Commission paves the way for radio spectrum sell-offs

Date: 22/06/06

The European Commission will be laying all its cards on the table next week (28 June), when it publishes its review of the regulatory framework for e-communications networks and services. Controversial proposals set to be unveiled include the creation of a European spectrum agency.

"We need to introduce market mechanisms for spectrum trading," said Martin Selmayr, the Commission's information society spokesperson, confirming rumours of plans to free up the airwaves. "The best way would be an EU spectrum agency adopting a very strong market-oriented approach. It would allow everybody owning spectrum to use it for whatever purpose they like or to sell it."

Spectrum is the natural resource that allows the packaging and transmission of electronic data for mobile telephone, television, radio and broadband services. Commission proposals are likely to be controversial among member states unwilling to relinquish control.

Antti Kohtlaa, director of networks at the Finnish ministry of communications, expressed reservations on full-blown liberalisation of spectrum trading. "We have to look carefully at how secondary trading [free trading of spectrum between operators] is used," he said. There is the danger that if we use this type of trading, it will end up in the hands of the big operators."

UK regulator Ofcom, which oversees national spectrum distribution, is supportive of the EU-level action. Spokesperson Simon Bates said: "We believe industry will always be better placed than regulators to decide how spectrum should be used and who should have access to it. We would stand firmly behind any proposal by the Commission for a more flexible approach to spectrum management."

"However, if, as some people have alluded to, the Commission intends to mandate trading, we might have to take a better look."

David Pringle, of the GSM Association, which represents vendors selling the world's largest mobile system, said the Commission should proceed with caution. "Whilst in principle spectrum liberalisation may be a good thing, there are significant issues that need to be resolved before it could be implemented. There is no clear understanding of what a spectrum property right is.

"The devil's in the detail with this stuff, particularly regarding property rights. If they aren't drawn up in a robust way, there could be interference between users of spectrum and disputes. Spectrum is different from traditional property rights. It's a multi-faceted concept."

Selmayr said: "We have to be courageous to do this. Spectrum is a very important economic resource, so there will have to be mechanisms allowing more efficiency." The economic impact of liberalised cross-border trading is potentially huge. The present market of all spectrum-based services represents 200 billion euro per year of Europe's gross domestic product. The net gains of a liberalised market would be worth 8-9bn euro annually.

'Super regulator' to patrol single market

The Commission's concerns over the slow progress of liberalisation in markets such as broadband have prompted it to include tough proposals for an EU 'super regulator' in the review. The body would aim to iron out differences in the way member states apply remedies with the ultimate goal of ensuring efficient markets.

"We don't want to dissolve national regulators, but they could be part of a structure independent from political decisions," said Selmayr. "It would be a decentralised model with one EU regulator guaranteeing quick remedies."

Kip Meek, chairman of the European Regulators' Group (ERG), said: "The proposal for a super regulator was debated at the beginning of the decade when the existing framework was drawn up. There was a very strong reason it was rejected, for the same reasons a veto on remedies would be inappropriate, ie. national regulators will always have a greater understanding of the vagaries of local markets.

"The ERG is itself a developing institution in the middle of a programme of activity that will make it a more effective harmoniser."

The proposed pan-European regulator would, the Commission claims, be a light, efficient body. Selmayr indicated that the Commission would also be open to the idea of regional, cross-border regulatory groupings under the umbrella of one EU regulator. "We would always make sure someone had direct contact with the market place," he said.

Interfering states risk telecoms veto

A 'veto' would be the leanest way of enabling harmonisation of the EU telecoms market. Selmayr objected to use of the term. "It's not a veto. We don't want to say 'no'," he said. "We want to urge national regulators to take decisions they are legally obliged [to take]. We want to speed up the process by setting deadlines and urging immediate, efficient action."

Currently, national regulators vary greatly in terms of the power they are able to wield to prevent competition abuses. The case of Germany's regulator, which shielded national champion Deutsche Telekom from EU intervention on price regulation in May, is often cited as a classic example of how national political pressure can stand in the way of free markets.

Kip Meek of the ERG added: "We don't regard this as a done deal in the sense that there will be a long legislative process. We hope there will be a useful debate on this."

Communications policy

• The regulatory framework for e-communications networks and services was introduced in 2002 to promote market competitiveness
• The European Commission's review on 28 June will contain recommendations for legislative proposals to be presented at the end of the year
• Legislation would require the approval of the European Parliament and the 25 member states
• The revised framework is expected to be implemented in member states around 2009-10

Article anticipates the adoption of a review of the regulatory framework for e-communications networks and services by the European Commission on 28 June 2006. The controversial proposals, set to be unveiled, included the creation of a European spectrum agency.