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Berec criticises EC proposals for deregulation

Wednesday 24 May 2017 | 16:26 CET | Background

The European Commission wants to stimulate investment in the telecom sector by relaxing some regulation, according to a paper from Berec, the assembly of national telecom regulators. The Commission has proposed the Electronic Communications Code (ECC) to replace the current regulatory framework in the sector. In Berec's opinion, the proposal is full of measures that will all lead to regulators taking a step back. The idea seems to be that less regulation alone will lead to more investments, and reduced competition is an acceptable price. This will not be to the benefit of end-users, Berec warned, and recommended that part of the EC's plans be scrapped. The amendments proposed by members of the European Parliament are even less acceptable, the regulators said. 

 

The ECC was first presented by the EC in September 2016 as part of a review of the existing framework, and the proposal is now under discussion at the Industry, Research and Energy (ITRE) committee in the European Parliament. Berec has provided its response to both the EC and MEP versions and found that some of the measures may have the opposite of the intended effects. 

Bigger barriers to regulation

If the plans are approved as they stand, the regulators fear it will become more difficult for them to impose ex ante regulation, as is common now following market analyses. The minima in the current three-criteria test for imposing regulation would be increased under the ITRE proposal, while the Commission wants to expand its veto rights, from the market analysis to the measures imposed.

Furthermore it would no longer be possible to regulate retail markets as is. Berec agrees with the Commission on the principle that regulation should go 'upstream' (focusing on wholesale markets), but the national regulators still see situations where problems for end-users cannot be solved, or not quickly enough, with wholesale measures. 

In addition, the focus has shifted from ex ante regulation to ex post oversight, with a greater emphasis on general competition law. The regulators acknowledge the general philosophy that ex ante regulation should be gradually withdrawn, but still see persistent or potential bottlenecks in the market. This makes it risky requiring regulators to take a step back in a wide range of areas. 

Time for analysis

Berec also made a point of the regulators' capacity to investigate the market. Currently they can require a company to provide information, but the Commission has proposed limiting this to providers of electronic communication services. Berec would rather see this option expanded, to also include providers of content, such as TV, as well as OTT providers, if they are found to have an important role in the market. 

The MEPs also proposed dropping the requirement for member states to draw up rules on their sanctions policies. Berec opposes this, underling that regulators need to have the power to enforce their decisions. 

Berec does support the Commission's proposal to extend the period between market analyses to five years from three. This reduces the administrative burden and also provides more stability in the market. However, the regulators are against a suggestion from the ITRE to maintain the three-year regulatory cycle in highly dynamic markets. Such a distinction between markets would only lead to uncertainty, Berec said. 

Another questionable distinction is a separate regime for 'Very High-Capacity Networks' (VHC)  and for 'new' networks or network elements. There is no definition yet for these, and the regulators are not ready to leave this to the operators to decide. This could result in large parts of the market being left outside regulatory oversight. 

The ITRE also proposed that regulations would expire automatically once the period covered by the market decision ends and that a provider designated as a significant market power can request a new market analysis if market conditions change. The regulators warned that this could lead to huge delays, creating more harmful uncertainty for investments. 

Scrap completely

Berec recommends scrapping completely two new segments included in the code. The first covers ‘co-investment’. The Commission wants to stimulate investment in faster networks by offering a lighter regulatory regime. Players that group together in co-investment schemes would face less oversight from the regulator.

Berec envisaged a situation where a co-investor participates only financially, without contributing to the development of technology or services. This could result in the monopoly or dominant position of the other investor only being strengthened if the regulator is forced to back off. Berec noted that co-investors are already active in a few countries, working within the currently regulatory framework. It made a number of suggestions for changes in this, all of which means that the national regulators would still be able to keep a tight rein on the market. 

Berec also sees little promise in a plan to address 'vertically separated companies'. The Commission has proposed scrapping all the rules for companies that separate their network in a separate wholesale business. Berec warned that providers that have only made an administrative separation, but are still the same group, would then be subject to no regulation. If only ex post intervention is still allowed, it would all be too late, the regulators expect. 



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