WIK Conference

New rules for digital networks and services?

Debating the Commission's proposals for the Review of the EU Framework for electronic communications

The Commission’s proposals for the review of the EU Framework for electronic communications were presented and debated at WIK’s annual conference, held in Brussels on 17-18 October 2016.

The opening session was devoted to a discussion on what end-users would need in a 2025 horizon and whether, on current trends, the market would deliver. Christian Wernick from WIK presented a market model based on the German market, which suggested that high end users might need 1Gbit/s download speeds as well as improved upload speeds and quality characteristics. However, presentations from Dominique Meunier of IDATE and Wolter Lemstra of TU Delft suggested that although Europe includes world leaders in very high capacity broadband, other countries were likely to fall behind. Lemstra recommended that a priority for Europe should be to ‘close the gap’.

In the following session, Anthony Whelan, Director for Electronic Communications at the European Commission (DG Connect), presented the main lines of the Commission’s proposals while Wilhelm Eschweiler, currently the Chair of BEREC and MEP Pilar del Castillo explained their views.

Anthony Whelan noted that the Commission’s proposals for an e-communications ‘code’ amounted to an evolution rather than a revolution. He cited the continued reliance on the SMP (Significant Market Power) test in market analyses. However, a key development was that the code seeks to support efficiency in the deployment of very high capacity networks (including in rural areas) and to provide more space for commercially negotiated terms. Whelan also highlighted measures in the code which seek to strengthen NRAs and BEREC, and noted that the code includes proposals to allow greater co-ordination in spectrum (for example as regards terms for licensing periods and renewals), responding to demands in this direction from the European Parliament. The Commission was also seeking to expand entry possibilities through greater use of unlicensed spectrum.

Giving the preliminary views of BEREC, the European regulators group, Wilhelm Eschweiler noted that BEREC shared the Commission’s objectives around ultrafast broadband, but emphasised that as an ‘objective’ it should not displace existing objectives around competition, end-user interests and the single market. There were also questions around the practical effect of the provisions aimed at fostering deployment such as the preferential treatment proposed for co-investment. Above all, there was a need to maintain flexibility. Eschweiler noted that spectrum was likely to be the main battlefield in the negotiations on the package. As regards BEREC, he considered that its strength lies in its ‘rootedness’ to national regulators, and that while there was room for improvement, the philosophy should not change. BEREC in general had been a success story, he said. There was no evidence that it had failed, and therefore he saw no need to expand its role.

In her statement, MEP Pilar del Castillo, presented the package as an opportunity to seize the single market opportunity. She agreed that there was a need for high capacity connectivity, but asked whether the proposals would make this a reality, and in particular whether the focus on co-investment and wholesale only models would be effective. As regards the treatment of OTTs and traditional communication service providers, del Castillo emphasised that ‘zero regulation must be an option’. Lastly, she considered it urgent to achieve a more harmonised framework for spectrum, and in that she was supportive of the Commission’s proposals, as were other political groups. Some measures such as licence duration, should even be extended, she said.

The following session focused on the measures proposed by the Commission to boost very high capacity broadband. Ilsa Godlovitch from WIK presented research conducted for the European Commission in which she highlighted how measures to focus on duct access in very dense areas had led to increased fibre deployment and infrastructure competition. However, an important challenge remained in those areas which were commercially viable, but in which end-to-end infrastructure competition was unlikely to occur. The preferable solution for such areas was co-investment involving the incumbent alongside other players. However, there were questions over whether incentives under the EU framework and market review system would effectively achieve this outcome.

Focusing on deployment in so-called ‘challenge’ areas, Karl-Heinz Neumann of WIK noted that fibre deployments in these areas were most often made not by incumbents, but by specialist regional providers or municipalities. In many cases take-up was high. Some providers had also succeeded in encouraging end-users to pay more for rural connections or covering the costly in-house cabling themselves. Dr Neumann recommended support for wholesale only models in these areas and regulatory approaches which permitted deaveraged pricing.

Gabrielle Gauthey, of the Caisse des Depots, made a strong case for wholesale only models also to be favoured beyond so-called challenge areas. She highlighted that the French model had resulted in deployment of very high capacity broadband in very dense areas (through infrastructure competition) and in rural areas, but that deployment ‘in the middle’ was lacking, even though financing was available.

EU Commissioner Günther Oettinger described his vision of a European Gigabit-Society. He emphasized in his speech on the WIK conference the importance of the telecommunications sector as enabler for other sectors and that this importance is across the European continent and not only the EU states.

Furthermore, he described the importance of aligned spectrum for the roll-out of 5G networks considering the need to have spectrum available by 2019 already. In the context of 5G network, he also ventilated his wish that there would be cross border test case for example for automated driving.

Peter Olson, Vice president and Head of European affairs from Ericsson gave a technical view on the future developments in the area of 5G network technology. He described the financial and technical efforts made by the manufacturers to produce new standards required to implement 5G networks and how these will integrate existing mobile network technologies like 2,3 and 4G building all on the same shared core network while still maintaining different radio access networks.

The first day closed with a keynote presentation from Vicky Ford, Chair of the European Parliament’s internal market committee. She warned that policy-makers should not ban products or limit services unless they were convinced that that was what consumers really wanted. These kinds of arguments had been used to campaign against open trade. Policy-makers should also not place all their focus on the small proportion of consumers that shop cross-border. As regards broadband, she stressed that there was a need for bigger, better, deeper networks, and that operators needed a reliable framework. However, there was still a need for regulation because markets tended to be oligopolistic. The single market would be successful, if it led to effectively functioning national markets, she said.

On the second day of the conference, attention turned to institutional questions. Prof Alexandre de Streel presented research conducted for the European Commission which highlighted that existing soft law tools such as Recommendations and the ‘article 7’ process did not result in effective consistency. He also noted that the degree of consistency needed might vary depending on the issue. For digital services, he advocated that a single regulator should be responsible with rules fully harmonised at EU level. For digital networks, the best solution would be to blend the EU perspective with national expertise by creating a co-operation structure that fell short of being a federal regulator, but also provided stronger guidance than an ‘inter-governmental conference’.

Sebastian Soriano, the Chairman of ARCEP and future Chairman of BEREC highlighted the need for regulators to maintain independence from political pressure and industrial lobbying, and stressed that this was true at the EU level as much as at national level. He also highlighted alternative self and co-regulatory approaches to improving the way markets function. For example, comparative data on coverage and quality should be made freely available so that competition was not only about price. He was also working on a platform to empower end-users to signal problems to ARCEP.

Finally, Prof Eli Noam provided a stylised perspective on the debate around federalism vs subsidiarity. A key conclusion was that there may be benefits from diversity, including competition amongst states or national regulators. Local policy-making could also be concluded more rapidly, which was an advantage in the fast-moving ICT environment. Ultimately, allowing regional diversity could enable lessons to be learned at the federal level.

The conference concluded with a session focused on service regulation. Nicolai van Gorp highlighted concerns that OTT had gained mass popularity, but was not subject to telecom rules such as those aimed at guaranteeing privacy and security. This could exclude those people which had privacy concerns. Valid concerns on privacy and security had been reflected in the Commission’s proposals, but van Gorp also considered that the Code may have gone too far in applying certain consumer protection rules to number-based online communication services. Michele Ledger from Cullen highlighted the tension between the expanding remit of sectoral legislation to cover digital services and the introduction of horizontal rules which were intended to apply to all services. Horizontal rules such as the GDPR and NIS Directive should be preferred in this context. They also carried the benefit of providing a one stop shop and mechanism for consistency. In the subsequent debate, Microsoft illustrated the complexity of applying the proposed new rules to Skype – a service which combines number-based and number-independent communications. Orange argued that the application of regulation to ‘electronic communication services’ resulted in too wide a scope for regulation, and that this category could be removed as the rules could apply more specifically to networks or inter-personal communications.

Presentations of the conference are available for download.

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Kathrin Frieters
Phone +49 2224 9225-28
Fax:    +49 2224 9225-68

Ilsa Godlovitch
Phone: +32 2 8300380
Fax:     +32 497 505641