Making the connection - How the European Commission forged the single telecoms market

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The European Parliament has today voted on proposals to unify the national telecom markets of the 28 member states of the EU into a single telecoms market and reflect in legislation the modern day internet age that telecoms exists in. The basis of the proposals underpins the EU Treaty Principles of the right for operators to provide communication access freely across the EU and the right for consumers to consume digital services in the EU. Part of the EU Commission drive is to enable consumers to be free to access a competitive market of telecoms services without - what they consider to be - strong deterrents, such as roaming costs of accessing such services. The legislative changes to several regulations will build on the foundations of the 2009 Telecoms Framework Directive to create the unified Telecoms Single Market. The legislation, which has so far been referred to as the 'Connected Continent legislative package', will be directly effective in member states when it comes into force.

What are the main changes?

• Less regulation complications for companies

The legislation will provide certainty and simplicity for operators by providing Single EU Authorisation for all 28 member states, so operators will not need authorisation in every member state that they provide services to. Rob Bratby, Managing Partner of Olswang's Singapore office commented: "The change from individual country authorisations to a Europe-wide one will significantly ease the compliance burden on international operators. This is a welcome development". To increase competition in the market, smaller operators will be provided with assistance and exemptions from market barriers to entry. In its simplification the Commission has stopped short of providing a unified Regulator for the single market, indicating that the priority is on the speed of implementation of the single market, as opposed to bureaucratic delays. However, the Commission can block any proposals from national regulators which contradict the single market's aims and intends to uphold the market's objectives of providing uniformity and stability for operators and consumers[1]. Bratby said: "Less European regulation will encourage companies operating in Asia to think about investment into that region".

• Spectrum sharing, Wireless, 4G investment and integrated networks

The legislation simplifies the wireless markets by encouraging the sharing of spectrums to ensure that spectrum use prices are not exclusionary to new market participants and that overpriced spectrum auctions do not occur. By freeing up spectrum operators are compensated and spectrum trading can also occur to provide additional revenue and access for other operators. Wireless and 4G usage will also be more accessible through relaxed authorisations and less prohibitive conditions. Furthermore, significant market operators will be obliged to offer competitors virtual access to their networks, and such access sharing will enable new entrants to the market.

• Terminating roaming premiums in the market by 2016 or earlier

From 1 July 2014, operators will no longer be able to charge for incoming calls to customers whilst they are travelling abroad in the EU. The incentive for operators is decreased regulation if they alter their domestic plans/bundles from 2014 to ensure that users can use their phones or smartphones at domestic rates when travelling in the EU. The alteration should be performed by 2016, but operators can do so on a roll-out basis either by service plans or by countries. This is likely to be the popular option amongst operators keen to retain their customers when they travel in the EU. Alternatively, operators can enable customers, under the 2012 Roaming regulation, to elect to use competitor providers at the alternative provider's domestic rates when abroad within the EU from July 2014.

Additionally, operators will not be able to charge more than domestic long-distance calls for all fixed line calls to other EU Member States, or charge more than the euro-tariffs for regulated voice and SMS roaming communications for mobile to other EU member states.

Further regulatory options may be considered after the Commission reviews the Roaming regulation implementation in 2016.

Blanca Escribano, Head of the Telecoms practice in Spain, commented: "The changes introduced into the Roaming regulation bring new mechanisms for operators to offer domestic tariffs to users when they are traveling across the EU. This is a positive development for end users, but is expected to increase the usage of telecom services (especially data) and to boost the provision of new telecom services related to the Internet of Things in the EU. Roaming charges are one of the entry barriers that operators find when providing machine to machine communications , which are international by nature."

• Customer choice / Net neutrality:

The Commission has included provisions to ensure that the customer has full knowledge of the fundamentals of their contract and choice to leave if they deem it unsatisfactory. As a starter, contracts should be written in plain language, with customers needing to be informed of charges, data speeds, volume limitations and the quality of a service. If the services fail to match what the customer pays for, the customer can terminate. Operators must also provide easy switching with financial penalties if they fail to do so efficiently for the customer. There will furthermore be mandatory comparison tools by national regulators or accredited third parties, so price and service transparencies are clear to customers. Contractually, the operator cannot make the customer enter into initial periods in excess of 24 months and must offer 12 month options. Roll-overs must also be notified to customers a month before and provide customers with a free and easy termination. Any contract may also be terminated by the customer within the initial 6 months, subject to a one month notice period and reimbursement of any subsidised equipment or periphery materials, with network restrictions lifted upon payment.

The most controversially discussed items were the "net neutrality" provisions, which aim to safeguard an open internet where preferential treatment of particular content, content blocking and throttling will generally be banned. The European Parliament decided for a very broad definition of net neutrality whereby "all Internet traffic is treated equally, without discrimination, restriction or interference, independently of its sender, recipient, type, content, device, service or application." Besides the general internet access, operators may still offer so called "specialised services". However, these services must not be at the cost of the Internet speed a customer is paying for, and be offered only at logically distinct capacity and with strict admission control. While the strict net neutrality provisions adopted by the Parliament might be beneficial for new and innovative business models over the Internet, they might also prevent telecoms operators from investing into new networks. It is therefore foreseeable that these provisions will now be intensely discussed at Member State level.

Reaction to the legislation has been mixed, but what the telecoms single market aims to achieve is a synergetic relationship with eased regulation on operators. This way, benefits can be passed down to customers without hampering growth or placing onerous restrictions on what is currently a heavily regulated sector. Enabling the sector as a single market is intended to allow for new entrants, increased competition and improved services. "It remains to be seen how operators and markets will effectively react to these modified and enhanced opportunities and whether truly European market players will emerge" stated Dirk Van Liedekerke, Managing Partner of Olswang Brussels.

All of these changes are intended to create value to EU citizens, both commercially, by attracting increased investment to create a growing economy, and personally, as everyone is a customer of what is an essential service to modern life. It will be intriguing to watch what innovation, flexibility and growth springs from the telecoms sector following the creation of this telecoms single market.

"It is not the end of the story" said Purvi Parekh, Co-Head of Olswang's international Telecoms practice. "EU Member States will now continue to review the Regulation. It is likely that the final agreement of the Regulation implementing all of these changes will happen by the end of 2014".

If you would like further information about how the telecoms single market may affect your business, please contact Purvi Parekh or your local Olswang contact.

[1] http://ec.europa.eu/digital-agenda/en/connected-continent-legislative-package