RD235 - ETNO Reflection Document - ETNO contribution to the 2006 Review

ETNO believes that a thorough ‘root and branch’ review of the current EU telecoms regulatory policy is necessary to deliver the optimal regulatory conditions for a period of time that will reach beyond 2010. The electronic communications sector is undergoing unprecedented challenges globally, requiring innovative firms accelerated capacity to adapt to these challenges. The current system providing inefficient incentives and assistance to market players needs to come to an end in Europe.

Consequently, (ex-ante) pre-emptive economic regulation should by and large also be terminated within the earliest possible timeframe.

ETNO believes that a thorough ‘root and branch’ review of the current EU telecoms regulatory policy is necessary to deliver the optimal regulatory conditions for a period of time that will reach beyond 2010 .

The electronic communications sector is undergoing unprecedented challenges globally, requiring innovative firms accelerated capacity to adapt to these challenges. The current system providing inefficient incentives and assistance to market players needs to come to an end in Europe.

Consequently, (ex-ante) pre-emptive economic regulation should by and large also be terminated within the earliest possible timeframe. The previous logic of the EU regulation assumes a wishful and non-described transition from the opening up of monopolies to a final situation where business activities by providers of electronic communication services are not treated differently from other business activities, i.e. are regulated by competition law where interventions are taken only if a dominant position is abused. However, experience so far shows that regulatory interventions are increasing and the policy direction of considering ex-ante regulation as a last resort tool has been largely abandoned. Backward looking models together with a system of inadequate incentives for regulators has led to the regulated perimeter being extended to market areas that didn’t exist only a few years ago. They are being regulated under outdated assumptions perpetuating old-fashioned and inefficient market structures far from sound business realities and needs.

To enable the necessary transition to happen, we believe that clearly defined transition steps should be introduced. These would include the review of the current Regulatory Framework. In the meantime, principles and objectives towards deregulation should be introduced and implemented within the existing EU regulatory framework to prevent that the “regulated perimeter” gets beyond legacy issues. Otherwise creative, innovative European firms will be subject to more burdens than those inherent to the business affecting their ability to compete globally.

As the NRF in its current form does not meet the requirements of the marketplace, ETNO proposes further modifications to the current system of market-based regulation. These should focus on improving the largely unused “Three Criteria Test” by giving it an outstanding role by e.g. being treated separately from the decisions and analyses taken by NRAs. Should it be needed for remaining legacy issues after this review period, last resort ex-ante regulation could be considered but should be restricted to non-replicable legacy assets. ETNO calls on the Commission to explore these proposals in its Review, including the early introduction of good regulatory practices such as forbearance in Europe.

The aim of the 1999 Review was to create a regulatory regime that could be rolled back as competition strengthened, the ultimate objective being to control market power through the application of competition law. Consequently, the revised regulatory framework should ultimately put an end to the current sector-specific regulation, leaving it to competition law to deal with electronic communications market failures if any. NRAs would then be in charge of managing scarce resources (numbers, addresses, spectrum, etc.), authorisations and rights of way, and advising NCAs in cases of conflicts.

This paper also provides more detailed suggestions on the issue of harmonisation as well as on the Universal Service and Access and Interconnection Directives.

ETNO’s views on spectrum issues related to the review will be submitted separately.