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EU targets investment in high speed networks

As part of its third set of legislative proposals under the Digital Single Market (DSM) strategy on the 14 September 2016, the EU Commission proposed a Directive to recast the European Electronic Communications Code, currently being discussed by the Council and it preparatory bodies.

October 2016

Throughout the DSM review, the Commission has identified investment in new network technologies as a key policy objective. The EU has now tabled substantive proposals to encourage investment, including:

  • a new Universal Service Regime, focusing on affordable voice and broadband services;
  • a new regime for wholesale access, with a lighter touch to regulating operators who invest in shared infrastructure or operate wholesale only networks; and
  • a plan for greater co-ordination of spectrum auctions.

Universal Service

The EC proposes a new Universal Service Obligation which requires all Member States to ensure that everyone has access to affordable, functioning fixed internet access and voice services (at the same time, the EU proposes to scrap the legacy regime which guaranteed the availability of pay phones and directory enquiry services unless the mandatory continuation of such services are still justified in a particular country).

Given the reliance of today's society on internet services, this must surely be a welcome initiative. However, there is more work to be done to translate this objective into a workable regulatory regime. What does "affordable" mean, what quality of service can be expected of a 'functioning internet access service" and how will it be funded?

In terms of quality, the EC has provided a high level definition of a functioning internet access service (by reference to the availability of a minimum range of services) but the specific quality requirements are to be defined by the national regulator of each Member State.

Member States have also been tasked with the question of affordability. Member States are obliged to monitor the retail tariffs available in their country and will have the power to require providers to offer lower rate tariffs to consumers with lower incomes or special social needs (with greater transparency obligations applicable to such special tariffs).

The EC anticipates that this Universal Service Obligation will largely be met by commercial activity and other regulatory levers (such as spectrum coverage commitments). If, however, a Member State concludes that these forces will not deliver the Universal Service Obligation, it may require designated providers to deliver it (and it may designate different providers for different parts of the country). The designation of such providers must be done in an "efficient, objective, transparent and non-discriminatory" manner. Where a national regulatory authority (NRA) is satisfied that such a provider is unfairly burdened by the cost of delivery, under the Universal Service Obligation, it may compensate the provider for its net costs from public funds.

Given the role of NRAs in determining questions relating to affordability and quality, as well as their role in forcing providers to deliver services in geographical areas, there must be a relatively high likelihood of disputes with industry in delivering this policy objective.

Wholesale Access

Wholesale access is the model under which a service provider is granted access over another's network so as to enable it to provide its own communication services. Wholesale models are important to consumers and the digital economy as enabling alternative services increases competition and thus innovation and affordability.

Regulated wholesale access to the networks of providers with significant market power such as BT in the UK, has been a cornerstone of EU regulatory policy to date. However, many operators in the industry have sought a review of the regime, seeking a relaxation of the rules where competition is otherwise facilitated by market forces. Operators have also argued for de-regulation so as to create better conditions for investment.

The EC's proposals are intended to strengthen the access regulations under a more focused approach and to encourage greater infrastructure competition and investment.

The process under which market reviews, and thus SMP designations is made, is to be streamlined to focus on geographical markets where such intervention is really required. The reviews are to become more forward looking, moving from a three to five year outlook in order to provide operators with greater certainty of the opportunity for investment. As part of this process, NRAs are to identify 'digital exclusion areas' where there is no immediate prospect of the commercial availability of broadband of at least 100 Mbps and Member States can put these regions out to tender.

Another key proposal, aimed at encouraging investment in new networks, is to exempt SMP operators from price regulation in relation to access to new networks open to co-investment from others within the industry. In order to benefit from this exemption, the new network must:

  • be open to co-investment on fair, reasonable and non-discriminatory terms; and
  • contribute significantly to the deployment of high speed networks.

Providers which do not invest in the new network would still benefit from regulated access. Given the benefits most markets have seen from network sharing, it will be interesting to see whether this proposal encourages joint investment in new network technologies.

A similar proposal is to apply a lighter touch access regulation to those operators which operate exclusively on a wholesale basis, i.e. ones which only provide services to other communications providers and do not provide services to end user customers. Provided that such wholesale operators have not entered into an exclusive distribution agreement with a communications provider, much of the access regulation will be waived.

Spectrum Management

Spectrum is a scarce and valuable resource and spectrum regulatory issues have been the subject of much dispute among network operators. With 5G services on the horizon, the Commission has proposed a framework for greater co-ordination on spectrum auctions at an EU level so as to take a harmonised approach to market shaping factors.

The proposals also include the adoption of a 'use it or lose it' regime under which operators which do not use spectrum would risk losing it. It will be interesting to see whether this encourages spectrum trading.

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EU targets investment in high speed networks
Angus Finnegan

Harriet Fletcher

Harriet Fletcher


Angus and Harriet look at the key communications proposals recently published as part of the DSM strategy.

"Given the reliance of today's society on internet services, [the proposed new Universal Service Obligation] must surely be a welcome initiative. However, there is more work to be done to translate this objective into a workable regulatory regime."