Friday, November 28, 2008

Europe - analysis of reform compromises

Council waters down deal on telecoms package

After a fierce debate, EU telecoms ministers reached agreement yesterday (27 November) on a review of rules governing electronic communications, scrapping many "ambitious" proposals made by the European Commission.

Despite the interruption of the morning session to revert to bilateral negotiations, a deal was reached following negotiating efforts by the French EU Presidency. In the end, the UK, Sweden and the Netherlands abstained, and Italy approved the conclusions despite reservations.

Insititutional negotiations begin today ahead of a second reading in the European Parliament expected in April 2009. Final adoption is expected by mid-2009.

The most controversial issues were radio spectrum, the new telecoms authority, functional separation and the regulatory framework for Next Generation Networks (NGNs). The Commission's original proposals were largely watered down, as anticipated by EurActiv.

Radio spectrum

On radio spectrum, Sweden and the UK endorsed the Commission line in favour of flexible use of the spare frequencies freed by the switchover from analogue to digital services. The majority of the countries instead pushed for maintaining the status quo and also rejected the idea of harmonising radio bands.

The final text agreed by ministers remains generally against flexible use of frequencies, which could have technical drawbacks and ultimately might interfere with the services of broadcasters, deemed too politically and socially important by many states. However, although the text calls for "an adequate level of technical quality," it also says that this should not preclude "the possibility of using more than one service in the same frequency band".

Telecoms authority

Despite strong opposition from Italy, Belgium, Sweden and the UK, the Council deal strongly waters down the Commission's original plan. The new body is foreseen as an extension of the current European Regulators Group (ERG), with advisory powers and private status. The EU executive wanted it as a sort of new community agency with an EU budget and staff.

As the Commission pointed out, the private nature of the body might cause legal problems when its advice is taken into account by the EU executive. "The European Court of Justice might request us to take into consideration other private bodies," warned the spokesperson of Information Society Commissioner Viviane Reding.

Moreover, the veto power on national regulatory measures, which the Commission originally assigned to itself, has been changed to an opinion power. Nevertheless, the Netherlands raised concerns and threatened to veto the deal until the very end, denouncing possible counterproductive meddling of the Commission in national decisions.

Functional separation

The debate on functional separation between services and network activities set states like the UK and Sweden, which are in favour of the measure to spur competition, against countries like Spain and Germany, which are completely against it. The final deal foresees the possibility of using functional separation only as an "extraordinary measure" and provided that a range of conditions are met.

It was exactly the nature of these conditions that sparked controversy within the Council. The final deal lowered the requirements for a national regulator to impose functional separation.


The battle on NGNs concerned a last-minute amendment that the German delegation had added to the negotiating text. The objective was to clearly indicate the importance of investing in the new networks and to give account of the underlying economic risks. Ministers agreed to "take into account investment risks," leaving investors the freedom to define access prices for competitors interested in using their infrastructure. However, access will have to be guaranteed to preserve competition.

Roaming and broadband as universal service

In separate negotiations, ministers also agreed on new roaming caps proposed by the Commission (EurActiv 24/09/08) and discussed a French proposal to voluntarily include broadband as a universal service, with the objective of attaining complete coverage for European citizens by 2010.


Luc Chatel, French minister of state in charge of the telecoms package negotiations, commented: "Thanks to this agreement the European telecoms market will be more competitive. From tomorrow, I will start negotiations with the Parliament and the Commission to have it finally agreed by the end of their mandates."

Viviane Reding, the EU telecoms commissioner, commented : "The new text now agreed by ministers is an improvement compared with the initial text, even though I continue to believe that Europe's telecoms sector requires better rules than those now on the table here."

Socialist MEP Catherine Trautmann, Parliament's rapporteur on the Electronic Communications Framework Directive, welcomed the agreement, which she said sent "a positive signal to the telecoms sector as a whole and allows the co-legislators to go forward and engage in trialogues".

In a bitter note, she added: "The European Parliament is eager to sit at a table with the Council and start discussing the few controversial points. The Commission's role in this process is to facilitate the negotiations - and I'd like to insist on this point because unfortunately it is not always so clear."

Conservative MEP Malcolm Harbour, Parliament's rapporteur on one of the texts of the telecoms package, said: "Today's Council decision avoids a long period of uncertainty, and will encourage potential investors in next generation fibre and wireless networks."

Incumbent telecoms operators did not welcome the deal. “The EU Telecoms Council has missed an opportunity to bring the necessary changes to encourage investments and recognise the risk they entail," said Michael Bartholomew, ETNO director.

"Furthermore, in the current context of economic and financial crisis, the adoption of functional separation and a weakening of the conditions for its imposition goes against the objective of boosting NGN and sends a negative signal to investors," added Bartholomew.

But alternative telecoms operators welcomed the deal. Ilsa Godlovitch, ECTA's director of regulatory affairs, said: "We welcome the result of today's Council of Ministers meeting. We are particularly pleased that the Council has followed the Parliament in ensuring telecoms regulators are entitled to use functional separation as a remedy to promote competition. We are also pleased that the Council has rejected the incumbents’ demand for risk sharing of investment in fibre access networks."

Private television also welcomed the agreement. Ross Biggam, director general of the ACT, commented: "It will be helpful to adopt the Electronic Communications Package still under this legislature. We are very positive that similar to the European Parliament, the Council has also recognised the important role of member states when it comes to spectrum allocation and management."

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