November 14, 2007 9:29 AM PST

The future of telecom regulation in Europe

The European Commission has adopted a raft of proposals that will see Europe's telecommunications infrastructure dramatically shaken up.

At the heart of the proposals, which represent the biggest change in telecommunications regulation in five years, is the Commission's desire to see the European telecommunications market made into a more level playing field. The existing framework was set in place by the Commission in 2002.

Many countries in Europe still have a dominant telecommunications incumbent, like BT Group used to be in the U.K. before the creation of Openreach, a BT unit established to allow rival companies equivalent opportunities in the market. It is a course of action known as "functional separation."

Britain's Office of Communications, known as Ofcom, is the model regulator, in the opinion of the Commission. "In the U.K., functional separation has spurred a new wave of investment and infrastructure-based market entry as evidenced by the explosion of local loop unbundled lines in (the) U.K., which has jumped from less than 100,000 in June 2005 to 3.3 million by the end of October 2007," read a statement issued on Tuesday by the Commission.

The Commission appears to feel that a similar approach would benefit some other European countries where the incumbent telecommunications company is felt to have too much power in its national market. It is a situation that often prevails because national governments own most, or all, of the shares in many incumbent operators.

A powerful veto
One proposal that has been adopted by the Commission has been to give the new European Telecom Market Authority (ETMA)--which comprises elements of the Commission's telecommunications and competition authorities--a power of veto over national regulators in this regard.

The new framework will also see a greater push toward radio spectrum harmonization across the European Union. The Commission is eager to see wireless broadband technologies such as WiMax fill the gaps left by wired connectivity, and to provide new options to consumers, but inconsistent use of frequencies across Europe is seen as a barrier to investment by manufacturers and providers alike.

However, the Commission has stopped short of instituting the full "super-regulator" many national regulators had feared. The European Regulators' Group--which is to become an official Commission agency--has welcomed this development, but it has expressed worries over the Commission's power of veto. Calling the move "unnecessary centralism," the ERG has written to the Commission complaining of a risk of "undermining at a European level the very independence which the Commission is concerned to protect at the national level."

Some telecommunications companies have, however, welcomed the revised framework. Colt Telecom Group, a provider of telecommunications services to businesses in Europe, issued a statement on Tuesday in which it called the reform "long overdue, particularly if EU-based businesses are to continue to compete in a globalized market."

"For the EU to remain a significant economic player, greater harmonization and regulatory consistency across Europe is essential, particularly in countries where national regulators have not yet implemented directives in a complete or effective way," Colt's statement said. The company also called for regulators to focus on the business market as well as residential services.

The revised framework has broad implications for other aspects of the telecommunications industry. For instance, providers of voice over Internet Protocol services will be forced to allow users to call emergency services numbers--something they do not guarantee at the moment. "This measure will undoubtedly save lives," said James Allen, a telecommunications analyst at Analysys.

In related news, ETMA will absorb the European Network Information Security Agency, which was set up in 2003 to tackle cybercrime and malicious software. According to a Commission statement, the close link between regulation and network security means "many synergies can therefore be found by bringing together regulatory and security expertise in one authority responsible for telecoms regulation."

Even the thorny issues of privacy and Net neutrality are affected by the new framework. Net neutrality relates--among other things--to the ability of ISPs to prioritize chosen traffic. This is something that happens already, because services such as VoIP cannot function well without priority. But critics fear ISPs might start giving priority to content providers that are willing to pay them the most money.

"The reform will guarantee that your Internet service provider must clearly inform you in advance if they impose limitations on accessing certain sites," reads the Commission's statement. "This information will make it easier for (end users) to decide whether you want to switch to another provider or not. National regulators will also have powers to intervene when the quality of service for transmission could be at risk."

The Internet Service Providers' Association and Ofcom could offer no comment at the time of writing.

David Meyer of ZDNet UK reported from London.

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