Framework Directive
Authorization Directive
Access Directive
Universal Service Directive
Radio Spectrum Decision
Conclusion of the Implementation Report

In 2002 the European Parliament and Council adopted a new regulatory framework for telecommunications. This framework is composed of five harmonization directives and a decision on radio spectrum. The new regulatory package will replace the existing directives, and will reflect increasing technology convergence and competition in electronic communications markets. The package applies to all electronic communications infrastructure and associated services such as cable television networks, application programs and conditional access services. Moreover, it grants national regulatory authorities (NRAs) flexibility to apply regulation where competition law remedies are not sufficient to address market failures. Where competition is effective, NRAs can repeal unnecessary regulation. In parallel, the European Commission adopted a new liberalization directive to reflect the changes introduced by the new harmonization package (Directive 2002/77/EC). EU member states must transpose all the new directives into national law by July 24 2003. National transposition measures must apply from July 25 2003.

Early in December 2002 the commission presented its Eighth Report on the Implementation of the Telecommunications Regulatory Package (COM (2002) 695). It assesses the state of implementation of the current regulation and also clarifies the necessary steps to allow a successful transition to the application of the new regulatory framework.

Framework Directive

The Framework Directive (2002/21/EC) aims to establish a harmonized framework for the regulation of electronic communications services and networks. It grants NRAs further powers to regulate the fast-evolving markets of the electronic communications sector. The directive reasserts the requirement for an independent and impartial regulatory authority. In its implementation report, the commission strongly recommends the transfer of all regulatory powers to NRAs, in particular where some regulatory powers remain in the hands of the relevant ministry. The directive also introduces mechanisms for the commission to harmonize NRAs' views and to maintain a sufficient level of legal certainty.

The Framework Directive gives NRAs the task of defining the markets to be subject to up-front regulation. NRAs will base their decisions on a more competition law-based approach, as explained in the commission's Guidelines on Market Analysis and Assessment of Significant Market Power under the Community Regulatory Framework for Electronic Communications Networks and Services. First, NRAs define product markets on the basis of a commission recommendation identifying product markets susceptible to sector-specific regulation. NRAs can regulate other product markets than those defined in the recommendation, but only with the commission's approval. Second, NRAs define the geographic markets within their territory: the commission is responsible for identifying transnational markets. Once markets are defined, NRAs must designate operators with significant market power (SMP) following the competition law criteria of dominance stated in the guidelines. The directive therefore abandons the 25% market share test used under the current framework. In its implementation report the commission stresses the necessary cooperation between NRAs and national competition authorities to ensure consistency in their analysis.

The Framework Directive introduces a regulatory obligation on NRAs to consult interested parties on proposed measures at national level. NRAs should also consult other NRAs and the commission where the proposed measures impact on trade between member states and in case of cross-border disputes between undertakings. In this respect, the Framework Directive establishes a Communication Committee. In addition, the commission has established a European Regulators Group for Electronic Communications Networks and Services (Decision 2002/627/EC), to provide an interface between NRAs and the commission.

Finally, the directive requires an appeal mechanism against NRA decisions before an independent body. In its implementation report the commission stresses that the appeal body should review not only the process, but also the substance of NRAs' decisions.

Authorization Directive

The Authorization Directive (2002/20/EC) aims at simplifying and harmonizing the authorization procedures for market entrants. It provides for general authorizations instead of individual licences, save in limited circumstances. As a result, operators will only be required to provide NRAs with a notification and do not need to wait for a decision. The directive will allow member states to grant individual licences only for the right to use radio frequencies and numbers. Such rights should be granted through open, transparent and non-discriminatory procedures.

However, the directive extends the list of conditions which can be attached to a general authorization (Annex A of the directive). Stricter obligations listed in Annex B and Annex C of the directive can be attached to the right to use radio frequencies and numbers.

Moreover, the directive grants NRAs further powers to impose financial penalties where undertakings do not comply with the obligations of the general authorization.

Finally, the directive maintains the possibility for NRAs to levy administrative charges on market entrants to cover the administrative cost of the procedure. In addition, NRAs can levy usage fees for the use of radio frequencies and numbers in order to ensure their optimal use.

Access Directive

The Access Directive (2002/19/EC) introduces flexible regulatory obligations for operators to gain access to and interconnect with other networks. Depending on the level of competition in the relevant market, NRAs can choose the appropriate and proportionate obligations to impose on SMP operators among those listed in the directive, such as transparency, non-discrimination or accounting separation. In its implementation report the commission confirms that the forward-looking long-run average incremental costs approach remains the most appropriate to ensure that interconnection tariffs applied by SMP operators are cost oriented.

The directive extends the list of obligations which can be imposed by NRAs, such as the obligations to give third parties access to the local loop and to provide for collocation or other forms of facility sharing. NRAs can also impose obligations which are not listed in the directive subject to the commission's approval. Moreover, the directive gives NRAs the flexibility to repeal obligations when competition in the relevant market increases. In its implementation report the commission states that local access is constructed in a way which makes regulation necessary to force incumbent operators to supply services such as bitstream access under non-discriminatory, transparent and cost-oriented conditions.

Finally, the directive maintains negotiations between undertakings on technical and commercial interconnection arrangements as the rule. NRAs can intervene in cases where negotiations have failed, at their own initiative or at the request of the parties involved. The directive maintains the obligation on all operators to negotiate interconnection upon request.

Universal Service Directive

The Universal Service Directive (2002/22/EC) states the rights of all end users to have access to a minimum set of electronic communications services of quality and at an affordable price.

The scope of 'universal service' is not extended. Member states are required to ensure that all reasonable requests for fixed-line connection and access to telephone services, including narrowband internet access, are met by at least one undertaking. However, the commission is to review the scope of 'universal service' within two years of the implementation of the directive, and subsequently every three years. Basic user and consumer rights - such as transparency of information, quality of telephone services, access to directories and itemized billings - will remain broadly unchanged from the requirements of the current regime.

One of the few novelties introduced in the directive is the possibility for member states to designate several undertakings to provide universal service. Such a designation should result from a non-discriminatory, transparent and objective methodology, and ensure the cost-effective provision of universal service.

Finally, the directive maintains the obligation on SMP operators to provide fixed public telephone services at cost-oriented, transparent and non-discriminatory prices. In its implementation report the commission stresses the necessary application of these principles to avoid distortion of market conditions and facilitate price decreases. The commission also recalls that member states should ensure the progressive rebalancing of retail tariffs as provided for under EU law.

Radio Spectrum Decision

The Radio Spectrum Decision (676/2002/EC) seeks to ensure a coordinated and harmonized approach to the availability and the efficient use of radio spectrum. Consequently, a Radio Spectrum Committee has been established to assist the commission in discussing proposals for technical measures on radio spectrum. It is composed of representatives of member states and chaired by a representative of the commission.

The decision also requires the committee to take into account the views of the industry and all interested parties on technological, market and regulatory developments in relation to the use of radio spectrum. As a result, the commission has established a radio spectrum policy group (Decision 2002/622/EC). The latter assists and advises the commission on radio spectrum policy issues such as spectrum availability, allocation of spectrum or methods for granting rights to use spectrum. In this respect the Framework Directive gives member states the possibility to authorize spectrum trading between undertakings.

Conclusions of the Implementation Report

In its implementation report the commission insisted that member states should adopt the measures necessary to allow a successful transition to the application of the new framework before July 24 2003. In particular, it considers that member states should establish all the underlying administrative structures and the legislative framework by this date. Market analysis and the assessment of competition by NRAs required under the new framework may come at a later stage.

The commission also insists on the key role granted to NRAs in the transition process. It concludes that the conditions of licensing, interconnection, leased line delivery and the provision of universal service substantially comply with the existing framework and constitute a solid basis for the transition toward the implementation of the new framework.

For further information on this topic please contact Colin Long or Cecile Plaidy at Olswang by telephone (+44 20 7067 3000) or by fax (+44 20 7067 3999) or by email ([email protected] or [email protected]). The Olswang website can be accessed at