures to delay regulatory action. Last year Eircom appealed against Comreg's decision to force the company to open its telephone network to local firms. The court came down in favour of Eircom, ruling that Comreg had acted unlawfully in depriving it of its rights of appeal.

Meek was reluctant to comment on failings in the EU-wide regulatory system, but did signal disapproval of so-called regulatory holidays, periods of grace during which specific remedies do not apply. Referring to the German case, he said: "We tend not to comment on individual countries. Nonetheless, not regulating to [encourage] a dominant telecoms company to invest for a period is something the ERG is sceptical about as an approach."

Article anticipates the adoption of the review of the regulatory framework for e-communications networks and services, scheduled for publication on 28 June 2006. Author suggests that there was the possibility of an extended European Commission veto over national regulatory decisions.

European Commission: DG Information Society: Policies: eCommunications: Tomorrow's Framework http://ec.europa.eu/information_society/policy/ecomm/tomorrow/index_en.htm

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