Competition Law Telecommunications

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Sector-specific Legislation or Competition Law?

  • Introduction

This theme report will discuss whether the application of competition law will made sector-specific legislation unnecessary in the telecommunications field. Although the course materials centred on a United Kingdom perspective, this report will focus on a German viewpoint, reflecting on the situation in this student's country of residence. First, some background information with regards to European legislation will be provided. Then, options of sector-specific legislation and competition law will be discussed for Germany. Finally, a conclusion and recommendations on how the future German Telecommunications market could be “regulated,” considering the harmonisation in the European Community (EC), will be offered.

  • Definitions

Regulations in the area of access to Telecom applications caused three groups of supporters: those who defend a continuing function for sector-specific regulation, those favouring an approach based on instigating competition law, and those supporting a gradual phasing-out of sector-specific rules as a competitive market develops.[]

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Sector-specific regulation intends to ensure public interest objectives being defined in a precise legal framework, insinuating that general competition law did not cover these objectives. Further, sector-specific regulation is assumed to guarantee legal certainty for investors and the timely solution of problems of anti-competitive practice. To the contrary, competition law serves the main purpose of transitory regulation towards the early onset of competition. Conditions including pricing, standards, interoperability, and temporary bottlenecks are to be gradually harmonised. Considering the different degrees of competence in the EU Member States, flexibility and national discretion are seen as vital criteria in this process.

  • Underlying Legislation in the European Telecommunications Market

According to the EC Treaty[], established by the European Economic Community (ECC), in 1957, legislation that negatively affects competition between Member States has been barred and is specified in Articles 81 and 82 of the Treaty[]. Article 81[] bans “all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market […].” In addition, Article 82[] intends to prevent “Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part […]insofar as it may affect trade between Member States.“ Both articles form the basis of EU anti-trust law, and thus, apply to each Member State.

Further, as underlined by the Commission in the Telecom Access Notice[], Article 10 EC implies in particular that national authorities entrusted with the application of sector-specific rules have to refrain from any action that would undermine the effective protection of Community law rights under the competition rules.

  • Legislation in the German Telecommunications Market

As of 1998, the German telecommunications network monopoly of the Deutsche Bundespost (German Postal Services), opened up to competition. Since then, the German Telecommunications industry is going through various proceedings in legislature, including controversial aspects that sometimes require the assessments by the Bundesrat (Upper House of Parliament). Considered topics range from regulatory framework issues to licensing questions for new services.[] Despite the privatisation of German telecommunication services, access to relevant applications is still based on sector-specific regulation.

In Germany, the Regulatory Authority for Telecommunications and Posts (RegTP), or Bundesnetzagentur[], regulates the rates for telecommunication services under the German Telecommunications Act[]. In addition, the RegTP addresses abusive practices by dominant telecommunications carriers. The agency further defined national competition rules for relevant markets. The legal principles include the Framework Directive for electronic communication networks and services[]. It might be noteworthy that, per definition, directives do not leave European Member States any discretion in legal practice.[] Although the EC Treaty, Article 249 (3) allows for the choice of methods at the domestic implementation level, the Directive is binding as to the result to be achieved. Against this background, Article 15 (3) Sentence 1 of the Framework Directive allows for different procedures: first, the provision may be adopted on a direct basis into domestic law.[] Alternatively, Member States can utilize what Olswang solicitors call “net neutrality and freedoms.”[] While the former possibility, although politically the easiest, leads to the loss of the remaining discretion for a regulatory micro-control, the latter option may provoke access rules to be sorted out by the market when the measures take effect.

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Interpreting the Framework Directive further for Germany, it is necessary to review EC compliance with the existence of significant market power (SPM).[] In addition, the RegTP is not the designated National Regulation Authority (NRA) in Germany. Thus, for administration and enforcement of EU competition law, it must turn to the Federal Cartel Office (FCO), to perform this function. The FCO serves as an agency surveying competition in Germany, including cartel procedures, exercising its power under the German Act Against Restraints of Competition[]. To assure compliance the Directive 2002/21/EC, the German Telecommunications Act[] and the RegTP must seek FCO approval on anticipated competition in the telecommunication market. Thus, the FCO possesses also the power to enforce aforementioned Articles 81 and 82 of the EC Treaty.

  • Case Example

The case of O2 v. The European Commission[] illustrates the assessment of anticompetitive effects in Article 81(1)[]. The case concerns an agreement between O2 and T-Mobile Deutschland GmbH. The agreement between both parties provides for infrastructure sharing and national roaming for the third generation of mobile telecommunications in the German market. The agreement was notified to the Commission and O2 and T-Mobile requested negative clearance under Article 81(1) EC Treaty and Article 53(1) European Economic Area (EEA) agreement. O2 claimed that there is no restriction on competition within the meaning of the aforementioned articles, and that the alleged restrictions of competition do not flow from an agreement within the meaning of the articles.

  • Conclusion and Recommendations

This theme report discussed whether the application of competition law will made sector-specific legislation unnecessary in the telecommunications field. For Germany, this author believes that both sector-specific legislation and competition, in general, serve the purpose of providing frequent access to the telecommunications networks. Favouring gradual phasing-out of sector-specific rules as a competitive market develops would achieve a balance between over-regulation and sustainable competition. Critical services and its entrance barriers would be clearly defined.

Possible recommendations for such a strategy may include a Board that operates as a panel addressing competition issues in the German telecom sector. The regulatory mechanism of such group could act as a quasi-judicial authority in the transitional process. The Board may have all Telecommunications Act powers available in civil cases. Thus, the Board must be granted a clear authority to have exclusive jurisdiction to determine, for example, applications for deregulation of telecom services on the basis that SMP does not exist, and applications for re-regulation of services where SMP is alleged to exist.

References

Legislation:

Article Article 249 EC Treaty serves as basis for the enforcement, available at http://www.eu-oplysningen.dk/euo_en/spsv/all/63/, accessed 25 March 2008

Bundeskartellamt (1958), German Act Against Restraints of Competition, available at http://www.bundeskartellamt.de/wEnglisch/download/pdf/06_GWB_7__Novelle_e.pdf, accessed 20 March 2008.

DIRECTIVE 2002/21/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive), available at http://ec.europa.eu/information_society/ topics/telecoms/regulatory/new_rf/documents/l_10820020424en00330050.pdf, accessed 20 March 2008.

German Telecommunications Act (25 July 1996), Federal Law Gazette I p 1120, available at http://www.iuscomp.org/gla/statutes/TKG.htm , accessed 20 March 2008.

Treaty Establishing the European Community, Rome, March, 1957.

Reports:

EC Green Paper (1999), The Convergence of the Telecommunications, Media, and Information Technology Sectors, and the Implications for Regulation, available at http://aei.pitt.edu/983/01/telecom_convergence_gp_follow _COM_99_108.pdf, accessed 20 March 2008.

European Commission (9 July 2002), Commission issues market power assessment Guidelines for electronic communications, IP/02/1016, Brussels.

Federal Agency (2008) available at http://www.bundesnetzagentur.de/enid/ 1d42c11b2aa863460e8790184ef7f36a,0/xn.html, accessed 20 March 2008.

Telecom Access Notice, para. 19. The Commission relies mainly on case 66/86 Ahmed Saeed [1989] ECR 838.

Cases:

O2 v Commission, CFI, Case T-328/03, May 2 2006, Official Journal of the European Union, available at http://eurlex.europa.eu/LexUriServ/ LexUriServ.do?uri=OJ:C:2006:154:0015: 0015:EN:PDF, and http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2003:275: 0052:0053:EN:PDF accessed 20 March 2008.

Articles:

Grossmann, K.P., & Hiltl, C. (1996) 'The New German Law on Telecommunications', Intern. Journal of Law Info Tech, pp. 112-130.

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Loetz, S., & Neumann, A. (1 December 2003), The Scope of Sector-specific Regulation in the European Regulatory Framework for Electronic Communications German Law Journal, European & International Law 4 (12), 1307-1334.

Olswang (2008), All change in electronic communications: the Commission's proposals for amending the current regulatory framework, E-Commerce Law & Policy (10)2, p. 10-12.

Internet:

Lévêque , F. (2006) EU Competition Law Available at: http://www.cerna.ensmp.fr/Enseignement/CoursEUCompetionLaw/EUCompetitionLaw.htm, accessed: 18 March 2008.

Spies, A., & Wrede, J.F. (1997), The New German Telecommunications Act, available at http://www.mttlr.org/volfour/spies_art.html, accessed 20 March 2008.

Bibliography

Legislation:

Directive 2002/21/EC of the European Parliament and of the Council, March 7, 2002. Available online at: http://europa.eu.int/eur-lex/pri/en/oj/dat/2002/l_201/l_20120020731en00370047.pdf

Commission Recommendation of February 11, 2003, on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and Council on a common regulatory framework for electronic communications networks and service, 2003/311/EC, OJ L 114/45.

Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic networks and services, 2002/C 165/03, OJ C 165/6 (11.7.2002).

Competition Act 1998 (Concurrency) Regulations 2004, SI 2000/260. Available online at: http://www.opsi.gov.uk/si/si2004/20041077.htm

Reports:

EC Green Paper (1999), The Convergence of the Telecommunications, Media, and Information Technology Sectors, and the Implications for Regulation, available at http://aei.pitt.edu/983/01/telecom_convergence_gp_follow _COM_99_108.pdf, accessed 20 March 2008.

CRTC, Submission in response to the Telecommunications Policy Review Panel Consultation Paper, August 17, 2005, paragraphs 157-160. Available online at:http://www.crtc.gc.ca/eng/publications/reports/t_review05.pdf.

Internet:

U.K. Department of Trade and Industry, Our Competition Future: Building the Knowledge Driven Economy, 1998. Available online at: http://www.dti.gov.uk/ comp/competitive/pdfs/es_pdf1.pdf