Encouraging quality connectivity to create the Digital Single Market

As part of the EU strategy to create a Digital Single Market (“DSM”), the European Commission has recently proposed a new European Electronic Communications Code (the “EEC Code”). The EEC Code merges the existing four key telecoms Directives (the Framework, Authorisation, Access and Universal Service Directives) into a new Directive, in order to create a new regulatory framework to meet Europe’s growing connectivity needs.

The EEC Code introduces a number of new initiatives in order to encourage investment in high-capacity networks and improve Europe’s competitiveness. Some of the key features of the EEC Code include:

  • New regulation of over-the-top (“OTT”) VoIP communication services
  • Significant amendments to the universal service regime
  • Simplification of access regulation
  • A coordinated approach to spectrum allocation
  • Amendments to voice termination rules
  • Strengthened consumer rights
  • The EEC Code was announced together with an action plan for the rollout of 5G and free public WiFi. We have considered these proposed changes in more detail below

2. Over-the-Top Providers

A notable change proposed by the EEC Code will be that online providers of OTT VoIP communications services equivalent to those of traditional telecoms operators will be covered by similar regulatory obligations and rules. Currently, OTT VoIP services are generally not subject to some of the regulatory obligations applicable to traditional telecoms providers (eg, access to emergency numbers, switching and customer contract obligations and data protection), even though the service provided to customers may be largely equivalent. Most of these obligations will apply to OTT VoIP services which use telephone numbers (eg, Skype), which will now have to provide certain contractual information to customers and ensure that they meet requirements relating to access to emergency services.

Other obligations apply to all OTT services including those that do not use telephone numbers (eg, WhatsApp), which will now be subject to rules regarding security and equivalent access for users with disabilities.

3. Amendments to Universal Service Regime

The EEC Code proposes to remove the mandatory inclusion of legacy universal services, such as public payphones, in order to focus the universal services regime on modern services required by EU citizens. For example, the EEC Code provides that, for the first time, basic broadband access will be considered as a universal service under EU law. Communications providers under a universal service obligation will be required to provide access to basic internet and voice communications at an affordable price.

4. Simplified Access Regulations

Amendments to access regulations aim to improve the current ‘Significant Market Power’ access regime while promoting infrastructure competition and network deployment. The EEC aims to ensure that access obligations are imposed only if necessary to remedy retail market failures and assure end-user outcomes. Given the importance of access to networks in helping to stimulate the deployment of high capacity networks, the EEC Code sets out simplified procedures and more tailored conditions under which such access is granted.

The EEC Code focuses on providing greater access to civil infrastructure, eg ducts and poles, in order to provide the necessary incentives to telecoms operators to invest in future network infrastructure. There may be some overlap between the access obligations proposed by the EEC Code and the access obligations included in Directive 2014/61/EU on measures to reduce the cost of deploying high-speed electronic communications networks, which has been transposed into Irish law by way of the European Union (Reduction of Cost of Deploying High-Speed Public Communications Networks (Regulations) 2016 (S.I. No. 391 of 2016).

The EEC Code also amends the current maximum national regulator market review period from three years to five years, which aims to give operators more stability in long term planning and national regulators more flexibility as regards the timing of market reviews.

5. Coordinated Spectrum Policies

The EEC Code aims to reduce divergences between EU Member States of regulation of radio spectrum. New long licence durations (minimum 25 years) and rigorous requirements around the granting, renewal and restriction of rights of use are proposed by the EEC Code in order to ensure effective and efficient use of spectrum. For example, it is proposed that Member State authorities apply conditions to rights of use for radio spectrum defining the level of use required (‘use it or lose it’ principle) and the possibility to trade or lease the right of use.

The EEC Code proposes that Member State authorities must promote effective competition and avoid distortions of competition when granting, amending or renewing rights of use for radio spectrum. Member State authorities shall be able to take appropriate measures such as:

  • Limiting the amount of radio spectrum for which rights of use are granted to any undertaking.
  • Reserving a certain part of a frequency band or group of bands for assignment to new entrants.
  • Refusing to grant new rights of use for radio spectrum or to allow new radio spectrum uses in certain bands, or attaching conditions to such rights of use, in order to avoid distortions of competition by any assignment, transfer or accumulation of rights of use.
  • Prohibiting or imposing conditions on transfers of rights of use for radio spectrum not subject to national or EU merger control where such transfers are likely to significantly harm competition.
  • Amending the existing rights of use where necessary to remedy ex post a distortion of competition by any transfer or accumulation of rights of use.

The EEC Code proposes to coordinate the timing of spectrum assignments across Member States and key spectrum licence conditions. These provisions aim to help reduce costs for telecoms operators and continue the drive towards a digital single market.

6. Voice Termination Rules

The EEC Code proposes a binding methodology for national regulators to set voice termination rates, to be set by a Commission Decision, and proposes maximum voice termination rates in fixed and mobile which will be set by way of delegated acts adopted by the Commission.

7. Strengthened Consumer Rights

The EEC Code proposes to update consumer protection rules to improve transparency and switching rules applicable to consumer contracts. Consumers will have to be provided with essential contract information in a short form document. The new rules will also make it easier for consumers who sign up to bundle subscriptions (eg, combined television, telephone and internet) to switch providers.

8. Rollout of 5G and Public WiFi Fund

The European Commission has also proposed an action plan for encouraging investment in the rollout of dense 5G networks across EU Member States. The initiative aims to tackle market challenges in order to achieve a goal of 5G connectivity across Europe by 2020.

Additionally, the European Commission has proposed a budget of €120 million to develop a public voucher scheme to make WiFi available to the public through thousands of local access spaces, such as parks, public buildings, etc, in cities across Europe.

9. Conclusion and Next Steps

The EEC Code is a proposal for a Directive, and will be required to follow the ordinary legislative procedure, with scrutiny from the European Parliament and the Council of Ministers before it becomes EU law. We estimate it could take up to 18 months for the EU institutions to ratify the Directive. Member States will then have a specified period of time (eg, another 18 months) to transpose the EEC Code into national law.

It remains to be seen how the UK will approach agreement and transposition of the final Directive into national law given it is likely that it will have triggered Article 50 of the Treaty on European Union by the summer of 2017, which will start the process of ‘Brexit’ from the EU. The current UK telecoms regulatory framework is based on the existing four telecoms Directives identified above, and it remains to be seen whether the UK will seek to introduce parts of the EEC Code into national law, perhaps in order to facilitate telecoms providers with operations in the UK and in other EU Member States which may wish to have a consistent regulatory regime across Europe.