20th April 2017
The European Commission published landmark reforms in September 2016 to shake up the telecoms industry and dramatically increase investment in high-speed networks and 5G connectivity. The European Parliament and EU Council are now stepping up the pace of their work on the reform, and aim to agree their respective positions and start to negotiate on final texts by the end of the year.
The Commission’s political Communication is an overarching strategy document on its vision for a ‘European Gigabit Society’. This is accompanied by a (non-legislative) action plan to roll out 5G in the EU by 2020, and a WiFi4EU initiative focused on deploying of high-speed internet in rural communities.
Most significantly for business, the Commission proposed a complete overhaul of the existing framework (a new European Electronic Communications Code, or ‘EECC’), controversial plans to boost the EU’s telecoms regulator BEREC’s powers, and updates to Significant Market Power (SMP) Guidelines.
A new European Electronic Communications Code (EECC): The cornerstone of the EU reform
The new Electronic Communications Code will consolidate 4 of the 5 existing telecoms Directives (Framework, Authorisation, Access and Universal Service) into a new single Directive. Why? EU regulators consider the current Framework to be wholly ill-equipped to deal with the mobile market as it has evolved until now and where it’s headed. The Framework is also not fit to transform the EU into a real player in the global race towards ubiquitous connectivity and 5G roll-out - a strategic priority for the highest political levels in Brussels and key to boosting the EU’s popularity.
An overall theme of the new Code is investment (versus competition, which comes through more strongly in the existing Framework). This is clearly in response to relatively downcast projections about Europe’s trajectory towards 5G when benchmarked against the US, South Korea, Japan and China. The Code is also all about “future proof regulation”, given many existing rules are outdated and irrelevant when compared to market evolution.
Zooming in on OTT players: Blanket regulation from the top-down?
Over-the-top (OTT) VoIP communications services such as WhatsApp and Skype are likely to fall under the scope of the new Code, much to their despair. Telecoms operators have long argued that this is necessary to level the playing field, since the latter are not currently subject to restrictions on the way they use customer data, obligations around access to emergency numbers, and switching and customer contract rules. The WhatsApps of this world refute their arguments as being a blatant tactic to protect incumbent monopolies, and highlight the differences in their business to the classic vertically integrated paradigm. Leading Members of the European Parliament (MEPs) are divided over the question of scope, and it looks like typical battle lines are drawn between Socialist / Green and Liberal / Centre-right lines.
A new SMP and access regime in Europe
The Code includes sweeping changes to the SMP regime. The EU wants national regulators to impose access obligations to the wholesale level only (and at the retail level if there is significant market failure). It has proposed a “double lock veto” on SMP remedies, requiring approval from both BEREC and the European Commission. The Commission is also seeking views on how to update the existing SMP Guidelines, aimed at helping national regulators in their market-based analysis, calculation of significant market power, and decisions on whether or not to intervene.
Related to SMP is the central issue of access, whereby access rights are granted (to civil infrastructure, for example) in an effort to incentivise telecoms operators to invest in the network infrastructure of the future. The Commission also wants to lengthen the maximum national regulator market review period from 3 years to 5 years to offer operators greater certainty in long-term planning.
The reforms will affect every business operating in the telecommunications space, regardless of size or business model. This EU’s mantras are “better regulation” and “less is more”, so this is likely to be the framework which governs the sector for the next decade. A heavy-handed approach to OTT providers that considers them legal equivalents to telecos would imply significantly more regulation, but could also offer legal certainty. Vertically integrated players also face new rules that will impact compliance and relations with end-users, but are likely to benefit from new incentives and support to help them to improve connectivity. Changes to the access / SMP regime could significant alter the competitive landscape, and businesses need to be on the right side in order to benefit from strategic incentives whilst avoiding price regulation. A new approach to spectrum allocation should result in a more harmonised (though not perfect) regime, where long licence durations are 25 years at a minimum and stringent rules around the granting, renewal and restriction of rights of use become the norm.
Time for influence is short, and stakeholders on all sides will need to work quickly and efficiently with ITRE MEPs, and already start to engage with their Council allies before inter-institutional negotiations in Q4 (earliest). To better understand the impact of the Code and with whom and when to engage, contact Eleanor Flanagan, Director, New Technologies in our Brussels office.
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