1. Introduction 1

2. Criteria for ‘measuring’ Liberalisation 2

3. FAIR Update Tables – Conventions and Caveats 3

4. Highlights of Progress Towards ‘Free’ Competition 3

Market liberalisation in the telecommunication and related sectors is aimed at achieving both economic and social advantages for businesses and consumers in the European Information Society.

There is clear evidence that the era of European telecommunication liberalisation has brought lower tariffs and a vast range of new telecommunication services that previously were not technically feasible, and more importantly, could not be provided by companies other than the incumbent public telecommunication operators.

The era of European telecommunications liberalisation has spawned a new regime of regulations aimed at ensuring that competitive entry occurs in all segments of the market. This new regime has its positive features but it also forms a set of constraints within which would-be telecommunication operators have to operate. As of February 1998, the Commission’s view is that most of the necessary legislative framework is in place and is being applied in a way that is likely to stimulate the development of the European Union telecommunication market which is valued at about ECU 141,000 million and is growing at about 8.2 per cent per year. Increased attention is now being given to the implementation and enforcement of the new legislative package.

The United Kingdom is regarded as the most liberalised European telecommunication market. It has taken about 16 years to reach its present state. Some observers argue that EU member states that are now moving to liberalise their markets will learn considerably from the British experience, thus averting many of the problems that Britain has confronted in the government’s bid to prise open the former state monopoly market. Other countries may see competitive inroads by new suppliers take hold more rapidly than has been the case in Britain. For example, Denmark, Finland, and Sweden have introduced considerable liberalisation and harmonisation measures.

This up-date on developments in the telecommunication markets of the 15 EU member states is based upon a wide range of sources and documentation available at the time of writing, and responses to a short FAIR questionnaire circulated to telecommunication researchers in eight member states. The aim of this working note is to complement other available sources by presenting a snapshot of the current status not only of the regulatory provisions in the member states, but also of the presence of key players in the market. This note focuses on:

• Abolition of special and exclusive rights for public telecommunication operators
• Liberalisation of equipment and service markets
• Establishment of a regulatory framework
• Role of National Regulatory Authorities
• Evidence concerning existing and new telecommunication operators
• Highlights of progress on recent issues

There is no standard set of criteria currently in use for measuring or bench marking market liberalisation in the EU. In general, the European Commission has been using the following set of steps.

• Decisions with respect to which aspects of telecommunication regulation to move forward on in order to effect market liberalisation;

• Achieve agreement on a set of directives with dates of implementation which would, if followed by Member States, achieve progress; grant Member States delays or ‘derogations’ when appropriate.

• Monitor the ‘transposition’ or implementation of the directives whereby they are enacted in member states’ own legal systems

• Put infringement processes into play for late performers (mainly DG IV).

• Rely on National Regulatory Authorities (NRAs) to achieve practical implementation of the directives

• Monitor user responses including larger users (large national and international companies) and telecommunication operators (incumbents and new entrants) to check progress and review the indicators of progress used by these groups, e.g. service levels and timeliness of observation of regulations, and costs.

The Commission has designated a set of key ‘indicators’ for the transposition by member states of the telecommunication regulatory package that has been put in place. These cover the following areas:

• Alternative infrastructure for liberalised services by 1.7.96 (by 15.11.96 for mobile infrastructure
• Direct interconnection of mobile networks with mobile and PSTN in other Message Services by 15.11.96
• Full competition by 1.1.98
• Availability of fixed and mobile numbers by 1.7.97
• Funding mechanism for Universal Service Obligations if any notified by 1.7.97
• Terms and conditions for interconnection published by telecommunications organisations by 1.7.97
• Cost accounting systems for pricing interconnection in place
• Tariff rebalancing by 1.1.98 or plans in place
• Draft licensing/declaration procedures notified to the Commission by 1.1.97

Other provisions concern the establishment of independent National Regulatory Authorities with powers with respect to interconnection, licensing, numbering, universal service and dispute resolution, universal service obligations and funding mechanisms, verification and approval of cost accounting systems, tariff principles, procedures for allocating numbers and provisions concerning licensing.

During the run up to 1 January 1998 and the opening of the European market to ‘free’ competition, the Commission’s attention has been focused on non-voice services, mobile services, establishing NRAs, fixed voice/open network provision, interconnection costs and advanced features such as choice of carrier and number ‘ownership’ by users rather than by telecommunication operators.

The FAIR regulatory update question was: ‘Does Member State ‘x’ follow Directive ‘y’?’

A summary table necessarily simplifies the way directives are being implemented by the Member States and the indicators of new entrant activity. Judgement is required in order to synthesise the information that is available from various sources and many of these contradict each other. The FAIR up-date procedure drew upon available sources and invited telecommunication experts in the consultancy and academic fields to provide their views as to the current state of practical application of legislative and regulatory provisions.

The summary tables in Annex 1 follow a standard pattern. Information in round brackets ( ) is possibly out of date but could not be updated given the time available for the preparation of this update.

Key to entries:

u = main provisions in place

~ = some provisions in place

? = not known

Drafts = draft measures sent to Commission } at any time

Local level: between 0.6 and 1.0 ECU/minute; mid point = 0.8

Single transit: between 0.9 and 1.8 ECU/minute; mid point = 1.35

Double transit: between 1.5 and 2.6 ECU/minute; mid point = 2.05

Figure 1 shows the percentage by which member state interconnect prices exceed (or fall below) the mid point recommended for the above three categories of prices.

Figure 1

Note: Greece, Ireland, Luxembourg and Portugal data were not published at the time of writing.

The results in Figure 1 can be interpreted as one indicator of the extent to which barriers to new entry continue to exist in each of the reporting member state markets. Austria’s interconnect prices are clearly out of line with Commission recommendations while the United Kingdom (below), France, Denmark, and Germany are reasonably closely in line with the mid-point of the prices suggested by the Commission. Prices significantly exceeding the Commission’s prices suggest that the government is not strongly encouraging incumbent telecommunication operators to offer interconnection facilities that are attractive to new entrants.

The summary tables in Annex 1 provide information on progress toward market liberalisation in the telecommunication sector. Table 1 (below) provides a summary of the status of regulation with respect to the audio-visual sector and the provision of Internet telephony. This table shows that member states have regulatory provisions in place for the audio-visual sphere and that some cable operators are beginning to offer telecommunication services. Internet Telephony has not yet matured to the extent that it appears to be challenging existing regulatory provisions in a significant way.

Sources: Various, see endnote No. 4

With the release of the Commission’s ‘third report’ on the implementation of the EU’s regulatory provisions, Commissioner Martin Bangemann said:

Despite major progress by the European Commission to put the elements of a competitive telecommunication and audio-visual market in place in Europe, there continues to be significant heterogeneity in the timing and mode of implementation and enforcement of directives at the member state level. This diversity is acknowledged but it is not clear whether the degree of diversity is sufficient to dampen the expected benefits of the liberalised market to a significant extent in the medium term.

Discussion about the need for one or more EU-wide regulatory agencies covering telecommunication matters and developments in the audio-visual sphere is continuing. Apart from debates about the legal form of one or more organisations, the benefits and disadvantages of embracing ‘carriage’ and ‘content’ regulation within a single organisation, and issues of subsidiarity, there is also debate about the need for telecommunication sector specific regulation versus ‘regulation’ by reference to competition policy.