Policymakers Spurn Proposed European E-Communications Unit

The industry panel has the lead in vetting the reform package. On Wednesday, witnesses debated current and future challenges to completing Europe’s single market in electronic communications and the power balance among national telecom regulators, the proposed authority and the Commission.

Two EC proposals are problematic, Richards told lawmakers. Giving the Commission veto power over national regulators’ competition orders “implies that a single right answer can simply be rolled out, top-down,” he said. And the proposed authority, seen as an advisory body starting out with some 130 staffers, could undergo mission creep, he said. As all other agencies are, the authority would be under the ultimate supervision of governments and the EC, threatening independent regulation, he said.

“Considerable consensus” across Parliament holds that the proposal to create a market authority and to combine it with the European Network and Information Security Agency (ENISA), is a “cumbersome and unsatisfactory solution,” U.K. MEP Malcolm Harbour told us later. Regulators, including Richards and European Regulators Group Chairman Daniel Pataki, want an “ERG plus plus” a smaller, more focused group of regulators able to advise the EC but also address cross-border some regulatory matters, though not spectrum management, he said.

The enhanced ERG would be based on the group’s current structure but have more resources for coordination and some decision-making powers, Harbour said. The idea actually is quite close to the market authority proposal, but would require amendment to ensure that the entity remains embedded in EU law and answers to Parliament, he said. Information Society and Media Commissioner Viviane Reding, who spoke at the hearing, seemed to leave the door open to such a move, seen as acceptable to lawmakers, said Harbour, who stressed his comments were his own, and not Parliament’s.

Everyone sees the need for a visible and strong network and information security agency, ENISA Management Board Chairman Reinhard Posch told lawmakers. ENISA, a temporary body ceasing work next spring, has developed know-how that should not be reduced or lost in starting a new agency, he said. The only reason for change is the potential to build on ENISA’s strengths and make it permanent, he said.

TV Spectrum Reform Opposed

The EC reform package advocates a largely market-based approach to management of radio spectrum as well. But data published Wednesday by the European Broadcasting Union (EBU) suggested that giving mobile operators UHF frequencies in the 470-862 MHz band freed up by digital TV switchover will hurt terrestrial broadcasters and consumers.

“Considerable caution” is needed in picking and applying market mechanisms, the report said. Managing the UHF band via markets likely will fail because some services’ large societal benefits aren’t reflected in their business value, discouraging providers from paying for spectrum, it said. Business model differences leave some providers less able to monetize spectrum use than others, and networks feel impact when users’ independent decisions affect one another -- effects not captured in a private entity’s willingness to buy spectrum.

“All these factors are present in terrestrial broadcasting,” the EBU said. Most terrestrial broadcasters use public funding or ads to meet public service objectives and provide universal free access, it said. The funding models might deliver high public and consumer value, but broadcasters are less able than mobile operators and other service providers to monetize the consumer relationship in a direct way. And the digital terrestrial platform’s wider benefits aren’t reflected in individual channels’ ability to pay for UHF spectrum, it said.

Policymakers seek a common UHF sub-band for use in non- broadcast services across Europe, but face two key obstacles, the report said: The ITU plan for digital terrestrial TV’s use of the spectrum and DTT services’ diverse requirements across Europe. “It is almost certainly unrealistic to identify a homogenous digital dividend across Europe in the medium term,” the report said.

Functional Separation Seen Possible

The hearing highlighted differences between new entrants and incumbents on whether permitting regulators to require dominant players to split their infrastructure and services arms (functional separation) helps or hinders next-generation network investment, Harbour said. Lawmakers and incumbents seem split on the question of whether the remedy would stifle investment, and likely would vote to give regulators the power to use it if needed, he said.

Ofcom supports functional separation, Richards said. He dismissed concerns about the requirement, saying most are “simply myths.” However, he warned, other countries can’t expect a guarantee that they will replicate British Telecom’s success, urging that functional separation not be the default position.

The Internal Market and Consumer Protection Committee has its first exchange of views today on proposed changes to the universal services directive, said Harbour, who will draft the official report. No proposed change seems controversial, but a move to make telecom companies notify customers of data security breaches is interesting, he said. The EC has said little about how it will work, and MEPs likely will want to make it tougher, he said.