COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposals for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code (Recast) and a Regulation of the European Parliament and of the Council establishing the Body of European Regulators for Electronic Communications

EN EN
EUROPEAN
COMMISSION
Brussels, 3.10.2016
SWD(2016) 303 final/2
PART 1/3
CORRIGENDUM
Annule et remplace le SWD(2016) 303 final.
Suppression des liens vers des documets externes.
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposals for
a Directive of the European Parliament and of the Council establishing the European
Electronic Communications Code (Recast) and
a Regulation of the European Parliament and of the Council establishing the Body of
European Regulators for Electronic Communications
{COM(2016) 590 final}
{COM(2016) 591 final}
{SWD(2016) 304 final}
Europaudvalget 2016
KOM (2016) 0591
Offentligt
i
Contents
INTRODUCTION...............................................................................................................9
1 WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM?...............................11
1.1 What was concluded from the evaluation/fitness check of the existing
regulatory framework? ....................................................................................11
1.2 What is the problem? What is the size of the problem?..................................13
1.2.1 Obstacles to unconstrained connectivity ...........................................16
1.2.2 A regulatory framework not fit to rapid market and
technological changes........................................................................26
1.2.3 Regulatory redundancies and inefficiencies and lack of
coherence in the Single Market.........................................................33
1.3 What are the main drivers?..............................................................................41
1.4 Who is affected by the problem, in what ways, and to what extent? ..............42
1.5 Baseline: How would the problem evolve, all things being equal? ................44
1.6 Why should the EU act?..................................................................................49
2 DOES THE EU HAVE THE RIGHT TO ACT? ......................................................51
2.1 Why could Member States not achieve the objectives of the proposed
action sufficiently by themselves? ..................................................................53
2.2 What would be the added-value of action at EU-level?..................................53
3 WHAT SHOULD BE ACHIEVED? ........................................................................55
3.1 What are the general policy objectives?..........................................................56
3.2 What are the more specific objectives?...........................................................57
3.2.1 Contribute to ubiquitous very high capacity connectivity in the
single market .....................................................................................58
3.2.2 Competition and user choice in the single market: ...........................59
3.2.3 Simplification of the regulatory intervention and single market
coherence:..........................................................................................60
3.3 How do they link to the problem? How do the objectives relate to each
other, i.e. are there any synergies or trade-offs? .............................................62
3.3.1 Synergies between objectives............................................................62
3.3.2 Trade-offs between objectives...........................................................63
3.4 Are these objectives consistent with other EU policies and with the
Charter for fundamental rights? ......................................................................64
3.4.1 Coherence with other EU policies.....................................................64
3.4.2 Coherence with the Charter for fundamental rights ..........................65
4 OPTIONS, IMPACTS AND COMPARISON OF OPTIONS BY POLICY
AREA........................................................................................................................65
4.1.1 Access regulation ..............................................................................67
4.1.2 Options ..............................................................................................67
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4.1.3 Discarded options..............................................................................72
4.1.4 Impacts ..............................................................................................73
4.1.5 Comparison of options ......................................................................83
4.1.6 The preferred option..........................................................................95
4.2 Spectrum..........................................................................................................96
4.2.1 Options ..............................................................................................96
4.2.2 Discarded options..............................................................................99
4.2.3 Impacts ............................................................................................100
4.2.4 Comparison of options ....................................................................106
4.2.5 The preferred option........................................................................111
4.3 Universal Service ..........................................................................................111
4.3.1 Options ............................................................................................111
4.3.2 Discarded options............................................................................113
4.3.3 Impacts ............................................................................................113
4.3.4 Comparison of options ....................................................................117
4.3.5 The preferred option........................................................................120
4.4 Services and end-user protection...................................................................120
4.4.1 Options ............................................................................................120
4.4.2 Discarded options............................................................................127
4.4.3 Impacts ............................................................................................127
4.4.4 Comparison of options ....................................................................136
4.4.5 The preferred option........................................................................149
4.5 Institutional governance ................................................................................150
4.5.1 Options ............................................................................................150
4.5.2 Discarded options............................................................................158
4.5.3 Impacts ............................................................................................158
4.5.4 Comparison of options ....................................................................162
4.5.5 The preferred option........................................................................167
4.6 Who would be targeted by the different policy options? ..............................168
4.7 Applying the Think Small Principle..............................................................168
4.8 Positive and negative impacts, direct and indirect, changes in impacts,
potential obstacles .........................................................................................169
4.9 How the preferred options relate to the specific objectives ..........................169
4.9.1 Contribute to ubiquitous VHC connectivity in the single
market..............................................................................................169
4.9.2 Competition and user choice in the single market ..........................171
4.9.3 The REFIT potential: simplification of the regulatory
intervention and single market coherence.......................................171
4.10 The legal form of the preferred options.........................................................176
4.11 The impact of the preferred options ..............................................................177
4.11.1 Methodology ...................................................................................177
4.11.2 Impacts of preferred policies on fixed and wireless broadband
availability and quality ....................................................................178
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4.11.3 Impact of improved broadband quality and electronic
communication service development on TFP .................................180
4.11.4 Implications for jobs and growth.....................................................181
4.11.5 Impact on competitiveness ..............................................................183
4.11.6 Potential for disruptive change through innovation ........................184
4.11.7 Conclusions .....................................................................................187
5 HOW WOULD ACTUAL IMPACTS BE MONITORED AND
EVALUATED?.......................................................................................................188
5.1 Plan for future monitoring and evaluation - consider what should be
monitored and evaluated and when...............................................................188
5.1.1 The European Digital Progress Report............................................188
5.1.2 Eurobarometer annual household survey ........................................189
5.2 Core monitoring indicators for the main policy objectives and the
corresponding benchmarks against which progress will be evaluated;.........189
5.2.1 Benchmarks.....................................................................................190
5.2.2 Summary .........................................................................................193
5.3 Monitoring of the preferred policy option:....................................................194
6 ANNEXES .............................................................................................................. 199
6.1 ANNEX 1 - Procedural Information ............................................................. 199
6.1.1 Identification; .................................................................................. 199
6.1.2 Organisation and chronology: ......................................................... 199
6.1.3 Regulatory Scrutiny Board .............................................................. 199
6.1.4 Evidence .......................................................................................... 200
6.1.5 External expertise ............................................................................ 200
6.2 ANNEX 2 - Stakeholders and Public Consultation ....................................... 201
6.2.1 The stakeholders engagement strategy ............................................ 201
6.2.2 The outcome of the public consultation .......................................... 203
6.3 ANNEX 3 - Discarded options ...................................................................... 224
6.3.1 Access regulation ............................................................................ 224
6.3.2 Spectrum .......................................................................................... 226
6.3.3 Universal Service ............................................................................ 226
6.3.4 Services and end-user protection options ........................................ 227
6.3.5 Institutional governance .................................................................. 228
6.4 ANNEX 4 - Who is affected by the preferred options and specific impacts on
stakeholders ................................................................................................. 229
6.4.1 Implications for telecommunications network operators and service
providers ............................................................................................................. 235
6.4.2 OTT providers and non-telco .......................................................... 244
6.4.3 SMEs ............................................................................................... 247
6.4.4 Consumers ....................................................................................... 252
6.4.5 Member States' authorities .............................................................. 256
6.4.6 National regulatory authorities (NRAs) and spectrum regulatory
authorities (SRAs) .............................................................................................. 260
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6.5 ANNEX 5 - Analytical models used in preparing the impact
assessment. .................................................................................................... 264
6.5.1 Modelling the gains from intervention ............................................ 264
6.5.2 Assumptions and limitations of the modelling approach ................ 264
6.5.3 Impact of the proposed policy options on the KPIs ........................ 265
6.5.4 Impact of the KPIs on some macroeconomic variables .................. 266
6.5.5 Overall macroeconomic, social and environmental impacts ........... 270
6.5.6 Simulation results, based on the preferred policy scenarios............ 273
6.5.7 Earlier literature on modelling e-communications and ICT ............ 283
6.5.8 Econometric modelling ................................................................... 285
6.5.9 Elaboration of the methodology ...................................................... 286
6.5.10 List of abbreviations and equations in the CGE model ................... 297
6.6 ANNEX 6 - Data and problem evidence ....................................................... 306
6.6.1 Introduction ..................................................................................... 306
6.6.2 The state of play on connectivity and the telecom sector ................ 307
6.6.3 Technical annex on technologies and medium ................................ 325
6.7 ANNEX 7 - Impact on competitiveness and innovation .............................. 327
6.7.1 Impact on competitiveness .............................................................. 327
6.7.2 Potential for disruptive change through innovation ........................ 328
6.8 ANNEX 8 – Options diagrams ...................................................................... 332
6.8.1 Access options ................................................................................. 332
6.8.2 Spectrum options ............................................................................. 333
6.8.3 USO options .................................................................................... 333
6.8.4 Services options ............................................................................... 333
6.8.5 Governance ...................................................................................... 334
6.9 ANNEX 9 - The connectivity strategy: a European Gigabit Society ............ 335
6.9.1 The public consultation on internet speeds and the new
ambitions ......................................................................................... 335
6.9.2 Connectivity and its importance ...................................................... 336
6.9.3 Towards the Digital Single Market and new connectivity
ambitions ......................................................................................... 340
6.9.4 Technological developments ........................................................... 340
6.9.5 Some future developments .............................................................. 343
6.10 ANNEX 10 – Problem drivers ...................................................................... 346
6.10.1 The lack of incentives to deploy networks in the absence of
infrastructure competition or in rural areas ..................................... 346
6.10.2 Inefficient allocation mechanism for public funding ...................... 347
6.10.3 Fragmented regulated and commercial offers for businesses
across the EU ................................................................................... 348
6.10.4 Minimum harmonisation, differentiated rules ................................. 349
6.10.5 Differentiated rules leading to uncertainty on spectrum
assignment ....................................................................................... 350
6.10.6 Technological and market changes ................................................. 351
6.10.7 Increasing adoption of bundles ........................................................ 353
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6.10.8 Suboptimal design of market review cycles and Inconsistent remedies
under current rules (art.7)................................................. 354
6.10.9 Obsolete and redundant rules .......................................................... 355
6.11 ANNEX 11 - 5G spectrum requirements for connected car (use case) ........ 357
6.12 ANNEX 12 – Comparison of impacts by stakeholders ................................. 359
6.13 ANNEX 13 - Report from the Expert Group meeting .................................. 375
6.14 ANNEX 14 – The state of play and the EU dimension of connectivity ....... 385
6.14.1 Costing the gap and the financial endowment of current initiatives
........................................................................................................................... 385
6.14.2 International comparisons ............................................................... 386
6.14.3 Towards a connectivity objective ................................................... 388
6.14.4 What is the EU dimension of the problem? .................................... 389
6.14.5 Baseline analysis: how would the problem evolve without intervention
...................................................................................... 391
6.15 ANNEX 15 - Glossary and Bibliography ...................................................... 399
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Table of figures
Figure 1- Problem tree --------------------------------------------------------------------------- 14
Figure 2 – eSkills in the EU, DESI 2016 ------------------------------------------------------ 18
Figure 3 - Summary of future wireless evolution--------------------------------------------- 21
Figure 4 – IoT connected devices: cellular and non-cellular in billions ------------------- 22
Figure 5 - Timing of 800MHz spectrum awards---------------------------------------------- 23
Figure 6 - Average price paid in the 800MHz (€/MHz/pop) and LTE (4G) Coverage in
EU MS.--------------------------------------------------------------------------------------------- 24
Figure 7 - OECD wireless broadband take-up (subscriptions/100people)----------------- 25
Figure 8 – Bundles in the EU in 2015---------------------------------------------------------- 31
Figure 9 - Homogenous provisions on contract with specified terms (Art 20 USD)----- 36
Figure 10 - Spectrum sharing per different 5G use case------------------------------------- 36
Figure 11 - Europe IP Traffic and Service Adoption Drivers------------------------------- 45
Figure 12 - Projected take-up of NGA by technology (to 2025)---------------------------- 45
Figure 13 - Fixed broadband subscriptions to at least 100 Mbps, EU and selected MS. 46
Figure 14 - Model of market potential – Germany 2025 ------------------------------------ 47
Figure 15 - Intervention logic diagram--------------------------------------------------------- 55
Figure 16 - Incumbent and entrant network access infrastructure 2014 ------------------- 78
Figure 17 - Mapping initiatives in EU28.------------------------------------------------------ 80
Figure 18 - Duration of market review procedure Source: Deloitte based on NRA survey
------------------------------------------------------------------------------------------------------ 87
Figure 19 - Ethernet leased line 5km local access pricing benchmarks (Source: WIK
based on Reference Offers as of October 2014) ---------------------------------------------- 88
Figure 20 - Ethernet leased lines: on-net provisioning timescales within the SLA------ 88
Figure 21 - Technology mix under different scenarios ------------------------------------ 179
Figure 22 – Broadband in Japan -------------------------------------------------------------- 179
Figure 23 - Real labour productivity (preferred options vs status quo)------------------ 183
Figure 24 -Trends in labour productivity – international comparisons ------------------ 183
Figure 25 - Overview of competitiveness impacts -------------------------------------- - 186 -
Figure 26 - EU innovation capacity in comparison with other regions ------------------ 187
Figure 27 - Projected FTTH/B take-up (as % BB) ----------------------------------------- 191
Figure 28 - Broadband take-up by technology in Sweden--------------------------------- 191
Figure 29 - Fixed broadband price baskets 2012 ------------------------------------------- 193
Figure 30 - Overview of the quantitative modelling framework -------------------------- 271
Figure 31 - Overview of the impact mechanisms of the preferred policy options. ----- 272
Figure 32 – Broadband speed increases under different scenarios ----------------------- 273
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Figure 33 – Production factors ---------------------------------------------------------------- 275
Figure 34 – GDP by final use components -------------------------------------------------- 275
Figure 35 – Current account balance, % GDP ---------------------------------------------- 276
Figure 36 – Gross value added by sectors in 2025 ----------------------------------------- 276
Figure 37 - Digital Economy and Society Index (DESI), Connectivity, 2016 ----------- 308
Figure 38 - Total telecommunication services revenues per region, billion EUR, 2012-
2016------------------------------------------------------------------------------------------------ -309
Figure 39 - Share of fixed and mobile CAPEX in Europe, 2015 ------------------------- 309
Figure 40 - Total telecom carrier services revenues by segment, 2012-2016 ------------ 310
Figure 41 - NGA broadband coverage in the EU, 2010-2015----------------------------- 311
Figure 42 - Next generation access (FTTP, VDSL and Docsis 3.0 cable) coverage, June
2015------------------------------------------------------------------------------------------------ 311
Figure 43 - Fibre to the premises (FTTP) coverage in the EU, 2011-2015-------------- 312
Figure 44 - Fibre to the premises (FTTP) coverage, June 2015 -------------------------- 312
Figure 45 - Mobile broadband coverage in the EU, 2011-2015 -------------------------- 313
Figure 46 - 4G (LTE) coverage, June 2015 ------------------------------------------------ 313
Figure 47 - Percentage of households with a fast broadband (at least 30Mbps)
subscription at EU level, 2010-2015 ---------------------------------------------------------- 314
Figure 48 - Percentage of households with an ultrafast broadband (at least 100Mbps)
subscription, July 2015 -------------------------------------------------------------------------- 314
Figure 49- Share of fibre connections in total fixed broadband, July 2015 ------------- 315
Figure 50 - Fixed broadband subscriptions by headline speed at EU level, 2008-2015 315
Figure 51 - Fixed broadband subscriptions by headline speed, July 2015--------------- 316
Figure 52 - Mobile broadband penetration at EU level, January 2009 - July 2015 ---- 316
Figure 53 - Mobile broadband penetration at EU level, January 2009 - July 2015 ---- 317
Figure 54 - Mobile data traffic per type of device and region, Megabytes per month, 2015
- 2020 ----------------------------------------------------------------------------------------- 318
Figure 55 - Percentage of M2M modules of device connections by region, 2015 - 2020 ---
-------------------------------------------------------------------------------------------------- 319
Figure 56 - M2M traffic as a percentage of total mobile data traffic by region, 2015 -
2020------------------------------------------------------------------------------------------------ 319
Figure 57 - Fixed broadband household penetration by income quartiles at EU level,
2011-2015 ----------------------------------------------------------------------------------------- 320
Figure 58 - Household fixed broadband penetration and share of broadband access cost
(standalone 12-30Mbps download) in disposable income, 2015 -------------------------- 320
Figure 59 - Percentage of households subscribing to bundled services at EU level, 2009-
2015------------------------------------------------------------------------------------------------ 321
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Figure 60 - Popularity of different services in bundles at EU level, 2015 --------------- 321
Figure 61 - Popularity of different bundles (% homes with subscriptions) at EU level,
2015------------------------------------------------------------------------------------------------- 322
Figure 62 - Mobile broadband prices (EUR PPP) - handset use in the EU and the US,
2015------------------------------------------------------------------------------------------------- 322
Figure 63 - Mobile broadband prices (EUR PPP) - handset use, 1GB + 300 calls, 2015 ---
------------------------------------------------------------------------------------------------------ 323
Figure 64 - Mobile broadband prices (EUR PPP) - laptop use in the EU and the US, 2015-
------------------------------------------------------------------------------------------------------ 323
Figure 65 - Mobile broadband prices (EUR PPP) - laptop use, 5GB, 2015 ------------- 324
Figure 66 - Real labour productivity (preferred options vs status quo) ------------------ 327
Figure 67 - Trends in labour productivity – international comparisons ----------------- 327
Figure 68 – Key applications and technological developments --------------------------- 340
Figure 69 – Network features and speeds ---------------------------------------------------- 341
Figure 70 – Cost scenarios for Southern Primorska region -------------------------------- 342
Figure 71 – benefits from adopting a cloud solution --------------------------------------- 343
Figure 72 – Cisco VNI forecasts -------------------------------------------------------------- 344
Figure 73 - Internet of Things Units Installed Base by Category (Millions of Units) - 344
Figure 74 – Latency and speed needed by applications and services -------------------- 345
Figure 75 - Example of differences in timing and duration of licenses for major EU
operators ------------------------------------------------------------------------------------------ 351
Figure 76 – Use of Instant Messaging in EU member States ----------------------------- 352
Figure 77 - Mobile and Fixed revenues in the EU (million Euros) ---------------------- 352
Figure 78 – Adoption of bundles in the EU, 2010-2014 ---------------------------------- 353
Figure 79 – Adoption of bundles per MS, 2009-2015 ------------------------------------- 354
Figure 80 - Total spectrum requirements for motorway use case ------------------------ 357
Figure 81 - % of FTTB connections on total subscriptions (OECD) -------------------- 386
Figure 82 – Next generation access (FTTP, VDSL and Docsis 3.0 cable) coverage, June
2015----------------------------------------------------------------------------------------------- 387
Figure 83 - Projections for NGA (>30Mbps) take-up 2015-2025 ----------------------- 389
Figure 84 – GDP contributions from the Digital economy ------------------------------- 390
Figure 85 - Broadband trends in Europe following the LLU Regulation (2000) ------- 391
Figure 86 - Europe IP Traffic and Service Adoption Drivers -----------------------------392
Figure 87 - Projected take-up of NGA by technology (to 2025)-------------------------- 393
Figure 88 - Model of market potential – Germany 2025 --------------------------------- 395
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Table of tables
Table 1- State of Play on USO providers in the EU 28....................................................34
Table 2 - Overlap between key provisions of the USD and horizontal rules...................35
Table 3 - Estimated costs of the current institutional set-up for access ...........................74
Table 4 – Mapping efforts at ARCEP (indicative)..........................................................79
Table 5 – Effects on stakeholders from access options....................................................92
Table 6 – A comparison of options - access.....................................................................95
Table 7 – Benefits for verticals ......................................................................................105
Table 8: Effects on stakeholders – spectrum options.....................................................108
Table 9 - A comparison of options for universal service ...............................................120
Table 10 - Comparison of options - Services.................................................................141
Table 11 - Comparison of options – Must carry and EPG.............................................146
Table 12 - Summary of governance options ..................................................................157
Table 13 - Comparing the impacts of governance options.............................................166
Table 14 – Summary table on the scope of rules and impact on selected stakeholders.175
Table 15 - Impact of assessed scenarios on GDP, consumption, investment and
employment (source: Ecorys).........................................................................................181
Table 16 - Monitoring indicators by policy objective....................................................190
Table 17 – Summary of potential benchmarks...............................................................193
Table 18 – Operational objectives for preferred options................................................195
Table 20 - Summary stakeholder impacts ............................................................... 233
Table 21 - Practical implications of preferred options for telecommunication network and
service providers ..................................................................................................... 244
Table 22 - Summary of impacts on OTT ....................................................................... 248
Table 23 - Practical implications of preferred options for SMEs ................................ 251
Table 24 - Practical implications of preferred options for consumers ........................... 255
Table 25 - Practical implications for Member States ..................................................... 260
Table 26 - Practical implications for NRAs/SRAs ....................................................... 263
Table 27 - Percentage deviations in the all fibre scenario as compared to the baseline in
the main macroeconomic variables. .............................................................................. 277
Table 28 - Percentage deviations in the all fibre scenario as compared to the baseline in
the gross value added in 2025. ....................................................................................... 278
Table 29 – Impact from the preferred policy option ...................................................... 279
Table 30 - Percentage deviations in the services scenario as compared to the baseline in
the main macroeconomic variables. ............................................................................... 281
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Table 31 - Percentage deviations in the services scenario as compared to the baseline in
investment, labour and consumption by clusters of EU Member States in 2025. .......... 282
Table 32 - Impact of assessed scenarios on GDP, consumption, investment and
employment .................................................................................................................... 283
Table 33 - EU average of Connectivity Indicators in DESI 2016 .................................. 308
Table 34 - . Revenue growth rates, 2012-2016 .............................................................. 310
Table 35 - Table of mediums and technologies ............................................................ 325
Table 36 - Overview of competitiveness impacts .......................................................... 330
Table 37 -Potential socio-economic impacts of broadband deployment in Rural, Remote
and Sparsely populated areas ......................................................................................... 337
Table 38 - Total spectrum requirements relative to percentage of spectrum sharing
scenarios based on theoretical model ............................................................................. 357
Table 39 - Summary stakeholder impacts – access options ........................................... 360
Table 40 - Summary stakeholder impacts – spectrum options ....................................... 362
Table 41 - Summary of impacts on stakeholders – universal service options .............. 365
Table 42 - Summary stakeholder impacts – services options. ...................................... 367
Table 43 ---Summary stakeholder impacts – Must carry and EPG obligations ............. 369
Table 44 - Summary stakeholder impacts – Numbers. ................................................. 370
Table 45 - Costs of institutional options per stakeholder ............................................... 372
Table 46 – Summary of governance costs by option ..................................................... 373
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INTRODUCTION
When the current framework for regulation of electronic communications in the EU came into
force in its original version in 20021
, liberalisation was recent, former monopolist operators had
still very high market shares in traditional telephony services, while the evolution of internet and
broadband was still at an early stage and the telecom sector largely relied on copper networks to
offer its services. A key objective of the 2002 framework, consisting of (i) sector-specific
economic regulation based on the principles of EU competition law and (ii) rules safeguarding
end-user interests, was to promote competition via regulated access to incumbents' networks and
market entry as a means to make markets contestable, to achieve efficient market outcomes and,
in particular, to maximise consumer benefits.
While the general competition objectives were maintained in the 2009 revisions to the EU
Framework, more emphasis was placed on fostering efficient investment and innovation and a
specific reference was also made to fostering infrastructure-based competition to deploy Next
Generation Access networks (NGA). The 2009 review also aimed at furthering the internal
market by reinforcing the institutional set-up and strengthened a number of end-user rights. In
2010 the Digital Agenda for Europe introduced non-binding targets of universal access to
connectivity at 30 Mbps by 2020 to ensure territorial cohesion in Europe and a penetration target
of 100 Mbps (50% of subscriptions in Europe by 2020) to anticipate future competitiveness
needs.
Since then, the electronic communications sector has significantly evolved and its role as an
enabler of the online economy has grown. Market structures have evolved, with monopolistic
market power becoming increasingly limited, and at the same time electronic communications
and the telecoms sector in particular have now acquired a vital importance for most sectors of the
overall economy2
. Consumers and businesses are increasingly relying on data and internet access
services instead of traditional telephone and other communication services. This evolution has,
on the one hand, brought formerly unknown types of market players to compete with traditional
telecom operators (e.g. service providers offering a wide variety of applications and services,
including communications services, over the internet, so called over-the-top -players (OTTs))
and, on the other hand, it has increased the demand for high-quality fixed and wireless
connectivity with the rise in the number and popularity of online content services, such as cloud
computing, the Internet of Things (IoT), Machine-to-Machine communication (M2M) etc.
Electronic communications networks have evolved as well. The main changes include: (i) the
ongoing transition to an all-IP environment,(ii) the possibilities provided by new and enhanced
underlying network infrastructures, which can support the practically unlimited transmission
capacity offered by fibre optical networks, (iii) the convergence of fixed and mobile networks
towards seamless service offers to the end-users regardless of location or device used and (iv)the
expected introduction of innovative technical network management approaches, in particular
Software Defined Networks (SDN) and Network Function Virtualisation (NFV). These
usage and operational changes have exposed the current rules to new challenges which are likely
to increase in importance in the medium and long term, and cannot therefore be excluded from
the scope of the present impact assessment.
The review of the regulatory framework for electronic communications needs to be seen in light
of the priority of the Juncker Commission to create a connected Digital Single Market (DSM)3
.
The DSM strategy4
recognised the importance of the paradigm shifts that the digital sector is
1
The current Framework consists of a suite of Directives covering the Framework for regulation (and its objectives),
rules concerning the authorisation of electronic communications network and service providers, ex ante regulation of
access and interconnection, universal service and user rights.
2
See details in section 2
3
See: https://ec.europa.eu/priorities/publications/president-junckers-political-guidelines_en
4
A Digital Single Market Strategy for Europe COM(2015) 192 final
10
exposed to and stated that individuals and businesses should be able to seamlessly access and
exercise online activities under conditions of fair competition.
According to the Commission Communication, the DSM Strategy will be built on three pillars5
.
The second pillar specifically focuses on the review of the telecoms framework and states that
"The Commission will present proposals in 2016 for an ambitious overhaul of the telecoms
regulatory framework focusing on (i) a consistent single market approach to spectrum policy
and management (ii) delivering the conditions for a true single market by tackling regulatory
fragmentation to allow economies of scale for efficient network operators and service providers
and effective protection of consumers, (iii) ensuring a level playing field for market players and
consistent application of the rules, (iv) incentivising investment in high speed broadband
networks (including a review of the Universal Service Directive) and (v) a more effective
regulatory institutional framework".
The prerequisite to achieve this goal is to ensure access to unconstrained connectivity based on
ubiquitous, very-high-capacity fixed and mobile broadband infrastructures. The increase in data
consumption and the process of aggregation and conversion between increasing (wireless) data
usages into fixed networks will require the provision of Giga-Bit connectivity ever closer to the
end-user. In order to achieve this, the review will focus on investments in Very High Capacity
networks through direct market incentives, in order to maximise the benefits for the European
digital economy and society. Such a necessary prioritisation requires the endorsement of Giga-
Bit connectivity needs and ambitions to be achieved by 2025 (i.e. building on existing targets for
2020), as a measurable and achievable focus point within the broader connectivity ambition for
the European digital economy and society.
The proposal for the review of the regulatory framework for electronic communications is
accompanied by the 'European Gigabit Society Communication'6
, which sets forth specific
objectives to be achieved by 2025, namely (i) Gigabit connectivity to a set of focal points
(schools, medium-sized and large enterprises, transport hubs, main providers of public services),
(ii) 5G coverage for all urban areas and all major terrestrial transport paths, and (iii) an
upgradable connectivity of at least 100Mbps downlink for all European households. It proposes a
set of complementary initiatives to help attain these objectives, to be primarily achieved by the
market with the requisite policy, regulatory and financial support at the EU, national and local
levels. In particular, the review and the accompanying legislative proposal is the key instrument
for facilitating the market to achieve the set objectives.
The 'European Gigabit Society Communication' is also complemented by the '5G Action Plan'7
.
Timely deployment of 5G is considered a strategic opportunity for Europe and a key asset for
global competitiveness. The Action plan aims at a swift and coordinated introduction of 5G in
Europe, in view of reaping all its anticipated benefits. While the revised framework for
electronic communications is expected to already support improved conditions for the
deployment and take up of 5G, the Action Plan proposes complementary and targeted
operational measures, aimed at leveraging the anticipation effect on industry and investors
5
According to the Commission Communication, the Digital Single Market Strategy will be built on three pillars:
 Better access for consumers and businesses to online goods and services across Europe – this requires the
rapid removal of key differences between the online and offline worlds to break down barriers to cross-border
online activity.
 Creating the right conditions for digital networks and services to flourish – this requires high-speed, secure and
trustworthy infrastructures and content services, supported by the right regulatory conditions for innovation,
investment, fair competition and a level playing field.
 Maximising the growth potential of our European Digital Economy – this requires investment in ICT
infrastructures and technologies such as Cloud computing and Big Data, and research and innovation to boost
industrial competiveness as well as better public services, inclusiveness and skills.
6
Commission Communication 'Connectivity for a European Gigabit Society: Laying the Foundations for a
competitive Digital Single Market'
7
Commission Communication '5G for Europe: An Action Plan'
11
generated by the proposed new framework. It calls for cooperation among stakeholders,
including Member States, in order to establish a coordinated calendar, plan trials, identify and
allocate the necessary spectrum bands, etc.
The emphasis on connectivity as a new objective of the framework should not of course
downplay the other existing objectives such as competition, internal market and end-user
protection which will remain valid and on which the framework has delivered to various extents,
as analysed in the REFIT exercise carried out in parallel with this IA report.
1 WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM?
1.1 What was concluded from the evaluation/fitness check of the existing regulatory
framework?
In the context of the REFIT programme, the current regulatory framework has been evaluated
not only in terms of achievement of the original goals, but also in view of potential
simplification and reduction of the regulatory burden. The main findings can be summarised as
follows (see specific Staff Working Document on the subject).
Relevance: the analysis showed that the specific objectives of the framework - promoting
competition, realising the single market and protecting consumers' interest – remain as valid as
before, with an increased relevance for the single market objective. Connectivity has emerged as
the underlying driving force for the digital society and economy, underpinned by technological
changes and evolving consumer and market demands. There is therefore a widely recognised
need to consider adjusting the current policy and regulatory tools to further support the
deployment of infrastructure and take-up of corresponding services in line with future needs in
view of the structural evolution of the sector, its importance within the larger economy, and the
political commitment of the Juncker Commission to deliver the DSM.
Most regulatory areas remain as relevant (if not more) than in 2009 – in particular spectrum
regulation and access regulation. While the relevance of certain specific components of the
universal service regulation is being put into question, the concept of a safety net ensuring that
all citizens are included in a fully developed digital society is gaining relevance. Similarly, while
the specific provisions under the consumer protection objective might have to be adjusted in
view of technological market or legislative changes, the basic needs to which the provisions
respond remain unchanged and their specific objectives remain relevant.
Effectiveness: while the specific objectives of the framework (competition, single market and
consumer protection) have remained unchanged by the 2009 review, the specific aims of this last
reform include aligning spectrum management with market demands to realise its full potential
to contribute to innovative and affordable services making access regulation more predictable,
while adding some emphasis on network investment and ensuring better consumer rights.
The regulatory framework has had an impact on the competitiveness of the sector, which in turn
has delivered overall significant consumer benefits, in particular basic broadband, lower prices,
and increased choice. The contribution of the framework - mainly through access and spectrum
regulation, but also with the support of market entry provisions – to deliver competition is
undeniable and widely recognised even if sometimes difficult to measure. As regards the
contribution of the framework to the Single Market objective, the results are rather modest.
Regulatory consistency has been achieved only to a limited extent, affecting the operations of
cross-border providers and reducing predictability for all operators and their investors. More
importantly, the cooperation and consistency tools available led to a situation where best
regulatory solutions have not always been followed, with impact on consumer outcomes. Finally,
the achievements of the framework in promoting consumer interest are significant, in tackling
certain sector-specific consumer protection issues and in ensuring a safety net so that all citizens
can benefit from electronic communications services. However it is also clear that not all
consumer interest rules are still fit for purpose, in the context of technological, market, and
12
legislative developments, and that simplification can be achieved. At the same time, consumer
surveys continue to report a relative dissatisfaction, which requires attention.
In terms of specific regulation areas, access regulation delivered competition, though more at
service level than at network level. While investments in VHC networks have advanced, they
have not taken place across all Member States at the pace envisaged by the public policy agendas
and more importantly at the pace to meet the future connectivity needs for a fully-fledged DSM.
Access regulation has also become more predictable, thanks to the reinforced EU-level
consistency check, which however does not adequately cover remedies, with the effect that
significant regulatory inconsistency remains on the single market.
While progress were made in the field of spectrum (e.g. the release of a significant amount of
spectrum for wireless broadband as well as achievements in the field of technical harmonisation,
which were praised in the public consultation by Member States and operators), they were more
limited than wished in the last review. In particular the impact of the current spectrum regulation
on competition and single market outcomes - with direct consequences for consumers in terms of
availability of innovative and affordable services - is put into question by the current evaluation,
with the example of the delayed 4G deployment in most parts of the EU. Indeed, the majority of
respondents (spanning from telecom and non-telecom associations to virtual mobile operators,
converged operators and vendors) in the public consultation considered that the lack of
coordination of selection methods and assignment conditions has impaired the development of
electronic communications services. Operators have also criticized the ineffectiveness in
addressing interference issues and ensuring usage efficiency.
The regulation of numbers proved generally unproblematic at national level. However, the
provisions have not been particularly supportive to the single market in particular given that
there is emerging demand for using numbers outside the country where they have been assigned
(extraterritorial use of numbers) and for which the current framework does not provide clear
rules. .
While universal service rules were effective, reviewing its specific components appears
necessary. Similarly, in order for the consumer protection rules to remain effective, they need
to be revised to remove redundancies, where identified, with horizontal rules and to safeguard
end-user interest in light of market and technology developments (e.g. increasing use of
communications services provided over internet access, so called Over-the-Top communications
services . As far as network and service security rules are concerned, their adoption has
contributed to an improved situation in the EU, but their impact remains unequal across the MS,
not least due to the respective scope and definitions of national implementing provisions.
Efficiency: The framework often allows ample flexibility to national regulatory authorities
(NRAs) to adapt their decisions to national circumstances, and the actual administrative costs
and burdens depend to a large extent on the solutions adopted in each Member States. This
flexibility allows for cost optimisation for and by national administrations. At the level of
operators, costs and burdens are not evenly spread across the stakeholders. Access regulation is
considered burdensome by incumbent operators, yet nothing more than what is necessary to
reach the competition objective by alternative operators
Most operators refer to consumer protection rules as being over burdensome especially in view
of the differing implementation across Member States and of the overlapping horizontal
legislation. While this suggest a need for simplification and reduction of burden in specific
areas, consumer organisations recall the value of certain sector-specific rules and of the
discretion left to Member States to complement minimum harmonisation in a fast moving sector.
Several areas were identified for reducing administrative burden while preserving the
effectiveness of the provisions. The level of complexity of access regulation is considered in
most cases necessary to ensure that regulation affecting operators directly is fit for purpose and
13
not unnecessarily burdensome on operators. This is in particular the case of "stable" markets,
where simplified procedures can be envisaged without affecting the quality of the regulation
(e.g. the case of the termination markets). In a similar vein, it can be questioned, based on the
actual implementation experience, whether the very short cycles of market reviews are truly
necessary. Achieving more regulatory consistency in areas such as spectrum or authorisation
requirements might in addition reduce the administrative burden of businesses operating across
several Member States.
EU added value: the framework has played a role in the broader development of national
regulatory regimes and market developments that favour a pro-competitive offer of electronic
communications services across Europe. It has contributed to major positive outcomes for
consumers and businesses, across and within Member States. Moreover, it has levelled up
national regulation in the area of electronic communications, including in areas which were
previously not even tackled by some Member States, such as consumer protection, where there
are, however, too many overlapping or varying provisions and simplification can be achieved.
Coherence: not many coherence issues were identified during the evaluation work. Generally
speaking, the various instruments making up the regulatory framework for electronic
communications have reinforced each other in the pursuit of its objectives. As an illustration,
provisions on authorisation enable pro-competitive market entry. Access regulation and
spectrum management contribute to positive outcomes for consumers, to the point where
commercial offers render regulated universal services redundant or obsolete in certain instances.
Some issues of internal inconsistencies have been identified.
Two external consistency issues require however attention in the review process namely the
coherence between regulations aimed at incentivising competitive network rollout and the EU
financing and state aid rules in the field, as well as the potential overlaps between sector specific
and horizontal consumer interest legislation. Provided that detailed analysis of the exact scope of
the provision in place concludes that sector specific rules have become redundant, those
particular provisions can be withdrawn, leaving sector specific rules only to address those areas
where such rules are still warranted, in line with the REFIT principles.
The evaluation has identified several areas where simplification is possible and the
administrative burden could be reduced without compromising – in some cases even
improving - the effectiveness of the provisions: e.g. longer ex ante market regulation cycles,
universal services adjustments, streamlining certain overlapping consumer protection provisions.
This aspects is more widely analysed in Section 1.2.3 and in section 4.9.3 where the preferred
policy option is analysed from the perspective of meeting the objective of simplification and
administrative burden reduction.
1.2 What is the problem? What is the size of the problem?
As anticipated by the DSM strategy, the traditional telecom sector is under increasing pressure to
(i) serve increasing user demand for data connectivity, (ii) anticipate future demand and socio-
economic needs and (iii) react to new internet-based competitors. These aspects are important
since investments in networks are becoming instrumental for productivity gains not only in the
telecom sector, but especially in several downstream sectors (transport, health etc.) and for the
functioning and growth of the entire European economy, as shown by the macro-economic
modelling described in Annex 58
. In this regard, the Commission has identified three
interrelated problems that need to be addressed:
8
Short-term demand uncertainty may (and does) manifest itself, but it does not reduce the needs for ultimate
migration to very high capacity networks in the future.
14
- The obstacles to unconstrained connectivity based on ubiquitous, Very High Capacity
(VHC)9
fixed and mobile broadband infrastructures serving the Digital Single Market, attested
by: the low coverage and take up, especially for VHC networks; unsatisfactory connectivity
offers across the EU for businesses; and a lack of timely and appropriate spectrum management.
- A regulatory framework not fit for rapid market and technological changes, reflected by:
discrepancies between rights and obligations for the provision of equivalent services; gaps in
consumer protection in some areas; and persisting barriers to switching, in a market increasingly
characterised by the bundling of offers.
- Regulatory redundancy, inefficiencies and lack of coherence in the Single Market;
unnecessary administrative burden and high compliance costs.
Figure 1 illustrates the problems underpinning the review of the electronic communications
framework and describes the problem drivers, (with market and regulatory failures further
elaborated in section 1.3 and annex 10), the problems themselves (presented below) and the
consequences of those problems in a no change scenario (described in section 1.5). As shown by
the colours in the picture, problems are interrelated and tend to have similar drivers or
consequences.
Figure 1- Problem tree
9
VHC should guarantee best-in-class performance in terms of speed (that should be significantly above 100 Mbps
and able to reach 1 Gbps when considering both upload and download capacity), latency, package loss and jitter.
This definition is therefore more ambitious that the definition of NGA that includes all technological solutions able to
deliver more than 30Mbps download.
15
Context
Problem
drivers
Consequences
Digital
divide
for
citizens
and
SMEs
Sub-optimal
socio-
economic
development
outcomes
Sub-optimal
allocation
of
capital
Lower
take-up
of
innovation
Technolo
gical
and
market
changes
Lack
of
incentives
to
deploy
where
no
infra
competiti
on/rural
areas
Inefficient
allocation
mechanis
m
for
public
funding
Uncertain
ty
on
spectrum
assignme
nt
Suboptimal
design
of
market
cycle
reviews
and
inconsistent
remedies
(Art.7)
Emergence
of
OTTs
overcoming
borders,
IoT,
5G
Boom
in
devices
and
data
consumption
Needs
for
ubiquitous
and
VHC
connectivity
Increasing
adoption
of
bundles
Obsolete/
redundant
rules
Fragmented
regulated
and
commercial
offers
for
businesses
across
the
EU
Problems
Gaps
in
consumers
protection
in
some
areas
Uncertainty
about
rights
and
obligations
for
provision
of
equivalent
services
Low
coverage
and
take
up,
and
suboptimal
investment
Lack
of
timely
and
appropriate
spectrum
affecting
investment
Compliance
costs
and
lack
of
coherence
in
the
Single
Market
Rules
unfit
to
bundles
for
switching
purposes
Unnecessary
admin
burden
(Universal
service,
overlapping
consumer
rules)
Higher
connectivity
costs
for
multisite
business
Loss
of
competitiveness
of
EU
industry
Obstacles
to
Connectivity
Regulatory
framework
unfit
to
market/technological
changes
Regulatory
redundancies
and
inefficiencies
and
lack
of
coherence
in
the
Single
Market
Problem
tree
–
framework
review
Minimum
harmonisa
tion,
differentia
ted
rules
Lack
in
consumer
trust
in
digital
services
Mkt
failure
Reg.
failure
Combined
16
1.2.1 Obstacles to unconstrained connectivity
This section analyses the obstacles to unconstrained connectivity in the EU. These factors
prevent the achievement of ubiquitous and performing fixed and mobile broadband
infrastructure that is a necessary component for global competitiveness and lies at the heart of
the DSM strategy. When considering the problems of suboptimal investment and the need for
connectivity it is important to take into account that albeit networks are often national or local
in nature (and will in some cases get even more local in the future with the proliferation of
small fibre operators as it has already happened in Sweden) the problem of suboptimal
investment is a European problem, as even local networks are financed from international and
cross-border capital markets; furthermore, the deployment throughout Europe of networks with
similar (high) connectivity characteristics is vital for the development and widespread take-up at
European scale of the sorts of consumer and industrial applications and services on which the
DSM will thrive. So despite the often local nature of the networks, connectivity and investment
have a clear internal market dimension and the review should strive to induce policies which are
more favourable to investment without jeopardising the existing objectives.
The causes of suboptimal investment are explored in more detail in section 1.2.1.1, below while
the size of the investment gap and the inadequacy of public sector financing to take on even the
current deployment challenge and to meet the current DAE target is explored in more detail in a
dedicated annex 14. The same annex also includes international comparisons on connectivity
and the EU dimension of the connectivity problem.
1.2.1.1 Low coverage and take up and the reasons for suboptimal investment,
As recognised in the evaluation report in section 7.1.1.10
, the level of investment has been
suboptimal. As of July 2015, only 71% of Europeans have access to NGA networks (above 30
Mbps), and the figure is as low as 28% in rural areas11
. The take-up rate of NGA was around
30% of the overall subscriptions in 2015
The trend of the take-up rate for NGA networks shows that Europeans are rapidly replacing
their basic broadband connections with NGA: while in 2013 the only 15% of European
subscribed to NGA above 30Mbps, the same figure was 21% in 2014 and 30% in 2015 (see
annex 6 for more detailed statistics). .Figure 13 shows how demand for 100 Mbps turns into
take-up in countries where networks are widely available.
The Impact Assessment support study has estimated that the EU is very likely to miss the target
of 50% take-up of 100 Mbps networks by 202012
, according to current trends13
. The main
findings are reported in annex 14 and in figure 87 included therein. The same study shows that
basic NGA at 30 Mbps is not enough to meet the near future connectivity needs (see also annex
9).
Causes of suboptimal investments
10
" investment has been uneven across the EU and clear gaps have begun to emerge between and within different
countries in the path to upgrading broadband networks to provide ultrafast speeds and meet increasingly demanding
quality parameters.
11
Source: Digital Agenda Scoreboard, https://ec.europa.eu/digital-single-market/en/connectivity
12
The Europe 2020 Strategy has underlined the importance of broadband deployment to promote social inclusion
and competitiveness in the EU. It restated the objective to bring basic broadband to all Europeans by 2013 and seeks
to ensure that, by 2020, (i) all Europeans have access to much higher internet speeds of above 30 Mbps and (ii) 50%
or more of European households subscribe to internet connections above 100 Mbps. See:
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010DC0245R(01)&from=EN
13
See SMART 2015/0002, section 3.1.
17
There are a number of causes for investment in connectivity being suboptimal. These causes can
be regrouped in two main sets: (i) causes that are of a macroeconomic or socio-economic nature
and therefore exogenous to the regulatory framework that is the object of this review (e.g. the
financial crisis took a toll on telecom companies' CAPEX as well) and (ii) some are of a
regulatory nature (level of uncertainty due to price regulation; deterrent effect to incumbent first
movers because non-discriminatory access requirements mean they cannot differentiate on the
basis of their investments, whereas competitive pressure on them is often insufficient to force
investment, especially in less dense areas; access-based alternative operators often have
insufficient scale to invest alone) and therefore can be considered as endogenous to the
framework. The corollary of the previous statement is that the proposals that will be
presented in the forthcoming sections can only affect to a given extent the level of
investment, although they will be significantly beneficial to investment and will make an
important contribution by reducing risk the operators face and increasing their expected return
on investment.
Investment is not suboptimal everywhere, as clearly evidenced by the different degrees of
coverage in Europe (see figure 42 below). The evaluation identified in section 6.2. that:
 Telecom network CAPEX in Europe was 43 bn EUR in 2013. CAPEX figures have
remained relatively stable over the last four years despite the fact that in the same period
NGA coverage increased from 29% to 68%. Mobile CAPEX spending represented 59%
of total spending14
.
 Capital expenditure/revenue ratio is a better measure of assessment of capital
expenditure. In a context of declining revenues in the sector, there has been an increase
in this ratio, from 11.7% in 2009 to 14% in 2013. In other words, telecom operators
increased the proportion of their investment through the period.
In terms of endogenous factors, investment may have been restrained by the fact that average
revenue per users went down in Europe for a number of years. According to a study quoted in
the evaluation (Section 6.2.), Average Revenue Per User (ARPUs) of the top seven mobile
operators in the EU would have gone down 34.8% between 2006 and 2013, with a 5% decrease
in investment.15
This does not mean that investment and competition are at odds with each other. Under the
current regulatory framework, as shown in the evaluation report (see in particular section
7.2.3.1) investment has been uneven across the EU and divergences have begun to emerge
between and within different countries in the path to upgrading broadband networks to
provide ultrafast speeds and meet increasingly demanding quality parameters.
Some of the countries in Eastern Europe which had relatively lower standard broadband
coverage have relatively high coverage of FTTH, as do countries that have pushed for
infrastructure competition such as Spain, Portugal and Sweden, while certain countries with high
NGA coverage overall including Belgium, the UK and Germany, have very limited deployment
of FTTH. This reveals a second ‘gap’ amongst EU countries whereby the quality of NGA
infrastructures varies depending on whether an ‘upgrade’ of existing networks or FTTH
deployment strategy was pursued. Basically in some countries operators are deploying NGA but
not VHC networks. The result is that the Digital Agenda Target of 50% of 100 Mbps is at risk of
not being met (see figure 83).
Of course, infrastructure competition will not be possible everywhere, but regulation should
promote it when possible. In this respect, the support study SMART 2015/0002 suggests in its
analysis of business and regulatory models suggests that the geographical dimension of the
deployment problem may be addressed by a combined approach:
14
Digital Agenda Scoreboard 2015
15
Mazars - Etude Télécom mai 2015
18
1. The problem in dense urban areas is to encourage feasible infrastructure investment and
foster competition;
2. The problem in less dense (but economically viable, i.e. that can guarantee return on
investment in the long term) zones, is to encourage first movers without losing the
effects of competition by ensuring wholesale access on lines favouring future
investment;
3. The problem in rural and ‘challenge areas’ which are not traditionally economically
viable is attract new business models that have a different risk/return profile and give
support when needed.
Different requirements are likely to be needed for business access, as the market can involve
different scale economies and customer distribution (as well as different operators) than the
residential mass-market.
In terms of exogenous factors, beyond the macroeconomic (GDP, country risk etc.) investment
may in some instances be sub-optimal (or in less performing technologies) due to the expected
lower take up.
Demand and low take-up can also certainly condition investment. As explored in the access
study, (SMART 2015/002) that states "Take-up may also be restricted in cases where there is
low demand for high speeds. Indeed, low take-up even in the presence of fast infrastructures is
cited by several stakeholders (NB mostly incumbents) as a key problem in the market today".
However, the forecast run by IDATE in the same study have shown the insufficiency of
networks to meet future demand, so in the medium run this may be a problem, as demand keeps
booming and infrastructure cannot be upgraded in the short term. This is also part of the reason
why a European Gigabit Society strategy is needed, since a policy and non-binding strategy
can be better suited than regulation at taking into account demand-side aspects (e.g.
promotion of connectivity for schools, in order to integrate connected learning tools with
education). The importance of demand is another reason to maintain the important role of
competition in the regulatory mix, as competition on very high capacity networks should not
only ensure that prices are attractive to end users, and not too distant from those for traditional
copper networks, but also that there is more commercial innovation in building demand.
The level of e-skills is certainly affecting demand for NGA services as illustrated by Figure 2
below.
Figure 2 – eSkills in the EU, DESI 2016
The public consultation showed that in relation to different treatment of legacy copper
networks (whether pure copper access networks or upgraded FttC networks with copper sub-
loops) to incentivise upgrades, operators invoked the principle of technological neutrality and
leaving the market to decide how to best meet demand. However, a number of contributors
consider that copper-based solutions will not represent a credible alternative in the long term.
19
Investors in FTTH solutions and some access seekers call for a recognition that the risk
involved in rolling out fibre to the premises is higher than upgrading copper, so that regulatory
incentives, if any, should not include FttC solutions. Regulators also argue that any risks
specific to a particular new investment network project should be considered if wholesale tariffs
are subject to regulation, in order to allow the operator a reasonable rate of return on adequate
capital employed (ROCE) and return on investment (ROI).
On a more critical note, there was some discussion in the Expert Group16
on 30 May 2016 over
what the review of the framework should aim towards as regards objectives for connectivity
overall and whether or not there should be an emphasis on very high speeds potentially delivered
via fibre connections (See Annex 13 for more details). It was noted by some experts that FTTH
may not be necessary to fulfil many of today’s needs at household level; even when considering
multiscreen 4K TV content (see also the access study, SMART 2015/0002); while the longer-
term needs of a significant proportion of the population are likely to be much greater. It follows
that, from a short term perspective, the added value of VHC may not currently be so high in
the eyes of consumers, with consequential effects on their willingness to pay for it at least in
the short term.
While these causes can and will be partially addressed in the review, it is also important to
acknowledge that a certain amount of public funding will remain necessary to improve the
business case for operators and promoters in the most difficult areas. Public funding dedicated to
high speed broadband networks is available, including EU funding in amounts which have been
increasing throughout the multi-annual financial frameworks17
. The current levels of public
funding remain however largely insufficient to meet the challenge presented above.
1.2.1.2 Low coverage and take up in mobile
As regards mobile, 4G coverage of households is almost universal in some Member States, but
it is still substantially below that of 3G (HSPA). Although the user experience for mobile
communications is very much determined by territorial coverage, LTE deployments have
focused mainly on urban areas, as only 36% of rural homes at EU level are covered against a
total coverage of 86% (see annex 6, figure 46 for Member States information).
The technical availability of mobile signals (i.e. LTE/4G coverage available in a territory) does
not necessary mean that the quality of service (including user experience) is optimal18
. Truly
ubiquitous coverage (i.e. everywhere) and capacity (i.e. peak speed up to 10Gbps) is a necessary
condition for the success of 5G. 5G networks will not only provide very high peak downlink
speeds in ultra-dense environments but also provide mobile broadband services to a range of
vertical industries, notably, for automotive, healthcare, transport and utilities. These vertical
16 On 30 May 2016, WIK-Consult GmbH, Ecorys Brussels N.V. and VVA Europe organised a high-level academic
expert panel to support the Commission in the preparation of the Impact Assessment for the Review of the electronic
communications framework. The purpose of the expert panel was to provide feedback on the provisional conclusions
reached by the consultants concerning the impact of planned changes to the e-communications framework. Prior to the
meeting, the experts were provided with a programme for discussion, slide presentation and draft ‘overview’ of the
consultant’s research findings.
17
The allocation of European Structural and Investment Funds for high speed broadband networks experienced a
sharp increase from €2.7 billion in 2007-2013 to around €6.4 billion for 2014-2020 (about €5 billion ERDF and an
estimated €1.4 billion EAFRD). The Connecting Europe Facility (CEF) in the digital area is endowed with a limited
budget of EUR 150 million to support deployment of state-of-the-art broadband infrastructure, based on the provision
of financial instruments via the European Investment Bank (EIB). The broadband component of CEF is expected to
mobilise around €1 billion. Finally, the European Fund for Strategic Investment (EFSI) does not have sectorial
earmarking hence it is difficult to anticipate how much broadband infrastructure investment will be facilitated by it.
18
The user quality of experience is affected by many other factors, namely the quality of user device (some smart
phones are better than others), user movement (when using phones in a train or car which is moving fast), user
contractual data plan, network congestion (it is different at 8am or 3pm) or network configuration (depending on the
operator).
20
industries will require sufficient capacity and reliability and other application-related parameters
(e.g. latency) to meet their robust performance requirements.
Although 5G will coexist with other legacy infrastructures (2G and 3G) as well as with upgraded
4G networks, capital-intensive 5G networks architectures will require high capacity connection
to base stations and, thus, involve a greater number of base stations as well as denser networks
that will increase the backhaul19
traffic. 5G connectivity will increase mobile data traffic,
through 3 main scenarios20
, i) enhanced mobile broadband (eMBB), ii) massive M2M
communications and/or iii) ultra-reliable low-latency communications. These will pose
challenges for backhaul links21
due to the fact that, on the one hand, network architectures
become much denser by means of, e.g., small cell deployment, and a significantly higher number
of backhaul links will be required. On the other, since the capacity of individual cells increases
thanks to advances in technology, the corresponding backhaul links also require more capacity to
manage data coming from technologically advanced cells. Indeed, with regard to facilitating
deployment of denser networks, many respondents in the public consultation pointed to obstacles
to the roll-out of small area access points needed for mobile services22
. A development that is
critical to estimating the costs of future connectivity of 5G is the increased prevalence of small
cells. Although these are already being deployed for 4G services to increase capacity of
networks, the very high data and bandwidth requirements of 5G will require a much larger
number of small cells. The 5G Manifesto for a timely deployment of 5G in Europe23
, endorsed by
key industry and telecom players, underlines the need for improved regulatory conditions of
spectrum in terms of local installation of cells to facilitate the construction of denser networks
Along these lines, many market actors and public authorities consider that a general
authorisation regime for small cells would foster innovation and competition both for services
and end-devices.
19
In a mobile network, the last link to connect various forms of base stations with either the core network or the
backbone network is referred to as backhaul. While optical fibre links are often the default solution, wireless backhaul
links also play an important role for cost reasons or due to difficulties to connect the location of some base stations by
optical fibre.
20
The ITU defines 5G as encompassing (i) Enhanced Mobile Broadband: Higher performance targets across the
board; relative to 4G including indoor/hotspot and enhanced mobile broadband everywhere; (ii) Massive Machine
Type Communications: Massive numbers of connected devices with a huge diversity of connectivity requirements
ranging low power/small data to high power/big data; and (iii) Ultra Reliable & Low Latency Communications:
Native support for use cases having highly divergent requirements including mission critical applications, tactile
internet experiences and self-driving cars.
21
The RSPG report on (wireless) backhaul predicts by 2020 capacity requirements for the backhaul link of already
one to a few Gbit/s per base station in dense urban areas, while only several hundred Mbit/s second are considered
necessary for rural areas and small cells. At the same time, the range of wireless backhaul is expected to be short
between 200 meters to 1 km in urban areas and even shorter for small cells, while it could be up to 15km in rural
areas. However, since peak data rates are expected to increase 10-50 times and user data rates 10-100 times with the
introduction of 5G, this will result in significantly higher peak data rates of roughly 10-50 Gbit/s for backhaul links.
As a consequence, the need to connect base stations directly with fibre backhaul or to at least bring a fibre connection
very close will increase significantly.
22
Such as lengthy permit process, high administrative fees for back-haul provision, inappropriate fee structure, lack of
harmonisation of management of electromagnetic fields' emission..
23
https://ec.europa.eu/digital-single-market/en/news/commissioner-oettinger-welcomes-5g-manifesto
21
Figure 3 - Summary of future wireless evolution
Source: Analysis Mason, 2016
Despite the fact that the specificities of the future 5G architecture are still unknown today and
standards still need to be defined, a Commission study uses a standalone small-cell deployment
scenario as a cost proxy and estimates 5G deployment costs in the order of magnitude of 120
billion EUR for 95% of EU28 population coverage24
. Hereby the costs for only the wireless
infrastructure amounts to 38 billion EUR, while the 81 billion EUR for fibre infrastructure used
for front/backhaul in this standalone scenario could be reduced due to synergies with fibre
rollout for other purposes25
. In order to provide full coverage of transport links, their model
predicts an additional 104 billion EUR, the wireless infrastructure accounting for 64 billion EUR
without any further synergies possible for fibre rollout in the corresponding scenario.
1.2.1.3 Lack of timely and appropriate spectrum affecting investment
The lack of sufficient connectivity to meet future demand and to allow development of services,
is especially notable in wireless connectivity networks that rely on access to spectrum26
. Demand
for spectrum is growing significantly driven by both existing and new services and applications.
24
According to the study SMART 2015/0068 on 'Costing the New Potential Connectivity Needs', a wide deployment
of small cells is commensurate with the aims of 5G in terms of peak mobile speeds and other target parameters and
thus serves as a cost proxy. The figure of 120 billion EUR corresponds to 95% of EU28 population coverage. The
figure is subject to a large number of assumptions (e.g., the unit cost of a small cell falls to 1000 EUR, only 50% of
small cells require fronthaul connections via fiber and the wireless infrastructure is shared) and varies in the model
from 75 billion EUR for a smaller proportion of cells using fiber fronthaul connections to 194 billion EUR without a
shared wireless infrastructure. A second DG CONNECT study on 'Identification and quantification of key socio-
economic data to support strategic planning for 5G in Europe' SMART 2014/008, estimates that in 2020 the total costs
of enhanced mobile broadband 5G networks deployment will be approximately 56 billion EUR in EU28 Member
States. The estimation is based on a high level linear extrapolation of the costs per subscriber of 2G, 3G and 4G
deployment in Europe. These costs do not include key technological components of 5G type networks (i.e. backhaul
and small cells) and does not consider the wide set of very challenging 5G requirements. It largely corresponds to a
scenario of the above study SMART 2015/0068 in which only macro cells are upgraded at the cost of 63 billion EUR.
25
In case of fiber rollout to big Socio-Economic Drivers and Professionals (SEDPs) and in combination with the fiber
necessary for macro cell coverage, the costs for fiber in this scenario would be reduced to 52 billion EUR.
26 The section dedicated to the efficiency of spectrum regulation in the Evaluation SWD further discusses the
contribution of spectrum management as currently arranged in the EU to competition and investment on the single
market.
22
It is estimated that up to 56 GHz27
will be needed to meet the demand of 5G users and
applications (e.g. the connected car, health related services, smart cities).
Mobile data traffic in Western Europe (and the US) is expected to grow 6-fold from 2015 until
2020, which represents a higher growth compared to South-Korea (x5) and Japan (x4). Indeed,
mobile data traffic will grow twice faster than fixed IP traffic from 2015 to 2020.
In terms of traffic, the average smartphone user in Western Europe will generate 4.6 GB of
mobile data traffic per month in 2020, up by 353% from 2015. In terms of devices, laptop
users will generate 4.4 GB and tablet users more than 6 GB (see Annex 6). IoT devices28
are
expected to surpass mobile phones as the largest category of connected devices in 2 years29
.
Between 2015 and 202130
IoT connections will increase at a compounded annual growth
rate (CAGR) of 23%, over that time, Western Europe will add the most connections, led by
growth within the connected car 5G vertical.
Figure 4 – IoT connected devices: cellular and non-cellular in billions
Source: Ericsson Mobility Report, June 201631
Timely award of sufficient spectrum (i.e. 5G pioneer bands below 6GHz such as 700MHz, 3.4-
3.8 GHz, 4.2GHz and new higher frequency millimetre bands) is critical to the launch of 5G – its
architecture will require a radio-frequency bandwidth of at least 100MHz32
to be accommodated
for enhanced broadband 5G services and, in parallel, involve more base stations (including small
cells) for radio access and denser connectivity to backhaul 5G increasing traffic.
Forecasted data for mobile broadband traffic confirm this trend of potential increase of wireless
traffic, the growing need of wireless connectivity is due not only to wireless broadband but also
M2M communications enabled by 5G networks. While M2M modules currently generate 3% of
total mobile data traffic in Western Europe, by 2020, this figure will go up to 11.6%, while M2M
modules will represent more than half of the total connected mobile devices. The US and Japan
27
According to the SMART 2014/0018 'Identification and quantification of key socio-economic data to support
strategic planning for the introduction of 5G in Europe' this number corresponds only to the extreme scenario of full
exclusive spectrum (no-sharing) for automotive cars. In case of 50% sharing this number is 35 GHz.
28
IoT includes connected cars, machines, utility meters, remote metering and consumer electronics
29
Ericsson Mobility Report June 2016.
30
28 billion connected devices billion are forecast by 2021, of which close to 16 billion will be related to IoT
31
https://www.ericsson.com/res/docs/2016/ericsson-mobility-report-2016.pdf
32
Every generation upgrade of mobile technology requires wider radio-frecuency channels. First generation worked in
25kHz channel , second generation GSM in 200kHz, 3G mobiles in 5Mhz channel and 4G mobiles in up to 20MHz.
23
will show similar figures, while in South Korea both traffic and number of M2M devices will be
significantly higher proportionally33
.
In order to meet these connectivity requirements timely access to spectrum needs to be assured.
In some Member States, there have been significant delays in making necessary spectrum
resources (i.e. bands technically harmonized at the EU level) available to market operators, the
main reason being the lack of consistency in spectrum governance across the EU (see Annex 2).
Taking 4G licences in the 800MHz band as an example, the figure below depicts the difference
in timing of spectrum availability across the EU countries which stretched over 5 years with
some countries still in the process of awarding 800MHz licenses, despite the envisaged deadline
in the Radio Spectrum Policy Program already having expired in January 2013.
Figure 5 - Timing of 800MHz spectrum awards
Source: Commission Services
The result of the slow coming into service of spectrum resources is that it affects possibilities
and incentives for operators to invest in the development of their networks (see Annex 2 on
Public Consultation). The results of the Public Consultation showed that although the current
technical harmonisation is seen to be working relatively well, there is criticism on the current
institutional system's capability to bring spectrum resources to the market in a coordinated and
timely manner.
Similarly, the differences in fees and auction prices paid across MS that, in addition, create
discrepancies between markets and operators and contribute to the fragmentation of the
European mobile market. In some cases, the auction processes (especially those with high
reserve prices) appear to be driven by fiscal considerations rather than the objective of optimal
use of the spectrum resource for connectivity. Thus, short term considerations (i.e. delicate
national budgetary situations) play against long-term economic investment considerations
needed to promote network roll-out. As illustrated in Figure 6, the LTE coverage in some EU
Member States (AT or IT) is negatively correlated to the average price paid34
for the 800MHz in
EUR/MHz/pop, whereas in other Member States (SE, DK or FI) the correlation is positive. The
more capital is required to acquire a licence the less capital is available for investment in the
network, and the lower the coverage.
33
See annex 6 for detailed data.
34
In an auction, the price paid is driven by the value to mobile operators,.
24
Figure 6 - Average price paid in the 800MHz (€/MHz/pop) and LTE (4G) Coverage in EU MS.
Source: Commission Services
Consequently, the coverage of 4G services in the EU has been slow; it started to develop late
and with great differences across national markets. However, it reached 86% in 2015 up from
27% in 2012. While LTE - 4G coverage, which allows users to profit from ubiquitous mobile
internet services of up to 30Mbps, is almost universal in some countries (the Netherlands,
Sweden, Portugal) reaching only 60% in others (Croatia, Romania). These differences amongst
Member States are even more marked when looking at rural LTE coverage which continued to
vary from close to 100% in Denmark, the Netherlands and Sweden to no coverage in Bulgaria,
Cyprus and Malta in mid-2015; the EU average is 36% (see Annex 6).
Compared with other regions of the word, Europe lags behind in the roll-out (85.6% of
households at EU level by 2015) and take-up of 4G/LTE. Leading markets for 4G (Japan, South
Korea, Canada and the USA) have substantially higher connection rates than in the EU.35
Whilst
Japan is leading the way with regards to mobile broadband (take-up and coverage). Japan is
closely followed by the Nordic countries (Finland, Sweden and Denmark) and Estonia. Australia
is the 6th best performer, followed by Korea and the United States36
.
35
However, the degree and quality of coverage is variable in the US as well. A recent (2016) study by Imperial college
concluded that" From a public policy perspective the results reinforce the belief that ,although governments are
eager to mitigate the digital divide in terms of access to the Internet, there appears to be a mobile divide between
individuals and households in urban or affluent areas and those in rural or lower-income areas. See:
http://ac.els-cdn.com/S0308596116000410/1-s2.0-S0308596116000410-main.pdf?_tid=cad0768e-180a-11e6-bb74-
00000aab0f01&acdnat=1463034711_b683de50d0e533237591e737924da244
36
Source: I-DESI: https://ec.europa.eu/digital-single-market/news-redirect/31457
25
Figure 7 - OECD wireless broadband take-up (subscriptions/100people)
Source: OECD
Operators' incentives to invest in network deployment especially in the more capital-intensive
future 5G networks are influenced by factors such as the lack of predictability of spectrum
availability or broad synchronisation of spectrum release and licence durations relative to the
required investments cycles. Consistently with the above analysis, the 5G Manifesto with
European industry endorsement seeks sufficient spectrum bands to be licensed on time if 2020
target launch date for 5G is to be met37
. It also emphasises that the spectrum aspects of the DSM
- namely, harmonisation and predictability of spectrum policy across Member States (including
spectrum availability, licensing procedures and costs, licence terms, and liberalisation and
renewal of existing spectrum) – are essential to encourage more investment into the mobile
sector, particularly in 5G networks.
As indicated in the evaluation (section 7.2.3.2.), the harmonisation approach of the current
framework has not achieved sufficient convergence of the actual conditions attached to
individual licences or of the underlying motivations to impose such conditions, thereby creating
regulatory uncertainty and possibly impacting effective access and use of spectrum and market
investment incentives.
1.2.1.4 Unsatisfactory connectivity offers across the Union for businesses
The DSM strategy also focusses on business and SMEs. Business customers typically require
higher quality of service levels than residential customers, and may also require higher
performance levels as regards certain technical characteristics.
A survey conducted for SMART 2014/002338
confirmed that business customers value
symmetrical speeds, low contention, short latency, and unlimited data volumes that can only be
guaranteed by fixed VHC connections. They also require short provisioning and fault repair
times, and service level guarantees. Mobile broadband is not considered a substitute as it does
not sufficiently meet the higher expectations of business customers with regard to these aspects.
However it has also to be said that interviews conducted for the support study suggest that the
technical requirements of business customers may over time converge with the growing ones of
37
European operators are targeting the launch of 5G in at least one city in each of the 28 European Member States by
2020
38
See:https://ec.europa.eu/digital-single-market/en/news/investigation-access-and-interoperability-standards-
promotion-internal-market-electronic
26
residential customers. The widening use of telework practices could boost the need for
symmetric gigabit connectivity and therefore the need for VHC networks to be made available to
ever more end users. This could in theory also enable business users to benefit from any
infrastructure-based competition or co-investment in mass-market FTTH networks. Whereas
large companies tend to solve the connectivity problem through ad-hoc leased lines, SMEs are
often struggling to meet their connectivity requirements. Moreover, the wider diffusion of the
collaborative economy and the increasing number of micro enterprises that operate in it also
fosters higher connectivity requirements.
Multi-national businesses require not only the availability of connections in dispersed locations,
but also uniform conditions for provisioning, repair and quality guarantees. In a 2013 study
“Business communications, economic growth and the competitive challenge”, WIK estimated
the cost of non-creation of a single market enabling the seamless provision of business
communications services in Europe at €90bln per annum over time in terms of non-realized
efficiency and productivity gains.39
The lack of availability of harmonised conditions for business accessing connectivity across
borders has its roots in the national focus of the institutional regulatory set up and of the rules
intended to address cross-border market failures, such as the lack of availability of a business
grade product for which demand exists. Although rules for cross-border harmonisation exist,
they require relatively complex and often non-binding procedures to deliver consistent outcomes.
This has failed to provide the consistency demanded by multi-national business users operating
across the single market.40
The evaluation (section 7.2.2.) and the public consultation evidenced how cross-border providers
deplore the lack of consistent access products (in particular when it comes to the wholesale
inputs needed to serve the high end business market), the multiplicity and great diversity of
market entry provisions (e.g. authorisations, rights of ways) and, in solving disputes across
borders, etc.
The lack of available business connectivity products on a cross-border basis is one of the reason
why the framework contribution to the Single Market objective, was rated more critically than
the other objectives with most stakeholders41
considering that this is the least accomplished
objective of the framework, referring to the lack of regulatory consistency and to the persisting
barriers to operating across borders.
1.2.2 A regulatory framework not fit to rapid market and technological changes
This section deals with the problems brought about by the significant market and technological
developments that have taken place since the last review, changing the way citizens and
businesses communicate, and bringing the need to adapt current rules to these changes.
1.2.2.1 Uncertainty about rights and obligations for provision of equivalent services
The evaluation report noted that Over-the-Top players (OTTs) are not subject to sector-specific
rights and obligations, even when their services are used by the end-users to cover the same or
similar communications needs as the traditional electronic communications services. Many
39
The gains are associated with a welfare gain from lower prices, efficiency gains from an improvement in ICT
processes and productivity gains through a reorganisation of business processes.
40
64% of respondents considered that the access-related provisions have made a moderate or significant contribution
to the internal market (of which most consider the contribution has been moderate), while 29% consider it has made
little or no contribution.
41
Roughly 46% of the respondents to the public consultation consider the single market objective
achieved (of which 39% only "moderately" achieved), while the competition objective is considered
achieved by 59% of the respondents (of which 32% consider that it was "significantly achieved") and the
citizen interest objective is considered achieved by 54% of the respondents.
27
stakeholders (BEREC, several Member States, most operator associations, most incumbents,
some cable players, all user associations and some broadcasters) referred in the public
consultation to the need to review the current definition of ECS, owing to the increasing
uncertainty on the scope of the definition of ECS related to "conveyance of signals", the
inconsistent regulatory obligations for similar services and the convergence of communications
services.
New online players -often global- have emerged offering communication services which many
users perceive as comparable to traditional electronic communications services such as voice
telephony and SMS. These so called Over-The-Top-players (OTTs) provide their services in the
form of applications running over the internet access service and are in general not subject to the
current EU telecom rules. Some of such OTT communications services make use of telephone
numbers and can for this reason be considered to fall under the framework42
, but the point is
contested and de facto the rules of the framework have not been applied to them. Traditional
electronic communications services, however, clearly fall under the scope of the EU Regulatory
Framework, since they incontestably fulfil the definition of "Electronic Communications
Services" (ECS), a legal term contained in the Framework Directive (Art. 2(c)). Under the
interpretation offered by the European Court of Justice, ECS covers communication services of
providers that bear the responsibility for the conveyance of signals over the underlying
electronic communications network vis-à-vis end-users.43
Being responsible implies that the
service provider must have a certain degree of control over the conveyance of signals. Operators
of traditional electronic communications services usually also own and run (parts of) the
underlying network, which consequently puts them into a "controlling" position. Conversely,
providers of OTT communications services usually do not own or operate any network
infrastructure and cannot in principle fully control the signal in the same way, as this is carried
over the internet access service on a ‘best-effort’ basis (unless they negotiate a managed service
with network operators). These differences have led national regulatory authorities to adopt
diverging interpretations on the consideration of OTT communications services as "Electronic
Communications Services" (ECS)44
.The generic OTT label hides different types of
communications services which may e.g. offer the option to use the E.164 numbering system
(e.g. Skype out) in order to interconnect with traditional telecom service providers. In order to be
able to technically make use of numbers, such OTT operators need to e.g. conclude wholesale
termination agreements with traditional ECS operators in order to terminate a call. So by being
able to offer OTT communications services which - from a user perspective - can "interact" with
phone numbers, such OTT operators factually market their services as being equivalent to and
cheaper than traditional telecommunication services and end users can come to rely upon them
having equivalent functionalities. Other OTT communications services may not give the
possibility to use numbers, yet they nevertheless provide communications services that
consumers may in certain situations also see as functionally substitutable to traditional services.
Such disruptive innovations, while very convenient and financially beneficial to end users, bring
the need to analyse their impact on existing competition conditions and possible distortive
effects stemming from differentiated regulatory treatment, as well as the adequacy of existing
regulation in a changed environment.
Providers of traditional communication services, which mainly provide both networks and
services, including internet access services and some specific services, have to comply with
sector-specific obligations related to e.g. contractual rights, transparency, quality of service,
contributions to universal service funds, access to emergency services ("112") and caller location
information. Pure OTTs, on their side, are subject to horizontal legislation only and not to these
sector-specific obligations, even when their services are used by the end-users to cover the same
42
See ERG Common Position on VoIP adopted in December 2007
43
Case C-475/12, UPC v. Nemzeti Média, judgment of 30 April 2014, par. 43.
44
BEREC, Report on OTT services, BoR (16) 35,
http://berec.europa.eu/eng/document_register/subject_matter/berec/reports/5751-berec-report-on-ott-services.
Differences in national case law are also observed, as described in annex 10 (problem drivers).
28
or similar communications needs. Moreover, traditional providers are often subject to sector-
specific administrative charges and taxes. Finally, they have to comply with specific data
protection obligations under the ePrivacy Directive, beyond the Data Protection Regulation45
,
which applies also to OTTs.
At the same time, the EU regulatory framework offers providers of traditional communication
services certain rights which could be considered as an advantage in comparison to OTTs, such
as e.g. access to the (international) E.164 numbering plan. Such access to the numbering regime
provides a global reach through phone numbers and the interconnection agreements between
traditional telecom providers ensure a global network effect for telephony and SMS.
The differentiated regulatory treatment outlined above creates uncertainty about rights and
obligations for provision of equivalent services that needs to be addressed by the review. Firstly,
the question arises to what type of communications services the framework should extend.
Secondly, what sector-specific end-user protection rules are still warranted or have become
obsolete. Thirdly, whether underlying public interest such as e.g. security and privacy would
require extension of some of the sector-specific rules to OTTs.
1.2.2.2 Gaps in consumer protection in some areas.
Sector-specific end user protection rules complement general consumer protection and aim at a
high level of consumer protection in the electronic communications sector. These sector-specific
rules cover in particular areas such as contractual information, transparency, quality of service,
contract duration, switching, privacy and security, and access to emergency numbers. The
functioning of the provisions concerned is discussed in more detail in various sections of the
evaluation SWD 46
.
Many providers of electronic communications networks and services, a few broadcasters,
vendors and OTTs consider however that certain sector-specific end-user rights’ provisions are
not relevant anymore and should be repealed, mainly in the area of those contract rules which are
covered by various other Directives. European and national consumer associations, on their side,
have not identified any provision to be repealed, and would prefer to keep current sector-specific
end-user in order to supplement the framework and general consumer protection rules which do
not address sector-specific issues.
Although the rapid adoption of alternative OTTs communications services that are not subject to
these sector specific rules suggests that end-users generally feel confident in using these services
without sector-specific protection, there may be areas where the users of these new services are
exposed to the same risks that sectorial rules were designed to address, for instance regarding
security and confidentiality of communications or transparency and contractual information.
This brings the need to assess to what extent the rules on consumer protection which would still
seem to be necessary should be extended to all or some new market players. This was confirmed
in the public consultation where, despite the fact that most stakeholders (Member States, telecom
operators and their associations, broadcasters, vendors and OTT providers) argued that the
current framework has contributed to effectively achieving the goal of ensuring a high level of
consumer protection across the EU, many of them also considered that the current regulatory
framework has failed to deliver consumer protection with respect to emerging services based on
new technological developments and outside (or not clearly within) the remit of the sector-
specific rules. In particular, most responding Member States support specific requirements to be
applied to all communications services irrespective of the provider ("traditional" telecom
operators or "new" OTTs) in order to avoid risks of (a) insufficient customer protection, (b) a
lack of clarity, and (c) confusion among consumers who might mistakenly believe that their
45
REGULATION (EU) 2016/679 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 April 2016
on the protection of natural persons with regard to the processing of personal data and on the free movement of such
data, and repealing Directive 95/46/EC (General Data Protection Regulation)
46
See in particular sections 7.2.3.3, 7.2.3.9, 7.2.3.11, and 7.2.3.12 of the Evaluation SWD.
29
communication is protected by sector-specific rules. Consumer representatives supported this
view, calling for an extension of existing rights for communications services. The majority of
communications service providers, including OTTs, would prefer that end-user rights rely on
horizontal regulation (consumer and data protection), together with competition law tools, with a
minimum set of rules applying to all players.
Concerns about security of communications have risen in parallel with the adoption of new
services in the economy and society as a whole. In 2014 a total of 137 "major incidents" (in
terms of either duration or percentage of users affected) were reported, affecting in comparable
percentages fixed telephony, mobile telephony, fixed Internet and mobile Internet. Although
there are no comparable figures, security incidents have also been reported for alternative OTTs
communications services. Over half of respondents to the public consultation considered that
current rules have been effective in achieving their objectives and more than a third considered it
important to involve the complete Internet value chain under the security rules. This would help
to increase consumers' trust in the use of communications services regardless of the underlying
technology. End-users of OTT messaging services are currently less protected because there are
no security duties applicable to OTT communications that are comparable to those applying to
telecoms services. OTT communications services are not considered as digital services under
Article 3(11d) and Annex III of the NIS Directive, nor are they covered by the current Articles
13a and 13b Framework Directive. If security is considered as an important value, it is
reasonable to consider whether it should apply in a similar way to all comparable
communications services.
Another important requirement is confidentiality of communications which currently applies to
electronic communications services only. The exact delineation of the services subject to any
confidentiality obligations, and the scope of such obligations, is a matter for the review of the e-
privacy Directive which may build on the definitions developed in this review.
Current adoption of new communications services has not led to any particular needs thus far in
the area of interconnection and interoperability. The variety of available means of
communications, ease in switching between various OTT communications services (because of
multi homing, for instance) have ensured de facto end-to-end connectivity for end users via
various communications services (in addition to traditional numbers-based telephony and
messaging) and consumer choice. However, in view of the increasing importance of
communications platforms which benefit from network effects, it appears opportune to have
tools available in case healthy functioning of markets or innovation is threatened, in particular if
network effects would impede entry and innovation in the market and limit consumer choice in
the use of different services. Alternatively, a significant fragmentation in the services employed,
combined with a possible marginalisation of the interconnection/interoperability ecosystem
based on public numbering plans, could frustrate the objective of end-to-end connectivity of the
entire population. Either such scenario would in turn hamper the creation of a fully functioning
single market for communications services. The public consultation showed divergent views on
this issue, with mobile operators and certain incumbents calling for a phasing out of the ex-ante
regime in place, arguing that the IP-based delivery of voice services is modifying market
circumstances. MVNOs have an opposing view on the matter, on the ground that terminating
networks will always remain a bottleneck. OTTs consider that interconnection rules are needed
to avoid discrimination.
Rules regarding contracts and switching are complementary to competition: they ensure that
consumers derive maximum benefits from a competitive market: from making the right
purchase, to ease of switching to other providers when desired. These rules have thus enhanced
competition on prices, quality and service innovation and have fostered innovative commercial
offers. Regarding contract information, the majority (86%) of the respondents to the public
consultation consider that the same level of protection vis-à-vis contracts should apply to all
communication services, including those offered by OTT providers.
30
Good and reliable quality of service is of particular importance for the internet access service,
through which many communications services are made available to consumers. This is reflected
in the increasing attention that consumers pay to factors other than price when subscribing to an
internet access service. In particular, data show that after price, the two factors that consumers
consider for their purchase decision are the maximum download and upload speed of the service
and the maximum amount of data that can be used.
Similarly, an increasing number of consumers perceive that the possibility to keep their phone
number when switching provider is an important facility that they would like to use for other
components of the communication services, such as e-mails, contents, photos and content stored
online by the communication service provider.
The public consultation indeed supported these findings, with consumer protection bodies and
Member States in favour of keeping sector-specific end-user rights applicable to communication
services, while alternative telecom operators suggested that full harmonisation is needed for
contractual information, transparency measures, contract duration, switching, and bundles.
Telecom operators associations, most incumbents, several alternative players and most cable
operators think there is no need for additional sector specific consumer protection rules and that
any potential issues should be dealt with horizontally. However, these stakeholders acknowledge
that there may be several issues that need attention. Some of these would include bundling of
contracts and their impact on switching (see section 1.2.2.3 below). All these changes to the
market place raise questions about notably the scope of application of the regulatory framework
as well as the type of regulatory intervention prescribed by the latter to ensure consumer
protection in some areas.
1.2.2.3 Rules unfit to bundles for switching purposes
Technology developments have fostered the convergence of different technologies and services
enabling the delivery of seamless services to end-users in the form of bundles. The rapid
adoption of bundles in the EU47
has brought significant benefits to users in terms of convenience
and price; however, it has also affected market structure and market conduct and created new
transparency, comparability and switching problems for consumers, which poses longer term
risks for competition on prices and quality of service.
A bundle refers to a package of several different services sold together as a single plan: landline
calling, Internet access, mobile services, pay-tv. A bundle can also include products, most
frequently a terminal device The aim for vendors is to increase average revenue per user (ARPU)
by increasing the number of subscriptions sold to customers, and to secure customer loyalty.
Mobile customer churn rates decrease when their mobile plan is bundled with a fixed Internet
access and pay-tv plan.
50% of all EU households purchase bundled communications services in 2015, up from 38% in
2010. The most popular bundle is Fixed telephony + Internet followed by the triple play Fixed
telephony + Internet + TV. Internet access (either fixed or mobile) is present in 80% of all
service bundles, fixed telephony in 64%, TV in 54% and mobile telephony in 46%.
47
See section 6.10.7 on the increasing adoption of bundles
31
Figure 8 – Bundles in the EU in 2015
Bundles have both benefits and disadvantages for consumers. By integrating several services in a
single offer, with unified billing and customer care service, they can be more convenient and less
expensive for consumers. A 2011 Eurobarometer survey on e-communications measured that
68% of households with a bundle considered that bundles are more convenient because there is
only one invoice and 52% of them found that bundles are cheaper, while households without a
bundle at the time invoked as the main reason for not having a bundle the fact that they provide
packaged service they don't really need.
Yet bundles can also make transparency and price comparison more difficult and potentially lead
to lock-in effects, since bundles make it more difficult for consumers to switch providers of
certain services within the bundle. This problem is clearly identified in the evaluation report,
which indicates that this market has the largest proportion of consumers among the surveyed
markets who say they tried to switch provider but faced obstacles while attempting (7%). From
those customers who wanted to switch their internet service provider (42% of participants),
15.1% found it easy, 7.2% switched but found it difficult, 2.4% tried and gave up, and 3.6% did
not even attempt to switch as they thought it might be too difficult 48
.
Regarding transparency and price comparison, as shown in the evaluation report (see section
7.23.9.), the latest data available show that although more than two thirds (68%) agree that it is
easy to compare the services and prices of bundled offers of other providers, 24% of consumers
do not yet think it is easy to do so and also note that there has not been any improvement in this
area since the previous survey.
Respondents in Italy (88%), Greece (84%) and Bulgaria (82%) are the most likely to agree that
it is easy to compare, while the most critical countries are Denmark, where far fewer (31%)
agree this comparison is easy, followed by Luxembourg (57%) and the Netherlands (59%).
Easiness of comparison and take-up of bundles are not directly correlated, since adoption rates
in the latter group of countries is above the EU average, with 87% of households in the
Netherlands subscribing to a bundles of services. Yet data show a relative correlation between
easiness of comparison and actual switching of bundle service provider for some countries, with
Greece (80%) and Italy (70%) on top, while Luxembourg (40%) has one of the lowest rates in
switching.
A majority of respondents to the public consultation, including several Member States, almost
half of the NRAs, mobile and certain fixed operators and the European consumer association
advocate that the scope of current rules on switching needs to be adjusted due to bundles.
48
Section 7.2.3.9 of the Evaluation SWD. Flash Eurobarometer 243 Consumers views on switching service providers.
November 2015.
32
Bundles are a cause of concern and the TV service should not hinder switching of broadband
services. Consumers' view, shared by many others, is that consumers should be able to terminate
any individual service within a bundle (equipment linked to one service should not lock-in
consumers to other services), and renewal of one service should not be used to renew the entire
bundle.
On the opposite side to this view are a few Member States, operators' associations and a large
number of fixed operators, which think that additional rules would represent a disproportionate
burden on telecom operators, as OTTs are currently not obliged to offer unbundled services.
Moreover, they argue that the market is competitive, there is no evidence of harm (on the
contrary, consumers value bundles), and competition rules together with horizontal consumer
protection should suffice.
Besides the three major problems described above (different rules for equivalent services, gaps
in consumer protection and rules unfitted to bundles for switching purposes), technology and
market changes have also prompted the need to consider the advisability of adapting other sets
of rules.
For instance, must-carry obligations on providers of electronic communications networks for the
transmission of specified radio and television broadcast channels could be examined in view of
the increasing use of OTT services for accessing audio-visual content, as well as the prevalence
of catch-up or other video-on-demand services accompanying traditional broadcast channels and
broadcast distribution platforms. OTT services are not covered by 'must-carry' obligations.
While there is a majority view in the public consultation that transmission obligations imposed
on electronic network operators ('must-carry' rules) and rules related to electronic programme
guides should be adapted to new market and technological realities, there is sharp disagreement
how such adaptation should be conceived. Extension of current rules is supported by most
broadcasters whereas most telecom operators are in favour of reducing the scope of the rules.
Another area where adjustments may be necessary is numbering. While the evaluation showed
no significant problems with the implementation at national level, it made it clear that changes
may be needed to cope with future competition issues in the machine-to-machine market, e.g.,
connected cars, logistics, etc. with particular view to their increasing cross border aspects,. M2M
growth rates are expected to be many times higher than those of the pure voice communications,
changing the pattern and intensity of demand for numbering resources. The public consultation
showed consensus that to cope with the numbering needs of M2M in the future, a clear
framework for extra-territorial use of numbers is necessary to ensure sufficient numbering
resources. As rules regarding extraterritorial usage are not governed by the regulatory
framework, they may differ per Member State, entailing a risk of regulatory fragmentation. In
this respect, existing coordination efforts in CEPT to prevent regulatory fragmentation may not
prove sufficient to comply with the requirements of the Single Market. More specifically,
administrative limitations of extraterritorial use may raise concerns with regard to compliance
with EU Law notably with the requirements of Article 56 TFEU concerning the freedom to
provide services.
At present, the scope of entities that can be beneficiaries of assignment of numbers vary per
Member State and is often limited to specific categories of electronic communications service
providers, In this respect, the current beneficiaries, e.g. most mobile network operators,
expressed concerns over implementation and security issues, such as fraud, exhaustion of
national numbers, and interoperability and end-to-end connectivity aspects. Mainly respondents
beyond the telecom sector noted the increasing cross border aspects and the need to adapt to
market changes.
Rules on access to emergency services are a very important issue too, as indicated in the
evaluation report. In the public consultation, the telecom industry highlighted the importance of
reliable access to emergency services that, in view of the technical standards and legal
33
arrangements in place, can be provided only through ECS today. However, they argue that
access to 112 obligations should be imposed on OTTs as well, if technically feasible. A large
number of stakeholders consider that, although it would not be technically feasible to subject all
OTT services to the obligation of providing access to emergency services, all the voice services
perceived by the users as substitutive to the current PSTN voice service and which also give
access to E.164 numbers should be subject to the same obligations regarding the access to
emergency services.
Finally, obligations related to Universal Service may no longer be in line with current levels of
availability and use of communications networks and services, as evidenced by the evaluation of
the regulatory framework.
1.2.3 Regulatory redundancies and inefficiencies and lack of coherence in the Single Market
This section analyses the regulatory set up and regulation areas where objectives can be
achieved in more efficient ways. This problem is clearly identified in the evaluation report 49
.
1.2.3.1 Unnecessary administrative burden
The better regulation principle is about regulating only when necessary and in a proportionate
manner. The evaluation has identified several areas where the administrative burden could be
reduced without compromising – in some cases even improving - the effectiveness of the
provisions.
Access regulation is an area where a certain level of simplification could take place in terms of
process, intervention triggers or the relevance of access products for safeguarding competition,
without compromising however the results achieved. The current regulatory framework implies a
considerable amount of intervention intensity at both Member States and EU level, given, for
example, the need to carry out and consult on market analyses every 3 years as well as the
complexity of regulating ex ante the terms of provision of a significant number of different
access products based on such analyses, in particular as several access products may be required
for each regulated market. Moreover, the procedures as such could be simplified for certain very
stable markets such as the markets for call termination, without compromising the outcomes.
Evaluation findings indicated that there is room for reducing the regulatory burden on national
administrations/institutions and operators, or redirecting efforts to priority tasks, while at the
same time increasing the predictability and the stability of the framework. Based on the actual
implementation experience, it appears that the current cycles of market reviews are unnecessarily
short and that lengthening them would increase the regulatory certainty and reduce the
administrative burden for NRAs, the Commission, as well as for market participants. There are is
also a potential to avoid duplication of processes for the specification of new wholesale
remedies, and simplify the imposition of remedies in the medium term through the introduction
of standardised wholesale remedies in cases where such remedies would be appropriate, for
example in relation to business access for which there is significant trans-national demand).
Compliance burden could be reduced with limiting the interventions only when it is needed to
address retail market failures.
Areas where much is to be gained from streamlining include the universal service rules that can
be revised in view of their effectiveness and of the decreasing relevance of some of the elements.
There is a clear simplification and reduction of administrative burden potential highlighted by
the evaluation, indicating the possible removal of some redundant universal service obligation
components as public payphones, comprehensive directories and directory enquiry services.
49
For a more extensive analysis of administrative burden and potential redundancies, please refer to the Efficiency
and Coherence sections of the Evaluation SWD as well as to the REFIT conclusions.
34
Those are causing costs on top of the administrative burden for the NRAs from the process
leading to the imposition of obligations. For example, as indicated in the evaluation report, the
estimated maintenance of payphones in the EU costs annually over 1 bn euro – a large amount
that needs to be critically considered in the light of rather infrequent use of the facility.50
Usage
and costs of the provision of comprehensive directory and directory enquiry services are
difficult to estimate. However, the available data suggest that the relation between the cost and
demand is such that commercial provision by the market would suffice, in particular for online
directories and enquiry services.51
The evaluation also indicated that directories are satisfactorily
provided by the markets and demonstrated the non-use of 88% across the EU28 regarding public
payphones52
. [Evaluation p. 35] and highlighted the potential to narrow the scope of universal
service availability and possible administrative burden reduction through ending of the current
sectorial sharing mechanism possibility for financing.
The table below summarises the current state of play of universal service obligations in the
Member States. Orange indicates that a universal service provider (USP) was designated in the
past, but that the USO has been withdrawn in the year indicated in the applicable field. Around
42% of obligations related to public payphones, comprehensive directory and directory enquiry
services were lifted between 2006 and 201253
.
Table 1- State of Play on USO providers in the EU 28
50
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 42-43. Payphones use has
been dropping consistently over the last few years. Only 8% of population used payphones in 2014, and according to
the data of 2008-2009 only 1% of emergency calls was made from payphones (7% for cross-border emergencies).
51
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 38-42.
52
Special Eurobarometer Report 414,2014, p.153. However, it should be noted that unlike public pay phones, mobile
telephony is not regulated for accessibility. To tackle such issues and in order to improve the functioning of the
internal market for accessible products and services by removing barriers created by divergent legislation, the
Commission proposed the European Accessibility Act, which will facilitate the work of companies and will bring
benefits for disabled and older people in the EU.
53
It indicates whether a service provider has been designated to provide a universal service obligation (USO) for each
component of the universal service in the Member State. Green indicates that at least one operator is currently
designated to provide the component of the universal service. Orange indicates that a universal service provider (USP)
was designated in the past, but that the USO has been withdrawn in the year indicated in the applicable field. Red
indicates that no universal service operator has ever been designated in the Member State.
35
Source: SMART 2014/0011
Another target area will be the removal of certain consumer protection measures which are
adequately addressed through horizontal legislation.
The evaluation report indicates that simplification may be achieved among others by analysing
the necessity of overlapping provisions, which may lead to reducing the sector specific rules to
those areas where they are still warranted, or of provisions which developments may have made
redundant or irrelevant, such as for instance certain sector-specific consumer protection rules or
some universal service components. In the public consultation providers argued that at present
there is a problem of regulatory redundancy in certain areas because of overlapping general
consumer protection rules and telecom sector specific rules for consumer protection, as well as
duplication of authorities dealing with consumer dispute settlement and sanctions and that this
overlap leads to over-regulation, too detailed provisions, and inconsistency of rules.
The latest development of general consumer protection rules such as the Consumer Rights
Directive, the Regulation on online dispute resolution or the Directive for alternative dispute
resolution has resulted in partly overlapping legal frameworks, which could in some cases lead
to duplication of procedures, over-regulation, too detailed provisions or inconsistency of rules.
For example some contract provisions in Article 20 Universal Service Directive are overlapping
with information requirements in contracts in the Consumer Rights Directive covering aspects
such as characteristics of services, identity of trader, tariffs or contract duration; additionally
general contract rules are also set out in the Services Directive. In the same vein, out-of-court
complaint and redress mechanisms are provided for under Article 34 Universal Service
Directive, while a recourse to similar mechanisms is provided by the legislation on Alternative
and Online Dispute Resolution (Directive 2013/11/EU on consumer ADR ("ADR Directive")
and Regulation (EU) No 524/2013 on consumer ODR (“ODR Regulation”). The ADR Directive
enables EU consumers to resolve their disputes concerning contractual obligations stemming
from sales contracts or service contracts with EU traders, including electronic communications
service providers, through the intervention of ADR entities respecting binding quality
requirements. Under the ODR Regulation the EC launched in February 2016 an EU-wide online
platform (ODR platform) that facilitates the online resolution of contractual disputes between
EU consumers and traders over purchases made online. Online traders and online marketplaces
are required to provide a link to the EU ODR platform on their website.
Table 2 - Overlap between key provisions of the USD and horizontal rules
Source: SMART 2015/003
The evaluation report noted however that the exact scope and protection level of each set of rules
must be analysed in detail before any conclusions are drawn – in particular in view of making
sure that the level of protection offered to consumers remains adequate and whether sector-
specific rules are still warranted. In particular, even in the case of protection rules with similar
purposes and similar measures (e.g. transparency or dispute settlement) their exact scope and
36
redress mechanisms might differ. In any case, a clear need appears to address the (small)
inconsistencies identified (e.g. penalties, terminology, circular references, etc.).
Figure 9 - Homogenous provisions on contract with specified terms (Art 20 USD)
Source: SMART 2015/003
In the field of wireless communications a greater use of general authorisations in some
instances could also contribute to simplification, especially for new short-range bands (so-called
millimetre bands) envisaged for 5G well above 6 Ghz, while enabling users/innovators to gain
access to spectrum in a quick, open and non-costly manner. In the public consultation, market
actors and public authorities share the view that a general authorisation regime would foster
innovation and competition both for services and end-devices. Shared access to spectrum is
likely to play an increasingly important role in meeting this growing demand (see section
1.2.1.3), thus there will be an increased need for flexible access to some spectrum bands (e.g.
new Millimetre Wave spectrum) and a consistent approach in Europe which grants users
regulatory certainty. Indeed, most public and commercial respondents are calling for flexible or
shared access to spectrum to meet future demand, in particular for 5G, preferably on a voluntary
basis. Vendors and operators insist on the contrary on exclusive or licensed shared access for
quality purposes. Broadcasters raise interference issues and thus urge for careful selection of
compatible sharing usages.
Greater and more intense spectrum sharing is becoming possible because of more sophisticated
technologies and new authorization approaches. Successful deployment of 5G requires a
consistent spectrum sharing model across the EU. The figure below shows the impact that
spectrum sharing has on the need for additional spectrum in three 5G use cases, i.e. motorway,
healthcare, transport and utilities (see also Annex 11).
Figure 10 - Spectrum sharing per different 5G use case
37
Source: Real Wireless, SMART 2014/0008
The deployment of 5G networks may raise the need for fewer and simpler rules to create the
right conditions for necessary investment in fixed and wireless infrastructure (backhauls to be
'5G ready') to enable cross-border services. The increased reliance of mobile technologies on
fixed fibre backhaul (see annex 14) to achieve greater speeds and reliability also underlines the
importance of strategies which address fibre deployment and spectrum availability in tandem.
Along this line, most of public and commercial respondents to the Public Consultation called for
a flexible and shared access to spectrum, preferably on a voluntary basis, in order to meet the
future demand.
In terms of coherence and lack of effective coordination, the current governance structure of
access regulation is based on a relatively complex system of Recommendations, ex ante checks
and balances. Even in cases where common approaches are agreed between the Commission and
BEREC, the system does not achieve full consistency, because of the lack of effective co-
ordination mechanisms for regulatory remedies and lack of binding powers54
.
For instance regarding Mobile termination rates, despite a Commission recommendation, backed
by BEREC, certain NRAs still do not apply the recommended costing methodology, or have
adhered only after very long delays. This leads to an unjustified discriminatory treatment of
consumers in different Member States and to a transfer of resources between providers in
different Member States.
As regards consistency of market regulation, just over half of the respondents to the Public
Consultation answered that the Art.7/7a process had been "significantly" or "moderately"
effective in achieving regulatory consistency, while a combined 35% were of the opinion that
this process had only little or no effect on consistency. However even if the main arguments
brought forward were that the Art.7 procedure has none the less contributed greatly to more
consistency and contributes to a steady development of the Single Market many respondents
who were generally positive suggested that the Commission's role vis-à-vis remedies (under
Art.7a) should be strengthened, either by a veto-power, or by a so-called double-lock veto
(where BEREC and the Commission agree).With regard to spectrum, despite the fact that the
current framework55
allows the Commission to issue a Recommendation on the harmonised
application of spectrum provisions, the governance mechanism in place is not sufficient to
facilitate a consistent approach and common EU policy objectives can't be enforced resulting in
the problems identified under section 1.2.1.1 above and the problem drivers analysis in Annex
10. In the public consultation, while several respondents noted delays in the availability of
spectrum and fragmentation between conditions of use in different Member States and called for
a stronger role of the Commission, others disagreed and stressed the national character of
spectrum policy.
The existing spectrum governance structures focus on the harmonisation of technical parameters
but do not ensure sufficient consistency of the timing of effective use of spectrum once allocated.
Moreover, spectrum is assigned with varying conditions reflecting different (national) priorities
and regarding the objectives of the regulatory framework. This leads to disparate conditions
where a national border bisects otherwise similar areas. The absence of consistent EU-wide
objectives and criteria for spectrum assignment, as well as for the conditions applicable to
individual rights of use, creates barriers to entry at national level, hinders competition and
reduces predictability for investors across Europe.
54
Unlike in the process of defining relevant national markets and identifying SMP by NRAs (Article 7), the
Commission is not able to use a veto power with regard to remedies under the article 7a procedure. More general
binding decisions on remedies might still be possible under Article 19 of the Framework Directive, but may only be
implemented two years after a Recommendation on the same subject and following a lengthy process involving
BEREC and COCOM. Cf. case studies smart 2015/0002.
55
Article 19 of the Framework Directive
38
In the public consultation the views of the operators and of the regulatory community diverged.
While operators were in favour of more harmonisation of spectrum assignment procedures, the
regulatory community encompassing both BEREC and RSPG was of the view that the EU
already benefits from substantial coordination and harmonisation processes, and no further EU-
level coordination procedures are necessary. There was nevertheless openness to a peer-review
mechanism as regards spectrum assignment. While Member States reject the need for full
harmonisation they are open to a more common approach to spectrum management, and some
could accept a peer review of national assignment plans as well as a certain level of
harmonisation or approximation of conditions and selection processes.
Access to spectrum could also be simplified by placing greater emphasis on general
authorisations wherever possible as opposed to individual licenses. More generally speaking,
achieving more regulatory consistency in areas such as spectrum or authorisation requirements
might in addition reduce the administrative burden of businesses operating across several
Member States, while at the same time supporting the objectives of the framework.
1.2.3.2 Compliance costs
Inconsistent regulation across Member States in similar competitive situations and access
scenarios makes it burdensome and costly for market players relying on regulated access
products to offer services in multiple countries and thus creates artificial barriers to market
integration. Similarly, the lack of harmonised wholesale access products makes it difficult for
operators to offer services on cross-border basis. This aspect is of particular concern for business
end-users, which, despite benefiting from access regimes under the current regulatory
framework, encounter - due to uneven regulation across Member States for which no objective
justification may exist - difficulties to obtain fit-for-purpose telecom offers covering all services
and countries of operation, and for multi-national telecom providers, which seek to replicate
business models in multiple markets. Today, most large businesses, be they multinational/multi-
site companies or large businesses rely on a sufficient homogeneity of inputs, and may not be
able to contract connectivity inputs enabling them to sell on geographically integrated markets
themselves. This leads to higher costs, higher concentration in smaller markets and, ultimately,
higher prices and lower quality for end-users56
.
As regards the administrative costs of the market analysis process including the costs of three
yearly review cycles, stakeholders consider57
that those are relatively less significant.58
if
compared with the indirect impacts on competition and investment, and the economic costs of
fragmentation impeding the single market. However, if review cycles – and indeed remedies –
are shorter than needed, an important cost that is created beyond administrative costs, is
increased uncertainty concerning the nature and strength of regulation, which can undermine
investor confidence in both regulated operators and alternative operators that may be the
beneficiaries of regulation.
For service providers that offer services cross border, or the same service in several Member
States, the lack of harmonisation of end-user protection rules increases compliance costs and
complicates processes, preventing service providers benefitting from economies of scale.
Telecom operators found it difficult to provide robust calculations of all compliance costs and
only a few examples are available. For instance, one (large European) operator explained that its
annual costs for complying with Quality of Service rules (standards and reporting) are about 14
56
For more details see: WIK (2013) Business Communications, Economic Growth and the Competitive Challenge
http://www.wik.org/index.php?id=meldungendetails&tx_ttnews%5BbackPid%5D=85&tx_ttnews%5Bpointer%5D=1
1&tx_ttnews%5Btt_news%5D=1495&cHash=30344c3cd7aecfcd5efef7bec7b60b8b
57
Interviews conducted in context of SMART 2015/0002
58
The cost of undertaking market analyses for 7 markets on a 3 yearly basis have been estimated at €1.9m per NRA
per year – see Ecorys 2013 Future electronic communications market subject to ex ante regulation
39
million EUR per Member State59
. Other operators indicated that that the annual costs for
complying with contractual rights (including rules on contract duration, termination &
withdrawal) and transparency obligations add up to about 70 million EUR per Member State.
However available evidence is not sufficient to provide a robust estimate on compliance costs at
EU level.
1.2.3.3 Lack of coherence in the Single Market
As shown by the evaluation, the framework's contribution to the development of the single
market objective is perceived as relatively modest. Regulatory consistency has been achieved
only to a limited extent, affecting the operations of cross-border providers and reducing
predictability for all operators and their investors. More importantly, the cooperation and
consistency tools available have led to a situation where best regulatory solutions have not
always been followed, with impacts on end-user outcomes. EU-level consistency checks
contribute to the predictability of access regulation throughout the EU, however their influence is
significantly restricted as regards draft regulatory remedies. Similarly, the lack of consistency in
spectrum management has had negative consequences for end-users such as the delayed 4G
deployment in most parts of the EU.
This view is shared by stakeholders. Despite some advances in areas such as interoperability and
in the cooperation between NRAs, most stakeholders60
consider that this is the least
accomplished objective of the framework, referring to the lack of regulatory consistency and to
the persisting barriers to operating across borders. In particular, cross-border providers deplore
the lack of consistent access products (in particular when it comes to the wholesale inputs
needed to serve the high end business market), the lack of harmonisation related to the actual
access to spectrum by market players, the multiplicity and great diversity of market entry
provisions (e.g. authorisations, rights of ways) and the very different implementing rules across
the EU designed in view of consumer protection. Furthermore, the experience of implementing
the framework has revealed clear difficulties in obtaining consistent access regulation and
market entry conditions, in securing end-to-end trans-EU connectivity, in solving cross-border
spectrum interference issues in some cases, in solving disputes across borders, etc.
Findings from the evaluation in the area of access, spectrum regulation and consumer protection
illustrate how the lack of coherent regulatory approaches is impacting the single market.
While access regulation61
has generally delivered more consistency in areas where the
Commission was given greater competences, for example of determining market definition and
designating operator with Significant Market Power (SMP), greater discrepancies can be
observed with regard to the imposed remedies which cannot all be sufficiently explained by
varying national circumstances. This translates into divergent approaches towards the regulation
of fibre networks, symmetric regulation (ex ante access regulation which is not based on SMP),
pricing methodologies, the imposition of Virtual Unbundled Local Access (VULA) remedies ,
etc. Those diverging regulatory practices in the individual national markets can have a profound
effect on cross-border trade and, thus, on the development of a Single Market in electronic
communications and may seriously distort competition across the EU by "levelling" the EU-wide
playing-field. Diverging practices also affect predictability and the attractiveness of the telecom
sector to institutional investors who are willing to invest in a common European market; even
relatively smaller operators and project companies interested in network roll-out tend to rely on a
pan-European or even global capital market in order to obtain funding.
59
Ibid
60
Roughly 46% of the respondents to the public consultation consider the single market objective achieved (of which
39% only "moderately" achieved), while the competition objective is considered achieved by 59% of the respondents
(of which 32% consider that it was "significantly achieved") and the citizen interest objective is considered achieved
by 54% of the respondents.
61
Section 7.2.3.1 of the evaluation staff working document
40
BEREC's role in supporting consistent outcomes has received mixed feedback. BEREC’s
current institutional set-up results in it often opting for greater flexibility or the lowest common
denominator instead of focusing on a more harmonised approach for the single market.
Similarly, as regards the spectrum regulation area62
, while technical harmonisation and
coordination have worked relatively effectively to ensure the availability of spectrum resources
across the EU, in particular in relation for wireless broadband, the provisions concerning
spectrum management have not sufficiently or consistently supported the single market
objective.
The lack of Member State initiatives supporting spectrum usage opportunities across borders,
going beyond technical harmonisation aspects that could bolster new business models in
electronic communications may also reflect institutional limitations. The framework currently
does not foresee any decision-making mechanism at EU level to buttress and provide legal
certainty to such initiatives which would foster the internal market. More generally, and despite
some positive contributions, the development of mechanisms in favour of the Internal Market
has until recently received little attention in the work of the RSPG notwithstanding its
competence to support measures 'necessary for the establishment and functioning of the internal
market'63
.
By not achieving sufficient convergence of the actual conditions attached to individual licences
or of the underlying motivations to impose such conditions, the framework has failed to
eliminate regulatory uncertainty and possibly impacted effective access and use of spectrum and
market investment incentives. This lack of consistency has had negative consequences for end-
users, such as the delayed 4G deployments in most parts of the EU.
Another issue is also the lack of coherence in the single market as regards a high degree of
heterogeneity in the implementation and governance of consumer protection as a result of
different national legislation brought about by the current minimum harmonisation approach.
Indeed, as indicated in the evaluation report, a large majority of operators (25 operators and 10
associations of electronic communications providers) which reacted to the public consultation
believe that the provisions are administratively or operationally burdensome when providing
services in several Member States, because of the minimum harmonisation nature of the
consumer protection provisions in the regulatory framework, which lead to a different level of
protection across Member States. The various implementation models, often supplemented by
additional national consumer protection requirements, also result in varying compliance costs for
cross border providers. This tends to result in lower predictability for businesses and higher
compliance costs as explained in more detail in SMART 2015/0005. For example, some Member
States define specifications of contract terms for all types of users, while in other Member States
these provisions do not apply to business users. In about half of the Member States, operators are
obliged to publish information on fixed/mobile broadband and mobile voice; also differences
exist in terms of requirements on contract duration and termination, and some Member States
have adopted detailed rules regarding consumer protection safeguards in case of unilateral
changes on contract conditions. There are differences too in the application of out-of-court
dispute resolution.
62
Section 7.2.3.2 of the evaluation staff working document
63
Art. 2(1) of Commission Decision 2002/622/EC of 26 July 2002 establishing a Radio Spectrum Policy
Group, OJ L 198, 27.7.2002, p. 49, as amended by Commission Decision 2009/978/EU, OJ L 336,
18.12.2009, p. 50.
41
1.3 What are the main drivers?
The present section summarises the main problem drivers identified and illustrated inFigure 1,
on the basis of market and regulatory failures highlighted in the evaluation, the public
consultation and the support studies to this impact assessment. In line with the Better Regulation
Guidelines64
the drivers are based on our understanding of the underlying factors and behaviours
underpinning the problems stated. In addition to that, it should however be clear that several
external factors have contributed to the problems described above, such as: the larger economic
context in the EU; the evolution of demand patterns of companies and citizens for buying
services; comparative cost advantages of producing electronic communications services,
competitive dynamics and company strategies unrelated to regulation; and the availability of
public and private funding. The problem drivers identified are:
1. The lack of incentives to deploy new networks (NGA and VHC) in the absence of
infrastructure competition or in rural areas, explaining the slow pace of the gradual
transition from copper-based networks towards fibre-based networks. The driver also
investigates how certain elements of the current framework may lead to suboptimal
behaviours by operators.
2. Inefficient allocation mechanism for public funding; this driver concerns the way public
funds have been allocated (selection of the model of investment, structure/size of
procurement calls, mix of grants vs. financial instruments, etc.) and how the lack of
detailed and reliable mapping of existing infrastructures, of quality of services and about
credible forthcoming investment in the next three years may lead to suboptimal and
inconsistent outcomes across Member States.
3. Fragmented regulated and commercial offers for businesses across the EU; this driver
covers the reasons for inconsistently regulated access inputs, in particular those serving
business customers on a cross-border basis, and with regard to non-harmonised end-user
protection requirements.
4. Minimum harmonisation, differentiated rules; this driver covers the lack of consistency
of telecoms regulation which could be partially due to the current institutional set-up and
the way the institutional players interact.
5. Uncertainty on spectrum assignment due to differentiated rules; this driver concerns the
factors that hamper spectrum availability and deployment of mobile networks as a result
of weak coordination mechanisms. As noted in the public consultation by the operators,
different Member State choices regarding spectrum assignment conditions decrease
investment predictability. This concerns in particular different timing of assignments,
different conditions for licence duration and renewal, flexibility to trade, lease or share,
technology and service neutrality limits, refarming conditions, technical performance,
use-it-or-lose-it clauses and interference mitigation obligations.
6. Technological and market changes; this driver is about the reasons why the current
definition of electronic communications services brings increasing uncertainty as many
OTTs which do not provide conveyance of signals are entering the communications
market, due to the latest technological developments;
7. Increasing adoption of bundles ; this driver concerns the policy dilemma posed by
bundles that trigger economies of scale and scope, and advantages for consumers, but
at the same time make transparency, comparability and switching more difficult for
them.
8. Suboptimal design of market review cycles and inconsistent remedies under current
rules (art.7) This driver covers the insufficient legal certainty and regulatory
predictability regarding access obligations on NGA networks due to short market review
cycles, lack of sufficient focus on retail markets and the difficulty of enforcing
consistency on the basis of non-binding recommendations, impacting network roll-out.
64
See: http://ec.europa.eu/smart-regulation/guidelines/toc_guide_en.htm
42
9. Obsolete and redundant rules; this driver is about the regulatory inefficiencies that could
be identified in the current regulatory setting, and which are generating unnecessary
compliance costs or administrative burdens.
See Annex 10 for a more detailed analysis of the drivers underpinning the problem definition.
1.4 Who is affected by the problem, in what ways, and to what extent?
As connectivity underpins the DSM, a failure to achieve adequate connectivity is likely to have
wide repercussions on jobs and growth in the digital economy and beyond given that industry is
increasingly becoming digitalised65
Any lack of VHC connectivity is expected to impact
negatively on SMEs and micro businesses as well as citizens, by limiting the opportunity to
reduce mobility needs (teleworking, teleconferencing) and to reap the full benefits of all the new
applications that the collaborative economy is creating. It is worth recalling that micro and small
companies will create the bulk of the new jobs under the DSM. The modelling exercise
accompanying the support study to this IA (see Section 4.11 and Annex 5) confirms in general
terms the positive contribution of connectivity to job creation in an incremental and in an all-
fibre scenario. Overall, if all the preferred options are pursued as a result of the review
of the electronic communications framework, we expect expanded market-driven
investment and consumption and a cumulative effect on growth of 1.45% and on
employment of 0.18% in 2025, assuming that the reforms are implemented by 2020. A step
change of 0.8% in labour productivity is also envisaged during the period 2020-2025.
Assuming a baseline with an average annual EU growth of 2% and average annual increase in
employment of 0.3%, the cumulative impacts on economic activity and on job creation in
nominal terms from implementing the set of preferred options presented in section 4 could
amount respectively to EUR 910 bn. and to 1.304 million additional jobs by 2025.
These forecasts are based on a relatively conservative scenario in terms of expected roll-out of
fibre networks (the so-called "accelerated fibre scenario"), which is described in more detail in
section4.11.2.
Turning to the direct impacts, those most affected by the problems in fostering NGA deployment
include citizens and small businesses in rural areas, and citizens and small businesses in
countries or areas without effective infrastructure-based competition, which receive poorer
quality services than those in countries and areas which are well-served with infrastructure-based
competition. In areas where infrastructure-based competition is not effective, end-users may also
experience delays in upgrades to higher speeds and a lack of competitive high speed offers if
wholesale access on NGA and VHC networks is not effectively and efficiently implemented.
Affordable broadband has become of crucial importance to society and to the wider economy.
Broadband provides the basis for participation in the digital economy and society through
essential online Internet services. There is a risk of social exclusion from not being able to use
this type of services because of having no or an insufficient broadband connection. Universal
Service Obligations (USO) allow today data communications at data rates that are only
sufficient to permit functional Internet access66
at a fixed location, that are nearly universally
available and used by citizens across all Member States (MS)67
. Despite declining hardware
costs for computers and tablets, some users are still not able to afford a broadband package. On
65
See the recent Digitising European Industry package launched by the Commission.
66
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011
67
According to the DESI index, the standard fixed broadband coverage in the EU stands at 97% of homes in 2015,
with an average take-up rate of 72%. This demonstrates a gap between the EU households that have broadband
available and those households that actually have a broadband connection. Furthermore, there are still differences
between MS when examining availability and affordability of fixed broadband across urban and rural averages.
43
average in EU28, 24% of households without a broadband access (2014), believed that
subscription costs are too high to subscribe68
.
Among those most affected by the lack of consistent application of the framework are multi-site
and multi-nationally-operating businesses which struggle to obtain coherent connectivity
offers across the EU.
Telecoms operators are also significantly impacted by the problems described, notably due to
the fact that they are the traditional subjects of sector regulation that now need to compete in a
more complex and fluid market setting against players outside of the sector (namely, internet-
based service providers and content distributors). Unclear or overly onerous regulation affects
profitability and access to capital and may impede incumbents from investing in upgrading
infrastructure. Overly onerous regulation or a lack of effective measures to reduce the cost of
deploying fibre could also distort the buy or build decisions of (entrant) telecom operators in
areas where infrastructure competition is viable, while a lack of effective access regulation in
cases where it is necessary (e.g. where infrastructure duplication is not economically viable, even
in the long term) could cause former entrants to exit markets or regions entirely, not justified by
underlying economics or welfare considerations. Inconsistent application of the framework may
also affect the ability of operators to operate efficiently across borders and build scale across
Europe.
Telecoms operators also have to comply with sector-specific obligations related to e.g.
contractual rights, transparency, quality of service, contributions to universal service funds,
access to emergency services ("112") and caller location information that may in some instances
have become redundant due to technology and market evolution or to overlaps with horizontal
consumer protection rules, which may entail unnecessary administrative and compliance costs.
Heterogeneous implementation of consumer rules based on minimum harmonisation may raise
the costs of cross-border offerings or of expanding into other markets.
Equipment manufacturers depend on an investment-friendly environment to develop and sell
equipment to modernise and upgrade telecom networks. As an example the public consultation
showed how vendors seek a common definition of small-area wireless access points and the
harmonisation of technical characteristics about their design, deployment and operation. Content
and applications providers, as well as handset manufacturers, may also be held back from
launching and developing advanced services in Europe in the absence of adequate connectivity.
The fact that rules on communications services are ill-adapted to technology and market changes
also affects new players in the current value chain and in the future of the IoT. These players
may experience some uncertainty about whether or not they fall within the scope of the
framework and this may hinder future planning and investments.
Consumers are of course sensitive to the level of pricing. The present framework has delivered
lower retail prices in Europe compared to the US for mobile data offers, while in the case of
bundles of mobile voice and data plans, prices are cheaper for lower usage baskets and more
expensive for high-end packages69
(see Annex 6 for more details). SMART 2015/0002
investigates in more depth the impact that prices have on demand and the impact that different
regulatory models can have on retail prices. Consumers are also affected by the problems as the
level of protection when using new communications services is different than when using
traditional services. This applies in particular to areas such as confidentiality of communications
and security, where sector-specific protection seems to be needed regardless of the mode of the
provision of the service, but may also in the future cover areas such as interoperability and
access to emergency services.
68
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011
69
See: SMART 2014/0049 - Mobile Broadband prices (February 2015) https://ec.europa.eu/digital-single-
market/en/news/mobile-broadband-prices-february-2015
44
For a detailed analysis of stakeholders views, see Annex 2 on stakeholders' consultation. This
information is also complemented further by Annex 4 and Annex 13 analysing which
stakeholders are affected by the initiative and the proposed preferred options and in what way.
1.5 Baseline: How would the problem evolve, all things being equal?
This section presents in a succinct way the baseline for this IA exploring how the problem would
evolve, other things being equal. Annex 14 explores in more detail and provides more evidence
on the baseline. A more detailed description of the state of play for each of the policy areas
addressed by the review is included under the description of Option 1 (baseline) in Section 4.
The evaluation has shown that the existing framework has delivered more competition, better
prices and choice for consumers, and spurred operators to invest in upgrading their networks at
least in some areas. Today virtually all EU citizens have access to basic broadband networks
(97% fixed broadband connections according to the DESI index 201670
) and increasing numbers
of citizens and businesses have access to networks (Next Generation Access – NGA-
connectivity) allowing at least 30 Mbps download speed (70.9% NGA general coverage71
in EU
according to DESI 2016 – see annex 6 for more data). Only some countries, such as Malta,
Lithuania, Belgium and the Netherlands, already enjoy nearly comprehensive coverage of NGA
networks, in most of those cases probably mainly thanks to the competitive impulse provided by
legacy cable networks, which could be upgraded at relatively low cost72
. NGA coverage in
countries which lack extensive cable has been slow to develop in many cases (Italy or Greece
being emblematic). Moreover, a large part of the NGA coverage beyond the cable footprint in
many countries (UK or Germany, for instance) has been achieved through only partial upgrades
of the legacy copper loop (FTTC), rather than full upgrades (FTTH/B). As investigated in study
SMART 2015/0002, the former approach may not be sufficient to cope with the data
consumptions under the most ambitious scenario forecast.
A key development since the framework was originally conceived is that legacy telephone and
cable (coaxial) networks, including the copper ‘local loops’, are in the process of being upgraded
with fibre and other solutions which improve broadband performance.
In terms of demand, these enhancements are needed to enable customers to enjoy better quality
in online services including online video and cloud applications, as well as enabling multi-screen
viewing, which is becoming increasingly prevalent in European households with the
proliferation of devices as illustrated in Figure 11 below.
70
The Digital Economy and Society Index (DESI) is a composite index developed by the European Commission (DG
CNECT) to assess the development of EU countries towards a digital economy and society. It aggregates a set of
relevant indicators structured around 5 dimensions: Connectivity, Human Capital, Use of Internet, Integration of
Digital Technology and Digital Public Services. For more information about the DESI please refer to
http://ec.europa.eu/digital-agenda/en/digital-agenda-scoreboard
71
NGA broadband coverage/availability (as a % of households) with Next Generation Access including the following
technologies: FTTH, FTTB, Cable Docsis 3.0, VDSL and other superfast broadband (at least 30 Mbps download)
72
Several studies highlight the role played by cable in stimulating NGA deployments including SMART 2015/0002,
WIK-Consult (2015) for Ofcom ‘Competition and Investment: analysing the drivers of superfast broadband’, and the
EP (2013) study ‘Entertainment X.0 to boost broadband deployment’
45
Figure 11 - Europe IP Traffic and Service Adoption Drivers
Source: Cisco VNI Global IP Traffic forecast 2014-2019 – Europe includes Western Europe +
CEE, excluding Russia
According to CISCO, Global IP traffic will increase threefold over the next 5 years. Overall, IP
traffic will grow at a compound annual growth rate (CAGR) of 21 percent from 2013 to 201873
.
The widespread adoption of cloud services, the number of connected devices (IoT), the booming
M2M industry, contribute to further increase the traffic load on communications networks. In
particular, as businesses and consumers exchange their data with the cloud, this will also lead to
a modified demand pattern for upload traffic. Hence, while most of the traffic will still be in
download, demand for upload will increase, as well as the need for lower latency for applications
such as cloud computing and e-health, parameters included in the VHC concept.
In terms of supply of NGA in commercially viable areas, forecasts from IDATE based on
market intelligence (see figure below) suggest that upgrades to NGA and VHC networks will
continue, but at a relatively gradual pace. Across the EU, if FTTC/VDSL is excluded (as this
technology is less likely than the other technologies considered to be offered at speeds of
100Mbit/s and above), only 42% of households would subscribe to high speed technologies in
2020.
Figure 12 - Projected take-up of NGA by technology (to 2025)
73
Source: CISCO VNI index, see:
http://www.cisco.com/c/en/us/solutions/service-provider/visual-networking-index-vni/index.html
46
Source: IDATE, SMART 2015/0002
In terms of specific countries, IDATE projections suggest that by 2020 (see annex 14, figure 83),
even under very optimistic assumptions (assuming FTTC/vDSL delivers 100Mbit/s in practice),
many countries may miss the DAE target of 50% households taking up at least a 100 Mbps
connection, and that within the 16 affected countries the target will be missed by around 27m
households.
There is evidence suggesting that in the telecom sector demand responds to supply,74
and that
restricted download and upload speeds may limit the types of usage and applications that might
otherwise emerge. In Sweden, following an early boost by the central government, one out of
every two municipalities is involved in fibre to the business and fibre to the home deployments.
This has led to very high take-up: as of July 2015, 68% of the broadband connections in Sweden
are NGA75
, achieved predominantly through FTTH and FTTB connections. Where FTTH is
widespread, the availability of fibre makes extending fibre to base stations far more feasible and
efficient. This is well illustrated by the example of 4G in Stockholm where the world’s first 4G
deployment took place helped by the virtually 100% fibre coverage.76
As business and household services and applications depending on high quality connection are
becoming more popular, subscriptions to offers of 100 Mbps or more are growing sharply, albeit
from a low base; this growth trend is in fact more pronounced in the Member States with the
highest 100 Mbps subscription rate, suggesting both important emulation effects on demand and
increasing supply of attractive services which exploit such higher capacity connectivity.
Figure 13 - Fixed broadband subscriptions to at least 100 Mbps, EU and selected MS.
If bandwidth needs are calculated on the basis of what might be required to run certain
74 Data from the UK regulator Ofcom for example suggests that download bandwidth consumption for NGA (FTTC
and FTTP) networks was around two times higher than bandwidth consumption for non-NGA networks, with
significantly higher use of upload capacity. This evidence of higher usage being associated with the availability of
NGA is supported by the case study of Palaiseau in France, which has been the subject of a pilot trial for the switch-
off of Orange copper customers and migration to FTTH networks. In this case it was observed that the average
Internet traffic of Orange’s broadband customers as well as their consumption of video-on-demand was multiplied by
a factor of three. Importantly, this trial also resulted in fibre clients’ usage of upload bandwidth being increased 8
times, due to changes in Internet usage and an increased usage of cloud-based services.
75
See annex 6.
76
Source: Vodafone’s call for the Gigabit Society, Dec. 2015
47
applications, a case study of the German market providing a forecast for 2025 suggests that an
average user might require 150-500Mbit/s downstream with more than 100Mbit/s up, while
high-end users including those running small or home offices might require 1Gbit/s in download
and more than 600 Mbps in upload (see SMART 2015/0005). This bandwidth would be used not
only for multi-screen ultra HD video, but also for applications such as cloud and e-health as well
as for home working and small business needs.
Figure 14 - Model of market potential – Germany 2025
As shown in Figure 14 data rates required by the most demanding users could reach 1 Gbit/s or
more on the downstream link by 2025, while a significant proportion of households and offices
could demand download speeds of 500-1000Mbit/s and 300-600Mbit/s upstream by 2025. This
scenario therefore sets the upper bounds for potential users (including business user) demands in
the medium term – though it is worth noting that even a less ambitious scenario will need the
fibre rollout to reach far deeper into most of the present networks.
On the subject of inconsistency in the implementation of the framework, there is evidence that
without further direction at EU level, this problem is likely to persist and may worsen, in part
because when new technologies and services emerge they lack the harmonisation that was
historically required through EU legislation, and may not achieve adequate levels of
harmonisation through voluntary standardisation alone. Concerns over the impact of
fragmentation on business users, in particular multi-national ones, provide an example of the
enduring nature of these problems and difficulties in using current tools to address them.
Concerning future generations of wholesale access products for residential customers and small
business, the experience of a new product designed as a partial replacement for Local Loop
Unbundling on NGA networks, such as ‘VULA’ (Virtual Unbundled Local Access) or a WDM
(Wavelength Division Multiplexing) based access product provides a warning that without
efforts to apply a European ‘standard’ any future technological upgrades in fixed access
networks are likely to result in duplicate efforts to develop new wholesale access solutions and
divergent implementations at national level.
Furthermore, in the absence of more consistent and effective intervention in the area of
spectrum, Member States will keep a large discretionary power to organise spectrum
assignments and there would still be no possibility to adopt binding measures (other than by
distinct co-legislative initiatives) to eliminate fragmentation and introduce more consistency in
the selection and spectrum assignment process, or to coordinate some of its main elements.
Looking at future challenges of the introduction of capital intense 5G networks (planned for the
early 2020s), there might be a potential risk that they could not be properly addressed at the EU
48
level. The economic benefits of successful, fast and coordinated deployment of 5G across the EU
are very significant and they have been estimated at 146bn EUR per year and the creation of
2.39m jobs
77.
Overall it can be stated that a no change scenario would lead to a persisting digital divide for
citizens and SMEs, sub-optimal economic development outcomes, sub-optimal allocation of
capital, lack of consumer trust in digital services, lower take up of innovation and loss of
competitiveness of EU industry (see annex 14 for more details).
Promotion of the interests of end-users, including the provision of a safety-net through the
universal service obligations, is another principal objective of the regulatory framework, as it
ensures that consumers can participate in the digital society and fully reap the benefits of a
competitive market. Overall the framework has been successful in safeguarding consumer
protection, even when this is not fully translated in increased consumer satisfaction. Given the
increasing role of connectivity and electronic communications services in today's European
economy, it is important to continue protecting end users' interest.
National rules have ensured transparency of information on services and prices by providers,
including in some cases the provision of online tools comparing prices and services; rules on
contract duration have been transposed so that the initial commitment period does not exceed 24
months, while also ensuring that providers offer users the possibility to subscribe to a contract
with a maximum duration of 12 months (some Member States have opted for considerably
shorter periods, such as a 6-month general maximum period); some Member States have adopted
detailed rules regarding consumer protection safeguards in case of unilateral changes to contract
conditions.
Despite the above, consumers still refer to issues related to transparency and quality of
service, in particular with regards to the internet access service. This problem is especially acute
when access to the internet service is bundled with other communications service, resulting in
24% of consumers not finding easy to compare prices of bundles, while evidence shows that an
increasing number of consumers on most Member States opt for this service delivery mode. This
trend would not change in a status quo scenario and consumer perceptions of problems of
transparency and quality of service are likely to get worse due to the higher take up of bundles,
in a baseline scenario
The potential for Member States to mandate must carry obligations aim at ensuring that
channels of high public interest are broadcast by electronic communications providers, while
avoiding unreasonable burden on the latter. While Member States have made wide use of their
competences in this domain, the effectiveness of the rules has evolved as viewers increasingly
use OTT services on smart TVs and smartphones/tablets and traditional TV channels represent a
declining (while still dominant) share of audio-visual consumption patterns. At the same time,
the mission of public service broadcasters increasingly extends into the online world and
includes non-linear audio-visual services.
As explained in the problem definition, only providers of traditional communication services
have to comply with sector specific rules safeguarding end-user's interests. Providers of
communications service over the internet (OTTs) are not subject to these sector-specific rights
and obligations, even when their services are used by the end-users to cover the same or similar
communications needs as the traditional electronic communications services.
Must carry regulations were introduced to give privileges to general interest channels, with the
view of fostering media pluralism and freedom, as well as safeguarding fair competition between
channel providers. They owe their existence to concerns that privately owned distribution
77
SMART 2014/0008, Identification and quantification of key socio-economic data to support strategic planning for
the introduction of 5G in Europe
49
networks may prefer to provide commercially successful channels, rather than transmitting
sufficient general interest channels, if left unchecked.
Significant changes or further evolution of the problem are not foreseeable with regards to
services and end-user protection, absent further intervention at EU level. Uncertainty about the
scope of sector specific rights and obligations and gaps in consumer protection would persist,
which would in turn lead to a further fragmentation of the internal market and impede adoption
of new services.
Rules on universal service aim at providing a safety net ensuring that the most vulnerable in
society as well as those in more remote areas can receive basic services. In the absence of
intervention at EU level, Member States would likely take increasingly different approaches in
universal service obligations by unilaterally removing outdated services from the scope.
Consistency and coherence of the universal service regime across Member States would reduce
without a common approach towards the inclusion of broadband in the universal service scope.
The sectorial financing mechanism would continue being a possibility for financing. The costs of
financing the universal service obligation in the Member States could significantly diverge,
depending on possible national approaches.
In the absence of more consistent and effective intervention, Member States will keep a large
discretionary power to organise spectrum assignments and there would still be no possibility to
adopt binding measures (other than by distinct co-legislative initiatives) to eliminate
fragmentation and introduce more consistency in the selection and spectrum assignment process,
or to coordinate some of its main elements. Looking towards future challenges which could not
be addressed the most immediate and significant new technological development is the
introduction of 5G (planned for the early 2020s).
The economic benefits of successful, fast and coordinated deployment of 5G across the EU are
very significant and they have been estimated at 146bn EUR per year and the creation of 2.39m
jobs
78.
A failure to achieve a single market in electronic communications can in itself impose
considerable costs. To give an idea of magnitude (see annex 14 for more details) a 2011 study
conducted for the EC – steps towards a truly Internal Market for e-communications79
, concluded
that increased standardisation could provide annual gains of 0.3%-0.45% GDP (€35bln-€55bln)
and cautioned that failing to reach standardised solutions would affect future pan-European roll-
out as well as the development of premium over-the-top-services. The study also examined the
impact of harmonised ‘best practice’ and concluded that a fully-harmonised European approach
could provide gains of 0.22% and 0.44% of GDP (€27bln - 55bln) by delivering lower prices,
higher quality and greater investments.
1.6 Why should the EU act?
The DSM strategy states that the Digital Single Market must be built on reliable, trustworthy,
high-speed, affordable networks and services that safeguard consumers' fundamental rights to
privacy and personal data protection while also encouraging innovation. The strategy foresees
that the review should strive through common action to deliver benefits for end-users (citizens
and businesses) as well as to promote high-performance connectivity fostering the socio-
economic development of Europe and its communications industry. The European Council on 28
June 2016 also endorsed in its conclusions the importance of telecom and connectivity as a
backbone for the digital single market, calling for "swift and determined progress" to "ensuring
78
SMART 2014/0008, Identification and quantification of key socio-economic data to support strategic planning for
the introduction of 5G in Europe
79
Ecorys/TNO/TU Delft (2011) ‘Steps towards a truly internal market for electronic communications’
https://ec.europa.eu/digital-agenda/en/news/steps-towards-truly-internal-market
50
very high-capacity fixed and wireless broadband connectivity across Europe, which is a
precondition for future competitiveness.
In parallel the European Commission launched on 19 April 2016 the "Digitising European
Industry" initiative under the DSM package that establishes a clear link between connectivity
and a the need to ensure that Europe is ready for the emerging challenges of digital products and
services in areas such as: 5G80
, cloud computing, Internet of Things (IoT), data technologies
and cybersecurity81
. All- fibre networks seem to be in a better position to handle these
challenges than copper-enhanced networks, although technological evolution such as DOCSIS
3.1 for cable networks may alleviate many of the latters’ constraints82
. Annex 7 on
Competitiveness and Innovation further explains how the review of the electronic
communications framework could support the development and use of the ‘Internet of Things’
(IoT) 83
and digitalization of industry. In turn, IoT implies an increased role for communication
services in (and increased dependency on connectivity by) various industries, including
automotive, agriculture, health, transport, etc. Thus, policies which unlock the full potential of
IoT and the digitization of industry trigger a “disruptive growth path”.84
The review of the telecom framework supporting availability of VHC connectivity networks is
therefore complementary to the "Digitising European Industry" initiative since it drives the
development of value-adding services in the Internal Market that would rely on networks, while
the non-availability of VHC connectivity forces providers to adapt services or launch them
elsewhere.
Electronic communications is a strategic sector, which directly contributes €168.62bn of
European value added and 1.06 million jobs (around 1.3% of GDP and 0.47% of total
employment in 2012), with a labour productivity per person of more than 144 thousand euros
(the highest rate within the ICT sector), according to a JRC study85
. The sector supports a wide
range of other high-tech manufacturing and digital services (the ICT sector constitutes 4% GDP
and 2.76% of EU jobs, with a labour productivity rate 44.45% higher than total labour
productivity) as well as the economy as a whole.86
The risk, as explained in the support study to this IA (see SMART 2015/0005) is that the current
pace of infrastructure deployment may result in the coming years in constrained connectivity
negatively affecting EU citizens', businesses' and public authorities' capacity to produce, share
and benefit from innovative digital products and services. Moreover, the competitiveness of the
wider economy, not least of multinational companies based in the EU, is affected as VHC
communications services and networks are not even provided consistently to the business sectors
across Europe. As electronic communications networks become increasingly critical
infrastructures, market players should be able to expand, cumulating and increasing existing
demand and by way of that unleashing growth potential inherent in a DSM. While wholesale
markets for access to networks will, for reasons of lack of substitution and localness of service
provision, frequently remain either local, regional or at best national, other communication
service providers should not be subject to cross border barriers to further EU market integration.
In the absence of either structural or strategic barriers to overcoming market boundaries, it is the
80
It is expected that 5G will comprise three elements i) enhanced mobile broadband communications; ii) massive
machine-to-machine communications (M2M); and iii) ultra-reliable and low-latency communications.
81
See: https://ec.europa.eu/digital-single-market/en/digitising-european-industry
82
See SMART 2015/0002
83
BEREC (2016) and McKinsey (2015) identify a number of key enablers that contribute to unlocking the full
potential of the IoT. Key enablers are optimal fixed and mobile connectivity (realised through policy measures with
regards to access, spectrum and numbering), regulatory security for new players in the IoT value chain (which is
realised by clarifying the scope of the RF) as well as end-users confidence about security, privacy and confidentiality.
84
See: “Information Technologies and Labour Market Disruptions - A Cross-Atlantic Dialogue” background document
by the “interdisciplinary, cross-sector roundtable organised by the European Commission (DG Enterprise and Industry
and DG Communication Networks, Content and Technology) in cooperation with The Conference Board and Cornell
University ILR School” 3/11/2014, p. 11
85
http://is.jrc.ec.europa.eu/pages/ISG/PREDICT/documents/PREDICT2015.pdf
86
There is a wide range of literature linking broadband diffusion to GDP growth
51
legal and artificial barriers which hinder exploiting the growth potential of larger, border-
crossing communications markets in the EU. These barriers stem both from access regulation
and divergent end-user protection rules across Europe.
2 DOES THE EU HAVE THE RIGHT TO ACT?
The legal basis for the review of the Regulatory Framework remains Article 114 of the EC
Treaty. This Article confers on the EU legislature discretion, depending on the general context
and the specific circumstances of the matter to be harmonised, as regards the harmonisation
technique most appropriate for achieving the desired result, in particular in fields which are
characterised by complex technical features.
In general, the subsidiarity issues have been addressed as regards the existing framework. Given
that this is the review of an existing package, the below analysis concentrates on: the new
objective of ubiquitous and unconstrained connectivity, the enhanced role of BEREC as an EU
agency and the harmonisation of spectrum-related issues, rules on services.
Ubiquitous and unconstrained connectivity
Lack of ubiquitous, VHC connectivity hinders the single market from tapping into a significant
part of its human capital, and affects territorial cohesion, and has a negative impact on the ability
of businesses to produce efficiently and to provide innovative and competitive services.
Connectivity can play an essential socio-economic role to prevent isolation and depopulation,
and link peripheral regions with the central regions of the Union87
. Effective connectivity could
reduce the costs of delivery of both goods and services, public and private, and partially
compensate for remoteness ensuring the participation of people and businesses in these areas in
the DSM. Furthermore connectivity is an enabler not only for EU enterprises to compete with
other parts of the globe, but also for public services, including schools, to offer first class
services to EU citizens.
Enhanced role of BEREC as an EU agency
The EU has a need to act to address inconsistencies linked with the institutional set up under
the existing framework. Whilst market fragmentation is not solely to blame on the regulatory set-
up in the EU, it has become apparent over the past years, that the lack of consistency of telecoms
regulation is – to a degree at least – the result of the institutional set-up and the way the various
institutional players (i.e. mainly the NRAs, BEREC and the Commission) interact and can
influence the regulatory outcome.
Vesting BEREC with certain pre-normative and decision making powers in the area of ex ante
market regulation will enhance legal certainty and contribute to regulatory consistency. Stable
and coherent regulation is of outmost importance to create the right incentives for operators to
invest in capital intensive efficient and future proof infrastructure. Regulatory certainty over a
sufficient period of time and reassurance about the consistency of regulatory approaches
throughout the single market could unleash the investment potential not only of the large multi-
national operators and large investment funds, but also of smaller operators and investors at
national or local level, which must often rely on multinational sources of capital which attach a
lot of value to regulatory predictability. Furthermore, absence of EU rules in this area would on
the one hand bring fragmentation impeding the development of a DSM and on the other
administrative burden jeopardising the efficient development of such services. This is
particularly true for services such as M2M, which should be provided in such a way as to be able
to seamlessly cross national boundaries. In addition for the business sector, there are still
national barriers to the provision of business communications services on a cross-border basis
52
and this represents a significant missed opportunity for the functioning and the development of
the Single Market88
.
Harmonisation of spectrum related issues
Spectrum, as other resources such as numbers and to some extent land, belongs to the Member
States or at least fall under their jurisdiction, and their management and assignment needs to take
into account national particularities and needs. Nevertheless, there is a need for a more
convergent and consistent EU regulation for market entry to eliminate the obstacles that appear
due to divergent conditions for the assignment of individual rights of use of spectrum, numbers
or land. A consistent EU level regulation is necessary to (i) enable providers to expand their
services to other Member States; (ii) create a sufficient market scale effect allowing front
running Member States to benefit from it by providing the EU as DSM a sufficient attractively;
(iii) give access to state of the art wireless capacities and services for EU citizens and businesses
to benefit from the digital environment, innovative services and applications and be able to
commercially develop and underpin the benefits of the digital economy that is constantly
evolving towards the "mobile" economy, where spectrum policy has an important role89
; (iv)
allow countries which are lagging behind to catch up and participate into the DSM, thereby also
allowing more advanced Member States to further increase citizens' and commercial exchanges
within such countries; and, (v) treat all spectrum users in a coherent way throughout the Union.
Lastly, in order for the EU to lead on new and enhanced services, such as 5G, it needs to offer
equipment manufacturers and providers of communication services sufficient scale not only in
terms of technical harmonisation, but most importantly of a market developing in a broadly
aligned fashion, for services and devices to develop under stable and harmonised rules.
Services
In services, competition between local providers of electronic communications services that
bundle network access with services and global providers of services over the top of the
networks reinforces the right of the EU to act to ensure a level playing field. Action should also
be undertaken at EU level to reduce fragmentation of consumer protection rules, which on the
one hand raises the administrative cost for cross-border providers of services and hinders the
development of innovative services and on the other hand result to an uneven and sub-optimal
level of consumer protection across the Union.
Under the subsidiarity principle, the main purpose of which is to bring decision-making within
the Union as close to the citizen as possible, the Union is entitled to act if a problem cannot be
adequately settled by the Member States acting on their own. If the action of the Union does not
offer prospects for a more effective solution, the national authorities are expected to act
individually. Therefore, it is crucial to verify whether action by the Union would provide added
value, compared to individual actions by Member States.
53
2.1 Why could Member States not achieve the objectives of the proposed action
sufficiently by themselves?
Ubiquitous and unconstrained connectivity
The situation of Member States with regard to connectivity differs quite significantly. There are
very important discrepancies, which may not be explained solely from the different landscape,
population, GDP or purchasing power, but are the result of different policy choices made today
and in the past. Absence of EU action to pursue ubiquitous and unconstrained connectivity as a
separate objective of the framework would only perpetuate this patchwork with negative effects
on the single market and consumer interests.
In the public consultation, connectivity was perceived as a necessary condition to achieve the
Digital Single Market, with many respondents pointing to the need for policy measures at EU
level and adjustments to the current policy and regulatory tools, as these are provided in the
current regulatory framework, to support the deployment of infrastructure in line with future
needs.
Enhanced role of BEREC as an EU agency
The relative success of BEREC in promoting regulatory consistency and its failure in imposing a
single-market oriented solution when NRAs do not adhere to its analysis advocate for the need
to enhance its role and competences. The development of common and consistent approaches,
the sharing of regulatory knowledge and resources can achieve better regulatory results at lower
cost for the whole EU. This is particularly clear for areas of regulation with a cross-border
dimension, such as the provision of services to businesses, or spectrum. It is also true for
markets which are interconnected, such as the electronic communications markets. Regulatory
discrepancies in the treatment of interconnected markets may lead to a transfer of resources
between national markets, as we have seen with the discrepancy in the regulation of termination
markets and thus hinder the development of new and innovative products. While a certain
degree of flexibility must be maintained to adapt implementation to local circumstances,
national regulators performing regulatory tasks in relation to different types of markets will only
be able to achieve their objectives in the most effective way by co-operating between each other
and with the EC to devise the best solutions to similar problems. An approach based on the
common regulatory wisdom of the EU's regulatory community is therefore more likely to be
robust and effective then a range of purely national solutions.
Harmonisation of spectrum related issues
Spectrum issues cannot be addressed by individual Member States on their own, nor by a small
number of countries acting together, because they relate directly to cross-border coordination of
national spectrum assignment and management activities across the Union. While spectrum is a
national resource, it's assignment is necessary for market entry, i.e. of exercising an activity in
the digital single market. Absent rules at EU level, it may not be ensured that Member States
will take sufficiently into account not only the national specificities of their markets, but also the
connectivity needs, and the consistency requirements of the digital single market.
.
2.2 What would be the added-value of action at EU-level?
The technological developments and the ambitious Digital Single Market strategy have
strengthened the case for joint action at EU level. The EU depends on effective and widespread
connectivity across all its Member States. Moreover, as essential services such as banking and
interactions with local and national Governments move online, connectivity is today vital for
social and economic inclusion and the advent of 5G will further foster this role.
54
Besides bridging current gaps in end-user protection in certain areas such as security and
achieving effective outcomes for consumers, consistent approaches to the regulation of
electronic communications within the single market (including mechanisms to ensure effective
competition) are important in ensuring a level playing field amongst operators and avoiding
arbitrage whereby ‘national champions’ could be protected within their home market and
leverage such advantages when entering neighbouring markets.
There is also a strong case for action to address inconsistencies in markets which have a clear
cross-border aspect. One such case is business access, where a standardisation of product
characteristics and service levels is important in supporting the delivery of seamless services to
corporations across the single market.
With regard to the institutional set-up, while the current set-up may have contributed to more
benefits than a system involving Member States acting alone, opportunities to create more added
value may have been missed due to the challenges in achieving consistency that are inherent in a
regime which relies on soft law. This is particularly true for decisions affecting cross-border
services (including call termination and business access), but also applies for services such as
very high speed broadband, which have a significant impact on the digital single market as well
as on the wider economy and society.
The same rationale is valid for addressing lack of consistency in spectrum assignments across
the EU: differences in methods and conditions for spectrum use across Member States impede
the development of a true single market. Unjustified divergences between Member States should
be levelled out and comparable coordinated assignment conditions and awards developed. An
EU action drawing on national best practices and experience will ensure that spectrum is put to
optimal and efficient use as well as provide the regulatory predictability needed to incentivise
network investments to meet the connectivity needs.
In terms of stakeholder perception, there was a quite clear preference amongst the
respondents to the public consultation (see annex 2) for continuing action at EU level
(nearly 89%). The public consultation confirmed that further harmonisation would be welcome
on aspects such as spectrum management, market access, consumer protection, authorisations, or
privacy and security. The respondents highlighted a risk of fragmentation due to national
implementing measures and of incoherence with other regulation and competition law.
In the European Council (June 2016)90
, there was a general recognition of the importance of
enhanced connectivity as a regulatory objective, and of the need to create right conditions for
stimulating new business opportunities by better coordinating spectrum assignment modalities.
The reticence on the part of Member States is mainly focused on spectrum governance – while a
significant number of them agree with the need for coordination of spectrum policy objectives
and, in particular, acknowledged the potential for greater synergies between national authorities
including an enhanced role for the Radio Spectrum Policy Group (RSPG), the vast majority
insists in maintaining responsibilities for spectrum policy at national level, notably with regard
to spectrum assignment procedures and licence conditions to take account of national
circumstances and suggested that the spectrum coordination instruments currently available
under the framework were sufficient.
Measures at EU level are also needed to tackle the underlying causes of the problem, by enabling
any operator, whatever its size or scope of activities, to benefit from harmonised procedures,
stable and consistent regulation allowing for credible assessments about the return on capital
invested in enhanced networks. Such measures will ensure regulatory predictability and legal
certainty necessary to undertake investments in capital-intensive broadband networks and bridge
the digital divide, thereby allowing consumers to enjoy new services.
90
European Council Conclusions June 2016 http://data.consilium.europa.eu/doc/document/ST-26-2016-
INIT/en/pdf
55
3 WHAT SHOULD BE ACHIEVED?
The set of objectives and the intervention logic linked to the review of the regulatory framework
have to be inscribed in the wider context of the DSM strategy91
and the Political Guidelines for
the current European Commission – A New Start for Europe: My Agenda for Jobs,
Growth, Fairness and Democratic Change which set up the policy objectives of the Juncker
commission.
The European Council on 28 June 2016 also endorsed in its conclusions the importance of
telecom and connectivity as a backbone for the digital single market, calling for "swift and
determined progress" to "ensuring very high-capacity fixed and wireless broadband connectivity
across Europe, which is a precondition for future competitiveness. The review of the telecoms
regulatory framework should aim to incentivise major network investments while promoting
effective competition and consumer rights"; The June 2016 European Council conclusions are
also calling for a timely release of the 700 MHz band so as to help ensure Europe's leadership in
the roll-out of 5G networks.
The following diagram illustrates the intervention logic inspiring the review of the framework,
providing the necessary links between the drivers and the problems identified in section 1 and
the policy options presented in section 4 below.
The diagram below presents the overall objective for the review, the specific objectives that will
contribute to the overall objective, including the various policy areas concerned and the link with
the problems that are presented in section 1. The eight main problems identified are organised
under three categories: (i) Obstacles to unconstrained connectivity, (ii) A regulatory framework
not fit to rapid market and technological changes (iii) regulatory redundancies and inefficiencies
and lack of coherence in the Single Market.
Additional graphs presenting the link between each specific objective and related problems,
problem drivers and solutions are presented in section 3.2.
Figure 15 - Intervention logic diagram
91
See: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52015DC0192&from=EN
56
3.1 What are the general policy objectives?
The current regulatory framework is built on three main objectives as defined in Article 8 of
the Framework Directive: promotion of competition, of the internal market, and of end-
users' interests (understood largely in terms of legal rights: to universal service, privacy,
protection of end-users and vulnerable groups). Based on these main objectives, the framework
then sets out a number of sub-principles - such as promoting regulatory predictability, promoting
efficient investment and innovation, regulating markets only where there is no effective and
57
sustainable competition - which regulators should take into account when pursuing the primary
objectives92
.
The current review is a component of the DSM strategy launched in May 201593
. Its objectives
will have to be translated into implementable regulatory objectives in the framework. The
current three primary objectives under art. 8 FWD as well as the regulatory principles relative
to investment and innovation will remain valid and relevant. However, the telecoms sector is
generating more and more spillovers to the rest of the economy, becoming the foundation of
modern, innovative economic systems and as well as of certain societal services, such as e-
transport, e-government, e-health care, e-learning, etc. This can only be possible if appropriate
networks are rolled out at a sufficient scale and if VHC connectivity becomes accessible and
affordable to all citizens and businesses.
Connectivity was broadly recognised in the public consultation as the underlying driving force
for the digital society and economy, underpinned by technological changes and evolving
consumer and market demands. It appears necessary that the current objectives should be
flanked by a novel connectivity objective, spelled out as:
"Access and take-up by all European citizens and businesses of very high-capacity connectivity,
both fixed and mobile, and interpersonal communications services, on the basis of affordable
price and choice, enabled by effective and fair competition, by efficient investment with adequate
returns, by innovation, by common rules and predictable regulatory approaches in the internal
market and by the necessary sector-specific rules to safeguard the interests of citizens.
This new objective will be additional to the objectives already included in art. 8 of FWD
promotion of competition, of the internal market, and of citizen interests, which should be
read as a whole in line with the policy strategies and ambitions recalled in section 1, and in
section 3.2. on coherence of the objectives, in particular with the connectivity strategy which is
articulated around three set of specific ambitions, as assessed in annex 9:
a. Gigabit connectivity for socio-economic drivers
b. Ubiquitous mobile connectivity
c. Improved connectivity in rural areas
However it is important to clarify that unlike the provisions of the regulatory framework, the
provisions included in the Gigabit society strategy will be of a non-binding nature. The
strategy will reinforce the link between the objective of the regulatory framework and the overall
political targets of the Commission in terms of connectivity as explicated in the communication
accompanying the legal proposal, and can provide guidance for interpreting the regulatory
objectives proposed in the revised legislative framework as well as in other areas of public
intervention (state aid, structural and investment fund interventions, national broadband plans)
and a benchmark for private decision-making on long-term investments.
3.2 What are the more specific objectives?
Three specific objectives for the review of the regulatory framework have been identified by the
Commission services, in line with findings of the support study to this IA94
, the public
consultation and the workshops and meetings carried out in 2015-2016 and the Fitness Check.
The evaluation has showed that among the three existing objectives of the regulatory
framework the internal market is the one that has been achieved to a lesser extent as
explained in section 1.1. As the single market objective is inherently linked with each of the
92
As confirmed by the Fitness Check, the objectives spelled out above remain valid and are not to be confused with
the objectives of the review, presented in the diagram which refers to this review exercise.
93
See: https://ec.europa.eu/digital-single-market/digital-single-market
94
See SMART 2015/0005
58
specific objectives identified for this impact assessment it is not included as a separate stand-
alone objective but constitutes an integral and essential dimension of each of the specific
objectives presented below.
For each specific objective, the link with the problems identified in section 1.2 is provided, as
well as the link to the main measures that are included under the options for the policy areas
identified in section 4. The methodological link between problems, objectives and measures has
to be interpreted in a relative way, as the regulatory measures that fall under the scope of the
framework review are certainly not sufficient on their own to guarantee the full achievement of
the objectives: as explained in section 1.2.1.1, some significant exogenous factors of non-
regulatory nature concur to the problems identified. The measures proposed will contribute to
address these problems providing the fittest regulatory framework, but cannot be considered as
sufficient to solve them.
3.2.1 Contribute to ubiquitous very high capacity connectivity in the single market
This objective is addressing the following problems identified in section 1.2: low coverage and
correspondingly limited take up of very high capacity connectivity and the reasons for
suboptimal investment in the Single Market, lack of timely and appropriate spectrum affecting
investments in the Single Market, unsatisfactory connectivity offers across the Union for
businesses, regulatory redundancies and inefficiencies and lack of coherence in the Single
Market.
This objective is linked to the policy options identified in the access, spectrum, Universal
Service Obligations (USO) and governance areas by the following measures and solutions
proposed:
 Boost VHC network roll-out through increased emphasis on infrastructure competition when
possible, co-investment, infrastructure models (wholesale–only), cost reduction measures, on
the basis of adequate returns on investment; (see access options)
 Address business needs in terms of cross—border connectivity (see access options)
 Ensure sufficient incentives for operators to deploy VHC infrastructure (where infrastructure
competition insufficient), another aspect is to provide greater certainty for those committing
to invest in challenge areas; (see access options)
 Ensure faster time to market for spectrum resources, so that spectrum can speedily be made
available to the next generation 5G technology on terms which favour investment and
predictability; (see spectrum options)
 Modernise USO scope to take account of market and technological developments and bring it
into line with current citizen needs;(see universal service options)
The single market dimension is specifically addressed by the intent to:
 Promote EU-wide access products for cross-border services to business users in the
single market (see access options)
 Promote a consistent EU spectrum management and timely deployment of 5G
throughout the EU. (see spectrum options)
 Ensure common means of determining and mapping end user connectivity including
also quality of service (see access and spectrum options)
 Ensure a governance structure that can enable and foster connectivity, including new
tasks for NRAs, in the area of mapping, spectrum and effective EU coordination
mechanisms on spectrum and regulatory remedies (see governance options on access
and spectrum).
The following graph links the problems and the drivers related to this specific objective and
includes some of the proposed solutions. Section 4.9 provides a more detailed explanation of the
59
link between the measures proposed in the preferred options and the specific objectives,
describing how the former concur to achieve the latter.
Annex 10 (section 6.10.1) further details how certain elements of the current regulatory
framework could be improved to foster deployment of VHC networks.
3.2.2 Competition and user choice in the single market:
This objective is addressing the following problems identified in section 1.2: Low coverage
and correspondingly limited take-up, uncertainty about rights and obligations for provision of
equivalent services; gaps in consumer protection; rules unfit to bundles for consumer protection;
unnecessary administrative burden and lack of coherence in the Single Market.
This objective is linked to the policy options identified under all policy areas by the following
measures and solutions proposed:
 Ensure a European-wide pro-competitive regulatory framework for networks, internet access
services and communication services, creating a regulatory level playing field and enabling
affordable choice and prices for European citizens in electronic communications services;
(see access, universal service and services/end-users, governance options);
 Ensure affordability of connectivity under a modernised set of USO rules in line with current
citizen needs;(see universal service options)
 Address new, emerging end-user rights issues based on market developments (e.g. facilitating
switching or addressing issues with bundled services) (see services/end-users options);
 Promote trust in the use of new communications services (see services/end-users options);
 Avoid any lack of consistency and ensure that consumer protection measures are coherent
and do not present a barrier to the single market (e.g. removing outdated or overlapping
legislation) (see USO and services/end-users options);
 Ensure that obligations imposed on ECN operators remain efficient and proportionate when
viewers' preferences change with regard to audio-visual content consumption. (see
Problem Drivers Objective Solutions
Low coverage and take
up in very high
capacity networks
Insufficient
incentives to invest
(insufficient
infrastructure
competition,
unviable business
case
Inefficient allocation
mechanism for
public funding Contribute to
ubiquitous
connectivity
support deployment
of dense 5G
networks
support deployment
of VHC networks
ensure competition
on price
ensure competition
on quality
Inclusion of
affordable
broadband under
USO in MS
Promotion of
infrastructure
competition in VHC,
co-investment and
increased investor
certainty;
strengthened
oversight on
regulatory remedies
Modernise USO rules
Focus on broadband
affordability
Lack of timely and
appropriate
spectrum affecting
investments
Regulatory
uncertainty on
spectrum
assignment
Minimum
harmonisation,
differentiated rules
Faster time to
market of spectrum
resources
increase consistency
in some aspects of
MS spectrum
management
Binding assignment
criteria, provisions
on small cells and
wi-fi, more efficient
spectrum usage
Lack of coherent
connectivity offers
for business across
the EU
Fragmented
regulation of
wholesale business
access
ensure competition
on quality
ensure consumer
choice
Common
specification for
wholesale business
access
1. Intervention logic: measures to contribute to ubiquitous connectivity
Access
&
USO
Spectrum
Access
Operational
Objectives
60
services/end-users options)
 Ensure that the necessary harmonisation procedures are established in order to ensure
competition and user choice (see access and governance options)
The single market dimension is specifically addressed by the intent to:
 Full harmonisation of end-users rights in the single market (see services/end-users
options)
 Harmonise conditions for extra-territorial use of national numbers in all Member States
(see numbering and governance options)
 Foster trust in services by ensuring the setting up of an EU-wide protection regime for
end-users of all communications services in terms of security and (potentially)
confidentiality (see services /end-users options)
The following graph links the problems and the drivers related to this specific objective and
include some of the proposed solutions. Section 4.9 provides a more detailed explanation of the
link between the measures proposed in the preferred options and the specific objectives,
describing how the former concur to achieve the latter.
3.2.3 Simplification of the regulatory intervention and single market coherence:
This objective is addressing the following problems identified in section 1.2: Unnecessary
administrative burden & lack of coherence in the Single market; compliance costs.
This objective is linked to the policy options in all policy areas by the following measures and
solutions proposed:
 Reduce administrative burden by shortening current cycles of market reviews, and increasing
the regulatory certainty (see access options)
 Modernise the current set of sector specific end-user protection rules aiming at achieving full
harmonisation to the extent possible, remove provisions that overlap with horizontal
consumer protection legislation and identify those which should appropriately also apply to
equivalent communications services regardless of the mode of provision in order to promote
61
end-user interest and consumer welfare. The aim is to review the scope and the scale of the
rules, which rules are needed for which actors, as well as which is the competent authority to
apply them; (see services/end-user options)
 Reduce the scope for intervention and related administrative burden by allowing NRAs to
take action only when retail market failures are detected to address access seekers' problems,
and requiring account to be taken of commercial access agreements and co-investment
agreements. (see governance access options)
 Focus on general authorizations instead of individual licencing in the single market, ensure
minimum duration for individual spectrum licences and greater coordination of spectrum
availability and assignment conditions (see spectrum options)
 Modernise USO scope to take account of market and technological developments and bring it
into line with current customer needs. (see universal service options)
 Simplification and reduction of universal service-related administrative burden through
ending the current sectorial sharing mechanism possibility for financing. (see universal
service options)
 Ensure that the relevant functions are attributed to the different actors (NRAs, BEREC,
RSPG, Commission...) and that the structure of BEREC is simplified in order to have a
streamlined and efficient governance set-up (see governance options)
The single market dimension is specifically addressed by the intent to:
 Greater consistency in spectrum assignment processes, which at the moment tend to
generate complexity for operators wanting to use spectrum in various Member States,
and can also cause interference in border areas; (see spectrum options)
 Avoid duplicate processes for the specification of new wholesale remedies by the
introduction of standardised wholesale remedies for example in relation to business
access; (see access options)
 Enhance the single market dimension of spectrum by fostering the creation of a pan
European secondary market for spectrum that will allow a more efficient and dynamic
use of spectrum. (see spectrum options)
 Harmonize a minimum set of competences for independent national regulatory
authorities essential for market shaping aligned with BEREC tasks focused on the cross-
border dimension; (see governance options)
The following graph links the problems and the drivers related to this specific objective and
includes some of the proposed solutions. Section 4.9 provides a more detailed explanation of the
link between the measures proposed in the preferred options and the specific objectives,
describing how the former concur to achieve the latter.
62
In line with the better regulation guidelines of the EC, operational objectives will be developed
in section 4.9 only for the preferred option in each of the policy areas considered.
3.3 How do they link to the problem? How do the objectives relate to each other, i.e. are
there any synergies or trade-offs?
The different specific objectives spelled out above are closely connected.
3.3.1 Synergies between objectives
Main synergies between contributing to ubiquitous VHC connectivity and competition and
user choice in the single market. Competition is highly synergetic to connectivity: competition
drives investment and therefore contributes to the connectivity objective. The measures proposed
under the options in the access and spectrum area are all relying (albeit to a different extent) on
the role that competition can play in fostering investment and hence connectivity. Regulation can
act as a significant trigger to competition (either focused on access, on infrastructure
competition, or on the promotion of co-investment), which has important implications for
enhanced connectivity. This is true for basic broadband as well as for NGA and VHC networks.
The barriers identified in the sector of business communication services and high costs generated
for business users call for a more prominent role for competition to play in the telecom sector.
User choice is also highly synergetic to ubiquitous connectivity: measures in the area of access
(support for challenge areas), spectrum (the current lack of timely and appropriate spectrum
release had repercussions on delayed deployment of networks as well as the 4G handset
developed for the European market) and USO95
make sure that users can choose irrespective of
their location. User choice is also ensured by affordability of tariffs that could also be ensured by
USO.
Main synergies between contributing to ubiquitous connectivity and simplification of the
regulatory intervention and single market coherence. The synergies between those two
specific objectives can be observed in the area of access regulation and USO with reference to
the compliance and adaptation costs that measures in the current framework have generated.
Some measures to reduce compliance cost are proposed in section 4.3. Governance aspects are
also important with regard to the spectrum problems and the solutions that will be envisaged in
the policy options in this respect. The proposed measures aim at addressing overregulation. This
95
USO regimes are linked to connections at fixed location. However there should be no constraints on the technical
means by which the connection is provided.
63
would lead to more streamlined set of rules which in turn contributes to the connectivity
objective, and may attract smaller operators in local areas.
Main synergies between competition and user choice in the single market. The synergies
between those two specific objectives are evident when assessing the technological and market
changes that have affected the telecom sector in the last years. A more competitive market
delivers greater choice for consumers; it incentivizes the operators to innovate to satisfy
consumers' needs. A good example can be given by the emergence of bundles which are rapidly
changing the competitive dynamic in the telecom sector, bringing down costs for consumers, but
also making switching more cumbersome for end-users.
3.3.2 Trade-offs between objectives
Potential trade-offs between contributing to ubiquitous VHC connectivity and competition
and user choice in the single market. Access-based competition is and has been an effective
driver of investment in certain areas, so investment and therefore connectivity should not be seen
as opposed to competition. Potential trade-off could emerge between those specific objectives in
case connectivity is pursued at the expense of competition. The access regulation proposal that
will be developed below will be consistent with the principles laid down in art. 8 FWD,
including competition and will not modify the SMP regime currently in force nor will they
provide so-called "regulatory holidays" that would benefit in an uneven market certain market
players. Finally, a too ambitious USO definition in terms of speed, availability or affordability
could endanger the competition dynamic between market players and impose excessive or
publicly funded benefits on the operators identified as USO provider. This potential trade-off has
been taken into account when designing the USO options presented below in section 4.3, in
particular by focusing the proposed USO regime on addressing affordability rather than
availability of connectivity.
Potential trade-offs between contributing to ubiquitous VHC connectivity and
simplification of the regulatory intervention and single market coherence. The main trade-
off that can be envisaged between those two objectives could occur in case of wide de-regulation
that would remove ex-ante market regulation from those markets that can still be considered as
bottlenecks for the provision of telecom services, likely weakening investment pressure as well
as service competition, market entry possibilities in the single market and ultimately consumer
benefits. In order to avoid such a trade-off a number of options that have been considered in first
instance due to their potential effects in terms of simplification, have been discarded such as the
full de-regulation of telecom networks in the area of access or the termination of the USO
regime. More details on these policy options can be found in section 4.3. On the other hand the
pursuit of ubiquitous VHC connectivity may bring too intrusive legislation in terms of
technology and business decisions that could potentially reshape the industry. Policy options that
were susceptible to determine such an outcome such as mandatory structural separation or
mandatory copper switch-off (access regulation) have been discarded. A potential trade-off still
remains when changing the market review cycles to 5 years, but it is mitigated by a number of
safeguards (see section 4.1.1).
Potential trade-offs between competition and user choice in the single market and
simplification of the regulatory intervention and single market coherence. The potential
trade–offs that can be foreseen among these objectives mainly relate to the balance to be struck
when regulating new services. For instance an extreme interpretation of the level playing field
concept may lead to the imposition of the regulatory framework rules to all Over the Top
services, irrespective of the degree of substitution existing with the current ECS providers or of
the scale of their operations. This would probably hamper innovation and not benefit
competition, so that this option has not been considered.
64
3.4 Are these objectives consistent with other EU policies and with the Charter for
fundamental rights?
3.4.1 Coherence with other EU policies
The coherence between the objectives above and the following EU policies has been screened:
1. Digital Single Market: As already mentioned in the introduction section, the set of objectives
presented for the review of the telecom sector is consistent with the overall Juncker
Commission's political guidelines to achieve a connected single market and the DSM strategy,
whose main points concerning telecom were reported in section 1. More specifically, the
'European Gigabit Society Communication'96
, which proposes specific connectivity objectives to
be achieved by 2025, in addition to various complementary measures, is backed largely by the
measures envisaged in the current legislative review. In particular, the revised regulatory
framework is expected to create better incentives for deployment and take-up of very high
capacity networks, to adjust spectrum rules so as to better support mobile connectivity and to
incentivise take-up through competitive markets, consumer choice and affordable tariffs. In
addition, the '5G Action Plan'97
, which sets forth a set of measures aimed at a swift and
coordinated introduction of 5G in Europe, relies also to a large extent on the measures envisaged
in the review of the framework, in particular the revision of the spectrum rules, the consistent
treatment of dominant operators and a common approach to consumer protection rules. Of
course, the review of the telecoms framework will be highly synergetic with the other initiative
included in the DSM strategy, such as preventing unjustified geo-blocking, modernising the
European copyright framework, affordable cross-border parcel delivery services, reducing VAT-
related burdens etc.
2. Competition law and state aid regime: The Regulatory Framework is based on the
principles of EU Competition Law. It has followed since 2002 a deregulatory trend as markets
develop and this is maintained with the current review. As a consequence, wholesale markets
which are deregulated because there is no longer SMP or because competition at retail level is
fierce, remain subject to general competition law. This principle will be maintained when
pursuing the set of objectives for this review. Competition will continue being the driving force
fostering investment in VHC networks. State aid policy will also continue to be a key aspect of
ensuring access to performing infrastructure in areas with no business case. The new
connectivity ambitions to be developed in line with the DSM strategy and the Gigabit society
will go well beyond the current Digital Agenda for Europe targets and are likely to require
networks of better quality able to grant a superior Quality of Service to users, measured at
reference points in the network. The concept of VHC on which 2025 policy ambitions are being
developed goes beyond the current State Aid categories; however this tension in terms of
coherence appears manageable in the short term, and in the context of the review of telecom
framework which deals with market drivers of investment. On the other hand coherence should
increase if NRAs have a greater role in State Aid by carrying out mapping and can sanction
misleading, erroneous or incomplete information provided by operators.
3. Cohesion policy and European Structural and Investment Funds (ESIF) are an important
tool to fill the connectivity gaps in market failure areas and should be allocated in a way that
allows maximising the resources available98
. The review of the telecom frameworks and its
objectives should take this into account by providing appropriate conditions for private
investment the review will enable public funds to be focused where they are most needed and by
96
Commission Communication "Connectivity for a European Gigabit Society: Laying the Foundations for
a competitive Digital Single Market"
97
Commission Communication "5G for Europe: An Action Plan"
98
Compared with the previous programming period (2007-2013), the European Structural and Investment Funds (ESI
Funds) have stepped up efforts in the areas of ICT and digital networks roll-out. Overall, the ESI Funds are expected
to programme around EUR 14.5 billion to "Enhancing access to and use and quality of ICT". The allocation of ESI
funds for high speed broadband networks experienced a sharp increase from EUR 2.7 billion in 2007-2013 to around
EUR 6.4 billion for 2014-2020 (about EUR 5 billion ERDF and an estimated EUR 1.5 billion EAFRD).
65
fostering joint investment when structural funds are used. Also ESIF funds could be used to fund
– at least in some countries - part of the measures proposed under a number of options, such as
the mapping activities that NRAs may have to carry out. Infrastructure, demand, investment
intentions and services mapping by NRAs99
will create synergies with mapping activities taking
place at the regional level100
and be complementary with the action by DG AGRI, DG REGIO
and DG CONNECT which are already helping Member States to become familiar with the issue
through the establishment of Broadband Competence Offices at National or Regional level.
4. General consumer policy. As explained above, one objective of this review is to streamline
current sector specific rules on consumer protection so as to avoid any unnecessary overlap with
horizontal consumer protections when these ensure an adequate level of protection for end users
of ECS.
5. Audio Visual Media services policy: In accordance with art 1(3) of the Framework Directive
any objectives and finally provisions (existing and new/revised) are "…without prejudice to
measures taken at Community or national level, in accordance with Community law, to pursue
general interest objectives, in particular relating to content regulation and audio-visual policy."
In accordance with recital (5) of the Framework Directive "the separation between the regulation
of transmission and the regulation of content does not prejudice the taking into account of the
links existing between them, in particular in order to guarantee media pluralism, cultural
diversity and consumer protection." This means that whatever the objectives of the framework
are, the promotion of general interest content by Member States would have to be ensured in the
areas of must carry and would also be relevant for EPG provisions and in the field of spectrum
management. The burden imposed on ECN operators can be relevant for their investment
decisions. Also, audio-visual content is a driver of demand for connectivity; therefore the scope
for regulatory intervention in the area of audio visual media services policy can also have an
impact on demand for connectivity. Accordingly, the impacts identified in this assessment will
inform the Commission, but there are limitations to the legislative choices available to the
Commission in the areas of must carry, EPG regulation and spectrum management, which
originate in the need to preserve the general interest objectives mentioned above.
3.4.2 Coherence with the Charter for fundamental rights
As regards possible impacts on fundamental rights, as guaranteed by the Charter of Fundamental
Rights, the proposed measures aim at achieving higher levels of connectivity with a modernised
set of end-user protection rules. This will in turn ensure non-discriminatory access to any
contents and services, including public services, and help promote freedom of expression and of
business, and enable Member States to comply with the Charter at a much lower cost in the
future.
4 OPTIONS, IMPACTS AND COMPARISON OF OPTIONS BY POLICY AREA
The policy options presented for the review are divided into five different sets, covering the
following areas (i) access, (ii) spectrum, (iii) universal service obligation, (iv) services and end-
user protection, (v) institutional governance.
This section is organised by policy area, due to the wide heterogeneity of the provisions under
the scope of the current framework and to make sure that a reasonable level of analysis can be
reached:
99
NRAs could be appointed as Single Information Points under the Broadband Cost Reduction Directive
(2014/61/EU), thus enabling synergies.
100
See for instance the result of SMART 2012/0022 which gives an overview of the mapping initatives in the EU and
finds out that many of the national mapping initiatives are already carried out by the NRAs
https://ec.europa.eu/digital-single-market/en/news/mapping-broadband-and-infrastructure-study-smart-20120022
66
We first present the policy options. Some aspects falling within more than one policy areas
could be considered as horizontal (such as authorization) but are not considered for a stand-alone
set of options because no modification to the current framework has been proposed or
modifications are embedded in other areas. Given the sometimes technical complexity of the
options presented, Annex 8 includes a graphical description of the main measures associated
with the options presented in this section. Each set of options for the areas mentioned above is
endowed with a no change/baseline scenario, which will be used as the benchmark against
which the alternative options should be compared, in line with the provisions in the Better
Regulation Guidelines while many of the areas have a non-regulatory option. In the following
sections the options considered in the various areas are shortly presented. More detail on the
options can be found in SMART 2015/0005. Discarded options are also mentioned.
We then determine the impacts of the policy options in relation with the objectives stated in
the intervention logic included in chapter 3. The novel objective of the review is to facilitate
unconstrained connectivity for all in the Digital Single Market. This objective can be
operationalized in three specific objectives, presented in section 3.2.
Within each policy area, each specific objective translates into even more specific measures that
we have assessed using both qualitative and quantitative elements, including KPIs. Also some
options are designed to have a greater impact on one specific objective rather than the other,
which will be reflected in the analysis. In addition, each option is evaluated in relation to the
potential economic, social and environmental impacts it might have. The criteria against which
each option is assessed are:
What impact does the option have on achieving investment connectivity and innovation in
the context of the Digital Single Market Strategic objective to be considered in the
context of economic, social and environmental analysis for:
To what extent does the option contribute to ensuring a European-wide pro-competitive
regulatory framework for networks and communication services, together with
affordable choice and protection for end users?
How does the option contribute to reduced regulatory redundancies, inefficiencies impinging
the development of the electronic communications sector? What is the option impact on
administrative costs? Can it be effectively implemented? Are the impacts likely to
change over time? Does it reduce the barriers for scaling up in Europe?
Finally, we present the comparison of the options identified in the light of the impacts
determined. The options are assessed against the three core criteria:
1. Effectiveness: we consider the extent to which the options will address the identified
problems and deliver the desired objectives
2. Efficiency: we consider the likely time taken to achieve outcomes and the associated
cost of policy options for regulators and stakeholders
3. Coherence: we consider the degree to which the policy options provide stability in
relation to current mechanisms as well as internal coherence with approaches taken to
other topics. We also consider whether the measures are coherent in relation to external
measures such as competition law, the TSM Regulation and the Cost Reduction
Directive
We also discuss the degree to which different strategies at EU level provide additional value
added in comparison with Member States acting individually. For the sake of brevity, we present
only the main findings of the comparison exercise, while a more detailed analysis can be found
in chapters 1 to 5 of the support study to this IA, SMART 2015/0005. A preferred option for
each policy area is clearly stated at the end of each section.
67
4.1 Access regulation
4.1.1 Options
This section presents the access regulation policy options. All access options below, apart from
option 4, build on the current regulatory approach applying competition law principles for
market definition, designation of operators with Significant Market Power and for the imposition
of regulatory remedies. Therefore the soft law instruments which the Framework has mandated
the Commission to adopt and which constitute an integral part of the current regulatory
framework, including the Recommendation on Relevant Product and Service Markets and
Guideline for Market Analysis and the Assessment of Significant Market Power, remain relevant
and will need to be updated, as appropriate, under these three options.
Option 1 – Baseline scenario (status quo)
This option is based on the EU policies in place and reflects possible developments of these in
the absence of new EU-level action.
Under the baseline scenario the main tool by which NRAs promote competition under the
framework will continue to be the system of ex ante regulation, under which NRAs conduct
market analyses at regular intervals and apply appropriate remedies (such as access obligations
and charge controls) on operators found to have significant market power (SMP). Following the
2009 review of the framework, some adaptations were made to NRA’s tools and objectives to
reflect the need to foster ‘next generation’ fast broadband access. Emphasis was placed on the
need for NRAs to ‘promote efficient investment and innovation in new and enhanced
infrastructures’,101
and NRAs were given the additional option of mandating facility sharing in
the final (terminating) segment of the network.102
The 2009 review also introduced the potential
for NRAs to mandate ‘functional separation’ of SMP operators in cases where other remedies
had failed, although this remedy has not yet been used.
The flexibility given to NRAs in the 2002 Framework required the introduction of co-ordination
mechanisms. The main features were:
 The requirement for the Commission to issue a Recommendation on Relevant Markets
susceptible to ex ante regulation – which has become an important harmonising and
deregulatory tool
 The introduction of a system of ex post checks on market analysis and SMP designation
by the Commission through the article 7 process.
 The potential for the Commission to issue Recommendations on the application of the
Framework subject to consultation with the Communications Committee (a committee
composed of member state representatives)
In the 2009 revisions, these co-ordination mechanisms were further strengthened through the
extension of the article 7 process to remedies (which however fell short of enabling a
Commission veto) and the (thus far unused) potential for the Commission to issue Decisions
(subject to comitology) if Recommendations were not followed. The important role played by
NRAs collectively in these mechanisms also drove the creation of BEREC as a formal EU body,
replacing the ERG103
.
101
Article 8(5)d Framework Directive
102
Article 12 Framework Directive
103
In 2007, the Commission proposed to establish a new EU agency (EECMA) encompassing telecoms
regulatory functions and taking over the functions at the time of the European Network Security Agency
(ENISA). The proposal was substantially modified during the negotiations which resulted in the
establishment of the BEREC Office as an EU agency responsible for providing support to BEREC but
without regulatory functions itself and without any network and information security tasks.
68
Under this option the framework would continue to have a strong emphasis on market entry
through wholesale access and competing infrastructures.
This option implies a continued focus on market analysis and the regulation of operators with
Significant Market Power (SMP) to foster competition and investment. Regulation would be
applied through a three-yearly cycle of ex ante market reviews, and with appropriate remedies
selected from amongst those listed in the Access Directive. Price-controlled regulated access to
the wholly owned networks of vertically integrated incumbents, largely based on physical access
to copper assets and increasingly on virtual access to upgraded fibre-copper FttC/vectored assets,
would remain the main paradigm but with many local variations. The option of applying
symmetric obligations under article 12 of the Framework (and if relevant article 5 of the Access
Directive) would also remain.
NRAs would maintain significant flexibility in applying the framework to reflect national
circumstances. Consistency would continue to be supported through the use of non-binding
Recommendations (for the most part), monitored by means of the article 7 process. There would
in this context be no binding Commission decisions possible for remedies. BEREC’s governance
and remit would remain as present.
Option 2 - Continuity and simplification
This option foresees only relatively limited adjustments to the current rules on the basis of the
experience of the implementation of the framework in recent years and of the REFIT exercise,
with the important aim of increasing stability and simplifying the overall regulatory approach.
This option includes measures to provide more regulatory stability through longer market
review periods up to five years, with the possibility to interrupt it earlier in case of significant
market developments as is already possible. Further this option entails that NRAs would focus
more on the competitive situation at retail level when conducting their market analysis and
identifying the need for regulatory intervention at wholesale level, as is already indicated in the
Recommendation on Relevant Markets (i.e. an apparent SMP position at one wholesale level
need not result in regulation if in fact such wholesale input does not appear necessary to resolve
a competition / end-user problem at retail level). It also includes the codification of the "three
criteria test"104
, which is currently in the Recommendation on Relevant Markets, to ensure
proportionate market intervention.
This option could also include a clarification of the relationship between the SMP market
analysis process and symmetric obligations for access to civil infrastructure. Such
clarification could ensure that any symmetric duct and pole access obligations stemming from
implementation of the 2014 Cost Reduction Directive105
, as well as facility sharing obligations
mandated under article 12 of the Framework Directive are considered by NRAs when
conducting market reviews. It could also be clarified that access to civil engineering can in
principle be imposed through SMP regulation as a stand-alone remedy and not just as an
ancillary remedy to local access.
104
The three criteria are cumulative and, therefore, must be applied in conjunction. According to the
Recommendation, "The first criterion is the presence of high and non-transitory barriers to entry. These may be of a
structural, legal or regulatory nature. However, given the dynamic character and functioning of electronic
communications markets, possibilities to overcome barriers to entry within the relevant time horizon should also be
taken into consideration when carrying out a prospective analysis to identify the relevant markets for possible ex ante
regulation. Therefore the second criterion admits only those markets whose structure does not tend towards effective
competition within the relevant time horizon. The application of this criterion involves examining the state of
competition behind the barriers to entry. The third criterion is that application of competition law alone would not
adequately address the market failure(s) concerned.".
105
Subject to the rule that obligations imposed in application of the Framework prevail over those imposed in
application of the Cost Reduction Directive.
69
The requirement for transition periods after regulation is withdrawn could be clarified. Finally,
since voluntary functional or structural separation have not been used since their
introduction in the framework in 2009, a revised framework could clarify the procedure foreseen
in the Framework for the ad-hoc market analysis to be carried out in case of separation, as well
as a new clearer mechanism involving commitments for any such voluntary separation projects.
As option 2 builds on the status quo, but does not impact the current balance between flexibility
and harmonisation, the governance structure as regards BEREC and the article 7 process would
also remain largely unchanged under option 2. Nevertheless, there could be some minimum
harmonisation of NRA powers and the independence & regulatory capacity requirements could
be enhanced to address certain shortcomings of the current system.
The responses to the public consultation overwhelmingly affirm the important role that civil
engineering plays in the roll-out of NGA. Some Member States and a number of infrastructure
owners don't see the need to further intervene to ensure access to civil engineering falling within
the scope of the Cost Reduction Directive (2014/61/EU). However, alternative operators
highlight the importance of detailed SMP obligations, beyond the general obligations in that
directive. Furthermore, incumbent operators call for effective symmetrical access to in-house
wiring.
There was broad alignment between regulators, Member States and many others that longer
review periods (compared to the current mandatory three years) would be beneficial, particularly
in stable markets such as for example termination rates. On the one hand, access seekers reject
the idea that retail market considerations should be the focus of wholesale regulation, an idea
that is strongly supported, on the other hand, by network owners, who consider that continued
wholesale regulation is not justified if retail markets are competitive.
Option 3 – NGA+ Focusing regulation on high-quality connectivity
This option considers that while the key principles of the framework remain valid, significant
adjustments are necessary to provide necessary incentives for both incumbents and competitors
to make economically viable investments or co-investments in future networks that are in
principle capable of providing VHC connectivity to every citizen and business in Europe. These
measures would help addressing the endogenous regulatory factors exposed in section 1.2.1.1,
but do not automatically guarantee any level of investment which is influenced by other socio-
economic factors mentioned in that section. These measures aspire towards providing VHC
connectivity, corresponding to Europeans' future connectivity needs and thus bridging the digital
divide, taking into account that risks for operators are generally higher when CAPEX increases.
The measures will therefore aim at extending the reach of commercially viable areas. As the
demand side cannot be predicted it is not possible to calculate by how much commercially viable
areas will be extended, while their extension will in turn shrink the need for public support. As
discussed in annex 14, the public funds currently available are not sufficient to reach even the
current Digital Agenda targets. This is proposed to be done by focusing on promoting the
transition to VHC networks and promoting greater territorial coverage through the measures
mentioned below.
(i) First, NRAs would have the obligation to conduct a geographical survey of network
deployments on their national territory, on a forward looking basis and taking into account
investment plans of operators. The survey would cover existing infrastructure, investment
forecast and quality of service aspects from existing networks. This would improve the
geographical granularity of market analyses, and make it easier to conduct sub-national market
analyses. The results of the investment planning survey would constitute a basis for establishing
"digital exclusion areas" where very high capacity networks or upgraded legacy networks to at
least 100 Mbit/s download speed are not expected, and for calling on operators to declare their
intention to deploy.
70
NRAs will be able to sanction operators that provide misleading information concerning their
plans in those "digital exclusion areas", unless a reasonable explanation is provided. NRAs will
be empowered to take action against such misrepresentations. NRAs will be requested to publish
the main outcomes, to share the results with public authorities responsible for allocation of
public funding or for drawing up national broadband plans, for determining the extent of
universal service obligations or for defining coverage obligations attached to rights of use of
spectrum.
In the public consultation, a clear majority of respondents considered that NRAs should have a
role in mapping areas of investment deficit or infrastructure presence because they are vested
with the necessary powers to access relevant information and have the necessary expertise, as
well as independence. Some respondents (among which incumbents) are opposed to such a role
and contested as a matter of principle any public interference with investment. There is strong
support to a revision of the framework to better accommodate the role of NRAs regarding public
funded broadband projects, notably i) identification of target areas, ii) setting access price and
access obligations, iii) ensuring better consistency between obligations imposed under state aid
intervention and ex-ante regulation and iv) resolution of disputes. A few respondents propose
that the role of NRAs regarding mapping of infrastructures or setting target areas must be limited
to provide technical assistance to the relevant competent authorities or to being consulted.
On the same subject the Expert Group (see annex 13 for more details) considered that mapping
provisions are important to clearly describe the size of these problems: the magnitude of white,
grey and black areas is generally not known and changes continuously due to ongoing
deployments of infrastructure. A clear and reliable survey would show what the options to
improve existing infrastructure are, reducing one important market failure which is the presence
of sunk costs, giving rise to economies of scale and market power. Regions differ in the
scalability of investments and this problem may be more pressing in white areas than in black
areas.
(ii) reinforcing and adjusting the existing SMP rules for supporting deployment of VHC
networks where competitive safeguards are provided including co-investment to reward those
who invest first in very-high capacity networks, without compromising competition and
therefore provided competitive safeguards are present, as well as creating new alternative
regulatory incentives. This would be done by:
1. Codifying in legislation the principles of the 2013 non-discrimination and costing
recommendation106
, namely non-discriminatory access, flexible pricing in presence of
certain competitive constraints and copper-price stability, application of an Economic
Replicability Test in lieu of direct price controls to ensure sustainable competition.
2. The power for NRAs to impose symmetrical obligations, as already foreseen in Article 12
of the Framework Directive and Article 5 of the Access Directive would be clarified and
strengthened, while still being limited to non-replicable assets, and subject to the Article 7
process.
3. The market review process would formally encompass consideration of symmetrical
obligations alongside asymmetric obligations (Articles 12, 14 and 16 FWD and Article 5
AD as modified) as well as measures that may result from the application of the 2014 Cost
Reduction Directive. Hence, NRAs would start with the consideration of symmetric
obligations (limited strictly to non-replicable assets). If SMP is no longer found, these
measures could also contribute to safeguarding competitive markets together with
appropriate transitional measures.
4. The market analysis would also take account of the impact of such obligations alongside all
competitive pressures observed in the market, including the market effects of existing co-
investment projects, commercial access agreements and wholesale only networks.
106
See:https://ec.europa.eu/digital-single-market/en/news/commission-recommendation-consistent-non-discrimination-
obligations-and-costing-methodologies
71
5. If there are significant changes in the market situation, NRAs could conduct mid-market
reviews in order to take account of any significant market developments in this regard.
6. NRAs would be required to choose the most proportionate and effective SMP remedy or
combination of remedies where necessary, with initial priority to a stand-alone access
remedy to civil engineering (e.g. duct access).
7. NRAs will also be encouraged not to impose access obligations on network upgrades by
the SMP operator which are open to reasonable and sustainable co-investment offers, if the
upgrade represents a significant improvement compared to available networks in terms of
their performance, speed, quality and reach as well as a significant investment effort .
NRAs would maintain regulated access on the SMP network to a product which offers
comparable performance to that offered before the network was upgraded.
8. NRAs would be empowered to monitor incumbents' voluntary copper switch-off processes
to ensure appropriate and smooth transition for access seekers while promoting migration
to NGA and VHC networks.
9. Wholesale-only models of historic and new SMP operators will be further promoted by
clarifying their potential right to a lighter touch regulatory regime, unless there is evidence
of market failures that require further intervention.
10. Further reduction of regulatory burden could be achieved in termination markets by
providing greater guidance on setting cost models and then devising a single Union-wide
model for a harmonised rate calculation. BEREC would provide the technical input thus
achieving great simplicity and transparency and very low maintenance cost for the
individual NRA.
For this set of measures, the public consultation showed that regarding measures aimed at
facilitating the roll-out of high-speed networks in the most challenging areas, responses were
cautious with regards to first mover specific protections (to operators that are willing to roll out
next generation networks in challenge areas). Access seekers and consumer associations
warned about the risk of re-monopolisation, whereas network owners challenged the
proposition that a risk of strategic overbuild can be defined and distinguished from competition.
Some Member States highlighted the need for local responses to sub-national competitive and
investment challenges, indicating openness to consider approaches to incentivise first movers on
a geographical basis, subject to suitable safeguards being built in. In supporting first mover
incentives, most stakeholders agreed that any first mover advantage should be subject to
safeguards against re-monopolisation.
Network owners call for their discretion to decide whether and how to continue to use copper
assets (full copper loop or sub-loop), whereas access seekers request guarantees that physical
access to copper networks will continue to be guaranteed. While a majority of respondents,
including regulators, would not agree to mandating the switch-off of copper networks where
fibre is present, they still see a role for regulators to manage the transition where switching off
copper makes economic sense, with copper networks owners advocating minimal intervention,
and others rather invoking public intervention to preserve competition (e.g. transitional
migration regime).
With regard to co-investment models, many stakeholders can see the advantages of co-
investment for increasing the reach of NGA networks, for example, in less densely populated
areas. Their views however differ on the related regulatory regime. While incumbents favour
co-investments on commercially negotiated terms, access seekers call for strict conditionality to
ensure fairness and openness of the co-investment.
(iii) Allowing for the conclusion of longer contracts for provision of infrastructure for the
payment by instalments of the higher connection costs required to connect remote households
and to support ‘demand aggregation’ models for consumers in those areas. The user would pay
by instalment the infrastructure, but consumer rights on services will not be affected: the
maximum contract duration for provision of the service would remain unchanged thereby
preserving the possibility for customers to switch service provider. If consumers want to switch
72
service provider before the cost of the infrastructure has been fully repaid, they can, and the
remainder of the infrastructure cost can either be paid off at switching or they can continue
paying to the infrastructure provider.
(iv) defining common criteria for a standardised EU-wide access product to facilitate the
provision of cross-border services to business users107
. This would address concerns about
fragmentation impeding the provision of business services cross-border and delaying the
specification of wholesale products required to address problems which are common to several
Member States. There would be a provision in the framework which enables common product
and service specifications to be set in cases where the lack of such specifications impedes the
single market.
In the public consultation, in relation to the simplification of access products and focussing on
key access points, network owners responded in favour of a drastic simplification to a single
access product (if at all necessary), whereas access seekers insist on the importance of different
access products to compete at the retail level.
Option 4 – Significant reduction of sector-specific regulation
This option envisages a significant reduction of the reach of sector-specific access regulation, via
a sunset clause for ex ante regulation at least in areas where two or more infrastructures are
present, thereby a transition from ex-ante telecoms-specific regulation to a setting where NRAs
would only supervise the market as necessary, and the telecoms sector would otherwise be
subject to ex-post competition law control.
A certain role for NRAs would remain. Preference would be given for commercially negotiated
agreements between access providers and access seekers, without the need to conduct regular
market analyses and pre-approve reference offers as is the case under the current framework.
However, there would remain the possibility for NRAs to intervene in a dispute resolution
setting, potentially across market segments and geographical areas, but particularly where only
one broadband infrastructure is present. The powers of the NRAs would include the possibility
of ordering the supply of wholesale services, but this would be in the form of a single access
product, aimed to remedy the specific access problem identified in the dispute. The phased
withdrawal of the market analysis process under this option would also imply a reduced remit
for BEREC. The article 7 process would no longer be needed and could be withdrawn.
4.1.2 Discarded options
This section outlines the options which have been discarded. A more detailed analysis can be
found in Annex 3 on discarded options as well as the IA support studies.
 Full deregulation of telecoms networks
 Regulation of non-collusive oligopolies on the basis of a unilateral effects test similar to the
one used under the European Merger control regulation108
 Mandatory structural separation of former monopolies
 Mandatory copper switch off
 Rely fully on the mechanisms established for general ICT standardisation and remove
special competences for the Commission to recommend and ultimately mandate ECNS
standards
107
While imposition of such an access product would be subject to SMP analysis, it could also serve as a benchmark
product for commercial wholesale provision in deregulated markets.
108
See more detail on oligopolies in annex 3
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4.1.3 Impacts
This section presents the likely impacts from the options identified in section 4.1.1. It should be
noted that a significant proportion of stakeholders – and nearly all respondents from amongst
alternative telecom operators and regional fibre investors (although not incumbent operators) –
consider that the existing access provisions remain relevant.109
. A longer description of the
impacts from each option area can be found in SMART 2015/0005, while impacts on specific
categories of stakeholders are included in annex 13 and Annex 4 for the preferred option.
4.1.3.1 Option 1: Baseline scenario (status quo)
Option 1 involves a continuation of the existing regime.
Economic impacts
The economic impacts of the baseline include notably gaps in the capabilities of networks
impacting the delivery to affected households and businesses of applications such as cloud
computing and other services which require high and/or symmetric bandwidth (such as next
generation TV, video conferencing, e-Education, e-Health and remote monitoring applications).
In turn, weak links in connectivity within the EU may have broader impacts on Europe’s
attractiveness as a centre for innovation and business development in ICT. In this context, it is
notable that Japan and South Korea have well-developed ICT industries, which may have been
supported by the early drive for very high speed connectivity in these countries110
.
As 4G and 5G mobile networks are increasingly reliant on fibre backhaul in order to meet
requirements for ‘low latency’ needed for applications such as connected cars, a failure to
upgrade fixed infrastructure could have implications for mobile applications as well as fixed.
The economic impact of this option can be associated with the opportunity cost of failing to
ensure that Europe keeps pace with the infrastructure deployments needed to make use of
advanced services, including 5G.111
Based on econometric analysis and macro-economic
modelling prepared for this study, achieving average speeds expected in an all-fibre scenario by
2025 could raise EU GDP by 2% compared with the status quo and by 0.7% in an incremental
high speed scenario. See section 4.11 presenting the results of the macroeconomic modelling for
more details
The total costs of the institutional set-up applying to access including estimated impacts on
stakeholders are shown in the table below112
. A standard hourly rate is assumed for
professionals113 and a 40% mark-up is applied to account for overhead.114
The estimated costs for the BEREC Office are similar to those available in its published annual
accounts, which show that the costs of operating BEREC were €4,04m in 2014, and were
estimated at €4,02m in 2015 and €4.25m in 2016. The Agency operated with around 15
temporary agents, 8 contract agents and 4 seconded national experts over this period – a total of
27 staff. However, it should be noted that not all of BEREC’s work is related to access
109
Question 8 of the Commission’s online consultation
110
For example, in Japan, where very fast broadband coverage had reached 90% by 2012, the ICT market accounted
for around 8.9% of all industries and for 7.1% of total employment. In contrast, EU coverage in the EU was around
53%, ICT employment in the EU represented just 4% of GDP and 2.7% of total EU employment in 2011.
111
An estimate of user bandwidth requirements based on specific application needs illustrated in SMART 2015/0005.
112
The costs for the Commission and BEREC Office are based on staff and overhead cost data supplied by the
Commission, with an additional overhead mark-up for BEREC of €30,000 per person to reflect its small scale. The
costs for NRAs are estimated on the basis of a standard cost model which draws on responses to questionnaires
submitted by the Commission, BEREC and 21 individual NRAs.
113
ISCO2
114
This mark-up is used by the Dutch authorities in the context of standard cost models and was used in
the Ecorys 2013 study for the EC against which we cross-check our results
74
regulation (an estimate of 60% has been made based on data from BEREC concerning the split
of activities), and the substantive work of BEREC is undertaken by representatives from the
NRAs themselves and is therefore included within NRAs budget.
The estimate of the cost to operators is based on data collected on the costs of the market
analysis process in the context of Ecorys’ 2013 study for the EC concerning future electronic
communications markets subject to ex ante regulation.
Table 3 - Estimated costs of the current institutional set-up for access
Body Annual cost Assumptions
Commission €2.4m 20FTEs (art 7 unit)
BEREC Office €2.4m 60% of BEREC activity associated with
access regulation
NRAs €65.4m 25FTE on average per NRA to handle
market analysis and dispute resolution
Operators €190m Drawn from Ecorys (2013) costs of
market analysis system
Source: WIK calculations, Ecorys (2013)
On the basis of these estimations, the total cost for the institutional set-up for access
regulation is approximately €70m. This estimate is higher than the cost estimate of €50m for
27 NRAs reflected in the study by Ecorys et al for the European Commission in support of the
2014 Recommendation on Relevant Markets,115 but this may be explained by the fact that the
costs of dispute resolution and BEREC contributions from NRAs are incorporated within our
calculations.
Concerning the direct costs to regulated operators of complying with the existing framework,
these can also according to interview reports run into several millions of euros for larger
operators and especially those subject to regulation. The Ecorys study for the European
Commission on Relevant Markets estimated the total regulatory burden on all operators at
approximately €216m per year, which they suggested might fall to around €190m following the
reduction in the numbers of markets in the list (which was the outcome of the procedure).
Combined with the institutional cost, this would lead to a total cost of the access regulation
regime of around €260m per year.
Social and environmental impacts
Social impacts include the continued digital divide and its impact in terms of employment and
social cohesion, an effect which may be magnified by the more demanding technological
landscape. In addition, a lack of connectivity may drive migration away from rural areas, and
contribute to the disenfranchisement of communities which do not have sufficient bandwidth to
access public services, healthcare and education, for which being online is increasingly
important or even essential.
A number of studies suggest that increased high bandwidth connectivity has a positive effect on
employment and migration – and thereby a lack of connectivity could also be seen as holding
back rural and other populations which lack these benefits116
. When considering Green House
115
Ecorys (2013) Chapter 13
116
See more details in SMART 2015/0005
75
Gas emissions per subscriber and per Gigabit, the research concluded that an all-FTTH scenario
would result in 88% less greenhouse gas emissions from fixed networks in Europe than the
status quo. The emissions estimates were based on electricity consumption associated with the
different technologies and therefore would also have operational cost implications for operators
and implications on price for consumers. Emissions per Gigabit associated with VDSL2 and –
particularly HFC were substantially higher than those associated with all-FTTH networks.
4.1.3.2 Option 2: continuity and simplification
Since the existing framework has support from a number of stakeholder groups,117
another
option may be to retain it largely unchanged, but with certain amendments required to update it
and address any inconsistencies or lack of clarity.
Economic impacts
This option includes certain measures which are likely to reduce administrative costs. The
requirement for regulation only to address retail market failures and the extension of market
review timeframes are likely to reduce the compliance burden on NRAs (and the EC article 7
team) as well as for market participants. Estimates from Ecorys (2013) suggested that removing
2 markets from the original 7 markets listed in the 2007 Relevant Market Recommendation
might result in savings on the market analysis process of 10-15% (a saving of up to €7.5m). This
could be viewed as an equivalent change to extending the frequency of reviews from every 3 to
every 5 years, bearing in mind that NRAs would also need to place further resources on more
precise mapping within each market analysis. The consolidation of existing Member States
mapping activities into NRAs will avoid duplication of effort, increase reliability of the data
and, in certain cases, even reduce the overall mapping cost in Member States where multiple
mapping activities are currently carried out. Moreover, the introduction of retail analysis may
prove burdensome for some NRAs and add to the existing administrative burden.
It is also possible that limiting regulation to areas of true market failure and providing a longer
term horizon for regulatory solutions may increase certainty for investors in VHC networks as
well as permitting greater freedom to innovate (such as increased flexibility over pricing). This
may have some positive impacts on deployment and usage of VHC networks thereby improving
economic outcomes compared with the status quo. However, the scale of these effects is difficult
to estimate precisely, and it is unlikely that these conditions alone (in the absence of more
specific measures aimed at supporting deployment) would substantially increase VHC networks'
investment compared with the status quo.
As regards indirect effects, there is a risk that provisions concerning wholesale-only models
may foster separation and therefore increase reliance on regulated wholesale access to the
detriment of potential developments in infrastructure-based competition118
thereby impeding
incentives in fast infrastructure investment.119
On the other hand, it would reassure investors
regarding the regulatory approach to local fibre networks whose market power at the local level
may be found to be significant. If a single wholesale-only fibre network is deployed,
infrastructure competition is also likely to be of lesser relevance in attaining the various
117
Stakeholder groups supporting the access-related provisions of the existing framework in its current form (subject
only to incremental improvements) include BEREC (co-ordinating the collective views of NRAs, alternative telecom
operators and cable providers)
118
It is notable for example that there is limited infrastructure-based competition in the UK beyond the pre-existing
copper and cable infrastructure. BT introduced functional separation (under pressure from the UK regulatory authority
Ofcom), in 2005. It is possible that this approach reduced incentives for infrastructure-based competition..
119
Case studies from SMART 2015/0002 suggest that structural separation/wholesale only models can support the
business case for fibre by aggregating demand from several service providers. This strategy has been adopted in
particular by regional and municipal investors such as Stokab and Reggefiber to support a fibre business case.
However, the study also finds that separation may not itself drive technological upgrades..
76
objectives of the Framework. Separation or wholesale only models may result in increased
service competition, which may boost broadband take-up through reduced retail prices and
service innovation.120
Moreover the risk of impacting infrastructure competition could be
mitigated if separation is incentivised in areas or circumstances where infrastructure-based
competition is unlikely to arise.121
This option does not specifically tackle through legislative means, the central issues of: (i) Gaps
in the availability of VHC infrastructure; and (ii) fragmentation impeding consistent service and
competition for business users
Instead, it leaves these issues to be addressed – if at all – through soft law instruments such as
Recommendations, at least in the first instance.122
As an example, 7 years following the
adoption of the 2009 Recommendation on termination rates, there are still instances of non-
implementation of its core recommendations,123 despite the Commission’s active intervention
through the article 7 process124 and BEREC’s support for the Commission’s position. More
examples can be found in SMART 2015/0005.
Social and environmental impacts
Social and environmental impacts under this option would be similar than those under option 1.
4.1.3.3 Option 3: NGA+: Focusing regulation on VHC connectivity
Option 3 builds on option 2 by seeking to further elaborate principles and procedures for the
promotion of fast broadband and cross-border business access within the legislation itself. In the
sub-section below we present the main economic, social and environmental impacts linked to
this option. More detail and supporting evidence can be found in SMART 2015/0005.
Economic Impacts
The economic impacts of this option stem mainly from the expansion of VHC broadband and
knock-on effects of improved broadband infrastructure and services on the wider economy. The
econometric analysis run in the study supporting this IA Report has found a link between
increased average broadband speeds and total factor productivity across a number of sectors125
.
The analysis suggests that the estimated speed and quality increase associated with achievement
of all-FTTH across the EU by 2025 would result in GDP levels 2% higher than the status quo by
2025, or an increase of 0.76% over the status quo in a more realistic scenario in which 62% of
broadband connections are based on FTTH/B by 2025.
The findings confirm what literature suggests: over and beyond the economic benefits deriving
from standard broadband,126 VHC networks may bring benefits in terms of increased
120
Econometric assessments conducted in the context of SMART 2015/0002 and annexed to this report found that
NGA take-up was linked to lower NGA prices which were in turn associated with increased access-based competition
121
Costs for the deployment of NGA increase in less densely populated areas, reducing the prospects for network
replicability. See discussion in SMART 2015/0002 as well as WIK (2008) economics of NGA
122
Article 19 FWD permits Decisions to be adopted in specific circumstances – if Recommendations on the same
subject have been adopted, but proved ineffective in achieving consistent outcomes after a 2 year period
123
Most notably in MS like Germany, which have to date pursued a different cost methodology than that advocated in
the Recommendation and have maintained this position despite the agreement of BEREC to the EC position
124
Termination rates have been the subject of a majority of ‘serious doubts’ cases (at least 24 since 2011).
125
See SMART 2015 0002
126
Waverman (2009) finds that a 1% increase in broadband penetration in high and medium income countries leads to
0.13% growth in productivity
77
employment and productivity,127 contributing to GDP growth. For example, Forzati and
Mattsson (2013)128 examine the impact of fibre investment by Stokab in Stockholm during 20
years up to 2012 and estimate the benefit of Stokab to amount to 16 billion SEK (around
€1.7bln). Meanwhile, in a 2015 study,129 The Analysis Group estimated that gigabit broadband
communities in the US exhibited a per-capita GDP approximately 1.1% higher than the 41
similar communities with little to no availability of gigabit services.
Greater fibre availability alongside provisions to ensure consistency in wholesale product and
service offerings designed for business, could also support the expansion and productivity gains
by multi-national corporations in Europe. A 2013 study by WIK130 estimated that the economic
benefits of e-enabling multi-site and multi-national corporations inter alia through consistent best
practice regulatory practices could add €90bln to European GDP after a 10 year build up.131
The experience from the implementation of the regulatory framework in Portugal, Spain and
France suggests that pursuing a regulatory strategy which does not impose "standard" access
obligations on newly deployed VHC networks under the conditions that they are accompanied
by strong measures to enable alternative operators to ‘climb the ladder of investment’ towards
infrastructure-based competition in FTTH/B, (such as a reasonable possibility to co-invest in
such networks, duct access, and the maintenance of access obligations to the networks at the
performance level prior to upgrade), may trigger wider availability of FTTH/B across the
national territory.
The measures described above will foster infrastructure competition and to bring it to areas
where in the absence of effective provisions on duct/pole access it would have not worked,
generating a more even competitive field between incumbents and competitors as can be seen
from Figure 16. The analysis of the underlying causes of suboptimal investment in section
1.2.1.1 has however shown that regulatory solutions do not automatically solve the investment
problem as some of the factors affecting investment are of a macroeconomic or socio-economic
nature.
The Swedish experience is quite telling in this respect, as wholesale-only models have helped
expanding the NGA footprint by focusing on infrastructure investment models with longer
returns on capital, attracting investors that need lower but constant returns over longer asset
duration. This is also coherent with other EU initiatives, such as CEF/EFSI de-risking of
investment projects via financial instruments, which can be easily applied to financing of
infrastructure projects such as VHC networks. In the Swedish experience, demand aggregation is
also fostered by the possibility of "up-front payment", which is mimicked by the proposed
measure on instalment payments, suitable for rural areas where many residents own their
properties.
It should be also noted that coverage of very high bandwidth connectivity in Portugal and Spain
has also extended beyond very dense urban areas and is projected by IDATE on the basis of
operator announcements to reach 95% or above in these countries by 2020.132
Indeed, reports
suggest that Portugal Telecom could achieve copper switch-off by 2020,133
while Telefonica was
127 Canada, Singer et.al (2015) investigate the effect of FTTP rollout on employment on the basis of the deployment experiences in 39 regions between 2009 - 2014. They
estimate that fibre deployment to 100% of a region is associated with an increase in employment of about 2.9% - even if the region had already before a broadband infrastructure.
See also Katz et al (2010) and Liebenauer et al (2009)
128
Forzati, M., and Mattson, C. (2013), STOKAB, A Socio-economic analysis, report acr055698, Stockholm.
129
Analysis Group (2015), Early Evidence Suggests Gigabit Broadband Drives GDP, available at
http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/gigabit_broadband_sosa.pdf.
130
WIK (2013) Business communications, economic growth and the competitive challenge
131
The study estimated that 65% of the benefits could derive from productivity gains through reorganisation of
business processes, while another 34% would be caused by efficiency gains through improved ICT processes. The
remaining 1% comes from welfare gains through lower prices for business communications services.
132
SMART 2015/0002
133
Total Telecom: Portugal Telecom selling off its copper http://www.totaltele.com/view.aspx?ID=493077
78
predicted to achieve coverage of 16.2m households by end 2016 amounting to coverage of more
than 80% of the households in Spain.134
According to a recent paper by Shortall and Cave,135 the regulatory strategy employed in
France, Portugal and Spain, which could be described as a strong version of the conventional
‘ladder of investment’ theory, combined with symmetric regulation of in-building wiring, is also
associated with an appreciably more even split of homes supplied between the incumbent, on
one hand, and alternative telecom operators, on the other, than is the case in Germany UK, or
Belgium, where entrants have been more reliant on mainly active access to incumbent
infrastructure. In this sense this approach may lead to a more sustainable form of competition
over time than approaches which place greater reliance on access to existing infrastructure of the
incumbent.
Figure 16 - Incumbent and entrant network access infrastructure 2014
Source: Shortall and Cave 2015
Responses to the public consultation by stakeholders also support the need for action on NGA by
policy-makers. Specifically a high proportion of respondents of all kinds believe that duct access
will play an important role in enabling the deployment of new infrastructure,136
while there is
also widespread agreement from respondents within the telecom sector that current rules in the
Framework and Access Directives and in the Cost Reduction Directive are insufficient to ensure
that operators have access to buildings and in-building wiring for the deployment of fibre,137
although it should be noted that to date only one Member State (Italy) has transposed the Cost
Reduction Directive, and therefore it is possible that this perception may change following wider
transposition by mid-2016.
There are however some potential challenges and costs associated with this model. Pursuing
approaches such as those taken in France, Spain and Portugal may involve more effort at least in
the initial stages by NRAs in mapping the availability of ducts and the overlap of network
infrastructure, as well as in operationalizing the duct access remedy. In the context of interviews
134
http://advanced-television.com/2016/02/24/telefonicas-20-cut-in-ftth-investments/
135
Shortall and Cave, Communications & Strategies No 98 Q2 2015. Please note that the graph refers to infrastructure
and does not represent market shares at retail level.
136
Q38 Public consultation
137
Q41 Public consultation
79
conducted for this study, ARCEP observed that the effort required to establish its regime for
mapping, duct access and the implementation of regulated co-investment involved was as shown
in the following table. Further cost would have been incurred by the regulated SMP operator
(Orange) and by all telecom providers engaged in the co-investment process. These
administrative costs however are significantly less than the benefits and are expected to reduce
over time as the regime (which involves long-term IRUs of 20 years+) stabilizes.
Table 4 – Mapping efforts at ARCEP (indicative)
Process Time FTE
Modelling to distinguish dense vs less
dense areas (infrastructure viability
mapping)
6 months-1 year 2-3
Operationalization of duct access 4 years 1-2
Establishment and operation of
symmetric regime (for in-building
wiring and terminating segments
including decisions, dispute
resolution)
Ongoing 3-4 (initial) 2 ongoing
Another challenge is that a model which favours infrastructure-based competition for VHC
networks may not be easy to export in the short term in all countries, especially where there are
fewer competitors with a sufficient scale to ensure critical mass. In cases such as these,
traditional access-based regulation may continue to play a greater role. Where this is the case,
proposals within option 3 to allow lighter regulatory scrutiny under certain conditions such as
reasonable co-investment offers for the VHC infrastructures may nevertheless provide a
regulatory stimulus for investment by the regulated SMP operator and alternative operators, and
may assist the latter in accessing capital. This medium to long term incentive may provide a
stimulus for investment in VHC infrastructure, although the effects may not be always
significant.138
This option can be bolstered by measures concerning co investment and wholesale only models
which should be encouraged, especially in rural/underserved areas. If public funding such as
ESIF is used for the local loop, wholesale only models could ensure a positive pro-competitive
outcome.
On mapping of infrastructure, networks and quality of services, the current cost of collecting
data from operators varies across Member States as it is linked to the depth of datasets required,
and to other factors – such as the operating method (e.g. one-off/case-by-case surveys,
automated data transfer, etc.). The proposals included under this option will therefore entail a
rationalisation of the broadband data collection in Europe concentrating this capacity within the
NRAs. In some cases, when some other bodies carry out such data collection, they will have to
transfer this competence to the NRA. In other words, the main cost will be an organisational
cost borne in the short term – it may involve adjustment costs for the teams working on some of
the mapping initiatives – but in the long run, it will be compensated by the fact by having only
one national interlocutor as data recipient (i.e. the NRA), which is a major simplification for the
data providers (i.e. Telecom operators).
An inventory of mapping initiatives (including Quality of Service and Quality of Experience
inferred from infrastructure mapping) by TÜV Rheinland gives evidence of this widespread
138
Econometric analysis in the context of SMART 2015/0002 suggests that infrastructure competition for example as
embodied by cable coverage is a core driver of NGA coverage. However, as seen in countries such as the UK,
Germany and Belgium (which lack additional infrastructure-based competitive stimulus beyond cable) it may not be
sufficient to incentivise the deployment of VHC infrastructure.
80
practice with more than 80 mapping initiatives carried out at national level without counting the
multiple initiatives often carried out at regional and sometime at lower level to support specific
projects 139
. As depicted in the figure below, all Member States are mapping Quality of Service
in some fashion.
Figure 17 - Mapping initiatives in EU28.
Service Mapping*
Infrastructure
Mapping
Demand
Mapping
Investment
Mapping
Country
Focus on
Quality of
Service
Focus on
Quality of
Experience
Austria Ministry NRA
Belgium NRA
Bulgaria Ministry NRA
Ministry and
NRA
Cyprus NRA NRA NRA
Croatia NRA NRA NRA NRA
Czech
Republic
NRA NRA
Denmark NRA NRA
Estonia NRA NRA
Finland NRA NRA
France Ministry NRA NRA
Germany Ministry NRA NRA Ministry
Greece NRA NRA
Hungary
Ministry
and NRA
NRA
Ireland Ministry
Italy Ministry NRA
Latvia NRA NRA Ministry
Lithuania NRA NRA NRA
Luxembourg Ministry
Malta NRA NRA
Netherlands Ministry NRA
Poland NRA NRA NRA NRA
Portugal NRA NRA NRA
Romania NRA NRA
Slovakia NRA NRA NRA NRA
Slovenia NRA NRA NRA
Spain NRA NRA
Sweden NRA
UK NRA NRA
Colour code
139
Ongoing study SMART 2015
81
Service Mapping*
Infrastructure
Mapping
Demand
Mapping
Investment
Mapping
Country
Focus on
Quality of
Service
Focus on
Quality of
Experience
Existing mapping
initiatives
Planned mapping
initiatives
*Note: The table depicts if there is at least one initiative in the respective country; there is no count
of initiatives. Service mapping refers to initiatives collecting data on the quality of service (i.e.
theoretical network performance and marketed speeds) and on the quality of experience (i.e. the
line qualification and the connectivity experienced by the user).
Source: TÜV Rheinland, 2016.
On simplifying the setting of termination rates, several stakeholders who agree that termination
rates should be regulated up to and beyond 2020 still prefer a simplification of the rate setting140
.
The setting of a Euro-termination rate could eventually replace the setting of termination rates
at national level currently based on the modelling of the cost of an efficient operator in the
Member State concerned. Such Euro-rate would be linked to the finding of SMP in the
respective Member State.
A single Euro-rate has the advantage of great simplicity and transparency and very low
maintenance cost for the individual NRA, but could result in less accuracy of the resulting cost
oriented rate. For this reason BEREC would have to be closely involved in developing it and
updating it regularly, on the basis of data gathered from national regulators and operators. NRAs
would no longer have to litigate its parameters in national courts, thus alleviating compliance
costs for these mature markets. A mechanism to accommodate for significant divergences would
have to be identified.
Social and environmental impacts
Option 3 also includes measures which may foster sharing of ducts and co-investment in cables –
thereby limiting environmental impacts and the cost of digging. There are also measures which
could facilitate the deployment of VHC broadband to areas which may be poorly served today –
so-called ‘challenge’ areas, which could bring social as well as economic benefits to these areas.
The potentially longer duration of instalment contracts for the provision of infrastructure is a
possibility foreseen for the economic convenience of end users, and will not modify consumers'
rights to switch service providers, thus no social impact could be quantified.
On a more general point on social impact on consumers, it has to be noted that under option 3
competition is safeguarded by way of maintaining the current SMP regime; alternative operators
would have more realistic chances of obtaining strategic autonomy via co-investment, while
access to dominant operators’ network at the performance level prior the network upgrade will
140
The respondents to the public consultation of the framework review which strongly agree or agree that termination
rates should be subject to ex ante rules include the Maltese and Lithuanian ministries, the French and Bulgarian
NRAs, ECTA and ETNO, and certain cable, mobile and fixed operators (mainly alternative). They indicated that even
in transition to all IP, the current regime will remain relevant, however could be simplified by avoiding the
burdensome Article 7 procedure. Simplification could be done through automatically imposing either symmetric
interconnection prices (ETNO), or harmonized rates set at a genuine cost-level (MVNO Europe)/common EU price
cap (Telecom Italia), or by introducing a harmonized cost model (BG NRA).
82
be in all circumstances safeguarded. Consumers should be better off under this scenario since
they have the choice they previously had, while having the possibility to benefit from higher
quality connections if the measures proposed to enhance connectivity are put in place.
A study by Forzati and Mattson (2012) 141
suggests that high-speed broadband may stem the
flow of populations away from rural areas and support employment in these areas. Specifically a
10% increase in the proportion of the population living within 353 metres from a fibre connected
premise corresponds to a positive change in the population after three years of 0.25% in terms of
increased inflow or decreased outflow. They also found that the migration effect as well as (to a
lesser degree) the availability of fibre, contributed to increased employment in rural areas.
A 2013 study by Xing142
based on the experience in Sweden also highlights the environmental
benefits of FTTH. Specifically, he observes that FTTH uses around 20% less electricity
compared with a VDSL2 network serving the same number of subscribers and suggests that 1m
users connected to an FTTH network could save 1m tons of carbon-dioxide emissions through
reduced car usage per household.
In a model developed by PWC and Motorola,143
the relative environmental impact of different
FTTH deployment phases was assessed. The study’s authors concluded that the environmental
impact of a typical FTTH network would be positive within less than 15 years on average.144
Moreover they noted that the main contributor to environmental impacts is associated with the
laying of fibre in ducts. Accordingly they conclude that facility sharing could reduce these
impacts significantly.
4.1.3.4 Option 4: Significant reduction of sector-specific regulation
Economic Impacts
The New Zealand example of using dispute resolution-led processes under ex ante sectorial
legislation suggests that this is an inefficient means of enabling competition. It is notable that
this approach may have contributed to high prices and low take-up for broadband in New
Zealand in the early deployment phase compared with countries such as those in Europe, Japan
and initially the US, which pursued unbundling policies. See SMART 2015/0002 for more
details. In policy terms, adopting a New Zealand strategy in Europe might reduce competition
with detrimental impacts on consumer welfare and broadband take-up – especially in areas
which lack pre-existing cable competition which would in turn harm Europe’s wider
competitiveness.
Commercial agreements have been concluded between the incumbent and one or more access-
seekers for NGA wholesale access in countries such as Portugal (co-investment with Vodafone),
Germany and the Netherlands (long-term wholesale access to FTTC/VDSL network).145
However, the fact that agreement was reached in the context of the ex-ante market process may
have provided explicit or tacit incentives for the incumbent to reach agreement. In Portugal, the
potential for the NRA to mandate wholesale access to PT’s network under the SMP regime
(alongside competitive pressure from the extensive cable network) is likely to have incentivised
141
Forzati, M., Mattson, C., and Aal-E-Raza, S. (2012), Early effects of FTTH/FTTx on employment and
population evolution, Proceedings of the 11th Conference of Telecommunication, Media and Internet Techno-
Economics (CTTE), Athens.
142
Xiong (2013) Socio-economic impact of Fiber to the Home in Sweden http://people.kth.se/~maguire/DEGREE-
PROJECT-REPORTS/130226-Ziyi_Xiong-with-cover.pdf
143
http://www.bbcmag.com/2008issues/april08/BBP_Apr08_ParisEuroStudy.pdf
144
On the basis of assumptions that telemedicine could be used to certain consultations, that FTTH would enable 10%
of the working population to telework 3 days per week, while 20% of the elderly population could benefit from home
assistance
145
See case studies in WIK (2016) Regulatory approaches to risky bottleneck assets
http://stakeholders.ofcom.org.uk/binaries/telecoms/policy/digital-comms-
review/WIK_regulatory_approaches_to_risky_bottleneck_assets.pdf
83
the incumbent to make an arrangement with Vodafone. In the Netherlands, the NRA explicitly
stated that in the absence of agreement, it would prohibit the deployment of vectoring and set
charge controls for FTTC/VDSL access based on cost.146
Therefore the ex-ante regulatory
regime and associated powers for NRAs seem to have played a crucial role in fostering
commercial agreements in these cases.
Social and environmental impacts
This option relies on ‘light touch’ regulation to provide incentives for infrastructure-based
providers to extend the reach of their VHC networks to rural areas, thereby providing social as
well as economic benefits to customers that today are typically less well served and helping to
extend rural coverage. For example, the US, which operates one of the most light touch
approaches within the OECD for broadband regulation, has rural coverage at 25Mbit/s or above
at 47% according to a 2015 FCC report.147
This compares well with Europe’s coverage rate for
speed of above 30Mbit/s in 2014 of 25%148
However, under the US regime, the degree of choice
in high speed offers is limited, retail prices for high-speed broadband have been high and take-up
of high speed offers has been low149
. This raises doubts as regards whether a light touch
approach would address rural needs in a socially optimal way.
Alternative investors such as municipalities which may not have a purely commercial motivation
might be more incentivised to consider social welfare and to offer open networks enabling
competition in rural areas.150
Concerning environmental impacts, this option is more likely (than option 3) to lead to
incremental upgrades of the incumbent copper network through FTTC/VDSL, vectoring and
G.fast alongside incremental upgrades of cable, than the installation of FTTH, which is often
deployed as a result of disruptive influences from alternative operators and investors.151
There
may be environmental advantages in the short term to avoiding the replacement of all parts of the
copper and cable network with fibre. However, in the medium term these are likely to be
outweighed by the greater per Gbit/s energy requirements of xDSL and HFC technologies
compared with those associated with FTTH, and the initial environmental disadvantages
associated with FTTH can also be mitigated through re-use of existing ducts, where these are
available.
4.1.4 Comparison of options
4.1.4.1 Effectiveness
The status quo and continuity and simplification options (options 1 and 2)
The main problems identified relate to gaps in NGA and VHC broadband and fragmentation in
the supply of wholesale services impacting cross-border business users as well as cross-border
suppliers.
146
See Case study on NL WIK (2016) Risky assets: an international comparison and interview conducted with ACM
in that context http://stakeholders.ofcom.org.uk/binaries/telecoms/policy/digital-comms-
review/WIK_regulatory_approaches_to_risky_bottleneck_assets.pdf
147
FCC 2015 Broadband Progress Report. Cable coverage at 25Mbit/s reaches more than 80% households in the US
148
https://www.broadbandmapping.eu/wp-content/uploads/2015/07/Broadband-Coverage-in-Europe_final-
report_2014.pdf
149
The US enjoy however a large Universal Service Fund. As of mid 2015, 12.2 million Americans are supported by
the Low-Income window of the Fund and 1.6 million Americans are covered by the High Cost window for rural areas.
The provision is for services up to 3 Mbps.
https://apps.fcc.gov/edocs_public/attachmatch/DOC-337019A1.pdf
150
See Case studies in SMART 2015/0002
151
SMART 2015/0002 identified through a number of case studies that FTTH deployment is common triggered by
disruptive investors such as iliad in France, Reggefiber in NL, municipalities in Sweden. Countries lacking significant
disruptive operators such as the UK, Germany and Belgium have typically tended to pursue an upgrade of existing
infrastructure as opposed to FTTH deployment
84
Taking into account the identified problems and the gap between European and other countries´
broadband performance, such as Japan which adopted a straightforward high speed broadband
strategy– maintaining the status quo is unlikely to redress the situation. Projections for future
developments to 2025, (see figure 83) based on operator announcements and expectations
concerning state aid, suggest the gap will persist. Moreover, business users consider152 that it is
unlikely that fragmentation affecting cross-border use and supply will be resolved under a
continuation of the status quo. Option 2 provides some improvements on the status quo, but
does not address these concerns directly. It therefore achieves some benefits in terms of
increased certainty, clarity and streamlining, but is unlikely to be significantly more effective
than the status quo as regards the main problems affecting the market.
NGA+: Focusing regulation on VHC connectivity
In contrast with the options which largely maintain the existing system, option 3 attempts to
address the core ubiquitous connectivity challenge through a set of measures improving
infrastructure mapping,153 targeting regulation to foster infrastructure competition and co-
investment models and providing a harmonised approach towards wholesale products used for
business access. The measure would address mapping of existing networks, future investment
and quality of service with a view to make data accessible to relevant authorities planning
deployment of networks and make it public in a GIS format at the appropriate level of resolution
to the wider public. The effectiveness on the provisions on mapping is enhanced by the fact that
all Member States have by now established broadband mapping initiatives in different forms. In
a number of cases, similar initiatives also take place at regional or at municipal and project level
with a high risk of inconsistent and sometimes unreliable results. An inventory of QoS mapping
initiatives (including QoS inferred from infrastructure mapping) by TÜV Rheinland gives
evidence of this widespread practice with more than 80 mapping initiatives carried out at
national level without counting the multiple initiatives often carried out at regional and sometime
at lower level to support specific projects 154
.
It builds on successful regulatory approaches mentioned in section 4.1.3. The approach proposed
towards fast broadband deployment draws on successful regulatory strategies pursued in France,
Spain and Portugal. Outcomes in these countries155
suggest that this approach may be effective in
triggering the deployment of FTTH/B, as well as supporting sustainable infrastructure
competition (or co-investment) in certain areas that may permit SMP regulation to be rolled
back. It is notable that overall coverage of very high speed broadband in Spain and Portugal
(through FTTH/B or Docsis 3.0 and successors) is also projected on the basis of operator
announcements to be high,156
despite relatively modest broadband state aid financing in these
countries.157
The proposed standardisation of core wholesale remedies for business access draws lessons from
previous successful harmonisation strategies which were applied to legacy technologies
152
Interview INTUG SMART 2015/0002
153
Respondents to the public consultation Q26 mostly considered that there are adequate tools in the current
framework to enable NRAs to conduct mapping exercises. However, they are not obliged to do so, and this practice is
not yet widespread
154
Ongoing study SMART 2015
155
See Shortall and Cave Communications & Strategies (2015), SMART 2015/0002 – see interim slide presentation at
http://www.wik.org/fileadmin/Konferenzbeitraege/2016/Public_Workshop_April/Public_Workshop_slide_presentatio
n.pdf, and WIK (2015) Competition and Investment: an analysis of the drivers of superfast broadband
156
IDATE projects coverage of 94% in Portugal and 91% in Spain by 2025.
157
State aid per household (2003-2013) was recorded at €49 in Spain and €26 in Portugal based on data from DG
Competition see figure 19 WIK (2015) Competition and Investment
http://www.wik.org/fileadmin/Studien/2015/Competition_and_investment_superfast_broadband.pdf
85
(traditional leased lines and local loop unbundling), but now require updating in the light of
technological developments. 158
Moreover, the focus on civil engineering and the improved network infrastructure mapping are
likely to support further deployments from regional and municipal investors, and contribute to
achieving the objective of wider coverage of VHC technologies.159
As to commercial agreements, the terms negotiated by SMP operators are likely to depend on the
access terms which would otherwise be mandated by the regulator. The prospect of regulation in
the event of failure of commercial negotiations, or of ineffective implementation of such
agreements, should be maintained in order to ensure that such arrangements are sustainable in
the medium term.
Greater coverage of VHC networks should lead to take-up of these networks as shown in the
support studies to this IA report (SMART 2015/0005 and SMART 2015/0002). However, this
solution might not fully address issues with a lack of demand. The merger proceedings that
followed the adoption of NRA policies to foster FTTH investment in France, Spain and Portugal
(resulting in three significant players in each market)160 suggest that infrastructure-based
competition may lead to more concentrated markets than today, which might have a
countervailing effect on take-up where and if prices would be appreciably higher (although an
analysis of fast broadband pricing161 suggests that this risk has not materialised to date in Spain,
France and Portugal). Moreover, fostering co-investment in smaller size deployments could help
alleviate the risk of unnecessary consolidation.
This option will help addressing business access through a mechanism to harmonise
specifications and service levels, thereby applying standards to new business access technologies
in a similar way as was applied to traditional technologies to positive effect.162 Similar best
practice harmonisation measures on wholesale access products could also be used to support
competition and cross-border supply in residential services.
It should also be recalled that the conditions for leased line access as well as their specifications
were also originally closely harmonised at EU level through the 1992 Leased Line Directive163
and EU-wide standards. This harmonisation supported the expansion of the Internet during that
period.164 Common definitions also simplified the analysis of leased line markets and
imposition, in cases where SMP was found, of leased line remedies in the EU. Further discussion
on the impact of common standards as well as service levels for business access is included in
158
There is extensive analysis on this subject in SMART 2014/0023. There was also support for this approach in the
context of the EP 2013 study How to Build a Ubiquitous EU Digital Society. Although in a fully functioning market,
there is a risk of standardisation impeding product innovation, this risk is considered less in the context of wholesale
products which are not generally defined on a commercial basis but rather on the basis of regulatory requirements
from the NRA. The participation of all NRAs as well as operators in the definition of a common product specification
should also serve to foster an exchange of best practice leading to improved EU specification in comparison with what
might be expected from specifications occurring at a national level in isolation. Moreover, consistency of itself could
be considered to present advantages in comparison with fragmented national solutions in the context of offers used for
provision to multi-national businesses.
159
Such strategies appear to have had positive effect for example in the case of France – see case studies in SMART
2015/0002
160
For example, in Spain ONO/Vodafone and Orange/Jazztel mergers, in Portugal Optimus/ZON and in France
Numericable/SFR
161
Elaborated in SMART 2015/0002
162
See discussion in SMART 2014/0023. There was also support for this approach in the context of the EP 2013 study
How to Build a Ubiquitous EU Digital Society
163
ONP Directive on leased lines (Council Directive 92/44/EEC)
164
FCC data shows an expansion in the number of leased lines (64kbit/s equivalents) between the US and other OECD
countries (mainly in Europe) from 28,080 in 1995 to 185,972 in 1997 – a compound annual growth rate of 157% - see
table 2 OECD report “Building Infrastructure Capacity for electronic commerce” DSTI/ICCP/TISP(99)4/FINAL
86
the 2015 study “Access and Interoperability standards for the promotion of the internal market
for electronic communications.”
Reducing the scope of regulation
Option 4 aims to address the identified problems by limiting the scope of access regulation on
the basis that access regulation may undermine VHC networks' deployment and may not lead
entrants to ‘climb the ladder of investment’. A strategy of mandating the easing of ex ante
regulation before moving to competition law, would be consistent with this aim. However, case
studies as well as quantitative analysis conducted for SMART 2015/0002 cast some doubt on
whether this approach would in practice address the identified problems.
 Under this strategy, there is a high risk that infrastructure competition may not emerge,
while service-based competition may diminish. Tom Wheeler, Chairman of the US telecom
authority, the FCC, noted in a 2014 speech that most Americans did not have a competitive
choice of offers above 25Mbit/s.165 Minimum horizontal measures for duct access under the
Cost Reduction Directive would still apply, but these too rely on dispute resolution and
access obligations could not be as tightly regulated as those introduced on SMP operators
under the EU framework for electronic communications.
 As noted above in section 4.1.3 a strategy of dispute-resolution under ex ante telecom
legislation was pursued in New Zealand in the period from 2000, but was discontinued on
the basis that it led to low take-up and high prices for broadband.
 It is possible that a light touch approach resulting in consolidation might enable operators to
raise prices and revenues, and indeed broadband tariffs in the US, which pursues a light
touch approach to access regulation, are generally high in comparison with those in
Europe166. This should increase operators’ ability to invest. However, as previously
discussed, they may lack the incentive to invest if this strategy fails to further boost
disruptive infrastructure-based competition, which has been clearly identified in many
studies as a key driver of investment.167
 While higher prices and ARPUs may generate incentives for new players to enter the market,
market scale at entry may be difficult.
Overall therefore, we conclude that this strategy is unlikely to be effective in meeting the stated
objectives of ensuring affordable ubiquitous connectivity to all citizens in Europe and the
provision of cross-border business services. An approach based on dispute resolution rather than
ex ante market regulation is likely to be particularly disadvantageous to operators which may not
have large scale in any single market, but seek to serve customers across multiple regions and
countries across the EU. It may result in a prioritisation of mass-market remedies to the
detriment of wholesale services designed for the business market.
4.1.4.2 Efficiency
Status quo and ‘continuity’ options
The direct costs associated with maintaining the status quo include the cost to NRAs of
operating the market analysis process, and the cost to stakeholders (and especially regulated
operators) of compliance. The mechanisms currently used to ensure consistency, including the
article 7 consultation process, also incur costs to the European Commission, NRAs and in
relation to the operation of the BEREC Office. However, it should be noted that telecom
operators and their trade associations observed in the course of interviews for this study and
165
http://arstechnica.com/business/2014/09/most-of-the-us-has-no-broadband-competition-at-25mbps-fcc-chair-says/
166
More generally, cconometric analysis for SMART 2015/0002 finds that more concentrated markets may be
associated with higher ARPUs
167
SMART 2015/0002, WIK (2015) competition and investment, EP (2013) ‘How to build a Ubiquitous digital
society’ – and literature reviewed in the context of SMART 2015/0002
87
SMART 2015/0002 that they consider the indirect costs (in the case of SMP operators) or
benefits (in the case of operators making use of regulated access) significantly exceed the direct
costs, given the overall scale of the sector and its impact on the European economy. In this
context, the direct costs per se are not considered to present the main ‘problem’ as regards
regulation of the electronic communications sector.
Indirect costs of ‘overregulation’ cited by operators168 subject to SMP regulation include the
opportunity cost of reduced investment in high speed broadband infrastructure and the
consequent impacts on the quality of service to consumers. However, there are different views
amongst the industry and analysts as regards the existence and scale of these costs as reported in
the public consultation. This cost may be mitigated by the proposal in the ‘continuity and
simplification option’ to require NRAs to first identify a market failure at retail level before
intervening. Another cost which stakeholders and some NRAs have identified with the current
set-up is the uncertainty created by short review cycles and remedies which are reviewed (and
prices revised) on a frequent basis. This problem will be addressed under the ‘simplification’
option, and should reduce procedural costs as well as increasing regulatory certainty.
Looking at the timeframes to reach decisions, the typical time taken to conduct a market review
ranges from 9 months to 3 years, while this can in some cases last as much as 5 years (as
reported in Portugal). NRAs handle the process differently, but in some countries the market
analysis process can involve several rounds of consultation, and lengthy documentation, and
delays can occur if there are significant changes in market circumstances (such as mergers or
commercial agreements) during the course of the review. A further brief period is added for EU
consultation under the article 7 process, but this is short (amounting to only one month in the
absence of serious doubts) compared with the market analysis process as a whole. In markets
which are subject to change, it may be necessary to conduct this kind of in-depth analysis in
order to properly take into account national circumstances. However, for market definitions,
SMP designations or remedies which are not subject to significant change, the market analysis
process may be a source of inefficiency. It is also clear – especially for more complex markets
requiring lengthy reviews – that a requirement for a three-yearly review may give little time to
reflect on the consequences of previous market regulation.
Figure 18 - Duration of market review procedure Source: Deloitte based on NRA survey
Another core aspect of the existing framework which has been identified as complex and
inefficient in the context of EP (2013) ‘How to build a ubiquitous EU Digital Society’ and
SMART 2014/0024 is the process of ensuring consistency. Although the Commission can take
binding negative decisions as regards market definition and SMP (under the article 7 process),
168
In the context of interviews and consultation responses
88
the main tools through which consistency on remedies is achieved under the framework today
are non-binding Recommendations.
Such Recommendations can take 2-3 years to conclude, and as discussed in SMART 2015/0002,
as well as in the implementation reports published annually by the Commission, may require an
extensive period of enforcement via the article 7 process and still not achieve full consistency.
The clearest example of this is mobile termination rates which are not yet consistently calculated
in all Member States seven years following the adoption of the EC Recommendation and despite
the support for the Recommendation from BEREC within the article 7 process169
. Product
specifications170 and terms for business access, which is not subject to a recent
Recommendation, vary even more widely, as can be seen in the following charts comparing
pricing and provisioning times171.
Figure 19 - Ethernet leased line 5km local access pricing benchmarks (Source: WIK based on
Reference Offers as of October 2014)
Figure 20 - Ethernet leased lines: on-net provisioning timescales within the SLA
In cases where consistency is merely desirable but not essential, the advantages of flexibility
offered through non-binding guidance may outweigh the imperfectly consistent outcomes.
169
Article 19 FWD permits Decisions to be adopted in specific circumstances – if Recommendations on the same
subject have been adopted, but proved ineffective in achieving consistent outcomes after a 2 year period
170
Ethernet leased line product specifications have been relatively fully harmonised. However, SMART 2014/0023
revealed variations in the availability and specification of business-grade Ethernet bitstream which is increasingly
being use to serve the needs of smaller sites and businesses.
171
See further discussion in SMART 2014/0023
89
However, where consistency would clearly serve to improve Europe’s position in relation to
economically important objectives such as fast broadband and/or would have a significant
impact on competition, consumer welfare and the single market, the existing set-up appears
inefficient, especially when compared with specific legislation such as that on LLU (in 2000)
and Roaming, which were concluded within short periods172 and achieved more consistent
outcomes which were beneficial to end-users in a relatively short space of time.
NGA+: Focusing regulation on VHC connectivity
Because this option adapts the market analysis process to foster VHC broadband deployment
rather than relying on existing rules complemented with non-binding guidelines, it should be
more efficient at achieving results than the status quo or ‘continuity and simplification’, other
things being equal.
There are likely to be increased costs involved for NRAs which have not yet put in place
procedures to map the availability of standard and NGA infrastructure and assess viability of
replication, as well as for operationalising duct access173
.
However, setting core principles in legislation as well as the preference to incentivise
commercial arrangements including co-investment and long-term agreements could potentially
reduce the need for detailed SMP obligations and associated enforcement. As such it should help
to simplify both the market analysis process and review through the article 7 process. On the
other hand more pressure may be put on processes of general application such as infringement
proceedings at the EU level where necessary, dispute resolution and litigation. Further guidance
either in the form of soft law or delegated instruments may also be needed on certain aspects of
the revised legislation, such as more detailed guidance on infrastructure mapping or the
identification of transnational trends. These tasks could either be handled by the EC, with
BEREC continuing to act in a mainly advisory role, or by BEREC. The relative merits and costs
associated with these approaches are further considered in chapter 5 of SMART 2015/0005.
A further area in which this option is likely to increase efficiency is the proposal to support
standardised specifications and service levels for wholesale products used for business access,
and potentially provide for the standardisation of other wholesale products widely used across
the EU. SMART 2014/0024 suggests that such an approach could reduce time to market and
limit the burden on NRAs and operators seeking agreement at national level, compared with the
current approach in which similar wholesale products addressing technological adaptations are
developed in parallel in different countries. This approach should contribute to regaining the
efficiencies of previous standardised wholesale products such as LLU. Again however, this
approach may have implications for the remit and resourcing of BEREC.
Reduction in sector-specific regulation
Because it involves significantly less regulatory intervention, this option is likely to reduce costs
for NRAs which are currently associated with market analysis process. It may also render
unnecessary many of the core tasks currently undertaken through the article 7 review process and
BEREC.
However, this option places further emphasis on dispute resolution, which from the experience
of New Zealand may require additional resources and time than a general market review. In this
172
The LLU Regulation was agreed within 6 months following its proposal by the Commission.
173
For example, as shown in SMART 2015/0005, the cost of assessing the viability of infrastructure deployment and
competition in the case of France was around €280,000 while operationalising duct access cost around €1.4m over
an 8 year period. Establishing the regime for symmetric regulation and associated dispute resolution cost a further
€2.6m.
90
context, BEREC estimated during an interview conducted for this study that this scenario might
raise costs for NRAs compared with the status quo, and increase court proceedings.
There may also be significant indirect costs associated with a likely reduction in competition,
including increased retail prices and consequent reduced demand. It should be noted in this
context that econometric analysis conducted in the context of SMART 2015/0002 found that
NGA take-up (as a proportion of households) is linked to NGA prices, which in turn are
associated with the degree of access-based competition. Charges for high speed broadband in the
US, which has operated a policy of regulatory forbearance, are high in comparison with EU
charges.174
There may be increased costs to other related sectors such as applications and services and
greater need for enforcement action elsewhere, if a reduction in competition results in
discriminatory behaviour by telecommunications firms to the advantage of their tied service and
content providers. Finally, spill over effects from the telecom sector on other sectors (see macro-
economic analysis) may result in a negative impact on jobs and growth.
4.1.4.3 Coherence
Internal coherence
The status quo maintains coherence with past strategies in EU regulation of the electronic
communications sector. As such it may provide some stability and predictability for investors.
However, the current Directives include some points which may not be internally coherent. In
particular, the linkage between symmetric and asymmetric obligations is not specified, and the
Commission is not formally involved under Art. 7 in reviewing symmetric obligations under
article 12 of the Framework Directive, even though these might become more significant in a
fibre environment. The current framework also contains a number of provisions that have
remained unused, including the possibility for cross-border dispute resolution and the
consideration of leverage between neighbouring markets.
The continuity and simplification option may clarify the association between symmetric and
asymmetric obligations, but does not address the remit of the article 7 review. It also does not
provide a workable mechanism to ensure consistency for markets with a retail cross-border
aspect.
The NGA+ option provides coherence in the consideration of symmetric and asymmetric
obligations within a single market analysis process. In turn, this enlarged market review could
also be subject to the article 7 consultation process thereby ensuring consistent treatment. It also
includes provision for standardised remedies for business access. However, it is likely to result in
some disruption in markets where entrants have previously relied on wholesale access, but might
now be incentivised to invest or co-invest in their own access infrastructure. New provisions,
including the need to take account of commercial arrangements and co-investment, may also
require interpretation and involve disputes before appeal bodies.
The deregulatory option is consistent with the overall aim of reducing sector-specific regulation,
but would create significant market disruption and uncertainty, as the market analysis process
would be replaced with dispute resolution.
External coherence
174
See SMART 2015/0002 as well as WIK (2015) Competition and Investment
91
The status quo may be incoherent in some respects with external legislation. Specifically, the
role of NRAs as regards broadband state aid is unclear and can vary amongst Member States.
This may lead to inconsistencies in the analyses concerning the potential for VHC deployment
and infrastructure-based competition. The allocation of structural funds to broadband, in
focusing on cost, may also fail to appropriately target funds towards performant technologies.
Although the Regulatory Framework prevails if provisions exist concerning facility sharing
under the Framework, there may also be some uncertainty as regards how potential or actual
facility sharing under the Cost Reduction Directive should be considered in the context of the
market review process and in what circumstances it would be appropriate to apply additional
sector specific SMP or symmetric regulatory obligations to foster facility sharing.
The continuity and simplification option may address some lack of clarity around how
symmetric measures including those under the Cost Reduction Directive might be considered
within the market review process. However, it does not specifically address the roles of NRAs
concerning broadband state aid.
In requiring NRAs to undertake a current and prospective mapping exercise, the NGA+ option
provides linkages between the role of NRAs in fostering competition (in contestable areas) and
their potential role in identifying ‘challenge’ areas and gathering expressions of interest in this
regard. In turn, this should provide a natural connection between the regulatory remit of NRAs
and their engagement in the process of allocating state aid. The deregulatory option is externally
coherent in that, in rolling back sector specific legislation to a significant degree, it leaves more
scope to horizontal antitrust law and state aid.
4.1.4.4 Impact on stakeholders
The impact on stakeholders from the preferred option is assessed in more details in annex 4. The
impact on stakeholders, consumers and SMEs would benefit most from the increased availability
and quality of high speed broadband under the ‘fibre-ready’ NGA+ option (option 3). They
would also enjoy similar levels of competition in standard broadband and a greater degree of
choice in high speed broadband. Multi-national corporations would benefit from a greater degree
of consistency and competition in cross-border business offerings. On the other hand both
residential and business end-users would be least well served under the deregulatory option
(option 4), as they would likely face reduced competition, higher prices and greater
fragmentation in offerings. As regards the status quo and ‘continuity and simplification’
scenarios, consumers and SMEs would continue to have differing levels of choice and quality
depending on their location, while multinational corporations would continue to be negatively
impacted by fragmentation impeding coherent offers across the single market. OTT providers
which rely on the widespread availability of high-quality retail internet access over which to
offer services would be impacted in a similar manner to end-users.
Electronic communications operators would be differently impacted depending on whether they
are currently subject to SMP regulation or are beneficiaries of such. Incumbent operators would
benefit most from a significant deregulation of wholesale access (option 4), while entrants would
be negatively impacted by this scenario. Conversely in the status quo or ‘continuity’ scenario,
incumbents would continue to be subject to sometimes intrusive access regulation, while entrants
would benefit from continued access, although they would be vulnerable to disruption in access
due to technological upgrades by the incumbent, changes in regulation or regulated pricing. The
fibre-ready NGA+ scenario (option 3) presents challenges and opportunities for both incumbents
and entrants. The regulatory approach advocated would be likely to require more up-front
investment on the part of entrants, triggering the need for incumbents also to invest in response.
However, it should also result in more sustainable forms of competition (i.e. less dependent on
periodic regulatory decisions), control over retail offerings and long-term certainty. This option,
with its greater focus on deployment and infrastructure competition, is also likely to be
favourable to regional fibre investors. Cable operators may also benefit indirectly from reduced
92
regulation on incumbents in dense areas (enabling greater flexibility) and the potential to expand
their network reach.
Equipment manufacturers have been negatively impacted by the patchy network investment
arising from the status quo. Options 3 and 4 might result in greater investment, but by different
actors within the electronic communications sector – with option 4 benefiting existing
infrastructure providers looking to upgrade their networks (incumbent and cable) while option 3
would tend to foster investment by a wider range of operators in FTTH/B networks. The impact
of these options on equipment manufacturers may depend on their technological solutions and
customer base.
NRAs would benefit most from the option for continuity and simplification (option 2), under
which they would retain the existing degree of flexibility in regulatory decision-making, but
benefit from reduced burdens in relation to market reviews. NRAs would lose a degree of
flexibility under option 3, but some may at the same time benefit from greater empowerment (for
example as regards data gathering) and an expansion in their remit to support the identification
of areas requiring state aid.
The effects are synthesized by Table 5 below
Table 5 – Effects on stakeholders from access options
Option 1: Status
quo
Option 2:
Continuity and
simplification
Option 3: Fibre-
ready
Option 4:
Reduction in
scope of
regulation
Consumers Mixed – some
may be well-
served but
existing gaps
may remain
As option 1 Substantial benefits
arising from higher
broadband quality of
service due to
increased
deployment and
competition in very
high speed
broadband. Some
market
consolidation also
possible, which may
have positive as well
as negative impacts
on innovation and
price
Negative –
significant
reductions in
competition could
be expected
impacting pricing
and service
quality, although
some further
investment might
be made
SMEs Mixed – some
may be well-
served but
existing gaps
may remain
As option 1 Substantial benefits
arising from higher
broadband quality of
service due to
increased
deployment and
competition in very
high speed
broadband.
Negative –
significant
reductions in
competition could
be expected
impacting pricing
and service
quality, although
some further
investment might
be made
Larger and
multi-national
businesses
Negative –
fragmentation
would continue
As option 1 Benefits from
greater fibre
availability (also
Highly negative –
significant
reductions in
93
to impact cross-
border
connectivity
reaching smaller
sites, homeworkers)
and consistent
wholesale
specifications, if
SMP approach
maintained for
business access
competition and
further cross-
border
fragmentation
Incumbents Negative –
existing
regulatory
burden and
constraints
would remain
Some benefits
compared with
status quo –
more certainty,
higher burden of
proof for
intervention, but
may also
facilitate
functional
separation
Mixed. Some
benefits – potential
lifting of sectorial
regulation, but also
tighter regulation of
ducts, pressure to
invest
Highly positive –
significant
reduction in
regulatory burden
and constraints
and lessening of
competition
Entrants Mixed –
continuation of
access regulation
positive, but no
emphasis on
supporting more
sustainable
competition.
Therefore,
practical
application
varies by
country. Entrants
vulnerable to
technological
and regulatory
change.
Some benefits
compared with
status quo –
more certainty,
greater potential
for functional
separation, but
also higher
burden of proof
for intervention
– may reduce
regulation
Benefits for larger
scale players able to
invest and co-invest.
Negative for smaller
entrants relying on
wholesale access
Highly negative –
may undermine
business viability
Alternative
fibre investors
Neutral for
existing players,
but no additional
support for
further
investment
As option 1 Positive – greater
access to civil
infrastructure,
support for rural
investments
Neutral if not
reliant on
incumbent
SLU/duct access.
Otherwise
negative
Cable
operators
Stability
considered
highly positive,
although
continued
wholesale price
regulation could
undermine
revenues
Benefits
compared with
status quo –
more stability,
higher burden of
proof for
intervention
Mixed - Some
benefits from
potential lifting of
wholesale price
regulation, but also
greater infrastructure
competition and
pressure to invest
Positive – reduced
competition
Content and
application
providers
Mixed – existing
bandwidth gaps
would remain,
but competition
would continue
As option 1 Positive – greater
bandwidth
availability, but risk
in some markets of
consolidation
Negative – likely
to impede take-up
of higher speed
offers, and
concentrate the
94
to support take-
up and protect vs
discriminatory
conduct
impacting
competitive
safeguards
market, raising
risk of
discriminatory
conduct
Equipment
manufacturers
Neutral to
negative – no
specific stimulus
for investment
by industry
Neutral to
negative – no
specific stimulus
for investment
by industry
Mixed – depending
on business
model/customer-
base
Mixed –
depending on
business
model/customer-
base
NRAs Mostly positive –
retain existing
flexibility. But
several NRAs
have raised
concern over
burden of 3
yearly review
requirement +
some NRAs raise
concerns over
independence
and resourcing)
Positive – NRAs
would benefit
from continued
flexibility, but
with reduced
market analysis
administrative
requirements and
increased
potential to
implement
functional
separation.
Under this
option their
resources and
remit would also
be strengthened
Mixed – NRAs
would have more
prescriptive
requirements. Those
not already pursuing
mapping analysis
and the
operationalization of
duct access may
require additional
resources to do so in
the short term –
although the admin
burden may reduce
longer term
Negative – NRAs
would lose an
important tool for
the promotion of
competition, while
potentially facing
an increased
burden in dispute
resolution
BEREC Neutral Positive – remit
would be
expanded and
NRAs‘
competences
would be aligned
with BEREC‘s
This option would
entail the
strengthening of
BEREC Governance
as well as additional
responsibilities.
Although BEREC’s
competence and
influence would be
expanded, NRAs
would have less
direct control over
its Governance.
Highly negative.
BEREC would
lose a significant
portion of its
current remit
(concerning
market analysis).
4.1.4.5 EU value added
The status quo and continuity and simplification options (Options 1 and 2) do not change the
balance of responsibilities between the EU and Member States. Equally, because there is no
further transfer of responsibility compared with the status quo, option 2 does not increase the
benefits achievable through EU-level action compared with the status quo. Option 4 would
significantly limit the available options for ex ante intervention in the electronic communications
sector at a national level. As such, it imposes a significant degree of centralised control, even if
the decisions (through dispute resolution) would be taken at national level. By applying a
common approach that is likely to under-estimate the regulatory requirement, it is likely to result
in less effective outcomes than Member States acting alone. Option 3 (NGA+) adds specific
requirements to the existing market analysis process in order to make it suitable for VHC
networks. As such it reduces somewhat the current degree of flexibility. However, as it supports
95
a level of harmonisation based on established best practice cases and in line with many aspects
raised in the public consultation, it is likely to result in greater positive effects than Member
States acting alone.
4.1.4.6 Summary table comparing access options
Table 6 – A comparison of options - access
Effectiveness (wrt ubiquitous
connectivity)
Efficie
ncy
and
cost
reduct
ion
Coherence EU value add
Ultr
a-
fast
cove
rage
Ultr
afas
t
take
-up
Univ
ersal
avail
abilit
y
Comp
etition
(infra/
servic
e)
Busi
ness
acce
ss
Cost/
compl
exity/
enforc
eabilit
y
Disru
ption
from
statu
s quo
(stabi
lity)
Inter
nal
cohe
renc
e
Exte
rnal
cohe
renc
e
Subsi
diarit
y
Proport
ionality
(impact
compar
ed with
MS
acting
alone)
Optio
n 1:
status
quo
0 0 0 0 0 0 0 0 0 0 0
Optio
n 2:
strea
mlinin
g
+ + 0 +/+ 0 (+) ++ + + 0 0
Optio
n 3:
NGA
focus
++ ++ + ++/- ++ + - ++ + - ++
Optio
n 4:
Disput
e
resolu
tion
+ - (+) +/-- -- - -- ++ + -- --
4.1.5 The preferred option
The Commission considers that option 3 best fulfils the overall and specific policy objectives of
the review of the telecom framework as presented in section 3. In particular, the set of measures
under this option would inter alia: (i) help meeting the ubiquitous VHC connectivity objective
through the facilitation of co-investment and commercial agreements, and wholesale only
models, which are expected to help increasing the footprint of VHC networks; (ii) it would
safeguard competition through the maintaining of SMP rules on the basis of more granular
mapping, flanked by the clarification of symmetric rules; (iii) improve the efficiency and
predictability of regulation by lengthening the market review cycle and focussing regulation
where it is really needed by prioritising retail level problems. The single market coherence
would also be boosted by the development of EU-wide access products for business end-users.
96
Due to its effect in boosting connectivity, we estimate that option 3 would result in a 0.54%
increase in GDP compared with the status quo by 2025. These estimations are further
elaborated in section 4.11 and in annex 5 (section 6.5.6). By supporting deployment in rural
areas, this option would also contribute social benefits. Various studies have shown that greater
connectivity is associated with reduced migration in rural areas as well as increased
employment more widely.175
Finally, there is evidence that the deployment of all FTTH/B
infrastructure, which would be fostered through this option, could lead to environmental benefits
resulting in 88% less greenhouse gas per Gigabit (due to reduced electricity consumption)
compared with the status quo.176
4.2 Spectrum
4.2.1 Options
Option 1 No change Baseline scenario
This option is based on the EU policies in place and reflects possible developments of these in
the absence of new EU-level action.
The 2002 framework, developed at a time when mobile telephony was still in the growth phase
(and mobile data virtually unknown) gave significant flexibility to Member States in the
management of radio frequencies and procedures for the transfer of rights, subject to general
principles set out in the legislation. Two bodies were established at the same time to support the
co-ordination of spectrum policy: (1) the Radio Spectrum Decision of 2002 established the
Radio Spectrum Committee (RSC)177
. which has responsibility for technical measures required
to implement the broader Radio Spectrum Policy, and (2) the Radio Spectrum Policy Group
(RSPG) established under Commission Decision 2002/622/EC consisting of Member State and
Commission representatives was established as an advisory group to the Commission. The
RSPG issues opinions and reports on Radio Spectrum Policy at the request of the Commission
and more recently under an expanded remit also the European Parliament or the Council.
The 2009 revision to the electronic communications framework provided significant new
guidance on spectrum management, as mobile communications were gaining prominence and
spectrum was more and more seen as essential input to compete on the electronic
communications market. Most importantly, it also paved the way for the 2012 Radio Spectrum
Policy Programme (RSPP), which now serves as a roadmap for the development of the internal
market for a wide range of wireless technologies and services (i.e. not just for electronic
communications), taking into account both Europe 2020 and the Digital Agenda for Europe.
However, contrary to what happens to access regulation and its 'Article 7', the new provisions on
spectrum management did not include measures for the EU-level assessment of draft national
measures in particular the assignment of rights of use of spectrum.
This option would keep in place the current possibility of technical harmonisation of spectrum at
allocation level based on the Radio Spectrum Decision, as well as the very general provisions
regarding policy objectives and regulatory principles, on strategic planning and coordination of
spectrum policy, on management of spectrum including technology and service neutrality.
Member States will keep a large discretionary power to organise spectrum assignment in general.
175
Forzati, M., Mattson, C., and Aal-E-Raza, S. (2012), Early effects of FTTH/FTTx on employment and
population evolution, Proceedings of the 11th Conference of Telecommunication, Media and Internet Techno-
Economics (CTTE), Athens. Singer, H., Caves K. and Koyfman A. (2015) Economists Incorporated: The Empirical
Link Between Fibre-to-the-Premises Deployment and Employment: A case study in Canada, Annex to the Petition to
Vary TRP 2015-326, Bell Canada. Katz, R., Vaterlaus,S., Zenhäusern, P. and Suter, S. (2010), The Impact of
Broadband on Jobs and the German Economy, Review of European Economic Policy, 45 (1).
176
Aleksix and Lovric 2014 Energy Consumption and Environment Implications of Wired Access Networks
177
See https://ec.europa.eu/digital-agenda/radio-spectrum-committee-rsc
97
There would still be no possibility to adopt binding measures (other than by distinct co-
legislative initiatives) to eliminate fragmentation and introduce more consistency in the selection
and spectrum assignment process, or to coordinate some of its main elements as envisaged in
options 2, 3, and 4. Greater harmonisation would be potentially possible based on Commission
non-binding recommendations pursuant to Article 19 of the Framework Directive
Option 2 - Non-binding rules for enhancing consistency of spectrum management in
the EU
This option will incrementally adapt the framework to the on-going and expected developments
in terms of ubiquitous connectivity and 5G deployment and therefore to gradually introduce
more consistency in some aspects of Member States' spectrum management by (i) defining
spectrum-related objectives and principles in the framework, (ii) proposing a Commission
Article 19 Recommendation on some aspects of spectrum assignment, (iii) including a voluntary
pluri-national auction procedure and clarifying the possible related common conditions and (iv)
proposing measures to support deployment of very dense networks of small cells and access to
Wi-Fi networks. This option consists of the following specific measures:
(i) Introducing more specific spectrum-related objectives and principles in the framework,
including bringing together those in RSPP and in the current directives, to guide Member States
when managing spectrum at national level, this would include general principles of transparency,
defining criteria to determine the amount and type of spectrum to be assigned; general principles
regarding timing for accessing spectrum across the EU and linking assignment deadlines to
allocation deadlines as well as regarding license duration; general principles applicable to licence
fees to ensure optimal use of spectrum and avoid resulting prices which may stifle investment
and service development; objectives and principles on the levels of territorial coverage to be
achieved, such as full territorial coverage as a component of spectrum efficiency; principles
fostering sharing of spectrum and infrastructure and spectrum trading and leasing in EU
secondary spectrum markets; strengthening the objective of promoting an efficient use of
spectrum through the revocation of existing rights in case of non-use or non-compliance with
license conditions and by setting minimum technology performance levels; creating appropriate
incentives to free spectrum by existing users; and improving the protection of unlicensed band
users. Half of the respondents to the Public Consultation agreed that the current regulatory
regime has moderately achieved the aims of providing a single market for operators with
sufficient transparency and regulatory predictability as well as ensuring effective and efficient
use of spectrum. While public authorities could envisage limited coordination through common
deadlines for making a band available or the common definition of certain general principles,
many economic actors seek greater harmonisation of award methods and procedures (need and
timing of spectrum release and selections, general principles and objectives, transparency, ex-
ante competition assessment, refarming conditions, timing of advanced information to market
participants, measures to promote use efficiency, spectrum packaging) so as to enhance legal
certainty, support investments, promote competition, provide more clarity to manufacturers and
support economies of scale. Equipment vendors supported harmonisation for predictability, but
warned that timetables alignment should not delay early movers.
(ii) Accompanying these objectives with a separate non-binding Commission Recommendation
based on Article 19 Framework Directive which would set out criteria for defining the timing of
awards and renewals, common criteria for awards process and design, award fees and payment
conditions and defining the most relevant assignment conditions for investment decisions and
fostering the single market, such as licence duration, means to define and achieve coverage
obligations, auction fees, trading, leasing and sharing conditions, refarming, spectrum efficiency-
related technical requirements, market-shaping measures such as spectrum caps, spectrum
reservation or wholesale obligations based on Article 5 RSPP. This Recommendation would be
initiated immediately after the adoption of the review proposal, building on the RSPG Report on
efficient awards adopted in February 2016 or even adopted at the same time.
98
(iii) Including a voluntary pan-EU or multi-countries assignment procedure in the framework
which provides Member States178
with the possibility to jointly organise a spectrum auction
where national or pluri-national licences are granted in line with a common timetable and
conditions.
(iv) Introducing provisions on deployment of small cells to reduce costs of deployment of
very dense networks and access to Wi-Fi to meet the exponential demand for ubiquitous
connectivity while providing the IoT industry with low cost spectrum179
. Many public authorities
and private respondents to the Public Consultation supported the deployment of
commercial/municipal Wi-Fi networks in public premises.
(v) Introducing a coordination mechanism to ensure consistent spectrum cross-border
coordination outcomes, to enhance the current RSPG good offices work.
Option 3 –Binding and enforceable rules for enhancing coordination of spectrum
management in the EU with greater focus to adapt spectrum rules to the future 5G
challenges
This option would include all proposed measures in option 2, items (i), (iii) and (iv). However,
the spectrum-related objectives and principles in the framework are in this option accompanied
by (i) legally enforceable instruments (in lieu of a Recommendation) and (ii) a peer review
mechanism, allowing BEREC, Commission and Member States to review individual Member
States' planned national assignment procedures. Moreover, this option will set out greater
emphasis on the investment environment for dense 5G networks as well as on ensuring greater
consistency with regard to Member States´ measures affecting the competitive market conditions
and economic regulation.
This option also proposes to enhance the advisory status of RSPG. This option envisages the
following specific measures:
(i) Give more prominence to general authorisations vs. individual licenses to ensure that
national authorities deliver the most appropriate future licensing models (notably in 5G
context). This will allow more flexibility in accessing spectrum and to facilitate a hybrid
combination of license-exempt (through general authorisations) and licensed spectrum
(individual licenses). To do so, increased protection of unlicensed use of spectrum vs.
individual exclusive licenses in the band and in respect of out-of-band interference is needed.
(ii) Introducing, on top of the general objectives and principles in the framework legislation,
some substantive provisions and the possibility for the Commission to complement these via
binding guidance criteria set out in implementing decisions regarding the most relevant
elements of spectrum assignment processes. Such set of measures would aim at enhancing
consistency in spectrum management in the EU in areas such as the coordination of assignment
timing (deadlines) and regarding the most relevant assignment conditions for investment
decisions and fostering the single market such as a) methods for determining coverage
obligations, including major transport infrastructures in the EU, as well as powers to impose
mobile network sharing where needed to contribute to cover the most challenging areas where
replication is impracticable and end-users risk being deprived of connectivity; b) more
prominently promote sharing (including licensed shared access) as well as creating the right
conditions for spectrum trading and leasing in secondary spectrum markets through the
introduction of licences duration of at least 25 years, and; and c) injecting greater consistency
with regard to market-shaping measures such as e.g. spectrum blocks, spectrum caps, spectrum
reservation or wholesale obligations based on Article 5 RSPP. Conversely, it could also include
178
For example, neighbouring countries or regions with similar market structures.
179
These provisions were originally proposed in the proposal for a regulation laying down measures concerning the
European single market for electronic communications and to achieve a Connected Continent, and amending
Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012
99
some flexibility for Member States to allow alternative uses of harmonised spectrum subject to
certain conditions where there is no market demand for the harmonised use of the spectrum and
provided that the foreseen harmonised use is generally not pre-empted if market demand
appears. Most operators agree on the need for more consistent binding assignment conditions to
increase investment predictability, and, in particular, to support and ensure objective,
transparent and non-discriminatory treatment of operators. These consistent binding conditions
would also enable transparency and alignment of timing and conditions of licence renewals
(including longer licence duration and use-it-or-lose-it clauses), flexibility to trade, lease or
share, technology and service neutrality limits, refarming conditions, technical performance
and interference mitigation before assignment decisions are taken.
(iii) Establishing a peer-review mechanism within the EU body of competent national
regulators on NRAs´ draft national measures concerning the economic and regulatory market
shaping measures of spectrum assignments. This mechanism would foster common
interpretation and implementation across the EU of those elements of spectrum assignment
which most impact business decisions and network deployment. Such mechanism would
require NRAs to notify to BEREC -in parallel to the national consultation- such measures for
review and issuance of a non-binding opinion.
(iv) This option entails reviewing the current institutional set-up for BEREC (and the
competences of its component NRAs), while reflecting RSPG's enhanced advisory role in the
framework by systematically seeking RSPG advice prior to the adoption of Commission
implementing measures in the spectrum area (excluding technical harmonisation measures), so
that the relevant bodies provide better support and follow a more strategic and EU-oriented
approach when advising the Commission and Member States on spectrum management (see
section 4.5.1).
Option 4- EU harmonisation of spectrum management and establishment of an EU regulator
This option builds on option 3 but establishes more far reaching measures essentially in the
mechanisms to enforce EU spectrum policy. This option envisages:
(i) Establishing an EU regulator in charge of EU-level spectrum issues amongst other
competences;
(ii) Creating an implementing and enforcement mechanism which would give powers to the EU
regulator to review (possibly via a system of notifications) and veto any national assignment
plan that deviates from internal market rules and common EU assignment criteria without valid
justification related to specific national circumstances. Alternatively, the power to veto national
measures could be entrusted to the Commission, with the assistance of the analysis and
recommendation by the EU regulator (close to the solution of the quasi-binding powers of the
EU financial services authorities).
(iii) Giving the Commission and the EU regulator implementing powers to create a pan-EU or
pluri-national assignment procedure for specific bands and to establish its conditions of use.
(see option 4 on Institutional governance).
(iv) Giving the Commission implementing powers to set out criteria for the classification of
regions throughout the EU by similar characteristics (in terms of density, geography, network
deployment, etc.) and for determining the most appropriate obligations or assignment
conditions per class of regions.
4.2.2 Discarded options
This section outlines the options which have been discarded. A more detailed analysis can be
found in Annex 3 on discarded options as well as the IA support studies.
100
 Full harmonisation
 Creation of a single EU spectrum license that sets out pan-European rights of use of
spectrum
 Grant delegated powers to the Commission to further define harmonised conditions for
assignment of spectrum
Member States reject full harmonisation but are open to a more common approach to spectrum
management and at least some could accept a peer review of national assignment plans as well as
a certain level of coordination of conditions and selection processes, in particular as regards
timing.
4.2.3 Impacts
4.2.3.1 Option 1 – Baseline
In option 1 no regulatory intervention to address the problem defined above will be taken.
Economic Impact
This option is by its very nature varied and unpredictable, the lack of coordinated EU action
means it is not possible to pre-determine which Member States will take which decision within
which deadline, thus making the variables of the cost and benefit analysis too wide to determine
an estimate per country. However, it is clear that under this scenario, some EU countries will
miss their DAE targets, and that insufficient provisions will be made to enable the EU to
overcome difficulties faced in the introduction of 5G that is expected to take place from 2020
with commercial availability between 2020-2025. Although under the current framework there
is certain scope for ad-hoc technical harmonisation that is relevant for 5G deployment, the
existing spectrum management tools at the EU level neither provide sufficient regulatory
certainty (i.e. timely spectrum availability and relevant authorisation conditions) nor create the
necessary conditions for investment and innovation.
The largest part of the opportunity cost would fall on those countries that are least advanced in
terms of LTE coverage and market penetration. Taking the population coverage figures reported
in the DESI this includes for instance Bulgaria, Slovakia, Romania, Poland and France, all of
which have coverage figures below 80%. In comparison, impacts of this option on Member
States such as Denmark, Sweden, the Netherlands and Slovenia would be much less pronounced
given their current situation. A DG ECFIN study estimates the impact of spectrum reform in
attaining the DAE targets at 0.3-0.4% of EU GDP180
. In the absence of such reform under Option
1, this translates to an opportunity cost of between EUR 41 and EUR 55bm per year.
In terms of future 5G deployment, this option will not create the right conditions for an
innovative and competitive ecosystem that would underpin full benefits of 5G technologies in
the EU.
Social and environmental impacts
There are four main social impacts that need to be taken into account in all the options:
 Failure to release the potential for employment associated with reaching the DAE targets
in all EU Member States and with successful (i.e. fast and coordinated) deployment of 5G
services (see also Option 3 and 4)
 Increasing divergences in terms of mobile ubiquitous connectivity in those areas that lag
behind in the deployment of 4G and the introduction of 5G services. As a consequence,
we would be likely to see a worsening of the digital divide, with some areas (e.g. large
180
Dimitri Lorenzani, Janos Varga, The Economic Impact of Digital Structural Reforms. See:
http://ec.europa.eu/economy_finance/publications/economic_paper/2014/ecp529_en.htm
101
cities in some Member States) benefiting from at least a limited deployment of 5G
services while the majority of European would not.
 Reduction in road accidents and increase in online shopping as a result of 5G.
Collectively, these are estimated as a potential €12bn per annum from 2025 in a scenario
where 5G is fully deployed (i.e. Option 4)
 Loss of potential in the vertical industries that would benefit most from deployment of 5G
with repercussions for users of those industries (e.g. in e-health, transport, utilities and
automotive sectors). For instance, this could mean lower social inclusion and greater
health inequalities.
The environmental impacts that need to be considered include the potential loss of efficiencies
associated with the introduction of 5G e.g. in terms of smart cities, efficiencies in transport and
automotive and in energy usage (e.g. smart meters). A Commission study on the costs and
benefits of 5G181
has estimated total environmental benefits in the four verticals most likely to
benefit from 5G deployment at 50bn per annum across the EU These environmental benefits
would need to be set against potential environmental costs caused by the need for a greater
number of masts, small cells, etc. Nevertheless, according to the same study, 5G deployment is
estimated to lead to a significant environmental net benefit.
Under option 1, do nothing, these net social and environmental benefits would not materialise or
they would not materialise as quickly as under the other options. Each year of delay in full
deployment of 5G would carry a potential environmental and social opportunity cost of at least
EUR 60bn with it (based only on the quantified estimates in study SMART 2014/0008).
Under this option Member States would retain a large margin of discretion in spectrum
management. This will consequently lead to:
i) a continued divergence in the timing of assignments between early movers and late movers
which will lead to continued issues regarding deployment of new services across the Single
market, especially in border regions. Given this disincentive to act quickly, delays in spectrum
assignments are likely to persist;
ii) the current spectrum rules of the framework including assignment mechanisms and license
conditions (refarming) would not gain in clarity and predictability. Spectrum conditions for
assignment will continue to vary significantly across countries (e.g. license duration, fees, usage
conditions, etc.). Licence durations differ greatly among the Member States, ranging from 15
year license (DE) to indefinite (UK) depriving EU secondary spectrum markets to flourish.
iii) There would still be no real attempts to avoid revenue maximisation being the main objective
of national treasuries when setting spectrum fees.
iv) a continued fragmentation of the Single Market which in turn will mean that equipment
manufacturers and network operators will not benefit from greater regulatory certainty that a
coordinated approach to spectrum conditions would bring. There is, thus, a risk that the 4G
scenario (Europe to lag behind the US and other regions on network and equipment investment)
would be repeated with further significant opportunity costs. Estimates of 5G deployment show
that these costs could be even more substantial given the potential benefits of a coordinated
approach to 5G at European level.
181
Commission Study on the 'Identification and quantification of key socio-economic data to support strategic
planning for the introduction of 5G in Europe' SMART 2014/008
102
4.2.3.2 Option 2 – Non-binding EU guidance for enhancing consistency of spectrum
management in the EU
This option is unlikely to lead to very significant short-term changes in the way spectrum is
managed, it has the potential to "step-by-step" encourage consistency. It does not grant any new
powers to the Commission and the proposed general principles can be implemented by Member
States with a great margin of discretion.
Economic Impacts
The introduction of more specific spectrum-related objectives and principles will create Member
States peer pressure to allow a timely access to spectrum of innovative 5G services across the
EU – in particular, if a minimum territorial coverage (including major transport infrastructure) is
achieved, it will facilitate the deployment of 5G verticals like connected cars. Furthermore, when
general principles applicable to licence fees are set in place, revenue maximization in auctions
will no longer be at the core of auction design. Thus, operators will have more capital available
for investing in high-performance networks to meet the ubiquitous connectivity needs.
Although option 2 creates a frame that promotes best practices, its non-binding nature will not
ensure consistency of radio spectrum management in the Union, such a cautious approach will
not have positive impact on the market (including the promotion of EU secondary spectrum
markets) and, as it is the case of baseline scenario, fails to achieve a single market approach to
spectrum policy and management as spelled out as an objective in the DSM.
There is broad consensus among policymakers, industry and scholars that greater coordination of
spectrum assignments and management is necessary. A recent European Parliament report states:
“Stronger coordination of spectrum management is likely to foster innovation, allowing the
creation of economies of scale at the European level when harmonised spectrum is assigned and
the simultaneous use and reduction of uncertainties to speed up the investments in 4G
networks.”182
. Greater coordination on spectrum is also endorsed in the European Council
Conclusions (June 2016)183
that recognized the need to create right conditions for stimulating
new business opportunities by better coordinating spectrum assignment modalities. On greater
harmonisation of coverage obligations, Parliament did express support to harmonisation in
relation to coverage obligations in the Union during the discussion of the proposal for a
regulation of the European Parliament and of the Council laying down measures concerning the
European single market for electronic communications and to achieve a Connected Continent
(TSM proposal).
This is echoed by main operators and other stakeholders in The Manifesto for a timely
deployment of 5G in Europe184
and a GSMA report which finds that “a key component of the
strategy […] includes proposals for coordinated EU-wide conditions for spectrum policy
management. […] various factors - including the timing and design of spectrum auctions; the
cost, the duration and the terms of licences - all have a major impact on the availability, cost,
quality and reach of mobile broadband services”185
.
In addition, academic research such as Bohlin, Caves and Eisenach (2014) concurs that “the
performance of EU mobile wireless markets would be improved and the consumer welfare
increased by reducing fragmentation among suppliers, thereby allowing them to capture
economies of scale and scope; and, by removing barriers and increasing incentives for
investment and innovation, thereby speeding the deployment of next generation wireless
182
European Parliament, Reforming EU telecoms rules to create a Digital Union, 2016
183
http://data.consilium.europa.eu/doc/document/ST-26-2016-INIT/en/pdf
184
https://ec.europa.eu/digital-single-market/en/news/commissioner-oettinger-welcomes-5g-manifesto
185
GSMA, socio-economic benefits of greater spectrum policy harmonisation across Europe, November 2015
103
broadband infrastructures and accelerating the growth of the mobile wireless ecosystem”186
. In
addition,
Social and environmental impacts
The potential environmental and social impacts of this option are the same as those described
under Option 1. If this option does not lead to voluntary take-up among Member States, the
impacts would be an opportunity cost of at least EUR 60bn per year as of 2025, as a result of 5G
opportunity cost. At the same time, this option provides Member States with flexibility regarding
how to assign spectrum and under what conditions.
In conclusion, if all Member States voluntarily take-up the Recommendation, this would lead to
benefits that are very similar to those under option 3 (see quantification below). In such a
scenario, it is likely that costs would be somewhat lower than under option 3 due to the greater
level of flexibility afforded to Member States under this option which would allow them to tailor
specific elements of timing of assignments and conditions of usage to their national / local needs.
Although a Recommendation lacks the legal certainty of a binding measure, this instrument, if
swiftly adopted could influence important spectrum assignment auctions, such as those for the
700 MHz band which will be assigned for wireless broadband by 2020, in almost all Member
States. The Review, which is currently under preparation, is unlikely to be implemented until
shortly before 2020.
Conversely, if none of the Member States take up the voluntary measures, then this option does
not address the problems described in this section and it does not differ significantly from the
baseline scenario of option 1. Such an outcome would not contribute to reducing fragmentation
across the Single Market, nor would it lead to greater certainty for operators in terms of the
timing and usage conditions of spectrum in future, thus leading to minimal economic impacts
overall.
4.2.3.3 Option 3 – Binding and enforceable rules for enhancing coordination of spectrum
management in the EU with greater focus on adapting spectrum rules to future 5G
challenges
The main difference between option 2 and option 3 is the introduction of a peer review process
to improve coordination and the use of a binding instrument instead of a Recommendation – a
binding measure would introduce an obligation for all Member States to comply and would
therefore provide greater certainty to market operators.
Economic impacts
This option will have a number of positive impacts. First, long-term licence durations of at least
25 years proposed in this option will increase stability and certainty of investments as well as
innovation requirements. In addition, long-term licence duration will create the right conditions
for secondary spectrum markets to flourish in the EU. The potential benefits of spectrum markets
for increasing the efficiency of spectrum allocations is widely acknowledged as spectrum
markets allow a more efficient and dynamic use of spectrum. Allocations of spectrum to
different applications by regulatory interventions are typically static, i.e. the international
negotiations required for spectrum regulation187
apply for many years. Hence changes in traffic
demands, potential applications, user preferences, and available technologies over time and
locations could lead to inefficient use of spectrum resources. The secondary market for spectrum
186
Bohlin, Caves and Eisenach (2014), Mobile Wireless Performance in the EU and the US: Implications for Policy,
Communications and Strategies, no. 93, 1st Q. 2014, p. 35. This research was supported by the GSMA.
187
The World Radiocommunications Conference (WRC), the International Telecommunications Union (ITU)
conference which revises the binding Radio Regulations at least every 3 years.
104
allows a dynamic allocation of spectrum resources by adapting to these variations over time- and
geographic-scales. Thus, new technologies and services have more easily access to spectrum.
Second, setting in place a framework for tailored coverage obligations (that will also include
main transport infrastructures) to be defined by Member States will create the right conditions to
meet the ubiquitous connectivity needs of the DSM to the extent feasible through 5G wireless.
Consistency of assignments and usage conditions will be improved and costs would be reduced
compared with traditional assignments. The aim of this option would be to increase coordination
and speed of assignments188
– though it would not go as far as option 4 in terms of centralising
spectrum governance at EU level.
Thirdly, it will promote a flexible and efficient use of spectrum to respond to future 5G
challenges. A move to a licensing model more extensively based on general authorisations
especially for higher spectrum bands, if accompanied by cross-border harmonisation, would
mean that operators could have the same spectrum all over Europe, with similar conditions. Such
a system would rapidly speed time to market, as there would be no decisions needed (either at
national or EU level) on who gets what spectrum, access to spectrum will be faster for operators.
When answering to the Public Consultation, many market actors and public authorities
considered that a general authorisation regime would foster innovation and competition both for
services and end-devices.
Finally, the binding peer review process of economic and regulatory elements concerning market
shaping aspects of spectrum assignments will also inject greater consistency in the EU single
market, in particular, with regard to spectrum assignment conditions. This would mean in
practice that prior to granting, renewing or amending individual rights to spectrum, NRAs will
have to inform BEREC and the Commission on the market elements of such a measure. BEREC
will issue to the NRAs, together with a copy to the Commission, a public opinion on the draft
measure assessing the impacts to the internal market on the suitability to bring about timely
connectivity investments.
The cost of accessing spectrum, relative to the economic gain it facilitates on the part of right
holders, is likely to diminish through more coherent and replicable assignment processes189
, and
will in any case become more predictable for operational planning by wireless connectivity
providers. In addition, the shift in emphasis towards general authorisations will provide cost-free
access to some spectrum, partly off-set by stricter interference management criteria in technical
standards. The spectrum bands that have been subject to auctions in the past are however likely
to remain so.
Greater consistency on spectrum assignments will ensure Europe's leadership in a synchronized
roll-out of 5G networks and cross-border 5G services which is endorsed by leading telecom
operators, IT vendors and industrial groups in The Manifesto for a timely deployment of 5G in
Europe190
. In total it is estimated that benefits of €146.5 billion per annum will arise from the
introduction of 5G capabilities. €95.9 billion will arise from first order benefits in the four
verticals i.e. Automotive, healthcare, transport and utilities. Benefits are distributed across the
four sectors between strategic (€32 bn) and operational (€12 bn) benefits arising to organisations
within the verticals. Relatively high levels of benefits were also recognised for the consumers of
goods and services (€24 bn) from the verticals. Third party benefits (€27 bn) reach a similar
188
As explained in section 1.1.1.the example of 4G shows that there is a link between the timing of spectrum awards,
market penetration and ultimately economic growth.
189
This does not rule out an increase in national revenues from spectrum, linked to the higher value
attributed by market operators to this public asset made available to them on terms that give them
greater investment certainty over longer periods, and under conditions aligned to the need to
enhance very-high capacity network deployment and wide take-up.
190
https://ec.europa.eu/digital-single-market/en/news/commissioner-oettinger-welcomes-5g-manifesto
105
level of magnitude but they primarily come from one source, the impact of telematics
information for third parties in the automotive vertical.
Table 7 – Benefits for verticals
Verticals
Benefits
Automotive
(€ mn)
Healthcare
(€ mn)
Transport
(€ mn)
Utilities
(€ mn)
Total
(€ mn)
Strategic 25,800 1,100 5,100 775 32,770
Operational 1,800 4,150 3,200 2,700 11,850
Consumer 20,900 207 - 3,000 24,110
Third Party 27,100 72 - - 27,170
Total 75,600 5,530 8,300 6,470 95,900
Source: Study on the Identification and quantification of key socio-economic data for 5G in
Europe SMART 2014/008
One of the key benefits (€10.5 bn) identified in rural areas is the ability of 5G to address the
digital divide and overcome difficulties in providing ubiquitous broadband connectivity in more
rural areas where current fixed networks struggle to provide adequate service. 63 per cent of the
total vertical and environmental benefits of €146.5 bn per annum in 2025 are forecast to arise for
businesses and 37 per cent will be provided for consumers and society.
However, the downside of this proposal will be the time frame of the EU policy-making process.
Given the Commission proposals on the telecom review will likely be adopted by 2018, it will
not be able to influence the assignment of the 700 MHz in a considerable number of Member
States but that of only the second round of other important assignments of spectrum for wireless
broadband, such as the 900 MHz, 1800 MHz and the 2 GHz (LTE bands renewals), as well as of
new bands, with probably quite different characteristics, identified for 5G. Furthermore the peer
review on market shaping elements of national plans for spectrum awards could lengthen the
process in case the initial opinion triggers further discussions between participating authorities,
or between the responsible national authority and its domestic stakeholders.
Social and environmental impacts
As for option 1 and 2, the environmental and social impacts need to be expressed in terms of
potential opportunity costs compared with an ideal scenario of fast and successful 5G
deployment as estimated in the study on the costs and benefits of 5G SMART 2014/0008. Under
this option, 5G is deployed comprehensively and expeditiously in the Union and this would
mean that all social and environmental benefits would materialise as of 2025 as estimated in the
above study. This would lead to a total quantifiable impact of EUR 60bn per annum as of 2025
in the Union.
4.2.3.4 Option 4 - EU harmonisation of spectrum management and establishment of an EU
regulator
This option will unify spectrum policy in the EU. Operators will easily develop their activities
throughout the Union within an EU predictable framework. Under this option spectrum
management will slowly move from a national (MS) to a supranational entity, the European
Union in some bands (ECS bands).
Economic impacts
This option would lead to centralised decision-making which would likely be faster than the
current governance arrangements or the more tightly coordinated procedures proposed under
option 3. In addition, the introduction of a pan-European assignment procedure would create a
106
“true” single market for spectrum resources that cuts across national boundaries. Such an option
would be most likely to allow the European Union to make fast and coordinated spectrum
decisions. Such a centralised procedure would mean that the EU has at its disposal the
governance instruments to be as responsive as possible to spectrum needs in relation to 4G and –
more importantly - for the future introduction of 5G across the EU, which is estimated to give
rise to benefits of 146bn EUR per year (as described in option 3)191
.
However, under this option Member States will not be able to assign spectrum in the way they
consider most appropriate according to their national context and spectrum demand. This would
create some socio-economic distortions as the needs of the variety of spectrum users and
customers are different from country to country. There would be a risk that a pan-European
procedure impedes faster Member States to move forward and potentially sterilizes a number of
(national) spectrum bands for innovative services.
Although option 4 would not remove spectrum as a constraint to the development of different
sectors, it is, however, the option that comes closest to providing the EU with the governance
tools required to address spectrum constraints. In addition, this option will provide a centralised
governance framework and set up an EU regulator that will also have competences on spectrum
management. The impacts of option 4 of the institutional governance are included in section
4.5.3 .
Social and environmental impact
Under this option, like for option 3, 5G is deployed comprehensively and expeditiously in the
Union and this would mean that all social and environmental benefits would materialise as of
2025 as estimated in SMART 2014/008. This would lead to a total quantifiable impact of EUR
60bn per annum as of 2025.
4.2.4 Comparison of options
4.2.4.1 Effectiveness
The effectiveness of non-binding measures under option 2 would depend to a large extent on the
willingness of individual Member States to adopt the relevant guidance. Evidence from existing
attempts to offer ‘best practice guidance’ in certain spectrum management activities suggest that
given diverging interests, take up of such guidance might not be very high, thus undermining the
effectiveness of this option.
Option 3 is most flexible in its design because it combines both voluntary and binding measures.
Thus, this option 3 would be able to focus on the “quick wins” that would enable the Union to
prepare the ground for the deployment of 5G and to deliver the DAE while leaving more
controversial / less essential aspects for non-binding instruments. In addition this option would
allow sufficient flexibility to generate the economies of scale and legal certainty required for
operators who need to invest in mobile networks and infrastructure while at the same time
offering sufficient protection to other spectrum users (including broadcasters192
, unlicensed
users, etc.) and could be implemented in a timescale that is necessary to support the introduction
of 5G.
Option 4 is ultimately most effective in terms of synchronising awards and coordinating license
conditions. However, this may come at the expense of efficiency due to loss of flexibility to
adapt to local conditions. In addition, any impacts would likely only come into effect after a very
191
DG CONNECT study on 'Identification and quantification of key socio-economic data to support strategic planning
for 5G in Europe' SMART 2014/0008
192
Any EU action should comply with the ITU Radio Regulations and the Geneva Agreement of 2006 (GE06) which
protects digital terrestrial television in cross-border territories and could thus geographically constrain mobile
broadband deployment. In addition, the RSPG opinion on long-term strategy for the future use of the UHF band
protects broadcasting services in the sub-700MHz band until 2030.
107
long time, given the need for substantial adaptation in terms of governance processes and for a
long negotiation to develop the required legislation. This would in turn jeopardise the main aim
of the intervention: i.e. facilitating preparation for the development of 5G (expected for 2020).
4.2.4.2 Efficiency
Option 4 is least efficient because it will require substantial reform of current governance
processes and a long time to implement, especially given the likely reluctance of many Member
States and among stakeholders. Option 3 will also require significant governance reform though
the extent of this will depend on the range of aspects that would fall under a binding legislative
instrument. Individual measures could be implemented more efficiently, speeding up the
introduction of the most important factors. The creation of a peer review mechanism which
could issue non-binding advice on economic and regulatory market shaping measures of
spectrum assignments to individual MS and/or NRAs would be an efficient way to pool national
resources and ensure that national authorities remain committed to common goals. Finally,
option 2 would not entail any significant regulatory or enforcement costs nor would it lead to
major changes in terms of spectrum governance.
4.2.4.3 Coherence
All options are coherent with broader EU policy objectives including the DAE, the development
of the DSM and the upcoming development and roll-out of 5G in Europe. In addition, the
options are internally coherent with clear links to the objectives of the review. Option 3 and 4
propose binding and centralised (only for option 4) regulatory instruments which could lead to
the greatest level of internal coherence. Option 2 leaves greater flexibility to individual Member
States and would therefore lead to a greater level of divergence and a lower level of coherence in
terms of outcomes in line with the objectives of the review.
4.2.4.4 Impact on stakeholders
As regards the impact on stakeholders, MNOs (including SMEs), equipment manufacturers and
consumers or business end-users would benefit most from the preferred option (option 3). This
option would lead to more coordinated spectrum assignments and faster deployment of services.
Spectrum is a key enabler of the Digital Single market which benefits cross-border operators and
manufacturers of equipment that can operate at the same time, across the EU. SMEs would
benefit mostly as a result of reductions in the cost of access to spectrum due to a greater
emphasis on general authorisations as opposed to individual licenses (licensed)193
. End-users
(consumers and businesses) would benefit from earlier availability of innovative new services
including deployment of new technology such as 5G, in particular in countries which would
otherwise have delayed deployment of 5G services.
Option 2 would lead to greater uncertainty than Option 3 because it is based on voluntary
guidance rather than a binding instrument. As a result, the eventual impact of this option on
different stakeholders would depend on the extent to which the various provisions in the option
are taken up in different Member States. In practice, take-up would be unlikely to be even across
the Single Market, thus eliminating some of the positive impacts of scale for equipment
manufacturers and for MNOs. Lack of certainty about take-up would mean that investment in
new services / deployment of new technology is lower than under option 3, thus leading to a
more mixed picture for end-users (businesses and consumers). SMEs would not benefit from
reduced access costs to spectrum since there would not be a greater emphasis on general
authorisations. However, SMAs – especially in smaller countries with fewer resources – would
benefit from additional European guidance.
193
The value of access to unlicensed spectrum for new, innovative spectrum usage has been proven recently in the
area of IoT. Actually, in available unlicensed bands, several networks based on various technologies have been rolled
out – amongst others – by SMEs to provide connectivity for IoT applications and allowing other SMEs to implement
smart city applications.
108
Option 1 – baseline would not address the problems identified in this report and therefore leads
to negative impacts for all stakeholders. SMAs and other spectrum users other than MNOs
would not be affected by this option. Finally, option 4 would lead to positive impacts that are
similar to option 3 with the main difference lying in the significantly longer implementation
delay which would mean benefits materialise only after 2020. This delay would be of particular
significant for end-users (consumers and businesses) and for MNOs. For SMAs, this option is
less attractive because it transfers significant powers to the European level and thereby reduces
the ability of national SMAs to adapt spectrum assignments and conditions to local needs.
Effects on stakeholders are summarised in the table below:
Table 8: Effects on stakeholders – spectrum options
Option 1:
Status quo
Option 2:
voluntary
Option 3:
binding
Option 4: EU
regulator
End-users
(consumers and
business)
Negative – late
and
uncoordinated
deployment of
5G and lack of
action on recent
700 MHz
auctions means
businesses are
unable to
develop new
services (e.g. in
transport,
automotive,
healthcare,
utilities etc.)
and consumers
(including
businesses)
don‘t benefit
from innovative
services
Mixed –
while this
option could
be in place
fast, there is a
high risk that
voluntary
measures
would not be
taken-up by
many MS,
leaving the
same results
as under
option 1
Positive – this
option delivers a
coordinated
approach to
spectrum
assignment and
usage across the
EU including for
5G (though it may
come too late to
influence 700
MHz assignments
in some Member
States)
Mixed – while
this option sets up
a governance
structure to
address the
problem, the
complexity of
negotiating this
set-up means it
will come too late
to influence 700
MHz auctions and
will delay 5G
deployment
SMEs Negative – the
impacts would
not differ from
those for other
end-users
Mixed – the
impacts
would not
differ from
those for other
end-users
Positive - the
impacts would not
differ from those
of other end-
users. Swift
implementation of
5G would create
opportunities for
innovation and
entrepreneurship
which would
Mixed - the
impacts would not
differ from those
of other end-
users. Swift
implementation of
5G would create
opportunities for
innovation and
entrepreneurship
which would
109
benefit SMEs in
particular.
General
authorisations
could provide
greater
opportunities for
SMEs to gain
access to
spectrum which
(as regards the
main ECS bands)
is now only
accessible to large
companies with
the financial
power to purchase
exclusive rights
(e.g. MNOs, etc.)
benefit SMEs in
particular
MNOs Negative – this
option risks
repeating the
4G scenario
where Europe
lagged behind
other regions
for 5G with
insufficient
investment
Mixed –
while this
option could
be in place
fast, there is a
high risk that
voluntary
measures
would not be
taken-up by
many MS,
leaving the
same results
as under
option 1
Positive – this
option delivers a
coordinated
approach to
spectrum
assignment and
usage across the
EU including for
5G (though it may
come too late to
influence 700
MHz assignments
in a number of
Member States)
Mixed – while
this option sets up
a governance
structure to
address the
problem, the
complexity of
negotiating might
delay 5G
deployment
Other spectrum
users (e.g.
broadcasters,
PMSE, etc.)
Nil – this option
would continue
the current set-
up which
engenders
significant local
variability,
continued
erosion of
spectrum for
some users and
uncertainty
about future
spectrum
availability
Nil - This
option would
likely not
differ
significantly
from option 1
Uncertain - This
option provides a
greater level of
regulatory
certainty and
consistency across
MS, impacts on
other spectrum
users would
depend on
specific decisions
taken by but the
peer review
mechanism could
ensure that local
needs of different
spectrum users
continue to be
fully taken into
account.
Uncertain - This
option provides
the greatest level
of regulatory
certainty –
impacts on other
spectrum users
would depend on
specific decisions
taken by the EU
regulator. There
would be less
scope for
adaptation to local
needs under this
option.
110
4.2.4.5 EU added value
As it has been discussed above, Member States acting individually cannot capitalise the full
potential of spectrum resource – the deployment of 5G will require a coordinated approach to
ensure sufficient and adequate spectrum is made available on appropriate terms across the EU.
At the same time, the ability of Member States to adapt their spectrum decisions to the local and
national context remains important. Hence, while binding instruments may be required in some
instances (e.g. timing of assignments and certain usage conditions), it is not clear that this should
be the case for all aspects of spectrum governance. Indeed, care should be taken that
centralisation of decision-making is proportionate and limited to those areas with a clear cross-
border element. For instance a fully centralized spectrum management in the EU, as foreseen in
option 4 may be disproportionate given the very nature of spectrum as a natural national asset –
the issue can perhaps be addressed sufficiently at a Member State level without requiring full
harmonisation of spectrum management at EU level.
4.2.4.6 Summary table comparing spectrum options
o Effectiveness Efficienc
y
Coherence EU added value
Ultra
-fast
cover
age
Ultra
-fast
take-
up
Univer
sal
availa
bility
Busine
ss
Access
Cost
complexit
y and
enforceab
ility
Disrupti
on
Interna
l
Extern
al
Subsidia
rity
Proporti
onality
O1
Status
quo
0 0 0 0 0 0 0 0 0 0
Equipment
manufacturers
Negative – this
option repeats
the 4G scenario
(late &
uncoordinated
assignments)
for 5G and
therefore fails
to provide legal
certainty and it
fails to
capitalise on the
size of the
Single Market
Negative –
this option
risks
repeating the
4G scenario
for 5G and
therefore fails
to provide
legal certainty
and it fails to
capitalise on
the size of the
Single Market
Positive – this
option provides
greater regulatory
certainty and
consistency to
manufacturers
proving them with
incentives to
invest now in
order to serve the
Single Market
Positive – this
option provides
greater regulatory
certainty and
consistency to
manufacturers
providing them
with incentives to
invest now in
order to serve the
Single Market
111
O2
non-
binding
0/+ 0/+ 0/+ 0/+ 0 0/+ 0 0 + +
O3
binding
++ ++ + ++ ++ + + + ++ ++
O4 EU
regulat
or
++ ++ + ++ + ++ ++ + -- --
4.2.5 The preferred option
The Commission considers that option 3 on spectrum best fulfils the overall and specific policy
objectives of the review of the telecom framework as presented in section 3.
This option does involve some reduction in the current degree of national flexibility with regard
to spectrum assignments. The pay-off for this loss of flexibility is faster spectrum assignments
(especially in countries that are currently not among the fastest) and more consistent obligations
and usage conditions across the Single Market to support network deployment. In parallel,
greater consistency of assignments, particularly on long-term licence conditions of at least 25
years, will foster spectrum trading and leasing and pave the way for the establishment of an EU
secondary spectrum market. These effects would not be achieved effectively with a non-binding
instrument which would rely on Member States to take-up voluntary guidelines. Furthermore, a
peer review mechanism will lead to further alignment in market shaping elements of spectrum
assignments while maintaining national margin of assessment or detailed implementation
aspects.
This option leads to a coordinated approach to spectrum management that allows a timely
deployment of 5G in the Union while enabling the integration between technological innovation
and access to ubiquitous and VHC networks. In total it is estimated that benefits of €146.5
billion per annum will arise from the introduction of 5G capabilities. €95.9 billion will arise
from first order benefits in the four 5G verticals i.e. Automotive, healthcare, transport and
utilities.
4.3 Universal Service
4.3.1 Options
Option 1 - No change
This option is based on the Universal Service policies in place covered by the Directive on
Universal Service and Users’ Rights and reflects possible developments of these in the absence
of new EU-level action.
The aim of universal service is currently to provide a safety net ensuring that the most vulnerable
in society as well as those in more remote areas could receive basic electronic communications
services. At the time of the introduction of the USD in 2002, public pay phones and physical
directories were still in widespread use and the need to have access to telephony services at a
fixed location was considered a vital objective, alongside the more forward-looking concern that
users needed access to a connection that permitted a non-broadband 'functional Internet access’.
The Universal Service provisions cover connectivity and services, as well as the affordability of
tariffs and accessibility for disabled users. They permit financing of any ‘net cost’ of USO either
through a levy on operators or through public funds.
In the context of this option, the current situation would remain unchanged. The Member States
will likely take increasingly different approaches in the universal service obligation by
unilaterally removing outdated services from the scope on the national level. The consistency
112
and coherence of the universal service regime across the Member States will dwindle without a
common approach towards the inclusion of broadband in the universal service scope. The
sectorial financing mechanism will continue to be a possibility for financing. The costs of
financing the universal service obligation in the Member States would likely remain the same,
depending on possible national approaches.
The majority of Member States and regulators agree that universal service has been effective
and efficient in safeguarding end users from the risk of social exclusion, while most of the
operators see little or no impact and efficiency at all.
Option 2 - Minimum adaption to trends
Only Public Access Telephony Services (PATS) and the provision of functional Internet access,
are mandatory at EU level and can be financed from a universal service funding mechanism
supported by the sector. However, Member States will still have the flexibility to add old legacy
universal services (directories/directory enquiries and public pay phones) at national level. If a
Member State decides that other services shall be universally available in its territory, it can do
so financed from the state budget under observance of State aid rules.
In the public consultation, most market actors, Member States and consumer organisations
submit that obligations related to disabled end-users should be incorporated in horizontal law.
Respondents stress that any obligations should apply equally to all market players. Through the
broader implementation of the provisions of Article 23a of the Universal Service Directive, a
wider choice of services and tariffs for disabled users could be achieved.
Option 3 - Incremental adaptation to trends with the focus on broadband affordability
This option focuses the scope of universal service obligation at EU level on affordability of
voice communications and basic broadband. As in option 2, Member States have the flexibility
to keep the old legacy universal services within the scope of their national obligation, but this is
not anymore mandated at EU level. At the EU level, broadband would be defined by referring to
a functional internet access connection defined on the basis of a minimum list of on-line services
(web-browsing, eGovernment, VoIP etc.) that should be accessible. Affordability for the services
would be at least at a fixed location, thus allowing Member States the possibility to include
affordability measures by mobile.
Broadband being a basic infrastructure, it provides benefits for the society and economy as a
whole. Affordability measures would be specified at national level and could include special
tariff options, direct consumer support or a combination of both. Availability will be primarily
promoted by other policy tools (incentives to private investment, state aid, spectrum-related
coverage obligations, etc.). Only in exceptional circumstances, after demonstration of market
failure and after using other public policy tools, Member States would still have the flexibility to
include the availability (i.e. deployment) of basic broadband in the universal service scope.
This option also requires a revision of financing mechanisms. Taking into account a broader
range of beneficiaries (beyond the telecom sector) of universal broadband, sectorial funding
needs to be reassessed. Furthermore, sectorial funding represents an administrative and financial
burden for stakeholders causing market distortions and uncertainty. Taking the above into
account, financing though general budget is the more equitable and least distortive way of
funding the provision of universal service. Member States would be free at national level to
maintain or add services, funded from the public budget.
The public consultation showed that the vast majority of operators consider that the review
should be the opportunity to redefine or completely reconsider the universal service regime
(including its financing), with many claiming that it has become obsolete. Member States
mostly claim the need to maintain a universal service scheme, with flexibility at Member State
level on funding and on broadband. With regard to the inclusion of broadband within the scope
113
of universal service, while most operators and their associations have no doubts about the
positive impact of broadband on social and economic life, they claim that USO is not the right
instrument to foster broadband deployment. In any case, if broadband were to be included in the
US regime, it would have to be revised substantially. Respondents supporting both in and out
options (mostly Member States and regulators) submit that Member States should retain the
flexibility to make the choice at national level. Most operators and their associations, several
Member States and regulators consider that broadband under universal service bears high risks
of market distortions and cost inefficiencies. In particular, industry funding is considered too
distortive.
Option 4 - Significant adaptation to trends and connectivity objectives
This option is similar to option 3, but includes both affordability of broadband at least at a fixed
location and availability (in terms of coverage obligation) of broadband at a fixed location, and
it would also exclude PATS (from both affordability and availability measures)194
. The exclusion
of PATS is possible due to widespread availability and affordability of mobile voice and the
tendency to fixed-mobile substitution. It can be also complemented by special accessibility
measures (i.e. for disabled users), adopted in addition to the horizontal accessibility measures
and applicable to all providers (not just the designated universal service provider). Alternative
financing mechanisms would be introduced as under option 3. In the public consultation, most
market actors and regulators agree that universal service is not the right instrument to foster
very high-capacity connectivity for public places and therefore should not be linked to
connectivity objectives.
4.3.2 Discarded options
This section outlines the options which have been discarded. A more detailed analysis can be
found in Annex 3 on discarded options as well as the IA support studies.
 Connectivity to a network at all locations
 Terminate the universal service regime
 Provision of very high-capacity broadband networks in public areas and places of specific
public interest as an addition to Options 3 and 4
 Changing the national financing regime in addition to other financing options under options
3-4
 Changing the financing regime in addition to other financing options under Options 3-4 by
setting national user levies
4.3.3 Impacts
Universal service policy should specifically seek to support access to affordable connectivity,
especially for vulnerable end-users, at a quality which reflects market and technological
developments and enables societal and economic inclusion. Another key aim is to streamline and
simplify the system (including associated financing arrangements) in order to reduce costs and
inefficiencies and ensure the burden is fairly shared.
4.3.3.1 Option 1 No changes
Economic, social and environmental impacts
Lack of adequate changes to the universal service scope might contribute to hamper the
competitiveness of the electronic communications industry, possibly affecting the development
194
Public Access Telephony Services
114
of online markets and the full adoption of services by the weakest parts of the population.
Persisting digital divide will increase (risk of) inequality in participation in the Information
Society and social exclusion.
The current cost of the universal service provision can be considered relatively modest as a
significant number of the services is provided by the market and in some countries no universal
service providers were designated (Germany, Luxembourg and Sweden).195 To date, in about a
half of Member States universal service providers have requested compensation for an unfair
burden196, and in countries where the net cost of the universal service provision has been
calculated, it has been lower than estimated by the provider in advance and decreasing over
years.197 For instance, in Spain where the net cost has been calculated since 2003, it has been
steadily dropping, from 120,4 mln euro in 2003 to 19,5 mln euro in 2013 (the last year when the
numbers are available) – despite the expansion of functional Internet access to include 1Mbps
broadband.198 Yet, general assessment and comparison of the net cost across all Member States
is difficult because it varies greatly from country to country due to differences in the universal
service scope at the national level and size of the territory. The Member States' net cost ranges
from under 0,5 mln euro to over 30 mln euro a year199
. Stakeholders have also criticized the
overall administrative burden that arises from the current universal service regime for NRAs and
for operators in the electronic communications sector.
4.3.3.2 Option 2 Minimum adaptation to trends
The scenario where pay phones, directory and directory enquiry services are excluded from the
Union-level universal service scope affects not only electronic communications providers and
end-users, but also Member States and NRAs.
Economic, social and environmental impacts
The light adaptation of the universal service scope to technological and market trends is unlikely
to improve the prognosis presented in the baseline scenario, because the suggested changes do
not strike at the heart of the problems, namely the taking into account the increased connectivity
and development of NGA networks and risks of digital divide, the relationship between ECS and
OTT providers, lack of legal certainty and coherence. The exclusion of certain services such as
pay phones, directory and directory enquiry services will reduce the costs incurred by the USO
operators and NRAs in calculating the amounts due for the imposition of the USO status. The
social impact of excluding legacy services (public pay phones, directory and directory enquiry
services) from the universal service scope is likely to be small, since these needs are already
served effectively by other means, such as mobile communications, online directories and
various search facilities, as explained in the problem definition. Furthermore, the use of public
pay phones in the EU is very low. Environmental benefits will manifest themselves only in those
Member States that introduce broadband speeds in the functional Internet access at the national
level and, thus, will be able to improve energy efficiency and reduce pollution and carbon
emissions. The scale effects of such improvements will be limited.
195
See Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 23-25.
196
However, another reason for a low number of requests for compensation is the complexity of the compensation
procedure and uncertainty about the actual payment.
197
See country reports in Commission Staff Working Document to the Report on the Implementation of the EU
regulatory framework for electronic communications, SWD(2015) 126 of 19.06.2015.
198
See the press release of the Spanish regulator CNMC of 16.03.2016:
http://www.cnmc.es/CNMC/Prensa/TabId/254/ArtMID/6629/ArticleID/1689/El-coste-neto-del-servicio-universal-de-
telecomunicaciones-en-2013-ascendi243-a-195-millones-de-euros.aspx .
199
On basis of country reports in Commission Staff Working Document "Implementation of the EU regulatory
framework for electronic communications – 2015. SWD(2015) 126.
115
4.3.3.3 Option 3 Incremental adaptation to trends focusing on broadband affordability
This option is likely to have positive implications for a part of end-users as it is aimed at the
extension of the use of broadband access to a number of enhanced services and information and,
therefore, to reduce the number of citizens without a broadband connection. This option relies on
the consideration that basic broadband (>256 kbps, and in reality at least 2 Mbps, through a mix
of technologies) is currently available to all European citizens as mentioned in section 1.
Economic, social and environmental impacts
Promotion of broadband affordability within the framework of universal service policy is likely
to improve vulnerable citizens’ access to a number of essential e-services (eGovernment, VoIP,
ebanking etc.), to enhance their exercise of fundamental rights and participation in the
Information Society. The socio-economic analysis200
shows that those on low incomes, elderly,
those that are less mobile or less able to leave home due to carer responsibilities are more prone
to social exclusion. Broadband connection enables faster access to services, offers opportunity of
instant communication with friends and family and access to information that are available
around the clock and at lower costs as it does not incur travel expenses. These online activities
develop or improve sense of community, reduce isolation of individuals and communities and
support efforts to enhance equality and digital inclusion, which ultimately address social
exclusion problems.201
Broadband provides economic and financial benefits on individual and societal levels. For
individuals, a broadband connection offers new possibilities for improving (or receiving)
education and professional skills, thus improving his/her chances of employment and self-
employment. Households with a broadband connection enjoy financial savings due to the
opportunity to shop online, pay bills, taxes and use other services.202
Also growth and
competitiveness of the industries benefitting from broadband will increase due to ICT-related
efficiency and productivity resulting both from ICT and a more skilled workforce.203
National
affordability measures of direct consumer support will work as demand-support measures and
may stimulate broadband market development. The changes to the financing mechanism will
lead to less distortions of the competition between ECS and OTT providers.
Extending the affordability for the services to at least at a fixed location, would allow Member
States the possibility to include affordability measures by mobile. This approach on affordability
is supported by the fact that mobile phone ownership is much higher than fixed line telephone
access with 93 % of households in the EU having access to a mobile phone204
and that wireless
technologies can already provide connectivity at virtually all locations relatively efficiently. The
data shows that fixed voice telephony is not a preferred communication service, and the
availability and affordability of mobile phones can provide a more adequate basis to combat
social exclusion, also due to special designs for disabled users.205
The cost of the provision of broadband affordability depends on the exact definition of the
connection, but is likely to be low due the narrow and precise universal service scope. When
calculated as the cost of social tariffs, it is less than social tariffs for current universal service and
is from min. 147.2 mln euro to max. 436.2 mln euro per year (at the 2014 price level).206
The
overall cost of specifically attributing certain universal service implementation responsibilities to
200
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 56-57.
201
Analysys Mason and Tech4i2 (2013). Socio-economic impact of bandwidth. SMART 2010/0033, pp. 49-51.
202
Analysys Mason and Tech4i2 (2013). Socio-economic impact of bandwidth. SMART 2010/0033, pp. 52-54.
203
Analysys Mason and Tech4i2 (2013). Socio-economic impact of bandwidth. SMART 2010/0033, pp. 38-42.
204
Special Eurobarometer 438. Report. E-Communications and the Digital Single Market. May 2016, p. 45.
205
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 89 – 90 and 36-38.
206
The calculation methodology and data can be found in Tech4i2 et al. (2016) Review of the scope of universal
service, SMART 2014/0011, Annex, pp. 121-123.
116
NRAs is likely to be neutral. Many NRAs already have significant responsibility over policy
and/or technical aspects of USO.
The increased use of broadband facilitated by this option is likely to have positive implications
on reduction of greenhouse gas emissions, air pollution and waste207
. By fostering the adoption
of digital services, eCommerce, teleworking and other activities that generate less pollutants,
increase energy efficiency of necessary real-life activities and reduce transportation needs,
broadband contributes to the creation of sustainable, energy-productive and low-carbon
economy.208
A study of five EU Member States by the Global e-Sustainability Initiative (GeSI)
found that broadband-enabled typical household activities result in a reduction of 39 mln
tonnes of annual carbon dioxide emissions.209
4.3.3.4 Option 4 Significant adaptation to trends and connectivity objectives
Economic, social and environmental impacts
While impacts of this option for social inclusion, participation and reduction of digital divide are
significant, it has serious economic drawbacks. The total costs of providing fixed wired (xDSL,
cable and FTTx) broadband connections (excluding affordability costs) of 4 Mbps to all
households in the territory, has been estimated to be 6.8 billion euro for EU-27 in 2015210
. While
costs for some of the Member States with very high penetration and subscription levels (Malta
and the Netherlands) are negligible, Member States with large territory, difficult terrain and
extensive rural areas will have to bear a disproportionately high cost (for instance, it has been
estimated that Poland needs 1.3 billion euro).211
The provision of universal service is without constraints on the technical means and it is obvious
that mobile wireless and satellites are viable alternative or complementary technologies and the
required investments would likely be less212
. Furthermore, if access has to be requested it is
probable that not all unconnected households will make the request; this could considerably
reduce deployment costs213
.
Further drawbacks of using the universal service instrument for broadband deployment refer to
the high risk of market and competition distortions and cost deficiencies. Using universal service
funds to deploy broadband may discourage private investments resulting in crowding-out effects
and, potentially, delaying expansion of VHC networks. If sectorial funding is used, financial
transfers between competitors may strengthen the dominant position of the designated universal
service providers, especially the vertically integrated ones. This will not only damage
competition in the market, but also distort price levels and negatively impact affordability of
services.214
It is therefore advisable to use other policy tools instead of universal service,
207
Matthews, H.S., Hendrickson, C.T. and Soh, D. (2001) Environmental Implications of e-Commerce and Logistics.
DOI: 10.1109/ISEE.2001.924525 .Available at: http://ieeexplore.ieee.org/xpls/abs_all.jsp?arnumber=924525 .
208
See findings of the study by Global e-Susutainability Initiative and Boston Consulting Group (2012). GeSI
SMARTer 2020: The role of ICT in driving a sustainable future:
http://gesi.org/assets/js/lib/tinymce/jscripts/tiny_mce/plugins/ajaxfilemanager/uploaded/SMARTer%202020%20-
%20The%20Role%20of%20ICT%20in%20Driving%20a%20Sustainable%20Future%20-%20December%202012.pdf
209
See GeSI, Yankee Group and American Council for Energy-Efficient Economy (2012). Measuring the energy
reduction of selected broadband-enabled activities within households:
http://gesi.org/files/Reports/Measuring%20the%20Energy%20Reduction%20Impact%20of%20Selected%20Broadban
d-Enabled%20Activities%20within%20Households.pdf .
210
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011
211
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 72-73.
212
However, these technologies can be affected by issues like data caps, the shared nature of a wireless channel,
weather-dependence and, in the case of satellite, signal latency and end-user equipment costs. For more information
on general wireless connection scenarios in the EU, see Analysys Mason (2016)
Costing the new potential connectivity needs.
213
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 80 (Assessment of
different modalities of how broadband should be provided within the Universal Service Regime)
214
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, p. 75.
117
focusing on incentivising commercial investment, coupled with targeted state aid, where market
failures persist, and using pro-competitive and technologically neutral project models in specific
areas.
Environmental impacts of this option are similar to Policy Option 3. The positive implications
will increase with a greater amount of people adopting broadband and making use of teleworking
and telecommuting, which are responsible for the largest energy savings and reduction of carbon
emissions.215
4.3.4 Comparison of options
4.3.4.1 Effectiveness
Neither Option 1 nor Option 2 can be considered to be sufficiently effective to achieve the
objectives of universal service policy because they do not prevent social exclusion and inequality
avoiding the necessary change in scope needed to offer a minimum of communications services
reflecting technological and market developments.
Options 3 and 4 suggest modernisation of the universal service scope that takes into account the
ongoing connectivity trends and shall provide an improved access to and use of the broadband
connection as an important asset of participation in social and economic life. Options 3 and 4
also foresee an appropriate adjustment of the financing mechanism that would allow for a fair
distribution of costs and benefits of broadband for all stakeholders. By comparison to Option 4,
Option 3 provides for a greater flexibility at the national level.
4.3.4.2 Efficiency
Option 3 is the most cost effective as the calculated cost lies below the cost of social tariffs for
telephone subscription (1,07% v 1,95% of disposable income respectfully216). The cost of social
tariffs if affordable broadband connection were included in the universal service scope is
estimated to be between 147 mln euro and 436 mln euro per annum for EU-27. This is at a
similar level to social telephony tariffs currently offered under national universal service
schemes.217 If combined with public funding, Option 3 offers an optimal combination of low
cost and equitable distribution of their financing.
The current financing of universal service obligations is either through public funding, through
financing with contributions from the providers of electronic communications networks and
services (sectorial funding mechanism) or a combination of both public and sectorial funding.
For the Member States that use sectorial funding, the removing of sectorial contributions would
mean adding the net costs of universal service to the public budget. However, the mandatory
services at EU level would only cover affordability while the current scope also includes
availability. Furthermore, the exclusion of redundant services at the EU level may reduce the
financial burden. The net costs of providing affordable broadband would be an addition to the
public budget that should be assessed in the wider context of allowing participation in the digital
economy and society.
Option 4 is the most expensive one. It is estimated that already in 2015 the cost of connecting
(fixed wired technologies218
) all unconnected households in EU-27 amounted to at least 6.8 bn
215
See GeSI, Yankee Group and American Council for Energy-Efficient Economy (2012). Measuring the energy
reduction of selected broadband-enabled activities within households:
http://gesi.org/files/Reports/Measuring%20the%20Energy%20Reduction%20Impact%20of%20Selected%20Broadban
d-Enabled%20Activities%20within%20Households.pdf .
216
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, Annex, p.120.
217
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 87-91.
218
Other technologies, such as mobile wireless and satellite, are good complements and could influence the cost
calculations.
118
euro for 4 Mbps broadband connection (primary basket219
). The cost increases considerably with
higher speed connection220:
 Basket 2 (4.6 Mbps): 9.6 bn euro
 Basket 3 (8.3 Mbps): 15.6 bn euro
 Basket 4 (21 Mbps): 46.9 bn euro
Extrapolated to the connectivity needs of 2020, the investment necessary to overcome the
broadband inclusion gap to access the four baskets of online services in EU27Member States
results in221:
 Basket 1 (9.6 Mbps): 13.7 bn euro
 Basket 2: (11.9 Mbps): 17.1 bn euro
 Basket 3: (21.5 Mbps): 32.5 bn euro
 Basket 4: (54.5 Mbps): 143.8 bn euro,
with the financial burden falling disproportionally on the population of scarcely populated
Member States with large territory and difficult terrain.
The amount of funding can be adjusted by limiting the provision of broadband only to those
households that reasonably request broadband access and to primary location, as currently
required by the Universal Service Directive (see Recital 8 and Article 4 (1) USD). For such ‘on
request’ households the investment needed in 2020 is estimated at:222
 Basket 1 (9.6 Mbps): 7.5 bn euro (difference – 6.2 bn euro)
 Basket 2: (11.9 Mbps): 9.4 bn euro (difference – 7.7 bn euro)
 Basket 3: (21.5 Mbps): 17.8 bn euro (difference – 14.6 bn euro)
 Basket 4: (54.5 Mbps): 79 bn euro (difference – 64.7 bn euro)
Furthermore, the provision of universal service is without constraints on the technical means and
it is obvious that mobile wireless and satellites are viable alternative or complementary
technologies and the required investments would likely be less, but subject to certain
limitations223
.
Options 1 and 2 – although exhibiting the falling net cost of the universal service provision –
represent a financial burden for the electronic communications industry. As indicated in Section
4.3.3, maintenance of payphones in the EU is estimated annually at 1 billion euro, which is a
large cost considering the very infrequent use of the facility. Usage and cost of the provision of
comprehensive directory and directory enquiry services is difficult to estimate, but the available
data suggest that commercial provision by the market is viable and sufficient.224
219
In the study "Review of the scope of universal service, SMART 2014/0011" a methodology focusing on four
baskets of online services was developed. The primary basket was comprised of online services, which provide social
and digital inclusion, used by the majority of consumers. Three additional baskets of online services were developed,
which did not meet the requirement for use by the majority of consumers required by Annex V of the Universal
Service Directive.
220
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, p.p. 72-73.
221
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, p. 74.
222
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 80-81.
223
For more information on general wireless connection scenarios in the EU, see Analysys Mason (2016)
Costing the new potential connectivity needs.
224
Tech4i2 et al. (2016) Review of the scope of universal service, SMART 2014/0011, pp. 38-42.
119
4.3.4.3 Coherence
By comparison to Options 1 and 2, Options 3 and 4 are more strongly aligned with other policies
of the EU in the field of the Information Society and the EU Charter of Fundamental Rights due
to the significant revision of the scope. Broadband has developed into a basic platform for
information and communication services and activities, and ensuring access to and use of it will
facilitate full participation of the citizens in the social and economic life of the society.
Broadband-based services and applications offer innovative possibilities for communication that
may improve social and economic opportunities of people with disabilities and elderly people
and support their independence and integration.
Options 3 and 4 are more coherent with competition and investment policies as they improve the
level playing field for ECS and OTT providers by reforming the financing arrangements for
universal service and enhancing legal certainty.
Option 4, however, may collide with other policies fostering broadband deployment and with
State aid rules because it foresees an instrument of far-reaching public support of broadband
availability. By contrast, Option 3 suggests such possibility of flexibility for Member States to
include the availability element only in exceptional circumstances, after demonstration of market
failure and after using other more appropriate public funding tools such as state aid measures on
broadband deployment, spectrum coverage conditions, regulatory incentives for investment, e.g.
it might be reserved for more isolated cases, not easily captured by state aid schemes, or in the
final uncovered percentile of population under spectrum coverage conditions.
4.3.4.4 Impact on stakeholders
See also table presented in Annex 12 specifying in detail impacts on stakeholders for each policy
option.
While Options 1 and 2 seem to be most neutral in their impact on stakeholders, they fail to
address the core problems that the universal service regime is supposed to solve, i.e. provision of
a safety net for disadvantaged users in order to reduce the risk of social exclusion and digital
divide. Additionally, the sectorial funding mechanism of universal service that is currently used
by the majority of Member States creates economic burdens, and legal uncertainty with regard to
compensation, especially for new entrants. By contrast, Options 3 and 4 modernise both the
universal service scope and funding and score better in addressing the challenges described. At
the same time, Options 3 and 4 are sufficiently flexible and leave Member States enough room to
adjust the universal service scope to their national circumstances. The reformed financing
alleviates financial and administrative burden for all types of providers and operators. However,
inclusion of available broadband in the universal service scope (Option 4) is likely to have an
adverse effect on alternative providers and new entrants by comparison to the incumbents
because it might crowd out investments, distort competition and price levels and strengthen the
market position of incumbents.
4.3.4.5 Summary table comparing Universal Service options
120
Table 9 - A comparison of options for universal service
Effectiveness Efficienc
y
Coherence EU
valu
e
add
VHC
cover
age
VH
C
take
-up
Univ
ersal
avail
abilit
y
Compe
tition
(infra/s
ervice)
Fosters
cross-
border
service
s/entry
Cost/co
mplexity
/
enforcea
bility
Disru
ption
from
status
quo
(stabi
lity)
Inter
nal
coher
ence
Exter
nal
coher
ence
Addi
tiona
l
impa
ct vs
MS
actin
g
alone
Option
1:
status
quo
0 0 0 0 0 0 0 0 0 0
Option
2:
Light
adjust
ment
0 0 0 0 0 0 - -
Option
3:
broadb
and
afforda
bility
0 0 + + + + + + +
Option
4:
Broadb
and
availab
ility
+ + + - + - + - +
4.3.5 The preferred option
The Commission considers that option 3 on Universal Service Obligation is the best option to
achieve the overall and specific objectives of the review of the telecom framework as presented
in section 3.
No macroeconomic effects could be quantified through modelling for this policy area.
4.4 Services and end-user protection
4.4.1 Options
Options under this header will be structured around the following topics: services; must carry
and obligations applying to electronic programme guides (EPG obligations) and numbering.
121
4.4.1.1 Services:
Option 1 – Baseline scenario
Under the current framework the service policy is primarily aimed at protecting consumer
interests including disadvantaged and disabled end-users. Consumer protection obligations are
covered by the Directive on Universal Service and Users’ Rights, including provisions on:
A. Obligations to facilitate switching including 1 day number portability obligations
B. Sectorial contractual obligations, including conditions on contract contents, contract duration
and contract termination
C. Provisions concerning transparency on tariffs and other conditions
D. Ensuring equivalence in access and choice for disabled end-users
E. Provisions concerning transparency on Quality of Service and potential minimum QoS
requirements
The types of services covered by these provisions include all electronic communications
services’ (ECS) commonly provided over networks including telephone calls, messaging and
Internet access services. Electronic communications services are also subject to obligations
concerning security and integrity,225
while privacy is covered by a separate Directive,226
which is
subject to a separate review.227
General legislation e.g. on consumer protection also applies to all
ECS.
Under this option no change will be introduced to the regulatory framework relating to services,
thus this scenario reflects possible developments in the absence of new EU-level action.
Option 2 – Streamlining of current provisions and addressing certain new challenges without
modifying the scope of the Regulatory Framework
Option 2 would review the substantive provisions applicable to ECS providers while keeping the
current scope of the framework, mainly based on the definition of ECS, including the notion of
"conveyance of signals". Only telecom operators would remain subject to obligations and enjoy
the rights provided by the regulatory framework as it is the case today.
Provisions which have become obsolete due to new legal, market and technological
developments would be repealed. This includes the sector-specific provisions of the regulatory
framework which overlap with general EU consumer law, for instance general consumer law
rules on information requirements in contracts included in the Consumer Rights Directive.
However, as general consumer law requirements would still be complemented with provisions
that are sector specific the reduction of overlapping between sector specific and consumer
protection legislation is likely to be rather limited, as in many cases it seems indispensable to
keep certain sector specific provisions.
Provisions not covered by horizontal Union legislation will be maintained where they are still
needed, repealed where no longer needed or adapted to respond to new challenges. This would
for instance cover issues such as an adaptation of the rules to the increasing importance of
bundled offers and possible barriers to switching: current rules have been very effective in
empowering consumers to benefit from competition between voice telephony service providers
and they should be adapted to the new context in order to continue fostering competition and
consumers' choice. Other adaptations would include better readability of contracts and the
possibility to impose an obligation on operators to provide consumption monitoring tools. In
addition, this option would extend the already existing mandate to the Commission to impose
technical implementing measures with the possibility to adopt delegated acts necessary to ensure
the compatibility, interoperability, quality, reliability and continuity of emergency
communications in the Union with regards to caller location, call routing to the Public Safety
225 Article 13a Framework Directive
226 Directive 2002/58/EC as amended by Directive 2006/24/EC and Directive 2009/136/EC
227 See https://ec.europa.eu/digital-single-market/en/news/public-consultation-evaluation-and-review-eprivacy-
directive
122
Answering Point (PSAP) and access for disabled end-users. Only such an approach can ensure
cross border deployment and functioning of technical solutions.
As indicated in the problem definition, many stakeholders (BEREC, several Member States,
most operator associations, most incumbents, some cable players, all user associations and some
broadcasters) referred in the public consultation to the need to review the current definition of
ECS, owing to the increasing uncertainty on the scope of the definition of ECS related to
"conveyance of signals", the inconsistent regulatory obligations for similar services and the
convergence of communications services. Only a minority of stakeholders opposed to a review
of the definition, arguing that the concept of ECS has proven itself and that changes could create
regulatory, legal and investment uncertainty.
Option 3 – Internet Access Service (IAS) only
This option would limit the application of sector-specific legislation to internet access services
(IAS) only, adapted to the increasing importance of bundled offers, whereas communications
services that run on top of IAS would not be subject to such legislation. It is based on the idea
that in an environment migrating towards all-IP, most communications services will be data-
based. Hence, the IAS is likely to become the end-users' main gateway to access the internet and
most communications services, resulting in a high unilateral dependency on the end-user side,
which would justify the application of sector-specific rules to IAS.
It would rely on the definition of IAS in Article 2(2) of the Telecoms Single Market Regulation.
This option includes the streamlining exercise of Option 2, which would identify only those
rights and obligations (including end-user protection rules) which are relevant for IAS: Some
sector-specific rules (e.g. on contract duration or switching) would be maintained while others,
which are relevant for IAS and essential to end-users, such as rules on transparency, will be
adapted to market and regulatory developments. It would include a non-discrimination provision
guaranteeing the freedom of end-users to use public electronic communications networks or
services provided by an undertaking established in another Member State and prohibiting
discrimination based on nationality or the place of residence of the end-user. This option could
be accompanied by full harmonisation.
Communication services provided either traditionally, such as voice telephony, or on top of IAS,
would not be subject to sector-specific legislation.
This option will put a special emphasis on broadening end-user rights for IAS only. For example,
rights to have a facilitated switching process led by the receiving operator, the obligation to
inform the end-user in due time, so that the end-user has sufficient time to oppose to an
automatic roll-over, or the introduction of comparison tools and websites to ensure better
transparency and comparability of tariffs and quality of service parameters.
With a few exceptions, stakeholders did not show support to a reduction of sector specific
regulation to internet access service only, the main reason being that in a transition phase
towards a full Internet-based model there should not be any inconsistencies nor different
regulations and levels of consumer protection applying to different services that consumers
perceive as substitutable in order to ensure a level playing field. Only some telecom operators
advocated for such a possibility, but they considered that regulation should keep some consumer
protection features such as number portability, emergency calls, confidentiality, safety and
security obligations, transparency or cost control.
Option 4 – IAS and regulatory obligations for electronic communications services mainly
linked to the use of numbering resources
This option builds on option 3 as described above. Additionally, it proposes, on top of the
regulation of IAS (as IAS remains a critical access point for end-users to access other online
services), to apply a limited set of sector-specific rules to communications services, provided
either traditionally, such as voice telephony, or on top of IAS. The concept of interpersonal
communications services would include any functionally substitutable services used for inter-
personal communications, in other words services that enable direct interactive communication
123
between two or a determined number of natural persons (including those acting on behalf of
legal persons, but excluding M2M services) irrespective of the technology used for their
provision.
As regards regulatory obligations (i.e. the application of a minimum subset of communications-
specific rules, as identified in the streamlining exercise described in option 2) applicable to
interpersonal communications services, most of them would be linked to the use of public
numbering resources ("use" being understood as provision of numbers to the service's own
subscribers, or provision of a service that enables communication with other providers'
subscribers via such numbers) – confirming an approach that has been identified by regulators228
since at least the last review of the framework but which is widely contested by the relevant
service providers and has not been widely applied in practice. The scope of access to emergency
services would be redefined using the concept of number-based interpersonal communication
services, however, the difficulties in assuring quality of service of such calls would be
recognised . Rules that would apply to number-based interpersonal communications services
cover inter alia contract duration, transparency, information on quality of service, number
portability led by the gaining provider, provision of information to oppose automatic roll over of
contracts, consumption monitoring tools, comparison tools for both prices and quality of service
or switching rules for bundles to avoid lock-in effects.
However, there are certain areas where public policy interests may require applying regulatory
obligations to all newly defined interpersonal communications services, i.e. also to those that are
provided over the IAS but do not use numbering resources. These are at least the following
areas: security and confidentiality of communications229
(the exact confidentiality obligations
would be subject to further conclusions of the review of the e-privacy Directive).
This option could be accompanied by full harmonisation with limited exceptions, e.g. on
maximum contract duration, making it easier for communications services to comply with the
legislation.
Finally, for reasons of proportionality, this option does not immediately apply to OTT
communications services obligations in the areas of interoperability and emergency services; but,
as such obligations may become necessary in the future, it provides a mechanism giving the
possibility to intervene, if so needed, in these two areas.
In the public consultation a clear majority of respondents were of the opinion that all
functionally substitutable communications services should fall under a new, technology neutral
common definition, but had significantly varying positions on the types of obligations that
should apply to services falling within such a definition. Consumer organisations in particular
expressed support for specific rules with regard to voice services for end-users, highlighting the
importance of service availability and of voice quality as a distinctive characteristic. Only a
minority of stakeholders, including OTTs, opposed this approach. Many respondents claimed
that the definition should be independent from remuneration modalities (i.e. free / data driven)
and that the condition that service are provided "for remuneration" should not only cover
monetary but also direct or indirect remuneration (e.g. commercialisation of data).
A large number of stakeholders consider that all the voice services perceived by the users as
substitutive to the current PSTN voice service (same look & feel) and also give access to E.164
numbers should be subject to the same obligations regarding the access to emergency services.
In the same vein some NRAs support an obligation on communication services (including OTTs)
that give access to numbers in the numbering plan. Legal clarity is requested by these NRAs and
some operators regarding access to emergency services by all communication providers (OTTs
included) that offer access to an E164 number.
Option 5 – Functional approach to communications services
This option builds on option 3 and would establish a two-tiered approach as in option 4 with the
difference that, under this option, regulatory obligations would not be linked to the use of
numbers exclusively but would apply to all interpersonal communication services. The definition
of communication services would be based on a functional and technology-neutral approach that
228
ERG Common Position on VoIP, December 2007
229
SMART 2013/0019: 33% of respondents to the survey have concerns about privacy and claim this is a reason for
not using OTT services.
124
would comprise all services with communication features, including new services to emerge. A
minimum subset of communications-specific rules, as identified in the streamlining exercise
described in option 2, would apply to all functionally substitutable communication services (both
OTT and ex-ECS), for example to ensure protection against specific communications-related
risks (confidentiality and security) and to facilitate switching with portability rules, including
portability of user generated content. The obligation to give access to emergency services would
be extended to all these interpersonal communication services wherever technically feasible. It
would also include interconnection and interoperability obligations subject, however, to
reasonableness considerations relative to technical feasibility, significance of take-up of a given
service as well as cost considerations. This option could be accompanied by full harmonisation.
As in option 4, a clear majority of respondents were of the opinion that all functionally
substitutable communications services should fall under a new, technology neutral common
definition, but there were significantly varying positions on the types of obligations that should
apply to services falling within such a definition.
4.4.1.2 Must carry and electronic programme guides (EPG) obligations230
Option 1 – Maintain Member States' possibility to impose must carry and EPG obligations
Must carry and EPG obligations aim at ensuring that TV and radio channels of high public
interest are broadcast by electronic communications providers, while avoiding unreasonable
burden on the latter.
Under the current Regulatory Framework must carry rules: A) allow Member States to promote
general interest content; B) Ensure that provisions are proportionate and notably do not
disproportionately “crowd out” channels from commercial broadcasters or from other Member
States; C) Ensure that the provision of broadcast transmission services by electronic
communications networks operators can be a sustainable commercial activity on liberalised
markets
The provisions in the Regulatory Framework regarding electronic programme guides allow: A)
to promote fair competition (notably prevent EPGs affiliated with commercial
platforms/broadcasters from discriminatory treatment against other platforms/broadcasters,
including against providers of general interest channels); B) to facilitate access and orientation.
This option would keep the current must carry231
and EPG rules in place. While there is a
majority view from stakeholders that transmission obligations imposed on electronic network
operators (must carry rules) and rules related to electronic programme guides should be adapted
to new market and technological realities, there is sharp disagreement as to how such adaptation
should be conceived. Extension of the current rules is supported by some Member States and
most broadcasters, whereas most telecom operators are in favour of reducing the scope of the
rules. Accordingly, keeping existing must carry and EPG provisions in place can provide a
certain degree of balance between these conflicting stakeholder positions.
The scope of current obligations is limited by the requirement that a significant number of end-
users use the electronic communications network(s) concerned as their principal means to
receive TV and radio232
broadcast channels and that Member States review the obligations in
regular intervals. It would be clarified that the transmission obligations may include data
230
For an evaluation of the current must carry and findability provisions, please refer also to the corresponding
sections of the Evaluation SWD, in particular 7.2.3.13 and 7.3.2.13.
231
For the obligations currently in place see pp.23 of the study "Access to TV platforms: must carry rules, and access
to free-DTT" by the European Audiovisual Observatory, December 2015, available at
http://www.obs.coe.int/documents/205595/264629/Must+Carry+Report+(Dec.+2015)/bb229779-3fb2-488d-9c0e-
d91e7d94b24d Individual country reports are on pp. 53.
232
Radio is an important part of the cultural landscape in Europe and accordingly an important element of the digital
single market.
125
complementary to radio and TV channels which supports connected TV services and EPGs233
.
In addition, the newly adapted net neutrality rules would apply. Current obligations on EPGs
would also remain in place.
Option 2 – Phase out must carry obligations
This option envisages an obligatory phase-out of 'must-carry' obligations by 2020-2025. This
could be combined with the possibility for national and/or regional derogations where needed.
This option assumes a certain pace of broadband roll-out capable of supporting online TV
distribution. National and/or regional derogations could be granted where and for as long as
ubiquitous broadband coverage has not been achieved.
Telecom operators are in favour of reducing the scope of the rules, other stakeholders did not
show support to this option. Some cable and telecom operators call for complete removal of must
carry obligations or at least to limit them to the main/most essential general interest channels.
Option 3 – Extend must carry obligations
This option considers extending the scope of must carry obligations which Member States may
impose with respect to on-demand services and subject to the network's functionalities. Such
extended must carry obligations would apply to any platforms that provide a significant, share234
of TV and radio channels (including on-demand services) viewed in a Member State, regardless
of whether they are transmitted directly via electronic communications networks or via
specialised services provided over electronic communications networks.
The option to extend rules is supported by some Member States and most broadcasters. Telecom
operators are opposed.
Numbering235
Option 1 – No change in the EU framework on numbering
Telephone numbers play an important role in the proper functioning of the telephone network,
both fixed and mobile, notably in routing, management and identification. The use of numbers is
coordinated by the ITU at the global level236
and implemented by national governments in the
national numbering plans237
.
The current regulatory framework requires Member States to ensure that adequate numbers and
numbering ranges are provided for all publicly available electronic communications services, via
objective, transparent and non-discriminatory procedures. The management of numbers at the
national level is typically assigned to a government entity or agency, usually the National
233
This would allow Member States ensuring that signalling sent alongside broadcast signals and intended to ensure
synchronisation of the linear broadcast channels with OTT services is not blocked. This would entail that red button
services (providing additional programme information on demand) as offered by public and commercial broadcasters
in several Member States would not be blocked by ECNs.
234
As defined by Member States.
235
For an evaluation of the current numbering provisions (and corresponding problems), please refer also to the
corresponding sections of the Evaluation SWD, in particular 7.2.3.3 and 7.3.3.3.
236
International Telecommunications Union – Telecommunications Sector (ITU-T), which is originated as a
treaty organisation of member states operating under the auspices of the United Nations. Today, it brings together 139
countries, 800 private-sector entities and academic institutions
237
ITU-T's Recommendation E.164 defines the structure and functionality of the telephone numbering plans and is
followed by national governments in the actual assignment of blocks of national numbers to operators, who assign a
particular number to an end-user. Recommendation E.212 defines the International Mobile Subscription Identity
(IMSI) used within mobile networks, . The IMSI is used in addition to an E.164 (mobile) telephone number and . It
enables international roaming. For governance purposes, at regional level, regional organisations, such as the CEPT
(European Conference of Postal and Telecommunications Administrations) in Europe, coordinate the interests of
stakeholders at that level. CEPT further coordinates cross border issues among and its 48 Member Countries, that also
encompass EU Member States. CEPT can make Recommendations and Decisions but they are not legally binding.
126
Regulatory Authority. The Ministry responsible for telecommunications policy typically retains
the governance responsibility.
In addition, the Authorisation Directive lays down requirements on the assignment of numbers
and the conditions for the right of use. Annex C to the Authorisation Directive provides for an
exhaustive list of conditions which may be attached to the right of use for numbers.
Article 10 of the Framework Directive includes provisions requiring Member States to support
the harmonisation of specific numbers or numbering ranges within the Community where it
promotes both the functioning of the internal market and the development of pan-European
services, and vests the Commission with the task to adopt implementing measures. Article 27
USD lays down technical provisions on international telephone access codes and on the
European Telephone Numbering Space (ETNS), which has been dismantled in 2009 by the
withdrawal of the number by ITU.
Option 1 foresees a baseline scenario where no change is introduced to the current Regulatory
Framework. This baseline option would by definition not entail measures to cope with
developments in the area of numbering (notably, the dismantling of ETNS), that would require
adaptation of existing rules.
In the absence of further harmonisation or a Pan-European numbering range, Member States can
freely establish the conditions for the use of their numbering resources, and create new national
E.164 (telephony) number ranges as well as new E212 (mobile IMSI) ranges for M2M services
and define individually or in a coordinated manner specific regulatory requirements for these
new ranges to address shortage of existing numbering resources. Member States could also
decide to relax national number assignment criteria and assign numbers to M2M providers in
order to address the competition issue that non-electronic communications service providers are
deprived of numbering resources in a some of the Member States. This option however does not
provide solutions to regulatory fragmentation, and would not take into account requirements of
the Single Market.
Option 2 – No change in the EU framework on numbering with repeal of redundant rules
This option would entail no new elements to the regulatory framework. Only Article 27 USD on
European telephony access codes would be repealed due to the dismantling of ETNS, and the
remaining provision on international access code would be moved to the existing Article 10
FWD. The competences and freedoms of Member States would remain as described in Option 1,
and no European solutions would be developed for the challenges posed by M2M development
and cross border services on the Single Market.
Option 3 – Adapting the EU framework on numbering to address the competition issue on the
M2M market
Under this option the EU framework would be adapted to allow the assignment of numbers by
NRAs to non-MNOs, such as large M2M providers (as an explicit option for NRAs without
imposing any obligation on NRAs to do so). This would be particularly relevant for E.212
(mobile IMSI) numbers, that are in some Member States reserved to MNOs exclusively. In this
respect, current holders of numbers, in particular MNOs, highlighted implementation and
security issues such as risk of fraud, partial exhaustion of national numbering resources, and
problems concerning interoperability and end-to-end connectivity.
Concerning extra-territorial use of national numbers, NRAs would have to determine a range of
non-geographic numbers for the provision of ECS other than interpersonal communications
services throughout the territory of the Union. In addition the NRA granting rights of
extraterritorial use for numbers would have to attach conditions ensuring that consumer
protection and number-related rules of those Member States where the numbers are used, are
respected. The public consultation showed that there is a clear consensus that to cope with the
numbering needs of M2M in the future, clear rules for extra-territorial use of numbers are
necessary to ensure sufficient numbering resources.
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Finally, the framework would include a mechanism for introducing common EU-level
numbering spaces in the future, in case extra-territorial use is not sufficient to meet the
increasing demand. While the public consultation did not reveal a manifest support for a new
European numbering initiative, the rapid developments in the area of M2M could bring
fundamental changes to numbering regulation, which would be anticipated by such an enabling
provision.
4.4.2 Discarded options
This section outlines the options which have been discarded. A more detailed analysis can be
found in Annex 3 on discarded options as well as the IA support studies.
4.4.2.1 Services
 No sector-specific regulation for services in the future
4.4.2.2 Numbering
 Adapting the EU framework on numbering to address the competition issue on the M2M
market, and directly creating (E.164 and E.212) European numbering ranges to promote a
single market for M2M.
4.2.4.3 Must carry and findability (EPG)
 Extending the scope of must carry obligations to OTT services
 Extending the scope of EPG obligations and introducing regulatory safeguards to improve
findability
4.4.3 Impacts
4.4.3.1 Services
4.4.3.1.1 Option 1 – Baseline scenario
Option 1 involves a continuation of the existing regime. The current scope of the framework
would be maintained, implying that the currently prevailing uncertainty on rights and obligations
for the provision of equivalent services remains. Also current gaps with regards to consumer
protection would persist. Moreover, this option would not address technology and market
changes including emerging risks in the field of consumer protection related to the use of
bundles.
Economic impacts
Discrepancies on rights and obligations of the rules may hinder confidence in future activities by
communications service providers. Furthermore, it may also create new barriers for the internal
market as it opens the door to different interpretations by Member States and lead to new issues
of different regulatory treatment of similar services, depending on the degree of vertical
integration of the providers.
Telecom operators operating in multiple countries will remain subject to heterogeneous
compliance and consumer protection costs. This may impede telecom operators from expanding
across borders. In relation to obsolete or redundant consumer protection provisions, telecom
operators will remain subject to unnecessary administrative and compliance costs.
Annual economic growth is expected to advance as forecasted in the base scenario used in the
supporting study of this document, i.e. 1.7% for the period 2021 to 2025.
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Social and environmental impacts
The degree of protection with regards to security and privacy remains unchanged, and a
significant number of consumers will remain confused as to the degree of legal protection of
security and privacy when using a particular electronic communications service238
. This hinders
them in making informed decisions and leaves them without clear sector-specific legal
protection, when using communications services of OTT providers. Certain new end-user
challenges would go unaddressed, such as problems when switching multi-play bundles. The
growing reliance of end-users on OTT communication services may effectively reduce
accessibility of emergency services. The lack of accuracy of caller location in case of emergency
communication hinders effective access to emergency service while EU wide interoperable
accessibility solutions for disabled end-users are still not deployed. The net environmental
impact will be neutral.
4.4.3.1.2 Option 2 – Streamlining of current provisions and addressing certain new challenges
without modifying the scope of the Regulatory Framework
Option 2 envisages a streamlining exercise of the sector-specific rights and obligations but no
change to the current definition of electronic communications services (ECS). It will also address
new challenges based on recent commercial and technical developments in the
telecommunications markets.
Economic impacts
A significant impact on the objective of providing a European-wide pro-competitive regulatory
framework for communications services is not expected. Compared to the baseline scenario,
possible competitive distortions remain unchanged. Possible benefits for operators offered by the
growing popularity of multi-play bundles and their associated lock-in effects would be mitigated
as a result of new measures facilitating switching. These measures could have a chilling effect on
pro-competitive bundles, potentially depriving consumers of some benefits of built-in discounts
relative to stand-alone products or services.
The streamlining exercise would reduce some of the problems with regulatory heterogeneity,
however, it would only very slightly reduce the problem of unequal treatment for ECS and OTT
providers as it would lift some overlapping obligations and compliance costs for ECS and
removed obsolete rules. However, there would remain a risk of (growing) regulatory
heterogeneity resulting from current minimum harmonisation and doubts about the scope of the
regulatory framework. New players would experience no change with regards to uncertainty
about whether or not they fall within the scope of the framework.
Macro-economic growth will advance as forecasted in the base scenario with a very minimal
upward correction.
Improvement in the accuracy of caller location, access for disabled end-users and the
performance of Public Safety Answering Points would incur cost in the networks and Public
Safety Answering Points but these would largely be offset by the benefits arising from the
effectiveness of the emergency intervention (safeguarding public health and welfare).
Social and environmental impacts
Impacts on employment in the sector as well as macro-economic employment are negligible
compared to the baseline option.
238
SMART 2013/0019: 33% of respondents to the survey do have concerns about privacy and claim this is a reason
for not using OTT services
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The degree of protection of end users with regards to security and privacy of communications
would remain unchanged. Although there is still a risk that end-users could experience problems
when switching multi-play bundles, the new consumer protection rules in this respect, applying
key ECNS protections such as those on contract maximum duration and contract termination to
all components of a bundle, will likely have positive consequences for future affordability and
quality of communications services. More accurate caller location will be reflected in timely and
effective emergency relief resulting in the mitigation of adverse effects of emergency situations
to health and property. Accessibility solutions in emergency communications would ensure
integration, safety and mobility of disabled-end-users.
4.4.3.1.3 Option 3 – Internet Access Service (IAS) only
Option 3 would reduce the scope of sector-specific rules to the internet access service (IAS), but
leaves outside the scope any communication services (either traditional or provided on top of the
IAS).
Economic impacts
Traditional telecommunications services such as voice and SMS are no longer subject to
interconnection, interoperability and number portability obligations. This would in principle
reduce many compliance and enforcement costs, but could create new ones related to IAS
monitoring and reporting, and could as well create several competition issues. The possibility to
implement this option should also be examined in view of international commitments (e.g.
GATS) with regards to interconnection of public telecommunications services which would not
be covered by this option, e.g. voice telephony services.
First, end-users would experience considerably higher switching costs related to the inability to
port numbers which remain in widespread use. Second, new level playing field problems could
arise since large telecom operators could push smaller operators out of the market by denying
interconnection. This would not only have concentrating effects on the retail markets for voice
and SMS but, via bundling, also for IAS and broadcasting services. It would lead to less
competition between telecom operators and have an upward effect on fixed and mobile profit
margins. The latter effect is (partially) countered by additional end-user measures facilitating the
switching process and limiting automatic roll-over of contracts, as well as by comparison tools.
From an internal market perspective, the costs for telecom operators of operating in multiple
countries would be reduced. It would also reduce uncertainty about the risk of regulatory
heterogeneity resulting from current doubts about the scope of the regulatory framework.
However, lower levels of competition in national telecom markets could be detrimental for the
Internal Market as it implies rising (strategic rather than regulatory) barriers to enter national
markets. All in all, option 3 will likely lead to less competition and at macro-economic level the
impact may be neutral compared to the baseline as described under option 1.
Social and environmental impacts
Depending on the net effect on telecom revenues and profitability, some positive effects could be
expected in terms of employment creation in the sector but these could be offset by synergies
and economies of scale brought about by the likely market consolidation process. Given the role
of the sector as an enabling input for the whole economy, a reduction in the efficiency of its
functioning may have a negative impact on macro-economic employment.
The potential gains for consumers brought about by additional measures aiming at prohibiting
discrimination based on nationality or the place of residence of the end-user and making easier to
switch between providers of bundles could be countered by the likely market concentration.
Option 3 will have a negative impact in terms of security and privacy protection regarding
telecom services. The impacts in terms of affordability and/or quality are unclear.
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4.4.3.1.4 Option 4 – IAS as in option 3 and regulatory obligations linked to the use of
numbering resources
Besides the regulation of the IAS, this option would link the authorisation requirement for
communications services (other than internet access service) and subsequent regulatory
obligations to the use of numbers, while safeguarding other end-user and public policy interest
(security, privacy) as described in 4.4.1.1.
Economic impacts
This approach would bring some clarification on the scope of application of the framework and
make regulatory obligations legally binding for voice, text and other communication services
that make use of numbering. It is not possible to estimate the annual costs associated with
number-related obligations imposed on respective OTTs. However, the fact that OTT
communication services like e.g. Skype Out / Skype In and Viber Out / Viber In would be
clearly subject to the above set of obligations and associated costs is expected to have little
impact on competition in the market. All OTTs would be subject to similar obligations with
respect to confidentiality (and potentially privacy, subject to the ePrivacy Directive review) and
this may imply that some of the current OTT business models may need to evolve. In terms of
access to emergency services, once a standardised technical solution is available for routing OTT
emergency communications, its implementation would ensure broader access to emergency
services, hence larger scope for safeguarding life, health and property.
Enforcement and compliance costs would slightly go down with the streamlining of rules. The
administrative burden may increase for OTT providers that use numbering resources as they will
now be clearly subject to certain sector-specific regulatory requirements which have hitherto not
been systematically applied to them by Member State authorities. In addition, all OTTs
(regardless of the technology used) will see an increased administrative burden in relation to the
rules on security. In this regard, it is important to note that providers of electronic
communications networks and services have been subject to security obligations for years and
compliance costs have not been identified as an issue. As technological and market
developments now imply that in order to safeguard end-user and public policy interests certain
security obligations, albeit lighter in practice than those imposed on interconnected networks,
should cover also all interpersonal communications service providers it cannot be expected on
the basis of the past experience that the costs would be unreasonable compared to the benefits.
The impact assessment239
accompanying the Directive of the security of network and
information systems (NIS Directive) assessed NIS risk management compliance costs and costs
related to the notification requirement. On the notification, the report noted240
that on basis of
notification reports in some Member States under the current Article 13a (Security and integrity
provision of the Framework Directive) the time needed for a business in case it would need to
notify a breach is expected to be negligible.
The question as to what extent rules of the current rules of ePrivacy Directive should be
extended to all communications service providers and the subsequent cost implications will be
assessed as part of review of that Directive.241
The current rules on consumer protection would in most cases be streamlined (for example,
contractual information and transparency) and only in a few cases additional obligations would
be introduced. These additional obligations would address new challenges, for example, better
239
Commission Staff Working Document. Impact Assessment. Accompanying the document Proposal for a Directive
of the European Parliament and of the Council Concerning measures to ensure a high level of network and
information security across the Union. SWD(2013) 32.
240
SWD (2013) 32, p. 92.
241
See https://ec.europa.eu/digital-single-market/en/news/public-consultation-evaluation-and-review-eprivacy-
directive
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readability of contracts, provision of consumption control tools, enhanced provisions on price
and quality comparison tools, switching rules for the increasing number of bundles to avoid
lock-in effects and prohibiting discrimination based on nationality or the country of residence.
The resulting end-user benefits are assessed to outweigh possible additional costs. Offering end-
users a facility to timely monitor their usage of services is not assessed as burdensome to
providers (including OTTs using numbers) who, in most cases, already closely allow to follow
the consumption of their services for billing or monitoring purposes. The equivalence in access
for disabled users may not necessarily mean increased regulatory intervention if the market itself
ensures equivalence. The clarification of provisions regarding bundled offers would not involve
new compliance costs as such, but may in some cases result in the evolution of the terms of
current offers.
From a macro perspective, option 4 contributes to realising efficiency gains with lower
transactional and compliance costs (fewer duplicate compliance efforts or data requests), a more
equal regulatory treatment (particularly with regards to security and privacy), a reduction of
regulatory risk as a result of more regulatory clarity and more confidence among end-users. The
regulatory reform contributes to fostering the Internal Market. This increased efficiency effect
may add 0.15 percentage points to the annual GDP growth. Annual macro-economic growth is
estimated to be higher (1.85%) than the base scenario (1.70%)in the period 2021 to 2025.
Social and environmental impacts
Compared to the baseline, the direct impact on sectorial employment is likely to be negligible.
However, due to macro-economic efficiency gains, the positive macro-economic impact on jobs
and wages may be considerable.
End-users which value privacy, confidentiality and/or security are more likely to participate in
popular and innovative communication networks242
. Also, where this is (or may become)
technologically feasible, end-users may use various communication services to contact
emergency services subject to availability of standardised solutions. The suggested additional
measures focussing on potential lock-in problems related to bundling and the prohibition of
discrimination based on nationality or the place of residence of the end-user may support end-
users’ freedom of choice. A reduced risk to lock-in enhances competition among telecom
providers to the benefit of affordability and/or quality.
4.4.3.1.5 Option 5 – Functional approach to communications services
Option 5 differs from option 4 in that, besides regulating the IAS as in option 3, all obligations
apply equally to all newly defined communication services which are functionally substitutable
and hence in a degree of competition, independent of whether they make use of numbering
resources or not. Obligations to interconnect and to be interoperable are based entirely on an
assessment of reasonableness considerations relative to technical feasibility, significance of take-
up of a given service as well as cost considerations.
Economic impacts
The most direct impact of this option is that the current uncertainty about rights and obligations
for the provision of equivalent services would disappear, subject only to reasonableness
considerations in respect of interoperability. This would automatically create some more
compliance and enforcement and possible legal appeals costs for public authorities as well as
OTTs, which may be individually subject to interoperability and interconnection obligations
242
See SMART 20013/0019: 33% of respondents to a survey conducted for that study do have concerns about privacy
and that this forms a reason for not using OTT services.
132
based on an assessment of reasonability - a criterion which leaves room for uncertainty on the
part of OTT services, which could also impact innovation.243
Social and environmental impacts
As in option 4, the impact on sectorial employment is likely negligible as far as sectorial
employment is related to revenues. However, due to the contributions to macro-economic
efficiency gains, the macro-economic impact on jobs and wages is considerable and positive for
both skilled as well as unskilled labour. Similar to option 4, suggested measures on potential
bundling-related lock-in problems and supporting switching will enhance end-users’ freedom of
choice, with a positive effect on affordability and/or quality for end-users. Moreover, as in
option 4, end-users which value privacy, confidentiality and/or security are more likely to
participate in popular and innovative communication networks. This option would increase the
end-users' possibilities to establish emergency communications (for instance through multi-
modal IP Multimedia subsystem) including by voice, video, instant messaging and likely
increase the operational effectiveness of the emergency communications system, however
subject to significant investments in upgrading of the PSAPs.
4.4.3.2 Must carry and EPG obligations
4.4.3.2.1 Option 1 – Maintain Member States' possibility to impose must carry and EPG
obligations
Economic impacts
The direct economic impact (costs of implementation, compliance, and enforcement of must
carry and EPG obligations) of option 1 is negligible. Online viewing behaviour will continue to
grow and larger PSBs will have little difficulty in finding a prominent place in app stores as well
as on equipment installed at consumer premises or hand-held equipment. Regional and local PSB
will have more difficulty in this respect. Cooperation with larger PSBs to carry niche content in
their apps (possibly imposed by national governments) is a likely solution. In addition, niche
content providers can develop alternative routes to gain exposure via social media strategies.
The marginal costs of broadcasting a single channel are currently relatively low. But these costs
automatically grow in relative terms as the shift from linear to online evolves, because fixed
costs would have to be shared over a decreasing number of viewers. As such, the problem of
proportionality of current obligations may grow but this can be addressed by ensuring that
regular mandatory reviews of existing obligations are conducted at national level. Other
stakeholders (end-users, PSBs, OTTs) will remain largely unaffected.
The marginal costs of transmitting data alongside single radio and TV channels enabling
connected radio and TV services is negligible. A clarification that such transmission can be
covered by must carry obligations could contribute to improving the predictability of the
conditions for the introduction and further development of connected radio and TV services by
public and commercial broadcasters benefitting from must carry obligations.
Social and environmental impacts
The diversity of content to which end users can have access will increase to the extent that
Member State ensure broadcasters benefitting from must carry obligations can also provide red
button services.
243
See SMART 2013/0019 which points out that imposing interconnection and interoperability obligations on OTT
business models may hamper innovativeness.
133
4.4.3.2.2 Option 2 – Phase out must carry obligations
Economic impacts
Compared to the baseline, this option assumes a particular pace in the shift from linear to online.
This assumption is highly uncertain and differs (greatly) between Member States. The impact on
the business models of both large and small PSBs may be detrimental in some Member States.
Similarly, because the shift from linear to online follows a different pace for different Member
States, the proportionality problem for ECNs differs between Member States. Even in Member
States where there are currently no MC obligations (such as the UK), the impact of this option
may not be zero. The mere possibility for the UK to impose must carry obligations may put
some degree of discipline on network operators to voluntarily carry general interest channels. In
Member States where MC obligations currently exist, but where online viewing behaviour
increases rapidly (like in the Netherlands), the impact of phasing out MC obligations may be
more limited. However, in those Member States where MC obligations currently exist and
watching via OTT platforms increases only at a slow pace (like Germany and France), the
negative impact on PSBs would be more significant. ECNs may receive increased feed-in fees244
up to a maximum of 20 million EUR for a typical ECN operator in a large MS245
, which may
benefit end-users in terms of lower subscription fees for the network. In any case, for the EU
market as a whole, the impact on the business models of notably small PSBs may be detrimental.
It follows that an orchestrated phase out may for some Member States be disproportionate from
the perspective of the public interest.
Social and environmental impacts
Compared to the baseline, there is a risk that the impact on the diversity of content which can be
accessed by end users may be negative for some Member States. PSBs may experience less
exposure to the public, while end-users experience more difficulty in accessing content of public
interest. OTTs will remain unaffected.
4.4.3.2.3 Option 3 – Extend must carry obligations
Economic impacts
The economic impact of this option on larger and smaller PSBs is negligible and may have some
impact on the operations of ECNs. Extending a must carry obligation would impose an
additional burden on IPTV and cable TV platforms to the extent that the on-demand content
concerned is not already currently and voluntarily provided via these platforms. IPTV and cable
TV platforms currently already customise their on-demand content offered to local preferences.
Option 3 may lead to different treatment of IPTV and cable TV platforms by different Member
States. The extent to which this option impacts on stakeholders may therefore be considered low.
Social and environmental impacts
Compared to the baseline, the positive impact on the diversity of accessible and findable content
remains limited and has relatively low impact on large PSBs or on the variety of their content
offered to (i.e. choice for) end-uses. Given the abundance of online content, extending must
carry obligations to on demand content provided on IPTV and cable TV platforms could make it
easier for some smaller PSBs to build a significant audience. However, such obligations do not
appear to be necessary, see section 4.4.4.2.1 on effectiveness.
244
Except for ECNs in Member States for which temporary derogations may apply and must carry obligation would
remain temporarily in place because broadband coverage and capacity would not yet be sufficient for widespread OTT
viewing of TV and radio channels.
245
SMART 2015/003, section 1.6.1
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4.4.3.3 Numbering
4.4.3.3.1 Option 1 – No change in the EU framework on numbering
In global industry sectors such as the automotive sector, M2M communication becomes
increasingly important to control high-quality consumer and capital goods. While in 2014 about
7% of global mobile terminals are used for M2M communication, this is expected to rise to 28%
in 2019. Thus a considerable increase in devices, operators and services is expected.
In order to address the growing demand, and the competition issue of potential lock-in of M2M
service providers with an initial mobile operator, Member States could decide to relax national
number assignment criteria and assign numbers to M2M providers. In this case, mobile network
codes (MNC, a portion of the E.212 IMSI) could represent a bottleneck. As two digit MNCs are
assigned in most European countries, a maximum of 100 MNCs per country or per mobile
country code (MCC) can be assigned. Such approach would thus result in a possible shortage of
national E.212 numbers. To address the MNC shortage, Member States would have to assign a
shared E.212 number range (operator prefixes) to several M2M providers, or/and to adopt a
mixed use of 2- and 3-digit numbering ranges, and in excessive cases, to claim additional
international country codes for E.212 numbers. The borderless (extra-territorial) use of national
numbers would be difficult, if not impossible, to satisfy with this option, in the light of existing
tendencies in numbering regulation (see e.g. relevant CEPT Recommendation). It is to be noted
that ITU resources may provide an additional solution to many operators, but may not be suitable
for smaller operators due to extensive costs, compared to fees of many of the Member States.
Economic impacts
Option 1 may result in aggravated fragmentation of the regulatory landscape in Europe.
Moreover, in those Member States where MNCs remain reserved for M(V)NOS, M2M service
providers would remain locked-in in at least the short term. Even after an eSIM standard has
been adopted by the market, IoT service providers may remain locked-in; at least until their
already installed SIM dependent machines become suitable for replacement following full
depreciation. This period may possibly last longer as "over-the air-provisioning" (OTA) may
continue to be hindered by the limitations of the current Article 30 of the USD in facilitating a
change of providers, that was conceived for a market where the replacement of SIMs would not
mean a considerable barrier.
Bottlenecks in the IoT value chain as well as limitations to cross-border use may inhibit
innovations in IoT services by inter alia electricity providers, car manufacturers and producers of
medical equipment and bring an upward effect on prices for IoT services.
From an administrative perspective, the base scenario would entail a number of management
complexities (e.g. to implement shared national E.212 number ranges) and substantial
implementation costs (creating new national E.164 ranges and/or new E.212 codes), translating
into higher transaction/administrative costs.
Macro-economic overall gains from enabling the IoT have been estimated at 0.42%-points to
1.15%-points additional annual GDP growth. However, enabling the IoT involves other
challenges besides those related to connectivity (e.g. in the area of standardisation and security
and privacy). As such, it is difficult to isolate the impact on overall GDP of not solving the
challenges related to numbering.
Social and environmental impacts
Some jobs and skills may become redundant due to automation, while the value of other jobs and
skills will increase. McKinsey (2015) notes that “in general, manual work will come under
increasing pressure from IoT and smart machines, but IoT will open up some new employment
opportunities, too. Workers will be needed to install and maintain the physical elements of IoT
135
systems—sensors, cameras, transponders, and so on. Other workers will be needed to design,
develop, sell, and support IoT systems.”
Similar to overall GDP gains from IoT, it is not possible to isolate the impact of dealing with
numbering related challenges on employment from dealing with other challenges to enabling the
IoT. Environmental impacts are difficult to estimate. For the purpose of this review we assume
the net impact to be neutral.
4.4.3.3.2 Option 2 – No change in the EU framework on numbering with repeal of redundant
rules
Option 2 has no impact in comparison to option 1 besides the fact that the Framework is cleaned
from obsolete articles.
4.4.3.3.3 Option 3 – Adapting the EU framework on numbering to address the competition
issue on the M2M market
The problem of IoT service provider lock-in is addressed in a coordinated manner as well as the
use of extraterritorial use of numbers. Potential risks for circumventing local (in particular
consumer protection) requirements when providing cross border services are addressed by
reinforcing enforcement cooperation are addressed.
Economic impacts
While Member States will start assigning MNCs to non-M(V)NOs, option 3 results in a less
fragmented regulatory landscape in Europe. Independently of when an eSIM standard is adopted,
IoT service providers will run less chances of becoming locked-in. Moreover, once eSIM has
been adopted, the possibility for OTA will further facilitate the switching possibilities for IoT
service providers.
Bottlenecks in the IoT value chain (e.g. related to lock-in, cross-border use) are efficiently
addressed, having a downward effect on prices for IoT services as compared to the baseline.
There is greater development and adoption of IoT applications by inter alia electricity providers,
car manufacturers and producers of medical equipment. All in all, it follows that there are
potential positive impacts for the competitiveness of the EU as a whole.
With regards to administrative costs, option 3 helps to reduce a number of management
complexities and implementation costs related to network and functional testing, billing
verification and updates, as operators could cover their overall demand with a less diverse
numbering resource. At the same time, the currently proposed bilateral arrangements for
extraterritorial use between NRA's responsible for numbering assignment may be replaced by a
more harmonised governance structure that is much less burdensome in both procedure (time)
and cost. This may require a possible extension of the activities (and costs) of BEREC as well as
costs related to coordination with CEPT, which may still be much lower than the costs of the
currently proposed multiple bilateral agreements between NRAs and telecom providers.
The macro-economic impacts associated with unlocking the full potential of the IoT, although
difficult to isolate, are estimated 0.42% to 1.15% of additional annual GDP growth.
Social and environmental impacts
IoT users will experience lower prices for IoT services and a faster adoption / integration of IoT
services by/in existing products and services. NRAs will also not experience increased
administrative / transaction costs associated with complexity of management issues or the
increased of extraterritorial use of numbers.
136
4.4.4 Comparison of options
4.4.4.1 Services
4.4.4.1.1 Effectiveness
The effect of a reduction in administrative burden for ECS providers in option 2 is (slightly)
undone by the suggested additional obligations regarding bundled offers. This option will only
slightly reduce the gaps in consumer protection and not change the existing uncertainty about the
scope and heterogeneous implementation of the framework and their associated regulatory risks
for all stakeholders, not different from the base line. In terms of consumer’s freedom of choice
and their ability to benefit from innovative services, quality and lower rates, option 2 reduces
sector specific protection measures only when consumers remain protected by either current
horizontal rules or new market realities. As such, streamlining will have no impact in terms of
consumer protection in the context of using telecom or OTT services. Measures to address new
emerging risks regarding the use of multi-play bundles have a potential positive impact on
consumer protection. Issues with regard to security and privacy remain. Since this option is
based on minimum harmonisation, the degree of reducing regulatory heterogeneity depends on
whether Member States will add obligations to those prescribed by the Framework. In addition,
the mandate of the Commission to increase the effectiveness of access to emergency services
would be clarified with regard to caller location, PSAP performance and access for disabled end-
users.
Option 3 builds on option 2 and further reduces the administrative costs for ECS providers, for
instance on switching or contract duration rules, as only the Internet Access Service would be
subject to sector-specific legislation. There would, however, be no more sector-specific end-user
protection for other ECS (e.g. telephony), provided either traditionally or over the Internet
Access Service. This option would eliminate the uncertainty about rights and obligations and
ensure regulatory harmonisation, but it would have a negative impact for small telecom operators
and result in lower competition in traditional services.
Option 4 notably reduces the unequal regulatory treatment of telecom and the most directly
comparable OTT services and reduces gaps in consumer protection, which may in turn foster the
adoption of these services by consumers who are today concerned by the possible risks
associated to security, privacy and access to emergency services. The scope of the rules is clear
which reduces associated regulatory risks. Accompanied by full harmonisation, this option takes
the benefits of option 3 without its disadvantages.
Compared to option 4, option 5 eliminates the different regulatory treatment of telecom and OTT
services as it equally applies all obligations to all types of communication services. Consumers
would be less concerned about confidentiality and security or access to emergency services.
However, such regulatory extension involves some level of uncertainty in relation to the
applicability of interconnection and interoperability obligations or technical feasibility of access
to emergency services which may ultimately reduce the effectiveness of this option: it could
limit innovativeness of current and new service providers, in particular with regards to hybrid
communications services and new business models that may emerge in connection with
machine-to-machine communications.
4.4.4.1.2 Efficiency
Efficiency will be mainly measured in terms of enforcement and compliance costs.
Option 1 entails direct costs associated with maintaining the status quo, including the cost of
complying with redundant sector specific rules and unnecessary duplication of costs driven by
regulatory heterogeneity when operating in multiple countries. There is considerable overlap
between the rules in which Member States differ and the rules that are potentially redundant. An
estimate of these costs is not available.
137
Option 2 brings some room for savings in unnecessary administrative costs such as duplication
of costs associated with multi-country operations. Improvement in the accuracy of caller
location, access for disabled end-users and performance of Public Safety Answering Points
would incur costs in the networks and Public Safety Answering Points but would be largely
offset by the benefits arising from the effectiveness of the emergency intervention (safeguarding
public health and welfare).
The reduction in administrative costs under option 3 may be larger because more rules are
abolished. The reduction in enforcement and compliance costs will partially be undone by the
additional obligations regarding the Internet Access Service services.
Under option 4, the savings in administrative burden for telecom operators from streamlining is
partly undone by an increase in administrative burden for IAS as in option 3. Many of the
savings would contribute to reducing the duplication of costs associated with multi-country
operations, while the increases in IAS-related obligations would not lead to unnecessary
duplication of costs under the assumption of full harmonisation. The administrative burden may
increase for OTT providers that use numbering resources as they will now be subject to more
regulation. Moreover, all will experience an increased administrative burden in relation to rules
on security and privacy. In addition, depending on the solution that is chosen for access to
emergency services from OTTs to numbers in the PSTN network, interconnection and routing
cost could be incurred.
Under option 5 the room for administrative relief for telecom operators is similar to option 4.
The increase in administrative burden for OTTs is larger compared to option 4 as all OTTs will
be subject to the same regulation as telecom providers and all obligations will be related to all
clients and not only those that make use of the functionality to interconnect with services under
the numbering regime.
As explained, obligations to interconnect and interoperate will only be imposed if this is
reasonable subject to limitations of technical feasibility as well as cost. The reasonability clause
leaves room for uncertainty and costs associated with implementation, enforcement and possible
legal appeals.
4.4.4.1.3 Coherence
Coherence is evaluated in terms of 1) deviation (or disruption) of the status quo, 2) internal
consistency with other directives, regulations and objectives of the framework, and 3) external
consistency with the wider EU objectives and horizontal directives and rules fostering these
objectives.
Option 2 is not a fundamental deviation from the status quo: no fundamental changes are
proposed in the framework and the scope remains the same. The internal coherence with other
rules in the framework is not affected. Coherence with horizontal rules will increase as there will
no longer be differences between sector specific and horizontal rules that target the same
objectives. Moreover, circular references between sector specific and horizontal rules will be
dropped. In terms of the improvement of caller location and Public Safety Answering
Performance, the regulatory approach in the telecom legislation to access to emergency services
would seek to ensure the same level of efficiency and effectiveness as the eCall EU legislation246
does for in-vehicle emergency call systems.
246
Commission delegated regulation (EU) No 305/2013 of 26 November 2012 supplementing Directive 2010/40/EU
of the European Parliament and of the Council with regard to the harmonised provision for an interoperable EU-wide
eCall.
138
Option 3 is a significant disruption from the status quo. It would require a full revision of other
directives, regulations and objectives of the framework since only the IAS would be regulated,
leaving all communications services subject only to horizontal consumer protection rules.
Option 4 is a deviation from the status quo. The scope of the rules is enlarged to include OTTs
that use numbering resources, and other OTTs will be subject to a limited set of rules,
specifically with respect to security and privacy regulation which may force them to evolve their
business models. Internal coherence is stronger under option 4 as the framework now has
dedicated rules fostering the roll-out as well as the take-up of connectivity services, and
dedicated rules that safeguard competition and end-user protection in the domain of
communication services. As such, the entire framework would show a better fit with market
developments in which services are more and more detached from underlying (access) networks.
External coherence is served similar to 2.
Option 5 is a further deviation from the status quo. As under option 4, internal coherence is
larger: dedicated rules fostering the roll-out as well as the take-up of connectivity services, and
dedicated rules that safeguard competition and end-user protection in the domain of
communication services. Option 5, however, scores less than option 4 on internal as well as
external coherence as the extension of all sector-specific rules to OTT communication services
seems incompatible with the better regulation objective and with EU innovation policy.
4.4.4.1.4 Impact on stakeholders
Impact on consumers
Under options 1 and 2, people with a preference for privacy, confidentiality and/or security are
deterred from participating in popular and innovative communication networks. This issue would
increase under option 3 as end-users that are currently discouraged from using OTT services
because of concerns about privacy, risk being left without a more private alternative (i.e.
traditional telephony and SMS) that contains less unsolicited disturbances. Under options 4 and
5, people with preference for privacy, confidentiality and/or security experience fewer barriers to
participate in modern communication networks.
Under option 1 there is a looming risk to lock-in with multi-play bundles. This may likely have
negative consequences for future affordability and quality of the communications services.
Options 2, 4 and 5 introduce specific measures to reduce these risks. Under option 3, measures to
reduce lock-in with multi-play service providers may be offset by relaxing obligations for
interconnection and subsequent concentration of the market.
Under options 1 and 2 access to emergency services is de facto reduced as consumer preferences
for communication are gradually migrating to new OTT platforms that are currently exempt
from the obligation to provide access to emergency services. Under option 3, the situation
worsens as traditional telecom services would no longer be obliged to provide access to
emergency services. Under options 4 and 5 (some) OTT services will be obliged to provide
access to emergency services (where this is technologically feasible, and with appropriate
caveats to end-users as regards quality of service). Under option 4, however, this obligation
applies only to a limited number of OTTs that seek interconnection with the numbering regime.
Under options 3, 4 and 5 consumers will be able to use public electronic communications
networks or services regardless of their nationality or place of residence.
Impact on telecom operators
Options 1 and 2 maintain the unequal regulatory treatment of telecom operators, vis-à-vis OTTs.
Option 3 would considerably reduce the asymmetric regulatory treatment as the reduction of the
scope of the regulatory framework would give telecom operators more room to experiment with
139
other revenue models (e.g. advertisement based). Options 4 and 5 would also reduce the
regulatory asymmetry, but would not have any effect on operators' incentives to experiment with
alternative revenue models since the options involve clarifying/extending the scope of the
adapted regulatory framework.
Option 1 maintains currently redundant sector specific rules in place and hence maintains the
current level of administrative burden experienced by telecom operators. Option 2 aims to reduce
the administrative burden as much as possible by getting rid of sector specific rules that have
become redundant either because of overlap with horizontal rules, or because of changing market
conditions. Option 3 would further reduce the administrative burden by getting rid of all
obligations regarding communication services, but this effect would be mitigated by the
introduction of a number of new obligations (and associated administrative burden) for operators
that offer IASs. From option 2 to options 4 and 5, the reduction in obligations for telecom
operators when offering communication services remains the same, but the number of
obligations when offering IASs would go up. Additional measures that impact on OTTs do not
directly impact on telecommunication operators.
With respect to the Internal Market, the current costs of multi-country operations caused by
regulatory heterogeneity remain as high as they are now under option 1. The streamlining
exercise under options 2, 4 and 5 reduces the dimensions for regulatory heterogeneity that are
faced by telecom operators. Similarly, regulatory heterogeneity is reduced under option 3, but
the Internal Market will now be hindered by strategic barriers (caused by the absence of
interconnection obligations), rather than regulatory barriers.
Impact on OTTs
OTTs face hardly any administrative and compliance costs under option 1, 2, and 3 since they
are not subject (or in the case of those using numbers: not clearly subject) to most of the
framework’s obligations. Option 4 would impose additional administrative burden on a limited
number of OTTs that interconnect with the numbering regime. In addition, all OTTs (regardless
of the technology used) will experience an increased administrative burden in relation to
complying with rules on security and privacy. Under option 5, the administrative burden for
OTTs increases further as now all OTTs would be subjected to all rules in the framework.
Furthermore, Option 5 introduces for OTTs an obligation to interconnect subject to “reasonable
limitations of technical feasibility as well as cost limitations”. This obligation gives rise to
uncertainty and risks for innovation.
Impact on start-ups and SMEs
Because of the unclear scope of the regulatory framework under options 1 and 2, start-ups and
SMEs trying to gain a foothold in new digital value chains (e.g. the IoT value chain) experience
regulatory risk which lowers confidence in future planning and investments. Under options 3, 4,
and 5 the scope of the RF is clear and takes away this cause for regulatory risk.
Impact on NRAs
The impact for NRAs relates mostly to enforcement costs. Under option 1, these remain at the
current level. Option 2 will not have a major impact on enforcement costs. Abolishing
overlapping rules would not bring any predictable savings; either because they are currently
already enforced by competent authorities, because member states may decide to give
responsibility for enforcing horizontal rules to the NRA, or because new responsibilities for
NRAs may emerge in the form of providing technical assistance to competent authorities when
they were to deal with sector specific issues. Under option 3, (compared to option 2) there is a
risk of more need for ex-post interventions in which NRAs may need to support Competition
Authorities. Moreover, while a number of activities related to monitoring transparency and
quality of service of electronic communications services can be abolished, a number of these
140
activities need to be re-introduced to enforce similar type of obligations imposed on internet
access service. Under options 4 and 5 (compared to option 3), NRAs will need to devote more
resources to regulating OTTs as well. Moreover, under option 5, the obligation to interconnect
subject to “reasonable limitations of technical feasibility as well as cost limitations” gives rise to
enforcement/implementation costs.
Option 1: Status quo
Option
2:
Option 3: Option 4:
Option 5:
Consumers
A) Security and privacy
issues remain.
B) Looming risk to lock-in
with multi-play bundles
C) As OTT usage
increases, there is an
effective reduction of
access to emergency
numbers
A) 0
B)
Lower
risk
C) 0
A) More
issues
B) Unclear
(iii)
C) -
A) Fewer
issues
B) Lower
risk
C) +
A) Fewer
issues
B) Lower risk
C) +
Telco’s
D) Unequal regulatory
treatment vis-à-vis OTTs
remains.
E) Compliance costs
F) duplication of costs
when operating in multiple
countries
D) 0
E) go
down
F) down
(ii)
D) ++
E) down
less than in
option 2 (i)
F) market
entry i.s.o.
regulatory
barriers
(iv)
D) +
E) go down
less than in
option 3 (i)
F) same as 2
D) ++
E) same as 4 (i)
F) same as 2
OTTs
G) no compliance cost
except some legal cases as
to the scope of the RF
G) 0
G)
reduced
G) new
compliance
costs
G1) New
compliance
costs
G2) regulatory
risk (vii)
G3) impede
innovations(vii)
IoT Start-
ups and
SMEs
I) Low confidence in
future planning and
investments due to unclear
scope of RF
I) 0
I) More
clarity but
more
market
risks (v)
I) clarity
about scope
I) clarity about
scope
NRAs L) Enforcement costs K) 0 (i) K) go up K) 0 (i) K) go up (vii)
141
(vi)
(i) Reduction in compliance costs due to cancelling redundant rules are significant. Reduction of
enforcement costs by NRAs are zero. From option 2 to 3 the number of obligations for ECS
reduce, but new obligations for ECN arise. From 2 to 4 and 5, the reduction in obligations for
ECS remain the same, but the number of obligations for ECN go up. Additional measures that
impact on OTTs do not impact on Telco’s
(ii)Streamlining reduces the dimensions for regulatory heterogeneity. While lack of clarity about
the scope of the RF may lead to evolution of interpretations by MS and create new
heterogeneity of rules, this would not affect Telco’s but rather OTTs and IoT.
(iii) Measures to reduce lock-in with multi-play service providers may be offset by relaxing
obligations for interconnection and subsequent concentration of the market.
(iv) Relaxing obligations to interconnect may allow for the creation of market entry barriers
as National Markets concentrate.
(v)IoT start-ups will have less uncertainty about rights and obligations and experience less
duplication of costs when operating in multiple countries, however, Option 3 may introduce
competition issues for number-based m2m service providers vis-à-vis large operators
(vi) Risk of more need for ex-post interventions in which NRAs may need to support CAs
(vii) Interconnection subject to “reasonable limitations of technical feasibility as well as cost
limitations” gives rise to enforcement/implementation costs, uncertainty and risks for
innovation
4.4.4.1.5 EU added value
The question addressed here is how does each option respond to the need for EU action?
Option 1 and 2 leave a lack of clarity about the scope of the regulatory framework and implicitly
invite Member States to deal with the problem that similar services are subject to different rules.
This may raise new issues regarding cross border service provision. Options 3, 4, and 5 bring
clarity about the scope of the Regulatory Framework such that the need to take action at national
level no longer exists. EU action in this case reduces the risk of new forms of regulatory
heterogeneity. Option 3, however, creates potential new competition issues that require actions
by national authorities with a real chance that they do not respond with similar remedies and
thereby potentially contributing to new forms of regulatory heterogeneity and barriers for cross-
border service delivery. Option 4 has the advantages of option 3 in terms of clarity about the
scope of the rules but avoids the possibility of heterogeneous application at national level.
Option 5, while bringing clarity, is likely to be disproportionate and fails to ensure the necessary
level of regulatory certainty that the framework is meant to bring.
4.4.4.1.6 Summary table comparing services options
Table 10 - Comparison of options - Services
Effectiveness Efficiency Coherence EU
value
add
Streaml
ining
Compe
tition
and
innovat
ion
Consu
mer
protec
tion
Fosters
cross-
border
services
/entry
Cost/com
plexity/
enforceabi
lity
Disru
ption
from
status
quo
(stabil
ity)
Intern
al
coher
ence
Exter
nal
coher
ence
Additi
onal
impac
t vs
MS
acting
alone
Optio
n 1:
0 0 0 0 0 0 0 0 0
142
Status
quo
Optio
n 2:
strea
mline
only
+ + + ? ++++ 0 0 + 0
Optio
n 3:
IAS
only
+ +/– – +/- +++ – – – – – ?
Optio
n 4:
IAS +
CS +
E.164
+ ++ +++ ++ +++ – ++ + +
Optio
n 5:
IAS +
CS
+ ++ ++ + + – – + +/- +
4.4.4.2 Must carry and EPG obligations
4.4.4.2.1 Effectiveness
Social and environmental effects of the options are set out in the previous section.
In addition, option 1 has no impact in terms of diversity of content offered and would provide
some degree of balance between the benefits with regard to general interest objectives and the
cost imposed on ECNs.
Option 2 would remove the burden imposed on ECNs over time (i.e. by 2020-2025) but would
create disproportionate risks to the achievement of general interest objectives as some small
PSBs would have less access to essential broadcasting networks.
Option 3 would risk imposing disproportionate burdens on IPTV and cable TV platforms while
harm could be caused at the same time to general interest objectives by inappropriate and
disproportionate intervention. The proposal amending the Audio-visual Media Services Directive
explicitly refers to the competence of Member States to ensure discoverability of content of
general interest under national legislation. Accordingly it is not necessary to rely on must carry
obligations to pursue the same regulatory objective.
It follows that, taking into account also the social effects, option one scores best on effectiveness.
4.4.4.2.2 Efficiency
Genuine economic effects of the options are set out in in the previous section. In addition, under
option 1, the costs of implementing, enforcing, and complying with must carry and EPG
obligations are negligible for ECNs and NRAs: operational activities involved are limited and do
not differ from regular operations (such as customer relations, legal advice, etc.). It follows that
option 2 would hardly lead to lower costs. Under option 3, extending must carry obligations to
143
on- demand content provided by IPTV and cable TV platforms would cause additional costs for
implementation, enforcement and compliance. Accordingly, taking into account also the genuine
economic effects, option 1 scores best in terms of efficiency.
4.4.4.2.3 Coherence
Option 1 is not a radical change from the current provision. There is limited positive impact on
Single Market coherence as must carry obligations define a maximum scope for regulatory
intervention by Member States and therefore determine the maximum degree of possible
diversity between Member States. Similar coherence is not currently provided in the OTT area
nor for presentational aspects of EPGs. For EPG access which can be imposed by NRAs,
BEREC and art 7 procedures are available to ensure coherence247
.
For most Member States option 2 is a radical change from the current provisions. Maximum
internal market coherence is achieved as removal of must carry obligations would by definition
result in full coherence. However, option 2 may be incoherent with the Commission
Communication on a European agenda for culture in a globalizing world248
, subsequently
endorsed by Member States249
, according to which the promotion of cultural diversity represents
one of the main objectives that should guide EU action in the field of culture. These negative
impacts on internal coherence are considered to be more significant than the positive impacts on
single market coherence, as even without must carry obligations conditions in national
broadcasting markets across the EU will remain substantially different in terms of market size,
transmission networks used and user preferences for content (depending i.a. on language and
social-cultural identities).
Option 3 is also a radical change from the current provisions. As under option 1 there is limited
positive impact on Single Market coherence as must carry obligations define a maximum scope
for regulatory intervention by Member States and therefore determine the maximum degree of
possible diversity between Member States. However, with regards to internal consistency, option
3 scores negatively. While must carry obligations are currently imposed on ECNs, the extension
of must carry obligations to on demand content provided on IPTV and cable TV platforms would
be incoherent with the split between the rules that apply to ECN and those that apply to audio-
visual media content (see the penultimate paragraph of section 4.4.4.2.1). Again, the negative
impacts on internal coherence are considered to dominate the limited positive effects on Single
market coherence. Accordingly, option 1 scores best on coherence.
4.4.4.2.4 Impact on stakeholders
Consumers
Under option 1, consumers enjoy a certain degree of pluralism in the form of content of public
interest adjusted to local preferences. Option 2 would in some Member States (where must carry
obligations currently apply) experience less pluralism in return for (slightly) lower prices for
ECN services as ECN providers may pass on part of the increased feed-in revenues to
consumers. Option 3 would have no impact on pluralism or prices as it would not contribute to a
more effective digitisation strategy for public service broadcasters.
Electronic Communications Network providers
Under options 1 and 3 ECN providers that are subject to must carry and EPG obligations miss
out on feed-in fees. Under option 2, ECN providers would generate higher feed-in revenues.
247
For the details of the consolidation process under art 7 of the Framework Directive please refer to section 1.2.3.1
248
COM(2007) 242 final
249
Resolution of the Council of 16 November 2007 on a European Agenda for Culture, (2007/C 287/01)
144
Public Service Broadcasters
Under options 1 and 3 public service broadcasters experience low barriers for broadcasting due
to no/low feed-in fees. Under option 2, public service broadcasters would likely have to pay
higher feed-in fees, causing some public service broadcasters to cease (certain) activities.
OTTs
Under options 1 and 2 OTTs remain unaffected. Option 3 would require OTTs to adjust their
algorithms which may negatively impact on their business model (particularly if they apply an
advertisement based business model).
Member States
Under option 1, Member States have some degree of freedom to use appropriate tools as required
by local market circumstances. The scope remains limited to ECN services (but Member States
would remain free as regards non-ECN providers, subject to the currently proposed revision of
the Audio-visual Media Services Directive). Option 2 would limit the number of tools available
(it takes away must carry obligations as a tool) and option 3 would extend the scope of these
tools to include online services.
Option 1: Status quo Option 2: Phase out
obligations
Option 3: Extend must
carry obligations to
OTT providers
Consumers Positive, viewers
continue to have
access to PSB services
via traditional TV
networks, with
adaptation to
connected TV
environment.
Negative, in some
cases viewers may
lose access to PSB
services via
traditional TV
networks before OTT
substitution is viable
Neutral compared to
option 1: No impact on
PSBs (neither small or
large) or on the variety of
content offered to (i.e.
choice for) end-uses. The
abundance of online
content could make it
more difficult for some
smaller PSBs to build a
significant audience
Larger and
multi-national
commercial
content providers
Neutral – market entry
might continue to
focus on the OTT area
which has less
regulatory constraints
Positive - market
entry could include
traditional TV
networks to the
extent that
transmission capacity
becomes available
subsequent to
discontinuation of
must carry
obligations
Neutral. No change in the
possibilities to make
content available
compared to status quo
as OTT providers already
include PSB content.
PSBs, including
at regional and
local level
Positive, existing
privileges would
remain in place
Negative, appropriate
transmission on
traditional TV
networks would have
to be negotiated
under market
conditions.
Negative as concepts for
proportionate and
appropriate intervention
in the OTT area do not
currently exist. Positive
effects are possible in the
long terms, if such
intervention can finally
be successfully
145
conceived.
ECNs Neutral/positive –
existing regulatory
burdens and
constraints would
remain, but with a
perspective that they
will be removed
gradually over time
subsequent to national
reviews of obligations.
Strongly positive -
existing regulatory
burdens and
constraints would
disappear by 2020-
2025
Neutral – no change of
existing burdens and
constraints
OTT service
providers which
are not
themselves
content providers
Neutral – existing
obligations do not
relate to OTTs
Neutral – existing
obligations do not
relate to OTTs
Negative as concepts for
proportionate and
appropriate intervention
in the OTT area do not
currently exist.
While there is a majority view that transmission obligations imposed on electronic network
operators (must carry rules) and rules related to electronic programme guides should be adapted to
new market and technological realities, there is sharp disagreement as to how such adaptation
should be conceived. Extension of the current rules is supported by some Member States and most
broadcasters, whereas most telecom operators are in favour of reducing the scope of the rules.
Public service broadcasters consider that the future scope of rules should extend to interactive and
non-linear services, should also cover hybrid TV signalling and should apply on a technologically
neutral basis to all distributors of audio-visual content, not only to ECNs. Telecom operators call
for a level playing field between broadcasters and online platforms and call for improving access
to content rights. Some cable and telecom operators call for complete removal of must carry
obligations or at least to limit them to the main/most essential general interest channels.
Commercial broadcasters, one telecom operator and a citizen consider that the current provisions
are adequate.
4.4.4.2.5 EU value added
The most important reason for EU actions on must carry and EPG access should be found in
relation to the European Agenda for Culture which puts cultural diversity, including access to
culture and cultural works, at the heart of any EU action on culture..
In the context of this review, the need for EU actions should be related to the mandate given by
the EU to Member States in imposing must carry obligations and to NRAs in imposing EPG
access obligations. The current provisions in the Regulatory Framework seem to be sufficient.
Most PSBs, with an exception of small local PSBs offering niche content, do not experience
difficulty in providing their on demand content on IPTV and cable TV platforms. The smaller
PSBs find it difficult to build a large enough digital audience. Current provisions by the ECNS
regulatory framework do not allow for extending MC and EPG obligations accordingly. Such
extension does not appear to be necessary (as there are alternative options available, see the
penultimate paragraph of section 4.4.4.2.1)..Accordingly, option 1 scores best in terms of EU
value added.
4.4.4.2.6 Summary table comparing must carry and EPG options
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Table 11 - Comparison of options – Must carry and EPG
Effectiveness Efficiency Coherence EU
value
add
Streaml
ining
Compet
ition
and
innovat
ion
Consu
mer
protec
tion
Fosters
cross-
border
services/
entry
Cost/comp
lexity/
enforceabi
lity
Disrup
tion
from
status
quo
(stabil
ity)
Intern
al
coher
ence
Exter
nal
coher
ence
Additi
onal
impact
vs MS
acting
alone
Opti
on
1:
no
cha
nge
0 0 0 0 0 0 0 0 0
Opti
on
2:
Pha
se
out
MC
- - 0 0 0 0 0 - n.r.
Opti
on
3:
Exte
nd
MC
+ 0 0 0 0 - - 0 n.r.
4.4.4.3 Numbering
4.4.4.3.1 Effectiveness
The redundant rules addressed by Option 2 do not involve administrative costs, do not have
implications on competition and innovation and do not impact on consumers or on the Internal
Market.
Option 3 likely results in a net reduction of administrative costs (notably related to permanent
IoT/M2M roaming and extra-territorial use of numbers) and limits the risks of a lock-in of M2M
service providers by connectivity providers. This benefits the competition between connectivity
providers and creates a more level playing field for M2M service providers vis-à-vis telecom
operators. Option 3 allows for more flexibility of business models for M2M services, resulting in
more innovative services and benefiting the (faster) integration of more industries in the IoT. It
leads to (faster) integration of diverse industries into the IoT. Option 3 contributes (e.g. via
simplifying rules on extra-territorial use of numbers) to cross border connectivity and thereby to
cross border IoT services.
4.4.4.3.2 Efficiency
While the numbering resources do not face similar physical limitations as spectrum, the
numbering requirements bear costs for the operators. With the rapid development of M2M,
regulatory fragmentation under Option 1 and 2 may generate additional costs relating to the
fulfilment of divergent conditions for the use of numbers. Option 3 would aim to ease this
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fragmentation and could thus reduce the underlying costs, with spillover effects on more
efficient marketing of products throughout the single market (e.g. without a need to recall a
connected car to replace the SIM when sold cross border).
4.4.4.3.3 Coherence
Option 2 is not a deviation from the status quo: there are minor changes proposed in the
framework and the scope remains the same. Under option 2, neither internal nor external
coherence is affected.
Option 3 is not a major deviation from the status quo; there are no fundamental changes
proposed to the framework; the scope remains the same while option 3 mainly aims to provide
clarity, coordination and guidance. Internal coherence (with regards to the overall telecom
framework) is improved while objectives with regard to overall objectives of fostering
competition, innovation and the internal market are better served in the context of the evolving
IoT value chain. While these objectives are not only telecom specific, but also overall EU-wide
objectives, external coherence is served as well. Moreover, the provision of clarity and guidance
does not impact on the external coherence with existing governance arrangements between
Member States and the ITU.
4.4.4.3.4 Impact on stakeholders
Consumers
Under option 1 and 2, bottlenecks in the IoT value chain as well limitations to cross border use
may inhibit innovations in IoT applications and have an upward effect on prices for products and
services relying on IoT services. Option 3 addresses a number of these bottlenecks.
IoT users (Industry 4.0)
Under option 1 and 2, bottlenecks in the IoT value chain as well limitations to cross border use
of IoT services may lead to higher prices for IoT services and hinder the development and
adoption of IoT applications by inter alia electricity providers, car manufacturers and producers
of medical equipment. Such barriers could lead to a competitive disadvantage for these industries
in the EU vis-à-vis the rest of the world. Option 3 addresses a number of these bottlenecks and
hence facilitates the development and adoption of IoT applications by other industries.
IoT service providers (including SMEs)
Under options 1 and 2, because of the high costs related to physically swapping SIM cards in IoT
devices, IoT service providers (relying on SIM based connectivity) run the risk of being locked-
in with their connectivity provider, leading to higher prices for and lower quality of connectivity
services. Moreover, as a result of complex procedures regarding extra-territorial use of number,
options 1 and 2 would lead to IoT service providers facing difficulty in delivering reliable
always and everywhere connected services (domestic and cross border). Measures under option
3 would lower the costs of switching to a different connectivity provider and indirectly result in
lower prices and higher quality. Under option 3, the clarification, coordination and simplification
of rules regarding extraterritorial use would address these difficulties. All in all, compared to
options 1 and 2, option 3 would provide more room for innovations of IoT services.
Operators
For telecom operators, options 1 and 2 would potentially result in higher revenues from
connectivity services provided to IoT service providers. Furthermore, assuming an increasing
demand for cross-border M2M services, operators would experience higher costs for
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administration and implementation. Under option 3, the measures aimed at lowering switching
costs would lead to lower prices and revenues. The clarification, coordination and simplification
of rules regarding extraterritorial use would lower these costs.
NRAs
Assuming a growing demand for cross border M2M services, options 1 and 2 would also lead to
increased implementation costs for NRAs, for similar reasons as those applying to electronic
communications providers. Similarly, option 3 would largely prevent the increase in costs.
Option 1: Status quo
Option 2: only
Repeal of
redundant
rules
Option 3: Address
competition
Consumers A) Higher prices for IoT services
A) same as
option 1
A) Lower prices
IoT users
(Industry 4.0)
B) Higher prices for IoT services
C) Potential barriers for cross border
use of applications
D) Potential barrier for full integration
into the IoT
B) same as
option 1
C) same as
option 1
D) same as
option 1
D) Lower prices
E) Less risk
F) Fewer barriers
IoT service
providers
(including
SMEs)
E) Potential lock-in with connectivity
providers, leading to high prices and
lower quality
F) Potential bottlenecks in delivering
reliable always and everywhere
connected services (domestic and cross
border)
G) Less room for innovations of IoT
services
E) same as
option 1
F) same as
option 1
G) same as
option 1
E) Less risk
F) Less bottlenecks
G) More room for
innovations
Telco’s
H) High prices and profits
I) Growing administrative costs related
H) same as
option 1
I) same as
H) Lower prices,
less profits
I) Lower
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to extra-territorial use of numbers option 1 administrative costs
NRAs
J) Growing administrative costs related
to facilitating the extra-territorial use of
numbers
J) same as
option 1
J) Lower
administrative costs
4.4.4.3.5 EU value added
Exiting arrangements such as the relevant recent CEPT recommendation seem to propose an
authorisation regime that could prove burdensome and in any case seem to lack efficient
enforcement possibilities. Regulatory fragmentation in the area of numbering management could
seriously impede the development of the M2M sector, preventing operators to benefit from
economies of scale granted by the Single Market.
4.4.4.3.6 Summary table comparing numbering options
Effectiveness Efficienc
y
Coherence EU
value
add
Streamlin
ing
Competi
tion and
innovati
on
Consume
r
protection
Fosters
cross-
border
services/en
try
Cost/com
plexity/
enforceab
ility
Disrupti
on from
status
quo
(stabilit
y)
Inter
nal
coher
ence
Exter
nal
coher
ence
Additi
onal
impact
vs MS
acting
alone
Option 1:
no change
0 0 0 0 0 0 0 0 0
Option 2:
Repeal of
redundant
rules
0 0 0 0 0 0 0 0 0
Option 3:
Address
competition
+ + + + + 0 + + +
4.4.5 The preferred option
4.4.5.1 Services
The Commission considers that option 4 on services is the best option to achieve the overall and
specific objectives of the review of the telecom framework as presented in section 3.
Option 4 contributes most to realising efficiency gains: there are lower transactional and
compliance costs (by reducing duplicate compliance efforts or duplicate data requests); there is a
more equal regulatory treatment (particularly with regards to security and privacy obligations), a
reduction of regulatory risk as a result of more clarity about the scope of the regulatory
framework which promotes confident future planning and investments; and the regulatory
reform contributes to fostering the Internal Market. Through these channels, increased efficiency
gains may spur innovations that translate in the growth of total factor productivity and income
per capita. The impact on GDP growth of regulatory reforms have been analysed by Haider
(2012). The study analyses 1140 reforms in 172 countries during the period 2006-2010. Haider
finds that each reform is associated (on average) with a 0.15 percentage points increase in
annual economic growth. These reforms in Haider’s study did not include sectorial reforms but
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rather reforms of general regulation on doing business250
. This option ensures effective access to
emergency services envisaging the improvement of caller location, access to disabled end-users
and the performance of Public Safety Answering Points (as defined in option 2) and it also
brings regulatory clarity with regards the scope of the obligation to provide access to emergency
services.
4.4.5.2 Must carry and EPG obligations
Given that option 1 scores best on all criteria (effectiveness, including genuine social impacts,
efficiency, including genuine economic impacts, coherence and EU added value) the
Commission considers that option 1 is the best option to achieve the overall and specific
objectives of the review of the telecom framework as presented in section 3. No macroeconomic
effects could be quantified through modelling for this policy area.
4.4.5.3 Numbering
The Commission considers that option 3 is the best option to achieve the overall and specific
objectives of the review of the telecom framework as presented in section 3. The macroeconomic
effects could not be quantified through modelling for this policy area, Nevertheless, the expected
proliferation of M2M in all sectors of the economy from manufacturing to consumer electronics
should have a considerable impact on the overall economy.
4.5 Institutional governance
4.5.1 Options
Any institutional structure needs to be functional to the future objectives that the legal
framework which it will be called to fulfil and to the problems to be addressed by means of the
public intervention. The scope of the European institutional dimension, intended as the
governance template, and the procedural tools defined at EU level as necessary to support the
future regulatory framework, therefore, depend on the scope and intensity of the desired EU
harmonisation. The assessment of options for intervention levels below attempts to identify
which tasks are likely to require a more co-ordinated, or harmonised, approach at EU level and
what should/could be the intensity of such EU intervention.
The governance options flow from the options presented in each subject area and they assess at
the same time the different governance levels/bodies (Commission, independent NRAs, BEREC,
RSPG, etc.).
The analysis carried out by the consultant suggests that the maximum benefits can be gained
from a more targeted streamlining of regulation, combined with measures to ensure greater
consistency at an EU level on aspects which are still subject to regulatory intervention.
In the following sections we describe the potential governance solutions which would support
the preferred options identified in each policy area, with a focus on the implications of these
options for the distribution of tasks and resourcing of BEREC, the RSPG, NRAs and the
Commission.
Option 1: status quo – baseline scenario
Today’s regulatory framework provides a high degree of flexibility for national regulatory
authorities and Member States. This provides significant scope for regulation to be tailored to
250
The Woldbank Data on which the publication of Haider is based included mainly general reforms aiming to
improve ‘doing business’ in the following dimensions: Starting a Business, Dealing with Construction, Permits,
Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading Across
Borders, Enforcing Contracts, and Resolving Insolvency – see http://www.doingbusiness.org/
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meet specific national or local circumstances. However this system carries significant weakness
in areas where consistency is essential or would better serve the common European interest.
The current framework harmonises very few competences assigned to national regulatory
authorities responsible for ex ante market regulation and allows Member States to assign tasks
under the framework to Ministerial bodies or other authorities. The result is a patchwork, since
there is no other competence than ex ante market regulation for which all 28 national regulatory
authorities members of BEREC are also competent for. Even the resolution of disputes between
undertakings is not assigned in all Member States to the national regulatory authority responsible
for ex ante market regulation (it is assigned in Belgium to the competition authority). As a result
there is currently asymmetry of information between the different NRAs regarding market
developments in the area of services, such as interoperability between communication services.
Discrepancies exist for the general authorisation, for numbering, for consumer protection etc.
This has an impact when the legislator has given BEREC a role in areas where competence at
national level is not harmonised for its members, such as for instance the resolution of cross-
border disputes.
As regards access regulation, the current governance structure requires a relatively complex (and
some argue251
inefficient) system of Recommendations, ex ante checks (under the so-called
Article 7 procedure) and balances (with different roles for the Commission, BEREC, COCOM,
and the national as well as European courts) to ensure that consistent outcomes are achieved, and
yet even in cases where common approaches are agreed between the Commission and BEREC,
the system does not achieve sufficient consistency. A key example, described more fully in
SMART 2015/0002, concerns mobile termination rates, while business access is another area
where the existing system does not appear to be yielding effective results.
In the spectrum area, spectrum allocation and technical conditions are harmonised with
Commission decisions based on the Radio Spectrum Decision, with the participation of Member
States in the Radio Spectrum Committee. There is no institutional set up for coordination of
spectrum assignments. RSPG has a purely advisory role to the Commission on some more high
level strategic spectrum issues.
Under the current framework the Commission scrutinises (with BEREC) draft ex ante market
remedies notified by NRAs, but is not able to take binding action (e.g. to use a veto power)
under the article 7a procedure. More general Decisions on remedies might be possible in theory
under Article 19 of the Framework Directive, but may only be initiated two years following a
Recommendation on the same subject (which may have its own period for entry into effect, to be
first taken into account) and following a lengthy process involving BEREC and COCOM.
Under this option BEREC for access and the RSPG for spectrum would maintain their current
advisory roles. Responsibilities for independent NRAs in areas such as consumer protection and
spectrum would continue to vary to a degree at national level. The role of the Commission and
BEREC in relation to ensuring consistency of draft measures proposed by NRAs concerning
remedies in markets, in which operators with SMP have been identified, would remain of a non-
binding nature.
The responses to the public consultation show diverging views with regards to the aptness of the
current institutional set up at EU level. Almost half of the respondents to the PC agreed that the
current institutional set-up should be revised in order better to ensure legal certainty and
accountability. In particular some respondents called for making sure that institutions are
accountable for their decisions (both politically and legally).
251 See for example EP (2013) How to Build a Ubiquitous EU Digital Society page 29
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On the contrary, BEREC was of the view that the current sectorial institutional set-up has
worked well so far and any intervention should be therefore carefully considered. According to
BEREC, rootedness in its member regulators must remain core to the regulatory system.
Amongst those who favoured a revision of the current institutional set-up, proposals differed as
regards BEREC from a limited advisory role to turning it into a EU regulatory authority with
proper decision-making power. Some respondents called for strengthening BEREC's role within
the Article 7 procedure and also for improving coordination (with other institutions, regulatory
bodies and stakeholders).
Several respondents expressed their views that BEREC in its current form (as a body composed
of 28 individual NRAs) has shown a limited ability to act strategically and in the interest of EU
competitiveness and it does not contribute to the objectives of the Regulatory Framework in a
satisfactory manner.
With regard to spectrum governance, in order to serve the future wireless connectivity needs of
the EU, a common EU approach to governing spectrum access was welcomed by respondents to
the public consultation in order to enable technologies to be used seamlessly, but respect for
spectrum as a national asset was required. Delays in availability of spectrum and fragmentation
between conditions of use in different Member Stated were noted.
Option 2: enhanced advisory role and strengthen competences
Under this option, in order to improve consistency in a number of areas identified in the previous
sections of this report, it will be proposed to strengthen the role of independent NRAs by
establishing a minimum set of competences to be carried out by those NRAs across the EU.
This, in turn, should also have a positive effect on the efficiency of BEREC to achieve its
objectives since all its members would have the necessary competences and experience in the
relevant matters and, at the same time, a more efficient implementation of the best practice
guidance provided by the new BEREC, given that all its members would be responsible for
implementation at national level. The public consultation supported the alignment of a minimum
set of competences. BEREC for instance called for identifying a common set of sector specific
competences that should be entrusted to independent NRAs and aligning them to BEREC’s own
competences.
The harmonisation of the competences of independent NRAs will vest the NRAs with necessary
competence to intervene in all main areas related to the electronic communications networks,
except spectrum. As (some) NRAs would be assigned an increased portfolio of competences, it
is essential to ensure that they are attributed the necessary human and financial resources to carry
out those tasks.
At the EU level, both the new Agency (BEREC) and RSPG would continue to have an advisory
role and BEREC should extend its advisory scope to the areas where the independent NRAs
are competent in order to align BEREC tasks to those of the NRAs. However, in order to
increase its efficiency and provide more stable management, the governance structure of the new
BEREC would be adapted to substantially align with the 2012 Common approach on
decentralised agencies252
. This means that the regulatory functions would also be carried out
under an agency umbrella by a revised body which will operate with legal personality.253
This
would also address the lack of accountability of BEREC raised by respondents to the public
consultation.
252
See the Joint Statement of the European Parliament, the Council of the EU and the European Commission on
decentralised agencies of 19 July 2012.
253
In contrast to the current structure under which the Board of Regulators of BEREC is in charge of decisions on
regulatory matters and the BEREC Office (established as an EU agency governed by a Management Committee and
an Administrative Manager) is solely entrusted with a support administrative function to BEREC.
153
Although the seat of the new BEREC is an issue for political consideration, and it may be judged
that any adapted agency should be considered as the successor of the current BEREC Office,
whose seat has already been determined, the Common Approach states certain criteria to be
considered, including assurance that the agency can be set up on time, accessibility of the
location, existence of adequate education facilities and appropriate access to labour market,
social security and medical care.
A new Management Board would be established to oversee the day-to-day governance of the
overall Agency, replacing the current Board of Regulators and Management Committee.
Moreover, a more stable governance structure is envisaged through the establishment of a
Chairperson (to be selected amongst the members of the Management Board) with a longer term
(currently the term is one year), to grant additional stability. The Executive Director will have
extended powers compared to the current Administrative Manager of the BEREC Office and will
be selected from a list of candidates proposed by the Commission following an open selection
procedure as it is foreseen in the Common Approach and is the case in other agencies.
Under this option there will be an exchange of best practices within the RSPG regarding
spectrum assignments practice of Member States, and for the rest it will continue advising with a
particular focus on pre market-forming aspects.
Option 3: advisory role for BEREC/RSPG with certain normative powers for BEREC and
improved process for market review and spectrum assignment
Under this option most elements from Option 2 would be maintained, in particular the minimum
set of harmonised competences (now including also a competence to define the regulatory and
market shaping elements of ECNS spectrum assignments), the alignment of NRAs and the new
Agency's (BEREC's) tasks, the substantial alignment of the Agency's governance structure with
the Common Approach for EU agencies and the advisory role for RSPG .
Additionally, a number of changes are implemented in order to address some of the key
obstacles identified in the substantive areas, in particular for access, spectrum, services and
numbering. Accordingly, BEREC is vested with some additional tasks including certain binding
powers. It is worth pointing out that the substantial alignment of the Agency governance
structure with the Common Approach on decentralised agencies will also address the concern
raised by some PC respondents (in particular incumbent operators) that the current BEREC
structure does not allow the body to fulfil executive and binding tasks but only advisory. The
alignment with the Common approach will imply that the regulatory functions would be carried
out under agency umbrella by a revised body which will operate with legal personality. Under
the assessment carried out for access regulation, we identified the need to ensure greater
consistency and co-ordination in the practices of NRAs concerning market analyses, in
particular with regards to the choice of remedies with a cross-border dimension such as those
used for business services. In order to improve the current situation where the Commission and
BEREC have only non-binding powers as regards remedies, a 'double-lock' system is proposed
whereby, in cases where BEREC and the Commission agree on their position regarding the draft
remedies proposed by an NRA, the NRA could be required by the Commission to amend or
withdraw the draft measure and, if necessary, to re-notify the market analysis.
A majority of respondents to the public consultation agreed that the current role and
responsibilities of the institutional actors should be amended. On one hand a group of (mainly)
incumbent operators proposed more discretion for NRAs with a reduced role of the Commission
(or BEREC), highlighting the need for taking account of national circumstances. On the other
hand, there was a significant number of voices calling for an increased role of the Commission to
ensure consistency (through a veto for remedies, for example).
Currently, neither the Commission, nor BEREC have a full picture of the exact footprint and
capacity of electronic communications networks. While mapping initiatives have developed in
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most of the Member States, they differ in scope and level of detail and the information they
provide is not easily available and comparable. It is therefore proposed that NRAs would, as part
of the market analysis, conduct a periodic geographic analysis of the current and prospective
reach of networks (including quality of service mapping) and make this information available to
the Commission and BEREC in the context of their monitoring tasks. BEREC would also
receive the power to request information directly from operators, a power which would be
extended to also cover communications services, competence for which would have been
harmonised at national level with the NRAs, as in option 2. This will make available to BEREC
and the Commission the necessary information on networks and services to perform effectively
their monitoring tasks. BEREC shall also to provide assistance to NRAs on the mapping
exercise.
In some areas BEREC will no longer have solely an advisory role to the Commission but it will
get its own binding powers vis-à-vis its members. Accordingly BEREC may adopt a decision
identifying transnational markets, which previously was a power of the Commission. It will also
gain a power to adopt guidelines on how NRAs can design market regulation to meet
transnational demand. Furthermore it may also adopt decisions on cross-border disputes.
BEREC will also obtain the new non-binding competence to adopt guidelines on minimum
criteria for the reference offer of an SMP operator. It will also obtain a new role in assisting the
NRAs upon request.
As regard consumption control BEREC shall issue guidelines on the technical requirements of
measurement facilities for the implementation of the obligations for providers of internet access
services and providers of communications services using numbers to offer end-users the facility
to monitor and control their usage of services billed on time or volume consumption.
BEREC shall also adopt guidelines on relevant quality of service parameters and the applicable
measurement methods in order to fulfil the obligations of national regulatory authorities who
should specify which parameters should be measured and published by providers.
BEREC will also be assigned additional tasks in the area of numbering with a view to assisting
NRAs in ensuring an efficient management of extraterritorial use in compliance with the
framework and with consumer protection rules. In particular, this task would entail the
establishment of a registry on extraterritorial use of numbers and cross-border arrangements.
Where extraterritorial use is applicable, BEREC shall facilitate and coordinate the exchange of
information to assist the cross border aspects of enforcement and compliance with all the
relevant national consumer protection rules or national law related to the use of these numbers.
In addition, BEREC shall develop harmonised criteria for the fulfilment of numbering
management requirements in order to become assignees of numbering resources, and shall assist
the harmonised development of the triggering factors and scope for scarcity safeguards, i.e. when
and how can the NRAs restrict the assignment of numbering resources to prevent the exhaustion
thereof.
It will also get new tasks in the area of standardisation by assisting the Commission and the
NRAs in identifying a lack of interoperability of communications services that gives rise to
significant barriers to market entry and innovation, or an appreciable threat to end-to-end
connectivity between end users or a threat to effective access to emergency services, within one
or several Member States or throughout the European Union which could be addressed by the
imposition of existing European or international standards. When such standards are not
available, it will be BEREC's task to assess whether further action should be taken by the
Commission in the area of standardisation.
Furthermore, BEREC will be tasked to adopt guidelines on minimum criteria for the definition
of harmonised reference offers for regulated wholesale access products taking into account the
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needs of access seekers and end users, in particular in the presence of a transnational demand for
such products.
All this requires increased financial and human resources in order to enable the new BEREC
effectively to fulfil these tasks, which are necessary to ensure more homogeneous market
regulation and conditions at EU level, as well as for the independent NRAs as regards their
competences (including ECNS spectrum assignment).
As regards spectrum, NRAs responsible for ex ante market regulation would gain decision-
making competences concerning only the regulatory and market shaping conditions of spectrum
assignment for electronic communications networks and services.
Furthermore, a 'peer review' system within the EU body of competent national regulators is
introduced as a new coordination mechanism in order to improve efficiency and coherence
amongst Member States with regard to regulatory market elements of spectrum assignments.
This new mechanism will foster common interpretation and implementation across the EU of
elements of spectrum assignment which most impact business decisions and network
deployment. Such mechanism will require NRAs to notify (in parallel to the national
consultation) their measures concerning market shaping to BEREC for review and issuance of
non-binding opinion. While the regulatory community encompassing both BEREC and RSPG
was of the view that the EU already benefits from substantial coordination and harmonisation
processes, and no further EU-level coordination procedures are necessary, the RSPG showed
however openness to a peer-review mechanism as regards spectrum assignment and stakeholders
broadly recognise the benefits that a peer review can bring in terms of greater consistency.
The administrative secretariat of RSPG would remain with the Commission as today.
Vesting the politically independent NRAs with competence for certain (economic and market
regulatory) aspects of ECNS spectrum assignment would be done without reducing their level of
independence, which will be extended to all their new areas of competence. While Member
States would retain the power to set the objectives of spectrum assignment procedures in
accordance with the revised framework, and would be free to assign the competence of
conducting the actual assignment procedure to the politically independent NRA or to any other
body, the NRA would define at least all aspects which impact economic conditions and
competition on the market, in complete independence not only from the operators, but also from
any external intervention. This is important to reinforce the sentiment of regulatory certainty and
consistency, necessary to the investment community.
Moreover, additional general normative powers would be accorded to the Commission with
regard to laying down criteria for defining certain spectrum assignments elements (such e.g. as
timing of awards, criteria to define coverage obligations, trading, leasing and sharing conditions,
etc.), taking utmost account of advice of RSPG and based on adoption through comitology
(COCOM) – to guide individual NRAs, and the Agency peer review. Such a common EU
approach to governing spectrum was welcomed by respondents in order to enable technologies
to be used seamlessly, but respect for spectrum as a national asset is required. In the public
consultation, there was a split between regulators and (mainly) broadcasters that preferred a
national approach and telecoms operators that supported a certain level of binding guidance.
Most respondents supported the Commission intervening in assignment conditions and/or
procedural aspects, including with binding measures.
The RSPG general spectrum advisory role would be more clearly reflected in the regulatory
framework by reference to their opinions being taken into utmost account by the Commission
before adopting implementing measures by comitology (excluding technical harmonisation
decisions).
We could summarize the roles of the respective bodies as below:
156
The Radio Spectrum Policy Group will remain the advisory body for spectrum responsible for
articulating and coordinating national administrations' views on high level strategic issues in
spectrum policy and related developments. It will continue to be involved in the conception of
multiannual radio spectrum policy programmes and provide advice on conditions necessary for
deepening the Internal Market..
BEREC will be the forum for a new peer review process in the spectrum domain, which broadly
resembles its current role in market regulation. This concerns primarily the review of draft
measures that will affect the functioning of wireless markets or otherwise significantly shape the
economic conditions for networks and services using spectrum resources. BEREC will issue
(non-binding) opinions on these draft measures that assess the need for such measures based on a
thorough and objective assessment of the competitive market situation. These opinions serve to
promote a more consistent use and application of such measures which most impact business and
network investments decisions. Where national authorities intend to deviate from BEREC's
opinion, they will be obliged to state reasons for doing so.
The Commission's role will continue to be to provide strategic orientation for EU spectrum
policy, including in international contexts, to decide spectrum allocation and set out harmonised
technical conditions under the Radio Spectrum Decision and to ensure compliance with the rules
of the regulatory framework. With a number of new procedural obligations to be fulfilled by
national authorities, its monitoring and enforcement function in these domains will evolve
correspondingly. It will also be competent to present comments, together with BEREC's opinion,
on the NRAs' notified draft measures on spectrum assignments.
Option 4: EU regulator with certain implementation/execution powers
A last option is the establishment of an EU regulator, as a reinforced EU agency with the
necessary resources to accommodate a transfer of implementing powers, including supervision
and enforcement powers. The EU Regulator could act with binding powers in areas where it is
necessary to ensure uniform application of EU rules; new services with pan-EU or global
dimension, currently unregulated to a large extent or subject to unclear regulatory frameworks
(M2M, OTT as well as in other areas where the EU interest is particularly acute, such as roaming
or transnational markets).
As regards spectrum, there would also be an a priori peer review mechanism involving the EU
Regulator, possibly with a Commission veto power. Furthermore, there would be the possibility
for the EU Regulator to coordinate binding pan-European assignment procedures for specific
bands. Finally, the EU agency would also institutionalise a good office mediation service for
cross-border interference issues (as RSPG currently does ad hoc) and for cross-border regulatory
issues.
When asked whether the establishment of an EU Agency with regulatory decision-making
powers could positively contribute in achieving regulatory harmonisation in the EU telecoms
single market, for all the different areas (market regulation, EU spectrum management, end-user
protection and other) a majority disagree. It was argued that an EU agency would not be able to
take into account national circumstances. There were also statements regarding administrative
burden, bureaucracy, slow decisions, duplications, etc.
Some respondents (mainly operators) in favour for the establishment of such EU Agency
recommended that it should be responsible for services of the EU single market or for issues
such as service platforms whilst NRAs should continue dealing with local issues (e.g. network,
access to network).
As regards spectrum and numbering there was a call for more harmonisation but divergent
positions whether these issues should be dealt with by an EU agency. There was little demand
expressed in the public consultation for mandatory pan-EU or regional assignments. Most
157
respondents questioned the need for EU-wide licences, viewed assignment as a national matter,
which would however benefit from more consistency and coordination, and stressed that any
wider geographical scope should involve the Member States with some respondents viewing it as
a Council matter..
Table 12 - Summary of governance options
Institutional Access,
numbering and
services
Spectrum
Option 1:
Baseline scenario
BEREC and RSPG with
advisory role.
Independent NRAs
represented in BEREC in
charge of ex ante
regulation and dispute
resolution. The
assignment of other
competences at national
level largely varies.
Market review
process with
EC/BEREC
non-binding
powers as
regards
remedies.
RSPG adopt
opinions or reports
advising the
Commission, or
upon request the
Council or
Parliament. Some
NRAs have certain
spectrum related
competences.
Option 2:
Enhanced advisory role +
Strengthened
competences
Harmonise a minimum
set of independent NRAs
competences (ex-
spectrum) and align with
BEREC tasks.
Significantly align
BEREC governance with
Common approach on
decentralised agencies.
Main role for BEREC
and RSPG remain
advisory.
Extend NRAs'
competences:
consumer
protection,
numbering,
authorisation..
Improve process for
adopting RSPG
opinion or reports,
working
arrangements.
Enhance the current
RSPG Offices work
through a specific
mechanism to
ensure cross-border
coordination
outcomes
Option 3:
Advisory role
BEREC/RSPG with
certain normative powers
for BEREC + Improved
process for market review
and spectrum assignment
Harmonise a minimum
set of independent NRAs
competences (including
the regulatory and market
shaping elements of
spectrum assignment for
ECNS, subject to
governmental definition
of objectives) and align
with BEREC tasks.
Significantly align
BEREC governance with
Common approach on
decentralised agencies.
Normative powers (EC
implementing decisions)
for certain spectrum
assignment elements
As above +
'double-lock'
mechanism for
article 7a (EC
decision
possible if
BEREC agrees)
+ BEREC
additional
guidelines as
regards matters
such as
mapping,
standardised
wholesale
inputs for
business,
technical
aspects of
numbering,
switching and
Notification to
BEREC for peer
review process of
regulatory and
market shaping
spectrum
assignment aspects,
which issues non-
binding opinion.
RSPG to remain a
Commission
Advisory body, to
articulate and
coordinate national
administrations'
views on high level
strategies issues in
spectrum policy as
well as contribute its
158
taking utmost account of
RSPG opinion and
adopted through
comitology procedure.
interoperability. opinion to
preparation of
binding guidance
measures.
Option 4:
EU regulator with certain
implementation/execution
powers
Transfer certain
competences from
national to EU regulator
(possibly combining
market regulation and
spectrum) with
implementation/execution
and supervision powers.
EU Regulator will have
normative powers to
issue binding pan-
European assignment
procedures for specific
bands and institutionalise
a good office mediation
service for cross-border
interference and other
regulatory issues
The EU
Regulator/EC
would have
supervision and
enforcement
powers
implying ability
to act where
necessary to
ensure uniform
application of
EU rules in
cases where EU
interest acute
e.g. M2M, OTT,
roaming.
The EU
Regulator/EC would
have supervision
and enforcement
powers implying
ability to act where
necessary to ensure
uniform application
of EU rules in cases
where EU interest
acute. Potential
Commission veto
power concerning
spectrum
assignment
4.5.2 Discarded options
This section outlines the options which have been discarded. A more detailed analysis can be
found in Annex 3 on discarded options as well as the IA support studies.
 Commission powers to regulate markets directly
 Not having an EU agency at all: substituting the BEREC Office by secretarial support
functions to the Board of regulators to be provided by the Commission.
 Merging BEREC with the European Network and Information Security Agency (ENISA)
4.5.3 Impacts
Governance options provide supporting mechanisms for the achievement of the policy options.
They do not have social impact per se and their own economic impact is limited to their cost of
implementation.
There is no separate analysis of economic, social and environmental impacts of the governance
options. This is primarily because the substantive (per area) analysis already includes an
assessment of what benefits could be gained from harmonising certain features of the existing
regime, and the governance analysis simply seeks to assess which body or bodies (e.g. the EC
with BEREC in advisory role, BEREC in a more normative capacity, or BEREC taking certain
implementation/enforcement roles) would be best suited to achieve the harmonisation previously
identified as a desirable outcome (with attendant benefits already identified). In the comparison
of options part below we analyse the degree to which governance options are likely to effectively
support these benefits, in particular in relation to the preferred options in the different policy
areas. The social and environmental impacts of different governance options are unlikely to be
different from those associated with the preferred substantive options we have already discussed.
159
There is nevertheless a separate economic impact related to institutional choices represented by
the respective institutional costs of the different governance solutions which are analysed in
detail in the Study SMART 2015/0005 and summarised under the cost of the institutional set up
of various options below and Annex 12 includes a table with a more detailed presentation on
institutional costs. The efficiency analysis, in section 4.5.4 examines the costs in relation to the
anticipated benefits. In the same section, the impacts of the Governance options have been
assessed in relation to their effectiveness in supporting ubiquitous connectivity, competition and
end-user interests in the single market thereby supporting the economic, social and
environmental benefits that have already been identified in relation to these objectives. Their
coherence with the 2012 Common Approach on decentralised Agencies and with each other (and
specifically whether they achieve synergies and convergence between fixed and mobile
communications, content and services) and the degree to which they add value compared with
Member States acting alone, and the degree to which they respect the principle of subsidiarity
and proportionality, are also analysed in this section.
4.5.3.1 Cost of the institutional set up Option 1
The costs of the current institutional set-up consist in the costs of application of the framework at
a national level by NRAs and Spectrum Management Authorities (which may in some cases be
integrated into the NRA), and at European level in terms of the costs associated with developing
implementing guidelines and conducting case by case reviews of national procedures. The
estimated total cost of the regulatory set-up for implementation of the electronic
communications framework with overhead, is approximately €203 m per annum.
4.5.3.2 Cost of the institutional set up Option 2
This option would entail some increase in the costs of BEREC as an agency resulting from its
expanded advisory role and change in structure. A stronger role of BEREC will result in
efficiencies at national level given that national regulators can rely on coherent EU-level
regulatory guidance provided by BEREC. However, despite these expected efficiency gains,
there would be increased support costs for BEREC and increased costs for NRAs resulting from
the significantly expanded advisory remit of the new agency compared to the current more
limited mandate.254
The precise effect on the agency costs is difficult to assess, but could be
estimated at additional staffing of around 12 FTE taking the total to 40 FTE. The costs to NRAs
in relation to the new advisory support to BEREC, could be estimated at 10 FTEs (an uplift of
around 20%), assuming four additional requests for advice per year, and based on an estimate of
2.5 FTE per advice.255
We have discarded the option of BEREC being (fully or partly) financed by fees due to the
nature of the agency functions, which are mainly of an advisory character to the NRAs and EU
Institutions with the aim to ensuring greater consistency of telecoms regulation across the EU
rather than addressing market players directly.
The Commission’s resourcing requirements and associated costs would only marginally
increase, to reflect the agency's remit in developing implementing guidelines for example in
relation to mapping and standardised wholesale access products as well as in relation to its
representation at the Management Board in line with the Common Approach256
. Based on
Commission estimates, we have envisaged approximately the current level of resourcing i.e. 3
FTEs for this task assuming that the increased need for participating in the substantive work as a
254
It should be noted that NRAs do not have an equal level of participation in BEREC. Some NRAs may
contribute more resources and leadership of working groups than others. The figures we use are an average.
255
Data supplied by BEREC suggests that advice provided on various Commission Recommendations required
around 2.5 FTE on each occasion
256
The Common Approach foresees that the Commission should count with two representatives with voting
rights at the Management Board.
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voting member of BEREC will be balanced by the decreasing need for administrative support
provided to BEREC currently.
At national level, the budget of some NRAs, which currently count with a low level of resources
to contribute to the work of BEREC, would increase despite the more effective resourcing. We
have estimated an additional 10 FTEs for 5 NRAs which have expressed concerns257
over current
resourcing levels. In addition, NRAs would need to make greater contributions through
BEREC’s working groups due to the enhanced mandate of the agency, which we have reflected
through an increase in NRAs current resourcing contributions to BEREC accounting for 10 FTEs
across the EU. Additional resourcing in order to complete thorough mapping exercises may also
be required for those NRAs which do not currently engage in such exercises.258
However, many
NRAs already engage in such exercises and the extension of the market analysis process to five
years should also contribute to the reduction of costs for NRAs associated with market
analysis.259
Moreover, cost savings might be achieved as a result of standardised wholesale
product specifications which may remove the need for some of the duplicate processes that have
occurred at national level.
It should be noted that, while NRAs gaining responsibility for consumer protection (in cases
where they do not already have such responsibilities) would require an increase in their
resources, this may not influence the costs of the system overall, as there should be a
corresponding reduction in resources amongst the national bodies previously addressing these
issues.
As regards resourcing for spectrum, we have assumed that the Commission would continue to
provide an administrative support function to RSPG equivalent to 2.5 FTEs as in the status quo
but that due to the additional advisory requirements stemming from increased guidance on
spectrum co-ordination, the substantive contributions of SMAs to the RSPG would increase by
around 50% compared with the status quo260
.
If cost savings at a national level of around 15% can be made as a result of the streamlining of
the market analysis process and specifically the extension of the review period from 3 to 5 years
and the potential reduction in the number of markets to be analysed, this scenario should result in
costs of around €201m, a saving of around €2m across the EU compared with the status quo.
However, if no such synergies are achieved, this scenario would result in costs of around €211m,
€8m more than the status quo. The estimated total institutional set up cost for option 2 under
intermediate assumptions concerning efficiencies would result in total costs of approximately
€206 m per annum, around €3 m more than the status quo across the EU.
4.5.3.3 Cost of the institutional set up Option 3
The main cost impact of option 3 is likely to be the additional resources required by BEREC and
its members in order to fulfil its expanded remit especially as regards (i) the preparation of
detailed guidelines and decisions; (ii) extension of its remit to encompass market-shaping aspects
of spectrum and the associated peer review of NRAs' decisions in this regard. We have assumed
that the enlarged BEREC would require 60 FTE, implying a resourcing level in between the
257
Data request April 2016 in context of SMART 2015/0002
258
The additional resources required for mapping are difficult to estimate on a pan-European basis because many
NRAs have already engaged in some degree of mapping activity. As regards the costs of setting up a physical
infrastructure atlas the Impact Assessment for the Cost Reduction Directive 2014/61 suggests (see footnote 85) that
costs may vary from relatively low amounts (1-2m for the German Infrastrakturatlas and Portugal CIS database) to 75-
77m for the Flemish KLIP GS mapping and Polish GBDOT.
259
Based on data received from NRAs, the resourcing associated with access regulation is currently estimated at 36%
of the total. We have estimated 15% savings on this budget resulting from the decreased frequency of market reviews
(and potential reduction in regulation over time) based on Ecorys (2013) assessment of the savings from reducing the
number of markets to be analysed by NRAs.
260 This should be considered as the maximum percentage of increase in FTE. For prudential reasons the EC services
prefer to overestimate the potential cost, rather than underestimate.
161
current BEREC Office and the energy agency ACER. We have also assumed additional costs for
NRAs contributing to BEREC working groups, expanding their current contributions by 20 FTE
over the status quo.
Considering the functions that BEREC would carry out, we have analysed potential charging of
fees for the provision of specific services by the agency. However, we have concluded that, due
to the nature of the agency functions, there is in principle no room for it to be (fully or partly)
financed by fees. Indeed the main functions of BEREC would be in the remit of taking decisions,
opinions and guidelines to ensure greater consistency of regulatory intervention at EU level,
which do not fit into a 'service' approach. This option could, however, be reconsidered in the
future in case the agency is assigned new functions.
As regards access and services, the Commission’s remit would remain similar to present
(although it would gain the power to issue Decisions on market analyses in cases where BEREC
would agree with its serious doubts). However, its role in the development of spectrum
guidelines and peer review is expected to require an additional 5 FTE.
Under this option, NRAs currently lacking ECS spectrum responsibilities in the field of market-
shaping measures would gain such responsibilities. However, there may be little cost implication
if this results in a transfer of resources from existing bodies. Moreover, there may be some cost
savings for SMAs due to the introduction of mechanisms to co-ordinate assignment procedures
and conditions. We have estimated a potential reduction of 1 FTE per SMA resulting from
harmonised procedures resulting in total cost savings at the national level of around €2.6m
across the EU.
Assuming these savings could be achieved at a national level, the resulting costs for this option
are similar to the status quo, at around €202m. If no such savings can be made at a national level
and if the extended timeframes between market analyses also do not result in any national
savings, then the total costs of this scenario would be around €215m. Costs under intermediate
assumptions concerning efficiencies would result in total costs of €208.5m, around €5m more
than the status quo across the EU.
4.5.3.4 Cost of the institutional set up Option 4
Under this scenario, it is assumed that a larger scale Agency would be required along the lines of
the EBA, with an associated cost of around €31m per annum. We assume that on issues other
than spectrum NRAs would make an enhanced contribution to this Agency similar to that
estimated for option 3 (i.e. 20 FTE increased resource for BEREC contributions compared with
the status quo). As spectrum management would be tightly co-ordinated at EU level under this
scenario, NRAs (which would have full spectrum management responsibilities), would also
make additional contributions to co-ordination on spectrum matters – amounting to around five
times the existing contribution made by spectrum management authorities to the RSPG.
At the same time however, as responsibility for enforcing certain Decisions affecting the single
market (such as those relating to certain digital services) would be transferred to the EU level,
we assume a reduction of 5 FTEs for NRA activities excluding spectrum compared with
option 3.
Similarly, as certain decisions relating to spectrum would transfer entirely to the EU level (to the
enlarged BEREC), we assume further reductions of 5 FTE for each SMA (now incorporated with
the NRA) compared with option 3.
Under this scenario, increased costs of the centralised Agency would be more than compensated
by cost savings at the national level, resulting in a reduction in the overall costs of the
institutional set-up to around €198m. However, if the costs of national authorities prove to be
162
‘sticky’ then in a worst case scenario absent synergies this scenario could cost €234m, with
€216m in an ‘average’ view under intermediate assumptions concerning efficiencies.
4.5.4 Comparison of options
For the comparison between the different options, it is important to assess the degree to which
they will be effective261
, efficient262
and coherent263
in supporting the identified objectives and
specifically providing for the consistent application of regulation fostering VHC broadband,
competition and consumer protection in the single market, and better regulation in terms of
reduced cost.
4.5.4.1 Effectiveness
Option 2 (the enhanced advisory role) is likely to result in greater co-ordination than the current
set-up. However, like the status quo, an important aspect which may impede its effectiveness is
the existence of separate EU bodies for access and services on the one hand and spectrum on the
other, as well as the set-up which involves the Commission taking decisions or producing
recommendations subject to input from independent advisory bodies. This would maintain the
current complicated institutional structure and may risk slow processes, diverging views and
incoherent outcomes, potentially undermining the effectiveness of the system.
An important improvement, which is likely to increase the effectiveness of Options 3 and 4 vs
the status quo and Option 2, is that these options place greater responsibility with the EU level
body for developing guidelines on technical issues, such as business access products,
infrastructure mapping and extra-territorial numbering use, while maintaining the Commission's
leading role in developing broad guidelines on key policy issues, such as on co-investment or
Next Generation Access Networks and on spectrum. For this reason, they are able to derive more
benefit from the expert resources of national regulatory authorities and spectrum experts, and in
turn are likely to result in greater buy-in to the outcomes by national authorities which have
contributed to them. Additionally, these options (and especially option 4) bring together market-
shaping elements of the electronic communications sector (wired and wireless, networks and
services) under the same authorities, both at national and EU level. This should allow these
authorities to implement the framework in a manner which reflects the increasing convergence
between fixed and mobile networks and services.264
It is reasonable to assume that these effects would make Options 3 and 4 more effective in
promoting consistent best practice in fixed and wireless connectivity than Options 1 and 2. A
core distinction between Options 3 and 4 is that under Option 4 the EU Agency would have
responsibility for large extent decision-making and enforcement. Option 4 might be effective for
those issues in which identical approaches are desirable. However, it is likely to be less effective
than Option 3 in cases where knowledge of national and local conditions is required, which is
typically the case especially concerning regulation of infrastructure.
We conclude that Option 3 is likely to be most effective in providing the appropriate degree of
consistency to support VHC broadband deployment, competition, adequate consumer protection
and spectrum assignments in the single market.
261
Effectiveness is evaluated on the basis of the degree to which the options would achieve these objectives.
262
Efficiency is evaluated through an assessment of costs the complexity of the system.
263
Coherence is evaluated in terms of the coherence of the option with the existing set-up (ie degree of disruption
implied), with the 2012 Common approach on decentralised agencies and with other similar bodies
264 4G and 5G mobile technologies require increasing degrees of fibre backhaul, and there are increasing trends towards fixed mobile converged operators which can exploit
synergies. At the same time, the take-up of bundled fixed mobile converged offers by consumers is increasing, and many businesses have expressed a desire but some difficulties
in obtaining fixed and mobile services from a single provider (WIK 2013 business communications)
163
4.5.4.2 Efficiency
In assessing efficiency, we have estimated the institutional costs of each of the options. We
estimate that the total costs of the institutional set-up (including the costs for the Commission,
BEREC, RSPG, NRAs and SMAs) under the status quo are around €203m. See for more details
the analysis in section 4.5.3.1 and further details in the detailed institutional set-up analysis in
SMART 0005/2015.
The costs of the other options depend on the degree to which harmonised best practice and co-
ordination at EU level can be translated to efficiency savings at the national level. We therefore
consider a range of costs for each option also in line with indications from the expert group265
.
Under an enhanced advisory role (option 2), additional institutional costs would be incurred of
around €8m compared with the status quo. The main sources of the increase are the increased
resources required by the Commission for the drafting of further implementing guidelines under
the revised Framework and increased costs to the Agency and RSPG associated with their
expanded advisory role, despite expected efficiency gains by NRAs due to the EU level
approaches to specific regulatory aspects. There might also be additional costs for NRAs to
address under-resourcing for their contribution to BEREC reported by several NRAs266
and to
expand the remit of those without consumer protection responsibilities (although because we
assume that this cost would be transferred from other existing authorities it is not recorded in the
figures). However, these institutional cost increases might be more than compensated resulting in
total costs marginally less than the status quo if the cost of access regulation at national level is
reduced as a result of extended market review periods,267
and the implementation of standardised
remedies for core wholesale products,268
although requirements for more detailed market reviews
involving mapping269
may absorb some of those savings.270
Likewise, in the unlikely event that no efficiencies or synergies could be achieved as a result of
more effective co-ordination or extended market review periods, Option 3 is estimated to result
in total costs of around €215m (€12m more than the status quo). These additional costs stem
mainly from expanding the remit and tasks of BEREC and the introduction of a systematic peer
review process for spectrum assignments involving the Commission and BEREC.271
However, it
is likely that they would be at least partly compensated by potential cost savings regarding
spectrum management resulting from greater alignment of auction procedures and certain
conditions,272
as well as the extended market review periods. Indeed, when these efficiencies
are reflected, the resulting total cost of this set-up would be similar to the status quo.
265
The range of costs takes into consideration different possible materialization in time of efficiency savings at
national level and reflects the need to consider this aspect as expressed by the Expert group, see also Annex 13.
266
Questionnaire April 2016 SMART 2015/0002
267
Ecorys (2013) suggests potential cost savings of 10-15% resulting from a reduction in the number of markets on
the list of relevant markets from 7 to 5. An extension in the review period from 3-5 years might be considered to have
equivalent effect.
268
SMART 2014/0023 recorded 13 parallel procedures for the specification of virtual unbundled local access – it
seems reasonable to assume that costs to NRAs may have been reduced if common specifications had been pursued.
269 A
May 2016 interview with ARCEP suggests a cost of €4.6m over 7 years (~€0.7m annually) to establish a regime
similar to that which might be required under the adapted market analysis process. However, it is unclear how many of
the activities might be been conducted in the context of a standard market review.
270
A precise estimate of the cost difference compared with the status quo associated with mapping requirements is
challenging as a significant number of member states have already conducted mapping assessments of various kinds
and the cost may vary significantly depending on the type of mapping and detail involved. Moreover, if as is intended,
responsibility for infrastructure, investment and quality of service mapping is consolidated within the NRA, it could
achieve cost-savings in countries where these activities are distributed across a number of bodies. See SMART
005/2015 for further discussion of the cost implications of mapping.
271
We assume that introducing a minimum remit for NRAs including market-shaping aspects of spectrum would be
cost neutral, assuming that any resources currently residing in other departments would be transferred to the
independent NRAs.
272
These savings are estimated at around €2.6m across the 28 member states on the conservative assumption that each
spectrum authority could reduce FTE by 1.
164
Costs for option 4, at around €234m in the absence of efficiency savings are the highest of the
considered options. This is due to the fact that in this scenario the costs for the expanded EU
Agency would be significantly higher than for the other options (a cost similar to the European
Banking Authority is assumed). However, as certain functions would move from the national to
the EU level, it is reasonable to assume that some cost reductions might be possible at a national
level as regards access and consumer protection regulation as well as spectrum.273
If these are
taken into account, the total cost is projected to be €5m lower than the status quo.
When assessing efficiency, it is important not only to consider the costs for the institutional
actors, but also the cost and complexity to market players. For example, Ecorys (2013) estimated
that the costs to operators resulting from the market analysis process were more than four times
greater than those for NRAs, and therefore an extension in the period for market reviews could
also have a wider impact on industry cost savings.274
Because the institutional set-up for options 1, 2 and 3 involve different roles for different
authorities in different countries and for different topics, this set-up is also likely to perpetuate
high costs for stakeholders which would need to engage with and provide input to multiple
bodies at national and EU level.
Conversely, under option 4, where NRA responsibilities would be extended to cover the full
range of electronic communications issues and where a single body takes a leading role in
implementing guidelines, thereby addressing tasks that would otherwise be taken by the
Commission and/or RSPG, this set-up should result in reduced costs to stakeholders, especially
those with a multi-national footprint.
We conclude that if the potential synergies could be achieved, option 4 is likely to be the most
efficient solution. However, as costs can prove to be sticky and synergies might not be fully
achieved, option 3 may provide the most cost effective solution in relation to the potential
benefits that could be achieved through better co-ordination.
4.5.4.3 Coherence
All options would be significantly more coherent with the 2012 Common Approach on
Decentralised Agencies than the status quo which departs markedly from the model. Option 2
would provide greater coherence in the handling of consumer protection, but would maintain
separate bodies for spectrum and parallel roles for the Commission and BEREC on
implementing guidelines, which may result in complex or incoherent outcomes. On the other
hand, Option 3 is likely to increase the coherence of regulatory decisions by bringing together
responsibilities over market reviews and market-shaping aspects of spectrum. Under Options 3
and 4, the NRAs competences would also include economic and market regulation aspects of
spectrum assignment, meaning that all main tasks related to market-shaping can be dealt with
NRAs, adding greater coherence. Furthermore the spectrum peer review mechanism, which
requires NRAs to notify to BEREC their draft plans for spectrum awards and draft assignment
conditions would foster common interpretation and great coherence in the implementation of EU
assignment procedures and conditions across the EU. Option 4 would go even further towards
this goal by fully consolidating spectrum responsibility with the NRA and to a large extent
consolidating responsibility for governance of the electronic communications sector at EU level.
4.5.4.4 Impact on stakeholders
273
These cost savings are estimated at around €29m across the EU28, assuming reductions of 5FTE per member state
in access and service regulation and 6FTE in spectrum, but in practice may take time to materialise, as the costs of
regulatory authorities may in practice be ‘sticky’
274
See Ecorys et al (2013) Future electronic communications markets subject to ex ante regulation
https://ec.europa.eu/digital-single-market/en/news/future-electronic-communications-markets-subject-ex-ante-
regulation institutional costs are estimated at €50m in contrast with more than €200m for operators.
165
The preferred option for Governance (Option 3) involves the consolidation and alignment of the
remit of Regulatory Authorities at national level, as well as the extension of NRAs' remit to at
least market-shaping economic and regulatory aspects of spectrum assignment. BEREC would
also receive a consultative role in this regard. Its remit would also be extended to take certain
normative powers in relation to developing implementing guidelines in respect of transnational
demand (which would be adopted by the Commission) as well as playing a deciding role in
enabling a Commission ‘decision’ in relation to case by case assessment of remedies (under an
expanded article 7a FD process). BEREC would also perform the peer review of market shaping
aspects of national spectrum assignment procedures.
Alignment of governance mechanisms as well as full harmonisation and greater co-ordination at
EU level is likely to benefit OTT players which frequently operate in a multi-national or even
global environment, if the status quo would otherwise lead to fragmented national initiatives to
regulate aspects of their activities. SMEs will not be directly impacted by changes in governance,
but may benefit cross-border operations for smaller businesses by ensuring consistent application
of the rules, and interaction with fewer interlocutors. Consumers will indirectly benefit from
greater connectivity, cross-border entry and competition that may result from more effective co-
ordination at EU level.
The proposed changes to the EU framework for electronic communications would require
transposition into national legislation, and will entail changes to the national institutional set-up
in countries which do not already have arrangements in place corresponding to the revised EU
rules on structures and procedures, as well as changes at EU level. Specifically, at national level,
NRAs' remit would be subject to minimum harmonisation (to cover at least market-shaping
spectrum assignment issues and sector specific regulation in areas such as consumer protection).
Likewise, at EU level the preferred option would give BEREC an expanded consultative role for
market-shaping aspects of spectrum assignment and services alongside access, as well as
increased responsibilities including responsibility for developing implementing guidelines and
an enhanced role in the article 7a process on remedies as well as a peer review role on market-
shaping aspects of spectrum assignments.
Additional expenses are expected to vary between Member States, but across the EU overall
additional expenses for the resourcing of NRAs are expected to be minimal. Certain NRAs may
also need greater resourcing in order to adequately perform duties such as market analyses under
the revised framework including the proposed requirement for geographic survey of
infrastructure. The additional obligations are however only incremental to the initiatives that
already exist in some Member States that implemented advanced mapping systems and to the
transparency measures linked to the implementation of the Cost reduction Directive (such as
advanced notification of civil works) and to the reporting obligations already undertaken for
identification of white areas and investment mapping before notification of State Aid schemes by
Member States. There is a cost reduction potential in streamlining and coordination.
Stakeholders’ views vary on the degree to which consistency in regulation is important vs
flexibility at national level. There is widespread agreement amongst electronic communications
providers and digital service providers that consistency is helpful in the field of digital services,
which can in principle be supplied and consumed cross-border. More consistency in spectrum
regulation is also requested by many cross-border mobile operators.
Interviews conducted for the study SMART 2015/0002 as well as SMART 2014/0023 suggest
that consistency in regulation is also important for business end-users and certain suppliers of
business and mass-market services, which rely on wholesale access for a substantial element of
their customer base. However, it is less important for some nationally focused providers, while
many operators designated with SMP in local access prefer regulation to be more tailored to
local circumstances.
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It should therefore be borne in mind that not all stakeholders seek governance mechanisms
which serve to foster the consistent application of the framework. Rather the view of incumbent
operators is that institutional streamlining could better be achieved through a reduction in ex ante
regulation, which would limit the need for co-ordinating measures at EU level.275
For those stakeholders for whom consistency is important, the impacts of the governance options
are associated with their potential effectiveness in achieving the objectives for very high capacity
connectivity, competition and consumer welfare in the single market, the potential for the
options to achieve coherent decision-making, and the potential to streamline engagement,
avoiding the need for multiple parallel contacts at national and EU level. Option 4 would in
particular benefit multi-national operators with significant spectrum and/or wholesale access
interests as well as business end-users, while Option 3 would also bring greater benefits to these
stakeholders than the status quo.
The increased focus on harmonisation and monitoring of consumer protection measures in
Option 3 would also meet the demands of consumer groups276
for greater attention from BEREC
on consumer matters.
On the other hand NRAs call for more incremental and flexible approaches to governance at EU
level combined with better resourcing and an expanded remit for NRAs at national level, which
might be better served through an enhanced advisory role as envisaged in Option 2.
Many Member states are also cautious about approaches which entail a reduction in their
flexibility to assign responsibilities at national level, especially as regards important resources
such as spectrum.
See also tables presented in Annex 12 specifying in detail impacts on stakeholders for each
policy option and cost implications.
4.5.4.5 EU value added
Option 2 provides considerable scope for flexibility at national level, and therefore should allow
regulation to be tailored towards national circumstances. However, it is unlikely to provide
significant added value at EU level compared with the status quo. On the other hand, Option 4 is
likely to provide significant EU added value compared with Member States acting alone, but
likely does not permit sufficient scope for deviation to reflect national circumstances, and
therefore is unlikely to be proportionate. Option 3 provides the best added value as compared to
Member States acting alone and maintains an proportionate and appropriate balance between EU
and national responsibilities.
4.5.4.6 Summary table comparing institutional governance options
Table 13 - Comparing the impacts of governance options
275
Interview with ETNO SMART 2015/0002
276
As expressed in an interview with BEUC in the context of SMART 2015/0002
167
The average (mid-range) assumptions for efficiency savings are used in this assessment of
institutional cost. Under full efficiency saving assumptions (best case scenario), the costs for the
different options do not differ significantly
Source: WIK-Consult
4.5.5 The preferred option
Based on the analysis provided above, Option 3 appears to provide the greatest overall benefits
in relation to the cost. Specifically, it is likely to be more effective and coherent than option 2 in
meeting the objectives of fostering very high capacity connectivity, competition and end-user
protection because it provides a core role for BEREC in developing implementing guidelines,
avoiding potential complexities and divergence between the Commission and BEREC, and
fostering buy-in from NRAs. It also extends NRAs' and BEREC’s responsibilities for fixed
market analysis to market shaping aspects of spectrum management, ensuring a coherent
approach between the two. It empowers the Commission and BEREC to impose consistent
regulatory practices on access remedies where necessary, with BEREC's NRA-based
composition ensuring that adaptations to objective national or local differences will be duly
respected.277
.
Although Option 4 is positive in several respects and could be a relevant solution for aspects of
sector specific regulation which require full harmonisation, it appears in the final analysis that
across the balance of issues, Option 3 is likely to provide the most effective and efficient
outcome in achieving consistent application of electronic communications sector rules, while
respecting the principle of subsidiarity. Aligning the responsibilities of NRAs and the
corresponding EU body to include market shaping aspects of electronic communications
spectrum assignment should create synergies in policy development enabling NRAs and the
combined body to reflect the many inter-related aspects in a converging environment. In
addition to potentially enabling cost savings in national spectrum assignment processes, the
increased effectiveness, coherence and buy-in associated with this option are likely to reap
benefits in increased connectivity that considerably exceed the status quo. For example,
spectrum assignment policies and conditions affect the deployment and take-up of very high
277
Option 4 which foresees a level of centralised enforcement could on the other hand be very effective and efficient
for specific issues. This option could be considered for these specific cases. However, it is unclear at this stage
whether there are sufficient issues requiring uniform treatment to make this option worthwhile, and it would be
disproportionate and likely ineffective in achieving the objectives in cases where local expertise is needed to provide
more tailored solutions.
Effectiveness (wrt connectivity
imperative, consistency)
Institutional
cost
Cost to
stakeholders
Coherence EU value add Sub
Option 1: status quo 0
Fragmentation in
access, spectrum and
services policy persists
~€203m 0 0
Incompatible
with Common
approach
0
Option 2: Enhanced
advisory role
+
Stronger EU guidance,
but continued advisory
roles for BEREC, RSPG
impedes buy-in,
effectiveness
~€206m 0 +
Reflects
Common
Approach but
maintains
parallel
processes
+
Option 3: Some
normative powers +
synergy
++
Greater role and
expanded remit for
BEREC fosters buy-in,
spectrum consistency
~€208m 0 ++
Reflects
Common
Approach,
greater
spectrum
alignment
+
Option 4: Some
supervisory powers +
synergy
+
Effectiveness impeded
by distance from
national markets
~€216m + +++
Reflects
Common
Approach &
convergence
++
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capacity broadband, while mobile broadband may also impact competitive conditions in the
supply of broadband more widely. Meanwhile, the construction of fibre networks is important
for the development of new generation mobile technologies.
Importantly, Option 3 also preserves the flexibility of Member States to set objectives relating to
spectrum governance, including for specific assignment procedures.
No macroeconomic effects could be quantified through modelling for this policy area.
4.6 Who would be targeted by the different policy options?
The provisions included under the umbrella of the review of the telecom framework have several
impacts on a wide range of stakeholders. This includes not only telecom operators (incumbent
and challengers, but also entities operating in the wider digital environment such as OTTs and
other non-telecom operators, SMEs, consumers and institutional bodies such as NRAs and
Member States' bodies dealing with regulatory aspects. Given this level of complexity, a detailed
analysis of the different stakeholders affected by the different policy options is provided in
Annex 2 which summarises the process of consultation and its outcome and annex 4 which spells
out in more detail the impacts from the preferred options on the various stakeholders' groups.
Annex 12 presents the impacts of alternative options on groups of stakeholders.
4.7 Applying the Think Small Principle
When analysing the enterprise market, and with specific respect to access regulation we need to
draw a distinction between the two core targets: small and medium enterprises (SME) and large
businesses. The former have characteristics in common with residential users, as they tend to be
very much scattered over the territory and cannot afford dedicated capacity lines, as opposed to
large business. Micro enterprises and smaller enterprises outside central business districts
(including small businesses in rural areas) are likely to be important beneficiaries of strategies
which boost the widespread deployment of connectivity, as these organisations may today be
under-served compared with larger corporations which may already have fibre connectivity
installed to their premises. For example, the UK NRA Ofcom found in the context of research
conducted in 2015
278
that a significant minority of SMEs had had less favourable experiences
with broadband, including a lack of widespread superfast broadband availability, a concentrated
retail market structure, and dissatisfaction in relation to quality of service.
One of the cloud’s main attractions for SMEs are Software as a Service (SaaS) solutions that
enable them to access familiar applications and pay on the basis of their usage, rather than
acquiring an expensive licence. Big businesses can use cloud computing solutions to virtualise
their existing infrastructure and streamline their use of it. Infrastructure as a Service (IaaS) can
enable them to handle peak loads on their in-house system. SaaS solutions may also be adopted
as a way to manage their enterprise software better, especially resource planning (ERP),
customer relationship management (CRM), mail, desktop software, etc.
End-users and businesses (including SMEs) in countries and areas currently lacking
infrastructure competition are likely to be the main beneficiaries of measures to support the
deployment of VHC broadband networks. Measures to support the consistent specification of
wholesale remedies may also shorten the time to market for new wholesale offers and boost
service competition benefiting consumers in areas where infrastructure competition is not in
prospect.
A greater focus on general authorisations over individual licenses has the potential to open up
spectrum resources to innovative smaller companies which are not at present able to purchase
exclusive access. In addition, many of the end-user businesses which will benefit from
278
http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/sme/bb-for-smes.pdf
169
accelerated access to spectrum and introduction of 5G will be smaller companies. By opening
access to spectrum resources and accelerating 4G and 5G coverage across the Digital Single
Market, the spectrum option will facilitate innovation and entrepreneurship which benefits
primarily (though not only) start-ups and smaller companies. For instance, there might be
companies aiming to bring innovative new applications to market that rely on 5G availability and
reliability in sectors such as utilities, automotive and transportation or e-health.
Most of the provisions on services and end-user protection will continue to apply to all end-
users. The contract provisions will also benefit small and micro-businesses, who so request, in
the same way as consumers. Small and micro- enterprises, many of which provide innovative
online services, are in a comparable situation as consumers whereas larger end-users (who may
also opt-in under the current rules) are able to negotiate individual contracts for of electronic
communications services.
In order to ensure consumer rights and public policy interest, small providers of electronic
communications services will have to comply with rules on end-user rights as any other
provider. Public interest objectives justify the imposition of security and privacy279
measures on
all kinds of providers of electronic communications services. With regards to interconnection
and interoperability obligations, their extension to OTTs providing communications services
would be subject to an assessment of reasonableness considerations relative to technical
feasibility, significance of take-up of a given service as well as cost considerations. No lighter
regimes or exceptions are considered for micro enterprises since no telecommunications
operators are likely to fall under that category (less than ten employees and a turnover or balance
sheet total equal to or less than €2 million).
For an analysis of the implications of the preferred options on SMEs please see Annex 4 on Who
is affected by the preferred option and the specific chapter on SMEs..
4.8 Positive and negative impacts, direct and indirect, changes in impacts, potential
obstacles
Positive and negative impacts on different stakeholders are included in Annex 12 with an
assessment of impacts on groups of stakeholders by policy area for all options and Annex 4
focusing on representative groups of stakeholders and assessing implications of preferred options
for electronic communications network and service providers, Over-the-Top players, SMEs,
Consumers, Ministries, National Regulatory Authorities and Spectrum Management Authorities.
The analysis of the negative and positive and direct and indirect impacts is run for all the main
groups of stakeholders identified in the public consultation (see Annex 2).
4.9 How the preferred options relate to the specific objectives
Section 3.2 already identifies for each specific objective, the link with the problems identified in
section 1.2 and the link to the main measures that are included under the options for the policy
areas identified in section 4.
4.9.1 Contribute to ubiquitous VHC connectivity in the single market
This specific objective is linked to the policy measures proposed under access, spectrum,
universal service and governance preferred options.
The preferred option bundle will meet the ubiquitous VHC connectivity objective by fostering
infrastructure-based competition in fibre networks in areas where this is feasible (thereby
incentivising network upgrades and delivering a more stable competitive structure), while
279
The exact confidentiality obligations would be subject to further conclusions of the review of the e-privacy
Directive
170
elsewhere providing certainty and flexibility for NGA investors and promoting competition
through long-term co-investment or open (such as wholesale only) business models for fibre
infrastructure, in preference to the current prevalent short-term rental arrangements which are
vulnerable to technological and regulatory change. This option also involves an extension of the
timing of the current market review process, thereby increasing certainty and reducing costs.
Under this option, NRAs will take responsibility for mapping existing infrastructure and
assessing the potential for further deployment, which should also enable them to support
deployments in challenge areas which may be less attractive for commercial operators. NRAs
would also be able to sanction operators in relation to challenge areas if they provide misleading
information without a reasonable justification. Rural investors and their customers may also
benefit from the potential for longer contractual commitments linked to instalment payments for
physical connections, where needed in exchange for connecting households with high quality
networks.
The added boost to fibre deployment under this scenario should support fixed as well as mobile
next generation developments, which require fibre backhaul to support higher speeds and
quality. The preferred option bundle also provides for the adoption of harmonised wholesale
product specifications to reduce needless duplication of specification processes, reduce ‘time to
market’, foster cross-border expansion and support the provision of services to multi-national
corporations.
In addition, the availability of new mobile technologies will be accelerated across the EU, by
reducing the time required to bring spectrum to market, providing the potential for common
deadlines for spectrum awards as well as fostering consistent EU criteria for assignment
conditions through implementing decisions accompanied by a system of peer review. This could
pave the way for extended durations of licences combined with common measures to foster
efficient use of spectrum and thereby extend coverage and improve quality. Greater co-
ordination and regulatory certainty across countries and over time should in turn speed up
investment in infrastructure and services. Measures to facilitate permit granting to foster
deployment of small cells and to access Wi-Fi networks will contribute to reduce the costs of
future 5G network deployment and support the development of 5G in general, also ensuring
faster time to market for spectrum resources.
Moreover, the deployment of these new networks will require greater flexibility in the way
spectrum is accessed and used; a wider consideration of the possibilities of sharing; a consistent
approach to frequency assignment between neighbouring countries and potentially the
identification of more unlicensed spectrum.
In addition, the envisaged package would seek to ensure that price does not present a barrier to
the uptake of broadband services, by modernising the universal service concept and focusing it
around affordability of broadband connections.
The Single market dimension is specifically addressed by the measures related to the promotion
of EU-wide access products for cross-border services to business users in the single market.
Spectrum measures are in addition promoting greater consistency of spectrum management
elements to achieve a timely deployment of 5G networks and services throughout the EU. The
proposed regulation will ensure harmonised means of determining and mapping end user
ubiquitous connectivity comprising also quality of service. These measures will be accompanied
by a governance structure and effective EU coordination mechanisms that can enable and foster
connectivity, including new tasks for BEREC and NRAs, in the area of mapping (including
investments, infrastructure and quality of services) and the market shaping elements of spectrum
assignments conditions. .
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4.9.2 Competition and user choice in the single market
This objective is linked to the policy measures proposed under access, spectrum, services and
end users, must carry and EPG, numbering, universal service and governance.
A key aspect of the review is to assess to what extent sector-specific end-user protection rules
are still warranted in view of technology and market changes and of horizontal consumer
protection legislation and to what extent effective protection of the underlying public interest as
well as of competition would require extension of some of the sector-specific rules to OTTs. At
the same time, consumer protection measures should be coherent and not present a barrier to the
single market, and costs to operators should be minimised.
The preferred option bundle tries to ensure a European-wide pro-competitive regulatory
framework for networks, internet access services and communication services, enabling choice
and affordable prices for European citizens in electronic communications services while
addressing new, emerging end-user rights issues based on market developments.
The preferred option fosters trust while creating a regulatory level playing field by applying a
limited set of sector-specific rules to communications services, including more extensive
obligations for certain OTT services for which the use of numbers constitutes a key feature of the
functioning of the service (clarifying thereby the current scope of such rules). Consumers will
also benefit from a facilitated switching process for Internet Access, a protection against
discrimination based on nationality or the place of residence, protection from automatic roll-over
of contracts, better readability of contracts as well as the introduction of comparison tools and
websites and the facility to monitor and control their usage of services. In addition, other end-
user and public policy interests which are not covered by horizontal rules (e.g. security and
potentially confidentiality of communications) will be safeguarded in relation to all newly
defined communication services, regardless of how they are supplied.
In addition, in order to foster the development and take-up of digital services across the single
market, avoid any lack of coherence, ensure regulatory consistency and guarantee the
framework's best contribution to the development of the single market objective, full
harmonisation of sector-specific rules applying to digital communications services (such as calls
and messaging) is proposed. This should ensure uniform transposition of rules in EU Member
States, making it easier for stakeholders to understand and comply with legislation. Full
harmonisation will also facilitate that end-users obtain a connection through specific contract
arrangements in the EU, including a protection against discrimination based on nationality or the
place of residence, and the setting-up of an EU-wide protection regime for end-users of all
communications services in terms of security, interoperability (in case of need) and (potentially)
confidentiality.
Finally, in order to address challenges associated with connected ‘Things’, the package
envisages adaptations to the current framework in order to enable ‘permanent’ extra-territorial
use under certain circumstances, to promote the remote (over the air) SIM switching to solve the
lock-in of M2M providers, and the harmonisation of conditions for the extra-territorial use of
national numbers.
4.9.3 The REFIT potential: simplification of the regulatory intervention and single market
coherence
The policy measures proposed under the preferred option bundle support the REFIT
agenda and address the objective of simplification and reduction of administrative burden in
line with the findings of the evaluation exercise on the REFIT potential of the review (see
section 1.2.3.1 for more details). Several of the proposed changes under access, spectrum,
universal service, services/end users, numbering and governance policy areas aim to make rules
172
clear; allow parties to easily understand their rights and obligations; and to avoid overregulation
and administrative burdens.
The proposed changes include specifically: the streamlining and geographic targeting of access
regulation; the use (wherever possible) of general authorisation in preference to individual
licenses for spectrum; fostering secondary markets for spectrum; the removal of redundant
universal service obligations such as requirements to ensure the provision of payphones and
physical directories; narrowing of the scope of universal service availability and ending of the
sectorial sharing mechanism; clarifying the scope of the Regulatory Framework and the removal
of redundant consumer protection obligations where these would already be addressed through
horizontal legislation or met by the market; harmonisation and clarification of rules and
governance of numbering in the M2M context; and aligning the remit of NRAs with BEREC.
The simplification measures in the preferred options have also a single market coherence
dimension as they will ensure greater consistency in access remedies and in spectrum
assignment processes, which at the moment tend to generate complexity for operators wanting to
use spectrum in various Member States, and can also (in case of divergent timetables) cause
interference in border areas. Equally the introduction of standardised wholesale remedies for
example in relation to business access also facilitates businesses operating cross-border and the
lengthening of the spectrum licences fosters the creation of a pan-European secondary market
for spectrum as well as a more investment-friendly environment for holders of such licences.
A summary of the likely benefits that may arise as a result of these measures is presented below..
4.9.3.1 The streamlining and geographic targeting of access regulation
Measures proposed aim to provide more guarantees that wholesale access regulation is only
applied where needed to address retail market failures (including codification in the law of the
"three criteria test"). This should limit the scope for over-regulation. The bundle of preferred
options also includes an increase of the period in between successive market reviews from 3 to 5
years, which should increase certainty for stakeholders and reduce administrative costs. Costs
savings have been estimated at 10-15% of the current costs involved with market reviews (a
saving of up to €7.5m)280
.
As regards the market review process, NRAs will be required to conduct mapping exercises
before starting a market review which will improve the geographic targeting of regulation. This
measure ensures that access obligations are applied only in areas where they are necessary and
are the minimum necessary to address the identified problems, thereby contributing to reducing
the scope for over-regulation.
Giving NRAs a core role in relation to infrastructure, investment and quality of service mapping
should also serve to consolidate what are in some countries multiple mapping processes
conducted by separate bodies. This should make the process more coherent, ensuring consistency
between broadband state aid, ex ante regulation, and mapping conducted in the context of the
Cost Reduction Directive. It should also save in administrative costs and simplify the data
provision exercise for stakeholders.
280
Estimates from Ecorys (2013) suggested that removing 2 markets from the original 7 markets listed in
the 2007 Relevant Market Recommendation might result in savings on the market analysis process of 10-
15% (a saving of up to €7.5m). This could be viewed as an equivalent change to extending the frequency
of reviews from every 3 to every 5 years.
173
Furthermore, measures contribute to making rules clear by shedding light on the relationship
between the SMP status and symmetric obligations for access to civil infrastructure, so that such
symmetric obligations281
can be considered by NRAs when conducting market reviews.
Lastly, the adoption of standardised specifications for key wholesale products used by businesses
should minimise duplicate processes for wholesale product specification, reducing the cost for
NRAs and cross-border service providers, although there may be some set-up costs involved if
common specifications require changes to previously applied wholesale obligations.282
SMART
2014/0023 shows that as of April 2015, 13 separate processes had been applied for the
specification of VULA in different Member States. Standardisation of future key wholesale
products could help to limit duplicate effort and thereby speed time to market.
4.9.3.2 General authorisation in preference to individual licenses for spectrum, fostering
secondary markets for spectrum and coordination in spectrum management
In the field of spectrum, the preferred option includes a greater emphasis on general
authorisations as opposed to individual licenses in an attempt to ensure that national authorities
deliver the most appropriate future licensing models to underpin the full benefits of 5G. Such a
move toward general authorisations, as well as licensed shared access, would mean that the rules
for access to a particular band covered by this general regime are redrafted at EU level to allow
for cross-border harmonisation
A greater emphasis on general authorisations in a number of EU spectrum bands would therefore
lead to clearer and more comprehensible assignment rules across the Union. This would be of
particular benefit to smaller companies with more limited resources and which are unable to
purchase exclusive access to spectrum in each Member State.
In addition, general authorisations would contribute to avoiding overregulation and
administrative burdens. This regime will better fit 5G regulatory needs and thus, create the
right conditions for accessing and using spectrum in a flexible way – barriers to spectrum
entry will be lowered to stimulate innovation and new services. Focus on general authorisations
would mean that operators could have the same spectrum all over Europe, with similar
conditions which in turn would eliminate the need for individual decisions (either at national or
EU level) on who gets what spectrum.
Also the measures fostering the creation of a pan European secondary market for spectrum,
mainly through lengthening the licence duration, will reduce the administrative burden related to
auction processes for authorities and operators. The secondary market for spectrum will allow a
dynamic allocation of spectrum in the Union by adapting to the variations of demand over time,
new technologies and services will have an easily access to spectrum
The IA study estimated potential cost savings regarding spectrum management resulting from
greater alignment of auction procedures and certain conditions, These savings are estimated in
section 4.5.3.3.
4.9.3.3 The removal of redundant universal service obligations
In the field of universal service, the preferred option foresees exclusion of the following services
from the universal service scope at the EU level: pay phones, directory services and directory
enquiry services. These services are considered redundant because in the majority of cases they
281
Stemming from of the 2014 Cost Reduction Directive, as well as facility sharing obligations mandated
under article 12 of the Framework Directive.
282
See discussion in SMART 2014/0023. Such costs could be mitigated by phasing in changes to coincide
with the refresh of systems.
174
are sufficiently provided by the market by competing providers, and the respective USOs are
increasingly lacking at the national level.
Such amendment would render universal service rules clearer as the EU-wide universal service
scope would be narrowly defined and focused on affordability. This, in its turn, would make the
universal service rules more comprehensible for the affected end-users who would be able to
better grasp the idea of basic communications services, to which they are entitled, and
understand the amount of relevant rights. It would also reduce administrative burden for the
providers that will not have to supply the redundant services and comply with respective Quality
of Service and reporting requirements imposed on them as designated universal service
providers.
The ending of the current sectorial sharing mechanism possibility for financing will lead to
further simplification and reduction of administrative burden. Financing through public funds
will be easier to implement so that it will lessen administrative costs and will contribute to a
fairer distribution of costs and benefits of the universal service provision among all market
participants with less distortion to competition
4.9.3.4 Clarifying the scope of the Regulatory Framework and the removal of redundant
consumer protection obligations
By linking authorisation requirements to the use of numbers and by extending the scope of sector
specific rules on security (and potentially confidentiality of communications) to include all
communication services (independent of whether they make use of numbers) the proposed
measures aim to resolve the lack of clarity which is currently resulting from the ‘conveyance of
signals’ definition. The measures thereby contribute to making rules comprehensible and clear
and to allow parties to easily understand their rights and obligations. A majority of
respondents to the consultation (strongly) agreed that there was need for more clarity about the
scope of the Regulatory Framework. The redefined scope not only addresses regulatory
uncertainty perceived by current stakeholders, but also regulatory insecurity for future
stakeholders operating in future new digital value chains (such as the IoT). Moreover, clarity
about the scope of the regulatory framework prevents growing regulatory heterogeneity (and
associated costs) that may otherwise result from national authorities responding with their own
measures and interpretations of the scope of the Regulatory Framework.
The proposed widening of the scope of the Regulatory Framework leads to a de facto increase of
the administrative burden for a limited number of OTTs that use numbering resources as they
will now be subject to more regulation (relative to the current situation, where the applicability
of the framework is not widely recognised or implemented). However, not all obligations will
result in increased administrative burden. E.g. interoperability and interconnection obligations
will have little impact since interconnection and interoperability with the numbering regime is
already part of the respective service. Additional burden may result from portability
obligations283
and from administrative charges related to Article 12 and 13 of the Authorisation
Directive, which should however be appropriately modulated by reference to effective
revenues284
. Furthermore, option 4 makes it explicit for OTTs to provide access to emergency
services as far as this is technically feasible283
. All OTTs (regardless of the technology used) will
experience an increased administrative burden in relation to complying with rules on security
and privacy.
The bundle of proposed measures simultaneously aims to reduce administrative burden by
removing redundant sector specific consumer protection rules where these would already be
addressed through horizontal legislation or met by the market. Sector specific obligations
283
Provided Member States do not already impose these obligations following the ERG 2007 guidelines; otherwise
there would be no additional burden from the proposed measures.
284
which may add up to 5 to 10 million EUR for an OTT with 7.5 to 15 million paying clients, according to the
figures quoted in SMART 2015/0005 in section 7.4.4.
175
identified as being fully or partially redundant relate to transparency285
, quality of service285
,
contractual rights285
, and out-of-court dispute resolution. Telecom operators found it difficult to
provide robust calculations of related compliance costs. In qualitative terms they indicated that
the overlapping information requirements create additional burdens for businesses that have to
check all sets of requirements for any small or national differences and engage with two different
sets of regulators in relation to enforcement286
. The reduction in administrative costs will
partially be undone by the additional obligations regarding the quality of IASs, which likely
remain limited given the already existing Quality of Service reporting obligations under the Net
Neutrality rules and associated BEREC guidelines. Furthermore, facilitated switching processes
for IAS services will impose an additional burden on ECN providers.
For NRAs, the widening of the scope of the Regulatory Framework may involve additional
administrative burden. Regulators indicate that removing redundant rules would hardly affect
their operations, amongst others because if these redundancies and associated tasks for NRAs
would disappear, new responsibilities for NRAs would arise in the form of providing technical
assistance to more horizontal competent authorities when they were to deal with sector specific
issues287
With regards to consumer protection, the impact of the proposed measures is largely positive:
consumers are more protected with regards to security (and potentially confidentiality) when
using OTT services; consumers are more protected with regards to transparency and switching in
relation to IASs; consumers are not less protected with regards to other communication services
as the proposed measures only remove sector specific consumer protection rules addressing
consumer protection needs that are already addressed through horizontal legislation or that are
met by the market, or which have become redundant due to market developments (e.g. Article 17
USD).
Table 14 – Summary table on the scope of rules and impact on selected stakeholders
Wider scope of RF Redundant rules Additional IAS rules
NRA + 0 +
ECS/ECN 0 - - - +
OTT + 0 0
Consumer protection + 0 +
4.9.3.5 Harmonisation and clarification of rules and governance of numbering in the M2M
context
Improved governance of the extra-territorial use of national numbers (in order to realise country
agnostic connectivity for M2M applications) will avoid substantial administrative costs that
are currently preventing extra-territorial use288
. A more harmonised governance structure may
require a possible extension of the activities (and costs) of BEREC as well as costs related to
285
Where these apply to communication services other than the IAS
286
For more details see SMART 0005/2015 with further analysis on activities driving compliance related
administrative burden for operators regarding contractual terms and transparency
287
For more details see SMART 0005/2015 with further analysis on relief potential of enforcement costs for NRAs
288
Currently, extra-territorial use of number is governed by Annex E of the ITU E.212 recommendation, advising
operators wishing to implement the extra-territorial use of an MCC+MNC, to seek approval of the relevant
administrations of both Country A and Country B. The administrations should then confer together on the extra-
territorial use of the MCC+ MNC and notify the applicant and all other operators operating in Country A and Country
B of their decision. This is a costly administrative exercise in relation to M2M services, given the potential volume of
multiple (possible hundreds of) thousand SIM based machines served by a single M2M service provider. For more
details see SMART 0005/2015
176
coordination with CEPT. However, these costs are likely much lower than the costs of the
currently required multiple bilateral agreements between NRAs and telecom providers289
.
The proposed measures do not directly impact on consumer protection. However, consumers will
benefit since the proposed numbering regime will contribute to the removal of bottlenecks in the
IoT value chain and the promotion of innovations in IoT applications, with a positive effect on
choice and prices for products and services relying on IoT services.
4.9.3.6 Aligning the remit of NRAs with BEREC
The Governance preferred option aims at simplification through harmonizing a minimum set of
competences for independent national regulatory authorities essential for market shaping aligned
with BEREC tasks focused on the cross-border dimension. This should serve to consolidate
responsibilities and expertise within NRAs and simplify the engagement process for
stakeholders.
Moreover, the preferred governance option would lead to a streamlined and more efficient
governance set-up, in particular with a simplified structure for BEREC in line with the Common
Approach for decentralised agencies.
4.10 The legal form of the preferred options
The scope of the current Refit exercise includes four Directives (Framework, Authorisation,
Access and Universal Service Directive) and a Regulation (BEREC Regulation)290
. Each of the
Directives contains measures applicable to electronic communications networks and to electronic
communications services providers, consistently with the history of the sector in which
undertakings were vertically integrated i.e. active in both the provision of networks and of
services. The review offers an occasion to simplify the current structure, with the view to
reinforcing its coherence and accessibility, consistently with the Refit objective. It offers also the
possibility to adapt the structure to the new market reality, where the provision of
communications services is not any more necessarily bundled to the provision of a network.
Unlike networks, which are local, these services are more and more pan-European, or even
global. In order not to hinder innovation, we should avoid over-regulating these services.
Separating the network from the services regulation offers the possibility to establish a lighter
and more proportionate regime adapted to different types of services. Any obligation should
comply with the principle of proportionality. Restructuring the framework in a way to
distinguish network from services regulation will allow precisely to better calibrate the
obligations and in general the regime applicable to networks and services. Furthermore, since the
previous review, new non-vertically integrated players have also entered the upstream markets,
as well as providers of physical infrastructure only (ducts, poles etc.). These network operators,
who have no aspiration of entering the services market and have hence no contractual
relationship with end-users, should be subject to clearly separate and proportionate rules,
excluding for instance consumer protection.
Recasting will also allow addressing certain inconsistencies of the current structure. Currently,
the Authorisation procedure is in a different Directive than the general framework. Also, the
market analysis procedure is in the Framework Directive, while the access obligations are in the
Access Directive. It would be simpler if the procedure was brought closer to the obligations.
289
Under the current highly inefficient arrangements for extra-territorial use of numbers, operators choose to arrange
for country agnostic connectivity via the use of shared MCC901 numbers issued by the ITU. However, the range of
numbers under MCC901 is too limited to support the growing number of M2M applications and the option of a new
shared MCC90x involves several practical and costly problems. See SMART 0005/2015 for more details on current
arrangements for extra-territorial use of national numbers
290
The structure of the Regulatory Framework is completed by a number of other instruments, such as the ePrivacy
Directive and the Roaming Regulation which are not part of this exercise.
177
Furthermore, currently, symmetric obligations are scattered in the Framework (Article 12) and
the Access (Article 5) Directives. There is a gain in clarity if symmetric remedies are brought
together and close to the asymmetric remedies.
It is therefore proposed to proceed to a horizontal recasting291
of the four Directives, bringing
them all under a single Directive divided in three parts: one part on Generally applicable rules
(framework), one part on networks and one on services (alternatively three directives organised
on these lines). Furthermore, since BEREC is to be transformed into an EU agency, the BEREC
Regulation must be significantly redrafted into a new Regulation. This choice will minimise the
changes to those current texts which will be retained intact or only lightly amended, and will
ensure that the balance between directly applicable rules and rules allowing Member States to
take the necessary organisational measures for the sector is maintained.
4.11 The impact of the preferred options
This section presents in brief the results of the macroeconomic impact assessment that was
carried out as a part of the support study to this impact assessment. Further details on the
methodology, calculations and results of the model are provided in Annex 5.
Practical implications of these preferred options for representative stakeholder groups such as
Over-the-Top players, SMEs, Consumers, Ministries, National Regulatory Authorities and
Spectrum Management Authorities are described in Annex 4.
The preferred policy options should make a significant contribution towards boosting EU
productivity and innovation. Such innovation effects are particularly relevant in view of the fact
that the review of the electronic communications framework could support, among other
processes, the development and use of the ‘Internet of Things’ (IoT)292
and digitalization of
industry inter alia. If benefits are to be fully reaped, supply-side policies for electronic
communications, including the regulatory environment need to be complemented by initiatives
to support the absorption of new technologies within businesses of all sizes293
. The impact on
competitiveness and innovation is described in Annex 7,
4.11.1 Methodology
The impacts from the implementation of the preferred policy options have been quantified using
a combination of theoretical models, econometric and computable general equilibrium methods
and reference to relevant literature. The four steps are described below.
As a first step, the evaluated impact in terms of effectiveness and efficiency of the proposed
policy measures is translated into quantitative (where possible) key performance indicators
(KPIs), based on evidence from case studies and theoretical models.
291
For more information on this technique, cf. http://ec.europa.eu/dgs/legal_service/recasting_en.htm.
292
BEREC (2016) and McKinsey (2015) identify a number of key enablers that contribute to unlocking the full
potential of the IoT. Key enablers are optimal fixed and mobile connectivity (which is realised through policy
measures with regards to access, spectrum and numbering), regulatory security for new players in the IoT value chain
(which is realised by clarifying the scope of the RF) as well as end-users confidence about security, privacy and
confidentiality.
293
See also the EC initiative "Digitising Industry" under the DSM package. launched on 19 April 2016.
178
To provide a link between the KPIs and the macroeconomic framework, as a second step,
econometric estimates of the effect of the indicators on certain macroeconomic variables are
performed.294
These are complemented by other estimates, based on relevant economic literature.
Finally, the evaluated impacts are fed into the CGE modelling framework as an input shock and
the effects are multiplied and spread across the entire economy through the model system of
equations. The impact of the preferred scenario is evaluated quantitatively by means of
comparison against the baseline in each of the considered policy areas.
It should be cautioned that there are some limitations to the CGE approach. In particular, it is
not best suited to capture the effect of disruptive changes resulting from the digitalization of
industry. In addition, achievement of structurally different economic growth will be strongly
dependent on the ability of businesses to effectively and efficiently absorb new technologies and
benefit to the highest extent from the competitive advantages such technologies might provide.
Further opportunities and challenges are discussed in sections 4.11.4 and following.
The use of a CGE framework entails the following assumptions:
▫ No change in the input-output structure of the economies modelled. As already
discussed, in the context of the current evaluation this implies that the estimated impacts
are very conservative, where there is potential for higher benefits in case of disruptive
technologies and innovations.
▫ Constant share of public investment with respect to the gross value added in the absence
of policies
▫ Constant share of sectorial public investment with respect to the total capital
expenditures of the government in the absence of policies
▫ Assumptions about important model parameters, which are presented in detail in the
macroeconomic modelling annex. They are calibrated in order to ensure a plausible
trajectory of the macroeconomic variables in the baseline.
In order to present estimates of the magnitude of the estimated impacts in nominal terms, we
have also adopted the assumptions that in the baseline scenario annual GDP growth in the EU
will be 2%, while employment will increase by 0.3% per annum and finally, that annual growth
in gross fixed capital accumulation will be around 5%.
Further details on the macroeconomic methodology and results are provided in the specific
Annex 5 (see section 6.5) on this subject.
4.11.2 Impacts of preferred policies on fixed and wireless broadband availability and quality
In the field of access, it is assumed that the inter-institutional process of developing the revised
electronic communications framework and its subsequent adoption and transposition will result
in adaptations to the market analysis process which stimulates greater deployment of VHC
infrastructure from the end of 2020 onwards. In an accelerated fibre scenario, it is assumed that
FTTH/B expands to account for 54% of connections in 2025 with an additional 28% consisting
in high speed cable connections. Although this scenario is unlikely to be realised, we also model
for comparison an all-fibre scenario in which all broadband connections are supplied by means
of FTTH/B by 2025.
294
To estimate the impact of the KPIs on TFP we have applied stochastic frontier analysis and identified TFP with the
efficiency term in the estimated production function. Then, the impact of various e-communication key performance
indicators on TFP was evaluated.
179
Figure 21 - Technology mix under different scenarios
Although ambitious, it is notable that the growth pattern shown for the accelerated fibre scenario
is conservative in comparison with the expansion in fibre take-up experienced in Japan between
2005-2010 as shown in the following figure, and there are also examples of high fibre
penetration being achieved in some countries in Europe as can be seen from Figure 13 above.
Figure 22 – Broadband in Japan
These technological projections combined with data on actual speeds by technology from
Samknows and speed growth trends might result in the following projected speed increases
under different scenarios (see figure 32 in annex 5).
Meanwhile, the impact of co-ordinated spectrum assignments on the timeframe to achieve full
coverage of enhanced mobile broadband aspects of 5G295
is assessed with reference to
experience from the leading Member States as regards assignment of LTE. See Annex 5.
In the 'no change' policy scenario, full eMBB coverage would be achieved only in 2030 due to
the different starting dates for availability, while under Option 3, widespread coverage of fast
mobile broadband (although not full 5G capabilities which also depend on fibre backhaul
deployment), might be expected to be established considerably sooner due to aligned assignment
deadlines. Three years is taken as a benchmark based on the time taken for full coverage of LTE
in countries such as Sweden.
295
Other aspects requiring intensive densification of networks may take longer to achieve full coverage
180
4.11.3 Impact of improved broadband quality and electronic communications service
development on TFP
Based on the methodology adopted various calculations were performed, assuming that the
impact of the preferred policy options will be channelled through total factor productivity (TFP).
The latter measures the efficiency with which the production factors (capital and labour) are used
in production. Therefore innovations in the production processes are typically reflected in this
term.
Confirming the importance of broadband availability and quality for the economy at large, we
found, through econometric analysis, that there is a statistically significant relationship (in
logarithms) between Total Factor Productivity296
and 4G mobile broadband coverage as percent
of households (0.003) and average broadband connection speed (0.021), where estimated
coefficients are given in parenthesis.297
We also found a link between TFP and the Heritage
index of economic freedom (0.225).298
The elasticities applied in the simulations are presented in
the table below299
:
Variable
(in logs)
AG
R
LOWM
AN
HIGHM
AN
ENERGY TRANS
TELECO
M
ECO
M
SER
heritage300 0.22
5
0.225 0.225 0.225 0.225 0.225 0.225 0.225
mbb_ltecov
301
0.00
3
0.005 0.003
-
0.00000004
-
0.00000004
0.003 0.012 0.003
speed302 0.02
1
0.032 0.035 -0.0000009 -0.0000009 0.072 0.072 0.021
The estimated implications of the preferred access and spectrum options on TFP growth could
then be directly inserted in the CGE modelling framework.
The policy options in the area of services should also have positive impact mainly on regulatory
efficiency and effectiveness in the electronic communications sector. However, the magnitude of
this impact is not easy to quantify. In order to overcome this difficulty, we relied on the results of
a study by Haidar (2012) 303
, which indicates that impact of a more significant regulatory reform
on the growth rate of GDP per capita is 0.15% on average. We have assumed that such an impact
will be channelled through improved TFP in the e-communication sectors and by means of
iterations estimated that an average increase in GDP growth rate of 0.15 percentage points is
associated with a 4% annual increase in TFP in the TELECOM and ECOM sectors, starting from
2020.
296
Total factor productivity is a measure of the long-term technological progress. It is typically estimated in a
production, where it represents the (Solow) residual that is not attributed to the production factors used (usually labour
and capital).
297
This means for example that TFP is likely to grow by the connection speed growth to the power 0.021, while TFP
growth would be equal to the 4G mobile broadband coverage to the power 0.003.
298
The Heritage index is used as a proxy of the regulation effectiveness and efficiency and, more generally, of the
business and consumer climate.
299
Sector abbreviations: AGR – agriculture, LOWMAN - low-tech manufacturing, HIGHMAN - high-tech
manufacturing, ENERGY - energy sector, TRANS - transport, TELECOM - telecommunications, ECOM - other
electronic communications-related services, SER - Other services.
300
Heritage index of economic freedom, which is mostly used as a proxy of the regulation effectiveness and efficiency
and, more generally of the business and consumer climate.
301
4G mobile broadband coverage (as % of all households)
302
Average broadband connection speed
303
Haidar J. I. (2012) "The impact of business regulatory reforms on economic growth", Journal of The Japanese and
International Economies, 26 (2012), pp. 285-307.
181
4.11.4 Implications for jobs and growth
The specific estimated economic and social impacts of the preferred options for access, spectrum
and services – in terms of GDP, consumption, investment and employment, split by country type
(state of digital and economic development), are shown in Table 15 below.304
The estimates are considered as conservative as they do not incorporate the possibility for
significant structural changes, which might take place if disruptive technologies are introduced
as a result of the expected increases in broadband connection speed, introduction of 5G and
efficiency gains. Additionally, given their current economic structure, the less digitally and
economically advanced economies are now estimated to benefit to a smaller extent from the
expected improvements in the e-communication services. There is however a possibility that
these economies experience a leapfrogging effect and, in particular, that new e-communication
technologies help address the lack of adequate fixed infrastructure in some of the countries.
Table 15 - Impact of assessed scenarios on GDP, consumption, investment and employment
(source: Ecorys)
304
The clusters of EU countries according to their economic and digital development and size are as follows:
▫ Advanced: LU, Denmark, Sweden, Finland, Netherlands, Belgium, UK, Germany, Ireland, Austria and France;
▫ Intermediate: Lithuania, Estonia, Malta, Portugal, Czech Republic, Latvia, Slovakia and Slovenia;
▫ Less advanced: Bulgaria, Romania, Greece, Cyprus, Italy, Hungary and Poland
As identified, the clusters are similar to the groupings of countries, based on DESI (https://ec.europa.eu/digital-single-
market/en/desi), but they are not identical, as for the purposes of CGE modelling we consider GDP in mln EUR rather
than its growth rate, thus taking into account more long-term characteristics of the economies - the level of economic
development and the size of the economy.
▫
182
Generally, for all assessed scenarios GDP is expected to increase compared with the baseline,
with an anticipated GDP uplift of 0.16% in 2025 for spectrum policies compared with the
baseline and a GDP uplift of 0.54% for access policies based on the ‘accelerated fibre’
scenario, as described in section 6.5.
The cumulative impact up to 2025 is expected to be significant due to the expected supply side
impacts, which are built up over time. More positive economic developments will have a
significant impact on investment, while the effects on consumption with be more moderate,
along with the life-cycle hypothesis for consumption smoothing. In the access scenarios the
effects are larger for the intermediate and most economically and digitally advanced economies
in the EU, which have the potential to capitalize best the benefits from applying the preferred
policy options. In the spectrum scenario, intermediate economies are expected to perform better
against the remaining EU countries, as 5G will most probably induce more investments both in
the e-communication sectors and manufacturing.
We also find some positive employment impacts from access and spectrum policies (0.02%
higher than the baseline), while the efficiency gains potentially driven by reforms fostering
digital services, might result in increases in employment of up to 0.15% compared to status
quo.
GDP Consumption Investment Employment
2021 2025 2021 2025 2021 2025 2021 2025
Accelerated fibre
Advanced 0.06% 0.54% 0.04% 0.38% 0.14% 1.11% 0.00% 0.03%
Intermediate 0.07% 0.57% 0.04% 0.35% 0.12% 0.66% 0.01% 0.02%
Less advanced 0.06% 0.52% 0.04% 0.40% 0.08% 0.22% 0.00% -0.03%
EU28 0.06% 0.54% 0.04% 0.38% 0.13% 0.89% 0.00% 0.01%
All fibre
Advanced 0.08% 0.96% 0.05% 0.66% 0.16% 1.92% 0.00% 0.04%
Intermediate 0.08% 1.00% 0.04% 0.62% 0.14% 1.09% 0.01% 0.03%
Less advanced 0.07% 0.91% 0.05% 0.71% 0.10% 0.34% 0.00% -0.05%
EU28 0.07% 0.95% 0.05% 0.67% 0.15% 1.54% 0.00% 0.02%
Services-efficiency gains
Advanced 0.11% 0.62% 0.10% 0.63% 0.30% 1.38% 0.02% 0.14%
Intermediate 0.11% 0.67% 0.05% 0.49% 0.62% 3.06% 0.01% 0.21%
Less advanced 0.22% 1.25% 0.23% 1.12% -0.44% -8.80% 0.06% 0.16%
EU28 0.13% 0.74% 0.12% 0.70% 0.20% -0.30% 0.02% 0.15%
Spectrum
Advanced 0.00% 0.16% 0.00% 0.12% 0.00% 0.48% 0.00% 0.01%
Intermediate 0.00% 0.23% 0.00% 0.14% 0.00% 0.74% 0.00% 0.04%
Less advanced 0.00% 0.16% 0.00% 0.12% 0.00% 0.24% 0.00% 0.01%
EU28 0.00% 0.16% 0.00% 0.12% 0.00% 0.47% 0.00% 0.02%
183
4.11.5 Impact on competitiveness
The results of the CGE modelling provide some indications as regards the implications of
changes to the framework on labour productivity – one measure of EU competitiveness.
In the cumulative scenario case, where preferred policy options are implemented in all areas, real
labour productivity will exceed the baseline by an average of 0.8% for the period 2020-2025.
This is equivalent to an average of 0.2 percentage points higher growth rate of productivity in the
simulation scenario as compared to the baseline.
Figure 23 - Real labour productivity (preferred options vs status quo)
Source: Eurostat, own calculations
Viewed in international perspective, historically over the past quarter century labour productivity
growth in EU has been lagging by an average of 0.4 percentage points as compared to the US
and by 2.4 percentage points as compared to Korea (due its lower base). One can realistically
expect productivity growth acceleration in the US and Korea in the forthcoming years as well.
Despite this, the implementation of the considered policy changes should make a significant
contribution towards boosting EU productivity, and potentially closing the gap.
Figure 24 -Trends in labour productivity – international comparisons
184
Source: World Bank, World Development Indicators database
4.11.6 Potential for disruptive change through innovation
The assumption underlying the CGE model is that clearer regulation of communication services
and better connectivity will allow all sectors of the economy to operate more efficiently and
realise higher total factor productivity rates.
In addition, the implementation of the preferred policy options might give a significant boost to
innovation. Such innovation effects are particularly relevant in view of the fact that the review of
the electronic communications framework could support the development and use of the
‘Internet of Things’ (IoT) 305
and digitalization of industry inter alia by fostering:
 More regulatory certainty for all players throughout the IoT value chain contributing to a
better investment climate;
 Levelling barriers for scaling up in Europe (by reducing regulatory heterogeneity) to the
benefit of start-ups entering as new players shaping the IoT value chain.
 Improving connectivity for SIM based M2M services;
 End-users confidence about security, privacy and confidentiality306
.
 Faster adoption of 5G; and
 A more ubiquitous roll-out of fibre networks to homes and lamp posts as to provide a
backbone with the stability and low latency that is required by many IoT applications.
In turn, IoT implies an increased role for communication services in (and increased dependency
on connectivity by) various industries, including automotive, agriculture, health, transport, etc.
As such, policies which unlock the full potential of IoT and the digitization of industry could
trigger a so-called “disruptive growth path”.307
It is not possible to estimate ex ante the impact of such structural economic changes on the basis
of CGE modelling. Therefore, the CGE estimates should be treated as a lower bound. Assessing
the impact of disruptive structure changes would require a case study approach examining how
precisely production processes would change as a consequence of a progressing IoT. Such
analysis has been done by McKinsey (2015) “The internet of things: mapping the value beyond
the hype” which analyses a number of IoT use cases 308
involving sectors that are key for EU
competitiveness.
305
BEREC (2016) and McKinsey (2015) identify a number of key enablers that contribute to unlocking the full
potential of the IoT. Key enablers are optimal fixed and mobile connectivity (which is realised through policy
measures with regards to access, spectrum and numbering), regulatory security for new players in the IoT value chain
(which is realised by clarifying the scope of the RF) as well as end-users confidence about security, privacy and
confidentiality.
306
The reason, as explained by BEREC and McKinsey, is that new categories of risks are introduced by the Internet of
Things. McKinsey argues that more devices means more opportunities for potential breaches and BEREC argues that
“[d]ue to limited resources in terms of energy and computing power, […] IoT devices may be vulnerable to cyber-
attacks”. Furthermore, McKinsey argues that the impact of a data breach is much larger in the context of the IoT.
“when IoT is used to control physical assets, whether water treatment plants or automobiles, the consequences
associated with a breach in security extend beyond the unauthorized release of information—they could potentially
cause physical harm”. BEREC concludes that “If users do not trust that their data is being handled appropriately
there is a risk that they might restrict or completely opt out of its use and sharing, which could impede the successful
development of IoT.”
307
See: “Information Technologies and Labour Market Disruptions - A Cross-Atlantic Dialogue” background document
by the “interdisciplinary, cross-sector roundtable organised by the European Commission (DG Enterprise and Industry
and DG Communication Networks, Content and Technology) in cooperation with The Conference Board and Cornell
University ILR School” 3/11/2014, p. 11
308
Outside, Home, Human, Cities, Factories, Worksites, Offices, Retail, environments, and Vehicles,
185
 IoT will particularly increase productivity and innovation in sectors that are considered
essential for Europe’s global competitiveness (such as automotive309
and electrical
engineering310
). Realising the full potential of the IoT in Europe contributes to
maintaining/strengthening that position. Not realising the full potential of the IoT in
Europe may lead to other parts of the world overtaking that position.
 IoT will also increase productivity and innovation in as well as in agriculture311
which
is an essential sector for the regional competitiveness of Europe’s peripheral areas312
.
 Furthermore, IoT contributes to cost savings in a wide variety of other sectors such as E-
health, smart metering/grids, smart homes and cities, etc.
McKinsey estimates for the global economy that by 2025, the full potential of IoT amounts to
approximately 3.9 to 11.1 trillion dollars per year (including consumer surplus). In terms of % of
global GDP this amounts to 3.3% to 9.4% according to our own calculations.313
If Europe could
realise a similar gain by fostering key IoT enablers, this would amount to an additional GDP of
0.56 and 1.59 trillion euros in the year 2025.314
The contributions to European competitiveness that could be made from the proposed changes to
the EU regulatory framework are summarised in the following table.
309
BEREC BoR(16)39 as well as McKinsey (2015) identify automotive as key sector that will adopt IoT applications.
At the same time, it considered a strategic sector of the EU economy
http://ec.europa.eu/growth/sectors/automotive/index_en.htm
310
Electrical engineering is a sector in which the EU is the global leader and which will benefit greatly from the
ongoing growth in mobile devices see: http://ec.europa.eu/growth/sectors/electrical-engineering/index_en.htm
311
BEREC BoR(16)39 as well as McKinsey (2015) identify agriculture as key sector that will adopt IoT applications.
312
Thissen, van Oort, and Diodato (2013)
313
On the basis of data and forecasts provided by the Conference board, global GDP may grow from 88 trillion
dollars in 2015 to 117 trillion dollars in 2025, not accounting for a disruptive boost like the IoT. As such, the IoT may
create up to 3.3% to 9.4% additional income at global level by 2025. See https://www.conference-
board.org/data/economydatabase/index.cfm?id=27762 and https://www.conference-
board.org/data/globaloutlook/index.cfm?id=27451
314
Assuming the EU economy has grown to 16.58 trillion euros by 2025 (based on forecasts by the Conference
board). 0.33% of 16.58 trillion euros = 0.56 trillion euros. 9.4% of of 16.58 trillion euros = 1.59 trillion euros
- 186 -
Figure 25 - Overview of competitiveness impacts
Access Spectrum Services
Cost competitiveness VHC connectivity supports the
digitalisation of services, reducing cost
and time to market. Standardising
wholesale products used for business
should also reduce costs and increase
efficiency within cross-border
organisations
Positive (general authorisation will make
access to spectrum more affordable and
lower administrative / regulatory costs).
This is of particular benefit to smaller
companies with more limited resources
The reduction of administrative burden
and of regulatory heterogeneity realises
cost savings for telecom operators.
International
competitiveness
Access policies are likely to boost
infrastructure deployment in Europe,
closing the investment gap with other
economies. Increased bandwidth is likely
over time to support increased use of
digital services and the attractiveness of
the EU as a platform for technological
and service development.
Positive (as a result of e.g. device
manufacturers seeing Europe as a single
market, offering significant scaling
opportunities, and producing devices that
are able to operate in “European” bands)
Less regulatory heterogeneity
contributes to the realisation of a digital
single market which facilitates a faster
scale-up of European start-ups in the
global digital economy.
Innovation
competitiveness
The deployment of fibre to lampposts
and homes supports 5G development,
and new applications. A connected
economy may also drive disruptive
change in business processes
Positive (general authorisation will open
up spectrum access to innovative
services, faster roll-out of 4G/5G will
foster development of new services based
in Europe)
More clarity and equality throughout the
value chain with regards to regulation
reduces regulatory risk for new (small
medium sized and large) players. This
increases their willingness to invest and
innovate
187
A key challenge however in realizing the benefits identified from innovations including those
stemming from IoT is the capability of European businesses to leverage innovation. For example,
comparing EU315
innovation capacity and results against peer economies, according to the Global
Innovation Index for 2015,316
the EU seems to be lagging behind in terms of many aspects of
innovation,317
although some countries within Europe including Finland, Sweden, Luxembourg,
Denmark and Germany are reported to be relatively strong in making use of innovations specifically
in ICT.
Figure 26 - EU innovation capacity in comparison with other regions
Source: Global innovation index, own calculations
If benefits are to be fully realized, this highlights the need for levelling up within Europe, not only in
terms of supply-side policies for electronic communications including the regulatory environment, but
also – importantly – on initiatives to support the absorption of new technologies within businesses of
all sizes.
4.11.7 Conclusions
Overall, if all the preferred options are pursued as a result of the review
of the electronic communications framework, we expect expanded market-driven
investment and consumption and a cumulative effect on growth of 1.45% and on
315
EU figures are derived aggregating the member states scores, weighting them with the respective country population.
316 The Global Innovation Index is an annual ranking of countries by their capacity for, and success in, innovation. It is
published by INSEAD and the World Intellectual Property Organization, in partnership with other organisations and
institutions. It is based on both subjective and objective data derived from several sources, including the International
Telecommunication Union, the World Bank and the World Economic Forum.
317 There are clear differences for the business sophistication pillar of the index, which includes knowledge workers and
R&D activities performed in the business sector, links between the business sector and the academia and means of
knowledge absorption. Another aspect where EU is performing relatively worse concerns indicators for ‘knowledge and
technology’ including knowledge creation, diffusion and impact.
188
employment of 0.18% in 2025, assuming that the reforms are implemented by 2020. A step change
of 0.8% in labour productivity is also envisaged during the period 2020-2025.
Assuming a baseline with an average annual EU growth of 2% and average annual increase in
employment of 0.3%, the cumulative impacts by 2025 on economic activity and job creation in
nominal terms will amount respectively to EUR 910 bn. and 1.304 million additional jobs. This is a
conservative estimate, as it does not take into account the possible synergetic effects that might occur
in case the preferred options in all policy areas are implemented simultaneously. The model does not
capture the potential for technological developments to drive disruptive change throughout industry,
as might occur if Europe leverages on strong infrastructure and single market for digital services to
achieve leadership in the Internet of Things (see Annex 7). This finding must be qualified by the
acknowledgment that private sector investment will play the most important role in upgrading the
necessary and underlying network infrastructure to meet the connectivity needs. For this reason, the
positive impacts described will rely on those investments being made at a higher rate than is the case
today. The choices to make those investments will ultimately be taken by present and future network
owners, and regulators and legislators alone cannot implement the expected outcome.
While absolutely necessary, changes to the electronic communications framework are not sufficient in
themselves. Initiatives to support the creation of the Digital Single Market and enable business to take
full advantage of the potential offered by digitalisation, will also play a crucial role in driving
Europe’s competitiveness.
5 HOW WOULD ACTUAL IMPACTS BE MONITORED AND EVALUATED?
5.1 Plan for future monitoring and evaluation - consider what should be monitored and
evaluated and when.
The present section explains how the impacts that were identified in section 4 above will be
monitored and evaluated once the revised telecoms framework comes in place. Some entities may be
subject to specific evaluation requirement enshrined in their legal base.
5.1.1 The European Digital Progress Report
The European Digital Progress Report (EDPR) covers 28 Member States and provides
comprehensive data and analysis of market, regulatory and consumer developments in the digital
economy. It is based inter alia on DESI318
(Digital Economy and Society Index) and the Telecom
Implementation Report319
. It combines the quantitative evidence from the DESI with country-specific
policy insights. DESI is based on data from Eurostat and various studies and surveys320
, and
structured in five dimensions: Connectivity, Human Capital, Use of Internet, Integration of Digital
Technology and Digital Public Services. European Digital Progress Report also includes a section on
R&D.
Insights on national policies come directly from the in-house expertise and research of country teams
and daily work on telecom issues and the input from Member States. The information provided is
complemented by information collected through country visits.
The EDPR combines the reports and all evidence published for the Digital Scoreboard321
with the
Telecom Implementation report, and adds country reports. The EDPR is thus fed with evidence
coming from:
318
DESI reports available here: https://ec.europa.eu/digital-single-market/en/desi
319
Latest Telecom Implementation Report available here: https://ec.europa.eu/digital-single-market/en/news/implementation-
eu-regulatory-framework-electronic-communications-2015
320
Indicators and sources are available here: http://digital-agenda-data.eu/datasets/desi/indicators
321
The reports are available at: https://ec.europa.eu/digital-single-market/en/digital-scoreboard
189
- Digital Scoreboard, which measures progress of the European Digital Economy. It is fed by data
conveyed by the National Regulatory Authorities, Eurostat and additional relevant sources and
includes data about the general situation of all dimensions of Digital Economy Society Index in the
EU Member States322
. DG CONNECT together with European Commission services selected around
100 indicators, divided into thematic groups, which illustrate some key dimensions of the European
information society (Telecom sector, Broadband, Mobile, Internet usage, Internet services,
eGovernment, eCommerce, eBusiness, ICT Skills, Research and Development). These indicators
allow a comparison of progress across European countries as well as over time323
.
- Telecom reports on European electronic communications regulation and markets, which
provide comprehensive data and analysis of market, regulatory and consumer developments in the
sector. These reports cover a broad set of indicators such as prices, number of alternative providers,
investment by incumbents and new entrants, market shares of operators, broadband and NGA
coverage and take-up, and development of new technologies. As explained in section 4.5 above,
NRAs and BEREC would receive new tasks which would facilitate monitoring of electronic
communications markets. On the one hand, NRAs would receive the task of performing a periodic
geographic analysis of the current and prospective reach of networks and BEREC that of developing
technical guidelines for infrastructure mapping. On the other hand, the harmonisation of powers of
NRAs to include services will also facilitate monitoring from the Commission and BEREC, in
particular since the latter will be vested with a power to request directly information from
undertakings.
5.1.2 Eurobarometer annual household survey
The current Eurobarometer survey provides insight of how the e-comms market performed for end-
users and on the consumer's attitude on service platforms uptake and usage of services in relation with
a number of consumer protection-related issues. As an example, the 2016 edition324
focuses on a
number of end-user rights' issues in relation with the topics addressed as part of the review of the
Telecom Regulatory Framework, e.g. transparency, switching, contracts, but also explores the
perception and the actual take-up rates of Internet-based communications services as compared to
more traditional telecom services (e.g. instant messaging v SMS).
5.2 Core monitoring indicators for the main policy objectives and the corresponding
benchmarks against which progress will be evaluated;
The table below outlines the core indicators of progress that will be monitored by the Commission
Services to evaluate whether the objectives of this initiative are being met. The indicators will be
monitored through various sources including Commission's missions in Member States and
permanent dialogue with National Regulatory Authorities, the yearly European Digital Progress
Report and the statistics provided by the National Regulatory Authorities, Eurostat and additional
sources, included in the Digital Scoreboard 325
and Digital Data Tool326
as well as ad-hoc studies in
case is needed for specific policy monitoring purposes.
322
All information is available here: https://ec.europa.eu/digital-single-market/en/download-scoreboard-reports
323
All data is available at: http://semantic.digital-agenda-data.eu/dataset/digital-agenda-scoreboard-key-indicators
324
See: https://ec.europa.eu/digital-single-market/en/news/new-data-shows-mobile-internet-used-more-phone-call-
remains-most-popular-communication
325
All information is available here: https://ec.europa.eu/digital-single-market/en/download-scoreboard-reports
326
Available here: https://digital-agenda-data.eu/
190
Table 16 - Monitoring indicators by policy objective
Policy objective Monitoring indicators
Contribute to ubiquitous VHC connectivity in
the single market
Connectivity indicators in EDPR
Fixed and mobile Coverage and take-up by
technology, speed and QoS.
Analysis of retail prices, bundles and number of
operators in the market
Time to market for spectrum resources
USO affordability analysis.
Quantification of investment needs and
developments to reach objectives .
Competition and user choice in the Single
market
Competition and End-user Market indicators in
EDPR.
USO affordability analysis.
Trends in switching.
Simplification of the regulatory intervention
and single market coherence
Telecom regulatory Indicators in EDPR at EU
and MS level.
MHz assigned on the basis of general
authorisations (as opposed to individual rights)
Governance costs
5.2.1 Benchmarks
It is important to define measurement indicators in relation to a standard against which progress can
be compared.
Contribute to ubiquitous VHC connectivity in the single market
The Impact Assessment conducted for this study is based on a projection of accelerated FTTH/B
deployment resulting in 55% of broadband connections being on the basis of FTTH/B by 2025, from a
business as usual projected ‘starting point’ of 20% in 2019. Take-up could therefore be gauged
against this metric (Specific targets might be decided in the context of the European Gigabit Society
strategy). The projections also envisage that 87% of broadband connections would be supplied on the
basis of very high capacity connections (via FTTH/B (potentially including G.fast) or cable Docsis
3.1), which could provide a broader measure.
191
Figure 27 - Projected FTTH/B take-up (as % BB)
Source: WIK-consult – baseline to 2020 based on IDATE forecasts SMART 2015/0002
Data on the diffusion of fibre in Japan (see case study in SMART 2015/0002) as well as that shown
for Sweden below suggests that such a take-up target for very high capacity broadband could be
achievable within a ten year timeframe, even starting from a low base.
Figure 28 - Broadband take-up by technology in Sweden
High take-up rates require high very high capacity broadband coverage. FTTH/B coverage in Sweden
stood at 70% and exceeded 90% in Japan in 2014,327
thereby meeting a FTTH/B coverage target
which had been set by Japanese policy-makers for 2011.328
Indicators for very high capacity
327
FTTH FTTx watch
328
http://point-topic.com/content/operatorSource/profiles2/ japan-broadband-overview.htm
192
broadband coverage could be measured against benchmarks such as these based on fibre technologies
(as in Japan) or Gigabit capabilities (as in Singapore).329
The Impact Assessment conducted for this study is based on a 5G deployment scenario which can be
used as a benchmark against which to judge actual deployment. In addition, just like for access,
European wireless broadband deployment figures can be compared to other world regions such as the
US, Japan or South Korea.
Metrics for average actual download (and upload) speed within individual countries and the EU as a
whole could also be compared with high performing countries such as Sweden or Japan and South
Korea, drawing on research from companies such as Samknows and/or publicly available data from
Akamai and/or Opensignal.
As regards operational metrics, take-up rates of duct access in Spain (see SMART 2015/0002) provide
a useful example as regards take-up rates that could be targeted in countries where ducts are available
and where investors of suitable scale exist.
Meanwhile, data from ARCEP illustrates how the availability of choice (of 2, 3 or 4+ providers) in
very high capacity fibre networks might be illustrated, although it shows that, notwithstanding
significant progress, there are still limitations in the infrastructure-based competition available in high
speed broadband in the French market.
Source: ARCEP observatory Q1 2016330
Competition and user choice in the Single market
Usage can be a useful measure of the utilisation of VHC broadband and of user choice. Usage
measures are currently high in countries such as the US, which have significant diffusion of online
329
Singapore targeted 1Gbit/s for 95% of households by 2012, albeit with the support of an extensive state aid
programme. See Cullen International Benchmarking 15 national broadband plans http://www.cullen-
international.com/asset/?location=/content/assets/research/studies/2014/ericsson-benchmaking-15-national-
broadband-plans.pdf/ericsson-benchmaking-15-national-broadband-plans.pdf
330
http://www.arcep.fr/fileadmin/reprise/observatoire/hd-thd-gros/t1-2016/Obs_HD-THD_T1-2016-
deploiements.pdf
193
video and cloud services, and within Europe are typically higher in Nordic countries compared with
Southern Europe countries, notwithstanding the strong fibre coverage in some of the latter. An
internal EU-benchmark could be used as well as a comparison of usage in EU member states
compared with the US, South Korea and Japan.
Price baskets are a measure of competition and affordability of users' choice. They will need to be
adapted to capture future targets for very high capacity coverage and take-up (potential at speeds well
above 100Mbit/s). As illustrated below from OECD data, comparisons should be made not only
within Europe, but with countries such as Japan and South Korea which have achieved high coverage
at relatively low prices. It should be noted however that pricing can be affected by exogenous factors
such as cost differences, which in turn may be influenced by population density and dispersion.
Figure 29 - Fixed broadband price baskets 2012
Simplification of the regulatory intervention and single market coherence
Given the unique status of European regulation in the context of the single market it is more difficult
to propose international benchmarks for this specific objective. Benchmarks for this area should be
based on EU best practices.
The European Commission could launch a multi-year benchmarking study to survey the NRAs, the
ministries and other interested entities have implemented the measures proposed in the preferred
options of this IA. NRAs would then be benchmarked among each other to understand how effective
and efficient they were in streamlining the market analysis process and ensure coherence between the
Framework, broadband state aid and the CRD. The impact on the European Commission services
should also be part of the analysis.
5.2.2 Summary
A summary of potential benchmarks is shown in the table below.
Table 17 – Summary of potential benchmarks
Indicator Potential benchmarks
Take-up of VHC More than 50% take-up of FTTH/B by 2025
More than 85% take-up of very high speed technologies by 2025
Based on forecasts used in the Impact Assessment cross-checked against
194
progress in Japan and Sweden
Speed of 5G
deployment
Compared with 4G deployment speed and patterns in Europe as well as
against other regions in the world
Coverage of VHC More than 90% coverage of FTTH/B or Gigabit technologies by 2025
based on 2011/12 targets in Japan
Wireless broadband
and 5G coverage
Coefficient of variation in wireless broadband and 5G coverage across
Member States and regions
Speed Measure against average and peak actual speeds in countries such as
Sweden, Japan and South Korea
Usage Compare GB per user per month within Europe against US, Japan and
South Korea
Pricing Compare updated price baskets (based on speed/technological targets)
with benchmarks within Europe and with US, Japan and South Korea
Duct usage Compare duct usage (km/total) in comparison with countries with
established duct access such as Spain, France and Portugal
Infrastructure-
based competition
(including co-
investment)
Compare % households with choice of 2, 3 or 4+ very high bandwidth
connections against statistics from countries with established
infrastructure based competition and/or co-investment such as France,
Spain and Portugal
5.3 Monitoring of the preferred policy option:
The set of preferred options selected above will be monitored by the indicators listed in this section
and organised along operational objectives deriving by each of the preferred options. The table below
summarises this process.
195
Table 18 – Operational objectives for preferred options
Policy
area
Preferred option Operational objectives List of monitoring indicators
Access
regulatio
n
Option 3 –
Focusing
regulation on
VHC
connectivity and
the transition to
NGA rollout
 support deployment
of VHC networks
 ensure competition
on price
 ensure competition
on quality
 ensure consumer
choice
Coverage of NGA and VHC networks
Take-up of NGA and VHC networks
- Number of players in European
markets (fixed and mobile)
- Number of new entrants (fixed and
mobile)
- Market share of incumbent operators
- HHI index in EU markets
- Timeframe of implementing
regulatory actions in the European
markets
- Number of BEREC opinions
guidelines and/or recommendations
- Number of art.7 vetoes/ number of
notifications
- Pricing resulting in the EU for
comparable offers/bundles in 2009-
2014 and
- % increase of households than can
benefit from at least 2 NGA
connections
Spectru
m
Option 3 –
Binding and
enforceable EU
coordination of
spectrum
management with
greater focus to
adapt spectrum
rules to the future
5G challenges
 Faster time to market
of spectrum resources
 increase consistency
in some aspects of
MS spectrum
management
 support deployment
of dense 5G networks
Timeframe (years) between technical
harmonisation and assignment of the
band.
Number of Peer-reviewed assignment
procedures
Type and nature of coverage
obligations in new licenses
Number of new licenses to expire
beyond 25 years
Number of assignment processes with
196
coordinated timing
Number of sharing agreements
between operators
Number of MHz assigned on basis of
general authorisations
Number of small and macro cells roll-
out on cost sharing
Number and content of implementing
measures adopted by COM
USO Option 3
Incremental
adaptation to
trends with the
focus on
broadband
affordability
 Inclusion of
affordable broadband
under USO in MS
Fixed BB Price
Development of social tariffs
Services Option 4 – IAS
and regulatory
obligations linked
to the use of
numbering
resources
 Streamlining of
current provisions
concerning ECS
 link the authorisation
requirement for ECS
services and
subsequent
regulatory
obligations to the use
of numbers,
 safeguarding other
end-user and public
policy interest (not
covered by horizontal
rules)
 access to emergency
services, including
disabled end-users
 operationally
adequate caller
location accuracy
- Internet Users
- Take up of bundles
-_Use of the internet for different
communications services
COCOM 112 Key Performance
Indicators331
Must
carry
Option 1 –
Maintain MS'
possibility to
impose must
carry obligations
 Include reporting
about reviews of
must carry
obligations in the
implementation
reports
 Facilitate exchange
of experience and
best practice in
The review of must carry obligations
will be done at MS level. MS may
define the monitoring and evaluation
processes and the respective
competences of national authorities
331
https://ec.europa.eu/digital-single-market/en/news/implementation-european-emergency-number-112-results-ninth-data-
gathering-round
197
reviewing must carry
obligations where
necessary ad hoc via
discussion in
COCOM
Numberi
ng
Option 3 –
Adapting the EU
framework on
numbering to
address the
competition issue
on the M2M
market
 assignment of
numbers (in
particular E.212
numbers) by NRAs
to non-MNOs
There are several ways to monitor the impact of the preferred governance options. One solution could
be to require BEREC to periodically report on the achievement of the objectives assigned to it, as.
Another could imply an obligation for the Commission to prepare an evaluation report on the
experience acquired as a result of the operation of the new agency. Annual reports should also be sent
to the European Parliament in order to enhance transparency and accountability of the agency.
With regard to NRAs, the annual reporting obligation and the already existing transparency
obligations allow monitoring their performance in their new or amended tasks.


EN EN
EUROPEAN
COMMISSION
Brussels, 3.10.2016
SWD(2016) 303 final/2
PART 2/3
CORRIGENDUM
Annule et remplace le SWD(2016) 303 final.
Suppression des liens vers des documents externes.
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposalsl for
a Directive of the European Parliament and of the Council establishing the European
Electronic Communications Code (Recast) and
a Regulation of the European Parliament and of the Council establishing the Body of
European Regulators for Electronic Communications
{COM(2016) 590 final}
{COM(2016) 591 final}
{SWD(2016) 304 final}
Europaudvalget 2016
KOM (2016) 0591
Offentligt
199
1
2 ANNEXES
6.1 ANNEX 1 - Procedural Information
6.1.1 Identification;
This Staff Working Paper was prepared by Directorate B 'Electronic Communications Networks and
Services' of Directorate General 'Communications Networks, Content and Technology'. The RWP
reference of this initiative is 2016/CNECT/XX.
This Staff Working Paper is accompanied by the Fitness Check SWD for the current regulatory
framework conducted in the context of the REFIT programme assessed not only in terms of
achievement of the original goals, but also in view of potential simplification and reduction of the
regulatory burden.
6.1.2 Organisation and chronology:
Several other services of the Commission with a policy interest in the review of the telecom
framework have been associated in the development of this analysis. The Telecoms Framework Inter-
Service Steering Group met for the first time on the 7 May 2015.
A second Telecoms Framework Inter-Service Steering Group meeting took place on 9 July 2015
A third Telecoms Framework Inter-Service Steering Group took place on 26 January 2016 .
A fourth Telecoms Framework Inter-Service Steering Group Impact Assessment Steering Group took
place on 14 April 2016 to discuss a draft evaluation report and the problem definition of the IA.
Comments were received by 21 April 2016.
A fifth Telecoms Framework Inter-Service Steering Group took place on 30 May 2016 to discuss the
draft Impact Assessment
In the ISSG, chaired by SG, DG CONNECT, was flanked by DG DIGIT, DG COMP, DG JUST, DG
GROW, DG ECFIN, DG FISMA, DG TAXUD, DG TRADE, DG RTD, DG JRC, DG SANTE, DG
EMPL, DG EAC, DG NEAR, DG ENV, LS, DG REGIO, DG HOME, DG ENER, DG AGRI, DG
MOVE, EUROSTAT, EPSC.
DG Connect also benefited from the support received by the JRC Information Society Unit for the
assessment of the model elaborated for the IA support study SMART 2015/0005 presented in section
4.11 and Annex 5..In particular, the analysis carried out by JRC concluded that "the consultants
constructed a CGE model with a rich sectorial and geographical setup (8 sectors and 4 representative
countries). Also, the policy considered in the analysis is entered into the CGE model through
immediate costs are introduced in the form of (private and public) investments and public
expenditures. In addition the sector TFP is adjusted following the estimated impacts from KPIs. This
seems a fine way to capture the economic impacts from the policy considered".
6.1.3 Regulatory Scrutiny Board
This staff working document will be discussed at the regulatory scrutiny board meeting of 7 July
2016.
200
6.1.4 Evidence
The options considered in this impact assessment were designed by taking into account the following
main inputs:
(i) the contributions to the Telecom Framework Review public consultation, a
summary of which is attached in Annex 2 to this report.
(ii) the BEREC opinion on the review of the regulatory framework released on 10
December 2015
(iii) 335
,
The three review studies (delivered together with this Impact Assessment report) are:
(iv) "Support for the preparation of the impact assessment accompanying the review of
the regulatory framework for e-communications" (SMART 2015/0005)
(v) Regulatory, in particular access, regimes for network investment models in Europe"
(SMART 2015/0002)
(vi) Substantive issues for review in the areas of market entry, management of scarce
resources and general consumer issues" (SMART 2015/0003).
The Impact assessment was carried out on the basis of interim study results of the three review studies
quoted above. Finalisation is planned at this stage by the end of July 2016 for SMART /002, by end of
August for SMART 003 and by the end of September for SMART/005.
Other recent DG Connect studies in the field of Electronic communication:
(vii) "Review of the scope of universal service" (SMART 2014/11),
(viii) "Study on future trends and business models in communications services and their
regulatory impact" (SMART 2013/0019),
(ix) "Identification and quantification of key socio-economic data for the strategic
planning of 5G introduction in Europe" (SMART 2014/0008)
(x) "Economic and Social Impact of repurposing the 700MHz band for wireless
broadband services in the European Union" (SMART 2015/0010),
(xi) 'Costing the New Potential Connectivity Needs' (SMART 2015/0068)
(xii) "Impact of Traffic Offloading and Technological Trends on the Demand for
Wireless Broadband Spectrum" (SMART 2012/0015)28,
(xiii) "Spectrum Policy. Analysis of Technology Trends, Future Needs and Demand for
Spectrum in line with Article 9 of the RSPP" (SMART 2012/0005)27,
(xiv) Survey and data gathering to support the Impact Assessment of a possible new
legislative proposal concerning Directive 2010/13/EU (AVMSD) and in particular
the provisions on media freedom, public interest and access for disabled people,
The other relevant sources quoted in the document are indicated in the bibliography and range from
academic papers to industry figures and estimates.
6.1.5 External expertise
The European Commission sought external expertise on the technical field as well as on the socio-
economic impacts of the options presented above. The Commission contracted WIK-Consult, Ecorys
335
See; http://berec.europa.eu/eng/document_register/subject_matter/berec/opinions/5577-berec-opinion-on-the-review-of-
the-eu-electronic-communications-regulatory-framework
201
and VVA Europe to support the preparation of this impact assessment accompanying the review of
the regulatory framework for e-communications. In the framework of the study an expert panel of top-
level, globally recognised and reputable specialists (scholars, experts in the field). was organized to
provide feedback on the preliminary conclusions reached by the consultants concerning the impact of
planned changes to the e-communications framework.
A high level expert panel was held on 30 May 2016 conducted in the framework of study SMART
2015/0005. Participants were Prof. Joan Calzada, Prof. Frédéric Jenny, Prof. Brigitte Preissl, Prof.
Luc Soete, Prof. Reza Tadayoni, Prof. William Webb, Prof. Brett Frischmann, Prof. Eli Noam.
Experts profiles and a report of the discussion are presented in Annex 13.
In addition to the review and other studies quoted above also the following EC studies in the field of
Electronic communication were considered
 "Identification of the market of radio equipment operating in license-exempt frequency bands to
assess medium and long-term spectrum usage densities" (SMART 2014/0012),
 "Eurobarometer household survey on eCommunications" - SMART 2014/0014,
 "Investigation into access and interoperability standards for the promotion of the internal market
for electronic communications networks and services" (SMART 2014/0023) a study on the
'standardisation' of wholesale access products
 "Mapping of Broadband and Infrastructure Study" (SMART 2012/0022),
 "Mapping broadband infrastructures and services (phase II)" (SMART 2014/0016),
 "Impact of Traffic Offloading and Technological Trends on the Demand for Wireless Broadband
Spectrum" (SMART 2012/0015)28,
 "Spectrum Policy. Analysis of Technology Trends, Future Needs and Demand for Spectrum in line
with Article 9 of the RSPP" (SMART 2012/0005)27,
 "Study in support of the preparation of an impact assessment to accompany an EU initiative on
reducing the costs of high-speed broadband passive infrastructure deployment" (SMART
2012/0013).
 "Steps towards a truly Internal Market for e-communications in the run-up to 2020" (SMART
2010/0016),336
 "Study on the socio-economic impact of bandwidth" (SMART 2010/0033),
 "Broadband coverage in Europe in 2013" Updated on an annual basis (SMART 2013/0054),
 "Broadband retail broadband access prices in 2013" Updated on an annual basis (SMART
2010/0038),
 "Challenges and Opportunities of Broadcast-Broadband Convergence and its Impact on
Spectrum and Network Use" (SMART 2013/0014),
 "Use of commercial mobile networks and equipment for mission-critical high-speed broadband
communications in specific sectors " (SMART 2013/0016),
 "Study in support of the preparation of an impact assessment to accompany an EU initiative on
reducing the costs of high-speed broadband passive infrastructure deployment" (SMART
2012/0013).
6.2 ANNEX 2 - Stakeholders and Public Consultation
6.2.1 The stakeholders engagement strategy
A continuous and active stakeholder engagement strategy was devised and followed for the evaluation
and review of the regulatory framework for electronic communications networks and services. From
the outset key ideas for evaluation and reform of the regulatory framework were outlined in a public
roadmap337
that followed the Political Guidelines338
of the new Commission and the subsequent DSM
336
https://ec.europa.eu/digital-agenda/sites/digital-agenda/files/final_report_internal_market_ecom.pdf,
http://europa.eu/rapid/press-release_IP-12-193_en.htm?locale=en
337
http://ec.europa.eu/smart-regulation/roadmaps/docs/2015_cnect_007_evaluation__elec_communication_networks_en.pdf
202
Communication339
. The published roadmap explained what the Commission was considering,
describing the scope of and outlining the main change drivers underpinning this initiative and
announced further details of stakeholder consultation strategy. This fed into the subsequent
consultation activities, ensued an inclusive process with all interested parties having an opportunity to
contribute.
A dedicated 12 weeks open public consultation was launched on 11 September 2015 that gathered
inputs for the evaluation process in order to assess the current rules and to seek views on possible
adaptations to the framework in light of market and technological developments and thus contributing
towards the DSM. The consultation document was both broad and detailed, eliciting extensive inputs
from consumers, providers of electronic communications networks and services, national and EU
operator associations, civil society organisations, broadcasters, technology providers, Internet and
online service providers, undertakings relying on connectivity and wider digital economy players,
national authorities at all levels, national regulators and other interested stakeholders. Inputs provided
include stakeholders affected by the policy, those who have to implement it and those with a stated
interest in the policy. The consultation gathered a total of 244 online replies from stakeholders in all
Member States as well as from outside the Union.
On 11 November 2015, halfway through a public consultation process, public hearing was organised
in Brussels as well as broadcasted online340
. This offered an opportunity for in-depth discussions on
issues outlined in the public consultation document, allowing for reasonable time to formulate and
gather effective feedback from all relevant stakeholder groups, allowing the collection of all relevant
evidence (comprising data/information) and views.
During the consultation process broad public events were combined with more targeted consultation.
This in particular relate to a serious of consultation events held with sector regulatory community that
is entrusted with key supervisory and implementing tasks stemming from the regulatory framework.
Following a series of such events and at the request of the Commission, BEREC provided an input to
the evaluation and the review process and published its opinion in December 2015341
. In addition, the
RSPG had provided its opinion on DSM and the Framework Review342
.
In parallel to the public consultation, and as part of such targeted consultation efforts, on 7 October
2015 the Commission convened a dedicated meeting of e-Communications Administrations High
Level Group, comprising representatives of the relevant ministries. At this meeting national
authorities shared their views and discussed challenges, focusing on the need to develop the fixed and
wireless connectivity networks of the future and to drive take-up and innovative services across
Europe.
As part of the evaluation process the Commission has also contracted a number of studies.
Implementation of these studies encompassed public workshops that allowed stakeholders to
comment and provide feedback to the ongoing evaluation work.
Several such public workshops took place that allowed cross checking of findings and verifying
inputs and assumptions.
On 6 April 2016 was held in the Commission's premises a public workshop to validate the interim
findings a study Smart 002/20015 conducted by WIK, IDATE and Deloitte on "regulatory, in
particular access, regimes for network investments models in Europe" in the context of the
338
http://ec.europa.eu/priorities/publications/president-junckers-political-guidelines_en
339
http://europa.eu/rapid/press-release_IP-15-4919_en.htm
340
https://webcast.ec.europa.eu/public-hearing
341
http://berec.europa.eu/eng/document_register/subject_matter/berec/opinions/5577-berec-opinion-on-the-review-of-the-
eu-electronic-communications-regulatory-framework
342
http://rspg-spectrum.eu/wp-content/uploads/2013/05/RSPG16-001-DSM_opinion.pdf
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preparation of the regulatory framework for electronic communications networks and services. The
workshop was attended by 60 external participants – not counting the team of consultants, from the
main European industry associations of the sector, from the telecom industry, e.g. operators, service
providers, vendors, business users, OTTs, banks and local governments, as well as representatives
from BEREC and national regulatory authorities.
On 2 May 2016, a public workshop was held at Commission premises to validate the interim findings
of a study conducted by WIK, CRIDS and Cullen on "Substantive issues for review in the areas of
market entry, management of scarce resources and general end-user issues" (SMART 2015/003) in
the context of preparing the review of the EU regulatory framework for electronic communications.
The workshop was attended by around 100 external participants representing EU and national
sectorial industry associations, electronic communications network operators and service providers,
cable network operators, broadcasters, consumer interest associations, vendors, business users, as well
as members of RSPG, Member States and National Regulatory Authorities.
In addition, the Commission responded positively to numerous requests to participate and update on
the review progress at conferences, seminars and workshops, keeping open exchange with all
stakeholders.
The consultation strategy followed by the Commission allowed the widest possible dissemination of
information and allowing stakeholders for a reasonable time to formulate and gather effective
feedback on all key elements of both the evaluation and the review process. This among other
included problem identification, subsidiarity and the need for EU action, outlining possible policy
response and anticipating impacts of such response. The consultation strategy followed ensured that
both general principles and the five minimum standards were respected and met. The results of these
consultation activities are summarised in the published synopsis report343
which is annexed to this
report.
6.2.2 The outcome of the public consultation
The synoptic report summarising the main outcome of the public consolation carried out for the
review of the telecoms framework has been published in April 2016.
6.2.2.1 Introduction
The consultation on the regulatory framework for electronic communications networks and services
was launched to gather input for the evaluation process in order to assess the current rules and to seek
views on possible adaptations to the framework in light of market and technological developments,
with the objective of contributing to the Digital Single Market Strategy.
The consultation targeted consumers, providers of electronic communications networks and services,
national and EU operator associations, civil society organisations, broadcasters, technology providers,
Internet and online service providers, undertakings relying on connectivity and wider digital economy
players, national authorities at all levels, national regulators and other interested stakeholders. The
consultation gathered a total of 244 online replies from stakeholders in all Member States as well as
from outside the Union. The consultation elicited both consolidated contributions from umbrella
organisations and individual contributions from various stakeholders.
343
https://ec.europa.eu/digital-single-market/en/news/full-synopsis-report-public-consultation-evaluation-and-review-
regulatory-framework-electronic
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The participation of different stakeholder categories was overall balanced with stakeholders from the
wider digital economy actively responding as well as consumer groups, public authorities and
electronic communications networks and services providers. This includes stakeholders affected by
the policy, those who have to implement it and those with a stated interest in the policy. Online
contributions by public authorities (national administrations and sector regulators) were relatively
fewer than the inputs of electronic communications network or service providers or wider digital
economy market actors. Among
stakeholders representing electronic
communications networks and services
providers, different clusters of economic
actors with diverse economic power
gave input – traditional/incumbent
operators, alternative operators.
This report uses the above categorisation
of stakeholders in presenting converging
or differing views on issues addressed in
the consultation. The contributions of
the stakeholders who gave their consent
to publication are available online. This
report also takes account of BEREC's344
input to the evaluation and the review
process provided at the request of the Commission, the RSPG345
opinion on DSM and the Framework
Review and some 20 other contributions received outside the online consultation as well as feedback
received via the dedicated public hearing dedicated to this review . The BEREC opinion was
published in December 2015, and can be found on this website.
This analysis does not represent the official position of the Commission and its services and thus does
not bind the Commission.
The input gathered corresponds to the objective of the consultation in both assessing the performance
of the regulatory framework to date and also providing insights about possible adjustments in order to
respond to market and technological advancements and prospective challenges.
344
Body of European Regulators for Electronic Communications
345
Radio Spectrum Policy Group
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6.2.2.2 Analysis of responses
The analysis in subsequent sections of this report is based on inputs received by different stakeholder
categories.
6.2.2.2.1 Objectives and overall performance
In terms of the effectiveness, it is acknowledged by most stakeholders (consumer organisations,
Member States, operators, regulators, other) that while the framework has been successful in
bringing more competition in the market and promoting the interests of EU citizens, it was less
successful in promoting the internal market.
On the objective of achieving the internal market, most respondents indicated a moderate
contribution. Alternative operators generally perceive the framework as having set the right
environment for the internal market to develop. Conversely, several incumbents are rather negative on
this point and also some small players point out that the provisions of the framework are not apt to
foster cross-border deployments. Many respondents have stated that this objective has not been
achieved owing to the lack of a consistent approach by NRAs (national regulatory authorities), with
some of them being seen as more willing and ready to enforce framework provisions than others.
Hence this objective can be considered as only partially achieved.
The framework's contribution to the objective of protecting the interest of European citizens is rated
more positively. Most stakeholder groups (alternative operators, incumbents, others) consider that the
framework has contributed moderately to citizens' rights and interest. Alternative operators and
small fibre operators tend to attribute a more significant impact on EU citizens' interests, while
several incumbents are rather negative on this point, considering that the interest of the European
citizens has been promoted only to a certain extent, owing to the hurdles to investment in NGA
allegedly caused by access regulation. Some large operators and entities wonder if the interest of
citizens has been harmed by the focus on lower tariffs rather than on network quality. Finally, the
sparse contributions by private individuals have a much more negative character, with 8 out 12
pointing to little or no impact at all.
In terms of efficiency and whether the costs involved were reasonable, there was a somewhat negative
perception. Larger operators (incumbents and those with mobile arms) consider that the
administrative and regulatory costs borne have exceeded the results achieved. Alternative operators
believe, on the contrary, that the benefits have exceeded the costs, underlining that competition,
economical offers and several clear consumer benefits would not exist without the framework and that
access regulation is necessary and proportionate. Some alternative operators underline the value of
having a stable, predictable regulatory regime, whilst also highlighting some unnecessary costs: the
costs of market analysis for termination markets where the outcome of the analysis in any event is
stable, the cost of questionnaires, the overlap of tasks of public authorities, the lack of harmonisation
in consumer regulation including data protection and data retention, of universal service obligations.
In terms of relevance of the framework and whether EU action is still necessary, the general
perception is that framework is still necessary and there is a consensus amongst incumbents and
alternatives, large and small, consumer organisations. Alternative operators, consumer
associations, wholesale operators underline that competition cannot be maintained without ex ante
regulation and that full duplication of network infrastructures is not realistic. Most incumbents argue
for a simplified access regulation (limited to fixed infrastructures, with only one access product, based
on commercial negotiations and dispute resolution rather than on ex ante cost orientation). Some
operators and equipment manufacturers argue for a progressive transition to ex-post competition
law. Many respondents groups support the relevance of the framework for network and service
security.
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In terms of EU added value and whether similar progress could have been achieved at national or
regional levels, most operators highlighted the importance of competition for increasing choice and
transparency, lowering prices and bolstering consumer rights. Incumbents acknowledged the role of
the framework in liberalising monopolies. Many respondents highlighted a risk of fragmentation due
to national implementing measures and of incoherence with other regulation and competition law.
Equipment vendors in particular acknowledged the role of the framework in promoting competition.
While the desire to deregulate in one form or another is present in almost all categories of
contributors, albeit not equally, none of the contributions concludes that full repeal of the framework
is warranted. Consumer protection rules and universal service were the subject of widely
contradictory opinions from different stakeholder groups, with disabled user group noting that without
the framework, many measures to facilitate a disabled person's access might not have happened. In
terms of process, there were calls from some operators for a full harmonisation to address
fragmentation.
Connectivity is the overall converging theme in many contributions across different stakeholder
groups, with many suggesting that it should be a more prominent focal point in the revised
framework. Including investment as one of the objectives, however, divides the respondents. In
particular, consumer organisations, alternative operators and regulators fear that this could be
seen as undermining the current competition objective. Incumbents and many mobile operators
stress the increased need for connectivity and investment but diverge in the proposed solutions.
Connectivity to the benefit of end-users as an overarching objective to which competition, internal
market and investments provide the means, could be considered as a central theme supported by most
stakeholder groups.
1.1. Network access regulation
Extensive inputs were received from all of the major fixed and converged fixed/mobile electronic
communications providers active in the EU, whether they are former monopolies, small or large
access seekers relying on their networks, or independent fixed infrastructure owners including cable
and independent fibre networks.
Good connectivity is perceived as a necessary condition to achieve the Digital Single Market, with
many respondents pointing to the need for policy measures and possible adjustments to current policy
and regulatory tools to support the deployment of infrastructure in line with future needs.
6.2.2.2.2 Evaluation of the network access regulation
Amongst stakeholders from the industry, the positions expressed on network access and
interconnection regulation, including the current SMP-based approach, can be divided in two blocks,
with on the one hand operators whose business model predominantly relies on access (and who
strongly support the current ex-ante regulatory approach) as well as broadcasters, and on the other
hand the incumbents (who call for a reform of the regulatory regime in place). Cable operators are
supportive of the role that the SMP regime has had to promote competition, but warn that overly
aggressive regulation could hinder infrastructure deployment.
The main argument from alternative operators and their national and European trade associations is
that regulated access and interconnection have driven competition, innovation and investment and that
with the ongoing shift to NGA networks the needs for SMP-based regulated access to broadband
networks will remain acute. In addition, they submit that the current regulatory approach provides
NRAs with the right level of flexibility. Telecom users are also strongly in favour of the current
access regulation, with the exception of one business users association which considers that the
emphasis should be put on service competition rather than on the underlying infrastructure, and that
the sharing of infrastructure should be emphasised.
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On the other hand, incumbents consider that the access regime in general is a deterrent to investment
in NGA networks, does not provide enough predictability, and is a burden for operators and
regulatory authorities with high administrative costs. They claim in particular that promoting
infrastructure investments by enabling competition downstream (first by the imposition of wholesale
remedies and then by encouraging access seekers to gradually build their own infrastructure closer
and closer to end customers), the so called "ladder of investment" approach, has failed, in particular
when applied to NGAs, and that a lighter regime should be put in place with a focus only on situations
where monopolistic conditions persist. The need to incentivize investment is raised by many
incumbent operators. While many mobile operators also follow this line of thought, some of the
mobile operators support the regulatory approach in place.
Regulators consider that the current approach drives investment. On the other hand, some responding
Member States call in general for a pro-investment regulatory regime, estimating that the current ex-
ante SMP-regulation is outdated and should be adapted, with some suggesting that it should enable
NRAs to apply a more flexible approach for imposing symmetrical obligations of access to high-
capacity networks.
With respect to the interconnection of voice, mobile operators and certain incumbents call for a
phasing out of the ex-ante regime in place, arguing that the IP-based delivery of voice services is
modifying market circumstances. MVNOs have an opposing view on the matter, on the ground that
terminating networks will always remain a bottleneck. OTTs consider that interconnection rules are
needed to avoid discrimination.
Many of the access seekers consider that the current rules were effective in addressing single
dominance. This view is also shared by consumer organisations and part of the regulatory
community. Those operators in principle agree with the existing scope of access remedies, while
raising issues with its implementation in detail. On the other hand incumbent operators consider that
the full set of access remedies is often imposed mechanically, without cost/benefits assessment and
without regard to modulation according to actual problems identified. Intrusive access remedies,
imposed at all levels of the "ladder of investment" hamper investments in modern networks.
Moreover, the broad provisions concerning access regulation contained in the current framework
allows NRAs to engage in product micro-management, business case design and steering market
outcomes. This is said to cause significant delays in delivering new technologies and network
upgrades.
6.2.2.2.3 Review of the network access regulation
The majority of Member States/public authorities that have responded highlight the positive effect
that the implementation of the Framework has had on the market and the role of competition in
promoting investments. However, there is an acceptance that updating the framework will be
necessary, for reasons varying from promoting investment in next-generation infrastructures,
responding to technological and market changes and diminishing administrative costs. Some Member
States argue for flexibility in the application of incentives to meet future challenges at a national or
sub-national level. Access seekers and some other operators also call for greater guidance to be given
to NRAs to analyse sub-geographic markets to increase consistency. There are also calls from certain
Member States, which perceive limits in dealing with oligopolistic market structures, for a greater role
for symmetrical rules. Regulators broadly underline the achievements of the current system but argue
that some flexibility may be needed, for instance by considering more prominently symmetrical
obligations or by simplifying the regulatory approach to the termination rates markets.
Among operators, the responses of the two largest groups of stakeholders (incumbents on one side
and access seekers on the other) correspond to the general lines of the two groups: the first advocating
a de-regulatory push in the name of changed market dynamics and the risks involved in future
investment plans, the second defending the link between competition and investments and calling for
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a protection of access rights to legacy networks as well as to upgraded networks, where they fear that
a deregulatory approach would lead to the loss of the welfare gains achieved so far by the regulatory
framework. Those seeking further deregulation resist ideas that they fear may result in an increase of
the regulatory burden, particularly in relation to regulatory measures that may lead to the continued
regulation of markets even in the absence of proven market power. On the other hand, those that rely
on regulation resist proposals that imply establishing a link between investment incentives and a
lighter regulatory approach, as they fear that upgraded networks will become increasingly inaccessible
and that broadband markets will become increasingly concentrated or even re-monopolised. In each
case, however, the general approach is typically also accompanied by a recognition that regulated
networks and their related markets have changed, leaving scope for adaptations.
In relation to the simplification of access products and focussing on key access points, network
owners responded in favour of a drastic simplification to a single access product (if at all necessary),
whereas access seekers insist on the importance of different access products to compete at the retail
level. On the other hand, access seekers reject the idea that retail market considerations should be the
focus of wholesale regulation, an idea that is strongly supported by network owners, who consider
that continued wholesale regulation is not justified if retail markets are competitive.
In relation to different treatment of legacy copper networks (whether pure copper access networks or
upgraded FttC networks with copper sub-loops) to incentivise upgrades, operators invoked the
principle of technological neutrality and leaving the market to decide how to best meet demand.
However, a number of contributors consider that copper-based solutions will not represent a credible
alternative in the long term. Investors in FTTH solutions and some access seekers call for a
recognition that the risk involved in rolling out fibre to the premises is higher than upgrading copper,
so that regulatory incentives, if any, should not include FttC solutions. Regulators also propose the
idea that any risks specific to a particular new investment network project should be considered if
wholesale tariffs are subject to regulation, in order to allow the operator a reasonable rate of return on
adequate capital employed.
Network owners request discretion to decide whether and how to continue to use copper assets (full
copper loop or sub-loop), whereas access seekers request guarantees that physical access to copper
networks will continue to be guaranteed. While a majority of respondents, including regulators,
would not agree to mandating the switch-off of copper networks where fibre is present, they still see a
role for regulators to manage the transition where switching off copper makes economic sense, with
copper networks owners advocating minimal intervention, and others rather invoking public
intervention to preserve competition (e.g. transitional migration regime).
With regard to co-investment models, many stakeholders can see the advantages of co-investment for
increasing the reach of NGA networks, for example, in less densely populated areas. Their views
however differ on the related regulatory regime. While incumbents favour co-investments on
commercially negotiated terms, access seekers call for strict conditionality to ensure fairness and
openness of the co-investment.
The responses overwhelmingly affirm the important role that civil engineering plays in the roll-out of
NGA. Some Member States and a number of infrastructure owners don't see the need to further
intervene to ensure access to civil engineering falling within the scope of the Cost Reduction
Directive (2014/61/EU). However, alternative operators highlight the importance of detailed SMP
obligations, beyond the general obligations in that directive. Furthermore, incumbent operators call
for symmetrical access to in-house wiring.
There is broad alignment between regulators, Member States and many others that longer review
periods (compared to the current mandatory three years) would be beneficial, particularly in stable
markets such as termination rates.
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Regarding measures aimed at facilitating the roll-out of high-speed networks in the most challenging
areas, responses were cautious with regards to any first mover advantages (to operators that are
willing to roll out next generation networks in challenge areas). Access seekers and consumer
associations warned about the risk of re-monopolisation, whereas network owners challenged the
proposition that a risk of strategic overbuild can be defined and distinguished from competition. Some
Member States highlighted the need for local responses to sub-national competitive and investment
challenges, indicating openness to consider approaches to incentivise first movers on a geographical
basis, subject to suitable safeguards being built in. In supporting first mover incentives, vendors and
wider digital economy players suggest a concession model, with some operators noting that in such a
case regulators should be able to define a period in which the network operator is allowed to use its
network exclusively. Most stakeholders agreed that any first mover advantage should be subject to
safeguards against re-monopolisation. Wholesale-only models (which may counterbalance fears of re-
monopolisation) found the support of equipment vendors and smaller/fibre-only network
operators, but operators in general and public authorities disagree on whether such models would
have a positive effect on investment.
On oligopolistic markets, on the basis of BEREC's recently adopted report, all respondent regulators
and some Member States are calling for the widening/strengthening of regulatory powers to deal
with new duopolies or oligopolies (where such market structures lead to sub-optimal market
outcomes) albeit still with a high threshold for intervention. Some propose symmetrical regulation as
a possible solution. Some alternative operators also raised concerns about the adequacy of approach
under the current SMP test and guidelines to tackle joint dominance or "tight oligopoly" market
structures. However, many operators warn of the risk of over-regulation if ex ante regulation tools are
broadened, without a clear economic underpinning, to tackle oligopolistic conditions beyond the
current joint dominance test, as set out in Annex II of the Access Directive and the SMP Guidelines,
or beyond the current threshold for applying symmetrical rules.
6.2.2.2.4 Spectrum management and wireless connectivity
The importance of wireless connectivity and wireless broadband, and its link and complementarity to
a very high capacity fixed connectivity is acknowledged in consultation responses. Industry is
supportive of a more co-ordinated approach and looks for additional certainty in investment and
possibilities to develop throughout the EU new wireless and mobile communications including 5G.
Member States generally underline the achievements in the field of technical harmonisation, and the
need for additional coordination to be bottom-up and voluntary; some of them call for a better balance
between harmonisation and flexibility. There is widespread recognition of the importance of more
flexible access and use of spectrum in the future from both operators and public authorities, although
disagreeing about how to realise this.
6.2.2.2.5 Evaluation of the current rules on spectrum management
While a majority of respondents consider the current regime to have significantly contributed to
promoting competition, almost half say it has only moderately achieved the aims of providing market
operators with sufficient transparency and regulatory predictability, promoting citizens' interests and
ensuring effective and efficient spectrum use. A third of respondents considered that the current
regime had only a minor impact on keeping the administrative burden appropriate and on promoting
the Internal Market.
A majority of respondents that spans public authorities, regulatory and trade bodies both in and
outside the electronic communications sectors, MNOs, converged and satellite operators, user
associations and vendors, consider the current regime to have contributed to harmonised conditions
for the availability and efficient use of spectrum. Member States and regulators have in particular,
been consistent supporters of this position. More reserved views are found among broadcasters and
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other respondents, notably from the transport sector. The regime has been significantly more effective
for new bands than for bands still requiring freeing.
There is a general perception among several respondents (converged operators, operator associations,
vendors) that technical harmonisation has worked well and that the involved actors (RSPG,
RSC/CEPT and the Commission) have delivered. Even those parties seeing little or no benefit from
the existing regime (M(V)NOs, cable, converged operators, non-ECS associations) acknowledge the
achievements in technical harmonisation, but stress persistent regulatory fragmentation. Points of
criticism concern the ineffectiveness in addressing interference issues (transport) and ensuring usage
efficiency.
As for the selection processes for limiting the number of rights of use, industry respondents, including
operators and vendors, criticize a lack of consistency as well as sometimes unnecessary restrictions of
usage rights. Some respondents recognise coherence of application in the sense of certain rules being
widely used, while results still differ (converged operators, ECS associations). A majority of
respondents (spanning ECS and non-ECS associations, M(V)NOs, converged operators and vendors)
considered that the lack of coordination of selection methods and assignment conditions has impaired
the development of electronic communications services. The authorisation methods most often
mentioned as efficient for wireless broadband were auctions and general authorisations.
While respondents comprising broadcasters, mobile operators, associations of mobile and alternative
operators, regulators and vendors consider that inclusion of spectrum provisions in several
instruments should not per se impede their effective interpretation and/or implementation, several
respondents including incumbent operators and some Member States nevertheless consider a single
instrument to be potentially more effective, stressing the benefits of applying the same set of rules to
all spectrum users, which is also supported by most vendors and operators/associations, subject to the
rules being consistently applied.
6.2.2.2.6 Review of spectrum management rules
Regarding objectives and principles, most economic actors and some Member States seek more
consistency in spectrum management to increase legal certainty and spectrum value, and to secure
greater transparency and predictability for investment, in particular on licence durations, pricing and
availability of spectrum. There is also large support from public authorities to remove barriers to
access harmonised spectrum across the EU, in order to foster economies of scale for wireless
innovations and to promote competition and investment, as well as to avoid cross-border service
impairments. Operators also stress problems - in particular, late access to spectrum, high reserve
prices, inefficient spectrum packaging, spectrum left idle and lack of long-term vision.
The majority of respondents consider that spectrum assignment procedures have a significant impact
on structuring the mobile markets and their competitive landscape, e.g. number of operators, price,
network investment, and consumer prices. Some (generally large operators) criticise the use of
assignment measures as indirect means to ex ante regulate the market (through caps, reservations)
without the associated objective criteria. Others (vendors, some regulators) also consider that
additional factors such as regulatory conditions (e.g. access obligations for MVNOs) and historical
national market development have a similar structuring impact.
Most responding Member States, broadcasters and alternative operators associations insisted on
national specificities and are generally satisfied with the current framework. While public authorities
could envisage limited coordination through common deadlines for making a band available or the
common definition of certain general principles, many economic actors seek greater harmonisation of
award methods and procedures (need and timing of spectrum release and selections, general principles
and objectives, transparency, ex-ante competition assessment, refarming conditions, timing of
advanced information to market participants, measures to promote use efficiency, spectrum
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packaging) so as to enhance legal certainty, support investments, promote competition, provide more
clarity to manufacturers and support economies of scale. Member States expressed much resistance
regarding coordination of spectrum valuation and payment modalities, while many operators oppose
fee disparities and excesses, and in general support greater coordination of assignment processes.
Most vendors supported harmonisation for predictability and a robust end-to-end value chain, but
warn that timetables alignment should not delay early movers.
Assignment conditions generally are considered as heavily impacting investment and business
decisions, competition and the single market. Most operators agree on the need for more consistent
binding assignment conditions to increase investment predictability, and in particular to support and
ensure objective, transparent and non-discriminatory treatment of operators, transparency and
alignment of timing and conditions of licence renewals, longer licence duration, flexibility to trade,
lease or share, technology and service neutrality limits, refarming conditions, technical performance,
use-it-or-lose-it clauses and interference mitigation before assignment decisions are taken. On the
contrary, there is strong opposition to harmonise or even use wholesale access conditions from
operators and to a certain extent to harmonisation of coverage obligations from Member States. For
broadcasters, decisions on criteria and conditions should remain at national level to consider local
specificities or media pluralism and cultural diversity. Some also insist on the need for compensation
in case of refarming.
Member States reject full harmonisation but are open to a more common approach to spectrum
management, some could accept a peer review of national assignment plans as well as a certain level
of harmonisation or approximation of conditions and selection processes. A number of Member States
expressed their desire to remain flexible to support early take-up of new technologies and to
adequately balance harmonisation and flexibility in order to be able to adapt to market demand.
Most public and commercial respondents are calling for flexible or shared access to spectrum to meet
future demand, in particular for 5G, preferably on a voluntary basis; vendors and operators insist on
exclusive or licensed shared access for quality purposes. Broadcasters raise interference issues and
thus urge for careful selection of compatible sharing usages; in addition, some point to their
incapacity to at the same time compete for spectrum and meet cultural targets if flexibility is purely
market-based.
On refarming, a large majority including operators, vendors and their associations as well as
responding Member States and regulators seek further facilitation, notably on a voluntary basis except
in cases of inefficient use. The large majority of operators, vendors and their associations consider
that longer licence duration would be helpful in this regard. Most operators see a need to protect and
give priority to existing users to safeguard investments or avoid interference, while a minority
believes that appropriate spectrum pricing, trading and auctions can address this issue. When
facilitating refarming, some seek a careful balance between flexibility and preservation of
harmonisation.
With regard to facilitating deployment of denser networks, many respondents pointed to obstacles -
lengthy permit process, high administrative fees for back-haul provision, inappropriate fee structure,
lack of harmonisation of management of electromagnetic fields' emission - to the roll-out of small
area access points needed for mobile services, while some Member States disagree. Many market
actors and public authorities consider that a general authorisation regime would foster innovation and
competition both for services and end-devices and should include access rights to public and private
property to build a network. Vendors seek a common definition of small-area wireless access points
and the harmonisation of technical characteristics about their design, deployment and operation.
While opinions are divided as to whether end-users should be entitled to share access to their Wi-Fi
connections with others as a key prerequisite for the sustainable deployment of denser small cell
networks in licence-exempt bands, many public authorities and private respondents supported the
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deployment of commercial/municipal Wi-Fi networks in public premises, while seeking appropriate
regulatory safeguards for a.o. liability or exposure to EMF. Some operators reject such idea as
network roll-out could be facilitated via various forms of public-private partnerships, many stressed
that any such public support should be technologically neutral.
With regard to public protection and disaster relief (PPDR), a majority of respondents reject the
inclusion in licence conditions of obligations of service quality and resilience of network
infrastructure to enable a dual use of commercial mobile networks for PPDR, as MNOs' individual
business models do not combine easily with stringent PPDR requirements, and therefore should be on
a voluntary commercial basis only and based on net neutrality rules. Some operators believe that
providing PPDR services via commercial networks would be economically more efficient than
funding a separate network for PPDR services.
6.2.2.3 Sector-specific regulation for communications services
6.2.2.3.1 Evaluation of the current sector specific regulation for electronic communications services
With regard to the effectiveness of the current regulatory framework in ensuring a high level of
consumer protection, the clear majority of respondents (Member States, telecom operators and their
associations, broadcasters, vendors and OTT providers) believe that the current framework
contributed to effectively achieving the goal of ensuring a high level of consumer protection in the
electronic communications sector across the EU. Member States noted that in general the framework
had positive effects on the protection of consumer rights regarding traditional electronic
communication services (ECS). In particular, provisions related to contracts and those facilitating
change of provider (switching) have diminished unfair lock-in practices and ensure a high level of
consumer protection. Users and ECS/ECN associations, as well as the majority of operators
consider that the existing rules have delivered good outcomes and high levels of consumer
satisfaction.
Many respondents, however, consider that the current regulatory framework has failed to deliver
consumer protection with respect to emerging services, which are based on new technological
developments and currently fall outside the remit of the sector-specific rules. Most responding
Member States support specific requirements to be applied to all communications services
irrespective of the provider ("traditional" telecom operators or "new" OTTs) in order to avoid risks of
(a) insufficient customer protection, (b) a lack of clarity, and (c) confusion among consumers who
might mistakenly believe that their communication is protected by sector-specific rules.
Some telecom operators think that the current provisions have become outdated with little substantial
value for consumers, except for basic provisions on emergency services, number portability and
interconnection and argue that competition in the sector would allow for the removal of regulation.
Regarding provisions constituting a particular administrative or operational burden, a majority of
respondents (mainly operators and their associations) believe that there are administratively or
operationally burdensome provisions. The biggest concerns are expressed regarding different and
overlapping legal frameworks, e.g. Consumer Rights Directive (CRD); Universal Service Directive;
Unfair Commercial Practices Directive. Some respondents argue that this leads to over-regulation, too
detailed provisions, and inconsistency of rules. Some alternative operators consider the application
of end-user protection rules to business customers as burdensome. According to other incumbents
and their subsidiaries almost the entire Universal Service Directive is burdensome.
With regard to provisions to be repealed, the majority of respondents (mainly telecom operators and
their associations, a few broadcasters, vendors and OTTs and a Member State) have identified
certain sector-specific end-user rights’ provisions, which they consider are no longer relevant. These
include provisions such as contract rules which are covered by various other directives, in particular
the CRD. Regarding the maximum contract duration, some telecom operators suggest either an
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application of these rules also to OTT communications, or their abolition. One telecom operator
suggests the repeal of Art. 34 USD as out-of-court dispute settlements are also addressed in the
Directive on Consumer Alternative Dispute Resolution (ADR) and the Regulation on Consumer
Online Dispute Resolution (ODR). Some operators suggest the repeal of the provisions on printed
directories and public payphones. Some Member States, mobile operator association, EU and
national consumer associations and a trade union have not identified any provision to be repealed.
With respect to provisions protecting disabled end-users, the USD contains specific requirements
under the universal service obligation (USO) and regarding the equivalence in access and choice. The
majority of the respondents (telecom associations, telecom operators, users' associations, an
association of users with disability, other NGOs, regulators and Member States) found that the
current regulatory framework has been effective in achieving these goals. Several operators and
NGOs stated that the relevant Art. 23a is too weak ("Member States shall encourage"), it leaves too
much discretion ("where appropriate") and does not contain financing provisions. They consider that
it has therefore been only moderately effective in achieving the goals of providing equivalent access.
As a consequence, an inconsistent diversity of approaches has developed across the EU.
Incumbent and larger operators raised the financing issue. Initiatives designed to improve
accessibility of services to disabled people should be borne by the public authorities. If any
contribution is required from the sector, it should be requested to all players, including OTTs, in
proportion to their incomes and the number of users (“responsibility-sharing based on a
proportionality principle”).
With regard to the efficient implementation of number portability (NP) provisions, a large majority of
respondents consider that the current NP provisions allow significantly or moderately for their
efficient implementation. However, operators criticised the diversity of approaches, and of technical
means put in place, in various Member States. In some Member States, there is no common database
of ported numbers and in a few of them direct routing of ported calls is still not available. Some
operators and their associations argued in favour of a receiving provider-led porting process. Some
respondents stated that the current NP obligations are not well suited to new services such as M2M or
IoT.
With regard to the relevance of 112 provisions to ensure an effective access to emergency services, a
large majority of respondents agreed with the significant relevance of the scope and requirements of
the current regulation of access to emergency services. National authorities are also in line with this
trend. The telecom industry highlights the importance of reliable access to emergency services that,
in view of the technical standards and legal arrangements in place today, can be provided today only
through ECS.ECN/ECS argue that access to 112 obligations should be imposed on OTTs as well, if
technically feasible. A large number of stakeholders consider that all the voice services perceived by
the users as substitutive to the current PSTN voice service and which also give access to E.164
numbers should be subject to the same obligations regarding the access to emergency services. In the
same vein regulators support an obligation on all communication services (including OTTs) that give
access to numbers in the numbering plan.
As regards the effectiveness of network and service security rules in achieving their objectives, over
half of all respondents (including several Member States, most telecom operators and some
vendors) consider that the rules have been effective. A minority (one Member State, a few telecom
operators and some associations of operators) found them ineffective. More than a third of the
respondents (many incumbent and alternative telecom operators and associations, several ENISA-
member national authorities) underlined the need to involve the complete Internet value chain
(including OTT services, software and hardware).
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6.2.2.3.2 Review of the sector specific rules for communications services
With regard to the scope of the future rules and the need for sector-specific regulation of
communication services, the majority of respondents including BEREC, Member States, several
associations of broadcasters, of cable operators and of alternative operators, consumer
associations, cable players and OTTs note that there is still a need for sector-specific regulation of
communications services as ECS have become an essential service in every person's life, crucial to
ensuring a well-functioning society and economy. Therefore sector-specific rules are still considered
necessary for sustainable competition, innovation, a healthy low concentration of providers' market
power and also to guarantee that consumers can reap the benefits of such competition. Several areas
were listed, where sector–specific regulation is still needed: retail Internet access services, numbering,
end-user protection, universal service obligations, roaming and downstream availability and
accessibility of a wide variety of audio-visual services etc. Nevertheless, several of those respondents
prefer horizontal to sector-specific regulation wherever possible. A few of them, however, oppose the
inclusion of OTTs within the scope of such rules, because there remain fundamental differences
between the telecoms market and the market for Internet applications and content, and applying the
same detailed sector-specific obligations would be a disproportionate burden for a highly dynamic
industry sector.
Regarding the revision of the current ECS definition, BEREC, several Member States, most
operator associations, most incumbents, some cable players, all user associations and some
broadcasters consider that the current definition of ECS should be reviewed owing to the increasing
uncertainty on the scope of the definition of ECS related to "conveyance of signals", the inconsistent
regulatory obligations for similar services and the convergence of communications services. Several
respondents emphasised that a future-proof definition needs to be end-user-centric, the key factor
being substitutability from a customer perspective. Those opposing revision of the definition, (some
Member States, OTTs, software and equipment vendors, cable operators, some broadcasters
and a few individuals), argue that the concept of ECS has proven itself and changes may create
regulatory, legal and investment uncertainty. According to some stakeholders, instead of including
OTT services in the definition of ECS, the current regulatory requirements on traditional electronic
communications providers should be loosened. In OTTs' view, if the definition is reviewed, the
difference between Information Society Services and telecoms networks should be maintained.
The majority of respondents (some Member States, operator associations, most incumbents and
vendors) are of the opinion that for consumers OTT services are a functional substitute for traditional
ECS. The minority of respondents (some Member States, a few operators, OTTs and consumer
and user associations) submit that OTT services are functionally different from ECS. The majority of
respondents (Member States, regulators, most incumbents, alternative operators, associations,
trade unions, vendors) are of the opinion that all functionally substitutable communications services
should fall under a new common definition, but have significantly varying positions on the types of
obligations that should apply to services falling within such a definition.
The minority of the respondents (several Member States, NRAs, some associations, broadcasters,
OTTs, a few cable and fixed players) suggest maintaining the "conveyance of signals" criterion in
the definition of ECS. For broadcasters that criterion helps in distinguishing telecommunications from
audio-visual services. However, the majority of respondents (several associations, most MNOs,
most incumbents and few software and equipment vendors) do not consider "conveyance of
signals" as a necessary criterion. Rather, the lack of clarity in the ECS definition, when assessing
whether services “consist wholly or mainly in the conveyance of signals”, opens the door to different
interpretations and inconsistencies. According to BEREC, it "is worthwhile to examine whether it is
still an appropriate distinguishing factor."
With regard to the elements of the ECS definition related to transmission services in networks used
for broadcasting, all broadcasters and their associations, alternative operators and their
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associations, many fixed and converged fixed/mobile operators, an equipment vendor and
private individuals advocate that these should continue to be considered as ECS. For broadcasters,
excluding transmission services from the definition would mean that they are omitted entirely from
the telecom framework, undermining important legal protections for broadcasting (e.g. transmission
obligations). For some respondents "transmission services in networks used for broadcasting" should
not be considered as ECS. They argue that in the light of the convergence of the legacy broadcasting
transmission services and internet media services (including broadcasting), the transmission of the
service is platform-based and no longer network-based and any reference to services provided on a
network has to be eliminated.
With regard to a possible differentiation between managed and best-effort services in the ECS
definition, the majority of respondents (incumbents and alternative operators and their associations,
vendors and broadcasters) prefer no differentiation between managed and best-effort services in the
ECS definition as such a differentiation would facilitate circumvention of the rules by opting for 'best
effort provision' free of obligations. As to the question whether sector-specific regulation should be
limited to Internet Access Service, there is almost no support for such reduction, with only a few
exceptions.
Regarding the application of sector-specific provisions (end-user and other) to the IAS, telecom
operators, industry associations and vendors agree that as a general rule only horizontal
competition and consumer law should apply to internet access service and that, if any sector-specific
provisions are needed, these should apply to all other digital services. Almost all national
authorities, user associations, OTTs, some broadcasters and IT service providers see a need for
further end-user rights in relation to IAS in addition to those included in the proposal for the Telecoms
Single Market Regulation, although in many cases these stakeholders do not provide detailed
arguments to explain this position.
On the issue of definition of communication services, a significant number of respondents
(incumbents and alternative operators) emphasise that in an "all IP" environment network
interconnection is to be distinguished from the interoperability of services as users would be tied to a
single connectivity provider but not to a single communications service provider any more.
Some respondents do not believe that there is a need to apply the existing, as well as any further end-
user rights, to communication services (some Member States, a large number of mobile, fixed, and
cable operators, and OTTs). The main argument put forward by them is that horizontal regulation
(consumer and data protection), together with competition-law tools, should suffice. Those who were
in favour of having end-user rights applicable to communication services are mostly Member States
and consumer protection bodies, while alternative operators suggested that full harmonisation is
needed for contractual information, transparency measures, contract duration, switching, and bundles.
Several associations, most broadcasters, a few incumbents and converged fixed/mobile players
consider that there are new sector-specific end-user protection issues that need to be addressed. Among
the areas listed are: bundling of contracts and their impact on switching; communications contracts
with subsidised equipment; continuity of service (telephone or internet) when switching; control of
consumption; contract termination in case of the tacit extension of contracts; rights of the end-users
when relocating; improved rules for end-users with disabilities, findability of public-interest content.
Finally, regulators and others indicated that some new end-user protection concerns can be
anticipated in relation to services which are substitutable to traditional ECS, including access to
emergency services, network resilience, cyber security and interoperability between different digital
services, , transparency, protection of data confidentiality and privacy.
Trade unions, consumer organisations, vendors and directory services expressed support for
specific rules with regard to voice services for end-users. These contributions highlighted the
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importance of availability (call to emergency services, functionality during power outages and
disasters) and the importance of voice quality as a distinctive characteristic. Some mobile operators
considered voice-specific requirements still relevant, noting the need to ensure interconnection and
access to emergency services, while others noted the importance of requirements such as data
retention/lawful intercept. In general most incumbent operators would prefer horizontal regulation,
while maintaining the possibility of a few specific requirements (such as emergency services) and
consumer information was noted as safeguard measure. Directory service providers noted a risk that
without a specific requirement (Art. 25 USD), operators might not provide them with subscriber
information on a fair, objective, cost-oriented and non-discriminatory basis.
Half of the respondents (some Member States, broadcasters, a few telecom operators and
consumer protection bodies) are of the view that providers of communication services as newly to
be defined should potentially be subject to an SMP-based regulatory regime, if they can limit
competition, based on a market analysis and consistent with the non-discrimination principle. Those
disagreeing (some Member States, associations of incumbents, alternative and mobile operators,
vendors and OTTs) highlighted the existing high level of competition, market dynamics and
diversification of providers, and stated that competition law and horizontal consumer protection offer
sufficient protection in this regard.
There is a majority support ranging from national authorities to mobile operators and incumbents,
to extend the scope of the access obligations to emergency services to best-effort services. At the
same time, it is recognized by all stakeholders that minimum quality of service should be ensured for
emergency communications and best-effort communication cannot provide the end-to-end quality that
managed services can. Some operators support imposition of a general obligation to give access to
emergency services, adapted to the quality of service requirements that each type of services
(managed vs. best-effort) can provide.
Regarding numbering resources and assigning numbers directly to M2M users, most MNOs,
including smaller ones, highlight that this solution raises many implementation and security issues
and risks of fraud, could exhaust national numbers, would endanger interoperability and end-to-end
connectivity. There is a clear consensus that to cope with the numbering needs of M2M in the future, a
clear framework for extra-territorial use of numbers is necessary to ensure sufficient numbering
resources. A majority of respondents see a demand for over-the-air provisioning of SIM cards for M2M
communications, and to a lesser extent for end-users' own devices later on. However, the idea of
regulatory promotion of over-the-air provisioning is not supported, with the argument that it should be
up to the markets to decide on specific technological options.
While there is a majority view that transmission obligations imposed on electronic network operators
(must carry rules) and rules related to electronic programme guides should be adapted to new market
and technological realities, there is sharp disagreement as to how such adaptation should be conceived.
Extension of the current rules is supported by some Member States and most broadcasters, whereas
most telecom operators are in favour of reducing the scope of the rules. Public service broadcasters
consider that the future scope of rules should extend to interactive and non-linear services, should also
cover hybrid TV signalling and should apply on a technologically neutral basis to all distributors of
audio-visual content, not only to ECNs. Telecom operators call for a level playing field between
broadcasters and online platforms and call for improving access to content rights. Some cable and
telecom operators call for complete removal of must carry obligations or at least to limit them to the
main/most essential general interest channels. Commercial broadcasters, one telecom operator and a
citizen consider that the current provisions are adequate.
Media regulators and some telecom and cable operators consider that the presentation and the order
on navigation interfaces is crucial for user choices of audio-visual content and that ensuring non-
discrimination of general interest content is sufficient. Public service broadcasters consider that
Member States should be competent to ensure 'findability' of general interest content on user
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interfaces of significant networks and audio-visual platforms and that regulated EPGs should be
included in new TV sets. A pay-tv provider considers that prominence of content could also be
improved by better referencing/tagging of national and European offers. Several telecom operators
point to the need for broadcasters to be obliged to make real-time signalling available, in order for
EPGs to work satisfactorily.
6.2.2.4 The universal service regime
6.2.2.4.1 Evaluation of the current rules on universal service
The majority of Member States and regulators agree that universal service has been effective and
efficient in safeguarding end users from the risk of social exclusion, while most of the operators see
little or no impact and efficiency at all. Proponents of universal service argue that the availability of
certain basic services increased and that services became affordable and accessible to all. Opponents
claim that (1) the universal service regime has become outdated; (2) the high level of competition for
fixed and mobile services ensures the affordability of tariffs and not the regulatory obligation; (3) the
calculation of net costs have been fraught with controversy, challenges, and appeals; and (4) the
overall administrative burden and regulatory uncertainty have been very high, for a regime which has
not produced major benefits.
As for coherency with other rules, the majority of Member States agree that universal service has
been coherent with other provisions of the framework and state aid, while most of the operators see
little or no coherence at all.
The vast majority of operators consider that this review should be the opportunity to redefine or
completely reconsider the universal service regime (including its financing), with many claiming that
it has become obsolete. Member States mostly claim the need to maintain a universal service
scheme, with flexibility at Member State level on funding and on broadband. Regulators support
maintaining the status quo.
6.2.2.4.2 Review of the universal service rules
With regard to the scope of universal service most respondents consider that the current scope is
outdated because it was shaped in a context of market liberalisation and since then market conditions
have drastically evolved, with more competition and choice available to consumers.
There is a general acceptance among the respondents to exclude public payphones and comprehensive
directories and directory enquiry services from the scope. Due to availability of mobile telephony and
internet, there is no usage of or demand for public pay phones. Regulators acknowledge a decreasing
demand/usage for public pay phones but argue that Member States should retain flexibility to include
pay phones within the scope. As for directories, the availability of the same information through the
internet is a further competitive alternative. However, some directory and local search providers
underline that access to data risks being refused in the future, absent a universal service obligation
guaranteeing access to directory enquiry services.
Concerning the provision of telephony services at a fixed location, operators mostly agree that this
inclusion in the universal service scope is no longer necessary, because various types of players are
providing voice services (mobile, VoIP) on a competitive basis while regulators and Member States
mostly claim the opposite.
With regard to the inclusion of broadband within the scope of universal service, while most
operators and their associations have no doubts about the positive impact of broadband on social
and economic life, they claim that USO is not the right instrument to foster broadband deployment. In
any case, if broadband were to be included in the US regime, it would have to be revised substantially.
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Respondents supporting both in and out options (mostly Member States and regulators) submit that
Member States should retain the flexibility to make the choice at national level.
Most operators and their associations, several Member States and regulators consider that
broadband under universal service bears high risks of market distortions and cost inefficiencies. In
particular, industry funding is considered too distortive. The risk of lowering incentives to invest,
crowding-out effects, delays in network expansion and unpredictable large financial transfers between
competitors (if industry funding is used) are considerable. Instead, an investment-friendly regulatory
framework, lowering of deployment costs, demand stimulation, and well-designed public subsidy
schemes targeted at cases of clear market failure (evaluated by an impact assessment) should be used
for fostering broadband instead of USO. Many also highlight the need to promote competition and
commercial investment via regulatory tools. The use of such other public policy measures should be
based on timeliness (so as not to come in too early to disrupt or crowd out private investments),
proportionality, non-discrimination and technological neutrality.
As to how broadband should be defined if included: those favouring the speed aspect (consumer
groups, several Member States, media players, operators) consider it a simpler and more neutral
parameter. Media players argue for sufficient speeds to deliver media content. Those favouring the
criterion of the use of certain types of services (ECS/N associations) generally feel that it is more
flexible, able to evolve with time, more technologically neutral and has a more direct link to social
inclusion. Some players are wary of setting the speeds based on the average speeds used by the
majority of the population, so that the speeds are not set at a high level. With regard to the list of
essential services, most of the respondents agree that the list of services should be based on what is
necessary for social (digital) inclusion, but they have varying views on what set services this would
entail.
With regard to financing universal service, most operators and associations agree that the most
appropriate and equitable way of financing the universal service, in particular in light of the
possibility to include broadband within the universal service, would be through public funds.
Broadband for all should be supported through general taxation since it is a general public interest
goal that benefits society as a whole. The scope of universal service should be defined narrowly,
representing only a safety net in a market-driven sector. Many operators state that industry funding,
especially when limited to operators, is disproportionate. The use of public funds would have the
advantage of limiting the risk of setting too high targets for the universal service and is the only way
of ensuring that Member States properly weigh the needs against costs because of the need of
reducing public expenditure and maximising public economic welfare. The high uncertainty of the
right to compensation in the present universal service system and the difficult enforcement that led to
numerous disputes/litigations are a considerable weakness to be eliminated.
Several actors considered a combination of public funding and industry funding acceptable with the
majority of respondents however specifying that providers of on-line content, applications and
services should contribute, given they are the biggest beneficiaries of access. Broadcasters warned
against the redirection of resources from audio-visual content, innovative online services and digital
skills activities to the financing of infrastructure, since availability of such content is an important
determinant for the development of broadband networks.
According to regulators, the current funding mechanisms for USO remain relevant and that
flexibility should be retained, allowing Member States to choose the appropriate mechanism.
Most market actors and regulators agree that universal service is not the right instrument to foster
very high-capacity connectivity for public places. Market forces deliver these services and other
public funding policies should be used because the service is of public interest. Only a small minority
of respondents (satellite operators) agree that universal service should play a future role in to help
realise public interest objectives, but this should be financed by public funds.
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Most market actors, Member States and consumer organisations submit that obligations related to
disabled end-users should be incorporated in horizontal law. Respondents stress that any obligations
should apply equally to all market players. Through the broader implementation of the provisions of
Article 23a of the Universal Service Directive, a wider choice of services and tariffs for disabled users
could be achieved. According to regulators, specific provisions for disabled end users are already
included in the national regulatory frameworks of many Member States. Measures in the Directives
should continue to be flexible enough to adapt to the situation of each country.
6.2.2.5 Institutional set-up and governance
6.2.2.5.1 Evaluation of the current institutional set up and governance structure
The perception as regards NRAs' independence is generally positive, in particular those safeguards
applicable to independent NRAs. This perception is supported by different kinds of stakeholders, in
particular public and private, including operators (mostly incumbents as well as some alternative
operators and trade associations).
Just over half of the respondents consider that there is generally a sufficient degree of coherence in the
application of the regulatory framework by the various institutional players (NRAs, BEREC, the
European Commission). This idea was supported by public authorities, especially regulators and
approximately half of the operators. Some operators propose to reduce the overlapping competences
at EU and national level and to reduce and prioritise the objectives of the framework.
BEREC's role is positively perceived in relation to the Art.7 procedure, roaming, net neutrality, M2M
communications and advice to EU Institutions. While more than half of respondents (including
national regulators) considered that BEREC has achieved its main objective, a group of incumbent
operators, on the contrary, considered that BEREC has not achieved its main objective, arguing that
flexibility is overall favoured compared to harmonisation/consistency of application and that BEREC
has a tendency to support over-regulation. Some operators stated that BEREC should be constituted
as a supervisory authority independent from national interests or that it should be a proper EU
regulatory authority with decision-making powers.
Some respondents submit that BEREC’s current institutional set-up results in it opting for greater
flexibility at national level or the lowest common denominator instead of focusing on a more
consistent or harmonised approach for the single market, and therefore, BEREC's Positions and
Guidelines are sometimes just descriptive documents and not a collective commitment or a
development of best practice guidelines. Suggested proposals for addressing this include: allowing
BEREC to make binding decisions, appointing board members for four years, establishing a Director
appointed by the Board, more adequate funding, reassessment of the location of the BEREC Office,
more consistent launch of consultations, longer consultation periods and introducing a two-stage
consultation process on key policy matters. There were also calls for a stronger advisory role to the
Commission, more pro-activeness, and improved transparency and stakeholders' involvement.
As regards consistency of market regulation, just over half of the respondents answered that the
Art.7/7a process had been effective in achieving greater regulatory consistency, while a third were of
the opinion that this process had little or no effect on consistency. In the first category of positive
responses, there were many alternative operators, FTTH-operators and some incumbents and
MVNOs. Also those regulators and Member States who responded were largely positive. With
regards to areas which could be improved, many respondents who were generally positive suggested
that the entire process could be streamlined, made less burdensome for all stakeholders and that the
Commission's role vis-à-vis remedies (under Art.7a) should be strengthened, either by a veto power,
or by a so-called double-lock veto (i.e. regulators would be required to withdraw the draft regulatory
measures if BEREC agrees with the Commission's serious doubts).
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Those who disagree, are mainly incumbents as well as some individual respondents. The main
arguments brought forward for this view differ widely. On one hand, it is criticised that the current
process does not lead to enough consistency. On the other hand, some respondents complained that
the current system attempts a 'one-size-fits-all' approach not taking sufficient account of the need for
different solutions in different Member States, i.e. not giving regulators enough discretion.
Regulators challenged the need to ensure further regulatory consistency and the link between the lack
of consistency and the current institutional set-up. Regulators state that access markets are
intrinsically local and the nature of competition is not homogeneous either for supply or demand
reasons.
As regards the current spectrum governance, the technical side of harmonisation is seen by most
respondents to be working well with its aim of harmonising the least restrictive conditions. There is
criticism of the present system's capability to bring the actual services into being in a coordinated and
timely manner.
There is significant support for the role of RSPG in assisting and advising the Commission on radio
spectrum policy issues, with some respondents promoting it for a status similar to BEREC. The
interplay between national experts and the European format is seen to work well. In particular,
vendors would like the RSPG deliberations to be more open to industry participation.
6.2.2.5.2 Review of the institutional set-up and governance structure
Institutional set-up for market regulation
Almost half of the respondents agree that the current institutional set-up at EU level should be revised
in order better to ensure legal certainty and accountability. Respondents call for i) a clearer division of
powers between the different institutions (to avoid overlapping), ii) making sure that institutions are
accountable for their decisions (both politically and legally), iii) a high level of transparency in
decision-making (improved stakeholders' involvement). The arguments brought forward for change,
however, differed considerably. On the one hand, a group of mainly incumbent operators proposed
more discretion for NRAs with a reduced role of the Commission (or BEREC), highlighting the need
for taking account of national circumstances. On the other hand, a number of voices have called either
for an increased role of the Commission to ensure consistency (through a veto for remedies, for
example), or even the establishment of a pan-EU regulator. The regulatory community was of the
view that there are benefits associated with all NRAs having a common toolkit and flexibility to
determine which tools to use, in particular in view of the increasing complexity of the sector.
Amongst those who favoured a revision of the current institutional set-up, proposals differed from
BEREC adopting a limited advisory or benchmarking role (giving opinions and giving assistance to
NRAs where needed, providing timely technical guidance, etc.) to turning it into an EU regulatory
authority with proper decision-making power. Some respondents called for strengthening BEREC's
role within the Art.7 procedure and also for improving coordination rather than implementing
institutional changes. Some incumbents and alternative operators submit that BEREC in its current
form has shown a limited ability to act strategically and in the interest of EU competitiveness and, in
particular, for the development of the single market. Further it was alleged that it does not contribute
to the objectives of the framework in a satisfactory manner. Most respondents (all types of operators
and public bodies) considered that the current EU consultation process can be streamlined. However,
in the detail as to how this could be done the respondents vary considerably. Whilst some respondents
call for more NRA discretion (and a less prominent role for the Commission), others ask for full
harmonisation measures, at a minimum regarding the termination markets. In addition, a shift from
ex-ante to ex-post control is proposed, rendering an Art.7 procedure less relevant. Among those who
disagree (largely alternative operators), most argue that the current process is well-balanced and has
proved effective.
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Some incumbents advocate for dividing competence between EU and national levels, making
BEREC redundant, arguing that stronger compliance or a more binding nature of BEREC guidance
would not be appropriate. On the contrary, some alternative operators supported a stronger role of
BEREC within the Art.7 procedure and the strengthening of its influence on the scope of remedies in
case of a veto of the Commission. The sentiment as regards whether BEREC should be given more
executive tasks or binding powers is generally negative (including the majority of operators as well
as public authorities). Some respondents are concerned by the lack of accountability of BEREC
because it has a 'de facto' significant influence on national regulatory decisions and decisions by the
Commission.
The majority of the respondents disagreed with the establishment of an EU Agency with regulatory
decision-making powers for all the different areas (market regulation, EU spectrum management, end-
user protection and other). Some respondents, mainly operators, recommended that an EU agency
should be responsible for services of the EU single market or for issues such as consumer protection,
content, service platforms, whilst NRAs should continue dealing with local issues (e.g. network
access). As regards spectrum and numbering there was a call for more harmonisation, but there were
divergent positions as to whether these issues should be dealt with by an EU agency.
The regulatory community expressed its view against further harmonisation and indicated that
differences in regulatory approaches can be beneficial where they allow experimentation and
innovation (leading to the discovery of new best practices). Respondents were divided as to whether a
common EU approach would add value in addressing the differences in the regulatory approach
chosen by NRAs for individual markets in similar circumstances. The regulatory community also
notes that, in the wider digital ecosystem, it is particularly important to adopt a “light touch”
regulatory approach so as not to undermine investment and innovation. In principle, there could be
more room for co-regulation and self-regulation mechanisms. According to regulators, while this
kind of innovative and “softer” approach to regulation can be effective, where it is pursued it will be
important that its details are defined “bottom-up”, through the direct involvement of the affected
stakeholders.
Consumer associations called for caution and considered that co-regulation and self-regulation
should only be used on very specific issues and under strict conditions, such as: strong independent
governance of the self-regulatory scheme, oversight and enforcement across the sector, and the
presence of effective sanctions in cases of non-compliance.
As regards BEREC and the BEREC Office, almost half of the respondents had identified provisions in
the framework which in their opinion should be revised. Proposals put forward include longer or
extendable mandates for the BEREC Chair, relocation of the BEREC Office and definition of the role
of BEREC in drafting Recommendations. Some national regulators considered that the governance
structure is satisfactory but suggested a number of proposals for the mandate (consultation by the
Commission on legislative initiatives, new responsibilities as regards connectivity objectives, more
involvement in the area of spectrum through the exchange of best practices in the design of auctions
and beauty contests and monitoring of coverage and QoS), deliverables (binding acts in limited
circumstances, reinforced data collection) and functioning (simplification of the role of the
Management Committee, establishment of an office in Brussels).
Consumer and civil society organisations referred to the need for better collaboration of BEREC
with consumer organisations, civil society organisations and individual operators in addition to
operators' associations as well as with other bodies/agencies such as ERGA and ENISA. The
regulatory community has also identified the need to strengthen the cooperation with other networks
of regulators established in adjacent economic sectors.
NRA status and competences
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There is overall support for strengthening NRAs' independence, in particular by ensuring i) complete
separation between ownership of providers and regulatory tasks, ii) political independence in
particular in cases of restructuring, iii) control of adequate human and financial resources and iv) no
political appointment of Board members. Alternative operators stated that NRAs' independence may
also be affected when sector-specific NRAs are merged with other authorities. Respondents favoured
that the powers of NRAs are extended to areas such as State Aid, consumer protection and
coordination of spectrum policies. The regulatory community stressed the need of aligning the
minimum competences (including end-user protection) of NRAs to those of BEREC.
A clear majority of respondents considered that NRAs should have a role in mapping areas of
investment deficit or infrastructure presence because they are vested with the necessary powers to
access relevant information and have the necessary expertise, as well as independence. Those opposed
to such a role contested as a matter of principle any public interference with investment. There is
strong support to a revision of the framework to better accommodate the role of NRAs regarding state
aid, notably i) identification of target areas, ii) setting access price and access obligations, iii) ensuring
better coherence between state aid and ex-ante regulation and iv) resolution of disputes. A few
respondents propose that the role of NRAs regarding mapping of infrastructures or setting target areas
must be limited to provide technical assistance to the relevant competent authorities or to being
consulted.
Most operators indicated the need to revise several aspects of the general authorisation conditions,
strictly interlinked with some general substantive choices on the scope and extent of regulation on
ECNS (level playing field), in order not to hinder the cross-border provision of electronic
communications services and networks. Several operators suggested a specific lighter regime for
some categories of services (best efforts OTT, business services, small cross-border providers) in
order to reduce cross-border obstacles. Other suggestions included the harmonisation of Mobile
Network Codes conditions, reducing the scope of national discretion in setting the conditions attached
to rights of use, and a common notification template.
The principle according to which established and non-established operators should be subject to the
same rules in the country of provision was stressed by several respondents. The extension of
notification requirements to OTTs as well as the harmonisation of a notification template and
administrative simplification (online submission, single language version, one-stop-shop,
harmonisation of categories of services) were suggested, in particular by business users and cross-
border providers.
On numbering, most respondents do not consider it necessary to allocate more executive powers to
BEREC, in particular since numbering is a national competence and existing harmonisation at
CEPT/ITU/COCOM level seems to be working. On the contrary, some operators did not exclude the
power to grant pan-EU numbers for specific services (M2M).
Institutional set-up for spectrum management
With regard to spectrum governance, in order to serve the future wireless connectivity needs of the
EU, a common EU approach to governing spectrum access was welcomed by respondents in order to
enable technologies to be used seamlessly, but respect for spectrum as a national asset is required.
Delays in availability of spectrum and fragmentation between conditions of use in different Member
Stated were noted. Some respondents promoted a stronger role of the Commission. Some respondents
disagreed and stressed the national character of spectrum policy.
As regards spectrum management, the regulatory community encompassing both BEREC and
RSPG was of the view that the EU already benefits from substantial coordination and harmonisation
processes, and no further EU-level coordination procedures are necessary. However, RSPG showed
openness to a peer-review mechanism as regards spectrum assignment.
223
As regards the need for binding guidance on certain aspects of assignment procedures and conditions,
there was a split between regulators and (mainly) broadcasters that preferred a national approach
and telecoms operators that supported a certain level of binding guidance. Most respondents
supported the Commission issuing Recommendations (Art.19 FD) on assignment conditions and/or
procedural aspects, often qualifying it with basing any Recommendation on an RSPG/RSC process.
The majority of respondents supported the idea of establishing a mechanism similar to that set by
Article 4 of the Radio Spectrum Decision for certain key assignment parameters, at times pointing out
the need to choose between this process and the one under Art.19 FD.
There is little demand for mandatory pan-EU or regional assignments. Most respondents questioned
the need for EU-wide licences. A preponderance of answers viewed assignment as a national matter.
Any wider geographical scope should involve the Member States with some respondents viewing it as
a Council matter.
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6.3 ANNEX 3 - Discarded options
The following annex presents the options discarded that were not assessed in terms of impacts and
provides a rationale of the reason why they were not retained. The topics included below are further
investigated in the IA support study, SMART 2015/0005.
6.3.1 Access regulation
 Full deregulation of telecoms networks; Full deregulation of telecoms networks similar to the
system that applied following market liberalisation in New Zealand and now applies in the US.
This option was considered in light of the fact that when it was first introduced, it was envisaged
that the framework would enable a gradual roll-back of regulation with eventual reliance on
competition law. However, a full deregulation was discarded due to the disruption it would bring
to the industry (although option 4 describes a sunset-clause scenario).
 Regulation of non-collusive oligopolies on the basis of a unilateral effects test similar to the
one used under the European Merger control regulation. This approach has been considered
by some NRAs and new entrants in the market as an alternative to the finding of joint SMP, or
‘joint dominance’, as a basis for imposing regulatory remedies to redress market failures on
oligopolistic markets. It should be kept in mind that oligopolistic market structures in network
industries are likely, and in certain cases efficient, market outcomes. They are also the result of
the market liberalisation over the past twenty years. It is thus far not clear on what economic
grounds such an additional concept could be identified, and the merger-specific concept of
unilateral effects is not adequate. BEREC has raised this issue, but has recognised that the
underlying economic assessment approach is not yet clear. As criteria for such a new intervention
threshold are difficult to establish and therefore the risk of overregulation and further regulatory
fragmentation increases, it does not seem appropriate to increase the regulatory burden by
deviating from the current significant market power test.
Any competition concerns that may arise could be alleviated by facilitating alternative
infrastructure roll-out through symmetric access for strictly non-replicable assets and by
providing long enough transitional periods when regulation is removed. Furthermore, the future
revision of the current guidelines on market analysis and the assessment of significant
market power (SMP guidelines) is intended to bring more clarity on the criteria for the finding
of joint dominance, based on the experience with the Article 7 case practice and relevant
jurisprudence, which would assist NRAs to identify joint dominance. For this purpose, the present
SMP Guidelines need to be reviewed in line with the developments of EU law, with the aim of
further clarifying the tools for the correct application of this concept in the electronic
communications sector.
The experience in applying the principle of collective dominance by NRAs is limited. Since 2002,
less than ten cases proposing a joint SMP finding have been notified to the Commission (out of
more than 1,800 notifications in total), primarily in mobile origination markets (Market 15 of the
2003 Recommendation on Relevant Markets). The reasons for this could be manifold and will be
explored when SMP guidelines will be reviewed.
 Mandatory structural separation of former monopolies; this option would entail a
mandatory breakdown of the incumbent telecom operator. Under this option a structurally
separate operator supplies dark fibre on a wholesale –only basis and cannot compete on services.
The ownership of the two operators would then be distinct. The model would follow the
225
experiences being developed in New Zealand346
, Australia or Singapore. The current regulatory
framework already contains a procedure for exceptional measures, potentially beyond voluntary
separation. Thus, on the basis of the Access Directive, structural separation is a remedy which is
already available to NRAs. The concrete legal basis, would be Art. 8(3) for forms of separation
going beyond the functional separation foreseen in Art. 13a. Although this measure has been
advocated by a number of competitive and fibre operators in the public consultation, a mandatory
structural separation would impinge on the existing ownership rights and it was decided not to
pursue this option as a central part of the EU-level policy prescriptions. The proportionality of
such a measure would be put into question by the fact that voluntary separation is already
promoted by the measures described in chapter 4.
 Mandatory copper switch off. This option was discussed because competitive pressure from
legacy copper networks can be considered as one of the barriers to NGA deployment. Some MS
have trialled copper switch-off and operators have already announced the de-commissioning of
local exchanges and copper network switch-off in order transfer their customers base to their
NGA platform only. To date, however, no copper switch-off was mandated in any MS. Network
owners strongly opposed it in the public consultation the mandatory nature of such a move which
would cause disruption in network management. A mandatory copper switch-off was judged as
not feasible for proportionality and legal reasons, but a clearer and more predicable mechanism
can be provided to the incumbents who decide to switch off copper network, as envisaged under
option 3 for access.
 Explicitly reducing legacy copper access charges with the aim of incentivising incumbents to
deploy FTTH/B and switch-off the copper network. This strategy to accelerate the deployment of
fibre by regulated incumbents was proposed by alternative operators during the course of the
development of the 2013 Recommendation on cost methodologies and non-discrimination and not
retained.347 This option was rejected on the basis that it could make copper-based access relatively
more attractive compared with fibre-based access (to both access-seekers and consumers), and
therefore impede investment in and the migration to higher speed offers, which would ultimately
provide better quality, social and economic benefits.
 Remove the special competences for the Commission to recommend and ultimately mandate
ECNS standards and to rely fully on the mechanisms established for general ICT
standardisation. The instruments provided by ECNS legislation have been used very carefully by
the Commission since the last amendment of the Framework Directive in 2009. There have been
no changes to the list of voluntary standards and there have been no standards mandated. The
Commission has only issued a mandate to ETSI in the area of emergency call location. It had
therefore to be considered to remove the special competences of the Commission related to ECNS
standards. However a November 2011 study conducted for the EC 348
identified substantial
benefits from greater standardisation of solutions within the EU. While this could in principle be
achieved under the mechanisms established for general ICT standardisation349
, the possibility to
encourage and ultimately mandate the use of ECNS standards could help fostering the process.
The ongoing work in the area of emergency call location might also benefit from the possibility –
once the work is finished and a standard has been established - to encourage its use. Furthermore,
the second impact assessment interim report by WIK/Ecorys350
, explains that voluntary
standardisation may not be sufficient in the area of wholesale products used for business access
products, in particular when provided cross-border. It would therefore appear not to be
346
In Australia and New Zealand structural separation has been imposed in combination with massive public investment.
347
A discussion of this point can be found in section 6.1.2.2. of the IA accompanying that recommendation
http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2013/swd_2013_0329_en.pdf
348
Ecorys/TNO/TU Delft (2011) ‘Steps towards a truly internal market for electronic communications’
https://ec.europa.eu/digital-agenda/en/news/steps-towards-truly-internal-market
349
Regulation 1025/2012 EC on European Standardisation, see http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:316:0012:0033:EN:PDF
350
Annexed to this document, p35, the importance of standardisation in this area is also highlighted on p40 and p97.
226
appropriate to remove the special Commission competences in the area of ECNS standards.
Moreover, technical adaptations to the current provisions can be used to ensure that BEREC
expertise can be relied upon when the Commission issues mandates to European standardisation
organisations (ESOs) and to clarify the details of the procedure which would apply before the
Commission makes the use of a specific ECNS standard mandatory.
6.3.2 Spectrum
Several options have been envisaged or have been suggested by a few respondents to the public
consultation but will not be further considered at this stage .
 Full harmonisation, in the directive on all aspects of spectrum assignment, and especially of the
method to determine and/or collect spectrum fees; fee determination and collection has always
been considered as a national regalian competence. Therefore in regard to these elements
coordination should be limited to the main criteria used by MS when determining and collecting
fees and avoid revenue maximisation being used as the primary objective and criterion.
Implementing measures would be more suitable to enhance coordination in the definition of these
and other key spectrum assignments elements.
 Creation of a single EU spectrum license which would be granted by an EU body be it the
Commission or an agency. Besides the fact that this would only be justified in case of truly pan-
European services relying on spectrum (which to date have not emerged except for satellites), it
would be very difficult to create from a legal point of view and the principle has proven to be
politically unacceptable; even the implementation of a coordinated solution which required
similar national licenses to be granted to commonly selected applicants by the MS themselves has
been very difficult to put in place (see MSS case).
 Grant delegated powers to the Commission to further define harmonised conditions for
assignment of spectrum: as these are national competence, MS would possibly be less keen to
accept such a procedure and would possibly prefer the use of implementing decisions through
comitology. Moreover delegated acts are not always suitable from a substance point of view.
6.3.3 Universal Service
Connectivity to a network at all locations: This option is to enhance the focus of universal service
on individual end- users and to provide connectivity to a network in all locations (by contrast to the
current provision at a fixed location, which may be restricted to user’s primary location or residence).
This option is discarded because the expected deployment cost to deliver connectivity at all locations
were much higher than the cost to deliver connectivity at the end-user's primary location or residence.
The universal service cost needs to be kept at what is necessary to achieve a minimum safety net, with
other tools being prioritised to enlarge both fixed and mobile coverage.
 Terminate the universal service regime: Taking into account the current social, economic and
technological developments, this option suggests terminating universal service completely. This
option could be accompanied by the introduction of horizontal accessibility obligations on all
providers to ensure equivalence of access and choice for disabled users. This option is discarded
because universal service is still considered a valid concept by most stakeholders (i.e. MS, NRAs,
consumer organisations and most of industry players) and there are identifiable affordability needs
for the most vulnerable sections of the population even under competitive market conditions, which
can be met at limited cost.
 Provision of very high-capacity broadband networks in public areas and places of specific
public interest as an addition to Options 3 and 4: As an additional measure to Options 3-4, it has
been suggested providing very high-capacity broadband networks in public areas and places of
specific public interest such as schools, universities, libraries, education centres, digital community
centres, research centres, health care centres and town halls. Such provision under USO would
apply when private and other public investments do not deliver, and would be financed from public
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funds due to its general social benefits. This option is discarded because there are other EU and
national policies supporting NGA deployment in such specific places (for instance, ERDF,
GÉANT) and because USO cannot be considered a suitable instrument to foster high capacity
connectivity by comparison to private investment, PPP or other public policy instruments (e.g.
public procurement for public-service needs).
 Changing the national financing regime in addition to other financing options under options
3-4: In addition to other approaches, this option suggests establishing a system administered at EU
level which would permit contributions to be distributed across MS. This would allow to bridge
digital divide between less developed and more developed broadband areas. The providers
established in one MS only may be targeted more effectively. This option is discarded because it
requires significant changes to the institutional setup (i.e. delegating powers to the existing entity or
creation of a new entity for administration of the financial scheme at the EU level) that might be
difficult to achieve. Also, the suggested processing of the financing requests will result in a heavy
administrative burden.
 Changing the financing regime in addition to other financing options under Options 3-4 by
setting national user levies: In addition to other approaches, this option suggests setting national
user levies via direct surcharge on user invoice. This could also be another option for a social
solidarity scheme within the context and rationale of universal service where broadband were to be
included in universal service. While this approach should be relatively simple to manage, any
approach that targets subscribers directly elevates the retail price and risks both undercharging and
overcharging and impeding broader digital take-up.
6.3.4 Services and end-user protection options
6.3.4.1 Services
 No sector-specific regulation for services in the future: This option would consist in abolishing
provisions related to services from the Regulatory Framework. As a consequence of this measure,
there would not exist any sector-specific consumer protection that is not desirable given the highly
technical nature of telecommunications services. General consumer protection rules would not
suffice to protect consumers sufficiently in all respects.
6.3.4.2 Numbering
 Adapting the EU framework on numbering to address the competition issue on the M2M
market, and creating (E.164 and E.212) European numbering ranges to promote a single
market for M2M: This option would complement the option 3 under numbering. A European
numbering solution could provide the additional numbering resources necessary for M2M in
Europe, with M2M-adapted and common requirements, and a country-agnostic use within Europe
adapted to cross-border operating M2M applications. However past experience with ETNS and the
results of the public consultation did not reveal a preference for a European numbering range.
Therefore this option is not pursued at this stage. However, building on the current provisions of
the framework with regard to further harmonisation of specific numbers or numbering ranges a
mechanism is foreseen which allows for introducing a common EU-level numbering space in the
future in case extra-territorial use of national numbering resources is not sufficient to meet the
increasing demand.
6.3.4.3 Must carry and findability
 Extending the scope of must carry obligations to OTT services. This option would extend
the scope of operators on which must carry obligations could be imposed to OTT providers.
In case broadcasters, and more generally any content provider would provide their content via
OTT services, net neutrality provisions (in particular Art 3(1) and 3(3) of Regulation (EU)
2015/2120) ensure that broadcasters as end users of Internet access services can distribute
228
their content to their viewers without discrimination. It is therefore not necessary to extend
the potential scope of must carry rules to OTT services.
 Extending the scope of EPG obligations and introduce regulatory safeguards to improve
findability. This option would extend the scope of existing EPG access and presentational
obligations by modifying the definition of an EPG, which could include services and facilities
providing access to on-demand content and recommendation engines. It would be envisaged
to define at EU level the scope of possible measures under national law. Online viewing will
continue to grow and larger PSBs will have little difficulty in finding a prominent place in
app stores as well as on equipment installed at consumer premises or hand-held equipment.
Regional and local PSB will have more difficulty in this respect. Cooperation with larger
PSBs to carry niche content in their apps (possibly imposed by national governments) is a
possible solution. In addition, niche content providers can develop alternative routes to gain
exposure via social media strategies. Extending EPG obligations would not impose a great
additional burden on OTT platforms as many of the essential platforms (like app stores and
streaming platforms like YouTube and Daily Motion) include content of public interest in
their current navigation facilities anyway. MS have already the possibility under national
legislation to introduce prominence obligations on online service providers.351
So far, MS
have not made use of this possibility and the public consultation on the ECNS review has not
revealed any concrete concepts how such obligations could be conceived.
The considerations outlined above (platforms already provide navigation facilities + lack of action at
national level) put into question whether such obligations would be necessary and could achieve their
intended purpose. It would therefore appear to be premature to define at EU level the scope of
possible measures under national law and the option has therefore been discarded at an early stage of
the analysis.
6.3.5 Institutional governance
 Commission powers to regulate markets directly
This option would mean the transfer of powers from national level (NRAs) to EU level
(Commission). This option was discarded at an early stage as, even though it would likely serve to
increase consistency, it does not meet political feasibility, the subsidiarity requirements and the need
to build some flexibility into the system to efficiently ensure that national circumstances can be
adequately addressed and taken into account.
 Not having an EU agency at all: substituting the BEREC Office by secretarial support functions to
the Board of regulators to be provided by the Commission
This option, which is currently used for other EU bodies --- COCOM, RSPG or ERPG – could help in
avoiding the application of the detailed set of rules that applies to all EU agencies (financial,
staff/implementing rules, procurement, reporting, etc.) to a small organisation such as the BEREC
Office. However, it was discarded as these difficulties could also be overcome by the option of
establishing an EU agency carrying out certain regulatory tasks (not only a support function) with the
additional benefit of ensuring more autonomy.
Moreover, the political feasibility of this option is not guaranteed as the European Parliament in its
DSM report has called the Commission to ensure that a more efficient institutional framework is in
place by strengthening the role, capacity and decisions of BEREC in order to achieve consistent
application of the regulatory framework. In particular, the need to improve the financial and human
resources and further enhance the governance structure of BEREC was highlighted.
351
See Commission Staff working document AVMSD impact assessment, p.52
229
 Merging BEREC with the European Network and Information Security Agency (ENISA)
In 2007 the Commission proposed the establishment of a new agency building on the telecoms
advisory group ERG and taking over the functions carried out at the time by ENISA. The option of
following a similar approach with the current proposal, in particular in view of the discussions of the
Inter-Institutional Working Group on decentralised agencies' resources352
, was considered. There are,
however, several reasons which would not make it a feasible option at this stage, in particular the fact
the two bodies have become in the meantime well established organisations with increasingly growing
mandates (see e.g. Regulation (EU) 2015/2120 and current proposal for BEREC tasks and the tasks
assigned to ENISA, which has time definite mandate, in the Directive 2016/1148/EU on security of
network and information systems) which are not overlapping. Moreover, the nature of the tasks that
BEREC and ENISA would carry out are rather different in terms of the intensity of human and
financial resources needed and the type of relationship needed with stakeholders (ENISA counts with
a Permanent Stakeholders Group). Therefore, only minimum synergies (in the area of administrative
and budgetary matters, not specifically related to ENISA) could be expected to be derived from a
merger scenario.
Although the two agencies fall under the remit of DG CONECT and could be considered by some that
the tasks of BEREC and ENISA are related, contents-wise the two domains of cyber-security and
telecoms are different. Telecoms is an important infrastructure but ENISA deals with any network
infrastructure (not only the public ones that fall within BEREC remit) and any hardware and software
(that are outside BEREC remit). In particular, ENISA advises on cybersecurity in energy networks,
aviation networks, financial networks, health networks, etc.
Additionally, there are significant disadvantages to that option, as the representatives at Management
Board level are different: telecoms NRAs for BEREC and predominantly representatives from
ministries (telecoms, defence ministry, prime minister's office) or national agencies/offices focused on
cyber security or information security for ENISA353
. Also the consideration of the need to align the
BEREC/BEREC Office structure with the 2012 Common Approach makes it difficult at this stage to
consider, in addition to the significant governance changes needed, a possible merger with other
existing agencies.
The possible disconnection of the proposal for a BEREC Regulation from the proposal for a European
Communications Code would not ensure the achievement of the goals foreseen in the telecoms
review. The institutional proposals derived from the analysis carried out in the relevant substance
areas and it is pretty much interlinked (the current BEREC structure is not suitable for the new tasks
in the enlarged mandate – not sufficient resources, no voting rights for Commission, limited role for
the Administrative Manager, etc.). It is a package which not only concerns BEREC but other
institutional elements (NRAs, other competent authorities, RSPG, COCOM, Commission powers,
etc.), thus it could not be addressed in isolation or be delayed.
6.4 ANNEX 4 - Who is affected by the preferred options and specific impacts on stakeholders
This annex describes the practical implications of the preferred options identified in the Impact
Assessment for the Review of the Framework for electronic communications for representative
groups likely to be directly or indirectly affected by the legislation including electronic
communication network and service providers, Over-the-Top players, SMEs and consumers,
Ministries, National Regulatory Authorities and Spectrum Management Authorities.
For each stakeholder group, we discuss the relevant impacts of the preferred options, the key
obligations that will need to be fulfilled and when these might need to be fulfilled in order to comply
352
Analytical fiche no
3: Efficiency gains and synergies.
353
Only for two Member States a representative of telecoms NRA is the representative at ENISA Management Board.
230
with obligations under the revised framework. Wherever possible, we also indicate potential costs that
may be incurred in meeting those obligations.
The opportunities and challenges presented by the proposed revisions to the electronic
communications framework are described in the following table.
It is envisaged that consumers and SMEs will be the greatest beneficiaries of reforms to the electronic
communications framework. These stakeholders will benefit from greater availability and choice in
very high speed fixed and mobile connectivity, as well as an increased focus on the affordability of
broadband and measures enabling them to defray the costs for newly installed fibre connections.
Consumes and SMEs will also benefit from an extension in privacy and security protections for OTT
services and improved switching for broadband bundles. Multi-national businesses should also benefit
from more consistent standards for high quality connectivity cross-border.
Although they will need to meet tighter privacy and security standards, new (including European)
players in the OTT and IoT space should also benefit from improved broadband connectivity as well
as provisions, such as maximum harmonisation of consumer protection rules and cross-border number
utilisation which should foster the scaling up of service provision across the EU.
The package includes several measures which should benefit electronic communication network
providers which intend to invest in high speed networks. Such investors should benefit from increased
attention to duct access and symmetric access to non-replicable assets such as in-building wiring –
which are core elements facilitating the deployment of high speed networks. They should also benefit
from the potential to defray connection costs over a longer period. Finally, the revisions to the
Directive will explicitly recognise the important role that wholesale only models and co-investment
play in supporting sustainable competition in the market. Such models will be subject to lighter touch
regulatory controls. Incumbent operators which have been subject to tight regulatory controls on
wholesale access, may also receive regulatory relief in areas where there is effective competition or
where they make genuine co-investment offers.
Electronic communication network providers of all kinds should benefit from the increased certainty
and reduced administrative costs associated with longer periods between market reviews (of 5 rather
than 3 years except where there are material differences in the market situation). However, in
countries which do not yet pursue such strategies, there may be additional effort required to submit
mapping data to the NRA (to enable the geographic targeting of regulation) – and for operators with
SMP to make duct access operational and adapt product specifications for business access to meet
standardised requirements (following a suitable period).
The proposed revisions to the framework entail measures to increase reliance on general
authorisations for spectrum, speed up spectrum assignment and foster consistency in assignment and
core licence conditions. These provisions are broadly beneficial to electronic communication network
providers and should reduce costs, improve spectrum availability and facilitate multi-national
operations and service provision.
Operators offering broadband Internet access will need to meet more stringent requirements relating
to transparency and quality of service. However, they will benefit from a streamlining of the rules
applying to other electronic communication services. All operators should also benefit from a planned
removal of redundant universal service obligations and switch away from sectorial levies which
should reduce the regulatory burden on designated universal service providers and more widely
reduce administrative cost.
Member States should benefit from the greater broadband diffusion, consumer trust and associated
economic benefits associated with the preferred policy options. It is also possible, but not assured, that
streamlining of regulatory approaches (such as the consolidation of mapping responsibilities) could
231
save costs at a national level. However, where not already the case, Ministries will need to ensure
adequate resourcing and empowerment of NRAs, and the introduction of a minimum remit for
independent National Regulatory Authorities may require a transfer of certain responsibilities in a few
member states.
NRAs will benefit from the changes in a number of ways. Their independence and empowerment will
be reinforced, and certain NRAs would benefit from an expanded remit concerning consumer
protection and/or market-shaping aspects of spectrum. Burdens from market analyses should be
reduced by extending the period between reviews. NRAs will also play a more formal and decisive
role in an enhanced BEREC. However, NRAs will also need to conduct more geographically targeted
reviews, and will need to ensure they have adequate expertise to take on a more extensive remit in
relation to infrastructure, investment and quality of service mapping, as well as ensuring that
regulation is adapted to support infrastructure competition (if not already the case).
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Table 20 - Summary stakeholder impacts
Opportunities Challenges
Incumbent fixed and
mobile
telecommunication
operators
 More geographically targeted access regulation
 Lighter regulation in presence of co-investment or wholesale
only business models
 Savings from less frequent market reviews
 Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
 Faster access to spectrum, greater regulatory certainty concerning
spectrum assignments and more consistent usage conditions
 Lower spectrum access cost and regulatory burdens in bands
subject to general authorisation
 Fewer consumer protection obligations regarding electronic
communication services resulting in administrative savings
 Elimination of redundant USO obligations and abolition of
sectoral funding leading to reduced administrative cost and
financial burden
 Requirement to supply infrastructure/investment
mapping data for market reviews and operationalise
duct access (where not already applied)
 Greater (commercial) pressure to invest in
infrastructure due to additional infrastructure
competition
 Need to standardise business wholesale products
(given due notice)
 Further obligations concerning Internet access (to aid
transparency QoS and switching)
Alternative fixed and
mobile
telecommunication
operators
 Operational duct access, co-investment and wholesale only
incentives support more sustainable competition
 Standardised business wholesale products foster cross-border
entry and competition
 Savings from less frequent market reviews
 Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
 Faster access to spectrum, greater regulatory certainty concerning
spectrum assignment and more consistent usage conditions
 Lower spectrum access cost and regulatory burdens in bands
subject to general authorisation
 Fewer consumer protection obligations regarding electronic
communication services resulting in administrative savings
 Abolition of sectoral USO funding leading to reduced financial
burden
 Less regulation of short-term fixed access rental
 Greater pressure to invest or co-invest in own NGA
infrastructure
 Requirement to supply infrastructure/investment
mapping data (where not already the case)
 Further obligations concerning Internet access (to aid
transparency QoS and switching)
Alternative (cable and
fibre) infrastructure
 Greater focus on infrastructure competition and regulatory
targeting supports commercial flexibility
 Requirement to supply infrastructure/investment
mapping data (where not already the case)
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investors  Operational duct access may support network expansion
 Measures to extend contract duration for connections in
challenge areas, as well as regulatory support for wholesale only
models, are likely to benefit municipal and regional fibre
investors
 Savings from less frequent market reviews
 Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
 Fewer consumer protection obligations regarding electronic
communication services resulting in administrative savings
 Abolition of sectorial USO funding leading to reduced financial
burden
 Greater use of symmetric obligations for non-
replicable assets (where not already the case)
 Further obligations concerning Internet access (to aid
transparency QoS and switching)
OTT and IoT providers  Greater availability and quality of fixed and mobile bandwidth
supports OTT and IoT service delivery and innovation
 Reduced barriers to entry and expansion for OTT and IoT firms
due to maximum consumer protection harmonisation, and
provisions to foster cross-border use of numbers
 Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
 Switching and portability procedures currently
existing for EC(N)S need to implemented by OTTs
that interconnect with E.164
 Privacy and security obligations need to be
implemented by all OTTs
 OTT that interconnect with E.164 potentially subject
to levies for administration of regulatory authority
SMEs  Greater availability of and choice in very high bandwidth
connectivity with continued choice and value in basic broadband
 Improved affordability for fibre connections through defraying
connection charge
 Potential to connect business sites cross-border boosted through
standardised wholesale offers
 Reduced barriers to entry and expansion for smaller OTT and IoT
firms due to maximum consumer protection harmonisation, and
provisions to foster cross-border use of numbers
 Lower cost of access to spectrum (through greater use of general
authorisations and best practice in assignment conditions) leading
to greater access for smaller electronic communication
companies
 Greater predictability and trust amongst SMEs as users of ECS
and OTT, improved transparency concerning IAS
 Smaller electronic communication providers may be
less well placed to invest or co-invest in infrastructure
 Potential new obligations and NRA contributions for
small OTT in relation to E.164 interconnection,
privacy and security
234
 Reduced USO contributions for small suppliers (where
previously captured)
 Increased ease of engagement, reduced administrative burdens
due to converged governance
Consumers  Greater access to and choice in high quality broadband
connectivity
 Improved affordability for fibre connections through defraying
connection charge
 Greater availability and innovation in services relying on 5G and
future generation wireless technologies
 Accelerated fast mobile broadband
 Greater predictability and trust amongst users of ECS and OTT
due to extended privacy and security measures
 Increased ease of switching in relation to bundled offers
 Greater end-to-end connectivity and access to emergency
services when using OTT interconnecting with E164
 Improved transparency concerning IAS
 Potentially improved access to affordable broadband
 Potentially less detailed obligations on some ECS, but
practical implications limited since consumer
protection would be covered by horizontal rules or
addressed through competitive markets
Member States  Streamlining of regulatory approaches and governance at national
and EU level should drive synergies and may enable cost savings
 The proposed changes should support the diffusion of fixed and
mobile connectivity, thereby supporting economic development
and social welfare
 Ministries will need to ensure adequate resourcing and
empowerment of NRAs (where not already the case),
and governance changes may require a transfer of
certain responsibilities in some member states
NRAs  NRAs will see a reinforcement of independence and
empowerment as well as a harmonisation of their remit to
provide a more converged regulatory approach (for example in
relation to consumer protection and broadband mapping
(including for state aid and broadband cost reduction)
 NRAs will play a more formal and decisive role in EU policy-
making through the enhanced BEREC
 NRAs will benefit from a longer period between market reviews
reducing administrative costs and enabling longer-term decision
making
 NRAs not already pursuing such strategies will need
to ensure competence in mapping, ensure the effective
operationalization of measures to ensure infrastructure
competition in broadband, support the deployment of
broadband in challenge areas and provide
standardised solutions for business access
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6.4.1 Implications for telecommunications network operators and service providers
6.4.1.1 Access Provisions
Under the preferred option for access (Option 3 NGA+), telecommunication network operators
and service providers will be affected by adaptations to the market analysis process. This may
affect telecommunications operators differently depending on whether they are incumbent
operators, which are subject to SMP obligations, alternative operators which may rely to a
degree on regulated wholesale access, or other competitive operators making use of their own
network infrastructure.
6.4.1.1.1 Access provisions and operators subject to SMP obligations
Economic impacts
Incumbent operators which are today typically subject to SMP regulatory obligations are
expected to benefit from better motivated, more targeted and, in some instances, less onerous
regulatory obligations resulting from a requirement for NRAs to place greater focus on retail
market failure prior to intervention and from more granular geographic market analyses which
may result in deregulation in some areas. Incumbents may also benefit from greater flexibility
(for example in price setting) and reduced costs resulting from potential reduction on regulatory
access obligations in cases where they propose adequate co-investment or commercial offers, or
where they pursue voluntary structural separation.
The preferred option is also expected to increase commercial incentives on incumbent operators
to invest in upgrading networks in order both to protect their market share and to compensate for
the loss of wholesale revenues in a more competitive environment, as well as to benefit from the
proposed lighter regulatory treatment for new upgraded networks. As a result, it is expected that
following transposition and implementation of the legal provisions, CAPEX intensity amongst
incumbent operators in countries which have not already undertaken significant network
upgrades to VHC connectivity may increase.
Administrative impacts
Changes to the market review process are likely to result in certain administrative requirements,
as well as change in the nature of access obligations resulting from a shift in focus towards
infrastructure based competition (in countries where this is not already the case). Specifically, in
the early stage, immediately following the adoption of a revised framework and during an
estimated period thereafter of around 3-5 years, incumbents in countries which are not already
subject to such obligations may have the additional requirements to submit infrastructure
coverage data and plans concerning infrastructure deployment to support mapping by the NRA.
It should be noted that such obligations are only incremental to the data collection exercises that
already exist or are planned in many member states, as described in the study (SMART
2012/0022) on the mapping of broadband and infrastructures,354
and (when combined with
planned guidance in this area) should ideally serve to streamline and bring some coherence
between data collection for market analysis purposes and the transparency obligations that exist
in what may currently be viewed as separate exercises. For example, the Cost Reduction
Directive already includes obligations to provide information concerning civil works to be
performed in the next 6 months (Article 6 Directive 2014/61/EU) – relevant for investment
mapping, while reporting obligations are already undertaken to undertake investment mapping in
the context of State Aid schemes for broadband.
354
See Table 5-1 https://ec.europa.eu/digital-single-market/en/news/mapping-broadband-and-infrastructure-study-
smart-20120022
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Measures to operationalise duct access and symmetric obligations aimed at sharing non-
replicable assets
The greater focus on infrastructure competition in the framework is likely to result (for those
Member States not already pursuing such strategies) in a shift towards passive access and greater
attention to symmetric obligations concerning non-replicable assets. This may require
incumbents to provide information on availability of duct access, and potentially automated
systems to support ordering, provisioning and repair, in cases where duct access is feasible and
would be proportionate, but is not already fully operational. For incumbents in countries where
such obligations are not yet fully effective the operationalization of duct access could result in
one-off costs as well as ongoing costs associated with maintaining an online database for duct
access availability and meeting access requests (if not already incurred)..355
Moreover, administrative costs from the operationalization of duct and symmetric access may be
offset if these obligations result in infrastructure competition, which enables the relaxation or
removal of downstream asymmetric (SMP) access obligations.
Standardised wholesale offers for business
Incumbents may also be affected by requirements to move towards standardised wholesale offers
for business access, in areas where such access is required.356
The study SMART 2014/0023357
assessed the impact of such a requirement, and concluded that while (some not readily
quantifiable) costs may be incurred in adapting product offers, systems and processes, these
could be mitigated by a phased introduction of the obligation, permitting these changes to be
introduced during a refresh of systems. NRAs could determine the timing of such a required
change subject to national circumstances, but for the benefits to be realised introduction should
be subject to a deadline, which could be determined in Implementing Guidelines associated with
the revised Framework.
Extension of market review period
Another planned change to the market review process is a reduction in the frequency of market
reviews, which would be required every 5 years rather than every 3, with the potential for an
interim review if needed in light of changed market circumstances. This change should in
principle reduce the administrative burden involved in supplying market and operational data to
the NRA and preparing information for cost modelling purposes. However, these cost savings
are unlikely to be significant in the context of sector revenues, and it is possible that this change
could negatively impact incumbent operators if it results in obligations being in place for longer
than under the current cycle (although the reverse is also possible, in cases where regulatory
obligations are withheld, for example on newly installed infrastructure in the presence of
reasonable co-investment offers).
6.4.1.1.2 Access provisions and Alternative operators
It is anticipated that the increased focus on measures to boost infrastructure competition and
foster investment is likely to impact the business models of alternative operators, supporting a
355
However, it should be noted that duct access and symmetric obligations are already operational in several member
states including Portugal, Spain and France, while there are ongoing initiatives to operationalise duct access in
countries such as the UK, which should be complete before the framework review comes into effect. See for instance
Feb 2016 Ofcom Digital Communications Review Statement http://stakeholders.ofcom.org.uk/telecoms/policy/digital-
comms-review/dcr-feb-16/
356
For example, where there is no prospect of effective infrastructure-based competition
357
Investigation into access and interoperability standards for the promotion of the internal market for electronic
communications https://ec.europa.eu/digital-single-market/en/news/investigation-access-and-interoperability-
standards-promotion-internal-market-electronic
237
move to more self-sustaining models based on investment, co-investment and/or longer term
remedies or commercial solutions.
As this model is likely to involving upfront commitments, this may entail greater initial capital
expenditures for these alternative operators, which would be offset in subsequent years by lower
operational expenditures as business models shift from rental towards investment, co-investment
or risk sharing arrangements. Engagement in infrastructure build or long-term agreements is
likely to provide greater predictability for alternative operators than the current short-term
arrangements, although it will also entail greater upfront risks.
In turn, as and when alternative operators invest in their own VHC infrastructure they may be
subject to obligations to provide data concerning existing and planned fibre deployment as part
of the expanded mapping process. They may also be subject to symmetric obligations for the
sharing of in-building wiring or wiring up the first distribution point, in countries which do not
already pursue such approaches, although it should be noted that such obligations are already
operational under the existing framework in some countries358
..
Precise cost impacts on alternative operators willing to invest in own infrastructure resulting
from changes to the framework are difficult to estimate. However, the expectation is that the
greater focus on infrastructure-based competition in NGA and VHC may result in different
(more capex-intensive) business models for entrants, rather than increased costs overall.
As regards the standardisation of wholesale offers for business end users, changes to incumbent
systems may also imply a need for adjustments to access-seekers’ ordering and repair processes
and systems, which could be made after a suitable period determined by the NRA as discussed
above. On the other hand, standardised offers should lower barriers to expansion for operators
which do not have nation-wide coverage in specific countries.
Finally, alternative operators which currently make use of wholesale access would, like
incumbent operators, also benefit from reduced administrative costs associated with longer
market review periods, although these administrative savings are not expected to be very
significant as compared to other categories of costs and savings considered in this chapter.
6.4.1.1.3 Access provisions and other competitive operators
Cable operators and regional fibre investors are unlikely to be significantly impacted by the
proposed changes to the market analysis process. Nonetheless, these operators are expected to
benefit from an enhanced focus in the framework on infrastructure competition and more
geographically targeted regulation. Specifically, they may be able to exploit operational duct
access and symmetric measures to expand their existing footprint, and they may also benefit
indirectly from the possible relaxation of SMP obligations in certain areas where infrastructure
competition emerges, if this results in greater potential for pricing flexibility and tailoring of
products and bundles to specific customer groups for the market as a whole.
Regional fibre investors including municipal investors may also benefit from specific provisions
within the NGA+ option which aim to identify underserved areas that may offer deployment
opportunities for this operator group, as well as benefiting from measures which are designed to
hold operators to account as regards their investment declarations as made in the context of the
geographical surveys conducted by the NRAs..
358
Symmetric obligations on in-building wiring and terminating segments on all operators are possible under the
current Framework and are already operational and in place in countries such as Spain, France and Portugal.
Furthermore, under the cost reduction directive, any owner or user of in-building physical infrastructure should meet
reasonable requests for access in view of deploying high-speed electronic communications networks.
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On the other hand, VHC networks built by these operators may become subject to symmetric
obligations as regards sharing of in-building wiring or the non-replicable terminating segment,
which will entail additional cost. However, it should be noted that in several countries, these
rules are already in place, and it is envisaged under proposed revisions to the framework that
operators could be exempted from such obligations if they operate wholesale only business
models.
Like other operators they would benefit from reduced administrative costs resulting from
extended market review periods, but may need to supply additional information in order to
facilitate infrastructure mapping by the NRA, in those countries which have not already pursued
such procedures.
6.4.1.2 Spectrum provisions
The preferred spectrum option emphasises the need to prepare Europe for the future deployment
of 5G and to speed up access to spectrum resources. The preferred spectrum option (Option 3:
binding criteria) introduces (amongst other provisions) common criteria for most relevant
elements of spectrum assignments such as for example timing of awards, license duration and
coverage, a greater focus on general authorisations versus individual licenses and provisions to
facilitate the deployment of small cells and Wi-Fi. These provisions affect network and services
providers in terms of speed and access to spectrum resources across the Single Market and the
cost of such access. Under the preferred option these common criteria would be binding on
Member States.
6.4.1.2.1 Common assignment criteria and licence conditions
Mobile Network Operators (MNOs) are some of the main users of spectrum and they will
therefore be affected by common assignment criteria and obligations attached to rights of use
(e.g. license duration, spectrum caps, timing of assignment, methods for determining coverage
obligations, etc.). The nature of the impact will depend on the specific decisions taken at EU
level which are not specified in the option and are subject to negotiation.
However, it is already clear that under the preferred option, compared with the baseline, all
mobile network operators will be subject to more consistent conditions to access and use
spectrum resources across the Single Market. This will likely generate greater regulatory
certainty and foster the development of a level playing field across the EU. For instance, if the
regulatory framework specifies that e.g. spectrum auctions should reflect a due balance of
overall spectrum objectives, this should bring greater consistency in the conditions that will
govern spectrum assignment across the Union.
6.4.1.2.2 Greater focus on general authorisations over individual licenses
A greater focus on general authorisations is likely to significantly reduce access costs to
spectrum resources thus making spectrum available to smaller companies which cannot afford
purchasing exclusive access under individual licenses e.g. in an auction.
Operators who are already present in multiple countries would benefit because they could have
access to the same frequencies all over Europe, with similar conditions. Such a system would
rapidly speed time to market, as there would be no decisions needed (either at national or EU
level) on which operator obtains which spectrum. Furthermore, consistency of usage conditions
could be improved (e.g. if a harmonised EU band plan was agreed to) and costs would be
reduced compared with traditional assignments.
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6.4.1.3 Universal service provisions
The preferred option with regard to universal service is Option 3 (incremental adaptation to
trends with the focus on broadband affordability). This option foresees exclusion of payphones
and accessory services from the universal service scope at the EU level. The universal service
scope shall cover PATS and affordable broadband at least at a fixed location meaning that
Member States may introduce affordability measures also by mobile (connection at least at a
fixed location) at the national level. At the EU level, broadband can be defined by referring to
certain services to be accessible via the connection (web-browsing, eGovernment, VoIP etc.).
This option would ensure only the affordability of broadband (i.e. affordable retail pricing
measures), that shall be ensured at least at a fixed location, thus allowing Member States the
possibility to include affordability measures by mobile, while its availability shall be further
promoted by other policy tools (incentives to private investment, state aid, etc.). Availability of
broadband can be ensured only at a fixed location. Minimum harmonisation would be applied at
EU level, such that Member States could enhance the basic services baskets. Member States may
also decide, in exceptional circumstances, to support availability of broadband additionally to its
affordability. The preferred financing option is through general budget as a more equitable, fair
and least distortive way of funding of the provision of universal service.
ECS providers are likely to benefit from the revision of universal service according to Option 3
as it will likely reduce the uncertainty and administrative and financial burden on them. For
instance, they will not be obliged to provide pay phones that are considered redundant and
largely function at loss. Financing through public funds is easier to implement so that it will
lessen administrative costs and will contribute to a fairer distribution of costs and benefits of the
universal service provision among all market participants with less distortion to competition.
6.4.1.4 Provisions relating to electronic communications services
The preferred option regarding services (option 4) reduces, for services other than the IAS, the
burden relative to a number of USD obligations for ECS providers regarding contractual rights,
transparency, quality of services (QoS) monitoring, and out-of-court dispute resolutions.
Additional costs might be attached to the role that access network providers might have in the
standards that enable the routing of emergency calls from OTTs to numbers in the PSTN
network. Option 4 also introduces a number of new obligations for ECN providers applying to
IAS regarding transparency, QoS, and switching to other providers (including facilitated
switching process). The preferred option regarding numbering saves telecom operators from
inefficiencies in relation to extra-territorial use of numbers. The option on must carry/EPG does
not impact on telecommunications network and service providers.
6.4.1.4.1 Reductions in obligations regarding ECS
In relation to overlapping consumer protection provisions, telecom operators will be relieved
from unnecessary administrative and compliance costs regarding contractual rights,
transparency, quality of services (QoS) monitoring, and out-of-court dispute resolutions. It is
however not possible to estimate the overall costs for telecom operators of complying to
potentially redundant rules.
In a survey among telecom operators organised in the context of this impact assessment, telecom
operators indicate having to incur higher compliance costs resulting from existence of the rules
that overlap with horizontal rules and/or rules having become redundant due to market forces.
The overlapping information requirements create additional burdens for businesses that have to
check all sets of requirements for any small or national differences and engage with two different
sets of regulators in relation to enforcement. Activities that drive administrative burden and are
related to complying with sector specific obligations regarding contractual terms and
transparency are (amongst others):
240
 Activities related to regulatory/legal discussions with authorities on the terms of
obligations;
 Activities related to assuring proper implementation of elaborate guidelines for
marketing and sales (including specific provisions in contracts, in scripts for sales, in
supporting IT, etc.);
 Other activities involved with assuring internal compliance with regulation;
 The need to inform customers about the corresponding regulatory provisions have the
effect of making sales activities more lengthy and complex;
 Similarly, discussions with suppliers and partners (device suppliers, resellers) are made
complex and imbalanced by the constraints on contracts terms;
 Activities involved with in potential litigations;
 Public Affairs involved in potential public controversies relating to the compliance with
the rule.
In addition, specific resources may be dedicated to answering questions and to regularly
updating online information in order to comply with transparency obligations. Telecom operators
found it difficult to provide robust calculations of all compliance costs.
6.4.1.4.2 Introduction of new obligations regarding IAS
The reduction in enforcement and compliance costs regarding ECS will partially be undone by
the additional obligations applying to IAS regarding transparency (related to consumption
monitoring and comparison tools), QoS (reporting and, when criteria are not met,
fines/compensation/termination of contracts), and switching (facilitated switching process).
6.4.1.4.3 Changes with regards to extra-territorial use of numbers.
Compared to the base scenario a number of management complexities and implementation costs
may be prevented, such as: “Network testing, functional testing, billing verification, table
updates (in switches, STPs, HLRs, billing systems, etc.) [which] would need to be performed by
the operator and each of its roaming partners.”359
More streamlined extraterritorial usage would
allow operators to gain efficiency by benefiting from economies of scale granted by the Single
Market. Thus operators can provide cross border services without the need to change numbers.,
and can enter new markets without requesting a block of numbers in that country. At the same
time, current bilateral arrangements for extraterritorial use (resulting in an equally burdensome
costs for operators and roaming partners) may be replaced by a more harmonised governance
structure that is much less burdensome on operators. This may require a possible extension of the
activities (and costs) of BEREC as well as costs related to coordination with CEPT. However,
these costs are likely much lower than the costs of the currently required multiple bilateral
agreements between NRAs and telecom providers.
6.4.1.5 Governance provisions
The preferred option for Governance (option 3) involves the alignment of the remit of
Regulatory Authorities at national level, as well as the extension of BEREC’s remit to
encompass responsibility for market-shaping aspects of spectrum assignment and to take certain
normative powers in relation to developing implementing guidelines (which would be adopted
by the Commission) as well as playing a deciding role in enabling a Commission ‘decision’ in
relation to case by case assessment of remedies (under an expanded article 7a process). BEREC
would also perform the peer review of national spectrum assignment procedures.
This consolidation of responsibilities for market-shaping measures in fixed and mobile networks
as well as service regulation is likely to have a positive impact especially for those electronic
359
http://www.attglobalpolicy.com/wp-content/uploads/2014/06/ATT-Comments_BEREC-M2M-Project-Team-_19-
June-2014.pdf
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communication network and service providers, which are converged and/or operate or aspire to
operate cross-border. Converged regulatory responsibilities should lead to more coherent
decisions, while greater consistency at EU level may enable cross-border suppliers to achieve
cost savings from reduced regulatory variation.
Notwithstanding these potential benefits to electronic communication operators however,
increased consistency which reduces barriers to access or service provision between member
states, may pose competition challenges for operators which currently have a strong position in
national markets.360
6.4.1.6 Overview table
The following table summarises the changes obligations per subject area and associated practical
implications and costs.
360
For example, in the context of interviews for SMART 2015/0002 and SMART 2014/0023, multi-
national business end-users claimed that incumbent operators aimed to protect national markets.
Additional cross-border competition from OTT players might also pose a challenge to the service revenues
of traditional electronic communication providers.
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Table 21 - Practical implications of preferred options for telecommunication network and service providers
Changed obligations Practical implications Costs
Access - Longer market review periods
- Requirement to demonstrate retail
failure
- Infrastructure mapping
- Greater infrastructure competition
focus involving duct access,
symmetric rules, incentives for co-
investment, long-term commitment
- Potential for non-imposition of
access obligations on new high
capacity networks deployed on the
basis of an open co-investment offer
- Standardised wholesale remedies for
business end users
- Reduced admin burden for market
reviews due to longer periods, focus
on commercial rather than
regulatory solutions, but increased
burden in some countries for
mapping, duct access, greater focus
on symmetric rules for non-
replicable assets
- Requirement to standardise
specifications (and potentially
certain systems) for wholesale
products designed for business
- Potential savings from less frequent
market reviews ~€28m
- Other costs e.g. mapping difficult to
quantify and vary depending on
whether rules are already in place
- Standardised wholesale products may
involve set-up costs if/where they
require changes to systems and
processes, but these costs could be
mitigated by phased introduction.
Operational costs for multi-national
providers should be reduced
Spectrum - Harmonised assignment criteria and
licence conditions (e.g. license
duration) in all markets
- Greater use of general authorisations
rather than individual licenses
- More consistency across the Single
market
- Greater regulatory certainty
- Definition of coverage that is better
suited to a wireless environment
(e.g. not based on households but
based on share of time the service is
available)
- Faster access to spectrum
- More efficient use of spectrum
- Lower cost of access to spectrum
leading to greater access for smaller
companies
- Reduction in administrative costs
associated with assignment
procedures
Services and
numbering
1. Less obligations regarding ECS:
 Transparency
 Contractual rights
 QoS
 Dispute resolution
2. More obligations regarding IAS
A number of activities/resources can be
downsized as a result of 1), such as:
Regulatory affairs, Legal advice,
Customer Care, IT-Resources, Product
development, Product lifecycle
management, Terms and conditions
1) and 2) lead to a net relief of
administrative burden.
No information on the monetary
implications of 3).
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 Transparency
 QoS
 Switching
3. Different arrangements for extra-
territorial use of numbers
management, Billing.
A number of activities resources will be
re-introduced as a consequence of 2)
Compared to the base scenario
inefficient bilateral agreements on extra-
territorial use of numbers are replaced
by a more efficient system.
A number of management complexities
and implementation costs relate to
roaming may be prevented.
USO Affordability measures for broadband at
least at a fixed location
Abolition of sectorial funding, instead
financing through public funding
Reduced administrative burden due to
clearer and easier to implement funding
mechanism
Reduced financial burden due to
exclusion of redundant services at the
EU level and introduction of public
funding
Reduced administrative costs
Potential cost savings due to exclusion of
pay phones and accessory services for
EU-28 – (pay phones alone – 1 bn euro
annually)
Cost of affordable broadband at a fixed
location – from 147 mln euro to 436 mln
euro per annum for EU-28
Governance - Merged institutional structure
covering access, services and
aspects of spectrum at national and
EU level
- BEREC to take prime responsibility
for the drafting of implementing
guidelines
- Greater policy alignment
- Increased institutional alignment on
fixed and mobile regulation and
consumer protection
- Coherence in regulatory
responsibilities should benefit
converged players while greater EU
consistency should reduce
administrative costs, especially for
cross-border providers, but may
increase cross-border entry and
service competition, challenging the
service revenues of traditional players
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6.4.2 OTT providers and non-telco
6.4.2.1 Access and spectrum
Changes to access and spectrum rules do not entail any changes to obligations for OTT providers.
However, as for other sectors of the economy, but likely to an even greater degree, OTT providers
will benefit indirectly if the preferred options lead to greater deployment of fixed and wireless
network and technology and greater take-up among consumers across the Single Market.
Similarly, greater coordination of spectrum assignments under the preferred option does not directly
affect users in industries that might develop 5G applications and services. However, if this option
leads to successful and fast deployment of 5G in Europe it will constitute a significant growth
opportunity in some sectors (e.g. automotive, transport, health, utilities, and others) and for consumers
who benefit from the resulting innovations by way of greater safety, energy efficiency, and
environmental sustainability, etc.). In addition, a greater focus on general authorisations could put
spectrum resources within the reach of operators who are not at present able to purchase exclusive
access.
In terms of other current spectrum users such as broadcasters, the preferred option does not have any
direct impact since it focuses on assignment criteria and usage conditions for the provision of
electronic communication services other than broadcasting rather than on allocations of spectrum
bands. Of course, future deployment of 5G will affect all current spectrum users - both in terms of
spectrum demand and supply, as well as in terms of optimal allocation of spectrum to different uses.
These considerations go beyond the assignment criteria and usage conditions in the preferred option.
6.4.2.2 Universal service
The adoption of Option 3 for universal service will reduce the number of unconnected households and
improve access to a number of enhanced communications services. Due to these developments, OTT
providers are likely to benefit from the inclusion of affordable broadband in the universal service
scope as they can make better use of the increased connectivity and reach a larger pool of users.
6.4.2.3 Electronic communication services
The preferred option regarding services (option 4) introduces additional administrative burden for
OTT providers that use numbering resources as they will be subject to additional sector regulation.
All communications services providers (regardless of the technology used, this includes OTTs) will
experience an increased administrative burden in relation to complying with rules on security and
privacy. The preferred option regarding numbering does not impose additional administrative burden
on OTTs/IoT. OTTs may, however, have easier access to numbering ranges. The option on must
carry/EPG does not impact on OTTs.
The ERG 2007 guidelines indicate that NRAs may subject OTT voice services that interconnect with
the number regime to certain obligations. However, these guidelines are not binding and SMART
2013/0019 concludes that many NRAs do not follow these guidelines in practice. Under option 4, the
obligations become binding and will have to be enforced by NRA’s for all OTT services that make
use of the numbering regime (i.e. including OTT messaging services). As such, compared to the
baseline, the administrative burden may increase for OTT providers that use numbering resources as
they will now be subject to the same regulation. Most of the obligations and costs (except those
related to accessing emergency services) would be associated only with paying customers, as direct
245
revenues361
largely relate to customers paying for interconnecting with the numbering plan. There is
no quantitative information available on the size of the impact.
OTT services that make use of numbers (like Skype, Viber, or Google Voice) will be subject to the
same obligations with regards to interoperability, end-to-end connectivity, and number portability.
Since interconnection with the numbering regime is already part of the respective service, the
obligation to provide interoperability and end-to-end connectivity will have little to no impact on
current business models of the respective OTTs. With regards to portability (and associated activities
to facilitate the switching process) it is not clear to what extent OTTs are currently de facto subjected
to obligations. Following the ERG 2007 guidelines they could be, but in practice they are often not362
.
Under option 4, it becomes explicitly clear that OTTs will have to be subjected to portability
obligations and this may have an impact on compliance costs, but we don’t have information on the
size of this effect.
In addition, Article 12 and 13 of the Authorisation Directive would also apply to respective OTTs,
which implies that NRAs may levy administrative charges. While following the ERG 2007 guidelines,
NRAs could already impose such levies on OTTs that interconnect with the numbering regime, in
practice this is not the case. The financial burden differs per Member State, but the size is relatively
small. For example, in Italy the charges under Article 12 may add up to a maximum of 0.2% of
turnover363
. For a mobile operator with an annual ARPU of 250 to 400 EUR, this boils down to an
average annual burden of €0.65 per paying customer.
Finally, OTTs would also be obliged to provide access to PSAPs, as far as this is technically feasible.
In some Member States (such as the Denmark, Finland and UK) such functionality is already
enabled364
in other Member States this is currently not the case. There is no information available on
the size of the costs.
All OTTs (regardless of the technology used) will experience an increased administrative burden in
relation to complying with rules on security and privacy and this may imply that some of the current
OTT business models may need to evolve. It cannot be expected from past experience that the costs
would be unreasonable compared to the benefits.
6.4.2.4 Governance
The preferred Governance option (option 3) envisages that the responsibilities of all NRAs would be
aligned with that of BEREC, and would therefore cover inter alia issues relating to sector specific
consumer protection. Alignment of governance mechanisms as well as maximum harmonisation and
greater co-ordination at EU level is likely to benefit OTT players which frequently operate in a multi-
national or even global environment.
6.4.2.5 Overview table
The following table provides an overview of the practical implications of the preferred options on
OTT players and other non-telco users of electronic communication networks.
361
not accounting for the indirect revenues as a result of e.g. integration in the wider MS Office suite in the case of Skype In
/ Out
362
SMART 2013/0019 and additional interviews with NRAs in relation to this study.
363
As indicated in the answers to the consultation by an Italian telecom operator
246
Table 22 - Summary of impacts on OTT
Changed obligations Practical implications Costs
Access Na Na na
Spectrum Na Na na
USO Na Na na
Services and
numbering
For E.164 OTTs
- Interoperability
- Interconnections
- Portability
- Access to emergency services
For all OTTs
- Privacy & security
-
Interoperability and interconnection are
currently already in place.
switching and portability procedures
currently existing for EC(N)S need to
implemented by OTTs that interconnect
with E.164
Privacy and security obligations need to
be implemented by all OTTs
Extended obligations may entail
some additional costs. No detailed
estimate possible
NRA financing OTT potentially captured within levies
for financing NRAs, where relevant
Additional administrative obligations
and costs
Costs for NRA financing likely to
vary by member state, but
experience suggests limited. No
detailed estimate possible
Governance Alignment of responsibility for sectoral
service regulation
May affect relevant bodies for
engagement in certain MS
Streamlining of consumer protection
responsibilities and increased EU-
level guidance should allow reduced
engagement cost
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6.4.3 SMEs
6.4.3.1 Access and SMEs
Micro enterprises and smaller enterprises outside central business districts (including small businesses
in rural areas) are likely to be important beneficiaries of strategies which boost the widespread
deployment of fibre, as these organisations may today be under-served compared with larger
corporations which may already have fibre connectivity installed to their premises. For example, the
UK NRA Ofcom found in the context of research conducted in 2015365 that a significant minority of
SMEs had had less favourable experiences with broadband, including a lack of widespread superfast
broadband availability, a concentrated retail market structure, and dissatisfaction in relation to quality
of service.
In addition to potentially benefiting from the installation of higher speed broadband, small businesses
should benefit from a choice in high speed offers either as a result of infrastructure competition or
otherwise through co-investment or regulated access (in the absence of co-investment offers).
Competition in standard broadband services via regulated access will also remain. Small businesses
which have or aspire to multi-national operations should also benefit from measures to ensure
consistent product and service specifications, which should increase competition in the provision of
cross-border services in addition to supporting seamless service characteristics.366
The preferred option for access envisages that payments for newly installed very high capacity
connections in rural areas (which might not otherwise be economic) could be defrayed over a longer
period than 24 months, 367
while maintaining the current rules for contract duration for service
contracts. This could support affordability of VHC connections for SMEs that may not be able to pay
high costs up front. It is not envisaged that the potential for longer term payments for the installation,
would impact customers’ rights as regards switching service providers.
Finally, the provisions on mapping of quality of infrastructure, will have a positive effect on SMEs, as
they entail the publication of this data. Businesses will therefore be able to gauge in advance the status
of connectivity (by means of line-specific tests and not by headline speed) in a given area. This will
be useful for instance when setting up a new business or relocate an existing one.
There are few electronic communication network providers that could be characterised as SMEs with
fewer than 250 employees, as the capital and resources required to install and operate networks mean
that most providers are larger in scale. However, smaller players may exist, for example in the
installation of regional networks or the provision of targeted electronic communication services, and
certain providers with scale across the EU such as suppliers of business communications, may
nonetheless operate at small scale in individual national markets. These providers would in principle
be subject to the same rules as other electronic communication providers with attendant advantages
and costs as described in section 4.5 except that, as today, NRAs are required to ensure that
obligations are ‘proportionate and justified’ in light of the objectives.368
More specifically, smaller
regional fibre investors are likely to benefit from an increased focus on infrastructure competition,
while business providers (which may have small scale in individual countries) will benefit from
standardised wholesale offers. Smaller alternative operators serving the mass market which rely
primarily on regulated access will be able to continue to offer competitive broadband services at
standard speeds (on the basis of regulated wholesale access in cases where SMP persists). However,
they may be less well placed to invest or co-invest in their own VHC network infrastructure than
larger scale players.
365
http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/sme/bb-for-smes.pdf
366
The impacts of consistent wholesale offers are described in more detail in SMART 2014/0024
367
The currently allowed period under Article 30(5) Universal service and User Rights Directive
368
Article 8 Access Directive
248
Smaller OTT players are not directly affected by network access obligations, but would benefit from
the additional capacity that may result from the focus on supporting infrastructure deployment.
6.4.3.2 Spectrum and SMEs
Under the preferred spectrum option, a greater focus on general authorisations over individual
licenses has the potential to open up spectrum resources to smaller companies which are not at present
able to purchase exclusive access. In addition, many of the end-user businesses which will benefit
from accelerated access to spectrum and introduction of 5G will be smaller companies. By opening
access to spectrum resources and accelerating 4G and 5G coverage across the Digital Single Market,
the preferred spectrum option will facilitate innovation and entrepreneurship which benefits primarily
(though not only) start-ups and smaller companies. For instance, there might be companies aiming to
bring innovative new applications to market that rely on 5G availability and reliability in sectors such
as utilities, automotive and transportation or e-health.
6.4.3.3 Universal service and SMEs
There are likely to be few implications of the universal service option on SMEs as the proposals aim
specifically to target broadband affordability for remote or vulnerable consumers. However,
affordable broadband home connections may also support the development of self-employment and
micro-organisations.
6.4.3.4 Services and SMEs
The preferred option as regards services creates more equality in regulatory treatment as obligations
on security and privacy would now apply to all types of communication services (telecom and OTT),
regardless of how they are provided. There may be some costs to smaller OTT providers which would
need to meet extended obligations (which are difficult to quantify). However, the changes would also
provide greater regulatory certainty for all players, as well as increased trust for SMEs as end-users of
OTT services, potentially thereby supporting increased take-up of OTT services including European
OTT start-ups.
A further important benefit which is especially relevant to OTT start-ups is the proposal to apply full
harmonisation for sectorial consumer protection rules. This should reduce barriers for scaling up in
Europe (by reducing regulatory heterogeneity) to the benefit of start-ups entering as new players
shaping the IoT value chain. As users of communication services, SMEs are not covered by horizontal
consumer protection rules, yet they still enjoy a certain degree of protection through competitive
markets. Furthermore, SMEs in new digital value chains (e.g. IoT) enjoy more trust and predictability
as regards the scope of the Regulatory Framework, contributing to confidence in future planning and
investment. SMEs in all sectors will be more inclined to embrace IoT applications and services as
these can now be purchased at lower prices and higher quality (including better guarantees for being
always and everywhere online). This will give more room for innovations by SMEs within the IoT
value chain as well as in other sectors.
6.4.3.5 Governance and SMEs
Changes to Governance will not impact SMEs directly, but may benefit cross-border operations for
smaller businesses supplying and using electronic communications services by ensuring consistent
application of the rules and by requiring interaction with fewer interlocutors.
249
6.4.3.6 Overview table
The following table summarises the changes obligations per subject area and associated practical
implications and costs.
250
Table 23 - Practical implications of preferred options for SMEs
Changed obligations Practical implications Costs
Access - Greater infrastructure competition
focus involving duct access,
symmetric rules, incentives for co-
investment, long-term commitment
- Potential for longer contract
duration for connectivity
- Obligations for the publication of
broadband QoS data
- Standardised wholesale remedies for
business end users
- Greater access to and choice in high
quality broadband connectivity
- Improved affordability for fibre
connections through defraying
connection charge
- Better availability and competition
in cross-border business
connectivity (also benefiting
providers)
- Greater transparency on line quality
- Smaller electronic communication
providers may be less well placed to
invest or co-invest in infrastructure
- na
Spectrum - Faster access to spectrum
- Greater use of general authorisations
rather than individual licenses
- Lower cost and improved potential
for smaller firms to access spectrum
- Facilitate innovation and
entrepreneurship amongst services
relying on 5G and future generation
wireless technologies
- na
Services and
numbering
- Clarity with regards to the scope of
the Regulatory Framework
- More equivalence in approach to
ECS and OTT providers offering
ostensibly equivalent services
- Maximum harmonisation:
- Less obligations regarding ECS:
 Transparency
 Contractual rights
 QoS
 Dispute resolution
- More obligations regarding IAS
- For SMEs as customers
- Greater predictability and trust
amongst SMEs as users of ECS
and OTT
- Improved transparency,
affordability and quality
concerning IAS
- Less barriers to embrace new
digital applications and services
(notably IoT).
- The reduction in sector specific
obligations (regarding ECS)
- Extended OTT obligations
and potential contribution to
NRA financing may imply
some cost increases for
SME suppliers – level
difficult to estimate
- Max harmonisation for
consumer protection should
reduce compliance costs
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 Transparency
 QoS
 Switching
- Potential contribution to NRA
admin costs
- Clearer and Improved arrangements
for extra-territorial use of numbers
may impact negatively on SMEs
since equivalent horizontal
obligations only apply to
consumers. However, SMEs
will enjoy protection through
competitive markets.
For SMEs as suppliers
- Increased consistency and
reduced barriers to cross-border
provision
- Potential contribution to NRA
(but may be subject to
threshold)
- Potential new obligations (in
relation to E.164
interconnection, as well as
privacy and security)
USO Sectorial contributions excluded for
broadband USO
Reduced contributions for SMEs as
suppliers
- Potentially reduced costs for SME
suppliers in member states which
applied sectorial financing
Governance - Alignment of responsibility for
consumer protection and market-
shaping spectrum regulation
Increased coherence in fixed, mobile
and service regulation, greater
consistency
- Greater consistency may reduce
administrative cost for multi-
national companies
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6.4.4 Consumers
6.4.4.1 Access and consumers
Consumers in countries and areas currently lacking infrastructure competition (including rural areas)
are likely to be the main beneficiaries of measures to support the deployment of VHC networks. This
may lead to the availability of broadband services with significantly higher quality than is available
today. In addition, consumers will benefit from a continuation of the degree of competition in existing
broadband services (as access obligations offering quality levels equivalent to those prior to new
infrastructure deployment will remain). This is unlikely to alter the current pricing dynamics for
broadband currently experienced in Europe.
From experience in countries such as France and Portugal, it is also expected that consumers will
benefit from competition in high speed offers and affordable prices resulting from infrastructure
competition or co-investment in very high capacity infrastructure. In cases where infrastructure
competition or co-investment does not materialise as expected, such choice can and should also be
preserved through regulated wholesale access. Experience from countries which have pursued a
similar approach to that advocated in the preferred option, including France, Spain and Portugal,
suggests that pricing for VHC broadband is likely to be reasonable.369
Affordable prices for VHC broadband are likely to be supported not only by competition in the
provision of high bandwidth services, but also as a result of continued support for competition in
copper-based networks , which is likely to result in ‘anchor’ prices for standard speeds, which
constrain the levels offered for higher speeds. Econometric analysis in the context of SMART
2015/0002 also tend to confirm that access regulation for standard broadband (through local loop
unbundling) can have an influence on prices for NGA and VHC broadband, which in turn support
take-up.370
The preferred option for access envisages to enable the cost of the (network) connection to be
defrayed over a longer period than the current contract duration (24 month) while maintaining the
current rules for contract duration for service contracts.371
This could support affordability of VHC
connections for customers that may not be able to pay high costs up front. It is not envisaged that the
potential for longer term payments for the installation, would impact consumers’ rights as regards
switching service providers.
Finally, the provisions on mapping of quality of infrastructure, will have a positive effect on
consumers, as they foresee the publication of these data. Consumers and businesses will therefore be
enabled to know in advance the status of connectivity (by means of line-specific tests and not by
headline speed) in a given area. This will be useful for instance when setting up a new business or
relocate an existing one or when moving to a new house with additional effects in terms of house
prices, repopulation, relocation of economic activity which in turn will drive more demand for
connectivity.
6.4.4.2 Spectrum and consumers
While the spectrum options do not directly impact on end-consumers /citizens, greater and faster 4G
and 5G coverage will enable consumers across the Single Market to benefit from advanced wireless
data services and innovative applications resulting in particular from the deployment of 5G . These
applications are likely to cover sectors as diverse as e-health , automotive / transportation and utilities
, all of which potentially affect a large share of EU citizens. In addition, common methods for
determining coverage obligations and improved connectivity across the DSM will contribute to
369
See SMART 2015/0002
370
See SMART 2015/0002 – also discussed in interim presentation slides
http://www.wik.org/fileadmin/Konferenzbeitraege/2016/Public_Workshop_April/Public_Workshop_slide_presentation.pdf
371
Article 30(5) Universal service and User Rights Directive
253
reducing social inequalities (e.g. by fostering digital inclusion). Finally, the introduction of 5G
services is likely to create a significant number of jobs (estimated at 2.39m across the EU)
6.4.4.3 Universal service and consumers
The preferred option for universal service is likely to have positive implications for end-users (and
particularly consumers) by reducing the number of unconnected households (currently 20% to 30% of
households), especially in rural and remote areas, where cost is the main reason for not subscribing.
This would allow for an improved access to essential e-services (eGovernment, VoIP, ebanking etc)
and would enhance citizens’ social participation and their exercise of fundamental rights, for instance
right to information, right to conduct business and right to education. For vulnerable groups of
consumers (those on low incomes, elderly, those that are less mobile or less able to leave home due to
carer responsibilities), affordable broadband is likely to reduce social isolation, improve sense of
community and promote social inclusion.
6.4.4.4 Services and consumers
Suggested measures focussing on potential bundling related lock-in problems and other measures
supporting transparency and switching will support end-users’ protection and freedom of choice
which will have a positive impact in terms of affordability and/or quality for the end-user. People with
a preference for privacy, confidentiality and/or security are more likely to be included in participating
in popular and innovative communication networks. The options for consumers to reach PSAPs
(when technically possible) will increase, however, while only a few OTTs seek to interconnect with
the numbering regime, the impact is limited.
Although the number of rules dealing with sector specific consumer protection would reduce, this
would not be at the expense of consumer protection. Rules are abolished only if respective consumer
issues are sufficiently protected by horizontal rules and/or if they are sufficiently protected by
competitive constraints imposed on market players.
6.4.4.5 Governance and consumers
Changes to governance will not impact consumers directly, although consumers will indirectly benefit
from greater connectivity, cross-border entry and competition that may result from more effective co-
ordination at EU level.
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6.4.4.6 Overview table
Table 24 - Practical implications of preferred options for consumers
Changed obligations Practical implications Costs
Access - Greater infrastructure competition
focus involving duct access,
symmetric rules, incentives for co-
investment, long-term commitment
- Potential for longer contract duration
for connectivity
- Obligations to publish QoS mapping
data
- Greater access to and choice in high quality
broadband connectivity
- Improved affordability for fibre connections through
defraying connection charge
- Greater transparency over quality of service
- na
Spectrum - Faster access to spectrum
- Greater use of general authorisations
rather than individual licenses
- Greater availability and innovation in services
relying on 5G and future generation wireless
technologies
- Accelerated fast mobile broadband
- na
Services
and
numbering
- Equivalence in approach to ECS and
OTT providers offering ostensibly
equivalent services
- Measures to reduce bundling-related
lock-in
- Interoperability, emergency service
access and portability requirements
for OTT interconnecting with E164
- Less obligations regarding ECS, but
More obligations regarding IAS
 Transparency
 QoS
 Switching
- Greater predictability and trust amongst users of
ECS and OTT due to extended privacy and security
measures
- Increased ease of switching in relation to bundled
offers
- Greater end-to-end connectivity and access to
emergency services when using OTT
interconnecting with E164
- Improved transparency concerning IAS
- Potentially less detailed obligations on some ECS,
but practical implications limited since consumer
protection would be covered by horizontal rules or
addressed through competitive markets.
- a positive impact in terms of affordability and/or
quality for the end-user
na
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USO - Focus on broadband affordability at
least at a fixed location
-Potentially improved access to affordable broadband na
Governance - Alignment of responsibility for
sectoral service regulation
- Increased ease of engagement, reduced
administrative burdens
- na
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6.4.5 Member States' authorities
6.4.5.1 MS and Governance
The proposed changes to the EU framework for electronic communications would require
transposition into national legislation, and will entail certain changes to the institutional set-up in
countries which do not already implement the revised structures and procedures as well as changes at
EU level. Specifically, at national level, NRAs remit would be subject to minimum harmonisation (to
cover inter alia market-shaping spectrum assignment issues and sector specific regulation in areas
such as consumer protection). Likewise, at EU level the preferred option would give BEREC an
expanded remit for market-shaping aspects of spectrum assignment and services alongside access, as
well as increased responsibilities including responsibility for developing implementing guidelines and
an enhanced role in the article 7a process on remedies as well as a peer review role on market-shaping
aspects of spectrum assignments. These changes may have the following implications for member
states’ responsibilities and budget.
Taking into account factors which may reduce costs as well as those which increase them, the
preferred option is projected to result in costs which are similar to the status quo (see discussion in the
detailed chapter on Governance in SMART 2015/0005). However, in a scenario where the projected
efficiencies are only partially achieved, the preferred option could entail additional costs of around
€5.5m across the EU, with costs varying for different countries. The implications of the adapted
governance structure on member states’ responsibilities and budget are described in more detail
below.
6.4.5.1.1 National level
An important change at national level will be the allocation of responsibilities in the field of consumer
protection and spectrum awards design under the framework to those NRAs372
which do not currently
have such responsibilities. This affects a subset of member states.373
If it entails a transfer of
responsibilities for existing tasks, cost implications may not be significant.
The preferred option also entails a requirement to ensure appropriate resourcing for NRAs both to
conduct their duties at a national level, and contribute to the expanded remit of BEREC.
Additional expenses are expected to vary between member states, depending on the current resourcing
available to the NRAs, but across the EU overall additional expenses for the resourcing of NRAs are
expected to be minimal.
Based on an additional 20FTE from NRAs across the EU contributing to BEREC (in addition to the
current estimated 49FTE),374
and a 50% increase in contributions from national authorities375
to EU
spectrum co-ordination (concerning the design of auctions and market-shaping measures), the
increased cost to NRAs for BEREC contribution is estimated at €2m in the EU 28 under the preferred
option.
Certain NRAs may also need greater resourcing in order to adequately perform duties such as market
analyses under the revised framework including the proposed requirement for infrastructure mapping.
372
Independent National Regulatory Authorities within the meaning of article 3 Framework Directive
373
According to data from Cullen, NRAs in Denmark, Estonia, Latvia, Malta, Poland and Spain do not currently have
responsibility for consumer protection, while NRAs in Netherlands, Spain, Cyprus and to some extent Slovakia and Portugal
do not have primary responsibility concerning regulatory aspects of spectrum management
374
Based on BEREC interview
375
Today contributions are made to the RSPG by various bodies at national level, but would under the revised framework
proposals be made by NRAs as regards spectrum auction design and market-shaping measures
257
However, as elaborated in the detailed analysis of impacts resulting from changes to the access regime
conducted under SMART 2015/0005, the additional mapping obligations are only incremental to the
advanced mapping initiatives that already exist in many Member States. Such mapping processes may
already have been developed for market analysis purposes, for the implementation of transparency
measures required under the Cost Reduction Directive (such as advance notification of civil works)
and to meet reporting obligations for identification of white areas through investment mapping before
notification of State Aid schemes. Indeed, it would be recommended for those national
administrations which have not already done so, to streamline these ‘mapping’ processes under the
remit of NRAs, which should ensure that the assessments are coherent, and may ultimately reduce
complexity and cost.
Other policy approaches such as extended market review periods and standardised wholesale
specifications for certain products with EU-level relevance, could also be expected to reduce costs for
NRAs on average.
Moreover, the introduction of greater co-ordination concerning certain aspects of spectrum
assignment, may result in reduced resourcing requirements for the management of spectrum resulting
in a reduced overall national burden associated with regulation of the electronic communication sector
at national level.
If costs for the application of non-spectrum aspects of regulation are broadly stable (taking into
account positive and negative factors), but spectrum-related resourcing could be reduced by an
average of 1FTE per member state due to greater co-ordination, the average estimated reduction in
national costs for application of the electronic communication framework as a whole would be around
€2.6m per annum across 28 Member States, but not necessarily equally distributed, since resourcing
levels vary widely.
6.4.5.1.2 EU level
As regards EU co-ordination, the reinforcement of BEREC’s responsibilities and its structure to
conform with the 2012 Common Approach will entail increased annual costs of an estimated €7m
compared with the status quo. This increased cost could be met from the EU budget376
. The preferred
option bundle may also entail increased resourcing requirements for the Commission (especially
relating to the proposed spectrum assignments peer review) with an estimated budgetary implication
of around €0.6m.
At EU level, Ministries would continue to play a role in comitology bodies such as COCOM.
6.4.5.2 MS and Services
In general, sector specific rules would be followed by the NRA and the attribution of horizontal rules
would be at national discretion. Some Member States might opt to give all consumer questions
relevant for a sector to the sector specific regulator. Options with regards to numbering and with
regards to must carry/EPG do not require actions from ministries, besides transposing new rules
(regarding the assignment of MNCs to non-MVNOs, and regarding extra-territorial use of national
numbers) into national law.
6.4.5.3 MS and Universal service
Adoption of Option 3 for universal service will have slight implications for ministries of some
Member States where ministries share the relevant competences with NRAs (for instance, in Austria,
376
Some EU agencies are partly financed by fees but no specific tasks carried out by BEREC which could be subject to a fee
paid by the beneficiaries of those tasks have been identified.
258
Estonia, Finland, France, Italy and Greece). In such countries, there will be new requirements with
regard to the definition of the scope of universal service and universal service obligations at the
national level, because Option 3 foresees only PATS and affordable broadband for the scope. Yet,
depending on the national distribution of competences, ministries may retain the task of defining
broadband at the national level (for example, by reference to specific communications services) as
well as to assess affordability. Nevertheless, flexibility of Member States will be preserved due to a
minimum harmonization at the EU level, i.e. the accessible communications services basket can be
enhanced at the national level and broadband affordability can be expanded to at least at a fixed
location. In addition, if a need is demonstrated at national level, Member States would have the
possibility to include the availability component in the universal service obligation and to maintain
services, which are currently part of USO at the respective national level (i.e. payphones and
accessory services). There is a further limitation of discretion of Member States as regards the choice
between different financing options, if public funding (as opposed to optional funding from the
industry) is mandated at the EU level.
6.4.5.4 Overview table
An overview of the impacts for member states is shown in the following table.
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Table 25 - Practical implications for Member States
Obligations Steps to be taken Costs
Access - Extension of market review periods, more
detailed reviews (including mapping),
harmonised wholesale specifications
- BEREC to develop Implementing guidelines on
adapted market analysis process and standardised
wholesale products
- Ensure adequate resourcing of NRAs to
conduct market analyses and contribute
to BEREC
Increased costs of ~€2m (+20FTE across EU28)
to support NRAs in contributing to BEREC,
some increased costs also to ensure effective
NRA resourcing where not currently the case,
but may be balanced by potential for reduced
costs from extended market reviews
Spectrum - EC to adopt implementing Decisions subject to
RSPG input and comitology
- BEREC to play role in peer review of spectrum
assignment
- Ensure adequate resourcing of NRAs to
contribute to BEREC/ RSPG
-
Some additional costs to support spectrum co-
ordination (see governance), but overall
potential saving of approx. €2.6m across EU28
for ECS spectrum management if co-ordination
reduces resourcing requirement (by 1FTE) at
national level
Services
and
numbering
- In general, sector specific rules would be
followed by the NRA and the attribution of
horizontal rules would be at national discretion.
Some MS might opt to give all consumer
questions relevant for a sector to the sector
specific regulator
- Ensure adequate resourcing of NRAs - Limited impact as the responsibilities of
NRAs in enforcing current sector specific
obligations can be downsized as a result of
the preferred option.
USO
- Defining the scope of functional internet access
- Implementing affordable universal service
NRAs already have significant
responsibilities on technical
implementation of universal service,
only a (slight) adjustment of them will
be necessary
The overall cost of specifically attributing
certain US implementation responsibilities to
NRA is likely to be neutral
Removal of sectorial funding possibility
Governance - Harmonised minimum remit for NRAs to include
consumer protection and market shaping aspects
of spectrum
- Expanded remit for BEREC to encompass
consumer protection, spectrum and alignment of
structure with Common Approach
- Peer review process for spectrum (involving
BEREC, EC)
- Transfer responsibilities for consumer
protection and market shaping aspects
of spectrum to NRAs (where not
already lying with independent NRA)
- Potential increased contribution to
BEREC and EC costs
-
Cost of transferring responsibilities between
national authorities may be limited
Estimated increased costs of reinforced EU co-
ordination ~€4.4m for enhanced BEREC, and
~€0.6m for Commission (although potential
national savings from spectrum co-ordination
described above)
260
6.4.6 National regulatory authorities (NRAs) and spectrum regulatory authorities (SRAs)
Under the preferred option bundle, NRAs will have full responsibility for implementation of
regulatory rules under the EU framework for electronic communications including those associated
with consumer protection and market-shaping aspects of spectrum assignment. This will entail an
expanded remit and associated resources for those NRAs which do not already have these
responsibilities. 377
NRAs will also need to make additional contributions to the output of an enlarged
BEREC. This may have the following practical implications.
6.4.6.1 NRAs and Access regulation
As regards implementation of the framework at a national level, the market analysis process will be
adapted to include infrastructure mapping, greater consideration of duct access and clarifications in
relation to the application of symmetric obligations, as well as co-investment and other commercial
arrangements, prior to mandating obligations for access on the basis of SMP. NRAs can already adapt
market analysis processes on a voluntary basis to reflect this approach, but will be obliged to follow
this approach in the reviews subsequent to the adoption of the revised EU framework for electronic
communications. These additional considerations – and especially mapping and the potential greater
focus on duct access and symmetric remedies may imply additional effort and resource for those
NRAs which have not already undertaken such analysis, especially in the first review process
following the application of the revised framework. However, many NRAs or regional authorities
already conduct mapping assessments thereby reducing the additional burden entailed by such an
obligation (see SMART 2015/0002 and section 2 (access) of the detailed Impact Assessment, while
the required effort in relation to duct access and symmetric remedies should be reduced in subsequent
reviews.
The preferred option also provides a role for NRAs in identifying ‘challenge’ areas, holding operators
accountable for the provision of misleading information concerning their deployment plans. This may
result in greater engagement by NRAs with the process of broadband state aid allocation, which also
involves the identification of areas in which NGA deployment is unlikely.
However, in addition to measures which may increase resourcing requirements for certain NRAs,
there are measures which are likely to reduce the effort needed. Market reviews will be required only
every 5 years as opposed to 3 years as currently,378
and the introduction of standardised wholesale
remedies for example in relation to business access, will avoid duplicate processes for the
specification of new wholesale remedies, and simplify the imposition of remedies (in cases where
such remedies would be appropriate).
NRAs will need to be effectively resourced not only to fulfil their national functions under the
electronic communications framework, but to contribute to an expanded BEREC, which will have
responsibility for the development of implementing guidelines as regards issues such as infrastructure
mapping and the development of standardised wholesale offers to support business communications.
NRAs would also contribute via BEREC to an updated article 7a process whereby a Commission veto
on remedies would be possible in circumstances where BEREC agrees.
Some of the changed requirements are likely to result in increased budgetary and resourcing
requirements for a subset of NRAs. These include obligations to ensure adequate resourcing,
responsibility for market shaping aspects of spectrum and consumer protection (where not already the
377
According to data from Cullen, NRAs in Denmark, Estonia, Latvia, Malta, Poland and Spain do not currently have
responsibility for consumer protection, while NRAs in Netherlands, Spain, Cyprus and to some extent Slovakia and Portugal
do not have primary responsibility concerning regulatory aspects of spectrum management
378
The 2014 Recommendation on Relevant Markets susceptible to ex ante regulation also involves two fewer markets than
the previous 2007 Recommendation, which should also entail reduced effort as the markets removed from the list are
progressively deregulated
261
case), and the requirement to conduct robust mapping exercises in relation to market analyses (where
not already the case). Additional contribution to BEREC would also need to be resourced.
However, many NRAs already have sufficient resourcing, scope and undertake detailed mapping, and
as discussed there are other aspects of the preferred package that may result in cost savings. Cost
implications for changes to NRA duties under the preferred option (excluding spectrum) may
therefore be considered neutral on average, although with variations amongst member states.
6.4.6.2 NRAs and Spectrum
In terms of the preferred spectrum option, NRAs would also need to have sufficient resources to deal
with the spectrum assignment selection processes and the related peer review and to engage with
BEREC accordingly. However, increased co-ordination of certain aspects of spectrum assignments at
EU level, may allow for cost savings in spectrum management to be made at national level. For
example, an estimated €2.6m could be saved across the EU, if greater spectrum co-ordination
permitted a reduction in spectrum management staffing of 1 FTE per member state.
6.4.6.3 NRAs and Electronic Communication Services
Under the preferred option, NRAs indicate that the impact on enforcement costs for consumer
protection is not a major issue. Abolishing the rules that overlap with horizontal rules would not bring
any savings in terms of the enforcement costs; either because they are currently already enforced by
competent authorities or because MS may decide to give responsibility for enforcing horizontal rules
to the NRA. Moreover, while NRAs may reduce a number of activities related to transparency and
QoS monitoring in relation to ECS, a number of these activities need to be re-introduced to enforce
similar type of obligations imposed on IAS.
The obligations imposed on OTTs that provide communications services with regards to security and
privacy may require additional activities to guide OTTs in implementing obligations (which may
include legal enforcement activities). While OTT business models are EU-wide it may require
coordination of activities at BEREC. The preferred option as regards numbering makes current
procedures with regard to extra-territorial use of numbers much more efficient. This may require an
increase of activities as it may lead to more applications for extra-territorial use of numbers.
Moreover, the ability of non-M(V)NOs to apply for MNCs may also require more resources for
NRAs. With regards to must carry and EPG, there is no impact on NRAs.
6.4.6.4 NRAs and Universal service
NRAs will be responsible for monitoring the national market evolution of functional internet access
and voice communications. NRAs will also continue to keep the tasks related to assessing the possible
unfair burden from the universal service provision and the calculation of the net costs.
An overview of the implications for NRAs is shown in the following table.
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Table 26 - Practical implications for NRAs/SRAs
Obligations Steps to be taken Costs
Access - Longer market review periods,
requirement to demonstrate retail
failure
- Infrastructure mapping
- Greater infrastructure competition
focus involving duct access, symmetric
rules, incentives for co-investment,
long-term commitment
- Standardised wholesale remedies for
business
- Implement revised market analysis
process in market reviews following
application of the framework to be
conducted on 5 yearly basis.
- Conduct infrastructure mapping
exercises (where not already
implemented)
- Investigate and where appropriate
apply measures to make duct access
and symmetric access to non-
replicable assets effective
- Include additional assessment e.g. of
co-investment, commercial offers,
prior to imposition of any additional
SMP remedies
- Implement standardised wholesale
solutions (after adoption and
following suitable period)
Difficult to precisely estimate and likely to
vary between NRAs as some may already
comply with the spirit of the preferred
option, while others require further
resourcing in order to do so.
Given balance between positive and
negative cost impacts, overall impact may
be neutral
Spectrum - Negotiate assignment criteria and usage
obligations which would form part of
EC implementing decisions
- Adopt system promoting general
authorisations over individual licenses
- Take on new responsibilities and
provide necessary resources
- Engage with spectrum advisory board
- Greater EU co-ordination in spectrum
assignment processes and licence
conditions requires additional
engagement with RSPG but may allow
cost savings estimated at ~€2.6m based
on reduction of 1FTE per SMA on
average
- Transfer of certain spectrum
competences to NRAs in countries
where not already the case considered
cost neutral
263
Services and
numbering
1. Enforcement of obligations on IAS and
ECS
2. Assist OTTs in implementing security
and privacy obligations
3. Enforcement of new OTT obligations
4. Operationalise new (more efficient
procedures) regarding roaming and
extra-territorial use
5. Clear possibility to assign numbers to
non-M(V)NOs
1. Adapt activities in enforcement of
some IAS and ECS obligations
2. Interact with OTTs, coordinate
with BEREC, legal challenges.
3. Integrate enforcement of OTT
obligations into current operations
4. Intensify cooperation between
NRA's as the relevance of cross
border aspects may increase
5. Increase resources as number of
applications may increase
 Net impact of 1 and 2 is likely zero
 Impact of 2 is mostly during a brief
transition period following
implementation of option 3. It requires
coordination with other NRAs and
may involve legal challenges.
 Impact of 4 is negligible
 4 and 5 may require some additional
resources because increased efficiency
may lead to an increase of the number
of applications (where the current nr of
applications is close to zero)
USO
- Monitoring market evolution
- Net-cost calculation
NRAs already have significant
responsibilities on technical
implementation of universal service, only
a (slight) adjustment of them will be
necessary
The overall cost of specifically attributing
certain US implementation responsibilities
to NRA is likely to be neutral
Governance - BEREC to develop Implementing
guidelines on adapted market analysis
process and standardised wholesale
products
- EC to adopt implementing Decisions
subject to RSPG input and comitology
- Double-lock veto on draft SMP
remedies under Article 7
- BEREC to play role in peer review of
spectrum assignment
- Contribute to expanded BEREC and
RSPG responsibilities
~€2m per year (for an additional 20FTE)
contributing to BEREC (over current
estimate of 39FTE) and some additional
contribution to RSPG
264
6.5 ANNEX 5 - Analytical models used in preparing the impact assessment.
6.5.1 Modelling the gains from intervention
The impact of the preferred policy options is estimated quantitatively using a mix of econometric and
computable general equilibrium (CGE) techniques. The algorithm for performing the impact evaluation
is presented very generally in the figure below. As a first step, the evaluated impact in terms of
effectiveness and efficiency of the proposed policy measures is translated into quantitative (where
possible) key performance indicators (KPIs).
To provide a link between the KPIs and the macroeconomic framework, econometric estimates of the
effect of the indicators on certain macroeconomic variables are performed. These are complemented by
other estimates, based on relevant economic literature. Finally, the evaluated impacts are fed into the
CGE modelling framework as an input shock and the effects are multiplied and spread across the entire
economy through the model system of equations. The impact is evaluated quantitatively by means of
comparison of a baseline (largely extrapolation-based) and relevant alternative scenarios for the
preferred policy options in each of the considered policy areas.
The choice of a CGE modelling framework for the estimation of the macroeconomic gains from
intervening is justified by the suitability and widespread use of this type of models for evaluation of the
impact of policy interventions. As the behaviour of various economic agents, such as consumers and
different businesses, is explicitly modelled, this framework provides also estimations on the impact of
the evaluated changes on different types of stakeholders, as well as the economy as a whole (through
aggregate measures such as GDP or welfare). As the model is recursively-dynamic in its nature, it
allows us to estimate also the transition paths for the macroeconomic variables, where, for the purposes
of the current impact assessment, we have considered the cumulative impacts up to 2025.
6.5.2 Assumptions and limitations of the modelling approach
The modelling approach relies on the assumptions that the selected KPIs reflect sufficiently enough the
expected developments in each policy area and that the estimated econometric relationship with the
total factor productivity (TFP) will not change as a result of the implemented policies. The
implementation of a CGE framework is also based on the following assumptions:
▫ No change in the input-output structure of the economies modelled. As already discussed, in
the context of the current evaluation this implies that the estimated impacts are very
conservative, where there is potential for higher benefits in case of disruptive technologies and
innovations.
▫ Constant share of public investment with respect to the gross value added in the absence of
policies
265
▫ Constant share of sectorial public investment with respect to the total capital expenditures of
the government in the absence of policies
▫ Assumptions about important model parameters, which are presented in detail below in the
current macroeconomic modelling annex. They are calibrated in order to ensure a plausible
trajectory of the macroeconomic variables in the baseline.
▫ Also, in order to present estimates of the magnitude of the estimated impacts in nominal terms,
we have also adopted the assumptions that in the baseline scenario annual GDP growth in the
EU will be 2%, while employment will increase by 0.3% per annum and finally, that annual
growth in gross fixed capital accumulation will be around 5%.
More generally, it is important to note that there are limitations on what can be estimated on the basis
of the model. Specifically, we note that the implementation of the preferred policy options might have a
significant boost on innovation and ultimately lead to disruptive growth. By their definition, however,
such structural economic changes cannot be estimated ex ante. Therefore, the estimates presented
below should be treated as a lower bound on might be practically achievable in case the implemented
policies facilitate the development and application of disruptive technologies with an important
implications on a wide variety of businesses and, eventually, on the economy as a whole.
The achievement of a structurally different economic growth however will be strongly dependent on
the ability of the business to absorb efficiently and effectively new technologies and benefit to the
highest extent from the competitive advantages such technologies might provide. More generally, the
impact of the proposed policies will be also contingent on the application of relevant innovation
policies.
Finally, as a recommendation for an ex post impact assessment, a dynamic study of the behaviour of
the various businesses at firm level before and after the introduction of the proposed policy changes in
the e-communication regulatory framework and the respective legislative and institutional setups might
provide useful insights. Also, if feasible, a large scale study with richer regional specifications might
have high value added, as territorial variations might prove significant.
6.5.3 Impact of the proposed policy options on the KPIs
6.5.3.1 Access
The economic literature recognizes the positive effect of improved broadband access and uptake for
achieving higher productivity and economic growth. Policy options in this domain relate to measures
fostering the adaptation of the existing infrastructure to be 'fibre-ready' and provide stimulus for the
development of the single market.
While the implementation of the policy options will be associated with significant CAPEX costs and
transition periods, they should also lead to higher-speed broadband access and improved business and
consumer climate.
6.5.3.2 Spectrum
As pointed out in the relevant section, spectrum has important implications on the deployment on
mobile and fixed wireless networks, as well as on mobile competition, thus on the quality and prices of
the services provided. Policy options, related to spectrum consist mainly of different degree of
harmonization (more or less binding rules) of the regulatory framework on spectrum management,
ranging from maintenance of the current status quo to full harmonization.
The enhanced harmonization of the spectrum regulations should lead eventually to higher speed due to
realized economies of scale and investments and improved transparency and certainty for the end
consumers.
266
It will, however, also lead to higher regulatory costs and various implementation-related expenditures.
It will require a certain transition period and, in case of higher harmonization, will reduce the flexibility
of the national authorities to conduct policies.
6.5.3.3 Services
Electronic communication services regulations need to be streamlined to level the playing field for all
market participants, while ensuring the safe and continuous provision of the services. Various policy
options are being considered, related mainly to identification of redundant regulations and/ or extension
of some of the existing rules to all market participants and specification of the role of the National
Regulatory Authorities and of BEREC.
The implementation of the envisaged measures might cause some additional administrative costs but
should in the end promote competition in the sector and, at the same time improve the business climate
through optimized regulation. In the end consumers are expected to benefit from higher quality and
more securely provided e-communication services.
The problem with the must carry and EPG is also related to the provision of e-com services. However,
the regulation of the access of public service broadcasters to online platforms falls out of the E-
communication regulation and will not be considered in the current impact assessment.
6.5.3.4 Numbering
The problem with the numbering is closely related to the observed trend of expansion of the M2M
applications and possible negative implications of solutions implemented only at national level. The
policy options considered are related to the establishment of a common basis for extra-territorial use of
national numbers throughout the entire EU and the use of M2M across borders.
Implementation costs for some of the policy options considered might be significant, but they should
eventually lead to a boom in the development of M2M applications and, thus of innovations and
economic growth.
6.5.3.5 Universal Services
Universal services have important social impacts and therefore it is essential to ensure that their scope
and coverage is aligned with the societal and technological developments. The policy options
considered in this respect comprise of exclusion of certain services from the US scope, which have
become redundant (payphones, directories and directory enquiry services), inclusion of broadband
affordability and, possibly, availability and, thirdly, adjustments in the pool of US contributors.
Optimizations in the scope of the universal services and contributors will enhance efficiency and
effectiveness in the provision of these services, leading possible to lower financial burden for the
contributors and better alignment of the US with the current technological, societal and economic
developments in the EU.
6.5.4 Impact of the KPIs on some macroeconomic variables
The literature review of the impact of the various policy areas considered under this study, shows a
multitude of studies assessing the effect from broadband access and uptake and some evidences on the
impact of 4G on economic growth, productivity and employment. Estimations of the macroeconomic
impact of high-speed broadband are however still limited in number and scope.
As can be inferred from the introductory section to this annex, the approach followed consists of
estimation of the impact mainly on total factor productivity (TFP) and predominantly the effect from it
to the other macroeconomic variables through the CGE model. To this end, we have constructed a two-
267
factor productivity function, where economic growth is explained by the contribution of capital (public
and private) and labour (skilled and unskilled). Contrary to the typical estimation of the TFP as a
residual in the production function, we have adopted the approach, used in GSMA and Deloitte
(2012)379
, where Stochastic Frontier Analysis (SFA) is used to proxy total factor productivity as a
measure of efficiency. The main advantage of this approach to TFP estimation is that it allows for
decomposition of the TFP into two analytically useful components: 1. technical progress over time and
2. different efficiency levels, measured as deviations of the respective economies from the (maximum
achievable) production frontier.380
The results of the SFA estimation are given below.
As a first step, TFP was estimated by regressing GDP in volumes against the two typical production
factors – capital (𝐶𝐴𝑃) and labour (𝐸𝑀𝑃𝐿), respectively measured as cumulative investments,
assuming a 10% depreciation rate, and employment. The remaining variables take into account the
economic crisis after 2008 (dummy variable 𝑑𝐶𝑅𝐼𝑆𝐼𝑆), evolution of the GDP in time (𝑇𝑖𝑚𝑒), i.e.
technical progress, a constant (Intercept) and country fixed effects. The parameter 𝐺𝑎𝑚𝑚𝑎 ∈ [0,1]
estimates the proportion of total residual variance, which is attributed to inefficiencies. Meanwhile
𝑠𝑖𝑔𝑚𝑎𝑆𝑞 measures the sum of the variances in the error components (inefficiency and statistical
noise).381
Variable Estimate Significance Variable Estimate Significance
(Intercept) 3.37 *** FI 0.07 *
log(CAP) 0.09 * FR -0.10
log(EM) 0.97 *** HR -0.83 ***
dCRISIS -0.03 *** HU -0.89 ***
sigmaSq 0.00 ** IE 0.27 ***
Gamma 0.80 *** IT -0.24 **
Time 0.13 *** LT -0.78 ***
BE 0.09 *** LU 1.04 ***
BG -1.62 *** LV -0.87 ***
CY -0.24 . PL -0.98 ***
CZ -0.72 *** PT -0.63 ***
DE -0.26 * RO -1.35 ***
DK 0.22 *** SE 0.13 ***
EE -0.72 *** SI -0.46 ***
EL -0.39 *** SK -0.68 ***
ES -0.35 *** UK -0.22 *
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
The results indicate much bigger elasticity of output to labour (0.97) as compared to capital (0.09) and
show returns to scale, which are close to constant (the sum of the coefficients in front of capital and
labour inputs is 1.06). If estimated only on the subset of Eurostat data for 2000-2007, the elasticities of
output to capital and labour are much more balanced, standing respectively at 0.45 and 0.46. The
estimation results show a positive time trend in national income with an elasticity of 13% and the
downturn from 2008 is estimated to provide a negative contribution to GDP of around 3%.
379
GSMA and Deloitte, 2012, "What Is the Impact of Mobile Telephony on Economic Growth?", Report prepared for the
GSM Association, available at: http://www.gsma.com/publicpolicy/wp-content/uploads/2012/11/gsma-deloitte-impact-
mobile-telephony-economic-growth.pdf .
380
The method and data used are described more in length below in the chapter devoted to the Elaboration of the
methodology.
381
Technically, 𝜎2
= 𝜎𝑢
2
+ 𝜎𝑣
2
and =
𝜎𝑢
2
𝜎2
⁄ , where are the variances in the assumed distributions of the inefficiency (𝑢) and
statistical noise (𝑣) components in the error term.
268
The mean efficiency for the dataset, including 28 EU MS in the period between 2000 and 2015 stands
at 0.88, where fixed effects are calculated negative mostly for the converging economies (highest for
Bulgaria and Romania) and positive for the highest income countries in the EU – Luxembourg and
Denmark, but also for Ireland.
Once efficiencies are estimated, they are used as proxy for the total factor productivity and are
regressed against:
▫ Heritage index of economic freedom ℎ𝑒𝑟𝑖𝑡𝑎𝑔𝑒𝑟𝑡, which is mostly used as a proxy of the
regulation effectiveness and efficiency and, more generally of the business and consumer
climate.
▫ 4G mobile broadband coverage (as % of all households) 𝑚𝑏𝑏_𝑙𝑡𝑒𝑐𝑜𝑣𝑟𝑡
▫ Average broadband connection speed 𝑠𝑝𝑒𝑒𝑑𝑟𝑡
Finally, as no data for Croatia was available for the speed of connection, it was excluded from the
estimation panel.
Variable Estimate382
Significance Variable Estimate Significance
log(heritage) 0.225 *** HU -1.176
log(mbb_ltecov) 0.003 ** IE -1.210
log(speed) 0.021 *** IT -1.099
AT -1.169 LT -1.285
BE -1.166 LU -1.187
BG -1.207 LV -1.253
CY -1.142 MT -1.160
CZ -1.216 NL -1.191
DE -1.174 PL -1.212
DK -1.193 PT -1.153
EE -1.234 RO -1.263
EL -1.091 SE -1.200
ES -1.153 SI -1.163
FI -1.179 SK -1.224
FR -1.137 UK -1.191
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
The estimation results indicate significant impact of economic freedom of the total factor productivity
(elasticity of 0.225), including also important governance aspects. Higher broadband speed and
expansion of the LTE mobile broadband also turned out to be statistically significant, though their
coefficients are much lower - 0.021 and 0.003 respectively.
382
The country fixed effects are all negative due to the lack of constant in the equation specification.
269
In addition to the results for the entire economies, sectorial production functions were also estimated.
As sectorial breakdowns for Croatia were not available on the Eurostat website, it was excluded from
the panel. The table below summarizes the results of the estimates performed for the seven sectorial
aggregates that are incorporated in the CGE model for estimation of the macroeconomic impact383
.
Variable
(in logs)
TOTA
L
AGR LOWMA
N
HIGHMA
N
ENERG
Y
heritage 0.225 **
*
0.300 0.058 -0.163 * 0.107
mbb_lteco
v
0.003 ** 0.001 0.005 ** 0.003 ** -0.006
speed 0.021 **
*
-
0.078
**
*
0.032 **
*
0.035 **
*
-0.136 **
*
Variable
(in logs)
TRANS TELECO
M
ECOM SER
heritage 0.0000002 -0.123 -0.412 * 0.141 .
mbb_ltecov -
0.0000000
4
** -0.020 0.012 **
*
0.003 *
speed -0.0000009 **
*
-0.139 0.072 **
*
0.012 **
Sector abbreviations: AGR – agriculture, LOWMAN - low-tech manufacturing, HIGHMAN - high-
tech manufacturing, ENERGY - energy sector, TRANS - transport, TELECOM - telecommunications,
ECOM - other electronic communication-related services, SER - Other services.384
Based on these estimates, we have assumed the following coefficients for the impacts in the CGE
model, taking into account both the statistical significance of the coefficients and the logics behind the
estimates. The table below summarizes the elasticities of the total factor productivity to the KPIs, used
for the subsequent estimations:
Variable
(in logs)
AG
R
LOWMA
N
HIGHMA
N
ENERGY TRANS
TELECO
M
ECO
M
SER
heritage
0.22
5
0.225 0.225 0.225 0.225 0.225 0.225
0.22
5
mbb_lteco
v
0.00
3
0.005 0.003
-
0.0000000
4
-
0.0000000
4
0.003 0.012
0.00
3
speed
0.02
1
0.032 0.035
-
0.0000009
-
0.0000009
0.072 0.072
0.02
1
383
Estimates in grey are not statistically significant.
384
The definition of the sectors is discussed in length in the section, describing the structure of the CGE model.
270
As estimated, the impacts of connection speed and 4G mobile broadband coverage on the sectorial total
factor productivity is higher in the e-communication services (ECOM and TELECOM) and
manufacturing and much less – in transport and energy sectors.
6.5.5 Overall macroeconomic, social and environmental impacts
Having established a link from the policy options, through the KPIs to some macroeconomic variables
and parameters allows us to perform an overall macroeconomic impact assessment. To this end, we
have constructed a CGE model, which is run for the three modelled economies (Germany, Czech
Republic and Bulgaria), selected based on a cluster analysis, taking into account the digital and
economic development and the size of the economies.
Each of these three economies is inhabited with a government, eight production sectors and a single
representative household, maximizing its utility from consumption, skilled and unskilled labour and
savings, given its budget constraint. The economic sectors comprise of agriculture, low-tech
manufacturing, high-tech manufacturing, energy, transport, telecommunications, other electronic
communication-related services and other services. Each of them maximizes its profit, based on its
production technology. The government is formalized through its budget constraint. The link with the
foreign sector is made through the invest-savings balance. Armington and constant elasticity of
transformation aggregation functions are used to determine the quantity and relative price of the
imports and exports.
The model is static in its essence, as all optimizing agents choose their optimal values only for the
current period. However, the model features also some transitional dynamics, defined through the
capital accumulation equation and an equation for total factor productivity growth.
The quantitative modelling approach can be schematically presented as in Figure 1. The next Figure 2
presents an overview of the impact mechanisms of the preferred policy options. To simulate the impact
of the preferred policy options on the economy, shocks to the TFP have been introduced. Their
magnitude is estimated based on the expected size and timing of the of the respective KPIs and their
identified econometric relationship with TFP. Most of the shocks were introduced in 2020 and had
impact already in 2021. Exceptions include accelerated fibre scenario, where impacts begin to be felt in
2019 as market analysis processes are voluntarily adapted in anticipation of the modification of the
electronic communications framework and the 5G spectrum scenario, where impacts are not
experienced before 2021, on the expectation that 5G technologies will not be ready for service before
that date.
271
Figure 30 - Overview of the quantitative modelling framework
Impact on the well-being of the society as a whole
Econometric
model
Economic
sectors
EU regulatory frame-
work for electronic
communications
Country-specific
developments and
regulations
Households
Government
T
a
x
e
s
Foreign sector
Taxes
Unskilled and skilled labour
Exports
Imports of investment goods
and raw materials
Imports of consumer goods
Transfers
Key policy
indicators
Intervention
logic Impact
on public spending
Intermediate
consumption
Impact on consumer preferences
Final consumption
Savings-investment
account
Government
budget balance
Household savings
F
o
re
ig
n
sa
vi
n
g
s
Investment
I
m
p
a
c
t
o
n
c
a
p
it
a
l
d
e
m
a
n
d
I
m
p
a
c
t
o
n
T
F
P
272
Figure 31 - Overview of the impact mechanisms of the preferred policy options.
Direct macroeconomic
impact
Second-round macroeconomic benefits
Immediate benefits
Policy options
Costs
Higher speed
Increased
competition
Productivity
gains
Economic
growth Social impacts
Environmental
impacts
(+)
(+)
Public
investments
Exports
(+)
(+)
(
+
)
Access
Spectrum
Sevices
Numbering
Universal
services
Public admin
expenditures
Private
investments
Improved
quality of
services
Improved
business
climate
Impetus on
innovations
Social benefits
Public current
and capital
expenditures
Private
investments in
TELECOM
and ECOM
sectors
Consumer
utility from
ECOM and
TELECOM
services
Public
expenditures
(+)
Government
balance
(
-
)
Public
revenues
(+)
Savings-
investment
balance
(-)
(
+
)
(-)
Imports
(
-
)
(+)
Private
consumption
Employment
Competitive
advantages
+ Sectoral
changes
Preferred policy option
273
6.5.6 Simulation results, based on the preferred policy scenarios
Access
The impacts on broadband download speed from the implementation of the preferred policy
options with respect to access are summarized in Figure 3 below:
Figure 32 – Broadband speed increases under different scenarios
Under both alternative policy scenarios, connection speed growth is expected to exceed that of
the baseline, respectively by an average of 3 percentage points in the accelerated fibre scenario
and twice higher in the all fibre scenario. In the accelerated growth scenario deviations in
connection speed growth amount to 6 p.p. in 2025. In the all fibre scenario, the gap in growth
increases to 22 p.p. by 2025.
In the accelerated fibre scenario, the impact on GDP is expected to be positive by 0.06%
already in 2021 and deepen to 0.54% by 2025. The impact will not be evenly spread across all
EU economies. Specifically, the middle group of countries will benefit most from the proposed
policy changes, while the group of less economically and digitally advanced economies is
expected to gain slightly less than the average from the increase in average connection speed.
274
From the supply side, private capital increases are expected to have the highest contribution to
economic growth, while the increases in labour will be modest (around 0.01%). Generally,
employment is expected to decline somewhat in the TELECOM sector, and, as this sector uses
skilled labour more intensively, overall growth in skilled labour is projected to be marginally
lower as compared to the unskilled labour. In the less digitally advanced economies the
replacement of the labour factor with higher productivity is expected to be more intensive and
therefore in these economies the overall employment growth will be marginal as employment is
expected to decline slightly also in the manufacturing sectors.
275
Figure 33 – Production factors
In terms of GDP composition by final use components, expectedly the highest deviation in the
alternative scenario as compared to the baseline will be recorded in investments, as they are
typically more volatile and respond more quickly to positive economic developments. In 2025
the cumulative deviation of investments against the baseline will amount to 0.9%.
Figure 34 – GDP by final use components
In contrast, consumption growth will be much more moderate - the deviation will amount to
0.4% in 2025. With respect to the external sector, exports will increase faster than imports and
thus the current account will improve.
276
Figure 35 – Current account balance, % GDP
As the largest impact from higher broadband connection speed was estimated in the electronic
communication sectors, they also exhibit the highest growth in value added, where other e-com
services increases slightly more than telecom due to the very low share of the former in total
gross value added. Manufacturing is also expected to benefit largely from higher connection
speed, while the impact on transport and energy will be much lower, around 0.2% in 2025, thus
contributing to the achievement of greener and more sustainable economic development.
Figure 36 – Gross value added by sectors in 2025
With respect to other important macroeconomic variables, relative prices of the e-
communication sectors are expected to decline, thus exercising downward pressure on inflation.
277
Finally, it should be noted that the realization of the preferred policy options is also associated
with some costs. For access policies, it has been estimated that the achievement of the
accelerated fibre scenario is associated with a need for investment of EUR 92 bn for EU 28. If
we assume that half of it is covered with public resources and financed through foreign
borrowing and if it is divided equally in the years between 2018 and 2020, than this public
spending is estimated to have an initial positive impact on GDP of around 0.1% from the
demand side. However it will also imply worsening of the government budget balance and the
external balances of the EU member states. This public spending is not expected to have a
significant long-term impact on employment or consumption. In the much more ambitious
scenario, where a total of EUR 200 bn is to be invested, the impacts are similar only scaled up
around 2 times.
In case all investment costs are covered out of public resources, GDP grows by around 0.22% in
2018-2020, but afterwards budget and consumption restrictions induce small declines of GDP as
compared to the baseline scenario. In the initial years of public investment, it also induces
private capital formation, where the latter increases by 0.2% and 0.3% respectively in 2019 and
2020 as compared to the baseline.
In the all fibre scenario, macroeconomic developments are largely the same, only scaled
upwards. The deviation in GDP from the baseline in 2025 will be as high as 0.95%, fuelled by
larger investment by 1.5% and 0.7% expansion in consumption as compared to the baseline.
Meanwhile, higher exports as compared to imports will determine the improvement in the
current account balances. In this scenario, employment in the less advanced economies in the EU
is already expected to decline on the account of lower job creation in the e-communication and
manufacturing sectors.
Table 27 - Percentage deviations in the all fibre scenario as compared to the baseline in the main
macroeconomic variables.
2021 2022 2023 2024 2025
GDP 0.07% 0.23% 0.45% 0.67% 0.95%
Public capital 0.00% 0.00% 0.02% 0.04% 0.08%
Private capital 0.00% 0.01% 0.03% 0.07% 0.12%
Skilled labour 0.00% 0.01% 0.02% 0.02% 0.02%
Unskilled labour 0.00% 0.01% 0.02% 0.03% 0.02%
Investment 0.15% 0.43% 0.80% 1.15% 1.54%
Consumption 0.05% 0.16% 0.31% 0.46% 0.67%
Export 0.10% 0.30% 0.58% 0.87% 1.23%
Import 0.08% 0.25% 0.48% 0.72% 1.00%
Current account 0.26% 0.71% 1.27% 1.78% 2.39%
278
Table 28 - Percentage deviations in the all fibre scenario as compared to the baseline in the gross
value added in 2025.
Gross value added Advanced Intermediate Less advanced
AGR 0.87% 0.88% 0.80%
ECOM 2.81% 2.46% 3.14%
HIGHMAN 1.36% 1.39% 1.15%
LOWMAN 1.08% 1.04% 0.88%
SER 0.77% 0.77% 0.74%
TELECOM 2.39% 2.47% 2.49%
TRANS 0.43% 0.45% 0.34%
ENERGY 0.32% 0.18% 0.39%
279
Spectrum
The impacts from the implementation of the preferred policy options with respect to enhanced
mobile broadband aspects of 5G385
are summarized in the table below:
Table 29 – Impact from the preferred policy option
Year EU eMBB 5G Coverage under
baseline
Estimated eMBB 5G coverage under
Option 3
2021 8.3 70.0
2022 27.0 93.3
2023 59.1 100.0
2024 79.4 100.0
2025 85.9 100.0
2026 89.0 100.0
2027 92.0 100.0
2028 95.0 100.0
2029 98.0 100.0
2030 100.0 100.0
In the 'no change' policy scenario full eMBB coverage will achieved only in 2030, while under
Option 3, a 100% coverage might be expected to be established in only 4 years (from 2020 up to
2023). If we assume that the impact on total factor productivity from eMBB aspects of 5G will
be of the same magnitude as that of 4G, then it will have an effect on GDP of 0.16% in 2025.
The impact will be highest in 2021, when almost 3/4 of the eMBB coverage will be realized. In
terms of variations between EU countries the intermediate and less economically and digitally
advanced countries are expected to benefit more from enhanced mobile broadband.
385
5G as a network of networks will consist in different scenarios (i) enhanced mobile broadband (eMBB) (ii) massive
machine-to-machine communications (very dense networks) and (iii) ultra-reliable and low latency networks. The
coverage requirements of two specificities of 5G networks ie density and latency, will not reach 70% of EU
population by 2020. However, as the economic gains are modelled on the gains assessed from LTE, a comparison with
eMBB is considered to be more relevant. Other aspects of 5G which support IoT may in turn unlock further disruptive
growth opportunities as discussed in the overview to the study
280
Similar to the simulations, based on access policies, faster coverage will have an important
impact on capital and a marginally positive effect on employment.
Again, gross fixed capital formation will expand most, by 1.9% in 2021 and 0.5% in 2025, while
consumption dynamics will be much smoother. In contrast to the access scenarios, in this
spectrum-related scenario import will grow slightly faster than export, leading to a nearly
balanced external sector.
E-communication sectors again will benefit most from higher eMBB coverage, this time
followed by low-tech manufacturing and the production of electricity, thermal energy and gas.
0,00%
0,02%
0,04%
0,06%
0,08%
0,10%
0,12%
0,14%
0,16%
0,18%
0,20%
2021 2022 2023 2024
Production factors
(percentage difference in the alternative scenario as compared to the
baseline)
Public capital Private capital Skilled labour Unskilled labour
1,9%
1,2%
0,7%
0,5%
0,5%
0,3%
0,2%
0,1%
0,8%
0,5%
0,3%
0,2%
0,9%
0,6%
0,3%
0,2%
0,00%
0,20%
0,40%
0,60%
0,80%
1,00%
1,20%
1,40%
1,60%
1,80%
2,00%
2021 2022 2023 2024
GDP by final use components
(percentage difference in the alternative scenario as compared to the
baseline)
Investment Consumption Export Import
281
Services – efficiency gains
The policy options in this area will have positive impact mainly on regulatory efficiency and
effectiveness in the electronic communication sectors. However the magnitude of this impact is
not directly quantitatively measurable. In order to overcome this difficulty, we have used the
results of a study by Haidar (2012)386
, which indicates that impact of a more significant
regulatory reform on the growth rate of GDP per capita is 0.15% on average. We have assumed
that such an impact will be channelled through improved TFP in the e-communication sectors
and by means of iterations estimated that an average increase in GDP growth rate of 0.15
percentage points is associated with a 4% annual increase in TFP in the TELECOM and ECOM
sectors, starting from 2020.
Under this scenario, GDP is expected to be by 0.74% higher than the baseline in 2025. However,
this scenario will be associated with somewhat lower investment (or postponed consumption) at
the expense of higher current consumption growth. Due to the fact that services policies will
have direct impact on the TFP in the e-communication sectors only, it is associated with higher
increases in skilled labour.
Table 30 - Percentage deviations in the services scenario as compared to the baseline in the
main macroeconomic variables.
2021 2022 2023 2024 2025
GDP 0.13% 0.27% 0.42% 0.57% 0.74%
Public capital 0.00% 0.01% 0.03% 0.07% 0.11%
Private capital 0.00% 0.01% 0.01% 0.01% -0.02%
Skilled labour 0.01% 0.04% 0.08% 0.14% 0.20%
Unskilled labour 0.04% 0.07% 0.09% 0.11% 0.13%
Investment 0.20% 0.30% 0.29% 0.12% -0.30%
Consumption 0.12% 0.25% 0.40% 0.55% 0.70%
Export 0.12% 0.26% 0.43% 0.63% 0.87%
Import 0.08% 0.16% 0.24% 0.29% 0.31%
Current account, % GDP (ppt) 0.02 0.07 0.14 0.25 0.40
386
Haidar J. I. (2012) "The impact of business regulatory reforms on economic growth", Journal of The Japanese and
International Economies, 26 (2012), pp. 285-307.
0,00%
0,05%
0,10%
0,15%
0,20%
0,25%
0,30%
0,35%
0,40%
0,45%
0,50%
Advanced Intermediate Less advanced
Gross value added by sectors in 2025
(percentage difference in the alternative scenario as compared to the
baseline)
AGR ECOM HIGHMAN LOWMAN SER TELECOM TRANS ENERGY
282
The variation in the responses of the EU MS economies is larger in this scenario as well. The
groups of less economically and digitally advanced economies, in particular, stands out as this
scenario estimates a relatively higher increase in public investment in these economies, crowding
out private investment. Also, in this cluster of EU MS the expansion in skilled labour is expected
to outweigh significantly that of the unskilled labour.
Table 31 - Percentage deviations in the services scenario as compared to the baseline in
investment, labour and consumption by clusters of EU Member States in 2025.
6.5.6.1 Cumulative impact
Generally, for all assessed scenarios GDP is expected to increase compared with the baseline,
with an anticipated GDP uplift of 0.16% in 2025 for spectrum policies compared with the
baseline and a GDP uplift of 0.54% for access policies based on the more conservative
‘accelerated fibre’ scenario.
The cumulative impact up to 2025 is expected to be significant due to the expected supply side
impacts, which are built up over time. More positive economic developments will have a
significant impact on investment, while the effects on consumption with be more moderate,
along with the life-cycle hypothesis for consumption smoothing. In the access scenarios the
effects are larger for the intermediate and the most economically and digitally advanced
economies in the EU, which have the potential to capitalize best the benefits from applying the
preferred policy options, and for the least advanced economies in the EU, which start from a
lower base. In the spectrum scenario, intermediate economies are expected to perform better
against the remaining EU countries, as 5G will most probably induce more investments both in
the e-communication sectors and manufacturing.
We also find some positive employment impacts from access and spectrum policies (around
0.02% higher than the baseline), while the efficiency gains potentially driven by reforms
fostering digital services, might result in increases in employment of up to 0.15% compared
to status quo.
-8,00%
-6,00%
-4,00%
-2,00%
0,00%
2,00%
Public investment Private investment Skilled labour Unskilled labour Consumption
Investment, labour and consumption by types of EU economies in 2025
(percentage difference in the alternative scenario as compared to the baseline)
Advanced Intermediate Less advanced
283
Table 32 - Impact of assessed scenarios on GDP, consumption, investment and employment
Source: Ecorys
6.5.7 Earlier literature on modelling e-communications and ICT
Overall, the economic literature acknowledges that e-communications and ICT are an important
driver of growth in the long-run, mainly through higher productivity. EC White paper on
"Growth, competitiveness, employment: The challenges and ways forward into the 21st
century"387
and US International Trade Commission study on the "Global competitiveness of
U.S. Advanced Technology Manufacturing Industries"388
already in the early 1990s draw
attention to the development of the information society as a key driver of growth and
competitiveness. Later studies, such as a study by OECD on "Globalization of Services and
Jobs"389
and an UN paper from 2007390
also indicate that efficient IT has become crucial
infrastructure for improvement of the tradability of certain services and for long-term economic
development.
Recently, there has been a multitude of studies, which either estimate the trends in the
development in e-communication services or the socio-economic benefits from higher
connectivity. The first group of studies incorporates either the construction of some measures of
digitalization or other indexes for IT readiness or use, like the 2013 "Global Information
Technology Report 2013: Growth and Jobs in a Hyperconnected World", edited by Beñat
387
http://europa.eu/documentation/official-docs/white-papers/pdf/growth_wp_com_93_700_parts_a_b.pdf
388
https://www.usitc.gov/publications/332/pub2434.pdf
389
http://www.oecd.org/site/tadicite/50287724.pdf
390
United Nations, 2007, "Technology, globalization, and international competitiveness: Challenges for developing
countries" in Industrial Development for the 21st Century",
http://www.un.org/esa/sustdev/publications/industrial_development/full_report.pdf
GDP Consumption Investment Employment
2021 2025 2021 2025 2021 2025 2021 2025
Accelerated fibre
Advanced 0.06% 0.54% 0.04% 0.38% 0.14% 1.11% 0.00% 0.03%
Intermediate 0.07% 0.57% 0.04% 0.35% 0.12% 0.66% 0.01% 0.02%
Less advanced 0.06% 0.52% 0.04% 0.40% 0.08% 0.22% 0.00% -0.03%
EU28 0.06% 0.54% 0.04% 0.38% 0.13% 0.89% 0.00% 0.01%
All fibre
Advanced 0.08% 0.96% 0.05% 0.66% 0.16% 1.92% 0.00% 0.04%
Intermediate 0.08% 1.00% 0.04% 0.62% 0.14% 1.09% 0.01% 0.03%
Less advanced 0.07% 0.91% 0.05% 0.71% 0.10% 0.34% 0.00% -0.05%
EU28 0.07% 0.95% 0.05% 0.67% 0.15% 1.54% 0.00% 0.02%
Services-efficiency gains
Advanced 0.11% 0.62% 0.10% 0.63% 0.30% 1.38% 0.02% 0.14%
Intermediate 0.11% 0.67% 0.05% 0.49% 0.62% 3.06% 0.01% 0.21%
Less advanced 0.22% 1.25% 0.23% 1.12% -0.44% -8.80% 0.06% 0.16%
EU28 0.13% 0.74% 0.12% 0.70% 0.20% -0.30% 0.02% 0.15%
Spectrum
Advanced 0.00% 0.16% 0.00% 0.12% 0.00% 0.48% 0.00% 0.01%
Intermediate 0.00% 0.23% 0.00% 0.14% 0.00% 0.74% 0.00% 0.04%
Less advanced 0.00% 0.16% 0.00% 0.12% 0.00% 0.24% 0.00% 0.01%
EU28 0.00% 0.16% 0.00% 0.12% 0.00% 0.47% 0.00% 0.02%
Cumulative
Advanced 0.17% 1.32% 0.14% 1.13% 0.44% 2.91% 0.02% 0.18%
Intermediate 0.17% 1.46% 0.09% 1.00% 0.73% 4.33% 0.02% 0.26%
Less advanced 0.28% 1.93% 0.28% 1.66% -0.36% -8.62% 0.06% 0.13%
EU28 0.19% 1.45% 0.16% 1.22% 0.33% 0.96% 0.03% 0.18%
284
Bilbao-Osorio, Soumitra Dutta and Bruno Lanvin391
, or some market analysis, such as the Telco
2015 report392
.
The aforementioned 2013 Global Information Technology Report, in addition to the provision of
various measures of technological readiness and digitalization, also identifies a significant
favourable impact of digitalization of GDP per capita and for curbing unemployment. Sectorial
impacts in the same paper show profound and accelerating effects of digitalization, which lead to
modification of the business models and lower barriers to entry, enhanced communication and
service provision to customers, optimization of the production process and streamlined
operations of the companies. The Global IT report from 2013 also provides evidence of the 3G
penetration on economic growth, as well as on the social and economic impacts the electronic
healthcare records.
Based on the above-mentioned studies, there is a general acknowledgement of the fact that the
development of electronic communication services has a significant positive impact on trade,
productivity and GDP. More specifically, the economic literature outlines the following impacts
of the enhanced use of e-communications:
 Human capital. The impact is channelled through two mechanisms: 1. an enhanced use
of e-communications would require more skilled labour and 2. the use of e-
communications makes information more easily available and favours more flexible and
distance learning.
 Labour mobility, business costs and environment. The use of video conferences or
other means of distance communication enables individuals to work from distance and
reduces both operating costs for the respective businesses and the traffic in the transport
network.
 Disintermediation and reduced transaction costs. The use of e-communications
allows for shortening the supply chain in the provision of a large number of goods and
services.
 Social benefits, like connection of excluded regions (e.g. rural regions) and gaining
collective power (e.g. by using social media). However the effect on employment is not
always unambiguous: sometimes technological progress might lead to less intensive use
of labour or facilitate outsourcing to countries with cheaper labour.
 Introduction of new products and services.
 With the use of e-communications more time becomes available for leisure or work.
 E-communications fosters innovation.
With respect to the methodological approach to the estimation of the social, economic and
environmental impact of various policies, affecting the e-communication sector, there is a
multitude of modelling alternatives. Recently applied methods include mostly econometric
modelling, but also computable general equilibrium (CGE) models and even dynamic stochastic
general equilibrium (DSGE) models.393
391
http://www3.weforum.org/docs/WEF_GITR_Report_2013.pdf
392
Telco 2015: Five Telling Years, Four future Scenarios, IBM,
http://public.dhe.ibm.com/common/ssi/ecm/gb/en/gbe03304usen/GBE03304USEN.PDF
393
DSGEs have become a popular tool for economic modelling, but they are still limited to a highly stylized
representation of the economy due to the challenges related to their numerical solution. Taking into account the need
to design a multi-sector model for the implementation of the current impact assessment, the development of a large-
scale DSGE model will be too ambitious within the scope of this project.
285
6.5.8 Econometric modelling
Examples of the econometric modelling approach are:
 Czernich et al. (2009)394
specifying a production function, assuming that increased use of
broadband services has a positive impact of the total factor productivity in the economy.
In their estimations, however, they use instrumental variables to control for the
broadband penetration already achieved. Thus, an increase in the broadband penetration
rate by 10 p.p is estimated to contribute to annual GDP growth per capita by 0.9-1.5 p.p.
It should, however, be taken into account that the results of this study cannot be directly
used in our work, as they relate more to increased coverage, rather than to higher speed
access. Nonetheless, this study could be useful from a methodological point of view.
 Spiezia (2012)395
constructs a production function, where three types of ICT investment
are incorporated: computer, software and communication. It is then estimated
econometrically for 26 industries and 18 OECD countries for the period between 1995
and 2007. ICT investments are found to contribute to economic growth by 0.4-1 % per
annum.
 Oliner et al. (2007)396
and Jorgenson et al. (2008)397
providing an estimation of the
impact of information technologies for the productivity increases in the US by including
both IT and intangible capital in a growth accounting framework.
 Regeneris' investigation, performed in 2012 for UK's largest communication services
supplier BT also provides econometric evidence on the impact of increased broadband
speed on welfare (measured by the gross value added) and employment due to enhanced
business performance, new business creation and better home working opportunities.
 Mölleryd's398
paper builds on a model used for estimation of the social and economic
benefits from the development of an open, operator-neutral fibre network in Stockholm.
It provides useful estimates of the benefits of high-speed broadband on economic growth
and firms productivity. The study also finds evidence that high-speed broadband
networks can potentially substitute some transport services, create employment
opportunities and even provide more efficient home care services.
6.5.8.1 DSGE modelling
Seeking to account for more general macroeconomic effects from the reforms, related to the
digital agenda of the EU, Lorenzani and Varga (2014)399
augment the EC dynamic general
equilibrium model QUEST III. The estimated policies include competition and investment-
enhancing policies in the radio spectrum, enhancement of the professional e-skills, deepening of
the e-Commerce and increased fixed broadband take-up. They find a positive impact of over 1%
on long-term economic growth of the reforms that have already been implemented and potential
for additional 2.1% in case the Digital Agenda for Europe targets are achieved.
394
Czernich, N., O. Falck, T. Kretschmer and L.Woessmann (2009), “Broadband Infrastructure and Economic
Growth”, CESifoWorking Paper, No. 2861, Munich
395
Spiezia V. (2012) “ICT investments and productivity: Measuring the contribution of ICTs to growth”, OECD
Journal: Economic Studies, vol. 2012/1.
396
Oliner, S. D., D.E. Sichel and K.J. Stiroh (2007), "Explaining a Productive Decade", Brookings Papers on
Economic Activity, 1, 81-151.
397
Jorgenson, D. W., M.S. Ho and K.J. Stiroh (2008), "A Retrospective Look at the US Productivity Growth
Resurgence", Journal of Economic Perspectives, 22(1), 3-24.
398
Mölleryd G., 2015, "Development of High Speed Networks and the Role of Municipal Networks", OECD Science,
Technology and Innovation Policy Papers No. 26, OECD.
399
Lorenzani D. and J. Varga (2014) “The Economic Impact of Digital Structural Reforms”, EC economic papers
529/September 014.
286
6.5.8.2 CGE modelling
CGE models are less frequently used to study the economic, social and environmental impact of
electronic communications but they present a number of advantages in case multiple countries or
multiple sectors need to be incorporated. As a most recent example of this type of modelling,
Christensen (2015)400
presents a multi-country, multi sector dynamic computable general
equilibrium model, where ICT and R&D are imbedded in the production function.
Khorshid and El-Sadek (2012)401
also develop a CGE model with a focus on the ICT sector for
Egypt, where they base their estimations on a social accounting matrix, which aim is to capture
the impact of the ICT on the other economic sectors, as well as on the labour and capital demand
and on the income distribution. As a result, they provide estimates of the impact from four
policies – 1. Measures to increase ICT investment, 2. Policies, specifically targeted to achieve
growth in the ICT sector, 3. National training, reorientation and capacity building program
leading to an enhanced factor productivity and labour efficiency in the economy as a whole
based on advanced ICT and 4. Foreign exchange policy to promote ICT exports to the outside
world.
Finally, Moon et al. (2000)402 use the ORANI-F model, calibrated to the Korean economy, but
rather than estimating the impact of ICT, they only make projections on the structure of the
Korean economy by sectors and draw implications about the development of the ICT sector in
terms of growth, export share, composition by subsectors, etc. However, this study has the merit
of providing a reference classification of the ICT activities.
6.5.9 Elaboration of the methodology
6.5.9.1 Estimation of the production function with stochastic frontier analysis
If we take into account that the production function is defined as the function, which transforms
given inputs into the maximum output quantity, then the actual output will be either at the
production possibility frontier or below it. Therefore, the output can be estimated as a function of
the production function, taking into account also possible inefficiency and stochastic shocks403
:
ln 𝑌 = ln 𝑓(𝑥) − 𝑢 + 𝜖, 𝑢 ≥ 0
(SFA1)
where 𝑌 is the output, 𝑓(𝑥) is the production function, where the input 𝑥 is an argument, 𝑢 ≥ 0
are inefficiencies and 𝜖 is the error term. The latter equation is equivalent to
𝑌 = 𝑓(𝑥). 𝑒−𝑢
. 𝑒𝜖
(SFA2)
and allows us to define the following measure of output-oriented technical efficiency:
𝑇𝐸 =
𝑌
𝑓(𝑥).𝑒𝜖 =
𝑓(𝑥).𝑒−𝑢.𝑒𝜖
𝑓(𝑥).𝑒𝜖 = 𝑒−𝑢
(SFA3)
400
Christensen M.A. (2015), "A CGE Model with ICT and R&D-driven Endogenous Growth: A Detailed Model
Description", Joint Research Centre technical reports, Report EUR 27548 EN.
401
Khorshid M. and A. El-Sadek (2012) “A Multi-sector ICT Economy Interaction Model for Egypt: The Path to
Information Society”, International Conference on Policy Modeling 2012.
402
Moon S-W, Y. Kim and D-P. Hong (2000), " The Economic Importance of the Information and
Communications Technology (ICT) Industry in Korea: A CGE Approach", presented at the 3rd Annual Conference on
Global Economic Analysis.
403
Meeusen, W. and J. van den Broeck, 1977, "Efficiency Estimation from Cobb-Douglas Production
Functions with Composed Error", International Economic Review 18:435-444.
Aigner, D., C. Lovell and P. Schmidt, 1977, "Formulation and Estimation of Stochastic Frontier Production Function
Models", Journal of Econometrics 6:21-37.
287
We have estimated the above econometric model by maximum likelihood estimator with time-
varying efficiencies, available in package 'frontier' under the R software. The error term follows
a normal distribution with zero mean and constant variance and the inefficiencies 𝑢 are assumed
to be independently distributed according to a positive half-normal distribution:
𝜖~𝑁(0, 𝜎𝜖
2
)
𝑢~𝑁+
(𝜇, 𝜎𝑢
2
)
These standard assumptions ensure that the distribution of −𝑢 + 𝜖 is skewed to the left so that
the difference between actual and optimal production ln⁡
(𝑌) − ln⁡
(𝑓(𝑥)) stays negative.
Based on a dataset for the 28 EU economies404
, we have estimated a production function, relating
GDP to capital and labour:
ln(𝑌𝑟𝑡) = 𝛼0 + 𝛼1. ln(𝐿𝑟𝑡) + 𝛼2. ln(𝐾𝑟𝑡) + 𝛼3,𝑟. 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝑟 + 𝛼4. 𝐷𝐶𝑅𝐼𝑆𝐼𝑆𝑡 + 𝑡 + 𝜀𝑟𝑡,
(SFA4)
where 𝑌𝑡 stands for GDP in constant 2010 prices of country 𝑟 in period 𝑡 (𝑡 ∈ [2000,2015]), 𝐿𝑟𝑡
is employment, 𝐶𝑜𝑢𝑛𝑡𝑟𝑦 capture the fixed effects for each of the EU28 MS and 𝑑𝐶𝑅𝐼𝑆𝐼𝑆𝑡 is
added to account for the economic crisis, starting from 2008 onwards. The capital 𝐾𝑟𝑡 is defined
as:
𝐾𝑟𝑡 = 3. 𝑌𝑟1995. ∑ (1 − 𝜈)𝑖
+ ∑ (1 − 𝜈)𝑖
𝐼𝑟𝑖
𝑡−1−1995
𝑖=0
𝑡−1995
𝑖=0 , 𝑡 ∈ [1996,2015]
(SFA5)
Assuming a depreciation rate 𝜈 = 0.1, the assumption of the capital-to-GDP ratio in the base
1995 year becomes irrelevant from 2005 onwards.
As a second step we then regress the derived efficiency terms against the Heritage Index of
Economic Freedom and variables, related to the development of the e-communication services in
the EU:
ln(𝐸𝐹𝐹𝑟𝑡) = 𝛽1. ln(ℎ𝑒𝑟𝑖𝑡𝑎𝑔𝑒𝑟𝑡) + 𝛽2. ln(𝑚𝑏𝑏_𝑙𝑡𝑒𝑐𝑜𝑣𝑟𝑡) + 𝛽3. ln(𝐷𝑂𝑊𝑁𝑆𝑃𝐸𝐸𝐷𝑟𝑡) +
𝛽4,𝑟. 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝑟 + 𝜐𝑟𝑡,
(SFA6)
In the above formula, ℎ𝑒𝑟𝑖𝑡𝑎𝑔𝑒𝑟𝑡 stands for the Heritage Index405
, intended to measure the
developments in terms of rule of law, size of the government, regulatory efficiency and openness
of the economy as key contributors to total factor productivity. Among others it can also be used
as a proxy to measure of the effectiveness and efficiency of the regulation.
The variable 𝐷𝑂𝑊𝑁𝑆𝑃𝐸𝐸𝐷𝑟𝑡 measures the average download speed. Finally, the impact of the
4G mobile broadband coverage (as % of all households) 𝑚𝑏𝑏_𝑙𝑡𝑒𝑐𝑜𝑣𝑟𝑡 also proved to be
statistically significant.
In the estimation of the impact of e-communications on the total factor productivity we also
tested specifications including other key variables from the Digital Agenda Database406
, such as
the Herfindahl-Hirschman Index on broadband competition, investments in the telecom sector,
market share of leading operator (in % of active SIM cards) and share of the individuals
interacting online with public authorities in the past 12 months. They however proved either
404
Eurostat, National Accounts (ESA2010) statistics.
405
http://www.heritage.org/index/
406
https://digital-agenda-data.eu/datasets/digital_agenda_scoreboard_key_indicators
288
statistically insignificant, or had the wrong sign. These problems are largely due to the short time
series available for most of the considered indicators, covering post-2008 crisis period, when
unsteady GDP growth rates and, at the same time, significant improvements in digital agenda
indicators were observed. Attempts to add other variables to control for the crisis were largely
not very successful either.
6.5.9.2 C.2. Cluster analysis for the selection of representative economies
The model features a regional breakdown to allow for assessment of the impact of the proposed
policy options not only for the EU as a whole, but also taking into account the differences
between the EU MS in terms of digitalization, overall economic development and size of the
economy.
As inclusion of all 28 EU MS economies increases exponentially the dimension of the model, we
decided to cluster the EU countries according to the dimensions, mentioned in the previous
paragraph and select a single representative economy from each of the identified clusters.
The variables, which were used to identify each cluster, are the following:
▫ The Digital Economy and Society Index (DESI), compiled by the EC
▫ Gross domestic product
The number of clusters was set to 6, based on the so called elbow method – number of clusters is
plotted against the percentage of variance explained (see the figure below).
The number of clusters to be used is selected based on two criteria:
1. Keep the number of clusters as small as possible
2. Choose the number of clusters so that adding another cluster does not improve the explanation
of the differences significantly.
Based on the above figure, we had to select either 4 clusters, but the grouping of the countries
into 4 distinctive clusters resulted in a separate group, consisting of Luxembourg alone. So, for
efficiency reasons, we resorted to 3 clusters.
The clusters were selected with the Ward method for hierarchical cluster analysis, based on
minimization of the within-cluster variances. As a result the following clusters were identified:
289
To obtain a better idea of the groups of countries, employed in the model, we have depicted each
of the countries along the clustering criteria, where colour codes were introduced to distinguish
the six clusters.
Generally, one can identify a group of 11 countries ( LU, DK, SE, FI, NL, BE, UK, DE, IE, AT,
FR), which have very developed economies and rate very high in terms of digital development.
The second cluster consists of the largest share of the countries, which joined the EU in 2004.
They are slightly worse in terms of digitalization and economic development – LT, EE, MT, PT,
CZ, LV, SK, SI. The group of the least developed countries in terms of economy and
digitalization consists of Bulgaria, Romania, Greece, Cyprus, Italy, Hungary and Poland.
Based on the identified clusters of countries, we have selected the following three representative
economies modelled in the CGE framework:
 Germany
 Czech Republic
 Bulgaria
They are viewed as 'typical' representatives of their groups, where no special economic or
political circumstances have been observed in the past years.
290
6.5.9.3 C.3. Computable general equilibrium model: outline
We model an economy, which consists of the three representative regions/ countries, selected as
a result of the cluster analysis, and rest-of-the-world, where eight types of products are being
produced using private and public capital, unskilled and skilled labour.
Each economic sector operates under perfect competition, maximizing its profit, subject to its
production technology. The sectorial production functions are defined as Constant elasticity of
substitution (CES) production functions. They take as production factors private and public
capital 𝐾𝑃𝑅 and 𝐾𝑃𝑈, skilled labour 𝐻 and unskilled labour 𝑁.
max𝐿𝑗𝑟𝑡,𝐻𝑗𝑟𝑡,𝐾𝑃𝑅𝑗𝑟𝑡,𝐾𝑃𝑈𝑗𝑟𝑡
(𝑃𝑉𝐴𝑗𝑟𝑡. 𝑉𝐴𝑗𝑟𝑡 − 𝑃𝑁𝑟𝑡. 𝑁𝑗𝑟𝑡 − 𝑃𝐻𝑟𝑡. 𝐻𝑗𝑟𝑡 − 𝑃𝐾𝑃𝑅𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡 −
𝑃𝐾𝑃𝑈𝑟𝑡. 𝐾𝑃𝑈𝑗𝑟𝑡)
(CGE1)
s.t.
𝑉𝐴𝑗𝑟𝑡 = 𝜎𝑗𝑟𝑡
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
. 𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+ (1 − 𝛽𝑗𝑟
𝑉𝐴
). 𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
)
1
𝜈𝑗𝑟
𝑉𝐴
(CGE2)
𝑁𝑗𝑟𝑡 ≥ 0, ⁡𝐻𝑗𝑟𝑡 ≥ 0, 𝐾𝑃𝑅𝑗𝑟𝑡 ≥ 0, 𝐾𝑃𝑈𝑗𝑟𝑡 ≥ 0
where 𝑗, 𝑟 and 𝑡 represent respectively the 𝑗-th economic sector, 𝑟-th region and 𝑡-th time period.
In other words, we have unconstrained maximization problem and a definition of the value
added 𝑉𝐴𝑗𝑟𝑡:
max𝐿𝑗𝑟𝑡,𝐻𝑗𝑟𝑡,𝐾𝑃𝑅𝑗𝑟𝑡,𝐾𝑃𝑈𝑗𝑟𝑡
(𝑃𝑉𝐴𝑗𝑟𝑡. 𝜎𝑗𝑟𝑡
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
. 𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+ (1 − 𝛽𝑗𝑟
𝑉𝐴
). 𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
)
1
𝜈𝑗𝑟
𝑉𝐴
− 𝑃𝑁𝑟𝑡. 𝑁𝑗𝑟𝑡 −
𝑃𝐻𝑟𝑡. 𝐻𝑗𝑟𝑡 − 𝑃𝐾𝑃𝑅𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡 − 𝑃𝐾𝑃𝑈𝑟𝑡. 𝐾𝑃𝑈𝑗𝑟𝑡)
(CGE3)
The household derives utility from final consumption 𝐶𝑖𝑟𝑡 and savings 𝑆𝑟𝑡 and disutility – from
the two types of labour 𝑁𝑗𝑟𝑡 and 𝐻𝑗𝑟𝑡. The introduction of labour as a control variable in the
household problem (i.e. endogenous labour supply) allows for modelling the link between
technological progress and labour supply.
max𝐶𝑖𝑟𝑡,𝑁𝑗𝑟𝑡,𝐻𝑗𝑟𝑡,𝑆𝑟𝑡
(∑ 𝜃𝑖𝑟
𝑖 . ln 𝐶𝑖𝑟𝑡 − ∑ 𝜉𝑗
𝑁𝑗𝑟𝑡
𝜌+1
𝜌+1
𝑗 − ∑ 𝜋𝑗
𝐻𝑗𝑟𝑡
𝜌+1
𝜌+1
𝑗 + 𝜅. ln 𝑆𝑟𝑡)
(CGE4)
s.t.
∑ 𝑃𝑖𝑟𝑡. 𝐶𝑖𝑟𝑡
𝑖 = (1 − 𝑡𝑑𝑟) ∑ (𝑃𝑁𝑗𝑟𝑡. 𝑁𝑗𝑟𝑡 + 𝑃𝐻𝑗𝑟𝑡. 𝐻𝑗𝑟𝑡 + 𝑃𝐾𝑃𝑅𝑗𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡)
𝑗 + 𝑟𝑜𝑟 ∗ 𝐴𝑟𝑡 + 𝑡𝑟𝑟 −
𝑆𝑟𝑡
(CGE5)
𝐶𝑖𝑟𝑡 ≥ 0, 𝑁𝑗𝑟𝑡 ≥ 0, ⁡𝐻𝑗𝑟𝑡 ≥ 0,
291
The government revenues consist of receipts from direct and indirect taxes, interest on its
assets407
and income from public capital. It spends on government consumption, transfers to the
households and capital expenditures. The difference between government revenues and
expenditures constitutes the government budget balance:
𝐵𝐵𝑟𝑡 = 𝑅𝑟𝑡 − 𝐺𝑟𝑡 =
𝑡𝑡𝑑𝑟. ∑ (𝑃𝑁𝑗𝑟𝑡. 𝑁𝑗𝑟𝑡 + 𝑃𝐻𝑗𝑟𝑡. 𝐻𝑗𝑟𝑡 + 𝑃𝐾𝑃𝑅𝑗𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡)
𝑗 +
∑ 𝜏𝑖𝑟.
𝑃𝑖𝑟𝑡
(1+𝜏𝑖𝑟)
. 𝑄𝑖𝑟𝑡 + ∑ 𝑃𝐾𝑃𝑈𝑗𝑟𝑡. 𝐾𝑃𝑈𝑗𝑟𝑡
𝑗 + 𝑟𝑜𝑟 ∗ 𝐴𝐺𝑟𝑡
𝑖 − (CGE6)
(∑ 𝑐𝑔𝑖𝑟𝑡. 𝑃𝑖𝑟𝑡
𝑖
+ 𝑡𝑟𝑟𝑡 + 𝐾𝐸𝑟𝑡)
For the foreign sector, we have adopted the Armington assumption, which contradicts the
conventional Heckscher and Ohlin foreign trade theory, but provides explanation on the
following facts:
 many commodities are imported and exported from a single country simultaneously;
 even at the most disaggregated level, most countries produce in all product categories
and thus specialization in a single product, for which the country has comparative
advantage, is not possible;
 the assumption takes into account the different substitution elasticities between the
commodities, produced in the country and the imported ones and therefore allows for
estimation of the changes in the relative prices of the imported goods and services.
To apply the Armington assumption, a composite product 𝑄𝑖𝑟𝑡 is defined, which quantity is
determined as a CES function of the quantity produced in the country for the domestic market
𝑄𝐷𝑖𝑟𝑡 and imports 𝑄𝑀𝑖𝑑𝑡.
𝑄𝑖𝑟𝑡 = 𝑒𝑖(𝛽𝑖. 𝑄𝑀𝑖𝑟𝑡
−𝜎𝑖
+ (1 − 𝛽𝑖). 𝑄𝐷𝑖𝑟𝑡
−𝜎𝑖
⁡)
−1
𝜎𝑖
⁄
(CGE7)
where 𝑒𝑖 is a scale parameter, 𝛽𝑖 measures the share of imports and 𝜎𝑖 is an exponent, which is
equal to
1
𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦⁡𝑜𝑓⁡𝑠𝑢𝑏𝑠𝑡𝑖𝑡𝑢𝑡𝑖𝑜𝑛
− 1. It is constrained to satisfy −1 < 𝜎𝑖 < ∞ to ensure that the
respective isoquant is convex, i.e. that we have a decreasing technical rate of substitution.
The domestic prices, respectively are determined by calculation of the optimal ratio between
imported and domestically produced goods and services:
𝑄𝑀𝑖𝑟𝑡
𝑄𝐷𝑖𝑟𝑡
= (
𝑃𝐷𝑖𝑟𝑡
𝑝𝑚𝑖𝑡
.
𝛽𝑖
1−𝛽𝑖
)
1
1+𝜎𝑖
⁄
(CGE8)
In a similar manner the substitution between the products, produced for the domestic market and
for exports is described through a constant elasticity of transformation function (CET). The CET
is almost identical to the above CES function, defined for the combination of domestically
produced and imported commodities, with the exception of the elasticities of substitution, which
are no longer negative.
407
Is government assets are positive, then it receives interest, if not – it pays interest on its debt.
292
𝑄𝑃𝑖 = 𝑓𝑖(𝜂𝑖. 𝑄𝐸𝑖
𝛾𝑖
+ (1 − 𝜂𝑖). 𝑄𝐷𝑖
𝛾𝑖
⁡)
1
𝛾𝑖
⁄
(CGE9)
Here −1 < 𝛾𝑖 < ∞ to ensure a concave isoquant.
Again, the optimal relationship between exports and products for the domestic market is
calculated:
𝑄𝐸𝑖
𝑄𝐷𝑖
= (
𝑝𝑒𝑖
𝑃𝐷𝑖
.
1−𝜂𝑖
𝜂𝑖
)
1
𝛾𝑖−1
⁄
(CGE10)
To complete the external sector, foreign savings 𝐹𝑆𝑟𝑡 are estimated as the difference between
foreign sector revenues from imports and interest on its assets and incurred expenditures from
exports, where 𝑝 is an index for the respective external trade partners.
∑ ∑ 𝑃𝐸𝑖𝑡. 𝑄𝐸𝑖𝑝𝑟𝑡
𝑝
𝑖 + 𝐹𝑆𝑟𝑡 = ∑ ∑ 𝑃𝑀𝑖𝑡. 𝑄𝑀𝑖𝑝𝑟𝑡
𝑝
𝑖 + 𝑟𝑜𝑟 ∗ 𝐴𝐹𝑟𝑡 (CGE11)
We also specify the usual equalities between total quantity supplied and used, defining the link
between the make and use tables in the national accounts:
𝑇𝑜𝑡𝑎𝑙⁡𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦⁡𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑑 = 𝑄𝑖𝑟𝑡 =
𝑇𝑜𝑡𝑎𝑙⁡𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦⁡𝑢𝑠𝑒𝑑⁡⁡⁡⁡⁡⁡⁡⁡ = ∑ 𝐼𝐶𝑖𝑗𝑟𝑡
𝑗 + 𝐶𝑖𝑟𝑡 + 𝑐𝑔𝑖𝑟𝑡 + 𝐼𝐷𝑖𝑟𝑡 + 𝑄𝐸𝑖𝑟𝑡 + 𝑄𝑇𝑖𝑟𝑡 (CGE12)
and savings equals investment:
𝑃𝐾
̅̅̅̅𝑟𝑡. 𝐼𝐼𝑗𝑟𝑡 =
𝐾𝑗𝑟𝑡
∑ 𝐾𝑗𝑟𝑡
𝑗
(𝑆𝑟𝑡 + 𝐾𝐸𝑟𝑡 + 𝐵𝐵𝑟𝑡 + 𝐹𝑆𝑟𝑡 − 𝑟𝑜𝑟 ∗ (𝐴𝑟𝑡 + 𝐴𝐹𝑟𝑡 + 𝐴𝐺𝑟𝑡) − ∑ 𝑃𝑖𝑟𝑡. 𝑍𝑖𝑟𝑡
𝑖 −
𝐷𝑈𝑀𝑀𝑌𝑟𝑡)
(CGE13)
where 𝐷𝑈𝑀𝑀𝑌𝑟𝑡 is a dummy variable, added to ensure that the system of equations becomes
functionally independent (which is not the case otherwise, due to Walras law). To close the
model, an additional equation for each region is defined by normalizing the prices to the overall
price level in the respective region:
𝑝𝑙𝑒𝑣𝑒𝑙𝑟𝑡 = ∑ 𝑤𝑖𝑟. 𝑃𝑖𝑟𝑡
𝑖 (CGE14)
As specified, the model is static in its nature, as all agents optimize only in the current period 𝑡⁡
and not over the entire time horizon of the simulations. However, the model allows also for
transitional analysis by incorporating a capital and asset accumulation equations and constant
growth of total factor productivity to capture some of dynamic in changes to the "state of the
world":
𝐾𝐾𝑃𝑈𝑗𝑟𝑡+1 = (1 − 𝛿). 𝐾𝐾𝑃𝑈𝑗𝑟𝑡 + 𝐼𝑃𝑈𝑗𝑟𝑡
𝐾𝐾𝑃𝑅𝑗𝑟𝑡+1 = (1 − 𝛿). 𝐾𝐾𝑃𝑅𝑗𝑟𝑡 + 𝐼𝑃𝑅𝑗𝑟𝑡
293
𝜎𝑗𝑟𝑡+1
𝑉𝐴
= (1 + 𝛾𝐴𝑡). 𝜎𝑗𝑟𝑡
𝑉𝐴
𝐴𝑟𝑡+1 = (1 + rorr). +𝑆𝑟𝑡
𝐴𝐹𝑟𝑡+1 = (1 + rorr). +𝐹𝑆𝑟𝑡
𝐴𝐺𝑟𝑡+1 = (1 + rorr). +𝐵𝐵𝑟𝑡
294
6.5.9.4 C.3.1. Sectorial and skill breakdowns
Sectorial disaggregation
In the selection of the disaggregation by economic sectors, we largely follow Christensen (2015).
The classification of the low-tech and high-tech manufacturing sectors is made following the
Eurostat classification408
. In addition to this division of the manufacturing activities, we also
specify the telecom, energy, transport and other e-com activities separately due to their
importance for the impact assessment. Thus the economic sectors covered include:
1. Agriculture
2. Low-tech manufacturing
3. High-tech manufacturing
4. Energy sector
5. Transport
6. Telecommunications
7. E-communication services
8. Other services.
Skill disaggregation of labour
As specified the sectors use labour with very different qualification. If we assume the ILO
classification based on occupations409
, where the occupations are mapped by skill, using the
following transition key:
ISCO-08 major groups
Skill level
(from 1 to 4, where 4 is the highest)
1 Managers 3 + 4
2 Professionals 4
3 Technicians and Associate Professionals 3
4 Clerical Support Workers 2
5 Services and Sales Workers 2
6 Skilled Agricultural, Forestry and Fishery
Workers
2
7 Craft and Related Trades Workers 2
8 Plant and Machine Operators and Assemblers 2
9 Elementary Occupations 1
0 Armed Forces Occupations 1 + 2 + 4
For the modelling purposes, we have grouped skill levels 1 and 2 into unskilled labour and skill
levels 3 and 4 into skilled labour. In this way over 4/5 of the labour employed in agriculture and
transport are unskilled. The share of unskilled labour in low-tech manufacturing and services is
respectively around 2/3 and 1/2 and for the telecommunications and other e-communication
services – between 1/4 and 1/3.
408
http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:High-
tech_classification_of_manufacturing_industries
409
International Labour Office, 2012, "International Standard Classification of Occupations ISCO-08", Geneva,
available at:
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_172572.pdf
295
6.5.9.5 C.3.2. Data sources and transformations
The inputs to the model consist of three major types: statistical data, estimates of some of the
parameters for the model, based on identified relevant studies and information on the policy
options considered, based on the input from the EC and a review of the development of the
relevant legislative and institutional framework.
In order to perform simulations with the specified model, it is calibrated with some
representative data about the groups of countries identified in the cluster analysis (described in
the next section). The latter, together with the envisaged econometric estimations of particular
parameters, also require detailed data about the e-communications services sector. Additionally,
data on the main socio-economic variables has been collected.
Below, a list of all used sources of information is provided. Data for the econometric estimations
was used in logarithms.
Data Source Used for
Supply-use tables for all EU
MS economies
Eurostat, Supply, Use and
Input-Output tables
Construction of the social
accounting matrices for the
CGE model.
Main revenues and
expenditure aggregates for the
government
Eurostat, Annual
government finance statistics
Construction of the social
accounting matrices for the
CGE model.
GDP and components by final
use, income and production
accounts (including by
economic sectors),
employment population and
per capita
Eurostat, National accounts Econometric estimations of the
impact of the KPIs
SAM and parameters
calibrations for the CGE model
Cluster analysis
Employment by occupation
and economic activity
Eurostat, Detailed annual
LFS statistics on
employment
Estimation of the skilled and
unskilled labour supply in the
CGE model
Exports and imports by
trading partners and
commodities
Eurostat, EU trade since
1988 by SITC
Construction of the social
accounting matrices for the
CGE model.
Data on KPIs, related to the e-
communications
EC Digital Agenda Key
indicators dataset
Econometric estimations of the
impact of the KPIs.
Heritage index Heritage foundation
webpage:
http://www.heritage.org/inde
x/explore
Econometric estimations of the
impact of the KPIs.
Data on DESI index Cluster analysis for the
identification of the regions in
the CGE model
296
6.5.9.6 C.3.3. Calibration
The majority of the parameters are calculated from the social accounting matrices, constructed
for the implementation of the computable general equilibrium model, respectively for Germany,
Czech Republic and Bulgaria. They are computed backwards, so as to reproduce some of the
equations in the model for the base year, taking the variable values as given.
Another big group of parameters are also calibrated based of historical data for the respective
economies. Finally, there is also a group of parameters, which are set, based on economic
literature review. The model proved robust with respect to most of them with the exception of
the elasticities in the Armington and CET aggregation functions (
𝒆𝒍𝑸𝒋𝒓⁡and 𝒆𝒍𝑸𝑷𝒋𝒓). They were adjusted to achieve a better reproduction of the baseline
trajectories.
Param
eter
Setting of the value
𝒆𝒍𝑽𝑨𝒋𝒓 0.99 (i.e. practically corresponds to Cobb-Douglas function)
𝒆𝒍𝑳𝒋𝒓 0.99 (i.e. practically corresponds to Cobb-Douglas function)
𝒆𝒍𝑲𝒋𝒓 0.99 (i.e. practically corresponds to Cobb-Douglas function)
𝒆𝒍𝑸𝒋𝒓 0.20, adjusted to reproduce plausible economic development trajectory in the baseline
𝒆𝒍𝑸𝑷𝒋𝒓 0.20, adjusted to reproduce plausible economic development trajectory in the baseline
𝜷𝒋𝒓𝒕
𝑽𝑨
Calculated values of the share of labour in gross value added (SAM)
𝜷𝒋𝒓𝒕
𝑳 Calculated values of the share of unskilled labour is total labour (SAM)
𝜷𝒋𝒓𝒕
𝑲 Calculated values of the share of public capital in total capital (SAM)
𝜷𝒋𝒓𝒕
𝑸 Calculated from equation (QMQD) in the base year (SAM)
𝜷𝒋𝒓𝒕
𝑸𝑷 Calculated from equation (QEQD) in the base year (SAM)
⁡𝝂𝒋𝒓𝒕
𝑽𝑨
(𝒆𝒍𝑽𝑨𝒋𝒓 − 𝟏)
𝒆𝒍𝑽𝑨𝒋𝒓
⁄
𝝂𝒋𝒓𝒕
𝑳
(𝒆𝒍𝑳𝒋𝒓 − 𝟏)
𝒆𝒍𝑳𝒋𝒓
⁄
𝝂𝒋𝒓𝒕
𝑲
(𝒆𝒍𝑲𝒋𝒓 − 𝟏)
𝒆𝒍𝑲𝒋𝒓
⁄
𝝂𝒋𝒓𝒕
𝑸
(𝒆𝒍𝑸𝒋𝒓 − 𝟏)
𝒆𝒍𝑸𝒋𝒓
⁄
𝝂𝒋𝒓𝒕
𝑸𝑷
(𝒆𝒍𝑸𝑷𝒋𝒓 − 𝟏)
𝒆𝒍𝑸𝑷𝒋𝒓
⁄
𝝈𝒋𝒓𝒕
𝑳 Calculated from equation (LAGGR) in the base year (SAM)
𝝈𝒋𝒓𝒕
𝑲 Calculated from equation (KAGGR) in the base year (SAM)
𝝈𝒋𝒓𝒕
𝑸 Calculated from equation (QAGGR) in the base year (SAM)
𝝈𝒋𝒓𝒕
𝑸𝑷 Calculated from equation (QPAGGR) in the base year (SAM)
297
𝜼𝒋𝒓𝒕
𝑳 Calculated from data on employment by occupation and economic activity (from 2008
onwards, NACE Rev. 2) from Eurostat
𝜼𝒊𝒋𝒓𝒕
𝑰𝑪 Calculated from equation (ICSH) in the base year (SAM)
𝜼𝒋𝒓𝒕
𝑽𝑨 Calculated from equation (VASH) in the base year (SAM)
𝜼𝒋𝒊𝒓𝒕
𝑸𝑷 Calculated from equation (QPSH) in the base year (SAM)
𝜼𝒊𝒊𝟏𝒓𝒕
𝑸𝑻 Calculated from equation (QTEQ) in the base year (SAM)
𝜼𝒓𝒕
𝑲𝑬 Calculated from equation (KEEQ) in the base year (SAM)
𝜼𝒊𝒓𝒕
𝑰𝑫 Calculated from equation (IDEM) in the base year (SAM)
𝜼𝒋𝒓𝒕
𝑰𝑷𝑼 Calculated from equation (IPUSH) in the base year (SAM)
𝜼𝒓𝒕
𝑭𝑺 Set as the share of current account in GDP in the base year
𝜼𝒓𝒕
𝑩𝑩 Set as the share of consolidated government budget balance in GDP in the base year
𝜼𝒓𝒕
𝑺 Set as the share of savings in GDP in the base year, adjusted to reproduce plausible
economic development trajectory in the baseline
𝒖𝒕𝒌𝒓 Calculated to reproduce a plausible economic development trajectory in the baseline
𝒕𝒅𝒓
Calculated from the SAM as a ratio between revenues from direct taxes and the
respective tax base
𝝉𝒊𝒓
Calculated from the SAM as a ratio between revenues from indirect taxes and the
respective tax base
𝜹𝒓 0.025
𝜽𝒊𝒓 Calculated from equation (HCONS) in the base year (SAM)
𝒘𝒊𝒓
Calculated as the share of consumption of product I in total consumption in the base
year (SAM)
𝝃𝒋𝒓 Calculated from equation (NSUP) in the base year (SAM)
⁡𝝅𝒋𝒓 Calculated from equation (HSUP) in the base year (SAM)
𝝆𝒓 2.3436, based on Mandelman and Zlate (2011)410
𝜿𝒓
1 (the parameter has a scaling effect and simulations with different values did not show
impact on the results)
⁡𝜾𝒓 Calculated from equation (IbarEQ) in the base year (SAM)
𝒓𝒐𝒓𝒓 Set at very low levels, in line with the current trend of very low interest rates
𝒑𝒍𝒆𝒗𝒆𝒍𝒓Calculated from equation (PNORM) in the base year (SAM)
𝒛𝒗𝒊𝒓 Calculated from the respective use tables in the base year
6.5.10 List of abbreviations and equations in the CGE model
6.5.10.1 List of indices
Abbreviation Definition
𝒋 sectors
𝒊 products
𝒓 regions
𝒕 time periods
410
Mandelman F. and A. Zlate (2011), " Immigration, Remittances and Business Cycles", Federal Reserve
Bank of Atlanta.
298
6.5.10.2 List of parameters
Abbreviation Definition
𝒆𝒍𝑽𝑨𝒋𝒓 Elasticity of substitution in the CES production function
𝒆𝒍𝑳𝒋𝒓 Elasticity of substitution in the labour aggregation function
𝒆𝒍𝑲𝒋𝒓 Elasticity of substitution in the capital aggregation function
𝒆𝒍𝑸𝒋𝒓 Elasticity of import substitution (Armington)
𝒆𝒍𝑸𝑷𝒋𝒓 Elasticity of transformation
𝜷𝒋𝒓𝒕
𝑽𝑨
Share of value-added to labour in activity j
𝜷𝒋𝒓𝒕
𝑳
Share parameter in the labour aggregation function
𝜷𝒋𝒓𝒕
𝑲
Share parameter in the capital aggregation function
𝜷𝒋𝒓𝒕
𝑸
Share parameter in the composite supply Armington function for i
𝜷𝒋𝒓𝒕
𝑸𝑷
Transformation function share parameter for i
⁡𝝂𝒋𝒓𝒕
𝑽𝑨
Exponent parameter for the production function
𝝂𝒋𝒓𝒕
𝑳
Exponent in the labour aggregation function
𝝂𝒋𝒓𝒕
𝑲
Exponent in the capital aggregation function
𝝂𝒋𝒓𝒕
𝑸
Exponent in the composite supply Armington function for i
𝝂𝒋𝒓𝒕
𝑸𝑷
Transformation function exponent for i
𝝈𝒋𝒓𝒕
𝑳
Shift parameter in the labour aggregation function
𝝈𝒋𝒓𝒕
𝑲
Shift parameter in the capital aggregation function
𝝈𝒋𝒓𝒕
𝑸
Shift parameter in the composite supply Armington function for i
𝝈𝒋𝒓𝒕
𝑸𝑷
Transformation function shift parameter for i
𝜼𝒋𝒓𝒕
𝑳
Share of unskilled labour in total labour supply
𝜼𝒊𝒋𝒓𝒕
𝑰𝑪
Quantity of i as intermediate input per unit of output of j
𝜼𝒋𝒓𝒕
𝑽𝑨
Value added per unit of output of j
𝜼𝒋𝒊𝒓𝒕
𝑸𝑷
Yield of commodity i per unit of activity j
𝜼𝒊𝒊𝟏𝒓𝒕
𝑸𝑻 Quantity of commodity i as trade input per unit of i1 produced and sold
domestically
𝜼𝒓𝒕
𝑲𝑬 Share of public investments in GDP
𝜼𝒊𝒓𝒕
𝑰𝑫 Share of investment demand for product i in total investment
𝜼𝒋𝒓𝒕
𝑰𝑷𝑼
Share of public investment in sector j
𝜼𝒓𝒕
𝑭𝑺 Share of foreign savings to GDP
𝜼𝒓𝒕
𝑩𝑩 Share of budget balance to GDP
299
𝜼𝒓𝒕
𝑺 Share of private savings to GDP
𝒖𝒕𝒌𝒓 Capital utilization rate
𝒕𝒅𝒓 Implicit direct tax rate
𝝉𝒊𝒓 Implicit indirect tax rate
𝜹𝒓 Depreciation of capital
𝜽𝒊𝒓 Share of commodity i in the consumption of household
𝒘𝒊𝒓 Weight of commodity i in the CPI
𝝃𝒋𝒓 Weight to disutility from unskilled labour in hhd utility function
⁡𝝅𝒋𝒓 Weight to disutility from skilled labour in hhd utility function
𝝆𝒓 1 over Frisch elasticity of labour
𝜿𝒓 Weight of utility to savings in the hhd utility function
⁡𝜾𝒓 Shift parameter in the investment aggregation function
𝒓𝒐𝒓𝒓 Rate of return
𝒑𝒍𝒆𝒗𝒆𝒍𝒓 Consumer prices level in the base year
𝒛𝒗𝒊𝒓 Change in stocks in value terms (for the base year calibration)
300
6.5.10.3 List of variables
Abbreviation Definition
Endogenous variables
𝝈𝒋𝒓𝒕
𝑽𝑨
Total factor productivity in the production function for activity 𝑗
𝑽𝑨𝒋𝒓𝒕 Value added in sector 𝑗
𝑷𝑽𝑨𝒋𝒓𝒕 Value-added price of activity 𝑗
𝑵𝒋𝒓𝒕 Quantity of unskilled labour demanded by activity 𝑗
𝑯𝒋𝒓𝒕 Quantity of skilled labour demanded by activity 𝑗
𝑳𝒋𝒓𝒕 Total labour employed in activity 𝑗
𝑲𝑷𝑼𝒋𝒓𝒕 Quantity of public capital demanded by activity 𝑗
𝑲𝑷𝑹𝒋𝒓𝒕 Quantity of private capital demanded by activity 𝑗
𝑲𝒋𝒓𝒕 Quantity of capital demanded by activity 𝑗
𝑷𝑵𝒋𝒓𝒕 Price of non-skilled labour in activity 𝑗
𝑷𝑯𝒋𝒓𝒕 Price of skilled labour in activity 𝑗
𝑷𝑲𝑷𝑼𝒋𝒓𝒕 Price of public capital in sector 𝑗
𝑷𝑲𝑷𝑹𝒋𝒓𝒕 Price of private capital in sector 𝑗
𝑰𝑪𝒊𝒋𝒓𝒕 Intermediate consumption of product 𝑖 in activity 𝑗
𝑸𝑨𝒋𝒓𝒕 Gross output in activity 𝑗
𝑷𝑨𝒋𝒓𝒕 Price of gross output in activity 𝑗
𝑸𝑷𝒋𝒊𝒓𝒕 Quantity of product 𝑖 produced domestically
𝑸𝑷𝑻𝒋𝒊𝒓𝒕 Total quantity of commodity i produced domestically
𝑷𝑷𝑻𝒊𝒓𝒕 Price of total quantity of commodity i produced domestically
𝑸𝑫𝒊𝒓𝒕 Quantity sold domestically of domestic product 𝑖
𝑷𝑫𝒊𝒓𝒕 Domestic price of domestic output 𝑖
𝑷𝑫𝑫𝒊𝒓𝒕 Domestic price of domestic output 𝑖 including trade and transport margins
𝑸𝑻𝒊𝒓𝒕 Quantity of commodity demanded as trade and transport margin
𝑷𝒊𝒓𝒕 Composite price of product 𝑖
𝑸𝒊𝒓𝒕 Composite supply of product 𝑖 at domestic market
𝑸𝑴𝒊𝒓𝒕 Imports of product 𝑖
𝑸𝑬𝒊𝒓𝒕 Exports of product 𝑖
𝑪𝒊𝒓𝒕 Consumption of commodity 𝑖 by household
𝑺𝒓𝒕 Household savings
𝑰
̅𝒓𝒕 Total investment demand
𝑰𝑫𝒊𝒓𝒕 Investment demand for product 𝑖
𝒁𝒊𝒓𝒕 Change in stocks of product i
𝑷𝑲
̅̅̅̅̅𝒓𝒕 Composite investment goods price
𝑰𝑰𝒋𝒓𝒕 Sectoral investment
𝑰𝑷𝑼𝒋𝒓𝒕 Public investment in activity 𝑗
301
Abbreviation Definition
𝑰𝑷𝑹𝒋𝒓𝒕 Private investment in activity 𝑗
𝑲𝑲𝑷𝑼𝒋𝒓𝒕 Total public capital stock in sector 𝑗
𝑲𝑲𝑷𝑹𝒋𝒓𝒕 Total private capital stock in sector 𝑗
𝑨𝒓𝒕 Private cumulative assets
𝑨𝑭𝒓𝒕 Foreign cumulative assets
𝑨𝑮𝒓𝒕 Government cumulative assets
𝑲𝑬𝒓𝒕 Government capital expenditures
𝑹𝒓𝒕 Government revenues
𝑮𝒓𝒕 Government expenditures
𝑩𝑩𝒓𝒕 Budget balance
𝑭𝑺𝒓𝒕 Foreign savings
𝑫𝑼𝑴𝑴𝒀𝒓𝒕 Walras variable (zero at equilibrium)
Exogenous variables
𝒕𝒓𝒓𝒕 Transfers from the government to the household
𝒄𝒈𝒊𝒓𝒕 Government consumption of 𝑖
𝒑𝒎𝒊𝒓𝒕 Import price of product 𝑖
𝒑𝒆𝒊𝒓𝒕 Export price of product 𝑖
6.5.10.4 Complete list of model equations
Production function
𝑉𝐴𝑗𝑟𝑡 = 𝜎𝑗𝑟𝑡
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
. 𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+ (1 − 𝛽𝑗𝑟
𝑉𝐴
). 𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
)
1
𝜈𝑗𝑟
𝑉𝐴
(PRODF)
First-order conditions for the producer optimization problem
𝐿𝑗𝑟𝑡 = 𝜎𝑗𝑟𝑡
𝐿
(𝛽𝑗𝑟
𝐿
. 𝑁𝑗𝑟𝑡
𝜈𝑗𝑟
𝐿
+ (1 − 𝛽𝑗𝑟
𝐿
). 𝐻𝑗𝑟𝑡
𝜈𝑗𝑟
𝐿
)
1
𝜈𝑗𝑟
𝐿
(LAGGR)
𝐾𝑗𝑟𝑡 = 𝜎𝑗𝑟𝑡
𝐾
(𝛽𝑗𝑟
𝐾
. 𝐾𝑃𝑈𝑗𝑟𝑡
𝜈𝑗𝑟
𝐾
+ (1 − 𝛽𝑗𝑟
𝐾
). 𝐾𝑃𝑅𝑗𝑟𝑡
𝜈𝑗𝑟
𝐾
)
1
𝜈𝑗𝑟
𝐾
(KAGGR)
𝑃𝑁𝑟𝑡. 𝑁𝑗𝑟𝑡
1−𝜈𝑗𝑟
𝐿
=
𝛽𝑗𝑟
𝑉𝐴
.𝛽𝑗𝑟
𝐿
.𝑃𝑉𝐴𝑗𝑟𝑡.𝑉𝐴𝑗𝑟𝑡.𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
.𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+(1−𝛽𝑗𝑟
𝑉𝐴
).𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
).(𝛽𝑗𝑟
𝐿
.𝑁𝑗𝑟𝑡
𝜈𝑗𝑟
𝐿
+(1−𝛽𝑗𝑟
𝐿
).𝐻𝑗𝑟𝑡
𝜈𝑗𝑟
𝐿
)
(NDEM)
𝑃𝐻𝑟𝑡. 𝐻𝑗𝑟𝑡
1−𝜈𝑗𝑟
𝐿
=
𝛽𝑗𝑟
𝑉𝐴
.(1−𝛽𝑗𝑟
𝐿
).𝑃𝑉𝐴𝑗𝑟𝑡.𝑉𝐴𝑗𝑟𝑡.𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
.𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+(1−𝛽𝑗𝑟
𝑉𝐴
).𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
).(𝛽𝑗𝑟
𝐿
.𝑁𝑗𝑟𝑡
𝜈𝑗𝑟
𝐿
+(1−𝛽𝑗𝑟
𝐿
).𝐻𝑗𝑟𝑡
𝜈𝑗𝑟
𝐿
)
(HDEM)
302
𝑃𝐾𝑃𝑈𝑟𝑡. 𝐾𝑃𝑈𝑗𝑟𝑡
1−𝜈𝑗𝑟
𝐿
=
(1−𝛽𝑗𝑟
𝑉𝐴
).𝛽𝑗𝑟
𝐾
.𝑃𝑉𝐴𝑗𝑟𝑡.𝑉𝐴𝑗𝑟𝑡.𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
.𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+(1−𝛽𝑗𝑟
𝑉𝐴
).𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
).(𝛽𝑗𝑟
𝐾
.𝐾𝑃𝑈𝑗𝑟𝑡
𝜈𝑗𝑟
𝐾
+(1−𝛽𝑗𝑟
𝐾
).𝐾𝑃𝑅𝑗𝑟𝑡
𝜈𝑗𝑟
𝐾
)
(KPUDEM)
𝑃𝐾𝑃𝑅𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡
1−𝜈𝑗𝑟
𝐿
=
(1−𝛽𝑗𝑟
𝑉𝐴
).(1−𝛽𝑗𝑟
𝐾
).𝑃𝑉𝐴𝑗𝑟𝑡.𝑉𝐴𝑗𝑟𝑡.𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
(𝛽𝑗𝑟
𝑉𝐴
.𝐿𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
+(1−𝛽𝑗𝑟
𝑉𝐴
).𝐾𝑗𝑟𝑡
𝜈𝑗𝑟
𝑉𝐴
).(𝛽𝑗𝑟
𝐾
.𝐾𝑃𝑈𝑗𝑟𝑡
𝜈𝑗𝑟
𝐾
+(1−𝛽𝑗𝑟
𝐾
).𝐾𝑃𝑅𝑗𝑟𝑡
𝜈𝑗𝑟
𝐾
)
(KPRDEM)
Leontief aggregation of intermediate consumption and value added
𝐼𝐶𝑖𝑗𝑟𝑡 = 𝜂𝑖𝑗𝑟
𝐼𝐶
. 𝑄𝐴𝑗𝑟𝑡
(ICSH)
𝑉𝐴𝑗𝑟𝑡 = 𝜂𝑗𝑟
𝑉𝐴
. 𝑄𝐴𝑗𝑟𝑡
(VASH)
𝑃𝐴𝑗𝑟𝑡. 𝑄𝐴𝑗𝑟𝑡 = ∑
𝜂𝑖𝑗𝑟𝑡
𝐼𝐶
∑ 𝜂𝑖𝑗𝑟𝑡
𝐼𝐶
𝑖
. 𝑃𝑖𝑟𝑡
𝑖 . ∑ 𝐼𝐶𝑖𝑗𝑟𝑡
𝑖 + 𝑃𝑉𝐴𝑗𝑟𝑡. 𝑉𝐴𝑗𝑟𝑡 (QAVAL)
Transformation of activity into output
𝑄𝑃𝑗𝑖𝑟𝑡 = 𝜂𝑗𝑖𝑟
𝑄𝑃
. 𝑄𝐴𝑗𝑟𝑡
(QPSH)
𝑃𝐴𝑗𝑟𝑡 = ∑ 𝜂𝑗𝑖𝑟
𝑄𝑃
𝑖 . 𝑃𝑃𝑇𝑖𝑟𝑡 (PAEQ)
𝑄𝑃𝑇𝑖𝑟𝑡 = ∑ 𝑄𝑃𝑗𝑖𝑟𝑡
𝑗
(QPTEQ)
𝑃𝐷𝐷𝑖𝑟𝑡 = 𝑃𝐷𝑖𝑟𝑡 + ∑ 𝜂𝑖′𝑖
𝑄𝑇
. 𝑃𝑖′𝑟𝑡
𝑖′
𝑃𝑃𝑇𝑖𝑟𝑡. 𝑄𝑃𝑇𝑖𝑟𝑡 = 𝑃𝐷𝑖𝑟𝑡. 𝑄𝐷𝑖𝑟𝑡 + 𝑃𝐸𝑖𝑡. 𝑄𝐸𝑖𝑟𝑡 (QPTVAL)
𝑃𝑖𝑟𝑡.𝑄𝑖𝑟𝑡
(1+𝜏𝑖𝑟)
= 𝑃𝐷𝐷𝑖𝑟𝑡. 𝑄𝐷𝑖𝑟𝑡 + 𝑃𝑀𝑖𝑡. 𝑄𝑀𝑖𝑟𝑡 (QVAL)
𝑄𝑇𝑖𝑟𝑡 = ∑ 𝜂𝑖𝑖′
𝑄𝑇
. 𝑄𝐷𝑖′𝑟𝑡
𝑖′ (QTEQ)
Armington function for domestic-import aggregation
𝑄𝑖𝑟𝑡 = 𝜎𝑄
𝑖 (𝛽𝑄
𝑖
. 𝑄𝑀
̅̅̅̅̅
𝑖𝑟𝑡
−𝜈𝑄
𝑖
+ (1 − 𝛽𝑄
𝑖
). 𝑄𝐷𝑖𝑟𝑡
−𝜈𝑄
𝑖
⁡)
−1
𝜈𝑄
𝑖
⁄
(QAGGR)
𝑄𝑀
̅̅̅̅̅𝑖𝑟𝑡
𝑄𝐷𝑖𝑟𝑡
= (
𝑃𝐷𝐷𝑖𝑟𝑡
𝑃𝑀𝑖𝑡
.
𝛽𝑄
𝑖
1−𝛽𝑄
𝑖
)
1
(1+𝜈𝑄
𝑖)
⁄
(QMQD)
303
Constant elasticity of transformation function for the domestic-export aggregation
𝑄𝑃𝑇𝑖𝑟𝑡 = 𝜎𝑄𝑃
𝑖 (𝛽𝑄𝑃
𝑖
. 𝑄𝐸
̅̅̅̅
𝑖𝑟𝑡
𝜈𝑄𝑃
𝑖
+ (1 − 𝛽𝑄𝑃
𝑖
). 𝑄𝐷𝑖𝑟𝑡
𝜈𝑄𝑃
𝑖
⁡)
1
𝜈𝑄𝑃
𝑖
⁄
(QPAGGR)
𝑄𝐸
̅̅̅̅𝑖𝑟𝑡
𝑄𝐷𝑖𝑟𝑡
= (
𝑃𝐸𝑖𝑡
𝑃𝐷𝑖𝑟𝑡
.
1−𝛽𝑄𝑃
𝑖
𝛽𝑄𝑃
𝑖
)
1
(𝜈𝑄𝑃
𝑖−1)
⁄
(QEQD)
First-order conditions in the household optimization problem
∑ 𝑃𝑖𝑟𝑡. 𝐶𝑖𝑟𝑡
𝑖 = (1 − 𝑡𝑑𝑟) ∑ (𝑃𝑁𝑗𝑟𝑡. 𝑁𝑗𝑟𝑡 + 𝑃𝐻𝑗𝑟𝑡. 𝐻𝑗𝑟𝑡 + 𝑃𝐾𝑃𝑅𝑗𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡)
𝑗 + 𝑟𝑜𝑟 ∗ 𝐴𝑟𝑡 + 𝑡𝑟𝑟 −
𝑆𝑟𝑡 (HBUDG)
𝐶𝑖𝑟𝑡. 𝑃𝑖𝑟𝑡. 𝜅 = 𝜃𝑖𝑟. 𝑆𝑟𝑡
(HCONS)
𝜉𝑗. 𝑁𝑗𝑟𝑡
𝜌
. 𝑆 = 𝜅. (1 − 𝑡𝑑𝑟). 𝑃𝑁𝑗𝑟𝑡
(NSUP)
𝜋𝑗. 𝐻𝑗𝑟𝑡
𝜌
. 𝑆 = 𝜅. (1 − 𝑡𝑑𝑟). 𝑃𝐻𝑗𝑟𝑡
(HSUP)
Government equations
𝐾𝐸𝑟𝑡 = 𝜂𝑟
𝐾𝐸
. ∑ 𝑃𝑉𝐴𝑗𝑟𝑡. 𝑉𝐴𝑗𝑟𝑡
𝑗 ⁡ (KEEQ)
𝑅𝑟𝑡 = 𝑡𝑑𝑟. ∑ (𝑃𝑁𝑗𝑟𝑡. 𝑁𝑗𝑟𝑡 + 𝑃𝐻𝑗𝑟𝑡. 𝐻𝑗𝑟𝑡 + 𝑃𝐾𝑃𝑅𝑗𝑟𝑡. 𝐾𝑃𝑅𝑗𝑟𝑡)
𝑗 + ∑ 𝜏𝑖𝑟.
𝑃𝑖𝑟𝑡
(1+𝜏𝑖𝑟)
. 𝑄𝑖𝑟𝑡 +
𝑖
∑ 𝑃𝐾𝑃𝑈𝑗𝑟𝑡. 𝐾𝑃𝑈𝑗𝑟𝑡
𝑗 + 𝑟𝑜𝑟 ∗ 𝐴𝐺𝑟𝑡 (REQ)
𝐺𝑟𝑡 = ∑ 𝑐𝑔𝑖𝑟𝑡. 𝑃𝑖𝑟𝑡
𝑖 + 𝑡𝑟𝑟 + 𝐾𝐸𝑟𝑡 (GEQ)
𝐵𝐵𝑟𝑡 = 𝑅𝑟𝑡 − 𝐺𝑟𝑡
(BBEQ)
Capital and investment equations
𝐼𝐷𝑖𝑟𝑡 = 𝜂𝑖𝑟
𝐼𝐷
. 𝐼̅𝑟𝑡 (IDEM)
𝐼̅𝑟𝑡 = 𝜄𝑟. ∏ 𝐼𝐷𝑖𝑟𝑡
𝑖
𝜂𝑖𝑟
𝐼𝐷
(IbarEQ)
𝑃𝐾
̅̅̅̅𝑟𝑡 = ∑ 𝜂𝑖𝑟
𝐼𝐷
. 𝑃𝑖𝑟𝑡
𝑖
(PKEQ)
𝐼𝑃𝑈𝑗𝑟𝑡 = 𝜂𝑟
𝐼𝑃𝑈
∗ 𝐾𝐸𝑟𝑡
(IPUSH)
𝐼𝐼𝑗𝑟𝑡 = 𝐼𝑃𝑈𝑗𝑟𝑡 + 𝐼𝑃𝑅𝑗𝑟𝑡 (IPREQ)
𝐾𝑃𝑈𝑗𝑟𝑡 = 𝑢𝑡𝑘. 𝐾𝐾𝑃𝑈𝑗𝑟𝑡
(KPUEQ)
304
𝐾𝑃𝑅𝑗𝑟𝑡 = 𝑢𝑡𝑘. 𝐾𝐾𝑃𝑅𝑗𝑟𝑡
(KPREQ)
Recursive dynamic equations
𝐾𝐾𝑃𝑈𝑗𝑟𝑡+1 = (1 − 𝛿). 𝐾𝐾𝑃𝑈𝑗𝑟𝑡 + 𝐼𝑃𝑈𝑗𝑟𝑡
(KKPUDYN)
𝐾𝐾𝑃𝑅𝑗𝑟𝑡+1 = (1 − 𝛿). 𝐾𝐾𝑃𝑅𝑗𝑟𝑡 + 𝐼𝑃𝑅𝑗𝑟𝑡
(KKPRDYN)
𝜎𝑗𝑟𝑡+1
𝑉𝐴
= (1 + 𝛾𝐴𝑡). 𝜎𝑗𝑟𝑡
𝑉𝐴
(TFPDYN)
𝐴𝑟𝑡+1 = (1 + rorr). +𝑆𝑟𝑡
(ADYN)
𝐴𝐹𝑟𝑡+1 = (1 + rorr). +𝐹𝑆𝑟𝑡
(AFDYN)
𝐴𝐺𝑟𝑡+1 = (1 + rorr). +𝐵𝐵𝑟𝑡
(AGDYN)
Foreign sector balance
∑ ∑ 𝑃𝐸𝑖𝑡. 𝑄𝐸𝑖𝑝𝑟𝑡
𝑝
𝑖 + 𝐹𝑆𝑟𝑡 = ∑ ∑ 𝑃𝑀𝑖𝑡. 𝑄𝑀𝑖𝑝𝑟𝑡
𝑝
𝑖 + 𝑟𝑜𝑟 ∗ 𝐴𝐹𝑟𝑡 (FSEQ)
Savings-investment balance
𝑃𝐾
̅̅̅̅𝑟𝑡. 𝐼𝐼𝑗𝑟𝑡 =
𝐾𝑗𝑟𝑡
∑ 𝐾𝑗𝑟𝑡
𝑗
(𝑆𝑟𝑡 + 𝐾𝐸𝑟𝑡 + 𝐵𝐵𝑟𝑡 + 𝐹𝑆𝑟𝑡 − 𝑟𝑜𝑟 ∗ (𝐴𝑟𝑡 + 𝐴𝐹𝑟𝑡 + 𝐴𝐺𝑟𝑡) − ∑ 𝑃𝑖𝑟𝑡. 𝑍𝑖𝑟𝑡
𝑖 −
𝐷𝑈𝑀𝑀𝑌𝑟𝑡) (IIEQ)
Product market clearance
𝑄𝑖𝑟𝑡 = ∑ 𝐼𝐶𝑖𝑗𝑟𝑡
𝑗 + 𝐶𝑖𝑟𝑡 + 𝑐𝑔𝑖𝑟𝑡 + 𝐼𝐷𝑖𝑟𝑡 + 𝑍𝑖𝑟𝑡 + 𝑄𝑇𝑖𝑟𝑡 (PRODMKT)
Additional equation due to Walras law of functional dependence
𝑝𝑙𝑒𝑣𝑒𝑙𝑟𝑡 = ∑ 𝑤𝑖𝑟. 𝑃𝑖𝑟𝑡
𝑖 (PNORM)


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EUROPEAN
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Brussels, 3.10.2016
SWD(2016) 303 final/2
PART 3/3
CORRIGENDUM
Annule et remplace le SWD(2016) 303 final.
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COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposals for
a Directive of the European Parliament and of the Council establishing the European
Electronic Communications Code (Recast) and
a Regulation of the European Parliament and of the Council establishing the Body of
European Regulators for Electronic Communications
{COM(2016) 590 final}
{COM(2016) 591 final}
{SWD(2016) 304 final}
Europaudvalget 2016
KOM (2016) 0591
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306
6.6 ANNEX 6 - Data and problem evidence
6.6.1 Introduction
Europe's Digital Progress Report provides an overview of the progress made by MS in
digitalisation. It also details the policy responses by MS to address the specific challenges that
face them.
The Commission adopted the DSM Strategy for Europe411
in May 2015, which identified that
Europe has the potential to lead in the global digital economy, but that fragmentation and
barriers that do not exist in the single market are holding back the EU. It estimated that bringing
down these barriers could contribute an additional EUR 415 billion to European GDP. The
digital economy could expand markets and provide better services at better prices, offer more
choice and create employment. The DSM could create opportunities for new start-ups and
provide an environment for businesses to grow and benefit from a market of over 500 million
consumers.
The Commission therefore announced a series of measures to be taken at EU level to:
 improve access for consumers and businesses to online goods and services across
Europe;
 create the right conditions for digital networks and services to flourish; and
 maximise the growth potential of the European digital economy.
The delivery rhythm of the announced measures has been brisk.
Already on 6 May 2015, the Commission launched a competition sector inquiry into eCommerce
relating to the online trade of goods and the online provision of services. More than 1300
companies responded before the end of 2015. A first set of very preliminary results has been
published on 18 March 2016, showing that geo-blocking is widespread in the EU. This is partly
due to unilateral decisions by companies not to sell abroad but also contractual barriers set up by
companies preventing consumers from shopping online across EU borders.
On 9 December 2015, the Commission presented a proposal for Directive on contracts for the
supply of digital content412
as well as a proposal for a Directive on certain aspects concerning
contracts for the online and other distance sales of goods413
. The aim of these proposals is to
remove barriers due to contract law differences. In addition, for the supply of digital content,
once adopted, the Directive should set out clear and specific rights for consumers. Indeed, there
is currently a clear gap in EU legislation in the area of defective digital content, as most MS do
not have any legislation in place to protect consumers in the case of defective digital content.
On the same day, the Commission proposed a Regulation on the cross-border portability of
online content services in the internal market414
to allow people to travel with their online
content. In other words, this Regulation should ensure that Europeans who have purchased films,
series, sports broadcasts, games or e-books online can access them when they travel within the
EU.
At the same time, the Commission published an action plan to modernise EU copyright rules,415
which should make EU copyright rules fit for the digital age. This ‘political preview’ will be
translated into legislative proposals and policy initiatives that take into account responses to
several public consultations.
411
COM(2015) 192.
412
COM(2015) 634.
413
COM(2015) 635.
414
COM(2015) 627.
415
COM(2015) 626.
307
A set of measures to support and link up national initiatives for the digitisation of industry and
related services across all sectors and to boost investment through strategic partnerships and
networks was adopted by the Commission on 19 April 2016.416
This package also contains
concrete measures to speed up the standard setting process for ICT and an updated e-government
action plan to modernise digital public services.
In addition to action at the European level, the DSM strategy recognised that such action needs
to be complemented by actions taken at MS level, since a major part of policies which are
essential for the development of the digital economy are formulated a national level. Moreover,
MS are at very different stages in the development of the digital economy; some, for example,
the Nordic countries, are among the most advanced in the world, while others still have a lot of
catching up to do. Therefore, both policy priorities and the impact of the DSM will differ
significantly from Member State to Member State.
This report combines the quantitative evidence from the Digital Economy and Society index
(DESI) with country-specific policy insights. It keeps track of the progress made in digitalisation
in the MS and provides important feedback for policy-making at EU level. To enable a better
comparison between MS, this report also develops a cross-country analysis for the main
dimensions of DESI. This report will feed into the analysis of MS’ economic and social
challenges and the monitoring of national reform efforts carried out under the European
Semester.
The report is structured in thematic chapters that examine one issue across all MS. The first
section starts with connectivity, followed by human capital, before moving on to internet usage,
the digitisation of industry and digital public service and finally R&D in ICT. This is followed
by country chapters, each of which looks in the same order at the same issues, except for R&D,
which is not covered at the level of MS.
6.6.2 The state of play on connectivity and the telecom sector
The Connectivity dimension of DESI looks at both the demand and the supply side of fixed and
mobile broadband. Under fixed broadband it assesses the availability as well as the take-up of
basic and high-speed NGA broadband and also considers the affordability of retail offers. On
mobile broadband, the availability of radio spectrum and the take-up of mobile broadband are
included.
On the fixed side, Luxembourg, the Netherlands and the UK are the strongest, and Poland,
Romania, Slovakia and Bulgaria the weakest. NGA subscriptions are particularly advanced in
Belgium, Romania, the Netherlands and Lithuania. As for mobile broadband, The Nordic
countries (Finland, Sweden and Denmark) lead along with Estonia, while lowest figures were
registered by Hungary, Greece and Portugal.
416
COM (2016) 176, (COM(2016) 178, COM(2016) 179, COM(2016) 180.
308
Table 33 - EU average of Connectivity Indicators in DESI 2016
Figure 37 - Digital Economy and Society Index (DESI), Connectivity, 2016
Total telecom services revenues have declined by 10 % in Europe since 2012. EU telecom
CAPEX has slightly increased in the same period.
Telecom operators in Europe generated less revenue than US operators. Revenues went down
from EUR 237 bn in 2012 to EUR 213 bn in 2016 (forecasted) in Europe. At the same time, the
US also reduced its figures from EUR 252 bn to EUR 240 bn, surpassing Europe despite its
smaller population. There have been large increases in emerging markets, especially in China,
where there is still relatively low take-up of telecom services417
.
Figure 38 - Total telecommunication services revenues per region, billion EUR, 2012-2016
417
Note: this analysis is based on detailed figures from 26 MS, which covered about 98 % of the total EU market
(total telecom carrier services).
DESI - Connectivity
Fixed broadband coverage (% of homes) 97%
Fixed broadband take-up (% of homes) 72%
Mobile broadband take-up (subs per 100 people) 75
Spectrum (% of spectrum harmonised) 69%
NGA coverage (% of homes) 71%
Subscriptions to fast broadband (% of subscriptions) 30%
Fixed broadband price (as a % of income) 1.3%
309
Source: 2015 EITO in collaboration with IDC
CAPEX figures remained stable over the last four years even though NGA coverage increased
from 54 % to 71 %. Mobile CAPEX spending represented 60 % of total spending.
Figure 39 - Share of fixed and mobile CAPEX in Europe, 2015
Mobile voice and fixed voice revenues have decreased by over 25 % since 2012. Mobile
data grew by 10 %, and will represent over a quarter of total telecom revenues at EU level
in 2016.
The revenues of the telecommunications sector went down by 10 % between 2012 and 2016
(forecasted figure).
Telecommunications revenues (carrier services) by segment showed, how voice services (both
fixed and mobile) lost importance. Fixed voice decreased by 17.2 %, while mobile by 30.8 %.
Fixed and mobile voice services made up 57 % of total telecom revenues in 2012, but will only
represent 47 % in 2016.
310
Table 34 - Revenue growth rates, 2012-2016
By contrast, the growth in mobile data services (9.9 % between 2012 and 2016) is remarkable.
Mobile data will represent over one quarter of total market revenue (26 %) in 2016. The growth
in mobile data services could not, however, compensate for the major decline in voice. Revenue
from fixed internet access went up by 13.1 % since 2012, whereas business data services
decreased by almost 1 % between 2012 and the forecasted figure for 2016, representing solely
7 % of total telecom revenue.
Figure 40 - Total telecom carrier services revenues by segment, 2012-2016
Source: 2015 EITO in collaboration with IDC
Coverage of next generation access (NGA) technologies continued to increase and reached
71 %. NGA deployments still focus mainly on urban areas, while only 28 % of rural homes
are covered.
For the purpose of this report, next generation access includes VDSL, Cable Docsis 3.0 and
FTTP. By mid-2015, Cable Docsis 3.0 had the largest NGA coverage at 44 %, followed by
VDSL (41 %) and FTTP (21 %). Most of the upgrades in European cable networks had taken
place by 2011, while VDSL coverage doubled in the last four years. There was remarkable
Revenue growth rates 2012-2016
Telecom carrier services -10.0 %
Business data services -0.8 %
Fixed voice telephony -17.2 %
Internet access and services 13.1 %
Mobile data services 9.9 %
Mobile voice telephony -30.8 %
311
progress also in FTTP growing from 10 % in 2011 to 21 % in 2015, but FTTP coverage is still
low.
NGA networks are still very much limited to urban areas: only 28 % of rural homes are covered,
mainly by VDSL.
Figure 41 - NGA broadband coverage in the EU, 2010-2015
Figure 42 - Next generation access (FTTP, VDSL and Docsis 3.0 cable) coverage, June 2015
Coverage of Fibre to the Premises (FTTP) grew from 10 % in 2011 to 21 % in 2015, while
it remains a primarily urban technology. Lithuania, Latvia, Portugal and Estonia are the
leaders in FTTP in Europe.
FTTP is catching up in Europe, as coverage for homes more than doubled since 2011. However,
the FTTP footprint is still significantly lower than that of cable Docsis 3.0 and VDSL. In
Estonia, Portugal, Latvia and Lithuania more than two thirds of homes can already subscribe to
312
FTTP services, while in Greece, the UK, Ireland, Germany, Austria and Poland only less than
10 % can do so. FTTP services are available mainly in urban areas with the exception of
Lithuania, Latvia, Estonia, Denmark and Luxembourg, where more than one in three rural homes
can also have access to it.
Figure 43 - Fibre to the premises (FTTP) coverage in the EU, 2011-2015
Figure 44 - Fibre to the premises (FTTP) coverage, June 2015
4G mobile broadband availability reached 86%, up from 27% three years ago. 4G has
been commercially launched in all MS.
In 2015, deployments of 4G (LTE) continued: coverage went up from 79% of homes to 86% in
six months. Nevertheless, 4G coverage is still substantially below that of 3G (HSPA). As of
313
October 2015, 80% of Mobile Network Operators in the EU offered 4G services on LTE
networks.
LTE is most widely developed in the Netherlands, Sweden and Denmark, while commercial 4G
services were launched only last year in Bulgaria.
LTE deployments have focused so far mainly in urban areas, as only 36% of rural homes are
covered. However, in sixteen MS, LTE is already available also in the majority of rural homes,
with very high rates in Denmark, Sweden, Slovenia, Luxembourg and the Netherlands.
Figure 45 - Mobile broadband coverage in the EU, 2011-2015
Figure 46 - 4G (LTE) coverage, June 2015
314
An estimated 8 % of European homes subscribe to ultrafast broadband (at least 100Mbps),
up from 0.3 % five years ago. Romania, Sweden and Latvia are the most advanced in
ultrafast broadband adoption.
The Digital Agenda for Europe set the objective that at least 50 % of homes should subscribe to
ultrafast broadband by 2020. From June 2015, 49 % of homes are covered by networks capable
of providing 100Mbps. As service offerings are emerging, take-up is growing sharply. The
penetration is the highest in Romania, Sweden and Latvia. These three MS have a high coverage
of FTTP. In Greece, Italy and Croatia take-up is low mainly due to the lack of superfast
infrastructure, while in Cyprus and Malta, where the infrastructure is available for many homes,
still mainly lower speed offers are purchased.
Figure 47 - Percentage of households with a fast broadband (at least 30Mbps) subscription at EU
level, 2010-2015
Figure 48 - Percentage of households with an ultrafast broadband (at least 100Mbps)
subscription, July 2015
315
FTTH and FTTB together represent 9 % of EU broadband subscriptions up from 7 % a year ago.
In these technologies, Europe is still very much lagging behind South Korea and Japan.
Figure 49- Share of fibre connections in total fixed broadband, July 2015
Fast and ultrafast broadband subscriptions grew by 36 % in 12 months. In Belgium,
Latvia and Romania, the majority of subscriptions are at least 30 Mbps. Ultrafast (at least
100 Mbps) is most widespread in Belgium and Romania.
Despite the growth in fast and ultrafast subscriptions, they are still rare in the EU. In January
2015, only slightly more than one in four subscriptions were at least 30 Mbps and only 9 % were
at least 100Mbps.
In Belgium, Romania, Malta, Latvia, Portugal, Lithuania, Ireland, the Netherlands and Sweden,
more than 50 % are already at least 30Mbps, while the same ratio is less than 10 % in Italy,
Greece, Cyprus and Croatia. In ultrafast (at least 100 Mbps), Sweden, Latvia and Romania are
the most advanced with more than 40 % of subscriptions.
Figure 50 - Fixed broadband subscriptions by headline speed at EU level, 2008-2015
316
Figure 51 - Fixed broadband subscriptions by headline speed, July 2015
There are 75 active mobile broadband SIM cards per 100 people in the EU, up from 34
four years ago. The growth was linear over the last three years with over 40 million new
subscriptions added every year.
Mobile broadband represents a fast growing segment of the broadband market. More than 60%
of all active mobile SIM cards use mobile broadband.
In the Nordic countries and Estonia, there are already more than 100 subscriptions per 100
people, while in Hungary, Greece, Portugal and Slovenia the take-up rate is still below 50%.
Most of the mobile broadband subscriptions are used on smartphones rather than in tablets or
notebooks.
Figure 52 - Mobile broadband penetration at EU level, January 2009 - July 2015
317
Figure 53 - Mobile broadband penetration at EU level, January 2009 - July 2015
Mobile broadband traffic: Tablets are expected to be the touchstone for mobile data traffic
in 2020, exceeding smartphones and laptops in average usage. Mobile data traffic in 2020 is
expected to be 6-fold higher than in 2015.
Mobile data traffic in Western Europe is expected to grow by 6-fold from 2015 until 2020,
which represents a higher growth compared to the US (x6), South-Korea (x5) and Japan (x4).
Indeed, mobile data traffic will grow 2 times faster than fixed IP traffic from 2015 to 2020.
The average smartphone user in Western Europe will generate 4.6 Gb of mobile data traffic per
month in 2020, up by 353% from 2015. Laptop users will generate 4.4 Gb and tablets user more
than 6GB.
Tablet devices in Europe will overtake mobile-connected laptops and smartphones in total data
traffic. Currently, in Western Europe, tablets represent 33% of total mobile traffic. In 2020, their
share will be 42%, while in South-Korea and Japan tablets will weigh less than 40% of total
mobile traffic.
As for the US, tablets will represent 44% of total mobile traffic by 2020, with 9Gb per month per
user, as opposed to 6Gb in the EU.
318
Figure 54 - Mobile data traffic per type of device and region, Megabytes per month, 2015 - 2020
Machine-to-Machine communications: In Western Europe, M2M modules currently
generate 3% of total mobile data traffic. By 2020, this figure will go up to 11.6%, while
M2M modules will represent more than half of the total connected mobile devices in
Western Europe.
Machine-to-Machine communications on mobile networks will continue to increase rapidly both
in terms of traffic and the number of devices. M2M currently represents 19% of all connected
mobile devices; this ratio is forecasted to go up to 51% by 2020 in Western Europe. M2M traffic
will also expand, but will still take a relatively low share of total traffic on mobile networks
(12%).
The US and Japan will show similar figures, while in South Korea both traffic and number of
M2M devices will be significantly higher proportionally.
319
Figure 55 - Percentage of M2M modules of device connections by region, 2015 - 2020
Figure 56 - M2M traffic as a percentage of total mobile data traffic by region, 2015 - 2020
Broadband take-up tends to be lower in MS where the cost of broadband access accounts
for a higher share of income, but the correlation is not strong. The lowest income quartile
of the EU population has a significantly lower take-up rate.
Considering overall take-up, European average is 72 % of homes with Luxembourg, the
Netherlands at the highest positions and Italy, Bulgaria and Poland lagging behind.
320
Statistics show that income plays an important role in subscription rates. The lowest income
quartile has only 51 % take-up of fixed broadband as opposed to 89 % in the highest income
quartile.
The lag in the lowest income quartile when compared with the national average is evident in
Bulgaria, Romania, Hungary, Slovenia, Lithuania, Czech Republic, Croatia, Spain and Slovakia.
Figure 57 - Fixed broadband household penetration by income quartiles at EU level, 2011-2015
Figure 58 - Household fixed broadband penetration and share of broadband access cost
(standalone 12-30Mbps download) in disposable income, 2015418
Source: Commission services based on Eurostat and Van Dijk
418
Data not available for Luxembourg and Malta.
321
Half of all EU households subscribed to bundled communications services in 2015. 80 % of
bundles include internet access. Fixed telephony + internet is the most popular type of
bundle.
50 % of all EU households purchase bundled communications services, up from 38 % six years
ago. The most popular bundle is fixed telephony + internet followed by ‘triple play’: fixed
telephony + internet + TV. Internet access (either fixed or mobile) is present in 80 % of all
service bundles, fixed telephony in 64 %, TV in 54 % and mobile telephony in 46 %.
Figure 59 - Percentage of households subscribing to bundled services at EU level, 2009-2015
Figure 60 - Popularity of different services in bundles at EU level, 2015
322
Figure 61 - Popularity of different bundles (% homes with subscriptions) at EU level, 2015
Prices of mobile voice+data plans vary greatly across Europe. In comparison with the US,
the EU is cheaper for lower usage baskets, and more expensive for high-end packages.
Looking at the usage basket of 300 voice calls and 1GB data usage on handset, minimum prices
range between €13 and €73 with an EU average of €31.
The cheapest countries are Estonia, Lithuania, Denmark and the UK with minimum prices below
€15. At the same time, prices are very high (>€60) in Hungary, Malta and Greece.
The EU on average has much lower prices than the US for the 0.1GB+30 calls and the
0.5GB+100 calls baskets, however, on the 2GB+900 calls basket, the US is by close to 30%
cheaper than the EU419
.
Figure 62 - Mobile broadband prices (EUR PPP) - handset use in the EU and the US, 2015
419
Source: SMART 2014/0049 - Mobile Broadband prices (February 2015) https://ec.europa.eu/digital-single-
market/en/news/mobile-broadband-prices-february-2015. This study was carried out for the European Commission
by Van Dijk.
323
Figure 63 - Mobile broadband prices (EUR PPP) - handset use, 1GB + 300 calls, 2015
Prices of mobile broadband plans for laptops also show large differences across Europe. In
comparison with the US, the EU is cheaper for all usage baskets.
Looking at 5GB data-only plans for laptops, minimum prices range between €10 and €46. The
EU average (€19) is below the price of fixed standalone offers of 12-30Mbps.
The cheapest countries are Austria, Italy, Finland, Denmark and Poland with prices below €12.
At the same time, prices are very high (>€30) in Cyprus, Spain, Czech Republic and Croatia.
The EU on average has much lower prices than the US for all the laptop baskets420
.
Figure 64 - Mobile broadband prices (EUR PPP) - laptop use in the EU and the US, 2015
420
Source: SMART 2014/0049 - Mobile Broadband prices (February 2015) https://ec.europa.eu/digital-single-
market/en/news/mobile-broadband-prices-february-2015. This study was carried out for the European Commission
by Van Dijk.
324
Figure 65 - Mobile broadband prices (EUR PPP) - laptop use, 5GB, 2015
325
6.6.3 Technical annex on technologies and medium
In the context of constantly increasing IP traffic, resources such as numbering or spectrum become more and more scarce. In spite of industrial development of more
sophisticated and optimised solutions of spectrum usage for wireless data transmissions or of other transport media like copper or fibre, the laws of physics as
currently understood are showing a clear unused capacity potential for certain technologies. Just comparing the fundamental properties of physical media available
for future technologies which could appear over the air, copper or fibre, electrical signal speed is just two thirds of the speed of light. Fibre has an efficiency range
of dozen of kilometres while copper G.fast is effective only over 250 m or so. More significantly, fibre theoretical capacity of frequency bandwidth is 50 000 GHz
against 0.2 GHz for twisted copper.
Concerning broadband technologies we are observing on the one hand a tendency of boosting equipment around a copper pair or wireless path in order to use higher
and higher spectrum in the fixed line or over the air over shorter and shorter distances; and on the other hand, evolution of optical devices in order to consume more
and more of the unused already available spectrum of the fibre while keeping or improving the efficiency range.
As suggested by the SMART 2015/0005 support study, the continuous reliance on the existing copper-based infrastructure may hinder the development and take-up
of certain applications if the most demanding scenario in terms of bandwidth needs materialises. The new concept of VHC takes into consideration a number of
parameters in terms of quality of transmission (speeds, latency, jitter, etc.), that will define performance in a broader sense than understood today (with a current
focus almost exclusively on download speeds).
Table 35 - Table of mediums and technologies
326
Medium Technologies
Down/Upstream
Rate
(1)
Efficiency
range
(1)
Typical
latency
(5)
Shared
medium
for
lastmile?
Frequency
bandwidth
(6)
Infrastructure architecture Suitability Future of the technology
copper
Wired
ADSL, ADSL2,
ADSL2+
24/1 Mbps 5 km
15-40
ms
no
0,0022
GHz
internet access by transmitting digital
data overthe wires of a local telephone
network copper line terminates at
telephone exchange (ADSL) or street
cabinet (VDSL)
· Vectoring: Elimination of cross talks for
higher bandwidths
· G.Fast: Frequencyincrease up to 212
MHz to achieve higherbandwidth
· use of existing telephone
infrastructure
· fast to install
· small efficiency range due to the
line resistance of copperconnection
lines
· further speed and range
improvements by enhancing and
combining newDSL-based
technologies (phantom mode,
bonding, vectoring)
· bridge technology towards
complete fibre optic cable
infrastructure
VDSL, VDSL2,
Vectoring
100 /40 Mbps 1 km
15-40
ms
no 0,017 GHz
G.Fast 500/500 Mbps 250 m
15-40
ms
no 0,212 GHz
CATV 200/100 Mbps (4) 2-100
km
(2)
15-40
ms
yes 1 GHz
· coaxial cable in streets and buildings;
fibre at the feedersegments
· network extensions to provide
backward channel functionality
· use of existing cable television
infrastructure
· fast to install
· high transmission rates
· Further implementation of new
standards (DOCSIS 3.1) will allow
to provide higher bandwidth to
end-users
fiber
Optical
p2p
1/1 Gbps (and
more)
10-60 km
0.3 ms
(5 µs
per
km)
no
50000 GHz
· signal transmission via fibre
· distribution of signals by electrically
powered network equipment or
unpowered optical splitters
· highest bandwidth capacities
· high efficiency range
· high investment costs
· bandwidth depends on the
transformation of the optical into
electronic signals at the curb (FTTC),
building (FTTB) or home (FTTH)
· next generation technology to
meet future bandwidth demands
p2mp yes
air
Wireless
LTE(Advanced)
100/30
(1000/30)
Mbps
(3)
3-6 km
5-10
ms
yes 0.1 GHz
· mobile devices send and receive radio
signals with any numberof cell site base
stations fitted with microwave antennas
· sites connected to a cabled
communication networkand switching
system
· highly suitable for coverage of
remote areas (esp. 800 MHz)
· quickly and easily implementable
· shared medium
· limited frequencies
· commercial deployment of new
standards with additional features
(5G) and provision of more
frequency spectrum blocks (490 -
700 MHz)
· meets future needs of mobility
and bandwidth accessing NGA-
Services
HSPA 42,2 / 5,76 Mbps 3 km
30-70
ms
yes 0.005 GHz
Satellite 20/6 Mbps High
500-
700 ms
yes 10 GHz
· highly suitable for coverage of
remote areas
· quickly and easily implementable
· run time latency
· asymmetrically
· 30 Mbps by 2020 based on next
generation of high-throughput
satellites
Wi-Fi 300/300 Mbps 300 m
100 -
1000
ms
yes
0.005-
0.160
GHz(7)
· inexpensive and proven
· quickly and easily implementable
· small efficiency range
· shared medium
· increased use of hotspots at
central places
WiMAX 4/4 Mbps 60 km 50 ms yes 0.01 GHz
· gets continually replaced by Wi-
Fi and LTE
Legend:
1 Technical standard max. 4 EuroDOCSIS
2 Depends on amplification 5 Usual practicalvalues depending on distance
3 Depends on the frequency spectrum used 6 difference between the upper and lower usablefrequencies for signals transmission
327
6.7 ANNEX 7 - Impact on competitiveness and innovation
6.7.1 Impact on competitiveness
The results of the CGE modelling also provide some indications as regards the implications of
changes to the framework on labour productivity – one measure of EU competitiveness. In the
cumulative scenario case, where preferred policy options are implemented in all areas, real labour
productivity will exceed the baseline by an average of 1% for the period 2020-2025. This is
equivalent to an average of 0.3 percentage points higher growth rate of productivity in the simulation
scenario as compared to the baseline.
Figure 66 - Real labour productivity (preferred options vs status quo)
Source: Eurostat, own calculations
Viewed in international perspective, historically over the past quarter century labour productivity
growth in EU has been lagging by an average of 0.4 percentage points as compared to the US and by
2.4 percentage points as compared to Korea (due its lower base). One can realistically expect
productivity growth acceleration in the US and Korea in the forthcoming years as well. Despite this,
the implementation of the considered policy changes should make a significant contribution towards
boosting EU productivity, and potentially closing the gap.
Figure 67 - Trends in labour productivity – international comparisons
328
Source: World Bank, World Development Indicators database
6.7.2 Potential for disruptive change through innovation
The assumption underlying the CGE model is that clearer regulation of communication services and
better connectivity will allow all sectors of the economy to operate more efficiently and realise higher
total factor productivity rates.
In addition, the implementation of the preferred policy options might give a significant boost to
innovation. Such innovation effects are particularly relevant in view of the fact that the review of the
electronic communications framework could support the development and use of the ‘Internet of
Things’ (IoT) 421
and digitalization of industry inter alia by fostering:
- More regulatory certainty for all players throughout the IoT value chain contributing to a better
investment climate;
- Levelling barriers for scaling up in Europe (by reducing regulatory heterogeneity) to the benefit of
start-ups entering as new players shaping the IoT value chain.
- Improving connectivity for SIM based M2M services;
- End-users confidence about security, privacy and confidentiality422
.
- Faster adoption of 5G; and
- A more ubiquitous roll-out of fibre networks to homes and lamp posts as to provide a backbone with
the stability and low latency that is required by many IoT applications.
In turn, IoT implies an increased role for communication services in (and increased dependency on
connectivity by) various industries, including automotive, agriculture, health, transport, etc. As such,
policies which unlock the full potential of IoT and the digitization of industry could trigger a so-called
“disruptive growth path”.423
It is not possible to estimate ex ante the impact of such structural economic changes on the basis of
CGE modelling. Therefore, the CGE estimates should be treated as a lower bound. Assessing the
impact of disruptive structure changes would require a case study approach examining how precisely
production processes would change as a consequence of a progressing IoT. Such analysis has been
done by McKinsey (2015) “The internet of things: mapping the value beyond the hype” which
analyses a number of IoT use cases 424
involving sectors that are key for EU competitiveness.
- IoT will particularly increase productivity and innovation in sectors that are considered
essential for Europe’s global competitiveness (such as automotive425
and electrical
421
BEREC (2016) and McKinsey (2015) identify a number of key enablers that contribute to unlocking the full potential of
the IoT. Key enablers are optimal fixed and mobile connectivity (which is realised through policy measures with regards to
access, spectrum and numbering), regulatory security for new players in the IoT value chain (which is realised by clarifying
the scope of the RF) as well as end-users confidence about security, privacy and confidentiality.
422
The reason, as explained by BEREC and McKinsey, is that new categories of risks are introduced by the Internet of
Things. McKinsey argues that more devices means more opportunities for potential breaches and BEREC argues that “[d]ue
to limited resources in terms of energy and computing power, […] IoT devices may be vulnerable to cyber-attacks”.
Furthermore, McKinsey argues that the impact of a data breach is much larger in the context of the IoT. “when IoT is used to
control physical assets, whether water treatment plants or automobiles, the consequences associated with a breach in
security extend beyond the unauthorized release of information—they could potentially cause physical harm”. BEREC
concludes that “If users do not trust that their data is being handled appropriately there is a risk that they might restrict or
completely opt out of its use and sharing, which could impede the successful development of IoT.”
423
See: “Information Technologies and Labour Market Disruptions - A Cross-Atlantic Dialogue” background document by the
“interdisciplinary, cross-sector roundtable organised by the European Commission (DG Enterprise and Industry and DG
Communication Networks, Content and Technology) in cooperation with The Conference Board and Cornell University ILR
School” 3/11/2014, p. 11
424
Outside, Home, Human, Cities, Factories, Worksites, Offices, Retail, environments, and Vehicles,
425
BEREC BoR(16)39 as well as McKinsey (2015) identify automotive as key sector that will adopt IoT applications. At the
same time, it considered a strategic sector of the EU economy http://ec.europa.eu/growth/sectors/automotive/index_en.htm
329
engineering426
). Realising the full potential of the IoT in Europe contributes to
maintaining/strengthening that position. Not realising the full potential of the IoT in Europe
may lead to other parts of the world overtaking that position.
- IoT will also increase productivity and innovation in as well as in agriculture427
which is an
essential sector for the regional competitiveness of Europe’s peripheral areas428
.
- Furthermore, IoT contributes to cost savings in a wide variety of other sectors such as E-health,
smart metering/grids, smart homes and cities, etc.
McKinsey estimates for the global economy that by 2025, the full potential of IoT amounts to
approximately 3.9 to 11.1 trillion dollars per year (including consumer surplus). In terms of % of
global GDP this amounts to 3.3% to 9.4% according to our own calculations.429
If Europe could
realise a similar gain by fostering key IoT enablers, this would amount to an additional GDP of 0.56
and 1.59 trillion euros in the year 2025.430
The contributions to European competitiveness that could be made from the proposed changes to the
EU regulatory framework are summarised in the following table.
426
Electrical engineering is a sector in which the EU is the global leader and which will benefit greatly from the ongoing
growth in mobile devices see: http://ec.europa.eu/growth/sectors/electrical-engineering/index_en.htm
427
BEREC BoR(16)39 as well as McKinsey (2015) identify agriculture as key sector that will adopt IoT applications.
428
Thissen, van ort, and Diodato (2013)
429
On the basis of data and forecasts provided by the Conference board, global GDP may grow from 88 trillion dollars in
2015 to 117 trillion dollars in 2025, not accounting for a disruptive boost like the IoT. As such, the IoT may create up to
3.3% to 9.4% additional income at global level by 2025. See https://www.conference-
board.org/data/economydatabase/index.cfm?id=27762 and https://www.conference-
board.org/data/globaloutlook/index.cfm?id=27451
430
Assuming the EU economy has grown to 16.58 trillion euros by 2025 (based on forecasts by the Conference board).
0.33% of 16.58 trillion euros = 0.56 trillion euros. 9.4% of of 16.58 trillion euros = 1.59 trillion euros
330
Table 36 - Overview of competitiveness impacts
Access Spectrum Services
Cost
competitiveness
High bandwidth
connectivity supports the
digitalisation of services,
reducing cost and time to
market. Standardising
wholesale products used
for business should also
reduce costs and increase
efficiency within cross-
border organisations
The prevalence of general
authorisations will make
access to spectrum more
affordable and lower
administrative /
regulatory costs. This is
of particular benefit to
smaller companies with
more limited resources
The reduction of
administrative burden
and of regulatory
heterogeneity realises
cost savings for telecom
operators.
International
competitiveness
Access policies are likely
to boost infrastructure
deployment in Europe,
closing the investment
gap with other economies.
Increased bandwidth is
likely over time to
support increased use of
digital services and the
attractiveness of the EU
as a platform for
technological and service
development.
Device manufacturers
will benefit from EU
single market, offering
significant scaling
opportunities, and
producing devices that are
able to operate in
“European” bands.
Less regulatory
heterogeneity contributes
to the realisation of a
digital single market
which facilitates a faster
scale-up of European
start-ups in the global
digital economy.
Innovation
competitiveness
The deployment of fibre
to lampposts and homes
supports 5G development,
and new applications. A
connected economy may
also drive disruptive
change in business
processes
The prevalence of general
authorisation will open up
spectrum access to
innovative services, faster
roll-out of 4G/5G will
foster development of
new services based in
Europe.
More clarity and equality
throughout the value
chain with regards to
regulation reduces
regulatory risk for new
(small medium sized and
large) players. This
increases their
willingness to invest and
innovate
331
A key challenge however in realizing the benefits we have identified from innovations including
those stemming from IoT is the capability of European businesses to leverage innovation. For
example, comparing EU431
innovation capacity and results against peer economies, according to
the Global Innovation Index for 2015,432
the EU seems to be lagging behind in terms of many
aspects of innovation,433
although some countries within Europe including Finland, Sweden,
Luxembourg, Denmark and Germany are reported to be relatively strong in making use of
innovations specifically in ICT.
Source: Global innovation index, own calculations
If benefits are to be fully realized, this highlights the need for levelling up within Europe, not
only in terms of supply-side policies for electronic communications including the regulatory
environment, but also – importantly – on initiatives to support the absorption of new
technologies within businesses of all sizes.
431
EU figures are derived aggregating the member states scores, weighting them with the respective country
population.
432
The Global Innovation Index is an annual ranking of countries by their capacity for, and success in, innovation. It is
published by INSEAD and the World Intellectual Property Organization, in partnership with other organisations and
institutions. It is based on both subjective and objective data derived from several sources, including the International
Telecommunication Union, the World Bank and the World Economic Forum.
433
There are clear differences for the business sophistication pillar of the index, which includes knowledge workers
and R&D activities performed in the business sector, links between the business sector and the academia and means
of knowledge absorption. Another aspect where EU is performing relatively worse concerns indicators for
‘knowledge and technology’ including knowledge creation, diffusion and impact.
332
6.8 ANNEX 8 – Options diagrams
6.8.1 Access options
6.8.2 Spectrum options
Option 1
Option 2
Option 3
Option 4
Do nothing
Move to dispute resolution Limit regulation/remedies
Streamline market analysis Maintain current situation / flexibility
Streamline market analysis Focus regulation for NGA Standardise business wholesale products
333
6.8.3 USO options
6.8.4 Services options
Costs
Green shaded: moderate enforcement, compliance and adjustment costs
Orange shaded: costs in terms of less privacy protection
Red shaded: high regulatory enforcement and compliance costs + increased regulatory
risks
Blue shaded: costs of reduction in national flexibility
(size of which depends on heterogeneity of preferences and degree of harmonisation of
horizontal rules)
Option 1
Option 2
Option 3
Option 4
Donothing
excludingpublicpayphonesandaccessoryservices
excludingpublicpayphonesandaccessoryservices Basicbroadbandaffordability
Basicbroadbandavailabilityandaffordability
excludingPATS
334
6.8.5 Governance
Harmonisation minimum set NRAsS
competencies (including spectrum)
and alignmented with BEREC tasks
BEREC & RSPG advisory role and certain
normative powers for BEREC
New governance: Chairperson, new
single Board, Executive Manager
with binding suppervisory and
enforcement powers
Option 1
Option 2
Option 3
Option 4
Do nothing
EU regulator
Enhanced advisory role
strenghtened competencies
Harmonisation minimum set NRAs
competencies and alignmented with BEREC
tasks, Enhanced BEREC advisory role
New governance: Chairperson, new single
Board, Executive Manager
Advisory and normative powers
Extended NRA competencies
(consumer protection,
numbering, authorisation,
geographical surveys ) aligned
with BEREC advisory tasks
Commission/BEREC Double lock for
coherence in market review
mechanisms (remedies)
BEREC new tasks including binding
powers (transnational markets,
cross-border disputes
Improved RSPG process for
opinions & reports
Exchange of best practices on
spectrum assignments
BEREC peer review on notified
spectrum assignment &
recommendations
335
6.9 ANNEX 9 - The connectivity strategy: a European Gigabit Society
This annex spells out the rationale behind the connectivity strategy for a European Gigabit
Society by 2025. The Communication accompanying the review of the telecoms framework will
introduce the policy context and the ambitions for Europe in the coming years. In this annex we
review the process followed and the evidence underpinning the need for a Gigabit society.
6.9.1 The public consultation on internet speeds and the new ambitions
Adequate connectivity is a prerequisite to achieve a genuine DSM. This is why the DSM
Strategy announced that the review of the Telecom Framework's focus would include
"incentivising investment in high speed broadband networks". This is also why President Juncker
and VP Katainen have made of telecommunciations one of the prioritiy areas for strategic
investment under the regulation setting up the European Fund for Strategic Investment. DG
CONNECT has then, over the last year, gathered evidence on Internet connectivity needs beyond
2020:
 We have held bilateral meetings not just with the telecom operators but also with various user
sectors' representatives.
 We have analysed connectivity facts and figures in available publications and forecasts.
 We have carried out and analysed a full public consultation which focused on speed and
quality of internet services.
Overall, the results of these various actions converge: the use of Internet services and
applications will substantially increase for both fixed and mobile connectivity and there is a need
to prepare now for higher speed (upload and download) and other features of quality of service
(latency, resilience, etc.) beyond 2020. The findings of these various steps illustrate the need to:
1. Show greater ambition in terms of both average and maximal speed and other quality
parameters beyond 2020, considering expected future developments and the time horizon for
investment.
2. Ensure that policy, regulatory and financing instruments support an investment-friendly
environment in line with such ambition.
These conclusions echo the call for a definition of Europe's connectivity ambition beyond 2020
from the participants - representatives of the industry, users and local and national public
authorities - in the broadband roundtables that Commissioner Oettinger chaired in early 2015.
These stakeholders called for defining long-term connectivity ambitions and for better rules and
instruments to further deploy broadband infrastructure.
On the need to show greater and longer-term ambition and in line with the mandate given to
Commissioner Oettinger by President Juncker to "set clear long-term strategic goals to offer
legal certainty to the sector and create the right regulatory environment to foster investment and
innovative businesses", Commissioner Oettinger announced in March his ambition of
connectivity for a European gigabit society by 2025, to be based on 3 pillars:
 Gigabit connectivity for socio-economic drivers, starting with schools, hospitals,
libraries, public administration and business centres.
 Future-proof ubiquitous connectivity to support all forms of mobility.
 Improved connectivity in rural areas.
While the DAE targets should remain valid up to 2020, the expected uses' evolution and
technological developments as well as the time horizon for investment (investment cycles
336
needed for such broadband infrastructure projects run over 5-10 years) call for setting up now
longer term objectives for 2025. A study is currently being conducted by the Commission
Services to assess the feasibility of the three pillars announced by Commissioner Oettinger and
come up with a preliminary estimate of the cost entailed.434
6.9.2 Connectivity and its importance
As mentioned in the main report and in the support studies, there are numerous studies showing
that improved Broadband access is beneficial for the society. The positive impact ranges from
purely economic GDP growth and unemployment decrease, through battling digital divide and
improvement in innovativeness for business and increased employees skills to entertainment
possibilities and wellbeing generated by e-health. EGovernment solutions decrease the costs of
the local administration and the citizens are more willing to participate in community life (e.g.
voting participation).
Czernich et al (2011)435
examined the wider effects of broadband on GDP per capita across the
OECD countries, finding that a 10-percentage point increase in broadband penetration raises
national annual per capita growth by 0.9-1.5 percentage points. EIB and IMIT436
study proves
that higher Broadband speed has positive impact on GDP and it is greater in countries with lower
income than countries with higher income. Katz et al. (2010)437
claims that Germany achieving
both the broadband penetration and speed targets will create more than 960,000 additional jobs
and output worth more than 170 billion euro. Rohman and Bohlin438
(2012) show that increasing
the Broadband speed in the OECD countries stimulates GDP growth. The impacts depend on the
broadband speed and the existing economic growth in particular country.
Studies conducted by De Stefano et al. (2014)439
, Kandilov et al. (2011)440
, Kim and Orazem
(2012)441
, Whitacre et al. (2014a)442
show that Broadband can increase the number of businesses
– either because it increases firm entry, or because it helps with firms’ survival. Akerman et al.
(2015)443
, Dettling (2013)444
, Kolko (2012)445
, Whitacre et al (2014b)446
show that Broadband
can positively impact on local employment. Employment effects can vary across different types
of areas, industries, and workers, with urban areas, service industries and skilled workers
possibly benefiting more than rural areas, manufacturing industries and unskilled workers.
434
See SMART 2015/0068
435
Czernich N., Falck O., Kretschmer T., Woessmann L. (2011), Broadbnad Infrastructure and Economic Growth,
The Economic Journal 121 (552) May 12, pp, 505-532
436
http://institute.eib.org/wp-content/uploads/2014/04/EIB_broadband-speed_120914.pdf
437
Katz, R. L., Vaterlaus, S., Zenhäusern, P. & Suter, S. (2010). The Impact of Broadband on Jobs and the German
Economy. Intereconomics, 45 (1), 26-34
438
Rohman, I. and E. Bohlin (2012), Does broadband speed really matter as a driver of economic growth?
Investigating OECD countries. International Journal of Management and Network Economics, 2012, vol.2, issue 4,
pages 336-356
439
De Stefano, T., Kneller, R., Timmis, J., (2014), The (Fuzzy) Digital Divide: The Effect of Broadband Internet Use
on UK Firm Performance. University of Nottingham Discussion Papers in Economics. Discussion Paper 14/06.
440
Kandilov, AMG, Kandilov, IT, Liu, X, Renkow, M., (2011), The Impact of Broadband on U.S. Agriculture: An
Evaluation of the USDA Broadband Loan Program. Selected paper Prepared for Presentation at the Agricultural and
Applied Economics Association’s 2011 AAEA & NAREA Joint Annual Meeting. Pittsburgh, Pennsylvania, July 24-
26
441
Kim, Y., Orazem, P., (2012), Broadband Internet and Firm Entry: Evidence from Rural Iowa. Iowa State
University Working Paper No. 12026
442
Whitacre, B., Gallardo, R., Strover, S., (2014a), Broadband's Contribution to Economic Growth in Rural Areas:
Moving Towards a Causal Relationship. Telecommunications Policy 38, 1011-1023.
443 Akerman, A., Gaarder, I., Mogstad, M., (2015), The Skill Complementarity of Broadband Internet. Quarterly
Journal of Economics.
444
Dettling, L.J., (2013), Broadband in the Labor Market: The Impact of Residential High Speed Internet on Married
Women’s Labor Force Participation. Finance and Economics Discussion Series Divisions of Research & Statistics and
Monetary Affairs Federal Reserve Board, Washington, D.C.
445
Kolko, J., (2012), Broadband and Local Growth. Journal of Urban Economics 71, 100–113.
446
Whitacre, B., Gallardo, R., Strover, S., (2014b), Does Rural Broadband Impact Jobs and Income? Evidence from
Spatial and First-Differenced Regressions. The Annals of Regional Science 53, 649-670.
337
Forzati and Mattsson (2012)447
show that increasing in the ratio of the population that lives
within 353 metres of a fibre-connected premise contributes positively to job employment from
0%-0.2% after two and a half years. Atkinson et al (2009)448
proved that investment in
broadband networks for USD 10 billion in one year generated about 498 thousand jobs in the
USA.
Table 37 -Potential socio-economic impacts of broadband deployment in Rural, Remote and
Sparsely populated areas
Domain Impacted
aspect
Examples of benefits in RRS areas by stakeholders
([B] business, [C] citizens)
Community
building
Quality of life
Social inclusion
Participation in social life reducing geographical distances
(including politics, leisure activities, etc.) [C].
Interaction among citizens allowing for the participation of
a larger set of stakeholders (including elderly people,
minorities, people living in remote areas, etc.) [C].
Crime and
public safety
Quality of life Reduction of crime due to the deterrent of remote
surveillance (e.g. safer small villages) [C]. Control of
strategic assets/infrastructures located in areas not easily
accessible (e.g. increasing security and response capacities
to man-made damages or natural disasters) [B].
Education and
skills
Competiveness
and innovation
Employment
Technological
skills
Social inclusion
Increase of productivity [B]. Increased contacts with
research and innovation actors (i.e. universities and
enterprises) allowing connections and technology transfer
processes at distance [B].
Increase of competitiveness on the job market with skills
alignment with those of the citizens of urban areas [C].
Creation of ICT professional competences as a side effect
of deployment and management of broadband
infrastructures [C]. Improvement in the ICT take-up
(eServices, eCommerce, eGovernment) [C] [B].
Increase of education delivered in remote mode facilitating
access to knowledge also by those having difficulties in
accessing transport networks (from disabled people to
people living in areas poorly covered by public transport
services)[C]. |
447
Forzati and Mattsson (2012), The economic impact of broadband speed: Comparing between higher and lower
income countries
448
Atkinson, R.T., Castro D., Ezell S.J. (2009), "The digital Road to Recovery: A Stimulus Plan to Create Jobs, Boost
Productivity and Revitalize America", The Information Technology and Innovation Foundation (ITIF)
338
Economy Employment
Growth
Competiveness
and innovation
Incremental cost
saving
Incremental
revenues
Selection and employment of workers at distance, accessing
competences not available locally or located in areas not
attractive for business [B]. Opportunity for workers to
contribute remotely to specific ICT-based jobs [C].
Creation of new ICT-based businesses [B].
Increase of the Total Factor Productivity of the areas [B].
Increased competitiveness of local firms in other sectors
than ICT through the creation of new/innovative products
and services [B].
Face-to-face communications worldwide, saving travels
costs and time [B]. Access of remote technological services
to increase firms’ efficiency (i.e. cloud computing) while
avoiding local physical installation of ICT equipment [B].
Implementation/adoption of logistic solutions addressed to
increase firms’ efficiency (i.e. monitoring of stocks) while
avoiding traditional transport and logistics [B].
Direct access to global markets [B] and potential gaining of
a market share through eCommerce solutions [B].
Environment Incremental cost
saving
Quality of life
Use of smart grids with energy efficiency benefits [B] [C].
Less physical travels, implying reduced CO2 emission and
use of fuels and time [B] [C]. Adoption of remote control
systems to prevent and mitigate natural disasters [C].
Equality and
well-being
Employment
Technological
skills
Quality of life
Social inclusion
Incremental cost
saving
Job opportunities for disabled people or people not served
by public transport means [C]. Education opportunities for
disabled people or people not served by public transport
means [C]. Connection opportunities with families/relatives
displaced in different areas [C]. Connection opportunities
through smartphones and tablets [B] [C]. Connection
opportunities for disabled people or people not served by
public transport means [C]. Opportunities to access
information and data worldwide [B] [C]. Opportunities to
save money from traditional telecommunications means
(i.e. fixed lines) [B] [C]. Opportunities to access
eCommerce and eGovernment services [B] [C].
Finance and
wealth
Wealth
Incremental cost
saving
Valorisation of the value of an area reflected in increased
prices for housing/business location [B] [C]. Opportunities
to access financial services for disabled people, people not
served by public transport means, and remotely located
businesses [B] [C].
Health care Incremental cost
saving
Quality of life
Reduction of costs for health consultations (for less critical
pathologies) [C]. Digitalisation and automation of
administrative procedures within public and private health
systems [B] [C]. Monitoring of basic health conditions
through mobile apps [C]. Monitoring of patients at distance
without requiring hospitalisation (for less critical
pathologies) [C].
Source: Linking the Digital Agenda to rural and sparsely populated areas to boost their growth
potential – Committee of the Region Report (2016)
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SMART 2015/0005 demonstrates the impact of speed (and therefore quality) of networks. It
estimates that an annual increase of broadband speeds of 21% (associated with a scenario
whereby projected ADSL connections were all replaced with FTTC/VDSL connections by
2025), would result in cumulative growth in GDP of 1.5% by 2025. A 28% annual increase in
speed (as would be associated with a replacement by all broadband connections with fibre)
would result in cumulative growth in GDP by 2025 of 5.1%.
According to Vodafone and Arthur D. Little the number of fields which could benefit from the
high-speed connectivity is substantial:
Better Healthcare: Fibre networks will be crucial for Digital Health such as Remote patient
monitoring, Remote care & rehabilitation, Professional operative consultations and Research
(e.g. Next Generation Genome Sequencing). Patient services are being improved, healthcare
is delivered in a more efficient way, more patients can be reached and benefit from
specialists’ attention and the cost of healthcare will ultimately be reduced. This sector still
relies on antiquated infrastructure and many ‘pre-Digital’ working practices today.
Better Education: New educational tools and applications are being enabled by fibre networks
such as immersive virtual reality training for professionals and remote interactive learning.
Fibre networks will support increased digitalization within the classroom (e.g. to download
content on tablets or laptops). This has allowed education to become more personalized,
tailored to the need of each individual by student, increasing buy-in and motivation.
Moreover, a larger network of students can be reached, teaching tasks distributed and
education delivered in a more efficient way.
Increased Security: Monitoring public or private environments, recognizing suspicious
activity and alerting security services can happen better and faster when fibre networks are
in place. More and higher quality images can be captured (subject to privacy safeguards) and
analysed whilst AI can recognize potentially dangerous situations and automatically trigger
emergency response.
Positive Social impact: Fibre networks enable a range of new applications for entertainment,
collaboration and social inclusion. Social relationships between people can be maintained
regardless of distance, age or level of mobility, e.g. through high definition video streams or
ambient presence.
Positive impact on Environment: Next Generation Smart Grid and Smart Mobility
applications can be enabled by fibre networks and will have a positive impact on Energy
consumption and CO2 emissions. Applications like Automated Energy Demand Response
reduce the production and consumption, enabling more efficient use of renewables. Smart
highways, Autonomous transportation and Smart traffic management tools – with core fibre
networks – will lead to more efficient Mobility.
Increased Employment: New jobs are created to construct and set up the new fibre
infrastructure. But more importantly, new applications and business models enabled by fibre
networks appear and create new job opportunities, and the wider availability of such
connectivity nationwide also distributes economic benefits and promotes modern commerce
outside urban centres.
The benefits from the network and especially high-speed network are well documented but the
value of benefits varies with the speed and scope of adoption, and in turn speed and scope of
adoption depends on the quality of networks. This circularity renders decisions difficult, in
particular for public investment.
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6.9.3 Towards the Digital Single Market and new connectivity ambitions
The DSM Strategy stresses the importance of connectivity and ICT networks: they "provide the
backbone for digital products and services which have the potential to support all aspects of our
lives, and drive Europe's economic recovery"; the DSM "must be built on reliable, trustworthy,
high-speed, affordable networks".
Adequate connectivity is a prerequisite to achieve a genuine DSM. This is why the DSM
Strategy announced that the review of the Telecom Framework's focus would include
"incentivising investment in high speed broadband networks". This is also why President Juncker
and VP Katainen have made of digital networks one of the prioritiy areas for strategic
investment under the regulation setting up the European Fund for Strategic Investment.
The lag between policy, investment and its impact on the society implies that in order to ensure
connectivity beyond 2020 the decisions have already to be taken. Europe's future economic
success will stem from innovation and new business models that will make the most of digital
networks – not just telecom infrastructure, but also cloud computing, Big Data, connected cars,
the digitalisation of our industry, and so on. Hence, a supply driven approach would be in line
with ensuring access to these new paradigms, even if demand may not follow immediately.
Policy aiming at increasing European competitiveness and attractiveness for business will
improve EU wealth and contribute to the well-being of all the citizens, stimulating jobs creation
and decreasing unemployment.
6.9.4 Technological developments
Our review of global IP traffic, technological trends, user scenario forecasts and the
infrastructure needs for key policy initiatives further reinforces the view that networks require a
true generational shift in terms not only of download speed, but also in other quality aspects such
as upload speed, low latency, reduced jitter and uninterrupted access. The figure below illustrates
the technological development, which will require better networks.
Figure 68 – Key applications and technological developments
Source: ADL
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As mentioned in annex 6, section3, in the context of constantly increasing IP traffic, resources
such as physical infrastructures, numbering or spectrum become more and more scarce.
Furthermore, copper-based infrastructures tend to have a much higher number of nodes and
equipment as well as require a higher amount of electricity. This implies higher maintenance
costs and longer down periods which represent obstacles to the efficient and reliable running of
these critical infrastructures. The figure below illustrates the differences between technologies.
Figure 69 – Network features and speeds
Source: European Commission
Additionally, despite the higher initial expenditure in terms of CAPEX, the maintenance and
operational costs OPEX are lower for fibre based technologies. The graph below is an example
of a business case from OAN project Southern Primorska. The higher initial costs are offset after
less than 3 years of operations assuming take-up of 50%.
342
Figure 70 – Cost scenarios for Southern Primorska region
Source; European Commission elaboration on data from project Southern Primorska
Hence, the physical characteristics of certain media make them inherently better than other
media for communication tasks. Extended reliance on the existing copper-based infrastructure is
already today showing inefficiencies in terms of quality of transmission (speeds, latency, range,
etc.), capacity, maintenance costs, energy and suitability, inflexibility to easily accommodate
Software Defined Networks and the service innovation that this brings with them.
343
6.9.5 Some future developments
The cloud technology, also referred to as XaaS being X as a service, where X might mean
Infrastructure, Software, Security, etc. becomes more and more popular. Investment in IT is
usually costly and might generate additional costs in order to satisfy peak demands. Companies,
which use cloud solutions only pay for capacity actually employed and do not need huge upfront
investment (CAPEX). Below there are 2 graph illustrating the benefits from the cloud solutions –
the left one represents a case, where a company invest in IT step by step and the right one the
company, which benefits from the cloud.
Figure 71 – benefits from adopting a cloud solution
Source:medium.com
In order to benefit from the cloud the economic actors have to be connected – outsourcing IT
capability requires excellent connectivity (both download and upload). Therefore for the
connectivity is extremely important if Europe is supposed to get on the cutting edge of
innovation by creating appropriate environment for the companies to optimize their costs.
According to Cisco IP worldwide traffic will be growing very dynamically as the number of
users and devices is fuelled by Internet of Things development.
Globally, average IP traffic will reach 511 Tbps in 2019, and busy hour traffic will reach 1.7
Pbps. In 2019, the gigabyte equivalent of all movies ever made will cross Global IP networks
every 2 minutes. Good connectivity will be key in order to ensure the wellbeing of the citizens.
Global IP traffic 2014 2019
Annual run rate 718.2 Exabytes 2.0 Zettabytes
Traffic per capita 8 GB 22 GB
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Figure 72 – Cisco VNI forecasts
Penetration of Internet users, especially the business one will increase in the next 5 years and the
trend will most likely continue till 2025.
Figure 73 - Internet of Things Units Installed Base by Category (Millions of Units)
Source: Gartner (November 2015)
New applications requiring low latency and VHC internet access are emerging and will create
the demand for better connectivity. Figure 38 illustrates that a number of applications will need
latency around 1ms and bandwidth of 1Gbps by 2025. Of course, one has to consider that many
of these application will be run in parallel, so that the bandwidth needed by households is
cumulative.
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Figure 74 – Latency and speed needed by applications and services
346
6.10 ANNEX 10 – Problem drivers
The present annex provides a more detailed description of the drivers included in section 1.3 and
of the evidence supporting them.
6.10.1 The lack of incentives to deploy networks in the absence of infrastructure competition or
in rural areas
The rules governing the sector fell short of providing sufficient incentives and opportunities for
the market-funded roll-out of NGA and especially VHC fixed and mobile networks. Moreover
the deployment of wireless infrastructure was hampered by insufficient availability of a key
resource i.e. spectrum.
The need for upgrades to legacy networks described under section 1.2.1 raises questions of
whether there are sufficient incentives to invest in the upgrade, and also which competitive
model should be applied, as the unbundling of the copper local loop from the central office may
become relatively less important because of the performance improvements on the basis of other
technologies.449
The transition from copper-based networks towards fibre-based networks is gradually happening
worldwide. In Europe, fibre is being deployed by a variety of operators in the access network to
overlay or replace legacy copper lines or even parts of HFC co-axial networks. One of the main
challenges for regulators today is to incentivise investment and support sustainable competitive
models for newly constructed networks, at the same time guaranteeing the attained level of
access to legacy networks until those become redundant. MS have followed different strategies
with varying outcomes,450
and new broadband gaps have emerged in terms of coverage and take-
up of NGA and VHC networks between countries in Europe, between Europe and international
competitors451
and between urban and rural households, which projections suggest may persist.
Deployment of VHC networks can be comparatively more expensive in near-term Capex than
incremental upgrades of legacy copper infrastructures and demand for - VHC connectivity is
very closely related to experience, hence requiring a supply-led ("build it and they will come")
approach. Traditional network operators managing depreciated legacy infrastructures do not
necessarily see the benefit of rolling out VHC broadband networks under these conditions, which
in turn renders perceived business cases uncertain, especially in challenge areas that in any case
can only support one network, such as rural areas.
Certain elements of the current regulatory framework, in the light of the most recent market
developments could be improved to foster deployment of VHC networks, such as:
(i) Incumbent operators fear that they will be most likely price regulated, potentially on cost
oriented basis if and where they deploy VHC networks, lowering their return on investment.
(ii) Insufficient regulatory predictability regarding access obligations on NGA networks (in
particular pricing); due to short market review cycles, lack of sufficient focus on retail markets
and the difficulty of enforcing consistency on the basis of non-binding recommendations,
impacting network roll-out. Conversely for regulated operators, obligations to share on a non-
449
Local Loop Unbundling has been the main tool facilitating competitive stimulus. LLU volumes are already starting
to decline in countries such as Germany, with the migration to next generation fibre networks, and several countries
such as the Netherlands and Sweden have focused on fibre access..
450
See SMART 2015/0002 for a detailed analysis of regulatory strategies and outcomes
451
Countries such as South Korea and Japan which placed significant emphasis early on FTTH are now clearly ahead
of most (although not all) European countries as regards fast broadband as shown in section 1 above
347
discriminatory basis any new assets may take away some of the incentives, especially for the
riskiest investments.
(iii) The lack of incentives for incumbents to co-invest; experience has shown that this is
relatively unlikely to happen in local markets, unless a credible threat of roll-out by competitors
is present or where the incumbent has responded to a policy push.
(iv) Likewise in areas where no NGA infrastructure is present the emergence of new local
operators may be discouraged by the commercial threat posed by existing operators that have
(non NGA) infrastructure in place.
(v) Lack of sufficient measures to support NGA deployment by alternative investors. By
focusing regulatory model on SMP finding, the system perpetuates a model built at a time where
only one network was deployed. It fails to take account of other operators and investment
models, which could benefit from greater support.
The implementation of basic competition safeguards which could help climb the ladder of
investment (e.g., access to civil engineering of SMP operators) can be made difficult if access to
civil engineering as a remedy is made ineffective by lack of information (mapping) or unclear or
uncertain conditions452
.
Further, while access regulation is a necessary condition for newcomers to enter the market, gain
scale and ultimately replicate the network infrastructure, on the other hand regulated access at
low prices has lower risks than full network build-out and thus may result in lower incentives for
alternative operators to invest or co-invest.
Ubiquitous connectivity also requires efficient investment in the roll-out of very high quality
networks fit for 5G technology, expected to drive business in the years to come. The architecture
of 5G networks will be much denser than previous wireless networks (i.e. 3G and 4G) and thus a
key challenge will be to adapt the licensing model accordingly, including by promoting license-
exempt spectrum or adaptations to the model of exclusive licensing. It has to be noted that in
addition to spectrum needs the 5G deployment needs also substantial fixed assets at its disposal.
Poor auction design or renewals conditions and uncoordinated releases as well as timeframe
between allocation and assignment of spectrum have severely hindered the level and the quality
of the roll-out of 4G networks and this cannot be repeated. Rapid access to spectrum under
appropriate conditions is key for early 5G network deployment.
6.10.2 Inefficient allocation mechanism for public funding
Investment needs remain considerable: as mentioned in annex 14, more than EUR 92 billion
were needed in 2014 to bring our digital infrastructures up to the DAE 2020 broadband targets
standard and more might be needed beyond that date to ensure that Europe's infrastructure
remains competitive.
Where the market cannot deliver on its own, public funding can contribute to the wide
deployment of VHC broadband networks. In particular the European Structural and Investment
Funds (ESIF) the Connecting Europe Facility and the European Fund for Strategic Investment
can help plugging the gap. These financing tools provide grants, financial instruments (equity,
debt, guarantees) and can be cumulated to contribute funding a given project. While grants are
452
However, in France and Spain, as well as in Portugal, duct access was ultimately pursued as the main remedy for
NGA under the SMP regime. Duct access SMP conditions were set in 2009 in France and Spain and complemented
with symmetric obligations for in-building wiring and in the French case, access to fibre terminating segments outside
areas in which the NRA considered that infrastructure competition could develop. The positive impacts of this policy
aredescribed in chapter 5.
348
mostly suited to plug gaps in market failure areas, financial instruments can reduce the risk
profile in areas where a business case is present but remain underserved. However, one must be
take into account that public support is a scarce resource and that it comes with significant
constraints of legal, industrial and administrative nature; as an example OPEX is not included in
grant funding, so the running costs fall on the network operator in any case.
However, the experience from the last programming period shows the trend that calls for tenders
won by incumbents have typically resulted in copper enhancing solutions, while public support
for VHC solutions has been more scarce.
The size of the tenders was also a problem, as it is very difficult for a new entrant to bid for large
regions, while they might have a chance in smaller areas. Finally, the lack of a homogeneous
network, infrastructure, investment and quality of service mapping by NRAs generates very
different outcomes in terms of granularity of assessment and sometimes underestimates the
amount of infrastructure present on the ground, diverting grants to area where a business case is
possible. Also, the way the call for tenders are designed often ends up favouring the incumbent
operator (size of the call, choice of direct support to operators instead of PPPs). The Commission
is committed to make the most of the public funding leverage effect with a view to promote and
unlock both public and private investment across Europe. This is all the more important as the
public resources assigned to broadband infrastructure are limited, (EUR 6.4 billion for 2014-
2020 are devoted to broadband by Structural Funds) as explained in more details in Annex 14
(section 1.11.1)
The Commission and the MS should strive to work together to ensure a maximization of
available resources for the financing of the broadband deployment including developing an
appropriate funding mix between grants and financial instruments.
6.10.3 Fragmented regulated and commercial offers for businesses across the EU
Geographic market integration, leading to larger demand, more competition (allocative
efficiency), lower costs (technical efficiency) and better product and services offers for
customers (qualitative efficiency), is impeded by artificial barriers to the expansion of markets
beyond borders. In the EU, the effects of various types of artificial barriers can be felt with
regard to possibilities of access seekers to avail for consistently regulated access inputs, in
particular with a view to serving business customers on cross-border basis, and with regard to
non-harmonised end-user protection requirements.
Inconsistency of regulatory intervention in electronic communications markets, which acts as a
barrier to market integration, is largely driven by three factors. First, national regulatory
authorities have under the current regulatory framework not the appropriate incentives to opt for
a DSM-compatible solution when choosing the appropriate regulatory remedy to a competition
problem identified in a market. Indeed, NRAs exercise their discretion resulting in divergent
approaches, for instance, in the regulation of fibre networks, symmetric regulation, pricing
methodologies etc..
Although the current framework allows for flexibility in applying its general principles to
national circumstances, this does not mean that all regulatory solutions can achieve the
objectives of the framework or that they can all achieve them in the best way. Secondly, the
technological complexity of networks, and in particular their local access parts, multiply this
(inconsistency) problem by rendering the design of the technical details and requirements of
comparable regulated access products more difficult. For example an international company
purchasing communication services in different jurisdictions would not be able to receive a
homogeneous offer on crucial elements such as activation or repair time. Thirdly, the current
system does not allow identifying transnational demand nor as a consequence require NRAs to
adopt remedies accordingly. This would enable the provision of connectivity for business users.
Fourthly, the consistency check procedure (so called "Article 7 procedure") as well as the
349
currently available "harmonisation procedures" (under Art.19 of the Framework Directive)
would often not tackle the problem effectively, as such measures take too long to be
implemented, leave too much room to national regulatory authorities to circumvent the outcome
of the procedures and, thus, unnecessarily increase the lack of regulatory predictability.
Lack of consistency in regulatory responses to similar problems453
does not just affect cross-
border operators, which have to adapt to different regulatory regimes and thus face greater
internal market barriers. It also results in different levels of effectiveness of national regulatory
regimes in fostering the best possible connectivity at affordable prices for end users. For
example the implementation of VULA reference offers in different MS has resulted not only in
different design outcomes, but also in different levels of take-up of this type of access products,
which may be due to the attractiveness to access seekers in terms of quality. In other words,
regulatory choices such as those regarding access obligations and the pricing of legacy networks
have an impact on the investment decisions of operators. In this way, end users pay the
consequences of inconsistent and potentially sub-optimal regulatory decisions, affecting retail
markets.
6.10.4 Minimum harmonisation, differentiated rules
Over the past years, it has become apparent that the lack of consistency of telecoms regulation is
– to a degree at least – the result of the institutional set-up and the way the various institutional
players (i.e. mainly NRAs, BEREC and the EC) interact and can influence the regulatory
outcome.
Whilst the EU Regulatory Framework had been designed with flexibility in mind in order to
allow NRAs to take account of national circumstances, many differences in the national
regulatory approaches cannot be sufficiently explained with varying national circumstances. This
reasoning led to, for example, the Commission's recommendations in relation to costing
methodologies ( termination rates and costing and non- discrimination recommendations). The
inconsistency witnessed is exacerbated by the fact that the procedural and institutional set-up
currently in place appears to be ill equipped to ensure a more consistent approach in similar
circumstances.
For example, in the area of spectrum, while harmonization of technical conditions for spectrum
use contribute to a great extent to the creation of economies of scale for device and network
equipment manufacturers, the subsequent uncoordinated releases of spectrum to operators
prevent these economies to be realized in full as network deployment only happens on a patchy
manner, thereby increasing manufacturer´s development costs and the time to bring equipment to
market. As investments decisions are increasingly made at global level, this phenomenon tends
to discourage technology and equipment development in Europe to the advantage of other faster
regions which will attract the investments.
Moreover, given that radio waves travel across national borders, the type of use of a frequency
band in one MS has an impact on the type of use possible in neighbouring countries. In practice,
if a MS uses a band for a specific type of application such as 5G before its neighbours who
continue to emit with different technical parameters, interference problems could occur across
borders454
– for example in bands below 1 GHz (i.e. 700MHz band). This problem would hence
be particularly relevant in smaller MS or in MS where a large proportion of the population lives
within reach of signal transmissions from neighbouring countries. In addition, the very fact that
453
In about 11% of all draft decisions subject to Art.7 notification the Commission has indicated that it may create a
barrier to a single market or is contrary to EU law, or even if no formal decision has been issued by the Commission,
the notifying NRA has withdrawn its notification.
454
Spectrum allocation and cross-sectoral interference issues fall out of the scope of this review. In particular, the
work on managing interference between GSM (mobile) and GSM-R (mobile communications for railways) is
addressed in serveral bodies ( CEPT and/or ERA) as well as at a national level. Some MS have introduced financing
schemes to encourage the installation of filters and new radio modules in the railway cabin radios.
350
there is only limited coordination of key determinants of market shaping inputs such as spectrum
assignments across MS leads to more fragmented markets than necessary.
The current minimum harmonisation approach has also produced different outcomes and led to
fragmentation in terms of consumer protection. In the field of contracts, for instance, this may be
seen as a positive element, since NRAs can go beyond the minimum provisions of the Universal
Service Directive where required. While the level of consumer protection - as measured by
completeness of contracts, ease of comparing offers and extent of switching - is generally
relatively high, the underlying measures are quite diverse. The diversity of national approaches
creates a barrier to entry for pan-European operators active in multiple MS. The problem may be
aggravated as MS may advance further and start developing their own measures in response to
the previously identified problems.
6.10.5 Differentiated rules leading to uncertainty on spectrum assignment
Spectrum rules do not support optimal spectrum availability and deployment of mobile networks
in Europe (regulatory failure).
The timely availability of spectrum to the single market, is negatively influenced by
(i) the time gap between spectrum allocation (harmonised use and technical conditions) and
actual assignment to operators, (ii) the uncoordinated timing of assignment of same bands
throughout MS and (iii) the varying conditions which govern spectrum renewal.
The current regulatory framework has no mechanism in place to facilitate a more consistent
approach let alone to enforce it and most attempts to coordinate the assignment of spectrum has
been made on a piecemeal, limited and insufficiently efficient approach with the need to adopt a
specific legislative measure each time a deadline has to be set for the assignment of a part of the
spectrum (the 2012 Radio Spectrum Policy Programme for 800 MHz 4G, the 1998 UMTS
decision for 3G, the pending proposal for a EP and Council Decision on 700 MHz). Moreover,
spectrum policy is often guided by national policy objectives which often do not take sufficient
account of common EU policy objectives such as the promotion of high quality communications
networks and the single market.
The figures below show for three major operators the timing and duration of licenses awarded.
The diagram clearly indicates that, even where licenses were awarded in neighbouring countries,
these awards took place in different years and they cover different durations.
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Figure 75 - Example of differences in timing and duration of licenses for major EU operators
Source: Wik Consult
Furthermore, the existing spectrum governance structures focus on the harmonisation of
technical parameters but may not allow for sufficient consistency of the timing of effective use
of spectrum once allocated. Moreover, spectrum is assigned with varying conditions reflecting
different (national) balances of the primary objectives underpinning the regulatory framework.
This leads to disparate conditions where a national border bisects otherwise similar areas. The
absence of consistent EU-wide objectives and criteria for spectrum assignment, as well as for
changes to the conditions applicable to individual rights of use, at national level creates barriers
to entry, hinders competition and reduces predictability for investors across Europe.
6.10.6 Technological and market changes
There have been significant changes in the telecommunications market since the last review that
have affected the way in which end users communicate. The increasing coverage of wired and
wireless broadband networks, coupled with the availability and affordability of consumer
devices, have made consumers and businesses to rapidly adopt new communications services
that rely on data and internet access services instead of traditional telephone services. The
market has seen how in very few years new players have managed to compete with traditional
telecom operators by offering a new set of communications applications over the internet.
Although there are still significant variations across Member States, overall European
consumers have been very quick in adopting these new communications services. At the end of
352
2015, a significant number of citizens used instant messaging services, a relatively new service,
several times per day compared to the users of e-mails or phone calls over a landline phone
(30% vs. 27%). On average, 50% of Europeans use instant messaging services regularly, with
36% using them daily.
Figure 76 – Use of Instant Messaging in EU member States
Projections on future take-up of instant messaging simply confirm current trends. The volume of
IP messaging, which was still negligible in 2010, exceeded the SMS volume only three years
later and it is expected to further increase its predominant share of overall messaging traffic in
the future. In 2014 alone instant messaging services on mobile phones would have carried more
than twice the volume (50 billion versus 21 billion per day) of messages sent via a short
messaging service (SMS).
With regards to revenues, it is estimated that between 2008 and 2014 fixed and mobile revenues
declined in the EU by 19%. In both markets there has been a drop in traffic-related revenues.
Taking into account also factors that are largely independent of the rise of OTT, such as revenue
decrease due to regulatory intervention (by NRAs or by the EC, such as a decline in termination
and roaming rates) or due to the global economic downturn, the study SMART 2013/0019
concludes that the rise of OTTs had no impact on fixed revenues, but did negatively impact
mobile revenues.
Figure 77 - Mobile and Fixed revenues in the EU (million Euros)
As regards to the provision of wireless connectivity, the upcoming 5G technology revolution
requires a fit for purpose spectrum management chain including allocation and assignment, since
353
the way airwaves are regulated depends partly on the technologies used and services offered.
Future users of dense 5G networks will need greater flexibility on both, access and use of
spectrum but today, in the current framework, there are insufficient incentives for holders of
rights to use spectrum efficiently in terms of technology and capacity.
There is consensus on the need to develop spectrum sharing to enable the 5G revolution. Today
there is much focus in the use of individual often exclusive licenses (which are justified for some
uses, e.g. mobile, to avoid interferences) but no sufficient incentives for secondary market for
spectrum. In addition, it becomes clear that commercial operators are also using license exempt
spectrum, notably for distributing Wi-Fi based connectivity from fixed infrastructures. Barriers
to spectrum entry need to be lowered to stimulate innovation and new services.
6.10.7 Increasing adoption of bundles
In response to network convergence and increased competition, telecom operators have started to
bundle different services like TV and Voice telephony to the internet access service. Moreover,
given the convergence of fixed and mobile services, also mobile services (voice and data) are
increasingly added to the bundle.
A bundle refers to a package of several different services sold together as a single plan: landline
calling, Internet access, mobile services, pay-tv. In 2014 take up of broadband bundled products
per total population was 46%, five points higher than the previous year, with an ever increasing
number of triple and quadruple play products.
The growing take-up of bundled services can be seen in the figure below. Double play bundles
are still most common, but triple and quadruple play bundles are gaining significance.
Figure 78 – Adoption of bundles in the EU, 2010-2014
At the end of 2015, 87% of households in the Netherlands and 78% in Malta had purchased
bundles services, as had at least half of all households in 19 other Member States. Italy, the
Czech Republic and in Lithuania were at the other end of the scale with 31%, 32% and 34% of
households respectively. Since 2009 there has been an increase in the number of households
subscribing to bundled products in all Member States, as shown in figure 68.
354
Figure 79 – Adoption of bundles per MS, 2009-2015
6.10.8 Suboptimal design of market review cycles and Inconsistent remedies under current
rules (art.7)
This problem driver consists of insufficient legal certainty and regulatory predictability
regarding access obligations on NGA networks due to short market review cycles, lack of
sufficient focus on retail markets and the difficulty of enforcing consistency on the basis of non-
binding recommendations, impacting network roll-out.
Provisions therefore need adjustments with a view to reducing the regulatory burden and make
regulation more clear and certain. The current process of frequent market reviews and ex ante
regulation has been reported in certain MS to cause little regulatory predictability and legal
certainty, on top of being rather cumbersome. This is related on the one hand to the variety of
(unranked) goals and remedies available to NGAs, but also to the relatively short regulatory
cycles (every three years, significantly shorter than investment cycle), in particular when
considered together with the associated appeals and court procedures. While regulation needs to
move along with a fast changing sector, operators often stress the need for regulatory
predictability.
It is also worth noting that the short cycle of market reviews, the lack of predictability and the
litigation that may follow have a discouraging effect on institutional investors such as
infrastructure funds, private equity and pension funds that may be willing to invest capital in the
sector's network operators, especially on a long-term horizon. On the other hand, investors
attracted by short-term gains and price arbitrage may be more attracted by a more volatile
environment. The effects of this "adverse selection" problem may hamper infrastructure
deployment which has is definition a long-term asset class, especially for operators which are
smaller and more exposed to instability.
Whilst market fragmentation is not solely to blame on the regulatory set-up in the EU, it has
become apparent over the past years, that the lack of consistency of telecoms regulation is – to a
degree at least – the result of the institutional set-up and the way the various institutional players
355
(i.e. mainly the NRAs, BEREC and the Commission) interact and can influence the regulatory
outcome455
.
Whilst the EU Regulatory Framework had been designed with flexibility in mind in order to
allow NRAs to take account of national circumstances, the Commission has repeatedly pointed
out that many differences in the national regulatory approaches cannot be sufficiently explained
with varying national circumstances. The inconsistency witnessed is exacerbated by the fact that
the procedural and institutional set-up currently in place appears to be ill equipped to ensure a
more consistent approach in similar circumstances456
.
In particular increased consistency in market regulation and management of scarce resources
would contribute greatly to a true Single Market. With regard to both areas, of course, there may
be various sub-themes457
, which would benefit more broadly from an institutional set-up that was
geared more thoroughly towards ensuring consistency. Where the problem of inconsistency and
fragmentation arises is exactly where the Commission does not have veto powers (and relies on
the non-binding recommendations), i.e. on the remedy side.
First, concerning market regulation, one area, in relation to which a more consistent approach is
particularly important, is the choice and design of access remedies. Unfortunately, it is especially
in this area where there is the most notable divergence across the EU. Whilst competition still
predominantly takes place at the national level, EU-wide consistency in designing access
remedies is increasingly considered important.. In addition to access remedies, fragmentation of
other regulatory conditions (e.g. authorisation conditions) may also represent an obstacle to
market entry and cross-border provision of services458
.
6.10.9 Obsolete and redundant rules
A number of regulatory inefficiencies can be identified in the current regulatory setting, which
are generating unnecessary compliance costs and discouraging investment. Given the
technological and market changes described above, certain provisions of the framework might
no longer be relevant or might have become superfluous.
This is the case for example for part of the Universal Service rules. The evolution of consumers'
behaviour, the wide coverage and availability of mobile networks and services, and the provision
by the market of comprehensive directories and directory enquiry services, which also
experience strong competition from other (notably online) information sources, have eliminated
or at least reduced the need for including certain universal service obligations, such as the phone
directories and public pay telephones. These changes will require an adaptation of the Universal
Service regime to remove outdated services. Moreover, with already nearly 100% standard fixed
broadband coverage in the EU, universal service obligations regarding the availability of
455
See, for example, the EP study on "How to Build a Ubiquitous EU Digital Society", p. 100 where it is stated that
"[…] the fact that Heads of NRAs are considered primarily to be motivated by a desire for self-determination, has led
to some criticisms that BEREC delivers verdicts based on a 'lowest common denominator', or prioritises flexibility
over consistency in the Single Market."
456
In particular, with regards to imposing remedies, the balance between achieving harmonisation in a flexible
framework appears to have been tilted in favour of flexibility neglecting legitimate needs for consistency. For
example, whilst remedies are imposed on operators by NRAs at the national level, the Commission and BEREC
almost exclusively input through non-binding instruments in order to attempt to achieve EU-wide regulatory
consistency on this level. In the past, this "soft law" approach has led to significant differences in some areas, clearly
proving to be an obstacle for the development of a Single Market.
457
For example, issues surrounding the independence and funding of NRAs, the constitutional set-up of BEREC, the
design of the EU consolidation process under Article 7, the Commission's powers to adopt harmonisation measures
under Article 19, standardisation, rights of way, numbering, spectrum management, naming and addressing to name
but a few.
458
The negative impact a fragmentation of conditions has on the provision of connectivity services has been widely
reported by the BEREC consultation on the cross-border obstacles to business services, and in the EP study on the
assessment of the EU Regulatory Framework (p. 42 and 107).
356
functional internet access and telephone service are likely to become redundant in many MS in
the future.
Further provisions might have become superfluous due to legislative developments in other
regulation areas. Some of the sector-specific consumer protection rules (e.g. Article 20 and 34
Universal Service Directive) are examples of provisions that need to be reviewed in those
respects to avoid that overlapping rules contribute to the unnecessary administrative burden.
Overlaps in legal frameworks on consumer protection are just one of the issues to be addressed
in this review. Sector-specific rules aimed at providing a particular level of protection to users of
ECS in areas such as data protection, privacy and security, freedom of choice and prevention of
lock-in effects, transparency, quality and affordability and access to emergency numbers. These
rules only apply to providers of ECS.
While in some case these rules applicable to consumers can be complementary, there are may be
instances where overlaps between the different set of rules can occur459
. For example the
information requirements in the Consumer Rights Directive overlap with certain general
provisions of Article 20 Universal Service Directive, while Article 34 Universal Service
Directive on out-of-court dispute resolution is covered by the Directive on alternative dispute
resolution for consumer disputes.
A specific situation may fall within the scope of two Directives or within the scope of specific
provisions of these directives and create a circular cross reference. One example may be the
priority provisions in Article 1(4) USD "The provisions of this Directive concerning end-users’
rights shall apply without prejudice to Community rules on consumer protection, in particular
Directive-s 93/13/EEC and 97/7/EC, and national rules in conformity with Community law" and
Recital 11 of the CRD: “this Directive should be without prejudice to Union provisions relating
to specific sectors, such as […] electronic communications”.
Another example is Art. 3 of ADR Directive, which states that "if any provision of this Directive
conflicts with a provision laid down in another Union legal act and relating to out-of-court
redress procedures initiated by a consumer against a trader, the provision of this Directive shall
prevail”.
This overlap results in a complex legal framework, with different consequences: the risk that it
is not fully respected; penalties could be contradictory within MS; differences in implementation
may also be due to an inconsistency among terminology; and these problems are compounded to
the prejudice of the internal market when rules are based on minimum harmonisation.
459
See for a detailed analysis the SMART 2015/005
357
6.11 ANNEX 11 - 5G spectrum requirements for connected car (use case)
In the study on 'Identification and quantification of key socio-economic data to support strategic
planning for the introduction of 5G' SMART 2014/0008 spectrum estimates within each sub-
range are calculated by multiplying the number of devices by their respective occupancy of the
spectrum in bps according to the scenario and multiplied by the assumed spectral efficiency of
the technology used for each device type.
The different approaches of 100 per cent sharing (fully shared) versus 0 per cent sharing
(exclusive licensing) have a very high impact on the total demand to support either type of
operation. In a fully shared (100 per cent sharing) environment, the spectrum needed is equal to
the total use case driven demand estimate. In an exclusive licencing environment however, the
spectrum needed is equal to the total use case driven demand estimate multiplied by the number
of operators in the environment. This approach is taken to understand the minimum and
maximum spectrum requirement figures.
In the connected car example illustrated below is based on two very high data rate use types
within the transport and automotive verticals, once the theoretical total (user driven) demand
estimates is calculated, the spectrum needs are analysed based on the five different spectrum
sharing scenarios. In doing so, this use case is intended to drive the spectrum requirements to an
extreme level to understand the impact on spectrum in a very challenging environment.
The table below shows how the total quantity of spectrum varies depending on the different
sharing scenarios that may emerge by 2025.
Table 38 - Total spectrum requirements relative to percentage of spectrum sharing scenarios
based on theoretical model
The figure shows the total spectrum requirements for each scenario split by the quantity of
dedicated and shared spectrum in each case.
Spectrum sharing scenario Total spectrum needed (GHz)
Scenario 1: 0% sharing 56.1
Scenario 2: 20% sharing 47.7
Scenario 3: 50% sharing 35.1
Scenario 4: 75% sharing 24.5
Scenario 5: 100% sharing 14.0
358
Figure 80 - Total spectrum requirements for motorway use case
All -exclusive case requires the largest quantity of spectrum (56.1 GHz) because each individual
of the four-service provider (x4) requires approximately the same amount of spectrum estimated
for the given scenario. The all (100 per cent) shared case has the lowest spectrum requirement
with a total of 14.0 GHz of spectrum. If by 2025 full sharing is not possible then a mix of
dedicated and MNO sharing with the 5G use cases (connected car, eHealth, transport and
utilities) helps to minimise the total quantity of required spectrum compared to the all dedicated
case.
The option of sharing spectrum becomes a benefit to service providers as the proportion of
shared spectrum increases. Total required spectrum reduces however, for each frequency range
where there is a limit to the quantity of available spectrum in each range. Therefore, this result
shows that some sharing will be necessary in Sub-1 GHz band because MNOs will likely only
have access to no more than 75 per cent of the spectrum in this sub-range by 2025 and therefore
sharing with other operators and new MVNOs will be required to serve the users in this transport
scenario below 1 GHz.
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6.12 ANNEX 12 – Comparison of impacts by stakeholders
In this annex, we present the summary tables of impacts on different groups of stakeholders in;
they were compiled under the supporting study to this IA on the basis of the public consultation,
the interviews with stakeholders and workshops organised by the EC. As mentioned in section
4.8 we pay specific attention to positive and negative impacts, direct and indirect on specific
categories of stakeholders, including SMEs, as required by the SME test under the better
regulation principles and public administrations. Although the impacts on stakeholders are
addressed for all the options considered under each policy area, a wider attention is paid to the
preferred option for each policy area. A more complete and narrative version is provided in
SMART 2015/0005, chapters 1 to 5.
6.12.1 Access regulation
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Table 39 - Summary stakeholder impacts – access options
Option 1: Status quo Option 2: Continuity and
simplification
Option 3: Fibre-ready Option 4: Reduction in scope of
regulation
Consumers Mixed – some may be well-served
but existing gaps may remain
As option 1 Substantial benefits arising from
higher broadband quality of
service due to increased
deployment and competition in
very high speed broadband. Some
market consolidation also possible,
which may have positive as well as
negative impacts on innovation
and price
Negative – significant reductions in
competition could be expected
impacting pricing and service
quality, although some further
investment might be made
SMEs Mixed – some may be well-served
but existing gaps may remain
As option 1 Substantial benefits arising from
higher broadband quality of
service due to increased
deployment and competition in
very high speed broadband.
Negative – significant reductions in
competition could be expected
impacting pricing and service
quality, although some further
investment might be made
Larger and
multi-national
businesses
Negative – fragmentation would
continue to impact cross-border
connectivity
As option 1 Benefits from greater fibre
availability (also reaching smaller
sites, homeworkers) and consistent
wholesale specifications, if SMP
approach maintained for business
access
Highly negative – significant
reductions in competition and
further cross-border fragmentation
Incumbents Negative – existing regulatory
burden and constraints would
remain
Some benefits compared with
status quo – more certainty,
higher burden of proof for
intervention, but may also
facilitate functional separation
Mixed. Some benefits – potential
lifting of sectoral regulation, but
also tighter regulation of ducts,
pressure to invest
Highly positive – significant
reduction in regulatory burden and
constraints and lessening of
competition
Entrants Mixed – continuation of access
regulation positive, but no
emphasis on supporting more
sustainable competition. Therefore,
practical application varies by
Some benefits compared with
status quo – more certainty,
greater potential for functional
separation, but also higher
burden of proof for intervention
Benefits for larger scale players
able to invest and co-invest.
Negative for smaller entrants
relying on wholesale access
Highly negative – may undermine
business viability
361
country. Entrants vulnerable to
technological and regulatory
change.
– may reduce regulation
Alternative
fibre investors
Neutral for existing players, but no
additional support for further
investment
As option 1 Positive – greater access to civil
infrastructure, support for rural
investments
Neutral if not reliant on incumbent
SLU/duct access. Otherwise
negative
Cable
operators
Stability considered highly positive,
although continued wholesale price
regulation could undermine
revenues
Benefits compared with status
quo – more stability, higher
burden of proof for intervention
Mixed - Some benefits from
potential lifting of wholesale price
regulation, but also greater
infrastructure competition and
pressure to invest
Positive – reduced competition
Content and
application
providers
Mixed – existing bandwidth gaps
would remain, but competition
would continue to support take-up
and protect vs discriminatory
conduct
As option 1 Positive – greater bandwidth
availability, but risk in some
markets of consolidation impacting
competitive safeguards
Negative – likely to impede take-
up of higher speed offers, and
concentrate the market, raising risk
of discriminatory conduct
Equipment
manufacturers
Neutral to negative – no specific
stimulus for investment by industry
Neutral to negative – no specific
stimulus for investment by
industry
Mixed – depending on business
model/customer-base
Mixed – depending on business
model/customer-base
NRAs Mostly positive – retain existing
flexibility. But several NRAs have
raised concern over burden of 3
yearly review requirement + some
NRAs raise concerns over
independence and resourcing)
Positive – NRAs would benefit
from continued flexibility, but
with reduced market analysis
administrative requirements and
increased potential to
implement functional
separation. Under this option
their resources and remit would
also be strengthened
Mixed – NRAs would have more
prescriptive requirements. Those
not already pursuing mapping
analysis and the operationalization
of duct access may require
additional resources to do so in the
short term – although the admin
burden may reduce longer term
Negative – NRAs would lose an
important tool for the promotion of
competition, while potentially
facing an increased burden in
dispute resolution
BEREC Neutral Positive – remit would be
expanded and NRAs‘
competences would be aligned
with BEREC‘s
This option would entail the
strengthening of BEREC
Governance as well as additional
responsibilities. Although
BEREC’s competence and
influence would be expanded,
NRAs would have less direct
Highly negative. BEREC would
lose a significant portion of its
current remit (concerning market
analysis).
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control over its Governance.
6.12.2 Spectrum
Table 40 - Summary stakeholder impacts – spectrum options
363
Option 1: Status quo Option 2: voluntary Option 3: binding Option 4: spectrum agency
End-users (consumers and
business)
Negative – late and
uncoordinated deployment
of 5G and lack of action on
recent 700 MHz auctions
means businesses are
unable to develop new
services (e.g. in transport,
automotive, healthcare,
utilities etc.) and
consumers (including
businesses) don‘t benefit
from innovative services
Mixed – while this option
could be in place fast, there
is a high risk that voluntary
measures would not be
taken-up by many MS,
leaving the same results as
under option 1
Positive – this option
delivers a coordinated
approach to spectrum
assignment and usage across
the EU including for 5G
(though it may come too late
to influence 700 MHz
assignments)
Mixed – while this option
sets up a governance
structure to address the
problem, the complexity of
negotiating this set-up means
it will come too late to
influence 700 MHz auctions
and will delay 5G
deployment
SMEs Negative – the impacts
would not differ from those
for other end-users
Mixed – the impacts would
not differ from those for
other end-users
Positive - the impacts would
not differ from those of other
end-users. Swift
implementation of 5G would
create opportunities for
innovation and
entrepreneurship which
would benefit SMEs in
particular.
General authorisations could
provide greater opportunities
for SMEs to gain access to
spectrum which is now only
accessible to large companies
with the financial power to
purchase exclusive rights
(e.g. MNOs, etc.)
Mixed - the impacts would
not differ from those of other
end-users. Swift
implementation of 5G would
create opportunities for
innovation and
entrepreneurship which
would benefit SMEs in
particular
MNOs Negative – this option risks
repeating the 4G scenario
where Europe lagged
behind other regions for
Mixed – while this option
could be in place fast, there
is a high risk that voluntary
measures would not be
Positive – this option
delivers a coordinated
approach to spectrum
assignment and usage across
Mixed – while this option
sets up a governance
structure to address the
problem, the complexity of
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5G with insufficient
investment
taken-up by many MS,
leaving the same results as
under option 1
the EU including for 5G
(though it may come too late
to influence 700 MHz
assignments)
negotiating might delay 5G
deployment
Other spectrum users (e.g.
broadcasters, PMSE, etc.)
Nil – this option would
continue the current set-up
which engenders
significant local variability,
continued erosion of
spectrum for some users
and uncertainty about
future spectrum availability
Nil - This option would
likely not differ
significantly from option 1
Uncertain - This option
provides a greater level of
regulatory certainty and
consistency across MS,
impacts on other spectrum
users would depend on
specific decisions taken by
but the peer review
mechanism could ensure that
local needs of different
spectrum users continue to
be fully taken into account.
Uncertain - This option
provides the greatest level of
regulatory certainty –
impacts on other spectrum
users would depend on
specific decisions taken by
the spectrum agency. There
would be less scope for
adaptation to local needs
under this option.
Equipment manufacturers Negative – this option
repeats the 4G scenario
(late & uncoordinated
assignments) for 5G and
therefore fails to provide
legal certainty and it fails
to capitalise on the size of
the Single Market
Negative – this option risks
repeating the 4G scenario
for 5G and therefore fails
to provide legal certainty
and it fails to capitalise on
the size of the Single
Market
Positive – this option
provides greater regulatory
certainty and consistency to
manufacturers proving them
with incentives to invest now
in order to serve the Single
Market
Positive – this option
provides greater regulatory
certainty and consistency to
manufacturers providing
them with incentives to
invest now in order to serve
the Single Market
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6.12.3 USO options
Table 41 - Summary of impacts on stakeholders – universal service options
Option 1: Status quo
(baseline)
Option 2: Light adjustment Option 3: Broadband
affordability
Option 4: Broadband
availability
Consumers Risk of social exclusion and
of the deepening digital
divide, support of redundant
services
Risk of social exclusion and
of the deepening digital
divide
Connection of disadvantaged
households, reduction of the
risk of social exclusion,
access to advanced services
As option 3, especially for
rural and remote areas
SMEs 0 0 Support of self-employment
and micro-organisation
As option 3
Larger and multi-national
businesses
0 0 0 0
Incumbents 0 Alleviating the financial
burden by narrowing the
USO scope
Alleviating the financial and
administrative burden by
narrowing the scope and
modernising the funding
As option 3; potentially
increase or entrenchment of
the market power
Entrants Legal uncertainty with regard
to financing
As option 1 More legal certainty with
regard to financing
As option3; potentially
increase or entrenchment of
incumbent’s market power;
distortion of price levels;
more difficult market entry
Alternative fibre investors 0 0 Alleviating the financial and
administrative burden
As option 3; distortion of
competition and price levels;
crowding out investments
Cable operators 0 0 As above As above
Mobile/ wireless providers 0 0 Alleviating the financial and
administrative burden; more
equitable cost-benefit
relation in the case affordable
As option 3
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mobile broadband
Content and application
providers
0 0 Improved channels for
advanced communications
services and greater audience
As option 3
NRAs 0 Less flexibility in the
adjustment of the USO to
national circumstances
Flexibility with regard to the
national USO; no choice with
regard to financing
As option 3
367
6.12.4 Services options
Table 42 - Summary stakeholder impacts – services options.
Option 1: Status quo Option 2: Option 3: Option 4: Option 5:
Consumers
A) Security and privacy issues remain.
B) Looming risk to lock-in with multi-
play bundles
C) As OTT usage increases, there is an
effective reduction of access to
emergency numbers
A) 0
B) Lower risk
C) 0
A) More issues
B) Unclear (iii)
C) -
A) Fewer issues
B) Lower risk
C) +
A) Fewer issues
B) Lower risk
C) +
Telco’s
D) Unequal regulatory treatment vis-à-vis
OTTs remains.
E) Compliance costs
F) duplication of costs when operating in
multiple countries
D) 0
E) go down
F) down (ii)
D) ++
E) down less than in
option 2 (i)
F) market entry i.s.o.
regulatory barriers (iv)
D) +
E) go down less
than in option 3 (i)
F) same as 2
D) ++
E) same as 4 (i)
F) same as 2
OTTs
G) no compliance cost except some legal
cases as to the scope of the RF
G) 0 G) reduced
G) new compliance
costs
G1) New compliance costs
368
G2) regulatory risk (vii)
G3) impede
innovations(vii)
IoT Start-ups
and SMEs
I) Low confidence in future planning and
investments due to unclear scope of RF
I) 0
I) More clarity but more
market risks (v)
I) clarity about
scope
I) clarity about scope
NRAs L) Enforcement costs K) 0 (i) K) go up (vi) K) 0 (i) K) go up (vii)
(i) Reduction in compliance costs due to cancelling redundant rules are significant. Reduction of enforcement costs by NRAs are zero. From option 2 to
3 the number of obligations for ECS reduce, but new obligations for ECN arise. From 2 to 4 and 5, the reduction in obligations for ECS remain the
same, but the number of obligations for ECN go up. Additional measures that impact on TTs do not impact on Telco’s
(ii) Streamlining reduces the dimensions for regulatory heterogeneity. While lack of clarity about the scope of the RF may lead to evolution of
interpretations by MS and create new heterogeneity of rules, this would not affect Telco’s but rather TTs and IoTs.
(iii) Measures to reduce lock-in with multi-play service providers may be offset by relaxing obligations for interconnection and subsequent concentration
of the market.
(iv) Relaxing obligations to interconnect may allow for the creation of market entry barriers as National Markets concentrate.
(v) IoT start-ups will have less uncertainty about rights and obligations and experience less duplication of costs when operating in multiple countries,
however, Option 3 may introduce competition issues for number-based m2m service providers vis-à-vis large telco’s.
(vi) Risk of more need for ex-post interventions in which NRAs may need to support CAs
(vii) Interconnection on the basis of “reasonable limitations of technical feasibility as well as cost limitations” gives rise to enforcement/implementation
costs, uncertainty and risks for innovation
369
6.12.5 Must carry and EPG obligations
Table 43 ---Summary stakeholder impacts – Must carry and EPG obligations
Option 1: Status quo Option 2: Phase out obligations Option 3: Extend must carry obligations to
OTT providers
Consumers Positive, viewers continue to have
access to PSB services via traditional
TV networks
Negative, in some cases viewers
may lose access to PSB services
via traditional TV networks
before OTT substitution is viable
Neutral compared to option 1: No impact on
PSBs (neither small or large) or on the variety of
content offered to (i.e. choice for) end-uses. The
abundance of online content could make it more
difficult for some smaller PSBs to build a
significant audience
Larger and multi-national
commercial content
providers
Neutral – market entry might
continue to focus on the OTT area
which has less regulatory constraints
Positive - market entry could
include traditional TV networks
to the extent that transmission
capacity becomes available
subsequent to discontinuation of
must carry obligations
Neutral. No change in the possibilities to make
content available compared to status quo as OTT
providers already include PSB content.
PSBs, including at regional
and local level
Positive, existing privileges would
remain in place
Negative, appropriate
transmission on traditional TV
networks would have to be
negotiated under market
conditions.
Negative as concepts for proportionate and
appropriate intervention in the OTT area do not
currently exist. Positive effects are possible in
the long terms, if such intervention can finally be
successfully conceived.
ECNs Neutral/positive – existing regulatory
burdens and constraints would
remain, but with a perspective that
they will be removed gradually over
time subsequent to national reviews
of obligations.
Strongly positive - existing
regulatory burdens and
constraints would disappear by
2020-2025
Neutral – no change of existing burdens and
constraints
OTT service providers
which are not themselves
content providers
Neutral – existing obligations do not
relate to OTTs
Neutral – existing obligations do
not relate to OTTs
Negative as concepts for proportionate and
appropriate intervention in the OTT area do not
currently exist.
370
6.12.6 Numbering options
Table 44 - Summary stakeholder impacts – Numbers.
Option 1: Status quo Option 2: Option 3:
Consumers A) Higher prices for Iot services A) same as option 1 A) Lower prices
IoT users (Industry 4.0)
B) Higher prices for Iot services
C) Potential barriers for cross border use
of applications
D) Potential barrier for full integration into
the IoT
B) same as option 1
C) same as option 1
D) same as option 1
D) Lower prices
E) Less risk
F) Less barriers
IoT service providers
(including SMEs)
E) Potential lock-in with connectivity
providers, leading to high prices and lower
quality
F) potential bottlenecks in delivering
reliable always and everywhere connected
services (domestic and cross border)
G) Less room for innovations of IoT
E) same as option 1
F) same as option 1
E) Less risk
F) Less bottlenecks
371
services G) same as option 1 G) More room for innovations
Telco’s
H) High prices and profits
I) growing administrative costs related to
extra-territorial use of numbers
H) same as option 1
I) same as option 1
H) lower prices, less profits
I) Lower administrative costs
NRAs
J) growing administrative costs related to
facilitating the extra-territorial use of
numbers
J) same as option 1 J) Lower administrative costs
372
6.12.7 Governance
Table 45 - Costs of institutional options per stakeholder
Baseline (option
1)
Preferred options access and spectrum (option 3) and services (option 4)
Bodies Status quo
(option 1)
Enhanced advisory role
(option 2)
Advisory role + some
normative powers (option 3)
EU regulator with
implementation/enforce
ment powers (option 4)
Commission → ↑ (EU technical guidelines) ↑ Spectrum peer review ↑ Spectrum peer review
BEREC Agency → ↑ (Additional advisory
requirements + compliance
with Common approach)
↑↑ (Enhanced technical
guidance role + compliance
with Common approach
↑↑↑ (substantial additional
resourcing required)
NRAs → ↑↑ (effective resourcing,
additional advisory
contribution to BEREC,
mapping) ↓↓ Fewer market
analyses, standardised
specifications
↑↑ (effective resourcing,
additional contribution to
BEREC, mapping) ↓↓ Fewer
market analyses, standardised
specifications
↑ (additional contribution
to BEREC) ↓↓ Fewer
market analyses, some
enforcement powers to EU
Spectrum
authorities
→ ↑ Increased contribution to
RSPG
↑ Increased contribution to
RSPG
↓ Greater EU guidance
↑ Increased contribution to
RSPG
↓ ↓ Some enforcement
powers to EU
A more analytical estimation of the costs is presented in SMART 2015/0005.
373
Table 46 – Summary of governance costs by option
374
Option 1 Option 2 Option 3 Option 4
Body Status quo Assumptions
Enhanced
advisory role Assumptions2
Synergy + some
normative powers Assumptions3
Synergy + some
normative and
supervision powers Assumptions4
Commission € 7.328.400 60FTE @€118,640pa
(blended rate) +
€210,000 missions
€ 7.921.600 Status quo + 5FTE to reflect
additional implementation
duties
€ 7.921.600 Status quo + 5FTE for
spectrum article 7 process
€ 7.921.600 As option 3
BEREC Agency € 4.061.000 28FTE €137,714pa (=
blended rate of
€107,714 + additional
est €30,000 pp
overheads to reflect
small scale) + €205,000
missions
€ 5.713.571 40FTE as opposed to 28FTE,
assumptions as before
€ 8.467.857 60FTE as opposed to 28FTE,
assumptions as before
€ 31.000.000 EBA cost
NRAs (excl spectrum) € 107.309.530 41FTE per NRA, blended
cost for FTE €66,768pa,
40% mark-up for
overheads
€ 103.103.146 Status quo + 5*10FTE for
under-resourced NRAs + 10FTE
for extra BEREC contribution.
Cost savings on extended
market review periods (est
15%). Cost increase associated
with mapping assumed
balanced by cost reductions
through standardisation +
reduced regulatory burden
€ 104.037.898 As option 2, but with
additional contribution to
BEREC.
€ 90.951.370 As option 3 but with
reduction of 5FTE per
NRA due to greater EU
level rule-making and
supervision
(of which BEREC
contribution excl
spectrum)
€ 4.580.285 49FTE based on BEREC
estimate
€ 5.515.037 status quo +10FTE reflecting
four additional guidance
requirements per year
€ 6.449.789 Status quo + 20FTE reflecting
additional contributions to
draft Implementing guidelines
€ 6.449.789 As option 3
RSPG support/office € 556.600 Based on 2.5 Cion FTE +
€260,000 expenses
€ 556.600 Status quo € 556.600 Status quo € 0 Spectrum activities
incorporated within
BEREC
SMA € 83.753.779 32FTE per SMA blended
cost €66,768pa, 40%
mark-up
€ 83.886.802 Status quo + increased RSPG
contribution (see below)
€ 81.269.496 Option 2 with saving of 1 FTE
per SMA due to more
standardised auction format
€ 73.417.579 As option 3 but with
further reduction of 3FTE
per SMA due to greater
EU level rule-making and
supervision (SMA in NRA)
(of which contribution
to RSPG)
€ 266.045 Based on 14 WG mtgs
per year, 10 participants
and 5 days prep
€ 399.067 Status quo +50% to reflect
increased advisory
requirements
€ 399.067 As option 2 € 399.067 As option 2
Total costs with
synergies (best case)
€ 203.009.309 € 201.181.719 € 202.253.451 € 203.290.549
Total costs (EU co-
ordination)
€ 16.792.330 € 20.105.875 € 23.794.913 € 45.770.456
Co-ordination as %
total cost
8% 10% 12% 23%
Total costs (no
synergies)
€ 203.009.309 € 210.996.615 € 214.685.652 € 234.043.890
Total costs (average) € 203.009.309 € 206.089.167 € 208.469.552 € 218.667.219
375
6.13 ANNEX 13 - Report from the Expert Group meeting
On 30 May 2016, WIK-Consult GmbH, Ecorys Brussels N.V. and VVA Europe organised a
high-level academic expert panel to support the Commission in the preparation of the Impact
Assessment for the Review of the electronic communications framework.
The purpose of the expert panel was to provide feedback on the provisional conclusions reached
by the consultants concerning the impact of planned changes to the e-communications
framework. Prior to the meeting, the experts were provided with a programme for discussion,
slide presentation and draft ‘overview’ of the consultant’s research findings.
This Annex presents details on participating experts, the agenda of the day with points for
discussion, and the report as reviewed by the members of the expert group.
PARTICIPATING EXPERTS:
The members of the academic panel were selected in consultation with the Commission by virtue
of their in-depth experience in issues relevant to the electronic communications sector,
innovation and governance.
Joan Calzada is Associate Professor at the Department of Political Economy, Universitat de
Barcelona, with expertise in theoretical and empirical industrial organization. His main research
interests are the economic regulation of network industries, especially telecommunications,
transportation, and water.
Brett Frischmann is Professor and co-Director of the Intellectual Property and Information Law
program at Cardozo Law School in New York City. His expertise lies in intellectual property and
Internet law, and in particular the relationships between infrastructural resources, property rights,
commons, and spillovers. Professor Frischmann is a prolific author, whose articles have
appeared in numerous leading academic journals. He has published important books, including
the award winning ‘Infrastructure: The Social Value of Shared Resources’ ( xford University
Press, 2012).
Frederic Jenny is Professor of Economics at ESSEC Business School in Paris and a Chairman
of the OECD Competition Committee. He has written extensively about trade, competition and
economic development and his research areas concern the relationship between structure and
performance in European countries and antitrust legislation in Europe.
Eli Noam is Professor of Economics and Finance at the Columbia Business School. His research
focuses on strategy, management, and policy issues in telecommunications, computing, and
electronic mass media. Noam has written numerous articles and books on subjects such as
communications, information, public choice, public finance, and general regulation.
Dr Brigitte Preissl is Head of Knowledge Transfer in Economics at the German National
Library of Economics in Hamburg. She has an extensive research record in the regulation of
telecommunication markets, the economics of service innovation and national research systems.
Luc Soete is Professor of International Economic Relations at the School of Business and
Economics, Maastricht University. His research covers a broad multi-disciplinary field which
focuses on the nature, origin and determinants of innovation. Soete’s publications include topics
on governance and institutions, ICT-enabled innovation as well as societal transformation.
376
Reza Tadayoni is Associate Professor at the Faculty of Engineering and Science, Aalborg
University. His research field is media convergence. He has been contributed to a number of
consultancy reports and studies for the Danish telecom and broadcast administration, EU and the
World Bank. He has been actively involved in European COST networks, including COST A20
on `The impact of the Internet on the mass media in Europe' and COST A16 on `ICT and
transnational communities'.
Professor William Webb is a Director at Webb Search Consulting and an expert on wireless
technology and regulatory matters. As a former director of Ofcom, he performed a research
across all areas of fcom’s regulatory remit and led major reviews conducted by fcom
including the Spectrum Framework Review, the development of Spectrum Usage Rights and
most recently cognitive or white space policy.
The expert panel was introduced by Anthony Whelan, Director for Electronic Communications
at the EC, DG Connect, and Chaired by Dr Iris Henseler-Unger, Managing Director of WIK.
Each subject was briefly introduced by a member of the study team on the basis of the circulated
slides. Pertinent questions were raised by the Chair, and the remainder of the session was
devoted to comments from experts.
AGENDA: EXPERT PANEL
IMPACT ASSESSMENT FOR THE REVIEW OF THE FRAMEWORK FOR
ELECTRONIC COMMUNICATIONS
30 May 2016
Berlaymont, Room 07/062, Rondpoint Schumann, Brussels
The EC is currently undertaking a review of the legislative framework applying to electronic
communications. The impact of the review could be significant. Electronic communications is a
strategic sector which directly constitutes €168.62bln of European value added and 1.06 million
jobs (around 1.3% GDP and 0.47% of total employment in 2012), with a labour productivity per
person of more than 144 thousand euros (the highest rate within the ICT sector)1. The sector
supports a wide range of other high-tech manufacturing and digital services (the ICT sector
constitutes 4% GDP and 2.76% of EU jobs, with a labour productivity rate 44.45% higher than
total labour productivity) as well as the economy as a whole.
The review comes at a crucial time for the digital economy. Consumer and business demand for
bandwidth continues to expand, driven by the growth of connected devices, digital content
services and cloud computing, as well as connected ‚things‘, we are mid-way through an
important cycle of investment in fixed infrastructure with the prospect of 5G to come, and
business models in the telecom sector are changing to adapt to a con-verged, data-driven
environment.
These developments highlight a new ambition for ubiquitous and Very High Capacity
connectivity. At the same time, they have revealed shortcomings in the framework, highlighting
the need for the Framework to be adapted to meet market and technological change in order to
protect consumer interests and enable competition to flourish across the single market.
Finally the review provides an opportunity to achieve efficiencies and see whether the complex
processes and institutional framework in place today can be streamlined to reduce costs and
bureaucracy.
In order to ensure that the changes to the framework are fit-for-purpose, in according the Better
Regulation Guidelines, the Commission is conducting an Impact Assessment to gauge the
economic, social and environmental effects of different options and assess how effective and
377
efficient they would be in achieving the objectives we have identified above. The Commission
has engaged WIK-Consult, Ecorys and VVA Europe to support them in this exercise. The
purpose of the expert panel is to provide feedback on the provisional conclusions reached
by the consultants concerning the impact of planned changes to the e-communications
framework. Details of the programme are shown overleaf.
Programme
Participants
Experts: Prof. Joan Calzada, Dr. Frédéric Jenny, Prof. Brigitte Preissl Prof. Luc
Soete Prof. Reza Tadayoni Prof. William Webb, Prof. Brett Frischmann,
Prof. Eli Noam
Commission Anthony Whelan, Reinald Krueger, Vesa Terava
Consultants Dr Iris Henseler-Unger, Ilsa Godlovitch (WIK), Nicolai van Gorp
(Ecorys), Pierre Hausemer (VVA), Iglika Vassileva (Ecorys), Tseveen
Gantumur (WIK)
Format Roundtable. The session is introduced by Anthony Whelan, Director for
Electronic Communications at the EC, DG Connect, and Chaired by Dr
Iris Henseler-Unger, Managing Director of WIK. Each subject is briefly
introduced by a member of the study team on the basis of the circulated
slides. Pertinent questions are raised by the Chair, and the remainder of
the session is devoted to comments from experts.
Record Minutes will be taken of the panel proceedings and circulated following
the workshop for comment and approval. The approved workshop
minutes will be annexed to the final report under preparation by WIK,
Ecorys and VVA.
09.30-10.00 Morning Coffee
10.00-10.30 Introduction and problem definition
Anthony Whelan EC
The context for the review
Identifying the core problems:
Gaps in high speed broadband deployment
Delays in LTE roll-out, perspective for 5G
The impact of market and technological developments
Redundant regulation
What should we seek to achieve?
10.30-12.40 Achieving ubiquitous high speed connectivity
378
Introduction by study team, debate
Approaches to access regulation to foster high speed broadband in
urban and rural areas
Approaches to spectrum policy to accelerate deployment
12.40-13.40 Lunch
13.40-14.40 Protecting consumers and promoting competition and innovation in
the single market
Introduction by study team, debate
Approaches to services policy
Need to adapt the concept of ‘electronic communications
services’?
Relevance of the use of public resources (e.g. numbering
resources) for sector-specific rights and obligations?
Which rules should apply to which communications
services?
The role of universal service in securing access to connectivity
14.40-15.00 Break
15.00-16.00 Implications for institutional governance, jobs and growth
Introduction by study team, debate
Implications for institutional balance, role of NRAs, EC, BEREC
and RSPG
How will achieving the objectives impact jobs and growth?
16.00-16.20 Concluding remarks and next steps
Anthony Whelan, EC
Draft report
The report included below needs approval by the expert group, which will be granted by the end
of June 2016.
379
Access
The experts agreed concerning the need to foster better infrastructure in rural areas,
where a potential digital divide still looms. There was some discussion over what
the review of the framework should aim towards as regards objectives for
connectivity overall and whether or not there should be an emphasis on very high
speeds potentially delivered via fibre connections. One view was expressed that
FTTH may not be necessary to fulfil many of today’s domestic needs; even when
considering multiscreen 4K TV content, copper is also able to realise sufficient
speeds. Moreover, the maximum capacity of In-house Wi-Fi may act as a
bottleneck, limiting the effectiveness of Very High speed Connectivity (VHC)
unless this additional performance barrier is addressed. It follows that, from a short
term perspective, the added value of VHC may not be so high in the eyes of
consumers and this gives rise to uncertainty as to whether they would be willing to
pay more for it. The impact of different technological solutions on cost and price
should also be analysed.
It was agreed that this short term perspective should be taken into consideration.
However, some experts noted that the Framework should have a more forward
looking perspective. Market demand for VHC may not be there today, but you still
might want to have infrastructures in place so that the market can evolve. In this
sense, one could say there are market failures related to connectivity in the form of
externalities and spill overs (innovations) that are not incorporated in the current
willingness to pay by consumers. As such, VHC is a legitimate objective in a
forward looking perspective but probably it will not be feasible to roll out FTTH re
all the way up to the homes across the entire Union by 2025; e.g. in some areas it
may already suffice to roll out fibre to the lamppost (in order to operationalise 5G).
However, when considering Europe's global competitiveness vis-à-vis other parts
of the world, we may want to set even higher targets as it may not be enough to
‘catch up’ but rather to aim to ‘leapfrog’.
The experts noted the need to be clear about what were the market failures involved
in the new context and highlighted that there may also be other market failures
involved than market power, such as innovation externalities, resulting in social
demand for infrastructure not being reflected in current private demand. It follows
that regulatory tools to promote competition may not be sufficient and that public
investments (eg by municipalities or via state aid) may be needed to complement
regulatory tools. Other solutions discussed included as initiatives for aggregating
local demand (as in Sweden) and/or to enable the cost of the (network) connection
to be defrayed over a longer period than the current contract duration (24 month)
while maintaining the current rules for contract duration for service contractst
The experts indicated that the impact assessment should clearly specify where
infrastructure competition alone does not work to stimulate connectivity and
choice, and where accordingly additional solutions are needed. One important
market failure is the presence of sunk costs giving rise to economies of scale and
market power. Regions differ in the scalability of investments and this problem
may be more pressing in white areas than in black areas. However, black areas may
experience other sources of market failure. Mapping is therefore important to
clearly describe the size of these problems: what is the magnitude of white areas?
What are the potential problems in black areas? What are options to improve
existing infrastructure? What is the interaction between electronic communication
framework and state aid framework in these different settings?
With respect to the proposal to standardize of wholesale products for business
communications, one of the experts questioned whether product innovation may be
…but it is a problem in
a forward looking
perspective and the
Framework should be
forward looking and
supportive of
innovation.
Solutions might not
always be regulatory
and may have to
involve public support
Mapping is
considered an
important initiative.
the role of sunk costs
in different areas
can be considered a
market failure
The connectivity
imperative is not an
immediate short term
problem (except in
rural areas)…
The trade-off
between
harmonization/stan
dardisation and
regulatory/commerc
380
negatively impacted as a result of harmonization of specifications. However, it was
noted that the wholesale products such as bitstream were often the result of
regulatory intervention from the NRA to mandate access, and therefore such
products may be less likely to be subject to commercial innovation.
On the other hand, one of the experts noted that market failures may result from
a lack of harmonization. An analogy was made that once national networks have
formed (e.g. in the banking sector) which largely serve national demand, none of
them will spontaneously embrace pan-EU network solutions that serve
transnational demand but that may have some short-term costs. This
argumentation would call for more harmonization and the consideration of
options which are more radical such as moving to EU regulators.
Spectrum
There was broad agreement among the experts that the spectrum analysis indeed
shows that the preferred option would constitute a significant improvement over
the status quo.
Several comments were made for the research team to consider in the final
report. First of all, the experts agreed that the successful, fast and joint
deployment of 5G is the key opportunity to be seized and the key challenge for
spectrum policy to tackle. While it is not yet clear precisely what 5G actually
entails, the experts suggested that an attempt should be made in the report to
define what is meant by 5G and to identify its key components (i.e. securing
pioneer 5G bands) that will generate the impacts that are described in the impact
assessment. Not all aspects of 5G technology will materialize at the same time:
some aspects such as e.g. mmWave technology are currently still very much
“research projects” that are likely to generate impact only in the longer term. At
the same time, other aspects, such as enhanced mobile broadband are likely to
be available much earlier.
Second, the experts agreed with the research team that the analysis should
clearly highlight how scale (and the speed of scaling up) is becoming an ever
more important imperative for economic operators, especially in network
industries. The experts pointed out that a true digital single market across the
EU, for which spectrum is an important input, is a key element to facilitate such
scaling up in Europe, experts mentioned 862-870MHz that is particularly
suitable for IoT applications. It is such scale economies that lead investors (e.g.
device manufacturers) to consider Europe as a significant player on the global
stage, in comparison with other large markets such as the US or China. For
instance, device manufacturers need to consider which spectrum bands their
technology should be able to operate in. For Europe to ensure that it drives such
decisions, it needs to present itself as a single market that is as economically
attractive as other major markets.
Third, the panel discussed the difference between market structuring and public
policy elements of spectrum assignments which should be acknowledged in the
report. Market structuring elements include e.g. license duration, spectrum caps
and other such elements. Public policy aspects refer to issues such as coverage
obligations. It was noted that EU level intervention is likely to be most valuable
Agreement on the
preferred option
Need a definition of
5G
Facilitating scaling
up is one of the key
impacts to consider
Distinguish between
market structuring
and policy aspects of
assignments
381
in the coordination of market structuring aspects, and in higher level framing of
overall policy objectives.
Lastly, it was generally acknowledged that the preferred option would make a
significant difference in terms of coordinating spectrum assignments in Europe.
For the experts, the more far reaching Option 4 (an EU regulator) which is likely
to lead to the biggest economic gains, is at the same time possibly less agile and
efficient in adapting to local constraints and likely to meet opposition from
Member States . A suggestion was made that the impact assessment should be
used to show the cost of such opposition by Member States (i.e. the difference in
impact between Option 4 and Option 3). There was consensus that Option 3
could eventually be seen as a stepping stone to a future gradual move towards a
sustainable and more consistent management of spectrum in the EU, and
possibly to the creation of an EU regulator.
Services
It was noted that the description of the preferred option should more clearly specify
that the reference to "numbers" means E.164 numbers and no other numbering
resources such as IPV6 addresses. Furthermore, it may need to be further analysed
whether making use of numbering resources is a relevant distinguishing feature for
applying sectorial obligations to services and whether this distinction is practically
applicable, although they did not elaborate on this point.
Some experts noted that the analysis on regulatory heterogeneity and on the
impacts from harmonisation focuses on the gains of harmonisation but not so much
on the possible costs for consumers. They agreed that regulatory heterogeneity with
regards to consumer protection leads to duplication costs, but questioned whether
there are benefits to regulatory heterogeneity if consumer preferences differ. At the
same time they agreed that certainty will be needed for the development of the
M2M market. They agreed on the need to be transparent about the pros and cons of
harmonisation.
Questions were raised as to what exactly the option with regards to bundles
entailed. There were some doubts about the effectiveness and practicality of
offering consumers the ability to buy services separately. The issue is rather about
the need to be clear on which rules apply to what services when a bundle contains
services that fall within the scope of the regulatory framework and services that do
not. Once this is solved one should look at how services should be provided and
what protections are needed. Consequently there is a need for some reasoning as to
how sector specific rules apply to the bundle.
Some experts recognised that bundling may create transparency problems as
consumers may find it more difficult to compare bundles to stand-alone products.
They noted that it is not always clear what is in the fine print and, in the end, a
consumer may have chosen a product in which he/she is actually not better off and
it is not clear what the costs of getting out of the bundle are. Another potential
concern, due to the popularity of bundles among end-users, was that some operators
may be hindered in replicating bundles because they do not have access to relevant
wholesale products (e.g. in Spain some operators have trouble getting wholesale
access to mobile). However, other experts stressed that bundles may have positive
attributes, not least to promote competition, and are no longer considered negative
for consumers. Consumers also gain from bundles in the form of reduced
transaction cost and a reduction of occasions at which a choice has to be made
(consumers don’t like to make choices). Thus there is a need to go case by case
Is numbering a
practical
distinguishing
feature?
Regulatory
heterogeneity is not
a bad thing per se
While consumers
may clearly benefit
from bundling, there
are also risks
involved
What exactly do the
measures with
regards to bundles
entail?
Option 3 should be a
stepping stone to a
future more
ambitious move
toward a more
consistent
management of
spectrum and
possibly an EU
regulator
382
rather than taking a single approach on this area and improve transparency through
comparison tools.
.
One expert noted that the basis for extending privacy and security obligations to a
wider set of communication services is not strong if it is only based on the
observation that one third of respondents to a survey find it an issue (referring to a
survey held in the context of SMART 2013/0019). Another expert recognised that
privacy and security issues are important in relation to communication services
(notably IoT services), but argued that the problem also applies to other types of
OTTs and not just to OTTs providing communications services. He suggested that
in the future IPv6 addresses will replace E.164 numbers and that privacy and
security issues should be dealt with under horizontal rules.
Universal service
While acknowledging the benefits of allowing Member States flexibility, experts
were interested to understand how a universal service (US) obligation for basic
broadband would be defined if included, e.g. who determines what is the minimum
bandwidth that should be guaranteed. They also inquired about the appropriateness
of including mobile connection in the options in this day and age where mobile
technologies are becoming much more important. It was explained that there is
minimum harmonisation at the EU level so that Member states have options to
define their understanding of US pursuant to the national circumstances (e.g. with
regards to a minimum required bandwidth) and that mobile technologies are
currently included as a technology that can potentially be used to realise broadband
services at a fixed location. However, nomadic services as such are not currently
included as a US.
Experts noted that the problem analysis could make a clearer distinction between
affordability and availability. While the preferred option aims at affordability (e.g.
ensuring affordable prices for all end users, in particular for the most vulnerable), it
was argued that availability is the real issue to be considered by the RF in general,
including possibly by US. Affordability can be realized through social income
related policies or subsidies. It was explained that under the preferred option
broadband availability would be further promoted through other instruments (such
as regulation, state aid or spectrum policy).
The analysis refers to “uncertainty” resulting from the fact that Member States have
their own approach to assessing costs and unfair burden. It was questioned whether
this causes “uncertainty”, or just “complexity”? It was explained that differences
between Member States in the calculation of net cost and the notion of unfair
burden makes it not always clear to operators entering the market what will be the
net cost of US provision, whether it will be considered an unfair burden and
whether they get any compensation, which may result in an uncertain market entry.
Governance
On the topic of governance, the expert panel reaffirmed some of the policy
specific elements discussed on access, spectrum and services. There was
agreement that localised governance may prevent cross-border markets
from emerging. If this is the case, then it significantly strengthens the case
for co-ordination at EU level
The RF may not be
the right framework
for dealing with
privacy and security
issues
Flexibility of
regulation at the
national level
Underline the
distinction between
the measures for
affordability and
availability of
broadband
Differences between
Member States may
create complexity, but
not necessarily create
uncertainty
Centralisation is
important for scaling
up and spillovers to
be generated
Administrative costs
related to a particular
set-up might not be
easily reduced
383
Second, the experts pointed out that in estimating the costs of governance
reform, it should be borne in mind that institutional costs are sticky and that
any savings from reform (e.g. administrative costs) might take a long time
to materialize. One expert observed that institutions often end up
maintaining the problem they were created to solve.
Third, one panel member challenged the team to consider subsidiarity in a
different light (finding the most appropriate geographic level of
intervention rather than one that necessarily places responsibility at the
most local level). He posited that, in the context of a digital single market,
there is a need to justify why a centralized, coordinated model of
governance for electronic communications is not the right way forward.
The European Research Cooperation (ERC) is an example where
centralisation of the allocation of research grants has resulted in a much
more efficient allocation of national research funds across EU researchers
and also a more effective search for talent, since there are strong arguments
for a larger scale when trying to identify high level expertise. It is a prime
example of how the subsidiarity arguments (scale economies and spill-
overs) are at play and where centralisation leads to more efficient
outcomes. A similar centralized model of governance could be beneficial in
the case of e.g. spectrum.
Finally, one panel member suggested that it is important to understand how
the governance model facilitates (rather than acts as a block to) innovation.
How can innovation (technological or regulatory) be introduced under a
new institutional set-up, what are the key steps for new ideas to be
introduced, for their merits to be considered, for them to be decided and
then implemented and how open is this process. For example one of the
benefits the preferred spectrum option is that it is open to this idea
discovery process but puts in fewer blocking factors than other options.
Macroeconomic modelling
The existing CGE analysis is a welcomed and well developed addition given the
necessity to estimate future impact scenarios in a strongly quantitative way. But
there are some limitations derived from the deterministic inclination of these
models that should be noted.
The model is based on current productivity parameters, while structural changes
might be expected as a result of the implementation of the preferred policy options
together with a variety of factors. It should be noted that, ideally, the impacts
should be analysed from a dynamic perspective, estimating the impact of changes
in productivity as a result of both infrastructural and socio-economic factors,
including organizational changes. This would require, among other things, that the
analysis does not focus only on the horizontal comparison of industries, but also on
the specifics of the production process throughout value chains and at the firm
level. It is really important to understand how processes of production will change
if policy strategies are to be rightly implemented.
The analysis should account for the fact that it takes time to adopt changes,
implement them and, finally, for them to have impact on the production process.
Moreover, the analysis should recognize limits in the absorptive capacity of firms.
Not all firms are instantly ready to jump to another production function. This has
nothing to do with regulation, but with the potential to harvest the benefits of
digitalization by industries. Such potential follows from the strategies that different
The analysis reflects
existing production
functions but not
disruptive changes of
production processes
Impacts may
materialize with a lag
Subsidiarity needs to
be considered in light
of the benefits of
greater coordination
The institutional set
up needs to be open
to innovation
384
industries and organizations might adopt e.g. regarding cloud computing. The
consultants confirmed that such lags have been accounted for in the model.
The CGE model seems to assume that the European economy is operating
independently of what happens in the rest of the world. While the current policy
options take the broadband situation in the most innovative economies as a
benchmark, we have to go beyond that and have a vision to be more innovative
than others. For example, the model suggests that exports growth will exceed that
of imports. If you want to keep comparative advantage or achieve it, then you have
to go beyond the benchmark of access policy, spectrum policy and service policy. It
was recognized that this is a general but accepted shortcoming of CGE modelling.
It would be interesting to see a disaggregated model at regional level, similar to the
RHOMOLO model for example. Such models allow for analysing what would
happen on the ground in different industrial hubs around Europe. It is recognised
that such models are indeed very interesting but also require an extensive amount of
resources and development time when done properly.
Finally, the experts note that the Regulatory Framework alone would not be enough
to realise the preferred outcomes in terms of competitiveness of the EU economy.
Infrastructure policies should be complemented with innovation policies and policy
of digital services (in broader sense than just communication services). All these
different policy fields should go together.
Regional models:
potentially very
promising but not
achievable under the
current IA
Materializing of
impacts depends on
complementary
policies in the area of
innovation and digital
services
CGE modelling is
limited in assessing
the impact on
comparative
advantages vis-à-vis
the ROW
385
6.14 ANNEX 14 – The state of play and the EU dimension of connectivity
This annex integrates the problem definition section by describing in more detail (i) the obstacles
to unconstrained connectivity identified in section 1.2.1., (ii) the EU dimension of the problem
and (iii) including more elements of the baseline, to complement the ones included in section
1.5.
6.14.1 Costing the gap and the financial endowment of current initiatives
Some studies have tried to estimate the NGA broadband gap in Europe and to provide estimates
about the cost to fill it. The best known of these studies is probably the one performed by the
European Investment Bank in 2011. The study considers four scenarios for broadband
deployment in Europe. The most ambitious scenario foresees FTTH/B roll-out throughout
Europe and the gap was estimated at €221 billion460
. The same scenario of 100% FTTH/B
coverage was analysed by Analysis Mason in a study for DG CONNECT in 2012461
. The amount
foreseen is similar (€250 billion, for deployment of FTTP-only, across Europe). The amount is
reduced to €154 billion in case of high duct re-use. Analysis Mason also estimated the costs
associated to a 100% FTTC deployment which are in the area of €50 billion. In case of high duct
re-use, the cost would go down to €31 billion.
An internal estimate on the basis of the Analysis Mason study was also carried out by DG
CONNECT in 2014 according to which Europe needed an additional EUR 34 billion in
investment to reach the target of 100% coverage at 30 Mbps, and an additional EUR 92 billion to
credibly enable reaching the 50% take-up target at 100 Mbps462
. These figures are already taking
account of the amount that the private sector could be expected to invest463
. and would leave part
of the network unfit to serve a Gigabit society if substantial copper-based parts of the networks
were to be durably maintained thereafter.
The financial resources available at the European level are certainly not sufficient to meet the
challenge presented above. The allocation of European Structural and Investment Funds for
high speed broadband networks experienced a sharp increase from EUR 2.7 billion in 2007-2013
to around EUR 6.4 billion for 2014-2020 (about EUR 5 billion ERDF and an estimated EUR 1.4
billion EAFRD)464
. However, most of this investment is expected to be made in the form of
grants rather than financial instruments so the leverage effect on public (national and/or regional
co-funding) and private co-funding will not reach more than EUR 9-10 billion – falling far short
from the needs to reach the EU targets for broadband coverage and take-up.
The Connecting Europe Facility (CEF) in the digital area is endowed with a limited budget of
EUR 1 billion for the period 2014-2020 after the severe cuts it suffered in the Multiannual
Financial Framework (MFF) negotiations from a proposed EUR 9.2 billion. EUR 150 million are
allocated to broadband infrastructure, based on the provision of financial instruments via the
460
http://www.eib.europa.eu/attachments/efs/eibpapers/eibpapers_2011_v16_n02_en.pdf
461
Analysis Mason, The socio-economic impact of bandwidth (2013).
462
Based on a 75% coverage assumption.
463
According to the Digital Agenda Scoreboard, telecom (including fixed, integrated and mobile-only) CAPEX in
Europe was € 43 bn in 2013. CAPEX figures remained relatively stable over the 2011-2014 years despite the fact that
in the same period NGA coverage increased from 29% to 68%. In 2014, Mobile CAPEX spending represented 59%
of total spending. However, this CAPEX is not only directed at modernising the network so that it is difficult to say
how much private operators will invest in increasing coverage in the coming years.
464
An estimate as the Commission cannot differentiate between allocations foreseen in EAFRD for ICT and
Broadband as this type of information is not requested by the regulation. However, additional information is requested
and will be provided in the context of monitoring activities (in particular, monitoring will be done for ''N° of
operations", "Population benefiting from new or improved IT infrastructure" differentiating here between
"Broadband" and "Other than broadband").
386
European Investment Bank (EIB). The broadband part of CEF is expected to mobilise around
EUR 1 billion465
.
Finally, the European Fund for Strategic Investment (EFSI) does not have sectorial earmarking
hence it is difficult to anticipate how much budget will be allocated to broadband infrastrcuture.
6.14.2 International comparisons
Affordable Gigabit connectivity has already been available as a consumer service in Japan,466
Singapore and Korea for some years, while in 2014 Korea’s SK Telecom announced trials of
10Gbit/s.467
In Korea, the National Broadband Plan (Ultra Broadband Convergence Network468
),
already launched a 1 Gbps target in 2010.
Gigabit connectivity is also available to households and small businesses in US cities served by
Google Fibre,469
and recent reports suggest that AT&T is responding to the competitive
challenge with more widespread urban Gigabit deployments of its own.470
However, it is
certainly not the case that all European countries are falling behind in a Gigabit society. As
shown in the analysis carried out in SMART 2015/0002, Sweden or Estonia already today
compare well with Japan on a range of NGA metrics (although Swedish fixed rural coverage
remains relatively limited).
Figure 81 - % of FTTB connections on total subscriptions (OECD)
465
Under the pilot phase of the Europe 2020 Project Bond Initiative, the EIB and the Commission closed in July 2014
the first deal on a broadband project bond (in France – Axione is the beneficiary). The leverage factor foreseen for the
broadband part of CEF is around 7x, so it is expected to mobilise around EUR 1 billion. This leverage was exceeded
by the Axione deal which had a leverage factor of 14x.
466
KDDI launches GBit/s service 2008 http://www.japantoday.com/category/technology/view/kddi-to-launch-1gbps-
fiber-optic-service-in-oct
467
SK Telecom showcases 10Gbit/s service http://www.businesskorea.co.kr/english/news/ict/6789-100x-faster-
internet-sk-broadband-offer-10-gbps-internet
468
See:
http://www.unescap.org/sites/default/files/4.1%20Korean%20Broadband%20Policies%20and%20Recommendations.p
df
469
https://fiber.google.com/cities/kansascity/plans/
470
See for example http://www.latinpost.com/articles/101338/20151210/google-fiber-vs-att-gigapower-likely-to-win-
gigabit-race-thanks-to-google.htm
0% 10% 20% 30% 40% 50% 60% 70% 80%
Colombia
Latvia
OECD
Greece
Belgium
Ireland
Germany
Austria
Finland
France
Chile
Poland
Italy
Canada
Australia
New Zealand
Mexico
United States
Luxembourg
Netherlands
Switzerland
Czech Republic
Hungary
Spain
Turkey
Denmark
Slovenia
Portugal
Iceland
Slovak Republic
Norway
Estonia
Sweden
Korea
Japan
Percentage of fibre connections in total broadbandsubscriptions, June 2015
387
Several other EU countries, including Portugal, Spain, France, Romania and other MS, which
benefit from an expanding FTTH/B footprint, albeit at different pace of deployment, may
become Europe’s leading countries for VHC connectivity in the years to come471
. However,
large European countries which have so far been experiencing limited or incremental NGA
deployment may lag behind European and global leaders on VHC broadband. illustrates the
state of transition from copper to fibre, which is much more advanced in other large economies
than in several large EU countries472
. Although the picture does not take into account the effect
of cable subscriptions, it gives an idea of the different pace of this transition. Furthermore, rural
NGA coverage has been increasing slowly in several countries such as Germany, France, Italy,
Austria and Finland, raising the risk of a growing urban/rural digital divide as can be seen in .
Figure 82 – Next generation access (FTTP, VDSL and Docsis 3.0 cable) coverage, June 2015
Source: IHS and VVA - Digital Scoreboard – Connectivity section473
Challenges to the regulatory framework474
The evaluation has confirmed that the access-related provisions of the EU Framework have
delivered in most Member States competition and market entry at least in standard broadband
and other copper-based telecom services, resulting in greater choice and value for consumers, as
also confirmed by the consultation475
. The market shares of incumbents have fallen steadily on
average across the EU reaching 41% of total subscriptions by July 2015 and average prices for
broadband services in the EU have been historically low in comparison with international
benchmarks such as the US or Canada for low data consumptions patterns.476
Access of all citizens and businesses to high-quality networks at affordable price has become a
prerequisite for Europe to reap the full benefits of the emerging digital economy. The existing
framework was not primarily designed for, and could have not foreseen, the scale of the need to
ensure the widespread availability of modern infrastructure (in rural as well as urban areas), to
471
See SMART 2015/0005 and SMART 2015/0002
472
Fibre subscriptions data includes FTTH, FTTP and FTTB and excludes FTTC. Some countries may have fibre but
have not reported figures so they are not included in the chart.
473
Source: : https://ec.europa.eu/digital-single-market/en/download-scoreboard-reports
474
For further discussion regarding the contribution of the regulatory framework to network investment and service
take up, please refer to the Evaluation of the regulatory framework for electronic communications SWD, in particular
to the sections concerning the effectiveness of access regulation and spectrum regulation.
475
86% of respondents to the Commission’s consultation felt that the EU framework (and the access-related
provisions specifically) have contributed either moderately or significantly to achieving the objective of competition.
Consultation Q4b, Q19a
476
Source: Mobile Broadband prices (February 2015) https://ec.europa.eu/digital-single-market/en/news/mobile-
broadband-prices-february-2015. This study was carried out for the European Commission by Van Dijk.
388
enable access to emerging applications and services - and to ensure that competition is fostered
in an environment of technological change.
6.14.3 Towards a connectivity objective
The need for Very High Capacity networks stems by the analysis of the likely connectivity
needs over the next ten years based on the current trends and comparing them with performance
enhancements required from telecoms networks to meet these needs. While expressing an
ambition for the future – especially in the fast changing and transformative digital sector –
cannot be fully evidence based, the trends described below, as well as findings of the public
consultation on "needs for Internet speed and quality beyond 2020", strongly support the
conclusion that Europe needs unconstrained VHC connectivity for all. This growth will be
underpinned by technological evolution (a comprehensive overview of the means and
technological choices available for network deployment and their implication in terms of
performance can be found in Annex 6.3., SMART 2015/0005 and SMART 2015/0002).
The evaluation clearly shows how regulatory choices under the framework can affect the
connectivity outcome (section 7.2.3.). Moreover, work conducted for the Commission477
in
support of the evaluation and review of the framework illustrates the impact that national
regulatory choices can have on the deployment and upgrade of higher performance networks.
The study presents how Spain, France and Portugal's NRAs have focused on stimulating entrants
to ‘climb the ladder’ to FTTH through a focus on duct access and in-building wiring in the
absence of downstream remedies as well as by promoting co-investment models. These countries
have seen developments in FTTH infrastructure competition, but these are largely limited to
very dense areas. Market structures in these countries have tended to consolidate towards fewer
fixed mobile integrated players. FTTH coverage has grown strongly in Spain and Portugal, but
more hesitantly until recently in France. The feasibility of this model has depended on the
characteristics of the existing networks, including the availability of ducts.
The main reason for both persistent capacity and coverage constraints, in particular outside urban
areas, lies in the huge investments required to roll out very-high-capacity networks. While the 30
Mbps target for 2020 is likely to be largely reached on the basis of current trends, the uncertainty
of adoption dynamics remains a key constraint to investment in VHC connectivity.
Despite progress in roll-out of NGA (> 30 Mbps), in the EU significantly fewer households,
49%, have access to networks of at least 100 Mbps, in contrast with Japan and South Korea
where according to latest data, 73% and 69% of total broadband connections are fibre. In
addition, connectivity in Europe is still overwhelmingly asymmetric, while upload speeds are
increasingly important for services, such as cloud computing.
As of July 2015, 70% of European households have basic broadband subscriptions; only 30% of
the households are subscribed to NGA above 30Mbps. The trend however, shows that Europeans
are rapidly replacing their basic broadband connections with NGA: in 2013 the only 15% of
European subscribed to NGA above 30Mbps, while 85% of subscriptions was to a basic
broadband connections478
. Figure 13 showed how dramatically the take-up rate of connection
above 100 Mbps is progressing in countries where fibre networks are widely available. Take-up
projections of NGA in a 5-10 year timeframe vary, and show significant differences across
countries and technologies. For example, taking into account evolving coverage and propensity
to take-up NGA, IDATE preliminarily projects that nearly half of households across the EU will
take NGA technologies (FTTC, FTTH/B or Docsis 3.0 and successors) by 2020, and nearly two
477
Regulatory, in particular access, regimes for network investment models in Europe (SMART
2015/0002)
478
Source; Digital Scoreboard: https://ec.europa.eu/digital-single-market/en/connectivity
389
thirds by 2025. However, there are significant differences between countries as shown in the
figure below.
Figure 83 - Projections for NGA (>30Mbps) take-up 2015-2025
Source: IDATE
As today not all NGA networks can deliver 100 Mbps, the picture above implies that without
appropriate investment incentives, Europe is likely to miss the target of having 50% take-up
of 100 Mbps services by 2020.
As reported in the evaluation on stakeholders' views (section 7.1.1.) some Member States, the
European Telecommunications Network Operators' Association (ETNO) and the large majority
of the incumbents go as far as suggesting, via the public consultation conducted in light of the
review, that investment should be made an explicit objective, next to competition, given the
significant network rollout and upgrade needs in the coming years. This would imply amending
the framework; among others access regulation, to favour dynamic efficiency gains over static
ones. In areas where infrastructure competition is not viable, competition would be "for the
market" rather than "in the market". Many other stakeholders including alternative operators and
consumer associations stress, on the other hand that competition would not survive outside the
regulatory framework and that the latter should not favour investment at the expense of
competition (and thereby also at the expense of the consumer outcomes that go along with
competition).
However, the findings of the access study and the forecast summarised in section 1.5 seem to
show the legitimacy of the connectivity objective in the medium run.
6.14.4 What is the EU dimension of the problem?
The state of play and the European dimension of the connectivity problem There is a particularly
strong rationale for EU action in the context of the challenges of the DSM. Digital services
(including calls, messaging and entertainment) are increasingly offered on a pan-European or
even global basis. In turn, digital services for consumers and businesses rely on ubiquitous
connectivity, in some cases requiring VHC and/or reliability. Connectivity is a vital enabler for
the DSM479
and warrants an EU-wide response, even if network deployments are mainly local in
479
See EC Digital Single Market Communication May 2015 http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=celex%3A52015DC0192
390
nature. The figure480
below gives an idea of the spillovers that are determined by communication
infrastructures on the wider European economy.
Figure 84 – GDP contributions from the Digital economy
The limited connectivity available in Europe already today negatively affects EU citizens',
businesses' and public authorities' capacity to produce, share and benefit from innovative digital
products and services. Moreover, the competitiveness of the wider economy, not least of
multinational companies based in the EU, is affected as high speed, high quality
communications services and networks have an economic effect across all business sectors in
Europe. As mentioned in section 1.2.1, it is important to take into account that albeit networks
are local in nature, (and will probably get even more local in the future with the proliferation of
small fibre operators such as in Sweden) the problem of suboptimal investment is a European
problem, as even local networks are financed from international and cross-border capital
markets. So despite the local nature of the networks, connectivity and investment have a clear
internal market dimension and the review should strive to induce policies which are more
favourable to investment without jeopardising the existing objectives.
According to the macroeconomic model elaborated for this study (see Section 4.1.1 and Annex
5), if all the preferred options are pursued as a result of the review
of the electronic communications framework, we expect expanded market-driven
investment and consumption and a cumulative effect on growth of 1.45% and on
employment of 0.18% in 2025, assuming that the reforms are implemented by 2020.
In general, digital technologies and ICT have been in the last twenty years an enabler for the
emergence and the expansion of new business models such as the sharing economy, crowd-
sourcing of ideas and solutions for large companies, mutualisation of software (SaaS), including
in the cloud. Experience from the harmonisation of approaches to previous generation
technologies and solutions, notably from the GSM Directive,481
LLU Regulation,482
and the
Leased Line Directive483
suggests that clear and co-ordinated action at EU level to implement
best practice in relation to connectivity can provide an important stimulus for deployment and
take-up, raising the performance of the EU as a whole, compared with action that could be taken
by MS individually. This is illustrated by Figure 49, which shows how broadband take-up in
Europe expanded in the years following the adoption of the LLU Regulation in 2000, which
applied best practice methods for broadband promotion (until then applied only in a few
countries such as Germany) more widely across the EU.
480
Source: SMART 2015/0005,.
481
Council Directive 87/372/EEC
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31987L0372:en:HTML
482
Regulation EC 2887/2000 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32000R2887
483
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31992L0044
• Digital
economy
• Information
Communications
Technology(ICT)
4% GDP
• Communications
Infrastructure
1.3% GDP
Digital Single
market
+€415bln
Digitalisation of
industry
+110bln pa
391
Figure 85 - Broadband trends in Europe following the LLU Regulation (2000)
Source: WIK based on Cocom data (except 2002 – OECD) and extrapolations
The 2002 Framework generally enhanced the flexibility of market regulation to deal with
different economic circumstances in the MS (via market definition and SMP identification), and
the 2009 review enhanced technological and service neutrality in spectrum bands (in contrast to
the approach of the GSM directive).
This has allowed for a much more flexible and sophisticated approach to regulation, which can
take economically-based decisions on a case-by-case basis. Nevertheless there is still is a clear
need for a degree of EU-level steering to define bottlenecks and ultimately to meet common
needs . This is recognised in the current framework through a level of flexibility which allows
coping with new technological and market circumstances.
Several of the issues raised by the stakeholders and in the implementation experience involve
cross-border challenges, such as numbering needs and roaming issues in relation to IoT,
spectrum coordination and consumer protection, or businesses' need for seamless connectivity
across multiple sites and countries. For example, the lack of European cross border coordination
on the timing of allocation and assignment creates cross border interference problems and
prevents services developing across the whole EU territory.
The heterogeneity in the implementation at national level of consumer protection as a result of
different national legislation brought about by the current minimum harmonisation approach has
impacted the effectiveness and efficiency of the rules and reflects the need for a coherent
approach at EU level. Consistency in consumer protection standards across borders would avert
further fragmentation along national lines and facilitate compliance for multi-territorial
operations. Further harmonisation of end-user rights in the EU, coupled with deregulation where
warranted, should thus result in a modernised set of consumer protections rules, providing higher
confidence among end-users and making it easier for providers of communications services to
comply with legislation and reducing unnecessary compliance costs.
6.14.5 Baseline analysis: how would the problem evolve without intervention
This section complements and deepens the analysis of the baseline presented in section 1.5
As mentioned therein, the existing framework has delivered more competition, better prices and
choice for consumers, and spurred operators to invest in upgrading their networks at least in
some areas. Today virtually all EU citizens have access to basic broadband networks (97% fixed
392
broadband connections according to the DESI index 2016484
) and increasing numbers of citizens
and businesses have access to networks (Next Generation Access – NGA- connectivity)
allowing at least 30 Mbps download speed (70.9% NGA general coverage485
in EU according to
DESI 2016 – see section 1.4.1 for more data). Only some countries, such as Malta, Lithuania,
Belgium and the Netherlands, already enjoy nearly comprehensive coverage of NGA networks,
in most of those cases probably mainly thanks to the competitive impulse provided by legacy
cable networks, which could be upgraded at relatively low cost486
. NGA coverage in countries
which lack extensive cable has been slow to develop in many cases (Italy or Greece being
emblematic). Moreover, a large part of the NGA coverage beyond the cable footprint in many
countries (UK or Germany, for instance) has been achieved through only partial upgrades of the
legacy copper loop (FTTC), rather than full upgrades (FTTH/B). As investigated in study
SMART 2015/0002, the former approach may not be sufficient to cope with the data
consumptions under the most ambitious scenario forecast.
A key development since the framework was originally conceived is that legacy telephone and
cable (coaxial) networks, including the copper ‘local loops’, are in the process of being upgraded
with fibre and other solutions which improve broadband performance.
In terms of demand, these enhancements are needed to enable customers to enjoy better quality
in online services including online video and cloud applications, as well as enabling multi-screen
viewing, which is becoming increasingly prevalent in European households with the
proliferation of devices as illustrated in figure 11 above.
Figure 86 - Europe IP Traffic and Service Adoption Drivers
Source: Cisco VNI Global IP Traffic forecast 2014-2019 – Europe includes Western Europe +
CEE, excluding Russia
According to CISCO, Global IP traffic will increase threefold over the next 5 years. Overall, IP
traffic will grow at a compound annual growth rate (CAGR) of 21 percent from 2013 to 2018487
.
The widespread adoption of cloud services, the number of connected devices (IoT), the booming
M2M industry, contribute to further increase the traffic load on communications networks. In
484
The Digital Economy and Society Index (DESI) is a composite index developed by the European Commission (DG
CNECT) to assess the development of EU countries towards a digital economy and society. It aggregates a set of
relevant indicators structured around 5 dimensions: Connectivity, Human Capital, Use of Internet, Integration of
Digital Technology and Digital Public Services. For more information about the DESI please refer to
http://ec.europa.eu/digital-agenda/en/digital-agenda-scoreboard
485
NGA broadband coverage/availability (as a % of households) with Next Generation Access including the following
technologies: FTTH, FTTB, Cable Docsis 3.0, VDSL and other superfast broadband (at least 30 Mbps download)
486
Several studies highlight the role played by cable in stimulating NGA deployments including SMART 2015/0002,
WIK-Consult (2015) for fcom ‘Competition and Investment: analysing the drivers of superfast broadband’, and the
EP (2013) study ‘Entertainment X.0 to boost broadband deployment’
487
Source: CISCO VNI index, see:
http://www.cisco.com/c/en/us/solutions/service-provider/visual-networking-index-vni/index.html
393
particular, as businesses and consumers exchange their data with the cloud, this will also lead to
a modified demand pattern for upload traffic. Hence, while most of the traffic will still be in
download, demand for upload will increase, as well as the need for lower latency for applications
such as cloud computing and e-health, parameters included in the VHC concept.
The trends explained above increase the demand for capacity and certain quality characteristic of
connectivity networks. There is an emerging consensus among industry players and investors
that in the medium and long run connectivity providers, both fixed and mobile, will have to rely
on (nearly) ubiquitous fibre infrastructures coming very close to users' premises, to support their
business, especially considering the expected requirements of 5G.
Gigabit connectivity is also foreseen in projections by Deloitte488
as a requirement to meet the
aggregate demand from dozens of connected devices in a home. This is becoming the norm in
European households where several users consumer bandwidth from several devices at once.
Deloitte further notes that “demand for connectivity has evolved symbiotically: as faster speeds
have become available, the range of applications supported has increased and the viable
number of devices per person has steadily risen.”
In terms of supply of NGA in commercially viable areas, forecasts from IDATE based on
market intelligence (see figure below) suggest that upgrades to NGA and VHC networks will
continue, but at a relatively gradual pace.
Figure 87 - Projected take-up of NGA by technology (to 2025)
Source: IDATE, SMART 2015/0002
IDATE projections suggest that by 2020 (see figure above), even under very optimistic
assumptions (assuming FTTC/vDSL delivers 100Mbit/s in practice), around 16 countries may
miss the DAE targets of 50% households taking up at least a 100 Mbps connection, and that
within the 16 affected countries the target will be missed by around 25m households. Under a
more conservative assumption, whereby only FTTH/B and cable are considered as reliably
offering more than 100Mbit/s, the gap in meeting the target would amount to around 27m
households. In reality other advanced hybrid copper-based solutions may deliver the required
speed provided the local loop is sufficiently short. Countries with limited historic cable
competition such as Italy and Greece are included amongst those considered likely to miss the
488
Deloitte Technology, Media and Telecommunications Predictions 2016
394
targets, while countries which have been characterised by strong FTTC, coverage could fail to
meet targets under the stricter assessment489
.
This pace of development may be sufficient to meet the needs of some users, but is likely to limit
the potential for more demanding users including small business and home office users and may
not be sufficient to enable Europe to fully benefit from a connected economy and society. As
explained in more detail in the support study SMART 2015/0005, chapter 1, the demand for
data is booming and the scenarios considered are mostly rather conservative.
Concerning rural NGA deployment, existing regulatory practice and outcomes vary across the
EU as shown in case studies for SMART 2015/0002. If the current varying practices remain, the
current status of uneven rural deployment is likely to persist, resulting in patchy access in rural
communities to broadband capable of reaping the benefits from the social and economic
integration that digitisation may bring. This process is likely to have repercussions on public
finances, especially if accompanied by ageing population. Challenge areas could in theory be
addressed through public subsidies, but these are by no means sufficient. The costs of achieving
DAE targets also in rural areas are exposed above in section 1.11.1.
An estimate of the connectivity problem in the future (2025 and beyond) can be inferred from
asking (1) whether there is likely to be a gap between bandwidth demand and NGA deployed;
(2) whether future demands can be met through incremental upgrades of existing copper and
coax (cable) networks or only through FTTH/B; and (3) the extent to which future mobile
technologies (5G) will be able to rely on fixed networks for backhaul and other data transmission
needs. The size of Europe’s bandwidth challenge can be seen most vividly by comparing where
we are today with what would be needed to benefit from all aspects of a connected society in
2025 as assessed in more detail in SMART 2015/0002 and SMART 2015/005490
.
According to Samknows, average download speeds achieved in Europe in 2014 were
24Mbit/s.491 If investment in NGA technologies continues at its current levels, IDATE has
projected that average download speeds would reach around 200Mbit/s- by 2025,492 while
upload speeds would reach around 90Mbit/s. Based on trends in video and cloud usage under the
‘status quo’, IDATE has also estimated that bandwidth use in the EU may expand from 62GB
per line per month in 2025 to 298GB per line.493 This may seem significant, and for households
used to experiencing restricted bandwidths,494 it may be appear enough.
As mentioned in section 1.5 there is evidence suggesting that in the telecom sector demand
responds to supply,495
and that restricted download and upload speeds may limit the types of
489
For additional deployment forecasts see , SMART 2015/0002.
490
In the context of the Expert Panel conducted under SMART 2015/005 – See Annex 13 for more detail, Prof. Brett
Frischmann observed that current demand expressed by end-users may fail to reflect the innovation potential in the
market, which could be unlocked through more performant infrastructure.
491
Page 115 Samknows for EC Oct 2014 Quality of Broadband Services in the EU
492
In the context of SMART 2015/0002 IDATE forecast likely uptake of NGA by technology to 2025 and based
speeds and speed growth per technology on the basis of Samknows data. According to Akamai speed measurements,
average speeds have been increasing by 16% per annum across a range of geographies. An alternative approach of
extending this projection would result in speeds of around 150Mbit/s in 2025.
493
SMART 2015/0002
494
Many Internet users are already experiencing challenges with the bandwidth they have available. Almost four in ten
respondents to the Eurobarometer survey of 2014 noted that they had experienced difficulties accessing online content
or applications as a result of insufficient speed of download capacities.
495
Data from the UK regulator Ofcom for example suggests that download bandwidth consumption for NGA (FTTC
and FTTP) networks was around two times higher than bandwidth consumption for non-NGA networks, with
significantly higher use of upload capacity. This evidence of higher usage being associated with the availability of
NGA is supported by the case study of Palaiseau in France, which has been the subject of a pilot trial for the switch-
off of Orange copper customers and migration to FTTH networks. In this case it was observed that the average
Internet traffic of range’s broadband customers as well as their consumption of video-on-demand was multiplied by
a factor of three. Importantly, this trial also resulted in fibre clients’ usage of upload bandwidth being increased 8
times, due to changes in Internet usage and an increased usage of cloud-based services.
395
usage and applications that might otherwise emerge. In Sweden, following an early boost by the
central government, one out of every two municipalities is involved in fibre to the business and
fibre to the home deployments. This has led to very high take-up: as of July 2015, 68% of the
broadband connections in Sweden are NGA496
, achieved predominantly through FTTH and
FTTB connections. Where FTTH is widespread, the availability of fibre makes extending fibre
to base stations far more feasible and efficient. This is well illustrated by the example of 4G in
Stockholm where the world’s first 4G deployment took place helped by the virtually 100% fibre
coverage.497
If bandwidth needs are calculated on the basis of what might be required to run
certain applications, a case study of the German market providing a forecast for 2025 suggests
that an average user might require 150-500Mbit/s downstream with more than 100Mbit/s up,
while high-end users including those running small or home offices might require 1Gbit/s in
download and more than 600 Mbps in upload (see SMART 2015/0005). This bandwidth would
be used not only for multi-screen ultra HD video, but also for applications such as cloud and e-
health as well as for home working and small business needs.
Figure 88 - Model of market potential – Germany 2025
As shown in figure 14 data rates required by the most demanding users could reach 1 Gbit/s or
more on the downstream link by 2025, while a significant proportion of households and offices
could demand download speeds of 500-1000Mbit/s and 300-600Mbit/s upstream by 2025. This
scenario therefore sets the upper bounds for potential users (including business user) demands in
the medium term – though it is worth noting that even a less ambitious scenario will need the
fibre rollout to reach far deeper into most of the present networks.
On the subject of inconsistency in the implementation of the framework, there is evidence that
without further direction at EU level, this problem is likely to persist and may worsen, in part
because when new technologies and services emerge they lack the harmonisation that was
historically required through EU legislation, and may not achieve adequate levels of
harmonisation through voluntary standardisation alone. Concerns over the impact of
fragmentation on business users, in particular multi-national ones, provide an example of the
enduring nature of these problems and difficulties in using current tools to address them.
Concerns over fragmentation in the market for business communications were first raised in a
survey conducted by the predecessor to BEREC, the European Regulators Group (ERG) in
2009,498
validated in a further survey published in 2013,499
and have subsequently been
496
See annex 6.
497
Source: Vodafone’s call for the Gigabit Society, Dec. 2015
498
ERG report on the regulation of access products necessary to deliver business connectivity services ERG (09) 51
http://berec.europa.eu/doc/publications/2009/erg_09_51_business_services_paper_final.pdf
396
reaffirmed by business end-users in the context of studies for the EC in 2015500
and 2016.501
Yet
in an interview conducted in 2016 for SMART 2015/0002, INTUG observed that it still had
concerns over the ability of business issues to be effectively addressed under the existing
institutional set-up.
Concerning future generations of wholesale access products for residential customers and small
business, the experience of a new product designed as a partial replacement for LLU on NGA
networks, such as ‘VULA’ (Virtual Unbundled Local Access) or a WDM (Wavelength Division
Multiplexing) based access product provides a warning that without efforts to apply a European
‘standard’ (as was created with ‘local loop unbundling’ on copper networks) any future
technological upgrades in fixed access networks are likely to result in duplicate efforts to
develop new wholesale access solutions and divergent implementations at national level. As seen
with the past implementation of VULA, this may result in slow take-up of wholesale offers of
future generations of fixed access infrastructure and therefore – especially in the early phase -
reduced levels of choice for consumers in areas where competition cannot be delivered through
infrastructure-based competition alone. In turn, this may dampen take-up of new technologies in
the early deployment phase.502
Lastly, in view of the fact that the preparation by NRAs of market analysis often coincides with
three year period between market reviews and results in delays of several years, the perpetuation
of the existing three year market review cycle, is likely to result in insufficient time for the
previous reviews to be confirmed and effectively implemented503
and their effects to be known.
Additionally, the continued re-evaluation and re-calibration of regulation conflicts with the aim
of many regulators to provide longer-term certainty and potentially long-term remedies504
in
order to provide more durable solutions that offer greater certainty to operators and investors.
Overall we can state that a no change scenario would lead to a persisting digital divide for
citizens and SMEs, sub-optimal economic development outcomes, sub-optimal allocation of
capital, lack of consumer trust in digital services, lower take up of innovation and loss of
competitiveness of EU industry. A review of studies on standard speed broadband suggests that
an increase of 10% in standard broadband penetration could contribute between 0.25% to 1.38%
to GDP growth.505
There is also a small, but expanding body of literature highlighting how the
effects of faster broadband through fibre connectivity could boost growth further and offer a new
lease of life to rural communities506
.
Promotion of the interests of end-users, including the provision of a safety-net through the
universal service obligations, is another principal objective of the regulatory framework, as it
499
WIK (2013) Business Communications, economic growth and the competitive challenge
500
SMART 2014/0023 Access and Interoperability standards for the promotion of the internal market for electronic
communications
501
SMART 2015/0002 access and investment
502
Evidence from standard broadband suggests that unbundling played a role in accelerating take-up in the early
deployment (but not later phase). It also had a positive impact on service quality. See unbundling the incumbent –
evidence from UK broadband Nardotto, Valletti, Verboven (2015)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2505035. SMART 2014/0024 also shows how NGA take-up could
have been accelerated if customers of entrants had been converted to NGA at the same rate as those of incumbents
503
This is especially true in the case of appealed decisions
504
Long-term discounts exceeding 3 years have been negotiated for wholesale FTTC/VDSL bitstream access in NL
and Germany. In France, one amongst a number of justifications provided by ARCEP in interview for SMART
2015/0002 for pursuing symmetric rather than asymmetric regulation to address fibre bottlenecks was the need to
provide a framework for longer term solutions (in this case on the basis of IRU)..
505
Among others: Crandall, R., Lehr, W., and Litan, R. (2007), The Effects of Broadband Deployment on Output and
Employment: A Cross-sectional Analysis of U.S. Data, Issues in Economic Policy, 6; Czernich, N., Falck, O.,
Kretschmer T., and Woessman, L. (2011), Broadband infrastructure and economic growth, Economic Journal,
121(552); Koutroumpis, P. (2009). The Economic Impact of Broadband on Growth: A Simultaneous Approach,
Telecommunications Policy, 33; Qiang, C. Z., and Rossotto, C. M. (2009), Economic Impacts of Broadband, In
Information and Communications for Development 2009: Extending Reach and Increasing Impact, 35–
50.Washington, DC: World Bank.
506
See for further studies SMART 005/2015
397
ensures that consumers can participate in the digital society and fully reap the benefits of a
competitive market. Overall the framework has been successful in safeguarding consumer
protection, even when this is not fully translated in increased consumer satisfaction. Given the
increasing role of connectivity and electronic communications services in today's European
economy, it is important to continue protecting end users' interest.
Current rules on contracts content, duration and termination, transparency on tariffs, quality of
service and other conditions, potential minimum quality of service requirements, switching and
number portability have enabled consumers to take advantage of a competitive market.
Regarding switching, the number of porting transactions has increased, in particular in relation to
mobile numbers, with switching rates above other subscription-based industries, even if certain
practical implementation difficulties still affect consumers (e.g. loss of service during switching).
National rules have ensured transparency of information on services and prices by providers,
including in some cases the provision of online tools comparing prices and services; rules on
contract duration have been transposed so that the initial commitment period does not exceed 24
months, while also ensuring that providers offer users the possibility to subscribe to a contract
with a maximum duration of 12 months; some Member States have adopted detailed rules
regarding consumer protection safeguards in case of unilateral changes to contract conditions.
Despite the above, consumers still refer to issues related to transparency and quality of service,
in particular with regards to the internet access service. This problem is especially acute when
access to the internet service is bundled with other communications service, resulting in 24% of
consumers not finding easy to compare prices of bundles, while evidence shows that an
increasing number of consumers on most Member States opt for this service delivery mode.
The provisions on security and integrity of networks and services have contributed to
strengthening the European telecom infrastructure’s resilience and services availability across
the EU. Yet effectiveness of the provisions is not complete and this would be related to the fact
that security obligations cover only electronic communications providers.
As explained in the problem definition, only providers of traditional communication services
have to comply with sector specific rules safeguarding end-user's interests. Providers of
communications service over the internet (OTTs) are not subject to these sector-specific rights
and obligations, even when their services are used by the end-users to cover the same or similar
communications needs as the traditional electronic communications services.
Significant changes or further evolution of the problem are not foreseeable with regards to
services and end-user protection, absent further intervention at EU level. Uncertainty about the
scope of sector specific rights and obligations and gaps in consumer protection would persist,
which would in turn lead to a further fragmentation of the internal market and impede adoption
of new services.
Rules on universal service aim at providing a safety net ensuring that the most vulnerable in
society as well as those in more remote areas can receive basic services. They cover both
connectivity and service aspects, as well as the affordability of tariffs and accessibility for
disabled users. The provisions permit financing of any ‘net cost’ of universal service obligations
either through a levy on operators or through public funds, where such a net cost would
otherwise constitute an unfair burden to the designated Universal Service Obligation (USO)
operator.
In the absence of intervention at EU level, Member States would likely take increasingly
different approaches in universal service obligations by removing outdated services from the
scope. Consistency and coherence of the universal service regime across Member States would
reduce without a common approach towards the inclusion of broadband in the universal service
398
scope. The sectorial financing mechanism would continue being a possibility for financing. The
costs of financing the universal service obligation in the Member States would likely remain the
same, depending on possible national approaches. Looking towards future challenges which
could not be addressed in the absence of more consistent and effective intervention, the most
immediate and significant new technological development is the introduction of 5G (planned for
the early 2020s). Indeed, as an ongoing Commission study507 confirms, 5G is expected to
deliver 1 gigabit per second simultaneously to, for instance, many workers on the same floor. In
addition, it offers enhanced spectral efficiency, enhanced signalling efficiency and reduced
latency compared to 4G. 5G is also expected to be a key enabler for M2M communications and
the IoT.
The economic benefits of successful, fast and coordinated deployment of 5G across the EU are
very significant and they have been estimated at 146bn EUR per year and the creation of 2.39m
jobs
508.
These estimates only consider the most immediate impacts of a delay including the
sectors that are most directly affected. It is likely that the full impacts of 5G would only
materialise at a later stage and that they would affect many more sectors of the economy. Later
deployment of 5G services would therefore also lead to delays in these ripple effects throughout
the wider economy.
A failure to achieve a single market in electronic communications can in itself impose
considerable costs. This is especially true for multi-national businesses, which require not only
the availability of connections in disperse locations, but also uniform conditions for
provisioning, repair and quality guarantees. In a 2013 study “Business communications,
economic growth and the competitive challenge”, WIK estimated that the creation of a single
market enabling the seamless provision of business communications services could lead to
efficiency gains and boost productivity providing economic benefits of up to €90bln per annum
over time.509
Meanwhile, a 2011 study conducted for the EC – steps towards a truly Internal Market for e-
communications510
– identified substantial benefits from greater ‘standardisation’ of solutions
within the EU, including: (i) Advantages for multinational corporations – making Europe a more
attractive location for headquarters, branch offices and production facilities; (ii) economies of
scale for manufacturers of telecoms systems, which could benefit from a lesser need for
customisation (iii) improvements in e-Health, e-Learning and business to business services. The
authors concluded that increased standardisation could provide annual gains of 0.3%-0.45%
GDP (€35bln-€55bln) and cautioned that failing to reach standardised solutions would affect
future pan-European roll-out as well as the development of premium over-the-top-services. The
study also examined the impact of harmonised ‘best practice’ in the promotion of competition in
telecoms, and concluded that a fully-harmonised European approach could provide gains of
0.22% and 0.44% of GDP (€27bln - 55bln) by delivering lower prices, higher quality and greater
investments.
507
SMART 2015/0003, Substantive issues for review: market entry, management of scarce resources, and general
end-user issues
508
SMART 2014/0008, Identification and quantification of key socio-economic data to support strategic planning for
the introduction of 5G in Europe
509
The gains are associated with a welfare gain from lower prices, efficiency gains from an improvement in ICT
processes and productivity gains through a reorganisation of business processes
510
Ecorys/TN /TU Delft (2011) ‘Steps towards a truly internal market for electronic communications’
https://ec.europa.eu/digital-agenda/en/news/steps-towards-truly-internal-market
399
6.15 ANNEX 15 - Glossary and Bibliography
ADR: Alternative Dispute Resolution
ADSL: Asymmetric Digital Subscriber Line
ARPU: Average Revenue Per User
ARCEP: Autorité de régulation des communications électroniques et des postes
ASQ – Assured Service Quality
BCG: Boston Consulting Group
BEREC: Body of European Regulators
BEUC: Bureau Européen des Unions de Consommateurs (The European Consumer
Organisation)
CAGR: Compound Annual Growth Rate
CAP: Content and Applications Provider
CAPEX: Capital expenditure
CEPT: European Conference of Post and Telecom Administrations
COCOM: Communications Committee
CRM: Customer Relationship Management
DAE: Digital Agenda for Europe
DESI: Digital Economy and Society Index
DG CNECT: European Commission Directorate General for Communications Networks,
Content and Technology
DNS: Domain Name System
DSM: Digital Single Market
ECHR: European Charter of Human Rights
EC: European Commission
ECN: Electronic Communication Networks
ECNS: Electronic Communication Networks and Services
400
ECS: Electronic Communication Services
ECTA: European Competitive Telecommunications Association
EFIS: ECO (European Communication Office) Frequency Information System
eMBB: enhanced mobile broadband
EP: European Parliament
EPG: Electronic Programme Guide
ERA: European Railway Agency
ERP: Enterprise Resource Planning
ERT: European Round Table for Industrialists
ESIF: European Structural and Investment Funds
ETNO: European Telecommunications Network Operators' Association
ETNS: European Telephone Numbering Space
ETSI: European Telecommunications Standards Institute
EU: European Union
EUR: euro (currency)
FCC: U.S. Federal Communications Commission
FTE: Full Time Equivalent
FTTB: Fibre to the Building
FTTC: Fibre to the Cabinet
FTTH: Fibre to the Home
FTTP: Fibre to the Premises
FTTx: Fibre to the x
FWA: Fixed Wireless Access
FWD: Framework directive
GDP: Gross Domestic Product
GHz: Gigahertz
GPS: Global Positioning System
401
GPT: General Purpose Technology
GSM: Global System for Mobile Communications
GSMA: GSM Association
HFC: Hybrid Fibre Coaxial technology
HSPA: High Speed Packet Access
IA: Impact Assessment
IAS: Internet Access Services
IASG: Impact Assessment Steering Group
ICT: Information and Communications Technology
INTUG: International Telecommunications Users Group
IoT: Internet of Things
IP: Internet Protocol
IPR: Intellectual Property Rights
IPTV: Internet Protocol Television
ISP: Internet Service Provider
IT: Information Technology
ITRE: European Parliament Committee on Industry, Research and Energy
LLU: Local Loop Unbundling
LTE: Long Term Evolution
M2M: Machine-to-Machine
MEP: Member of the European Parliament
MHz: Megahertz
MNC: Mobile network code
MNO: Mobile Network Operators
MS: Member States
MSC/MNC: multi-site/multi-national corporations
MVNO: Mobile Virtual Network Operators
402
NFV: Network Function Virtualisation
NGA: Next Generation Access
NIS: Network and Information Security
NRA: National Regulation Authority
ODR: Online Dispute Resolution
OECD: Organisation for Economic Co-operation and Development
OTA: over-the-air-provisioning
OTTs: Over The Top players
P2P: Peer-to-Peer
PATS: Public Access Telephony Services
PSAP: Public Safety Answering Point
PSB: Public Service Broadcaster
PSTN: Public Switched Telephone Network
QoS: Quality of Service
R&D: Research & Development
RSC: Radio Spectrum Committee
RSPP: Radio Spectrum Policy Programme
RSPG: Radio Spectrum Policy Group
SDN: Software Defined Networks
SIM: Subscriber Identity Module
SMA: Spectrum Management Authority
SME: Small and Medium Enterprises
SMP: Significant Market Power
SMS: Short Message Service
TFEU: Treaty on the Functioning of the European Union
TTE Council: The Transport, Telecommunications and Energy Council
US: United States of America
403
USD: Universal Service Directive
USO: Universal Service Obligation
VAT: Value Added Tax
VHC: Very High Capacity
VDSL: Very-high-bit-rate digital subscriber line
VoD: Video on Demand
VoIP: Voice over Internet Protocol
VP: Vice-President
VULA: Virtual Unbundled Local Access
WDM: Wavelength Division Multiplexing
WLR: Wholesale Line Rental
4G: Fourth generation of mobile phone mobile communication technology standards
5G: Fifth generation of mobile phone mobile communication technology standards