The New European Electronic Communications Code

Mike Conradi brings us up to date on developments with the proposed EU Code, highlighting the main features of the new Code

It is now almost two years since the European Commission proposed a new ‘European Electronic Communications Code’, which would amend and consolidate the current regime (dating from 2002). (This is not to be confused with the (UK-only) Electronic Communications Code, which was inserted by the Digital Economy Act 2017, sch 1 and is the Communications Act 2003, sch 3A.)

On 29 June 2018 a new, amended, draft of the Commission’s was published. This is expected to go to a final vote in the Autumn of this year.

The Code will, when finalised, repeal the existing 2002 Directives and replace them with a single, consolidated text, for implementation in Member States within two years. Having spent some time reading through the (c. 450) pages, the main changes or issues appear to me to be as follows.

  • High Capacity Networks. A new objective (Article 3.2(a)) – promoting access to, and take-up of, very high capacity connectivity for both fixed and mobile networks – is added to regulators’ existing general objectives (which relate to matters such as the promotion of competition and the development of the single market.
  •  Definition of ‘Electronic Communication Service’. This key term has been re-defined (Article 2) to refer to an ‘internet access service’, an ‘interpersonal communications service’ and a transmission service (such as for machine-to-machine communications or for broadcasting) but, as at present, content services are excluded. The most important new term here is ‘interpersonal communications service’ – this means any service that allows direct communications over an electronic communications network between finite numbers of people – a definition which would catch conventional telephony services as well as ‘over the top’ services like Skype or WhatsApp. The category is further sub-divided into ‘number-based’ and ‘number-independent’ interpersonal communications services, depending on whether or not conventional telephone numbering is used. The result is that number-based services should get the same regulatory treatment irrespective of whether or not they work ‘over the top’ of separate internet connections.
  • General Authorisations – Notification. Whereas the original intention was to allow electronic communication service providers to make a single pan-European notification (to BEREC, the pan-European regulatory body) the latest text instead suggests, as at present, that Member States may require service providers (other than number-independent communications services) to lodge a notification with the domestic regulator – but (at Article 12.4) there will now be much greater harmonisation around the information that may be requested for any such notification. This should be a significant improvement on the present system, which can be much more onerous in some countries than in others. This also preserves the ability of a Member State to decide not to require any notification at all (though only the UK, historically, has taken advantage of this ability).
  • Small-Area Wireless Access Points. Article 56 operates to prevent ‘competent authorities’ (which would include, for example, local authorities) from making the deployment of small area wireless access points subject to any individual permits. Moreover Member States must ensure that local and national authorities offer access to operators to street furniture (like lampposts and street signs) for the installation of wireless access points on fair, reasonable and non-discriminatory terms, with a single point of contact. These measures are designed to make it significantly cheaper, and easier, to install the infrastructure needed to build and improve networks, especially the forthcoming 5G networks.
  • Market Reviews. Under the Code (Article 65.5) National Regulatory Authorities (NRAs) will be able to wait five years, not three (as at present) in between market reviews and determinations of significant market power (SMP) and remedies. This may seem like a minor change but it ought to go some way towards assisting with the near-continuous market review process that occurs at present. NRAs will also have (Article 70) a specific power to oblige operators with significant market power to offer access to their civil infrastructure, like towers and ducts.
  • Access to Facilities. Article 59 includes a clear power on NRAs, irrespective of any market review and significant market power designation on operators, to impose an obligation to grant access to wiring and cables from the ‘first concentration or distribution point’. This is intended to apply, for example, to connection points in multi-story, multi-tenant buildings and, significantly, could apply to the owners of the wires or cables even if they are not themselves providing electronic communication services.
  • Co-Investment. Under Article 74, where an operator with significant market power enters into a co-investment arrangement with a competitor in respect of a plan to build fibre to the premises (for fixed networks) or base station (for mobile ones) then in some cases the newly-built assets may be exempt from access remedies that would otherwise have applied as a consequence of the significant market power status. Any such arrangement must offer genuine risk-sharing on a co-ownership model and there are various other conditions which must apply too. Specifically the programme must be open at any point in its lifetime to other service providers to join (though the price they pay may reflect the differing levels of risk applicable at different times). It must also facilitate downstream competition and access seekers who do not participate must still be able to access the same set of services as were available to them before the investment, adapting over time to improving levels of service and quality. These (complex) set of provisions are perhaps the most controversial change from the current regime, since they effectively give a ‘regulatory holiday’ to certain types of infrastructure which may be built by the incumbent (albeit in co-operation with one other party). Critics argue that this may be counter-productive, and that the old regime, under which significant market power operators must provide access to their network infrastructure at a price that reflects all their costs, including the cost of capital and the risk being taken, should be sufficient.
  • Wholesale-only Networks. Under Article 77 if NRAs conclude that a significant market power operator is operating on a wholesale-only basis then a light-touch form of regulation will apply such that NRAs may only impose obligations in relation to access to civil engineering (Article 70) or non-discrimination (Article 68). Other remedies (such as transparency, accounting separation or cost orientation) will not apply though an obligation to charge ‘fair and reasonable pricing’ may also be imposed.
  • Functional Separation. Articles 75 and 76, for the first time at a European level, deal with the possibility of imposing functional separation on a significant market power operator if the remedies imposed following a market review process have not succeeded in achieving competition, and with the possibility that a significant market power operator may choose to separate itself (in which case legally binding ‘commitments’ will apply).
  • Voice Termination and intra EU calls. Article 73 obliges the Commission, on advice from BEREC, to set single maximum voice call termination rates for fixed and for mobile networks. This will replace the current system whereby termination rates can vary between countries, sometimes quite significantly. Article 113a (amending the Open Internet Regulation) also adds a maximum retail charge for intra-EU calls (€0.19/minute) and SMS messages (€0.06).
  • Spectrum. The Code introduces further harmonisation measures for spectrum (eg at Article 4.3 and at Article 35). These include promoting shared use of spectrum and co-ordinating spectrum assignments. The consistency of the spectrum assignment process is to be safeguarded through a process involving BEREC scrutiny of NRA’s planned spectrum measures.
  • Universal Service. The Code updates the rules around Universal Service. The current references to payphones and telephone directories have been removed and replaced with an obligation to ensure that all consumers have ‘adequate broadband’ and voice communication services available at a fixed location (Article 79). ‘Adequate broadband’ is to be judged, taking into account BEREC reports, as the bandwith ‘necessary for social and economic participation in society’. This means the minimum needed to support services (set out in Annex V) such as email, internet banking, standard quality video calls and social media. The net costs of this universal service are to be paid for either through general taxpayer funds or else through a specific levy on electronic communications networks and service providers (Article 85).

Mike Conradi is a Partner at DLA Piper LLP, with a focus on providing commercial and regulatory advice to businesses in the telecoms sector.

Published: 2018-07-23T10:50:00

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