Monday, 2 February 2015

The EU And Telecoms (Part 1)

With this piece, in part 1, we turn our sights on the EU's complex role in member state telecommunications regulation, with emphasis on the UK. The above graph gives some indication of the intricate nature of telecommunications regulation within the EU and the partial subservient relationship for a member state such as the UK.

As can be seen above (click to enlarge) the UK's main regulator Ofcom has direct relationships with EU bodies which bypass UK ones, as well as having interaction domestically. The EU and UK regulatory structures increasingly are indistinguishable from each another.

Yet also the bewildering emergence and relentless progress of technology means we will also see that EU has only become a partial player in what is increasingly a global regulatory industry. This becomes evident when we consider that even within Europe itself where many functions are regulated beyond the EU.

An earlier example can be seen acutely with the establishment of the mobile phone standard GSM in the 1980s. GSM, with very little if at all EEC/EU involvement, was an illustration of European nation state co-operation and subsequently the GSM standard became a global success story.

The GSM agreement was reflected in the long standing establishment of non-EU bodies include the European Telecommunications Standards Institute (ETSI) and the European Conference on Posts and Telecommunications (CEPT).

Despite the existence of non-EU bodies it is with no surprise, due to the inherent cross-border nature of telecommunications, that the EU saw the sector as an opportunity to use the growth of telecoms to try to facilitate 'ever closer Union' further.

Pre-Maastricht the EEC had attempted to use the Terminal Equipment Directive (88/301/EEC) - issued under Article 90 of the Treaty of Rome - to force the liberalisation of telecoms including the satellite and mobile markets. Despite Member States objecting on the basis it was outside the EEC's own competences (satellite communications for example have military implications) the ECJ after 30 months of legal wrangling upheld the Directive.

Naturally the solution for the EEC (EU) to such legal wrangling was to make communications a competence via a Treaty. Thus not long after, we see the clear intentions of the EU's ambitions when in the Maastricht Treaty (Article 129 D) it for the first time gave the EU competence in the field of telecommunications (my emphasis):
The Maastricht Treaty gave the EU the task of establishing and developing trans-European networks (TENs) in the areas of transport, telecommunications and energy, in order to help develop the internal market, reinforce economic and social cohesion, link island, landlocked and peripheral regions with the central regions of the Union, and bring EU territory within closer reach of neighbouring states.
Even in the early 1990s telecommunications, which for obvious reasons was becoming a globalised industry, increasingly relied on global bodies to set global standards for convenience. The EU though envisaged the sector more as a mechanism and means to facilitate its own political union - despite the example of GSM and mobile technology where nation states had led and the EU had merely followed.

Typically then we saw in the early 1990s the EU arguing in favour of more telecommunications liberalisation with a view to completion of the internal market with an EU wide regulator. Emboldened by new powers in Maastricht led to the EU Commission launching a strong push to adopt a common strategy for the creation of a European information society driven by a European information infrastructure. In 1993, the Council of Ministers (EU) agreed to fully liberalise voice telephony services by 1 January 1998:
[The EU Commission] it is asking the Council to decide  on a number of principles contained in the Commission communication, in particular:
   -  the complete liberalization of services;
   -  a transitional period ending in 1998
   -  a precise schedule  in two main stages with a consolidation
      phase (1993-1995)  and a phase of gradual opening up to
      competition  (1996-1998);
   -  the role of infrastructures.

Following  its discussion,  the Council  instructed the Permanent Representatives Committee to continue work on this dossier with  maximum efficiency,  in order to enable the Telecommunications Council convened for 16 June to arrive at an agreement.
In addition the European Council meeting of December 1993, in its Presidency Conclusions considered a European Commission policy paper - European Commission White Paper, Growth, Competitiveness, Employment - The Challenges and Ways Forward into the 21st Century, 1993 which argued:
The Community needs an adequate frame-work for the developing of new market opportunities. In Europe some sectors are traditionally the exclusive preserve of non-market services or public utilities, in particular when it comes to the fulfillment of public needs. Reforms aiming at separating the different functions of public authorities with regard to the supply of such services as producer, purchaser and regulator, in sectors such as health care, telecommunications, etc. should enable the needs of users to be better served at less cost for public finances and with market creation potential .
The Presidency Conclusion on behalf of Member States accepted the EU Commission White Paper noting:
A more decentralized economy, given the growing importance of the local level; the economy needs to be geared to the possibilities offered by the new technologies...

...the trend towards a decentralized economy, which has been made possible by new information technologies, must be encouraged....The European Council asks the
Commission to examine ways of achieving this objective.
Thus the European Council requested a report be prepared for its 1994 Corfu meeting by a group of prominent persons on the specific measures to be taken into consideration by the Community and the Member States for the infrastructures in the sphere of information.

Such a group 'of prominent persons' became known as the 'High Level Group on the Information Society' - organized by the Commission and chaired by the then Commissioner for the Internal Market and Industrial Affairs (soon to become the Commissioner for Industrial Affairs, Information and Telecommunications Technologies), Martin Bangemann - a former leader of the German Free Democratic Party (FDP).

By 1994 the High Level Group on the Information Society produced a report for the 1994 European Summit; "Europe and the Global Information Society: Recommendations to the European Council" a report which became widely known as the Bangemann Report and was adopted by the European Council, Corfu, June 1994.

The report urged the European Union "to put its faith in market mechanisms as the motive power to carry [Europe] into the information age. This meant that actions must be taken at the European level and by Member States to strike down entrenched positions which put Europe at a competitive disadvantage."

The report proposed "fostering an entrepreneurial mentality to enable the emergence of new dynamic sectors of the economy; [a means of developing] a common regulatory approach to bring forth a competitive, Europe-wide, market for information services."

It then noted:
In addition to its specific recommendations, the group proposes an action plan of concrete initiatives based on a partnership between the private and public sectors to carry Europe forward into the information society.
The Bangemann Report was to have a very significant and lasting influence on the framing of subsequent EU policies for Information and Telecommunications Technologies (ICT) research and communication services. For many years following its publication the report was repeatedly cited as a kind of "Bible" by Commission documents and officials on a very wide spectrum of industrial and social policy initiatives. For example it was explicitly invoked as a framework for an important 1994 document setting out a new strategy for the audio- visual sector in the EU single market context and another paper in 1994 titled 'Europe's way to the Information Society: An Action Plan'.

Yet despite its significance within EU circles the Bangemann report was out of date almost as soon as it was written. It had largely ignored the emergence of the internet and what it did acknowledge was to highlight its basic lack of understanding and knowledge. Consequently it expressed a level of discomfort - page 27 (my emphasis):
Internet is based on a world-wide network of networks that is not centrally planned. In fact nobody owns Internet. There are now some 20 million users in more than 100 countries. The network offers electronic mail, discussion forums, information exchange and much more. Internet is so big, and growing so fast, that it cannot be ignored. Nevertheless, it has flaws notably serious security problems. Rather than remaining merely clients, we in Europe should consider following the evolution of Internet closely, playing a more active role in the development of interlinkages.
In the meantime, while largely failing to anticipate or understand the internet, the liberalisation process in other telecommunications sectors was being extended post 1994, for example in satellite communications.

By 1995 via the American based GPS had became a system that had broken out of realms of science fiction and used as an everyday tool for navigation by private vehicles, ships and aircraft. The EU in response planned to install a rival system called Galileo where it recognised "the value of a space programme, of which Galileo is a part, in completing the process of European integration".

In contrast to the liberalisation process, and interestingly, the intention to adopt similar criteria to public broadcasting services (PBS) came with a great deal of reluctance - the EU itself noting that "the relationship of European Union policy and Public Broadcasting Services could be summarized as a historic dilemma without a clear answer. The balance between a strong European competition policy and public broadcasting survival has still to be found. Perhaps the text cited below explains the Gordian knot faced by European Union":
“We need balanced solutions able at the same time to respect two important points. The first is the basic function of Public Broadcasting Services in the most of EU Member States. This fact has been recognised recently in Amsterdam Treaty with the Public Broadcasting Protocol. The second is that European integration is based on free market and equal competition. The future of the dual European TV system depends on how we can be able to combine these two apparently incompatible principles” (The digital age: European Audiovisual Policy. Report from the high level group on audiovisual Policy, 1998).
In essence the EU faced a dilemma; how to make compatible its own competition rules with public state funding of PBS. Article 87 forbids the state aid, which distorts or threatens to distort competition, insofar as it affects trade between Member States but with broadcasting an exception was made which notably meant that PBS could remain publicly funded to ensure the promotion of the "democratic, social and cultural needs of each society and to the need to preserve media pluralism".

This role of public service broadcasting in promoting cultural diversity was recognised in 2005 by the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions.

The reluctance of the EU was undoubtedly due to its appreciation that member states' PBS networks would be more sympathetic to its integration project under the guise of the 'cultural need' criteria. This becomes especially evident when we consider the BBC receives a substantial amount of money from the EU and possibly related (or not) has long been criticised for pro-EU bias.

Public broadcasting aside, generally from 1994 onwards, in the context of developing the 'information society', general liberalisation of telecommunications structures was presented as the way to develop multimedia - cable television networks were 'liberalised' in 1996, with mobile communications following on 1st January 1998.

Bangemann's report thus was hugely influential, and despite failing to anticipate properly or appreciate the approaching dominance of the internet, its vision of telecommunications liberalisation would influence the EU Commission's thinking regarding the internet.

The EU's determination to 'liberalise' markets resulted in a growth of "regulator watching", which followed closely the experiences of the privatisation drive in Member States particularly the UK. "Regulator watching", or a regulatory state, provided a convenient opportunity in extending EU governance across member states via a regulatory body.

By separating out the service provision by companies from sector oversight privatisation, and the creation of markets, allowed conditions to exist for the adoption of common rules by an independent regulatory body and the conditions of access to the market for new operators to be harmonised. All of which naturally increased the call for 'more Europe' under one EU regulator.

And in part 2 of the EU's effect on the telecoms industry we will see how it attempted to facilitate the emergence of an EU regulatory body.

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