Early in the morning on the 6th of June 2018, it was announced that the EU had finally reached a long-overdue agreement on the new Electronic Communications Code, which will replace the existing regulatory framework of the EU telecoms market. A full text of the draft was only released early in July. Assembly has made a first analysis of the draft (which still needs to go through a formal vote in the EU parliament), and of stakeholders’ comments on the main aspects of the deal. Very few are pleased with the outcome.
Key aspects of the Code
The Code represents a major overhaul of the existing regulatory framework of the telecoms sector, repealing four directives which have been into force since 2002, with some amendments.
The Code’s main aspects revolve around the following pillars:
Access regulation: in an effort to encourage investment, the Code allows NRAs to reduce the burden of ex-ante regulation were markets are competitive; symmetrical obligations can be enforced in some specific cases; and wholesale-only operators are largely exempt from ex-ante regulation.
Spectrum: licences will last at least 20 years; rules to foster harmonisation across countries are introduced.
Regulatory treatment of OTTs: for the first time, OTTs will fall within the scope of Electronic Communications Services, like traditional telecommunications services. Certain characteristics of the service – rather than the underlying technology – will determine which rules of the directive will apply.
Universal service: in the list of services subject to Universal Service Obligations there will be “affordable and adequate” internet access. This has been the case for several years in some EU countries, although many others were not yet including broadband in the scope of the USO.
Consumer protection: the Code strengthens users’ ability to terminate or switch contracts at no cost, and to avoid being locked in bundles (e.g. they will be able to surrender individual components of a bundle without being forced out of the whole contract). It also introduces some retail regulation in intra-EU calls and texts (i.e. a €0.19/min cap on calls, and a €0.06/min cap on texts).
The Code is the result of lengthy negotiations between, and within, EU institutions. The initial proposal was set out by the EC in 2016, which means it took almost two years to get to the final draft. The current text is now likely to be passed without further changes by the end of 2020.
Most stakeholders consider the Code a missed opportunity
ETNO used such expression in the title of its statement, released once the political agreement was disclosed. In particular, “The Code will not ignite the much needed rush to invest in 5G and fibre networks and it will add complexity to an already burdensome system”. ETNO also sees the Code as “an unfortunate example of Europe lacking a strong and coherent industrial policy, especially for the digital sector”.
Similar words were used by the GSMA, which is “disappointed that the agreement does not deliver sufficiently on the ambition to provide a strong, pro-investment regulatory reform”. Unsurprisingly, the association is concerned about the lack of harmonisation in spectrum awards across EU states, and its failure to reduce the burden on the “over-regulated” European telecoms sector.
The discontent of the incumbents does not translate into alternative operators’ satisfaction. ECTA, which celebrated its 20th anniversary on the day when the Code was agreed, warned about the risks of taking competition for granted. In his speech at ECTA’s 20th anniversary event in Brussels, Luc Hindryckx, Director General of ECTA, noted that access problems have never really been solved in several EU countries; and after copper, these problems are now coming up in fibre networks too. “The EC and regulators have responsibilities like never before”, he said, because the Code is legally very complicated.
Cable and wholesale-only operators are the most pleased
The most cheerful reactions in the industry came from wholesale-only operators. In the Code, networks built under the wholesale-only model will be spared from heavier access regulations. Due to their nature, wholesale-only operators are in principle less problematic than vertically integrated ones in terms of discriminatory and anti-competitive behavior. Franco Bassanini, president of the Italian wholesale-only venture Open Fiber, noted in his statement that the new Code, by regulating the wholesale-only model, creates “the best conditions” for the development of such type of operators. This will ensure “a more rapid change in the direction of the Gigabit society”.
Cable operators are also positive. It is worth reminding that, in general, these operators are neither regulated access providers, as cable networks are rarely designated with SMP, nor access seekers. Cable Europe’s statement reflects that, in saying the Code “largely preserves effective status quo”. CE is relieved that symmetrical access rules now appear to be limited to very specific circumstances, because access to networks “should not be granted lightly”.
Consumers associations welcome a “better deal for consumers”
The Body of European Consumers (BEUC) is overall pleased with the outcome of the agreement on the Code. In particular, BEUC notes that customers will be able to terminate contract without incurring additional termination costs; they will also be able to give up individual parts of a bundle without having to terminate the whole contract. This will reduce the risk of customer lock-in.
Speaking at the ECTA anniversary event on 6th June, Ursula Pachl, deputy director general of BEUC, praised the introduction of a price cap for intra-EU international calls and texts. This is one of the measures in the Code most criticised by other industry stakeholders. She said that prices for these calls are still “incredibly high”; to this end, what has been achieved in the Code is “not enough, but it is a start”.
Perhaps surprisingly, BEUC believes competition comes out strengthened after the approval of the new Code, because “Thanks to what has been agreed, national regulators can take measures to intervene and maintain a healthy level of competition”. Not quite the view taken by alternative operators.
The Code will be finalised by the end of 2018, and member states will have two years to transpose it
The Code was informally agreed on the 5th of June, but it will be some time before the EU telecoms sectors can consider it as law. The agreed texts are still pending finalisation and, crucially, they must still be formally adopted, by the Parliament and by the Council through an agreement at first reading. Once that has happened, they will be published in the EU’s official journal. It is expected this process will be completed around the end of 2018 (the EU Parliament’s plenary reading is scheduled for 12 November 2018, although that date is currently set as “indicative”).
Since the Code is being passed through the instrument of the Directive, member states will then have two years to transpose it into national legislation. An additional one-year transition period will apply to the harmonised end-user provisions. The BEREC regulation will enter into force 20 days after publication.
