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EU telecoms review meets with mixed response

On the whole, the Telecoms Reform Package presented by the European Commission on Wednesday, was met with a warm welcome. As many industry watchers anticipated, the scheme is a far reaching reform, proposing both new regulation and the removal of old regulation where competition is already considered effective.

By far the most contentious issue is the proposed creation of a European Telecom Market Authority, which many have described as a “super regulator”. While it should be pointed out that ETMA is not an entirely new institution but rather an evolution of an existing one, it looks for all intents and purposes that the industry body would have the power to overrule the 27 national regulators.

At the very least, it would replace the European Network Information Security Agency (ENISA) and the European Regulators Group (ERG), which was described by the EC as failing in its duties.

Ovum analyst, Matthew Howett, said the creation of ETMA would ensure the independence of national regulators, which in some countries face too much political intervention from governments. It would also reduce the burden on the national regulators and transfer important expertise to new member states which may lack resources.

But the ERG seems not so taken with the scheme, which it argues would be better served by “significantly strengthening” the current model of a European network of independent regulators.

The regulator group believes that “new layers of unnecessary centralism” risk undermining at a European level the very independence which the Commission is concerned to protect at the national level.

Concern was also expressed over the EC’s proposal to reduce the list of regulated markets by 50 per cent with immediate effect. Again, the ERG voiced its opposition to the removal of these markets, claiming that the plan “undermines the ability of NRAs to regulate in the interests of consumers”.

Ovum analyst Howett said the proposal meant consumers would, “become reliant on a system of ex-post regulation which has so far failed to act as a credible deterrent.”

On the other hand, the recommendation of functional separation as a remedy of last resort seems to have gone down well after the successful experience in the UK with BT/Openreach.

While the Commission recognises that this is not a solution that works for every country, Howett called it an, “excellent example of when the experience of the new authority could guide the Commission into making the right decision.”

Proposals for spectrum liberalisation and secondary trading were also well received, as spectrum policy is viewed as one of the most outdated and bureaucratic areas in need of most reform. “In our view the proposals are positive and amount to giving something back to operators after the intrusive retail regulation this summer over international roaming. The digital dividend spectrum has great potential to improve the availability of broadband in rural areas, although the commission must be mindful of technical aspects, such as problems with interference,” said Howett.

James Allen, principal consultant at Analysys, also noted new powers regarding net neutrality, under which the NRAs and the Commission will be able to set minimum standards of quality of service and the surprise proposal on constraining retail tariffs for certain call types, such as numbers in the range used for pan-European services.

Allen also welcomed provisions to enforce emergency services call capabilities on providers of VoIP services. “This measure will undoubtedly save lives,” Allen said.

Comments on the Telecoms Reform Package:

Viviane Reding, European Commissioner for Information Society and Media:

“Dominant telecoms operators, often still protected by government authorities, remain in control of critical market segments, especially of the broadband market. This is why new consumer rights, a new dose of competition, an effective system of independent telecoms regulators, new investment into competitive infrastructures and more space for new wireless services are needed to put Europe’s digital economy on track.”

Roberto Viola, Chairman of the ERG:

“In the short term the ERG urges the Commission to amend the Decision that set up the ERG in order formally reflect the ERG’s current and potential role in promoting the single market. The ERG is ready to act on the agenda being proposed today by the Commission. There is no need to wait until 2010. The ERG must get on with this essential work right away.”

Matthew Howett, Ovum analyst:

“Will the reforms proposed realise the full potential of the internal market? Only time will tell. Will all of the proposals make it through unchanged? If we consider the style that we have become used to from the Commissioner with first-class negotiation skills, Reding will initially take the most ambitious stance, knowing that after compromising she will get the deal she really wants. This time will be no exception.”

James Allen, principal consultant, Analysys:

“This is a complex set of proposed changes to the Directives which is not straightforward to interpret. The big prize on offer is a better functioning market in each Member State, as well as effective pan-national markets. But it is too early to tell how the game will play out, and whether that prize will ever be unwrapped.”

Alex Brown, telecoms partner and Jenny Block, EU Competition and Regulatory partner, Simmons & Simmons:

“Creating an appropriate mechanism for licensing of pan-European services is long overdue, but the devil will be in the detail and successful implementation may be rather a long time coming. In principle, this should address market fragmentation, lack of consistency and relieve an administrative burden on cross-border service providers.”

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