The European Union’s (EU) new e-communications regulatory system ...

Analysis. Marcus has been informally seconded to the European Commission (EC) since Feb. His paper -- Europe’s New Regulatory Framework [NRF] for Electronic Communications in Action -- reflects his own opinions as a Transatlantic Fellow of the German Marshall Fund of the U.S., and not those of the FCC or EC, he said. The NRF has been in effect since July 2003, though not all EU member states have imported it into national law. Despite that, Marcus said, the NRF’s core elements appear to function as intended. The “new and elegant” system recognizes that a great deal of telecom regulation deals with responses to market power, Marcus said. It defines a relevant set of e- communications markets and provides guidelines for determining the presence or absence of market power. Within each market national regulatory authorities in member states determine whether any players have significant market power (SMP). If they do, NRAs impose “ex ante” obligations that can include transparency, interconnection or other conditions. If no SMP is found, any such obligations already in place must be rolled back. The NRF seeks to move away from technology-specific and service-specific legislation, Marcus said: “This is a significant and dramatic innovation.” Nevertheless, he said, there are concerns. Implementation of the system is still a work in progress, with some countries, such as the U.K., far along and others at various earlier stages. Implementation involves detailed market analyses by expert economists, and could later barrage the EC with paperwork as countries notify the EC of their progress on each relevant e-communications market, Marcus sad. He added the NRF seeks to balance the needs of NRAs against those of a single European market and the EC’s prerogatives in maintaining that market. But a “key open question” has been whether the Commission and national telecom regulators could strike that balance. “In particular,” Marcus said, “there seemed to be a real danger that centrifugal forces might prevail, thereby preventing the European Union from achieving the true benefits of a single market.” The European Competitive Telecom Assn. recently reported “very significant differences” in the capability, orientation and conduct among European regulators, Marcus said. The existence of both centrifugal and centripetal forces is undeniable, he said, and the tension hasn’t been fully resolved. However, he said, 2 developments bode well for the future. The European Regulators Group agreed on appropriate remedies in the NRF, and the EC has made clear it will use its power to ensure consistent application of the framework. Still, other tensions exist, Marcus said -- the need to spur innovation without distorting competition, and promoting competition vs. encouraging the growth of pan- European networks and interoperability. Finally, he said, “The assessment of termination fees for completing a call is a complex area that represents a distinct risk as regards NRF implementation.” The EC has addressed the problem of uneven fixed and mobile call termination rates by identifying 18 potential markets where ex ante regulation might be necessary, he said. That’s a logical approach, Marcus said, but it will tend to lead to heavy regulation. It’s essential that NRAs “stay the course in order to reduce regulatory asymmetries,” he said.