By Chris Jones - 28th June 2006
Controversial proposals for improving competition in the EU telecoms market were unveiled by media commissioner Viviane Reding on Thursday.
The Luxembourg commissioner’s most contentious suggestion is the creation of a European spectrum management agency that would take an EU-wide approach to designating radio frequencies to certain services.
“We have to have a more market-based approach to spectrum allocation across the EU,” Reding said.
“The economic potential of spectrum is enormous – the value of the industry dependent on radio spectrum products is currently estimated at €200bn, or two per cent of EU GDP.”
“But we need to ensure access to radio spectrum for all competitors. The switch to digital services has freed large portions of spectrum, and we have to enhance the current systems of management if we want to take advantage of this digital switchover.”
The commissioner said that the current system – where each member state jealously manages its own spectrum allocation, with little coordination at EU level – was increasingly inefficient in a world where electronic services are not restricted by national borders.
She said that producers of, for example, wireless services that cross borders should not have to apply to each member state for spectrum licences.
“Authorisation should be made much simpler at an EU level,” she said.
She stressed that a spectrum management agency would also ensure that spectrum use was both service and technology neutral.
“Holders of a spectrum usage rights should be free to supply any type of service and to use any technology,” she said.
Reding also put forward the idea of “spectrum trading” – allowing rights holders to transfer those rights to other users without the need for prior authorisation, which she said would “allow the market, rather than the regulators, to pick the winners amongst new services available to consumers”.
She said that up to one third of the spectrum currently allocated could be freed up through this “secondary trading”, and that the EU economy would be boosted by as much as €8-9bn.
“We need to make politicians in member states understand that they have an extraordinary wealth when it comes to spectrum, and I therefore propose an audit of the total value of spectrum as a ‘wake-up’ measure,” Reding said.
The way in which EU telecoms markets are regulated could also do with improvement, Reding continued.
Under the current rules, in place since 2002, national regulators must assess the state of competition in 18 different sub-markets, from broadband to mobile via fixed lines. They must then suggest measures to improve competition, if necessary.
But Reding considers this to be an inefficient system, with the 400 or more notifications carried out since 2003 all subject to verification by the commission and many frequently delayed – to the detriment of competition – by lengthy appeals.
Reding is proposing to cut the number of relevant markets to 12 – removing six that she considers are now fully competitive – and at the same time create an independent European regulator that would ensure the rules applied by national regulators were the same in each country.
“We need better consistency of remedies to avoid distortions of competition – for the market and for the consumer. It is unacceptable that companies in one country benefit when regulations are poorly applied, while those in other countries are at a disadvantage when the rules are correctly implemented.”
“An independent European telecom regulator, based on the same system as the European central bank, would help ensure consistency. It would not eliminate national regulators, but act as an umbrella organisation for them.”
She also dismissed media suggestions that she wanted more power for the commission to veto national regulators’ decisions. “A European regulator would mean less power for the commission, not more,” she said.
National regulators believe that they are best-placed to judge whether national markets are working well, and are concerned about the threat of interference from Brussels.
Reding has nonetheless called for the power of veto to be extended to include the right to propose remedies – something which the commission could not previously do – “in order to contribute more effectively” to the consistency of regulation.
The EU’s media chief also had some harsh words for companies and regulators that have argued for so-called “regulatory holidays” for companies investing heavily in new technology.
Germany’s telecom regulator is currently facing legal action over its decision to exempt Deutsche Telekom’s new high-speed fibre optic network from regulations for the next three years, in order for the company to recoup its investment.
“EU rules are quite clear – regulatory holidays are not allowed to prevent the re-monopolisation of markets,” she said.
“Competition is not the enemy of investment – all the figures show that markets where competition is strong also have high levels of investment.”
She cited OECD figures which showed that countries such as Denmark and the UK, which have been the quickest to liberalise their telecoms sectors, have the biggest levels of investment – 0.73 per cent of GDP in the case of Denmark, for example.
Germany, which has not moved as fast, has investment levels of just 0.27 per cent, she said.
The commissioner said that one option could be “structural separation” - obliging incumbent operators to separate their infrastructure operations from their service provision.
“This is not obligatory at the moment under EU rules, but it seems to work well in the UK and would be worth considering for the EU as a whole,” she said.
But other member states may not be as willing to force national telecom groups to open up their networks to rivals, and Reding acknowledged that the debate was likely to be lively.
Reding’s proposals will be available for public consultation until the end of October, and she will then come forward will full legislative proposals by the end of the year, with the new framework rules due to come into force around 2010.
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