Article by Stan Gorinson, Connie Robinson, Emmanuelle Rouchel
Oftel, the national competition authority for UK telecommunications matters, has reviewed the first mobile case under the new EU regulatory framework for electronic communications and services. That review has resulted in the ending of certain sector-specific regulations.
New EU framework
The new UK regime is based on five recent EU Communications Directives, intended to:
- create harmonized regulation across Europe for electronic communications networks and services;
- reduce entry barriers; and
- foster prospects for effective competition to the benefit of consumers.
The new Directives require National Regulatory Authorities to evaluate the state of competition in the electronic communications sector and to repeal any unnecessary regulations, in order to ensure that the legal framework remains adequate in the context of rapidly evolving markets.
Four of the five new Directives were implemented in the UK on July 25, 2003. The fifth Directive on Privacy establishes users’ rights with regard to the privacy of their communications and has an implementation date of October 31, 2003.
Oftel’s review
Pursuant to the new regime’s requirements, the Office of Telecommunications (Oftel) carried out a review of the market for wholesale mobile network access and call/short message (SMS) origination in the UK.
The agency published two consultation documents in April and August 2003, which set out a proposal for defining the relevant wholesale mobile services market and assessing the state of competition in that market, as well as the regulatory implications of that proposal. The proposed market definition was the market for wholesale mobile network access and call/short message (SMS) origination is the UK.
The assessment of competitive conditions among the main market participants (O2, Orange, T-Mobile and Vodafone) was conducted on the basis of the Commission’s guidelines for determining whether a supplier has, individually or collectively, significant market power ("SMP"). Criteria used include significant historical fluctuations in relative market shares, significant asymmetries of relative profitability, continuing entry onto the retail market by service providers, fluctuating relative prices, and retailers’ countervailing buyer power.
Oftel concluded that no supplier had SMP on the market for wholesale access and call origination on public mobile telephone networks in the UK, either individually or in combination with one or more other suppliers and therefore, existing regulation could be curtailed.
Various comments were received from industry and from the European Commission, but no respondent challenged Oftel’s overall proposal. The Commission did not express any view on market definition or market power determination, although it commented on the methology used by Oftel in its market share and market concentration analysis. The Commission also commented specifically on Oftel’s proposal that nascent 3G (third generation) mobile services be included in the same market as second generation services until market evolutions allow a definitive determination.
On October 3, 2003, Oftel issued its Final Explanatory Statement and Notification, which can be found at: http://forum.europa.eu.int/irc/DownLoad/kmeuA-JAmZG-um6tSq-eT-jUVfZUSR2/ V5gGW3pHmfn2WMou9CcvG3d_BioqznZp/5sVyUDZCFj4sRiod-f/mobileaco1003.pdf
Discontinuing existing regulation
Prior to the implementation of the new regime, Vodafone and O2 had been identified under the Interconnections Directive as operators with significant market power and subject to regulatory controls. Among others, their obligations related to the provision of interconnection services and included the following:
- To offer to enter into interconnection agreements with other operators;
- To meet reasonable requests for access to the network;
- To send interconnection agreements to the Director General of Telecommunications; and
- Not to show undue preference or undue discrimination in the provision of interconnection services.
Because Oftel has now determined that no supplier dominates the market, these specific obligations will be repealed.
However, Oftel’s role as a market watchdog will continue and Vodafone and O2, like all non-SMP operators, will remain subject to the obligations of Article 4 of the Access Directive on the negotiation of interconnection agreements with each other.
Conclusion
This recent development illustrates how national regulators are now required, under supervision by the Commission, to withdraw obsolete sector regulation as new entrants become more settled and the effectiveness of competition is demonstrated.
Thus, the promotion of healthy competition is based not only on regulatory action to restrain dominant market participants, but also on freeing them from the weight of unnecessary regulations as they cease to exercise SMP.
Looking ahead, another important legal change to watch out for in the UK communications sector will be the transfer of certain functions, powers and duties flowing from the EU framework to the Office of Communications (Ofcom) a new regulatory authority which will take on Oftel’s functions.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.