The UK in the EU

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The EU & Telecommunications

Background

At the time of the signing of the Single European Act in 1986, telecommunications were largely excluded. The Commission argued that as the Single Market developed this exclusion should end. Part of the difficulty was that many Member States were protective of their national telecoms operator – usually a publicly-owned monopoly.

Initially the Commission focused its efforts on the issue of the public procurement of telecoms equipment as this aspect could be included in the first Single Market programme. But in 1994 a Commission green paper sought to widen the liberalisation of the telecoms market more radically by using its competition powers for dealing with state monopolies. This paper began a process which has continued since, with the opening up of the telecoms market across the EU and new measures to address competition issues in mobile telecoms.

The liberalisation of telecommunications has brought great benefits to consumers – both business and private, as well as to the overall EU economy. The break-up of established monopolies has brought a more responsive, more innovative telecoms sector. It has also brought a cut in the cost of services to the consumer of around 30 per cent in 10 years. The liberalisation of telecoms has contributed to the development of the knowledge-based economy in Europe and created a sector employing roughly four per cent of the workforce in the EU.

History: A Single Market in telecommunications

The 1994 Commission green paper proposed the liberalisation of voice telecommunications across the Single Market from 1998. The intention was to end the monopolies of public (or privatised) telecoms companies in all Member States. This was necessary to allow greater competition, including the provision of innovative services, but also to encourage the modernisation of telecoms infrastructure that all too often left the EU without the kind of communications that were increasingly sought by business.

Although there was initial resistance to full liberalisation, with the result that some communication networks owned by other utilities (for example, railway companies) were not included, the Council of Ministers agreed to proceed.

The Commission’s second green paper, of January 1995, covered the regulatory framework that would be needed in such complex but vital areas as interconnection and inter-operability, the licensing of telecoms infrastructures, networks and services and the provision of universal services. Responsibility for regulation would remain largely at national level but the Commission would be responsible for major competition decisions (as with other sectors of the Single Market). Further developments before 1998 included bringing mobile telephone services within the remit of the liberalisation package.

Although it was necessary to allow a transitional period for some countries (including Ireland), and the Commission felt it had to take enforcement procedures in 1997 against Member States who had been failing to implement all of the required directives, competition in the EU telecoms market began on 1 January 1998 as planned and full implementation was achieved by the end of 2001.

Regulation in a changing market

The package of measures that came into force in 1998 could not remain static. The speed of change in the telecoms market required a significant review of liberalisation four years after the opening of the market.

The 2002 reforms, implemented the following year, were necessitated by the pace of technological change since 1998. The new regulatory approach covered a wider field of electronic communications than just voice communication – reflecting the growth in the use of the internet since 1998 – and addressed the problems of privacy and data retention, which were of growing concern.

In 2006 the Commission proposed a further batch of reform proposals. These reflected its belief that in many Member States former nationalised telecoms operators were still dominant in segments of the telecoms market, particularly in the provision of broadband services. Ten per cent of EU citizens had no access to broadband and coverage in rural areas was inadequate. The Commission wanted better regulation of the radio spectrum to allow further development of wireless internet communications. Allowing consumers to change telecom provider in one day, the introduction of an EU-wide number for emergency services (112), and the deregulation of some markets so regulators could focus on areas where competition was weak, were all measures that the Commission believed would improve the Single Market in this field.

The draft legislation did not have an easy passage through the European Parliament however. On-going developments in technology meant that by the time the legislation was before the Parliament in 2008-09, new issues had arisen. The Parliament amended the universal services directive part of the reform package to allow internet service providers (ISPs) to restrict access to certain sites or services. This followed the report of a Committee of the Parliament (the rapporteur was British MEP Malcolm Harbour) which had argued against so-called "net neutrality" being enshrined in the directive and that existing human rights legislation would provide sufficient protection for freedom of expression. After some debate, the Council of Ministers accepted this.

A second area of discussion in the Parliament, and ultimately of amendment, was over the illegal downloading of copyright material through the internet. The Council of Ministers wanted illegal downloaders to have their internet access removed after a certain number of illegal downloads; the Parliament rejected this. As a result of this disagreement, the passing of the legislation was held up whilst Ministers and the Parliament tried to reach agreement. The finally agreed directive does allow for internet access to be restricted in the case of those making illegal downloads but requires a "fair and impartial procedure including the user's right to be heard" before this can take place.

The new regulations also establish an independent EU communications authority, which replaces the existing meeting of national regulators and the agency concerned with communication security. The role of the new body will be largely to co-ordinate existing national regulators and to provide expert advice to the Commission. It will not substitute for DG Competition in the Commission, nor act as a Europe-wide regulator, save in respect of the new all-EU phone code that will be available in future.

Consumer Benefits

The liberalisation of telecoms in the EU led to a fall in consumer prices of 27 per cent between 1996 and 2006. The average charge by 10-minute call from a fixed line fell by 74 per cent between 1999 and 2006. This fall in telecoms costs was a major benefit to the consumer but also an incentive to business, as falling costs enabled greater use of communications, including previously expensive cross-border calls.

The EU moved to tackle one of the biggest issues for mobile phone users with the introduction of the EU Roaming Regulation in 2007. Evidence had suggested that telecoms providers were making excessive mark-ups on calls made overseas by their customers. The regulation required all operators in the EU to offer a roaming tariff of a maximum of €0.49 for receiving calls and €0.24 for making calls in the EU by July 2007. Many operators in fact introduced the tariff early and lower prices soon became available on many networks. Further reductions in these charges meant that they were €0.43 and €0.19, respectively, by 2009. The introduction of this regulation led to a 60 per cent fall in roaming charges within months of it coming into force.

Future developments

Regulation of the telecoms sector requires continuous review and change. For example, the roaming regulation does not cover data services but within five years it is expected that all mobile phones will be equipped for such services. Technological developments, such as the growth of downloading and social networking sites in recent years, threaten to repeatedly outpace developments in regulation. A balance will need to be struck between enabling new services that could improve economic efficiency and create jobs and ensuring that important principles of privacy, data protection, and the protection of vulnerable groups (such as children) are maintained in a changing market.

Some areas of the telecoms market are likely to continue to be controversial. The management of illegal downloading – about which there are significant differences of opinion internationally – is likely to prove particularly challenging. Co-operation between the EU and the US will be of importance in respect of this and other internet-related services and will not always be easy to achieve because of differing opinions about where the boundary lies between the rights of the citizen and the protection of the rights of others.

Although significant progress has been made in breaking up former state monopolies, there is still some way to go in establishing a fully competitive EU market in fixed line services. Few pan-European operators currently exist and whether more emerge in the next few years will be an important test of the 2009 package of reforms.

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