Update on the Forthcoming EU Electronic Communications Directives

United Kingdom

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On 13 December 2001 the EU Parliament finally passed a legislative package of four Commission Proposals.  They are part of a wider package aimed at simplifying and harmonising more than 20 EU Regulations and Directives affecting the Telecommunications industry into just six new Directives.  The new “Electronic Communications Directives also contain other measures such as the goal of seeking (but not mandating) a single technical standard for Digital Television and enhanced cooperation between National Regulatory Authorities (NRA’s) on Radio Spectrum to avoid the vast difference in how EU Member States grant mobile Telecommunications licenses.

The new Directives effectively draw together the already converging Telecommunications, Digital Broadcasting and Internet industries, from a regulatory point of view.  The agreement of the Commission’s Proposals will result in the adoption in February 2002 of Directives relating to:

1)         A common regulatory framework for electronic communications networks and services (Framework Directive).

2)         Access and interconnection of electronic communications, networks and associated facilities (Access Directive).

3)          Authorisation of electronic communications networks and services (Authorisation Directive).

4)          Universal service and users rights relating to electronic communications networks and services (Universal Service Directive).

The legislative package will eventually contain the following additional directives dealing with the following matters:

5)         A regulatory framework for radio spectrum policy in the European Community (Radio Spectrum Decision). This Commission Proposal is currently at Common Position but as it  is a Council Decision it does not need EU Parliamentary approval.

6)         Processing of personal data and the privacy in the electronic communications sector (Data Protection Directive).

The Data Protection Proposal is currently still under negotiation and has not yet reached a Common Position adopted by the Council (i.e. not agreed by the Member States).

It is understood that the remaining issue to be settled is the proposed use of either a harmonised opt-in or opt-out mechanism (register), for Consumers who do not wish to receive Unsolicited Commercial Electronic Mail (commonly known as “Spam).  The majority of Member States favour an opt-in mechanism i.e. one in which the Consumer has to register to receive Unsolicited Commercial E-mail.  The UK has stated that it would prefer to have an opt-out mechanism i.e. one where the Consumer had to register not to receive Unsolicited Commercial E-mail.

Although this Proposal will need to achieve EU Parliamentary approval once it has reached Common Position adopted by the Council, it is envisaged that that should present significantly less difficulty than the “Framework Directive, which has been the major sticking point, between the EU Parliament and the Member States.

For several months the EU Parliament, with the support of the telecommunications industry has been pushing hard for the EU Commission to have executive-style powers of veto over certain aspects of the decisions of National Regulatory Authorities (NRAs) in Member Sates, concerning inter alia:

1)         The “significant market power test or “market dominance i.e. when a Telecommunications Operator has to submit to price controls and other constraints set by the National Regulator (NRA), and;

2)         What constitutes a “Relevant Market in determining criteria for when Telecommunications companies can be considered to be abusing their market position.

Member States have been vehemently arguing that National Regulators (NRA’s) are in the best position to determine when a telecommunications company is harming competition.

After months of wrangling and with the deadline of 31 December 2001 approaching, the Member States submitted a compromise proposal allowing the EU Commission the final say in the above two areas.

Instead of NRA’s applying sector specific competition rules tailored to the telecommunications industry and mainly affecting incumbent operators, i.e. those deemed to hold “significant market power, e.g. in the UK, fixed line operators such as BT and mobile operators such as BT Cellnet (now mm02) and Vodafone, the Commission will henceforth have the final say on whether any Company is abusing it’s market position and it will base its decision on existing EU competition law which uses the concept of “Market Dominance(Articles 81 and 82 EU Treaty). The Commission will effectively deal with appeals or complaints from Companies against the decisions of NRA’s in respect of those matters.

The Commission is expected to publish a set of guidelines for NRA’s (following Public Consultation) on when and how NRA’s should apply this “Market Dominance Test.

The Commission will have no powers over allocation of Radio Frequency licenses.

 

Article 6 of the “Framework Directive  

The new powers given to the EU Commission arise as a result of a new consultation and transparency mechanism introduced within the Framework Directive (Article 6).

Article 6 will apply to all decisions of the NRA’s that deal with the determination of significant market power, imposition of access obligations, market analysis procedures and the determination of the existence of effective competition within the market place.

Article 6 together with Articles 13 (Undertaking with significant market power), Article 14 (Market analysis procedure) and Article 23 (High Level Communications Group) have proven to be the most contentious of all articles.

It has been alleged that Article 6 not only constitutes an imbalance in the institutional arrangements set forth by the EU Treaty, but also that it goes far beyond the scope of any existing transparency mechanism in other Directives (e.g. Directive 2000/31 on E commerce and Directive 2000/12 on the taking up and pursuit of business credit institutions).

The Commission according to the EU Treaty is not entitled to decide on the interpretation of EU Legislation. It should monitor compliance with that legislation and leave the European Court of Justice to interpret the legal provisions and decide whether a violation of EU Law has occurred.

The application of the Transparency mechanism under Article 3 of the E Commerce Directive, where it is the intention of a Member State to adopt measures which would restrict the free movement of information society services, only includes a “petition (by another Member State) of the Commission to stop the measure. It explicitly recognises the right of a Member State to adopt the measure, which is a clear indication that there is no recognition of a priori veto powers of the Commission.

The Commission would have to use the Article 226 procedure and ultimately obtain judgement in the European Court of Justice should it consider that the measure in question is a violation of Community Law.

Furthermore the E Commerce Directive refers to measures adopted by Member States.

Article 6 of the Framework Directive is applicable to measures of NRA’s. This means that the Commission would intend to control implementation measures to be adopted by the NRA’s, in application of national legislation.

Likewise the Cooperation (Transparency) mechanism between Member States (the host and home States) contained in the Business Credit Institutions Directive takes place only between authorities in the host and home States. The Commission is not normally involved and only intervenes in a case where procedures for cooperation between the affected States have not taken place due to reasons of emergency.

Furthermore the Directive specifically states that in the case of a disagreement, the appeal against a decision to adopt a measure by the Host Member State shall be subject to the courts in the Host Member State. This clearly recognises the lack of veto Powers of the Commission.

For further information please contact David Roberts by telephone on +44(0)20 7367 3678 or by e-mail at david.roberts@cms-cmck.com; or contact Richard Eccles by telephone on +44(0)20 7367 3996 or by e-mail at richard.eccles@cms-cmck.com.