There was a collective sigh of relief among European incumbent carriers after the European Commission discarded the idea of forced separation of retail services from wholesale units, which had been put forth by Viviane Reding, the EU Commissioner for Information Society and Media.
During a speech made days before the decision, the European telecoms commissioner had discussed a possible policy option of structural separation of European incumbents. By this, she meant that local telecom regulators would require a dominant operator to provide non-discriminatory access to all operators by separating infrastructure provision from service provision.
She cited the UK where BT Group Plc has had its retail services operation, BT Openreach, separated from its network operation, BT Wholesale, in order to spur competition.
However, when the European Commission published its consultation documents for the Review of the Regulatory Framework, it left out any reference to structural separation. The consultation documents form the basis of the ongoing review of the EU electronic communications regulatory framework structure, which is scheduled to finish in October.
However, the consultation documents did include other recommendations made by Reding. Specifically, the streamlining of the procedures used to check all regulatory measures proposed by national regulators through the so-called Article 7 procedure.
It also included the possibility of implementing a more market-based approach to spectrum management, which is likely to see the removal of spectrum management from local regulators, with the creation of a European Spectrum Agency.
We are glad the EU has decided to build on the strengths of the exiting regulatory framework, said Simon Bates, a spokesman at UK telecoms regulator Ofcom, speaking to Computer Business Review. However, we don’t agree with some of the proposals to shift the balance of powers as we don’t think it is appropriate.
Bates agreed that more could be done to rationalize regulations across Europe, but pointed out that there is already an existing institution in place more suited to do this. The body is known as the European Regulators Group (ERG), which is made up of all regulators in the 25 member states of the EU.
According to Bates, the purpose of the body is to share and agree upon best practice experiences in their markets. For example, the body has come out against the use of regulatory holidays, presumably a measure not supported by the German regulator. The EGR is committed to develop its role, said Bates, but needs time to incorporate best practice across the group.
The Commission already has powers to take action against regulators and individual member states, he added. It doesn’t need new powers.
Reding has clashing repeatedly with the German regulator and the draft law going through the German parliament that will allow a regulatory holiday for five years of Deutsche Telekom AG’s new high-speed fiber-optic network.
The spat began in November last year when the Bonn, Germany-based carrier lobbied the new coalition government of Chancellor Angela Merkel over its new network to ensure it achieved adequate returns. It said it would spend 3bn euros ($3.5bn) over two years to upgrade large parts of its network.
The upgrade meant stripping out large parts of its old copper wire network and replacing it with high-capacity fiber-optic cable capable of speeds of up to 50MBps. The roll-out would cover 10 unnamed German cities by mid-2006, and by 2007 this would reach 50 of Germany’s largest cities.
I simply do not buy the argument that investment will only happen if we stop regulating monopolies, she said. The EU rules do not permit ‘regulatory holidays’, she added, before confirming that she intends to begin infringement proceedings against Germany if the draft law should become law without substantial changes.
Reding is to meet the German Economy Minister Michael Glos at the beginning of July in a bid to end the standoff.