Norway: Telecommunications – The Influence In Norway Of EU’s Proposal For New Regulation

Based on the rapid development in the information technology area, the Commission in 1997 launched "Green paper on the Convergence of the telecommunications, media and information technology sectors, and the implications for regulation towards an information society approach" (COM (97) 623). The Green Paper was the basis for the subsequent report made by the Norwegian Ministry of Transport and Communications: "Convergence – The fusion of telecommunication, data, and the media sectors".

The Green Paper was followed by "The 1999 Communications Review"¹, which included more detailed suggestions for regulatory change in the telecom area, inter alia with the object of including the rapid technological developments in a consolidation of the existing regulations.

After a round of consultation with national authorities and private participants on the telecommunication market, the Commission put forward a suggestion for a new set of rules, the Telecom Reform Package, in July 2000. The proposal from the Commission signifies a simplification and clarification of the existing regulations in the telecommunication area since the number of legal documents will be reduced from 28 to 8.The Telecom Reform Package consists of a regulation on access to the local loop ("the LLUB regulation")², a framework directive³, four harmonisation directives^{4 5 6 7}, a liberalisation directive⁸, and a proposal for a decision on EU’s radial spectrum policy⁹. The legislative package is meant to be flexible so that it easily can be adjusted to the on-going developments in this market. Further, the legislative package must ensure legal certainty and finally harmonise the member states’ regulation in this area. The new set of rules is also intended to be technology neutral resulting in the equal treatment of different technologies.

The Counsel and the Parliament currently discuss the Telecom Reform Package as a part of the co-decision procedure. At the Gothenburg Summit it was again stated that the aim is to approve the proposal before the end of 2001. To ensure the prompt adoption of the new legislative package, Norway is at the moment revising the existing legislation in the Telecom area. The revision is expected to result in a report on the changes necessary, to be presented to the Parliament late 2001.

In this article we will give a short overview of the proposal from EU and the effects this proposal will have on the telecommunication regulation and market in Norway. As it is still not clear what the final content of the proposed legislative package will be, we will not perform a detailed review of the changes necessary.

In Norway, a licence to provide telecommunication services is only necessary if you have significant market power, i.e. a market share of at least 25 %, or in other cases if decided by the Ministry of Transport and Communication ("MTC"), normally in case of wireless networks such as GSM and UMTS. Other operators or providers of public telecommunications networks, public telephony services and provision of transmission capacity will have to register with the Post and Telecommunication Authority ("NPT") before entering the market. In addition, authorisation from MTC is necessary, with certain specific exceptions, for the use of radio frequencies.

Although there are currently 83 market participants registered in the Norwegian telecommunication market¹⁰, only eleven licenses regarding public telecommunication have until now been issued by the Norwegian authorities. Licences for wireless services have been assigned after beauty contests, except in cases where the frequencies are plentiful. In those cases licences have issued on first-come first served basis. In Norway licences have not yet been subject to auctions, but it is likely to believe that a new GSM licence will be offered by an auction.

Telenor holds six of these licences; including a license for Fixed line, NMT 450, NMT 900 (expired 1. March 2001), GSM 900, GSM 1800 and UMTS. NetCom holds three licences; including a license for GSM 900, GSM 1800 and UMTS. Tele 2 Norge and Broadband Mobile¹¹ have each got a license for UMTS.

The dominant player is the incumbent operator Telenor, which provides services at all levels within telecommunication and information technology. Not surprisingly, the NPT has concluded that Telenor has a significant market power. Telenor had an annual turnover of NOK 37.6 billion in 2000. In 1999 it was estimated that Telenor had approx 85 % of the turnover to the end users.

Telenor was publicly listed at Oslo Stock Exchange and NYSE in December 2000. The ownership interest of the Norwegian State is approximately 70 % of the stocks. It is likely that this share will be reduced.

NetCom is the second Norwegian mobile telephony operator, with a strong foothold (approx. 25 % market share) in the mobile telephony market. NetCom is a subsidiary of Telia, the Swedish incumbent. Apart from Telenor, NetCom is the only operator with a significant market power.

Several other operators have been active in the Norwegian market over the past years. Important players are the companies Enitel, Tele2 Norge and Sense Communication.

2.2 Legislation

2.2.1 The Telecommunications Act

All telecommunications activities, including activities pertaining to the transmission of voice, text, visual images and data by means of light, radio signals or other electromagnetic signals in a communication system for transmission of signals, are regulated by the 1995 Telecommunications Act and secondary legislation. All providers of telecommunication networks and services are subject to the Telecom Act.

The Telecom Act covers a range of issues, including amongst others licensing, terms and conditions for the provision of services, technical requirements and standards, authorisations, the powers of the Telecom Authorities, rights of way, and sanctions against breaches of the Act.

The Act leaves wide discretionary powers with the Ministry of Transport and Communication (MTC), amongst others in relation to the issue of more detailed secondary legislation, the most important being Royal Decree (RD) 5/12/97 regarding Public Telecommunication Networks and Services.

In addition to the Telecom Authorities, the telecom markets are surveyed by the Norwegian Competition Authorities (NCA). The Norwegian Competition Act is fully applicable in the telecommunication sector giving interested parties the possibility to approach any one of them, or both, concerning the same subject matter.

Norwegian Courts have not played an active role in the enforcement of rules and regulations in this area. However, recently two of Telenors competitors succeeded in bringing claims against Telenor before the Oslo City Court, for breach of agreement and excessive pricing of leased lines. Not supprisingly, Telenor has appealed against both decisions.

Norway is not a member state of the European Union, but as a contracting party to the European Economic Area agreement, Norway has undertaken to implement into national law the relevant acquis that has been made part of the Agreement, including EU legislation on telecommunications. It is also worth mentioning that the EFTA Surveillance Authority has adopted Guidelines on the application of EEA competition rules in the telecommunications sector corresponding to the Commission Guidelines on the Application of EEC competition rules.

Since the adoption of the EEA agreement, all changes to the EU legislation on telecommunications have been incorporated in Norwegian law. The MTC has, as mentioned above, already started the necessary revision work on the basis of the Telecom Reform Package

3. The Telecom Reform Package 2000

3.1 Liberalisation

3.1.1 Liberalisation

The Commission’s proposal for a new competition directive is primarily a coordination of the existing directives regarding competition in the telecommunication market¹². Redundant provisions in the directive have been deleted and no new obligations have been added.

The decision to abandon the remaining privileges of the national operator and to open up all telecommunication activities to competition from 1 January 1998, was taken by the Norwegian Parliament in June 1996. Thus, Norway has complied with its international obligations under the EEA Agreement and the Fourth Protocol to the General Agreement on Trade in Services (GATS) and the Negotiations on Basic Telecommunications.

3.2 Regulation of access to the local loop

In one area, however, due to the competitive conditions, the Commission deemed it necessary to adopt a specific regulation, i.e. the LLUB Regulation. The owners of the local loop¹³ shall now offer access to the local loop on equal and none-discriminatory terms to its competitors. The quality of the access which is offered shall be equal to what the network use in its own operations. However, this obligation only rests on market participants with significant market power, in practice the nations’ incumbent.

The object of the regulation is to ensure that other market participants can compete with the incumbent in the fixed telephony services market. Until recently, only competition in the wireless market and in the traffic market of the fixed line network existed in Norway. The telephone rental charges in any case had to be paid to the incumbent. As this restricted competition, it was necessary to liberalise and open the last part of the telecom market for competition.

The LLUB regulation was in February 2001 made applicable law in Norway. This means that Telenor as an incumbent now shall oblige any reasonable request from potential entrants in the fixed line market, and must publish a public reference for access to the local loop. Telenor had already, at a limited scale, given access to the local loop.

3.3 Draft Harmonisation and Framework directive

The Telecom Reform Package contains a draft framework directive for the purpose of facilitating the harmonisation of the regulation of electronic telecommunication networks and services in the EU. The draft framework directive contains definitions and other general provisions applicable for the other directives as well as rules regarding the administration of frequencies and numbers, the right to expropriate, co-localisation, separation of accounts and other harmonisation rules regarding the common EU regulation.

The concept of Significant market power has been redefined in the Telecom Reform Package. In the current regulation in this area, significant market power will normally be around 25 %. It is proposed to change this so that significant market power will be based on dominance as developed under competition law. The Commission will annually adopt a decision outlining the different markets in which ex ante regulatory intervention may be justified. The National Regulatory Authorities ("NRA") shall then, on the basis of the Commission’s guidelines on market analysis and the calculation of significant market power¹⁴ investigate the markets to determine whether or not they are competitive. Where one or more markets are not competitive, the NRA may impose or maintain ex ante obligations on players with significant market power. Should the NRA find that the market is competitive, any specific obligations must be withdrawn. Decisions under this procedure must be notified to the Commission and the other NRAs. The proposed directive also gives the NRA extensive powers to collect information from market players and to exchange this information with other NRAs.¹⁵

The proposed directive further develops the requirements in relation to the NRAs and their tasks. As a main principle, the NRA shall be objective and independent and operate according to principles set up in the directive, which also establishes a right of appeal to a body independent of government, also on issues of fact.

Regulatory affairs are today handled by the NPT and administrative appeals are heard by the MTC. Appeals over NPT’s decisions will to a certain extent be handled independently from the government. This is true, however, only with respect to matters not involving competition related matters or matters of political or principle interest. Other appeals over NPT’s decisions are handled by NPT’s Complaints and Advisory Board (CAB). The members of the CAB are appointed by the MTC, but the CAB is not subject to instructions from the MTC.

The harmonisation directive will in Norway become important for the NPT and the NCA . These two regulatory bodies will have to decide on the division of competence between them. It will also be necessary to examine the current possibility of appeal which is not likely to fulfil the new requirements.

3.4 Authorisation of participants in the Telecom market

The 1999 Communications Review revealed that the general terms for entry in the telecom market differed to a great extent between the member states. Therefore, the Commission proposed the most radical amendments in this area, inter alia that general authorisations shall be given instead of individual licences. The number of conditions that can be imposed is reduced, and it will no longer be necessary to apply for an authorisation before one’s entry into the market. The draft authorisation directive also regulates the right to restrict the use of radio frequencies and the procedures for the assignment of the licenses. Hopefully, this will lead to more transparent regulation and lower administrative costs. It is also proposed that transfers of authorisations between the market participants shall be allowed.

In Norway today, owners and operators of public telecommunication networks offering transmission capacity and operators providing public voice telephony services must register in advance with the NPT. In some cases, see above, a licence will also be required. Consequently, the Norwegian legislation on this point must be amended.

3.5 Interconnection

The draft interconnection directive establishes the rules for access to and interconnection between electronic communication networks. The object of the directive is to stimulate to innovation, competition and options for the users of telecommunication networks and services.

When effective competition is established in the telecom market, general competition and contract law shall be the foundation for the regulation. Until then, however, the Commission and the NRA to some extent must resort to sector specific regulation.

In Norway¹⁶, operators providing access to public telecommunication networks or providing public telecommunication services have both a statutory right and an obligation to negotiate with other operators providing similar services for the interconnection of their services. An operator with significant market power is furthermore obliged to meet all reasonable request for interconnection, and must offer interconnection services at cost oriented prices

Interconnection agreements shall basically be negotiated between the different participants. However if an agreement is not achieved, the NPT has authority to mediate and finally impose conditions on the parties.

The directive will in the short run not lead to substantial changes of the Norwegian rules regarding interconnection. In the long run, however, it will be necessary to clarify the division of competences between the NPT and the NCA, as to which of these public authorities shall supervise interconnection agreements.

3.6 Universal services

The draft USO directive’s intention is to upgrade and modernise the Universal Service Obligations (USO) of the telecom market. The directive includes definitions of the extent of the USO and other users rights.

The existing regulation and conditions for leased lines will be maintained. Number portability shall be extended to include the wireless networks and the wireless operators. The directive also gives the NRA’s power to make decisions on behalf of the users, for instance decide the resale prices to participants with significant market power.

In Norway today, Telenor is the only participant in the telecommunication market with USO imposed on it as a license requirement. A mechanism of cost compensation has as yet not been introduced. It should be mentioned that the cost of USO in a mature market, like the Norwegian, is likely to be very low in relation to the turnover of the operators.

We have already seen some effects of draft directive in Norway. Number portability for wireless mobile numbers will be mandatory from 1 November 2001. (Number portability and carrier pre-selection for fixed public telephones was accomplished in Norway 1 June 1999.)

It will also be interesting to see whether NPT more actively will determine the resale prices and terms in the future. Although NPT already has the power to determine the resale prices and terms, NPT has so far left Telenor, which is the only operator likely to be found to have significant market power, more or less free to decide prices and terms in both the fixed and the wireless networks.

3.7 Protection of privacy in the electronic communications sector

The Commission has proposed a directive concerning the protection of privacy in the electronic communications sector; a replacement of the directive 97/66/EC on personal data and the right of privacy within the telecom area. The new directive is only an adjustment and update in relation to the technological development.

Some definitions have, for instance, been changed, an example is the concept on "traffic data". In the current directive, "traffic data" is defined as "to establish a call", accordingly intendment for voice telephony. The definition of "traffic data" is now changed to "the transmission of a communication", which covers all traffic data in a technology neutral way. The new directive also covers new information like location data from mobile telephones, which can only be used with consent from the subscriber.

In Norway, the rules on protection of privacy in the electronic communication sector have to be amended accordingly.

3.8 Radiospectrum Policy

The Commission has proposed to adopt a framework which will facilitate policy co-ordination, harmonisation and the provision of information on radio spectrum use and availability in the EC. To attain this purpose, a political forum shall be appointed to give the Commission advice on administration of the frequencies. Based on this advice, the Commission shall decide what kind of measures which shall be carried out. The procedure for granting authorisations for rights to use radio frequencies can now be found in the authorisation directive.

As the proposal only establishes a common and transparent framework for assignment and use of frequencies within the whole EU territory, concrete changes in the Norwegian legislation in the area do not as yet seem necessary.

The Telecom Reform Package 2000 will entail a consolidation and modernisation of the legislation in the telecom area as well as a change away from sector specific regulations to general competition law. The most important tangible changes brought by the Telecom Reform Package are the opening of the local loop and, and change in the definition of significant market power which corresponds to the concept of dominance in competition law. Also to be mentioned is the much needed harmonisation of the requirements for licenses or authorisations for telecom operators and service providers.

Further changes is the procedures for ex-ante regulatory intervention set out in the draft Harmonisation Directive, as well as the extensive powers for NRAs to collect information from the market and to exchange information with other NRAs.

The Norwegian MTC has already started reviewing the Norwegian legislation in the Telecom area to determine the changes required by the Telecom Reform Package. Apart from the necessary changes for NPT with regards to procedures and the possibility of appeal of any decision made by the NPT, it is to be hoped that MTC will avail itself of this opportunity to clarify the division of competence between the NPT and the NCA.

1. 1999 Communications Review and Orientations for the new regulatory framework (COM (2000))
2. Regulation (EC) no 2887/2000 of the European Parliament and of the Counsel of 18 December 2000 on unbundled access to the local loop (official journal L336, 30/12/2000 P, 0004)
3. Proposal for a directive of the European Parliament of the Counsel, on a common regulatory framework for electronic communications networks and services
4. Proposal for a directive of the European Parliament and of the Counsel on access to, and interconnection of, electronic communication networks and associated facilities.
5. Proposal for a directive of the European Parliament and of the Counsel, on the authorisation of electronic communications networks and services
6. Proposal for a directive of the European Parliament and of the Counsel, on a universal services and user’s rights related to electronic communications networks and services
7. Proposal for a directive concerning the processing of personal data and the protection of privacy in the electronic communications sector.
8. Draft competition directive consolidating existing directives on competition in the telecommunications markets – 12.07.2000.
9. Proposal for a decision on the regulatory framework for radial spectrum policy in the European Community.
10. Of the 83 participants, 37 of these have been issued with prefixes, and about half of these have registered for carrier pre-selection.
11. A co-operation between the Norwegian company Enitel and the Finnish incumbent Sonera.
12. 90/388/EEC, 94/46/EC, 95/51/EC, 96/2/EC, 96/19/EC, 1999/64/EC
13. The local loop is the extension. from local switch to the end-user which connects the end-user to the infrastructure of the telecommunications network.
14. The Commission has now issued draft guidelines on market analysis and the calculation of significant market power.
15. This proposal has been widely criticised by the market players. See Nikos Th. Nikolinakos, The new European Regulatory Regime for Electronic Communications Networks and Associated Services: The Proposed Framework and Access/Interconnection Directives, [2001 ]E.C.L.R. 3 p 93-109.
16. According to Regulation on public telecommunications networks and telecommunication services (RD 5/12/97, chapter 3 and 4)