ere THE JOURNAL OF E-COMMERCE, TECHNOLOGY AND COMMUNICATIONS. see a Sd rs SOR = eee eed i, aL ~ The Now Concopt of Market Dominance in the = - Ree se ete eae a eee are ekecicacet es ON ae Noe eng ee ou ‘Old, Something New, Something Borrowed, Sey ee TCC mes oe ead E.C. Measures Table ee een) Perches News Section ee eee een) See ee)November COMPUTER AND TELECOMMUNICATIONS LAW REVIEW VOLUME 7 ; ISSUE 8 : 2001 : ISSN 1357 3128 Opinion PAUL MOTION The Brussels Regulation and E-Commerce—A Premature Solu- tion to a Fictional Problem? 209 In late 2000 the ongoing regulatory tension between consumer and ‘business interests saw victory for the consumer camp in the form of the “Brussels Regulation”. Paul Motion argues that “e-regulation” is stifling enterprise and that the Regulation loads cost onto E.U. Dusinesses, contrary to the spirit ofasingle market, Articles STEPHAN POLSTER and The New Concept of Market Dominance in the Proposed E.U. MATTIAS BRANDL ‘Telecommunications Framework 26 This article examines the new concept of market dominance in the telecommunications sector as proposed by the European Commis- sion. On the basis of the Commission's draft Guidelines the article the intended move from sector-specific legislation towards full application of general E.U. competion law. NICK HIGHAM, NICK The Future of United Kingdom Content Regulation: A Round FITZPATRICK and DUNCAN Peg in a rectangular Box or Something Old, Something New, CALOW Something Borrowed, Something Blue 220 BARRY DOHERTY Competition Law and Sector-Specific Regulation 225 This article compares general competition rules in E.C. law and sector specific telecommunications legislation. In particular, it examines the concept of “significant market power” and the current proposals to redefine this as equivalent to “dominance” in competition law, as part of general reform of the telecommunica- tions directives, News Section an international Review of Cases and Legislation N-141 E.C. Measures Table computing, Telecommunications and Related Measures N-I55 cr tke SSUE @SWEET A MAKINELL UNETED FAND CONTAIITORSEDITORIAL 8OARD AND COUNTRY CORRESPONDENTS : [2001] C.TLA. i EpiTror MT tea. Reve Compuralaw EAInDURgR and Loncon Epiroriat Apvisory Boarp News Section HENRY CARR coins PARKER CONGR WARD Epitor Baise Digi Eguipmser Co, Cited Levels nee ‘ SIMON STOKES ana eeding Londo! smo RoByN DURE ELIZABETH-ANW STATON ALAN WHITFIELD London Unflaers & alliance Freshfelds Brocshaus Deringer Solicter Lendoe London Br Tondo CUE GRiNcRAS PAUL TAYLOR Clswang Orchard Londen oxdon CounTRY CoRRESPONDENTS Ausrraua RICHARD LETTERMAN PAOLO CERINA Swepen [ANNE FIZGERALD Wilkinson, Saree, Krauer nd Broso Casat e Asta MAGDALENA Hacc utan Man Rydin & Caisten EETER Leona nk Ma Sesto Any Japan Gilbert & Tobin ‘KARL H. PILNY ‘TERUO DOL ‘Switzeriand syiney Couder Brothers Tee ersty MARTIN ANZ. ‘cave MIDDLETON Becta ‘Toiyo ners & Hately JOHN SWINSON Mateons oten ages BENE naxetios Sessa ue Taman Eisoare Konuossarctos oases ae HORE SL MARK SNEDOON ‘Athens Taiwan University of Melbourne LaxemBours Meboucde Hone Kons STEPHAN LE GOUEE Taananp CONNIE cARNABUCIL Le Govelf Caw Ofize DDAWID TOOK Austria Mallesoas Stephen Jaques Loxembouzg Counsel MART ERODE eng Rong N Bangkok exes Bruager& jd IETHERLANDS po Siena ‘Tom Hore SIMONE VAN DE HOF urtep einai Beciun Linkitrs 6 Paines Bavesiy of Mag Linkaters@ Paines Bucs ‘ong Kong, ‘burg tooéor Bien & Oven xa PN ANNETIE CTTOW TM JORNSON Departent of Comper Sclence ‘wows ScHERS JACQUELINE HURT TANGUY VAN OVERSTRAETEN ——_Usvezsiy of Hong Kong Routholt 5] Berwin 8G, [EMMANUEL SZAFRAN cuss. reece ‘xnserdom Leedon De Bandt, van Hecke, Lagae and HAE ‘onan Fes Paul Weise Aland, New Zratanp 03 ones t ‘wharon & Samson XEN MOON La Sais and lance res 2} Bak & Son Birmingham aueidand Bazi. PETER WarRs er HEATHER ROWE canis ‘rail and Assocates tn assecaton EARL CONOR Sen gmegc man A So iat wee ler Tobia Sinpsn son Lonéon Koos scan ‘20 Paulo Hong. Nicenia NIGEL STAMP Canapa Ivpia i Ekin tense SREP oan BE ase ces. ro Mecarhy & Teaul: ‘rand @ Anand tages Usa “erorta ew Sent RHARDH STERN ond, Foss, Sebin & Davtdow Denmark Norway ‘bondi, Foxe, PER HARON SCHMIDT IRELAND BR ENS ashington De CHRISTIAN TH. KICLEYE. JARLETA BURKE ‘Riise AcvokacSema ans Just t Boowey Plesner & Lunze Bariser Wilkinson, Backer, Krauer & Quinn Frans, ‘ANNA-MARIE CURRAN serene oat, France ALBAN KANG JOHN R. 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Introduction ‘The starting point of any consideration of the jurisdiction and applicable law principles applying to electronic commerce in both contractual and nen-contractual obligations must begin with establishing the following: (1) juisdiction—which country’s courts have jurisdiction to decide the mat- ter; and (2) applicable law—what is the law applicable to the dispute? Relevant to the above are the following: ‘© “Brussels Convention"—1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, introduced into the United Kingdom Law by the Civil Jutisdiction and Judgments Act 1982 (still relevant to Denmark as a non-E.U. signatory). © The “Brussels Regulation’—Council Regulation 44/2001 of December 22, 2000 on jurisdiction and the recognition and enforcement judgments in civil and commercial matters [2004] OJ. L12, * Rome Convention—1980 Romte Convention on the law applicable to contractual obligations introduced into United Kingdom law by the Contracts (Applicable Law) Act 1990. ‘© Rome Il Regulation (under discussion—see later). ‘ Draft Hague Convention on jurisdiction and foreign judgments in civil and commercial matters available at htp.//www. hech.neve/workprog/ jdgm iti. # The E-Commerce Directive—Directive 2000/31 of the European Parliament and of the Council of June 8, 2000 on certain Tegal aspects of information society services, in particular electronic commerce, in the intemal market [2000] oJ. L178. ‘The stated aim of the E-Commerce Directive is to ensure that “information society services” benefit from the internal market principles of free movement of secvice and freedom of establishment, including obliging member states to remove any prohibitions or restrictions on the use of electronic contracts, exempting from liability intermediaries where they play a passive cole as “mere conduits", of information, and encouraging the developing of codes of conduct at E.U. level. The directive has to be implemented by January 17, 2002. + Distance Selling Directive 97/7 [1997] 0. L144 which was implemented in the United Kingdom in Septemuber 2000 by the Consumer Protection (Distance Selling) Regulations 2000 (8.1. 2000 No. 2334}. ‘The Brussels Convention, Brussels Il and the draft Hague Convention each contain Detween telecommunications, broadcasting and IT sectors. Generally speaking, the proposed new E.C. legislative framework for telecommunications intends to gradually decrease regulatory interventions in the light of growing competition on the telecommunications markets. In this context, the Commission introduces a new concept to deter- maine telecommunications operators (“TOs”) with significant market power ("SMP") which can be subject to ex ante obligations by the National Regulatory Authorities (“NRAS") in order to ensure the development of competitive markets. This article focuses on this evolving concept of market dominance at B.C. level and its consequences for TOs. The Concept of Market Dominance under Existing E.C. Telecommunications Law Market definition ‘The first step to assess market power is to define the market concemed. The existing ONP ("Open Network Provision") Framework (governing ex ance regulation in the telecommu- nications field defined the following relevant markets in the telecommunications area: * fixed public telephone networks and fixed public tele- phone services; ® the public provision of leased lines; ‘© public mobile telephone networks and public mobile telephone services; and © interconnection services. The concept of significant market power ‘The concept of SMP as developed in the framework of the ONP Ditectives is different from the definition of market dominance under general E.C. Competition Law. Pursuant to the relevant ONP-Directives, a TO is generally deemed to have SMP if it holds a market share of at least 25 per cent. ‘The NRAs may, however, deviate ftom the 25 per cent theeshold when determining SMP, by taking into account: © the T0's ability to influence market conditions; its turnover relative to the size of the market; ¢ ts control over the means of access to end users; 1 Annex 1 of the interconnection Directive 97/53, ‘© its access to financial resources; and + its experience in providing products and services in the market? ‘The scope of the SMP concept as introduced by the Commis- sion in the ONP Framework is broader than the notion of ‘market dominance under general E.C. Competition law.> By subjecting the telecommunications sector to a special (and i me in terms of determination of market ion intended to ensure development of effective competion on the evolving European tele communications markets. TOs notified by the NRA to the Commission as having SMP are subject to significant er ance obligations under the respective ONP Directives. SMP Under the Proposed New Regulatory Package The new concept of ex ante regulation in the telecommunications sector In its proposed reform directives, the Commission wants to introduce a new system for ex ante regulation of tele- communications markets. Adticle 14 of the proposal for a Directive on a Comron Regulatory Framework for Electronic Communication Net- works and Services (hereinafter referred to as “Framework Directive") provides for the Commission to issue a Decision on Relevant Product and Service Markets, addressed to the Member States. In this decision, the Commission shall iden- tify those product and service markets in which the imposi- tion of regulatory obligations in a form of specific measures addressed to undertakings having SMP may be justified. The notion of SMP is defined in Anicle 13 of the proposed directive (for details see below, The new concept on calcula- tion of SUP). ‘Within two months of the date of adoption of the decision, NRAs shall camry out an analysis of the product and service markets identfied in the decision. Such analysis shall be in accordance with Guidelines on Market Analysis and Declara- tion of SMP (hereinafter referted to as the “Guidelines”)* as also published by the Commission. In the respective market analysis, the NRAs shall determine whether a given market in their territory is already characterised by effective competi- tion and shall designate SMP operators in those markets. If the NRA condudes that there is no effective competition in the market (and Competition law remedies do not suffice to address any identified problems), the NRA must impose 2 Amt 4, para, 5, tem 2, intecconnestion Directive 97/83 and Art 2, Voice Telephony Directive 98/10. 3 Ar 81 and 82, E.. Treaty. 4 A draft of the Geideines was akeady published by the Commis- sion on Match 28, 2001, COM (2001) 175. (Bo0y CTLA SUE 8 © SwaRr & MAXWELL UMITED (AND CONTRIBUTORS]POLSTER AND BRANDL : THE NEW CONCEPT OF MARKET DOMINANCE : 2001] CLR. 217 proportionate ex ante obligations on operators designated as having SMP, or maintain such obligations already existing, ‘The specific obligations which may be imposed by the NRAS are set out under the proposed Directive on Universal Service and User's Rights relating to Electronic Comraunication Net- ‘works and Secvices* and the proposed Directive on Access and Interconnection of Electronic Communication Networks and Associated Facilities. Market definition Asalready set out above, the Commission, under Aricle 14 of the proposed Framework Directive, shall issue a decision identifying those product and service markets in which the imposition of ex ante regulatory obligations on SMP-opera- tors may be justified. ‘The purpose of this Commission decision is to provide the industry with legal certainty as to the kind of markets in which regulatory measures may be imposed by the NRAS. However, the NRA may also define markets that are difer- cent from those identified in the decision, provided that the Commission consents to such independent market defini- tions. "The Commission's decision on market definition is yet to be published. However, the annex to the proposed Framework Directive set out a minimum list of markets (as referred to in the proposed User’s Rights and Access Directives) which are to be included in the initial Coramission decision. Without going into detail, itis already evident from this preliminary list of markets that the Commission intends to significantly further subdivide the markets originally defined in the existing ONP-Interconnection Directive. In the draft Guidelines, the Comimission elaborated more specifically on the methods it will use in the future when defining markets in the telecommunications sector. Generally speaking, the Commission intends to adhere to the principles of market definition developed by general E.C. Competition law. The main criteria for defining a relevant market will thus be the demand-side and supply-side substitutability of the product or service in question. In order to determine whether a product or service is substitutable on the demand-side, the Commission particularly refers to the “hypothetical monopo- lst test” as already expressly applied to the telecommunica- ‘tons sector by virtue of the Commission Access Notice.” This test involves the assessment of the potential consequences of small but significant, lasting increase in the price of a given, product or service, assuuiny that the prices of all other products or services remain constant (‘relative price increase"), The likely responses by consumers lead to the assessment whether the products or services in question are substitutable and thus constinite a separate market. Where the cross-elasticity of demand between two products or services is high, one may conclude that the consumers view these products or services as close substitutes.* In the Guidelines, the Commission further established a basic market structure it evidently intends to apply when assessing SMP under the proposed regulatory package. Following its case law and its position in the Access Notice, the Commission distinguishes between two main types of relevant markets to consider, ie the market for services 5 COM (2000) 592. & COM (2000} 384. 7 Comission Notice on the Application ofthe Competition Rules 10 ‘Access Agrecments in the Telecomtmunications Sector, para. 40. 8 Guidelines, para. $1. provided to end users (services market) and that of access to facilities necessary to provide such services (access mar ket)? In the fixed services market, the Commission identified the following sub-divisions: ‘© The voice market is to be distinguished fom the data market; In the voice sector, the marker is further segmented {nto domestic and intemational connections; and ‘into initia! connection, the monthly rental, local calls and long-distance calls; ‘ ‘The Commission identifies separate markets for provi- sions of voice services to residential and business users??; ‘© With respect to retail services offered to residential usets, the Commission indicates a further sub-division of this market into the provision of traditional fixed teleph- ony services and high-speed (x-DSL) services. In the context of mobile communication services, the Com- mission established the following principles: ‘¢ The Commission maintains its opinion that the market for mobile telecommunication services encompasses both GSM 900 and GSM 1800 and possibly also ana- logue services.*? The question whether this market can be futher dvided into a carrier and a service market shall be decided on a case-by-case basis, * The Commission further clarifies that mobile voice and paging services will continue to be regarded as two distinct markets. ‘With respect to the markets for access to infrastructure, the Commission's view can be outlined as follows: The Commission proceeds from the assumption that the access market comprises all types of infrastructure that can be used for the provision of a given service."? ‘Whether this market Is to be divided into further sub- markets shall be decided on a case-by-case basis. © With respect to access to the local loop, the Commis- sion in line with its Communication on Unbundling the Local Loop established that for the time being, access to termination points of a specific network usually con- stitutes a separate product market, This situation might change if in the future alternative local loop networks (such as fibre-optic networks, wireless local loops or upgradable TV networks) can be considered as substitute to the fixed local loop infrastructure. © In the context of access to mobile nenworks, the Commission wants to distinguish between two distinct 9 Guidelines, para. 55; Access Notice, para. 45. 10 As tothe matket for business uses, the Commission addresses ‘the possibility to further break down this market into separate suarkes for piefessional, smal im customers and another fo lage businesses. 11 Commission Decision of May 21, WIM.1550—Redgfone/Atrouch 12 See, for instance, Commission Decision of September 15, 1999, (ase No, IN/G6.358 Anish Interactive Broadcasting/Open, it ‘which the Commission held thet with respect to the provision of voice services © consumers, the televane infasirucure market included both the copper network of the incumbent and the cable tremorks ofthe cable operators, as well as possibly wieess fixed nermer 13 Commission Commut mn. On. Enbundl te hemes w the Local >: enabling the competitive provision ofa full range of electronic Conmunattn secs: indsing bedband neta ane high-speed invemet, OJ. C272. 1999, case (tay CLR. SUE 8 SWEET & MAXWELL LIMITED [AND CONTRIBUTORS218 POLSTER AND BRANDI, : THE NEW CONCEPT OF MARKET DOMINANCE : [2001] CLR. markets for call origination and call termination. The Commission further raises the question whether access to any individual mobile network might be considered as a separate access market (as opposed to only patt of ‘unified market for access to all mobile networks). The Commission argues in this context that an undertaking, that wants to terminate calls to the subscribers of a given mobile network has, in principie, no other choice but to interconnect its own neswork with the neswork to which the called party has subscribed. A respective definition of interconnection markets in the mobile field would imply that every mobile network operator has SMP on the (separate) matiset for interconnection to his network, With respect to internet access, the Commission holds that access via different infrastructure (eg. cable and satelite access services) might be regarded as substitut- able and thus be included in the same product market. ‘Access to the internet via a mobile phone (2G or 3G) is, however, unlikely to be regarded as Substitute for other access methods, in particular due to diffezence in sizes of| the sre and the format of the mate that can be ol + ‘With respect to the determination of the relevant geographic ‘markets, the Commission intends to follow the concept as already established in general B.C. competition law and its, previous decisions in telecommunications cases. Conse- ‘quently, the relevant market shall be determined on the basis, of the main criteria, (1) the area covered by a network and (2) the existence of legal and other regulatory instruments. ‘The new concept of calculation of SMP. ‘Under the proposed Article 13 of the Framework Directive, an undertaking shall be deemed to have SMP if “either individually or jointly with others, it enjoys a position of ‘economic strength affording i the power to behave to an ‘appreciable extent independently of competitors, customers and ultimately Consumers". ‘This definition of SMP is consistent with the Cour. of Justice's and the Commission's definition of market dom- inance under general E.C. Competition law. The Commission. thus decided to align the definition of SMP under the ONP Directives to the EC's definition of dominance within the meaning of Article 82 of the E.C. Treaty. By replacing the broader SMP-definition as applied so far under the ONP Directives with the closer general definition of dominance, the ‘Commission significantly reduces the threshold for regulatory interventions by the NRAs. The Commission in this way responds to increasing competition on the markets and wants to introduce a concept that can be applied more flexibly to a rapidly changing market environment. As to the criteria to be considered when determining ‘market power, the Commission, in line with the principle developed by the EC], particularly refers to market shares of the undertaking concemed. In the Commission's decision- ‘making practice, the threshold for market dominance to arise isusually set at about 40 per cent, while a company with a 50 per cent market share is usually regarded as dominant, save in exceptional cases. Since under the previous concept of SMP under the ONP Directives, the threshold for market dominance was in principle a market share of 25 per cent, it {s evident that under the new regime fewer operators will be deemed to have SMP. However, the Commission states that 14 Commission Decision of September 11, 2000, Case COMPr M1982—Tetia/Oracle/Drutt. the fact that an undertaking with a strong position on the market (such as an incumbent) is gradually losing market share, might indicate that the market is becoming more competitive, but does not by itself preclude the existence of SMP of the operator concerned. Fluctuating market shares over a longer period may indicate, on the other hand, a lack. of market power. ‘The Commission stresses that not only market shaves, but also other criteria will be taken into account when determin- ing SMP. Such criteria are, for instance, the overall size of the undertaking, its technological advantages, control of infra- structure, its vertical integration, the existence of barriers to enter the market and the absence of potential competition. ‘The Commission acknowledges that it is eventually for the NRAS to decide upon the most appropriate criteria for deter mining SMP on a given market, Itis interesting to note that the Commission obviously excludes the application of the “essential facilities” doctrine to the ex ante assessment of SMP within the meaning of Article 13 of the Framework Directive. The Commission argues that this doctrine is only relevant in Article 82 cases, but not with respect to the imposition of ex ante obligations on TOs.*6 This view seems to be somewhat inconsistent with the concept to align assessment of SMP to the notion of dominance under Article 82 of the E.C. ‘Treaty. It remains to be seen whether the Commission will in fact adhere to this position in its future case law. Inits draft Guidelines the Commission emphasises that the principle of leverage of market power from one market to a Closely related market would likely have a wide field of application in the telecommunications sector. For instance, an operator whohas SMP on an infrastructure market and is also present on the downstream (service) market may be con- sidered by NRAS to have SMP on both markets. This concept will appiy, in particular, to vertically integrated telecom operators providing both infrastructure and services which might be found dominant on both the infrastructure and service market, even though their position on either of these markets taken alone would not be strong enough to trigger SMP. In ts Guidelines, the Commission thoroughly analyses the application of the concept of joint dominance. It seems that the Commission intends to rely on this concept more fre- quently in the funure in telecommunications cases. The Commission stresses that recent case law of the EC} and the Court of First Instance'® clarified that the existence of struc~ tural or economic links between two or more undertakings on a given market is not a mandatory condition for collective dominance to exist, The existence of an oligopolistic (where the market is dominated by only few operators) or highly concentrated market might suffice, provided that the struc- hue of such market alone is conducive to anti-competitive behaviour on the relevant market. The Commission will particularly be prepared to establish joint dominance on a given oligopolistic market, if such market has certain charac- teristics favouring co-ordinated behaviour, such as few mar- ket players, moderate growth on the demand-side, homogeneous products, similar cost structures and market shares of the participants, transparent market conditions, mature technology, high bartiers to entry, lack of potential competition, informed or other links between the market 15 Guidelines, para. 75, 16 Joined Cases C-395-596/96 P Compagnie Maritime Belge ¥ Commission [2000] E.C.R. 1-1365; Case 7102/69 Gencor ¥. Com- mission [1996] ECR 1-753. |POoI] CTL ISSUE 8 SWEET 8 MAXWELL LIED AND CONTRIUTORS)POLSTER AND BRANDL : THE NEW CONCEPT OF MARKET DOMINANCE : [2001] GTLR. 219 participants, retaliatory mechanisms and a lack or @ reduced scope for price competition, Ttis evident that the above criteria might match to markets in the telecommunications sector and in particular to mobile markets (Which often involve elements of an oligopolistic market structure) In its recent case law, the Commission has already identified joint dominance of market players on the Germany and Belgium mobile market. In Vodgfone/Air- touch,’ however, the Commission's concems were finally removed after it was secured that at least three large mobile operators were present on the market. However, in the Guidelines, the Commission points out that also markets with ‘more than three players may, under certain circumstances, be considered as being conducive to oligopolistic dominance. Imposition of ex ante obligations on SMP operators Pursuant to Article 14 of the proposed Framework Directive RAs may only impose ex ance obligations on SMP operators in case the market in question is not effectively competitive. ‘The question whether such effective competition exists is t0 be assessed by the NRAs. In its Guidelines the Commission does not expressly examine the notion of “effective competi- tion” in tenms of Artide 14 of the proposed Framework Directive. Consequently, it appears that the Commission equals the criterion of effective competition with the lack of SMP on a given market. If, on the other hand, a TO is deemed to have SMP on a market, effective competition is excluded 17 Commission Decision of May 21, TWIM,1430—Vadgfone/Atrtouch, 1999, case and the NRA may impose ex ante obligations on the operator concerned, When imposing ex ance obligations, the NRA has to comply with the principle of proportionality and must only ‘impose such obligations which relate to the market on which the TO concemed has SMP. According to the Commission, NRAs must impose at least one regulatory obligation on an undertaking that has been designated as having SMP. Under the curent proposal for the Framework Directive, the Commission shall be entitled to require NRAs to amend of withdraw any imposition or withdrawal of ex ante obliga- tions, if such measures are incompatible with the objectives of the new framework. The Council, however, wants 10 reduce the Commission's powers in this respect to a right to issue mere non-binding opinions. From today’s point of view, it is therefore rather unlikely that the Commission will be grated a right to change decisions by the NRAs. Finally, itis interesting to note that pursuant to recital 20 of | the proposed Framework Directive, ex ance regulatory obliga- tions shall be justifed only for undertakings which have financed infrastruccute on the basis of special or exclusive rights or are verically integrated entities (owning network infrastructure and also providing services over that infra- structure to which the competitors necessatily require access). In effect, this would mean that ex ante obligations could be imposed only on ex-monopolists and vertically integrated operators, However, since recital 20 is not mirrored in the main text of the proposed directive {which does not provide for a respective Imitation of potential ex ante obliga- tions), it will probably serve as a meze interpretative guidance cn the application of Article 14. Thus, itis likely that the Commission and NRAS will particulady be aware of market power of ex-monopolists and vertically integrated operators ‘when exercising their regulatory functions. (Boy CLLR SUE 8© SWEET & MAXWELL UFITUD [AND CONTRIBUTORS]220 HIGHAM, FITZPATRICK AND CALOW : THE FUTURE OF UNITED KINGDOM CONTENT REGULATION : [2001] Cc.LA. Tue Future of UNnitep KINGDOM CoNTENT REGULATION: A Rounp PEG IN A RECTANGULAR Box or SOMETHING OLp, SOMETHING New, SOMETHING BoRROWED, SOMETHING BLUE NICK HIGHAM, NICK FITZPATRICK AND DUNCAN CALOW DENTON WILDE SAPTE, LONDON. 1. Setting the Scene ‘Sometime soon, but no-one knows guite when, the United Kingdom government will switch off analogue television and ‘we will all enjoy end-to-end digital wansmission and recep- tion of audio-visual entertainment in the home. Something New? Yes, but itis also Something Old; we already have this in the form of a PC connected to the intemet. The resem- blance becomes clearer still when we have broadband inter- net and when that single rectangular box delivers both conventional broadcast services and intemet access, Some time sooner, peihaps in 2003, they will cull the regulators, but hopefully without the pyres. Today we have some 21 regulatory bodies in the United Kingdom audio- visual sector; that is manifestly absurd—surely a quango can g0. Five or six of the regulatory bodies will be combined! into a new super regulator to be know as the Office of ‘Communications, or OFCOM. OFCOM will assume responsi- bilities for the existing functions of the Independent Tele- vision Commission, Broadcasting Standards Commission, Radio Authority, Radiocommunications Agency and OFTEL and possibly the British Board of Film Classification. OFCOM will be an independent statutory bedy responsi- ble for economic regulation of telecommunications and con- tent regulation for television and radio. It will promote competition and manage . Rather than being the office ofa single individual, it wil be governed by a chairman and chief executive working with a small board of executives and non-executives. Unusually, OFCOM will report to both the Department of Trade and Industry and the Department for Culture, Media and Sport. Can a man have two masters? OFCOM is not out on its own. It will exercise Competition ‘Act powers, but concurrently with the OFT and it must exercise its sectorspecific powers within the constraints of the E.U, regulatory framework for electronic services and networks. ‘The government's high level regulatory objectives for content are currently stated to be: ‘* maintaining freedom of expression and the right to impart and receive information as ideas; ‘ ensuring the protection of children; preventing crime and disorder; 1 Under proposals set cut in the Communications Reform White Paper ‘© providing protection from unwarranted invasions of privacy: ‘ ensuring consumer protections; ‘© maintaining generally accepted community stan- dards. ‘OFCOM will be lef to interpret, promote and achieve these objectives on the basis of guidelines set out in the White Paper. [twill be expected to operate transparently, proportion~ ately and consistently and to be accountable. ‘The White Paper promises a grand vision of a unified coherent regulatory framework for the 21st century, but it side-steps many of the more complex issues arising from convergence. It does, to its credit, stress the govemment’s, desire for “light touch” regulation: OFCOM rmust determine whether regulation, co-regulation or self-regulation is the most effective mechanism and, as competition increases, regulation is also expected to erode. But there has been litle evidence of reductions in regulation to date and, perhaps, in the run up toa general election, the White Paper was never Tikely to establish a truly radical agenda, ‘s this change a good thing? Yes, but only ifa big circle ‘can be squared: ow does one sensibly bring together regula tion of conventional television with regulation of broadband Intemet, when these services are treated so very differendy today. Television Regulation in Europe Bunadeast television is heavily regulated in the BU. The 1989 Television without Frontiers Directive (89/552) lies at the core of the E.U.’s regulatory framework for “television broadcasts”. The Directive laid down minimum rules and standards thet apply to broadcasts emanating from within a E.U. Member State. The 1989 Directive was supplemented by a second “Tdevision without Frontiers” Directive in 1997 (97/36). The later Directive enhances the 1989 Directive and addresses some developments in broadcasting since the adoption of the 1989 Directive. ‘The directives cover core ideas of television broad- casting, notably: advertising and sponsorship; © protection of minors; «© public access to events of major public importance; « the right of reply; © controversially, the promotion of European works. ‘As defined, “Television Broadcasting” covers cable, terresttial and satellite television. Despite intense lobbying by some, [R00] CLR. SSUES © SWEET & MAXWELL LPTTED[ANO CONTRIBUTORSHIGHAM, FITZPATRICK AND CALOW : THE FUTURE OF UNITED KINGDOM CONTENT REGULATION : [2001] TLR. 221 and equally intense resistance from others, the dectives do not cover the provision of information on demand, like the intemet. The Commission intends, however, to conduct a full, scale review of the directives in 2002, with a particular focus ‘on technological developments and new forms of advertising. and how they might be separated from other forms of content. A consultation paper will then be published with proposals for any appropriate amendments. Television Regulation in the United Kingdom The Broadcasting Acts and Regulations The 1990 Broadcasting Act implements the provisions of the 1989 Directive in the United Kingdom. The Act created the Independent Television Commission (“IYC") with a remit to license and regulate all commercial television and also put the pre-existing Broadcasting Complaints Commission (*BCC") on a statutory footing with the remit to draw up a code, monitor broadcasting standards and handle viewer com- plaints, Various amendments were made to the 1990 Act by the 1996 Broadcasting Act in order to ensure that changes in technology, and in particular the advent of digital services, ‘were reflected in its provisions. The 1996 Act also merged the BCC with the Broadcasting Standards Council ("BSC"), 2 short-lived regulator which had been established in 1988 to address matters of taste and decency. The 1997 modifications to the Directive were imple- mented by means of the 1998 Broadcast Regulations and updating of the [TC Code of Practice. The Independent Television Commission and Broadcasting Standards Commission ‘The ITC was created to ensure that the provision of all television services, with the exception of those of the BBC, were “of sufficient high quality and offer a wide range of programmes calculated to appeal to a wide variety of tastes and interests”, The ITC is required to ensure that licensed services do not include any content which offends good taste or decency, or amounts to the exploitation of thase watching a programme without their being fully aware of what has, ‘occurred. The ITC is also given obligations towards ensuring the impartiality of broadcasts and the need to conduct audience research into public atiudes to broadcasting. Under its powers derived from the 1990 and 1990 Acts, the ITC has implemented various lengthy codes to which licence holders must adhere, including the ITC Programme Code, the ITC Code on Advertising Standards and Practice and the ITC Code of Programme Sponsorship. The ITC may impose a range of sanctions against licence holders for any failure to comply with the ITC codes including financial penalties and the shortening of or revoking of a broadcaster's licence. Complaints made to the Commission are investigated and its findings made public, thus ensuring that the “Right to Reply” principle, enshrined in the Television Without Frontiers direc- tives, is upheld. ‘The BCC were replaced by the Broadcasting Standards Commission (BSC) in 1997. BSC looks at complaints received from the public as to unfair weatment or the infringement of privacy, as well as monitoring programme content in relation fo the portrayal of sex and violence (although it has limited powers of enforcement). As with the ITC, the Commission was given a duty under Part V of the 1996 Act to draw up ‘codes and issue guidance on these matters. Unlike the ITC, however, the Commission's remit extends to all United King- dom broadcasters, including the BBC. The Position of the BBC ‘The British Broadcasting Corporation (“BBC”) was estab- lished by Royal Charter in 1927, and the Charter forms its constitution. The Charter is supported by a Licence and Agreement to Broadcast from the Secretary of State for National Heritage (now the Department for Culture, Media and Spor). The most recent Agreement was issued in April 1996 and provides for the continuance of the BBC as the ‘United Kingdom’s main public broadcaster until December 2006. ‘The 1996 Agreement aimed to bring the BBC into line with other broadcasters and to implement the terms of the Broadcasting Acts and Television Without Frontiers Directive The BBC was compelled to publish a Statement of Pledges outlining the standards which licence-fee payers could expect and be required :0 report on performance and achievement. ‘with regard to each commitment given. Similarly, the BBC was to clarify its responsibilities for impartiality and for taste and decency, so placing it under similar commitments as commercial broadcasters. The net result ofthis was the BBC's preparation of a code of guidance as to how to meet its obligations in this sphere, Nonetheless, the BBC is still able to implement these changes ofits own accord and is not subject 1 the oversight of the Independent Television Commission. Internet Regulations in Europe None of the specific regulatory framework for television applies to the intemet, which by contrast with television is lightly regulated in Europe. That should not be seen as particularly sumpising; there is no formal framework, for example, for the regulation of book, newspaper or magazine publishing, which only has to clear text against the general law of the various media, the odd one our s television, Those who like heavy regulation of television have naturally lob- bied to regulate the intemet more extensively; those who do not have pushed in the other way, and the latter have won the intellectual argument. ‘The current stance of the ITC, and the approach adopted in the White Paper, is that television and the internet are two very different things. That stance has been relatively easy to support so far—on both technical and legal grounds; and, as the IU has pointed out, whenever the United Kingdom Padliament has debated the internet, it has rarely if ever been argued that the ITC should be responsible for its regulation. ‘More importantly, from a technical perspective, narrowband access to services, largely comprising text and static content vvia aPC, has lite in common with most broadcast television. ‘The intemet has seemed mote to resemble print publishing, and the legal regime adopted for the intemet has been broadly the same. ‘After stormy early days, the approach to intemet regula- tion has indeed settled down to two basic concepts: ‘¢ what is illegal offine should be illegal online; * where some control is required, It should be under voluntary codes of conduct. One important code under development is that proposed by the Internet Content Rating Association ("ICRA"), an inter- national, independent organisation. The ICRA Code is intended to empower the public, especially parents, to make [BOOT CLLR ISSUE 8 © SWEET A MAXWELL UMITED [AND CONTRIBUTORS]222 HIGHAM, FITZPATRICK AND CALOW : THE FUTURE OF UNITED KINGDOM CONTENT REGULATION : [2001] C-TLR. Informed decisions about the viewing of electronic media by means of the open and objective labelling of content, while Protecting free speech on the internet. ‘The ICRA is an independent non-profit organisation and works in partnership with content providers toward the responsible development and growth of the internet. It is supported by AOL, Bell Canada, The-Bertelsmann Founda- tion, BT, Cable & Wireless, Digimarc, Electronic Network Consortium (Japan), EurolSPA, IBM, Internet Watch Founda- tion, Microsoft Corp, Network Solutions Inc, Novell, ONdigi- tal, PAGI (Singapore), Software and Information Industry Association, Online, Thus, .Kids Domain and UUNet. ‘The ICRA is currently developing a new global system which will: provide content providers with a tool to label their content objectively; provide parents with a device to filter content accord- ing to their own view of what is approptiate for their chiléren to view. The revised ICRA system will be launched in two parts—the labelling system for content providers is now available and the filtering systems for parents will be available in 2001. The ICRA also owns and operates the Recreational Software Advisory Council on the Internet ("RSAC") rating and filtering system, which is already integrated into Micro- soft's Intemet Explorer and Netscape’s Navigator. The RSACi system provides customers with information about the level of sex, nudity, violence, and offensive language in web- sites. ‘There are two elements to the system: web authors fll in aan online questionnaire describing the content of their site, simply in terms of what is and is not present. The ICRA then _genlerates a Content Label, which is a short piece of computet code that the author can add to his site. Users, especially parents of young children, can then individually set the intemet browser on their home PC either to allow or disallow access to websites based on the objective information declared in the Jabel. This facility is available on PCs, but not -yeton televisions unless and until manufacturers voluntarily include a “V Chip” within the set or are mandated to do so by law. . ‘A key point is that the ICRA does not itself rate internet content or form value judgments about sites; content pro- vviders do that, using the ICRA system. ‘The ICRA’ labelling system is designed to be as objective as possible, and to cover a wide range of content types, The system gives users a great deal of flexibility in their choices of ‘what may or cannot be seen in theit home ot workplace. The filter settings can of course be changed, disabled or enabled, but only if one has the password! Broadly, the controls may be applied to screen out sites which: © provide access to chat services; use bad language (what the Americans call the seven naughty words); have high levels of nudity and sexual content; © depict violence; « offer or promote gambling, drugs and alcohol. In contrast to the eatlier RSACi system, where “levels” of nudity, sex, violence and language were set, web authors are now asked questions about whether a specific item or feature is present or absent on the site, The responses to the {questions are then mapped on to content labels generated by ICTA, which conform to an internet industry standard known 28 PIcS—the Platform for Intemet Content Selection. Nothing, is proscribed centrally; web authors may include violent rape, images and full motion video that most would describe as “hardcore” and explicit sexual language (and even promo- tion of tobacoo!) but must rate the item accordingly. Many commentators have questioned why web authors should bother to rate accurately or at all, but there are a number of compelling reasons why a web author might want, to label the site. For example: (1) Commercial sites, with litte or no objectionable material, will want to label the site so as not to be blocked “by default" by users who only accept rated material. When parents set up the flter for their child, they will be offered an option to allow or disallow access to “sites that have no rating”. As most sites want the maximum number of visits to justify adverising or other related commercial activity, it makes good marketing sense for all commercial sites to be rated or labelled. (2) Operators of sites designed specifically for children ‘will wantito label their sites as some search engines build their database of “child-fiendly sites" by looking for ICRA labels. (3) Many operators of “adult only” sites are generally also keen to avoid offence to young children. (4) Finaly, labelling sites sends a clear signal to govern- ents that the World Wide Web is willing and able to self-regulate, rather than suffer the heavy hand of ‘government legislation. ‘The content labelling system, which can be found at ‘www.icra.org, has been developed by the ICRA in consulta. tion with international experts in content classification as well as industry leaders. The new labelling questionnaire not only assists content providers to iabel content objectively but now also allows for different cultural values within certain countries in Europe. Not everyone is satisfied, of course; the system depends. on content providers policing themselves and some will not. Other third party control mechanisms exist or have been proposed. For example, in the United Kingdom, the Internet, Watch Foundation (“IWE") was formed in 1996 as an independent organisation funded by United Kingdom intemet service providers. The IWF: © operates a hotline for reporting of illegal content, patticulady child pomography, and a “Notice and Take Down” procedure by which it may be removed from servers of United Kingdom intemet service providers and reported to the police; ‘* encourages the development of an international self- labelling system by which responsible adults can restrict children’s access to content they consider potentially harmful to them, ‘The majority of complaints come by way of on-line submis sion through the IWF's website, with the rest being sent by ‘email, The IWF assesses whether reported material is poten- tially ilegal and then notifies United Kingdom internet service providers of ilegal items, and advises removal. Under another initiative, Rightswatch, there ate pro- posals for the development of a notice and take down notice procedure to remove material on the intemet that infringes copyright. {G00 CLA ISSUE @ SWEET & MAXWELL LMITED [AND CONTREUTORS]HIGHAM, FITZPATRICK AND CALOW : THE FUTURE OF UNITED KINGDOM CONTENT REGULATION : [2001] C.TLR. 223, Future Regulation ‘The White Paper describes OFCOM's future role in the regula- tion of content across all electronic communications, which will have elements of conventional regulation, co-regulation and self-regulation. Co-regulation, the White Paper explains, means active involvement of OFCOM and ultimately the ower to *impose more formal regulation if the response of| industry is ineffective ot not forthcoming in a sufficiently timely manner”. For broadcast content the White Paper proposes a three- tier structure of regulation: ‘The first ties, applicable to all broadcasters, will cover basic standards such as provision of fair, impartial and accurate news, compliance with OFCOM codes, and rules on advertising and sponsorship. The second tier, applicable to broadcasters with public service obligations, will specify quantifable standards to be monitored by OFCOM, such as independent and original production quotas, regional programming level and news and * current affairs in peak time. ‘The third tier will consider qualitative issues arising from the public service remit of broadcasters and will primarily be delivered by self-regulation with statutory “backstop” powers reserved to OFCOM. These powers are not specified in the ‘White Paper, Confusingly, a further tier—a “tier zero"—of regulation to govemn broadcast material on the internet and via tele- phony is also proposed. This tier is intended to reflect the ‘government's expectation “to see public service broadeasters apply the same high standards and high quality in their services on the Internet and via telephony as they do on their traditional broadcast businesses”. This suggests that licensed broadcasters must comply with licence terms and content codes when broadcasting, while non-licensed webcasters distributing the same content need not, ‘With tegard to the BBC, the White Paper proposed that the powers given to the organisation's govemors in terms of regulation, should be left largely intact. Those who complain, to the BBC regarding taste, decency and faimess, and have their complaints rejected, many appeal to OFCOM if they feel that grievances have been inadequately dealt with. The BBC will also be answerable to the new regulator with regard t0 “quantifiable public service obligations". However, other powers of the BBC over content will remain intact, despite the Culture, Media and Sport Select Committee having pointed out the uced fox equal weatment of all broadcasters and having recommended that the BBC be brought under the broad remit of OFCOM. The position is different for intemet content. Research recently conducted by the United Kingdom Broadcasting Standards Commission and the ITC suggests a wide degree of public support for rating and filtering systems to help users control what they see on the intemet. Guided by these findings, the White Paper envisages OFCOM working with ICRA, the IWF and industry generally to propel development of these tools and promote understanding of them and their use. OFCOM will also try to ensure that clear signalling is in place when users move ftom one environment to another, for example, between television and the intemet. The ICRA code is therefore Something Borrowed into the United Kingdom regulatory framework. As part of its enquiry the Select Committee heard unequivocal statements from both Chris Smith and Patricia Hewitt that the govemment would not censor the intemet. Stil, the Select Comminee recommended that legislative drafting must be made clearer and should specifically prevent OFCOM imposing regulatory obligations on internet content. ‘The Committee also recommended imposing a specific reg- ulatory prohibition on OFCOM using its licensing powers for certain media as a back-door method of regulating internet content, which indeed it probably could not do because of constraints under the E.C, Licensing Directive? Impact on the Home Environment In the home of the future, there is likely to be one main rectangular, but fatter, box in the comer of the living room through which’ a family will receive most enteaainment services. This box is likely to be a form of interactive television, which will enable broadband intemet access alongside conventional television. One is forced to ask Whether, if intemet access on one channel is regulated only under voluntary Codes of Conduct developed by the ICRA and cothers, the next channel down on the zapper can remain subject to full ITC style regulation, remembering that, if current views on intemet regulation are maintained, the pendulum can only swing one way—in favour of removing, restrictions. The ITC has begun to recognise that, in the fumure, regulation is more likely to be a reactive affair; in which the ITC responds to complaints. The White Paper acknowledges the impact of new supply technologies—ADSL, fibre optic, 56 mobile—but tries to maintain a line by arguing that, wile intemet and broadcast television may be supplied through a single box, each will remain a distinct media deserving a separate regulatory approach. Of course, this stance in part relies on the fact that successful and ‘widespread use of broadband networks is stil some way off—even the most optimistic observer recognises that broadcast-quality audio visual services via the internet will not be available in a significant number of United Kingdom homes for a number of ‘years. However, when broadband is here, logic suggests that it will be very dificult to argue that a service, and its related advertising, supplied to a box via TCPAP should be regulated only by the general law and codes, while a conventional television broadcast, and its related advertising, supplied to the same box should be regulated heavily. Logic suggests that pressure for further relaxation of the broadcasting regulatory regime is likely to grow and that there will be calls for lighter touch regulation than anything discussed to date. Just as the Lord Chancellor had to surrender regulation of the theatre, so too, runs the logic, OFCOM (as successor to the ITC) must begin to loosen its grip on the box in the living room, and leave the regulation of content primarily as a matter for individual or parental discretion, so allowing mote families access to material of a nature that is scarcely known on television now, even after the watershed. If that is right, we will indeed get Something Blue. Yet logic alone is a dangerous guide to the world of culture, especially when allied to issues of international trade. ‘The Television without Frontiers Directive is the main 2 The E.C, Licensing Directive (97/15) limits the conditions that licensing authectes in the EU. may Impose on Licensees under {elecommunications licenoes or authorisations. 1 will shorty be replaced by the Proposed Draft Authorisations Directive (2000/0188), tu, while each directive applies, or will apply, to the Licensing of specamum used by broadcasters, the former is without prejudice 1 speciic Community rales on the distribution of audio- visual programmes and their content and the latter peraits the imposition of cbigations in relation 1 broadcasting content, in particular forthe protection of minors. [BOON CLR SUE 0© SWEET & MAXWELL LEFTED AND CONTREUTORS,224 HIGHAM, FITZPATRICK AND CALOW : THE FUTURE OF UNITED KINGDOM CONTENT REGULATION : [2001] CTLR ‘weapon in the armoury of the European Commission to protect European “culeure” from what is regarded, in certain European circles, as the “blight” of U.S. content. The Direc- tive contains, for example, quota requirements requiring broadcasters, where practicable, to show a majority of Buro- ean-produced content. This issue of quotas has been fiercely defended in Europe, despite U.S. attempts to have the quotas removed in negotiations under the World Trade Agreement. Despite the limited affect of current quotas, qualified as they are by the phrase “where practicable” itis unsafe to assume that Voices, and particularly pethaps French voices, that have argued so strongly in the tecent past for maintenance of quotas will be silenced merely by the arrival of broadband internet, Similarly, many in Europe continue fiercely to defend public service broadcasting for reasons of diversity and quality. The feature of public funded broadcasting is by no means assured, but inevitably, in an environment of public funding both the types of programme broadcast and the programme standards will remain subject to some element of regulation as a quid pro quo. Ifa public service broadcaster, such as the BEC, isto be subject to control through its Charter and through the new regulatory framework discussed above, there is also a strong case for applying broadly the same levels of regulation to the independent television broad- casting sector. Yet the problem persists: whatever the cultural and economic arguments in favour of the continued heavy reg- ulation of broadcasting, television programming will still be viewed on the same box alongside broadband intemet con- tent that is lightly regulated and sourced directly from coun- ties which do not adhere to the E.C. broadcasting rules. The forces of conservatism wil, rightly or wrongly, argue for the continued asymmetric regulation of television and broadcasting and broadband intemet, but can these dis- parties survive in the medium term’ against the logic of creating a single, proportionate and non-discriminatory reg- latory framework for two converging delivery technologie against continuing pressure for removal of non-quantitative trade barriers under the World Trade Agreement, pasticuladly from the U.S.; and even perhaps against innovative chai- lenges under the Treaty of Rome. (R001) CTL SUE 8 SHEET & MAXWELL UMFTED [AND CONTRBLTORS]DOHERTY : COMPETITION LAW AND SECTOR-SPECIFIC REGULATION : [2001] C.TLR. 225 ComPETITION Law AND SECTOR- SPECIFIC REGULATION BARRY DOHERTY SENIOR LEGAL ADVISER, OFFICE OF THE DIRECTOR OF TELECOMMUNICATIONS REGULATION, DUBLIN® Summary ‘This article explores the relationship between the general competition rules in the E.C. Treaty, and sector specific legis- lation in telecommunications. tn particular it examines the concept of “significant market power" or SMP. This i cur- rently distinct from the idea of “dominance” in competition Jaw, but there are proposals to bring the two concepts closer together as part of a process by which competition law would replace some of the special rules in the telecommunications sector. SMP is an important concept in telecommunications: law: operators with SMP can be subject to special obligations ‘concerning prices, non-discrimination etc. At first sight, this might seem similar to the competition law concept of dom- ‘nance, but there are differences in the contents of the obligations and the philosophy underlying them. Whereas competition law generally intervenes after an abuse to punish the offender, sector-specific regulations impose rules in advance without any suggestion of wrong-doing. ‘The article focuses on proposals to bring SMP closer to dominance as part of a process by which competition law would replace some of the special rules in the telecormmunica- tions sector The Two Types of Rules Competition rules ‘The Treaty provision on competition are found in Articles 81-86 E.C. (formerly Articles 85-90). Articles 83-85 provide for procedural matters, while substantive rales of competition are to be found in Articles 81, 82 and 86. Ie is beyond the scope of this article to attempt even a sketch of E.C. competition law in general: for present pur- poses, it suflices to say that Article 81 B.C. (former Article 65) is aimed at agreements which restrict competition and Article 82 B.C. (former Article 86) is aimed a unilateral actions which have the same effect, Jn the telecommunications field, however, the most ‘important rules have been based on Anicle 86 of the Treaty (former Article 90). This Article divides into three parts which are relevant for present purposes: Article 86(1) provides that the competition rules also apply to state-owned bodies. Article 86(2) is more complex, and a short summary would be misleading, It provides that certain types of bodies which provide “services of a general economic interest” or have “the character of @ revenue-ptoducing monopoly” can be pro- ‘ected from the rigours of competition if this is necessary to allow them to carry out their tasks. Note that these bodies are * The views expressed are purely personal. This article is based on. 4 pape given tothe Ish Socety for European Law, June 26, 1. not necessarily the same as those referred to in Article 86(1). Finally, Article 86(3) provides that the Commission may adopt decisions or ditectives (which bind the Member States} in order to enforce the competition rules. Unlike other forms of legislation, these directives are adopted by the Commission alone, without any formal role for the Council and Patlia- ment. ‘The overlap between sector-specificlaw and the competi- tion rules raises a number of interesting questions, some of which are beyond the scope of this article. © Breaches of E.C. competition law remain legal “even where they are tolerated or approved by the authorities of a Member State."* © A regulator which is called upon to approve tariffs or other agreements between operators must not take any measure “which might be construed as encouraging” operators to conclude agreements contrary to the ‘Treaty? «The Commission has indicated that it will not normally pursue complaints under the competition rules where the ‘same issue is pending before a national regulator. This article will deal with the substantive rules rather than these questions of jurisdiction. Unlike other aspects of com- petition law, the principles in the telecommunications sector have not developed through court cases or individual deci- sions on. Instead, the chief force for bringing competition to the market was legislation: Commission directives under Article 86(5)—former Article 90(5), Anticlé 86(3) allows the Commission to adopt directives in the field of competition without the Council or Parliament. having the last say, as is the case for all other legislation, During his tem of office in charge of competition, the European Commission used this power to liberalise the mar- et for selling telephone handsets and other equipment. Although it may seem strange now, the rule in most Member ‘States used to be shat only the telephone monopoly could sell handsets. in 1988, the Commission took the unprecedented step of abolishing this monopoly by a directive.* Despite 1 Joined Cases 43/82 and 65/82 Vereniging ter Bevordering van ‘het Vlaamse Bockwezen and Vereniging ter ing van de Belengen des Bocthandels v. Commission [1984] ECR. 19, [1985] 1 CALLR 27, para. 40. 2 Case 66/86 Ahmed Saved [1989] E.CR. 805; [1990] 4CMLR. 102, para. 491 3 Commission notice on the application of the competition rules 10 ‘access agreements in the telecommunications sector (01. 1998, (265/2) para. 0. 4 Commission Directive 88/301, 0J. L131/73 (comigendum 0). 1317/59). [Bool CLR SUE 8G SWEET & MAXWELL UMITED (AND CONTRIBUTORS!1226 OOHERTY : COMPETITION LAW AND SECTOR-SPECIFIC REGULATION : [2001] CLLR. initial resistance and a court challenge,® this succeeded, and over the next decade a series of Commission directives abolished all other “special or exclusive rights” to provide services and infrastructure.® Formost Member States, the telecommunications market ‘has been finally liberalised since January 1, 1998. Some ‘Member States were given longer to liberalise but the last of these derogations has now expired, so all Member States are ‘on the same footing. Sector-specific regulation There have also been a series of directives based on intemal market principles. The reasoning was that jt was not enough te abolish restrictions on entry and leave everything else to market forces: there had to be specitic rules on how operators should behave (e.g. data protection, numbering, consumer rights, etc.). In addition, the consensus was that new entrants would need special protection from the incumbents at least for a transitional period. The three most important directives cover: © licensing (97/13)—licences are to be awarded fairly and there are strict limits on the conditions which Member States can require; « interconnection (97/33)—all operators can get inter- connection with each other, and those with significant market power have to offer non-discriminatory access and cost-oriented prices; and @ universal service (98/10)—market forces are not allowed to prevail if this means basic services become unaffordable; there is a definition of what users are entitled to and rules for funding if the market does not deliver. Overlap Between the Two Sets of Fules ‘The two sets of directives cover much the same ground. For example, 2 1996 Directive of the Commission provides that ‘when a Member State awards licences to telecommunications ‘operators, the licence award procedure has to be fair and an appeal must be possible.’ The same rules are defined in much, more detail by a separate Council Directive on licensing.* ‘The Council directives tend to follow the Commission ‘ones, both chronologically and also in the sense that they fill in the rules already sketched out by the Commission ditec- tives? ‘This article will examine how the telecommunications directives and the competition rules regulate the markets to which they apply. At the hear of the telecommunications directives is the concept of “significant market power"—this, measures the market power of an operator to establish whether it should be subject to additional duties such as price control or non-discrimination. At present, the tigger for having significant market power or “SMP” is if an operator 5 Case C-202/88 France ¥ Commission [1991] ECR 11223; [1992] SCMLR. 552. © Commission Direcive 907388, 0]. L192/10, successively ‘extended t© cover all services and infiastucmare by Commission, Directives 94/45, 95/51, 96/2, 96/19 and 1999/64. 7 Amicle 2 of Dizective 90/388, 0. L192/10, as amended by Aticle 1 (2) of the Direcive 96/19, OJ. L74/13. & Dieaive 9785, 0), L188092, ‘9 Pierre Larouche, Competition Law and Regulation in European Jelecommunications (Part, Oxford and Poriand {Oregon}, 2000), hereafter “Larouche*, pp. 69-90. hhas 25 per cent marker power. At first sight, SMP might, sound as if it is simply a weaker form of the notion of dominance. However, on closer examination, the scope of the two concepts are quite different in scope and (more subtly) in, effect. ‘Comparison between SMP and dominance An obvious first points that the definition of SMP is based on, Council directives which can be changed by other directives. ‘The definition of dominance, on the other hand, is based on several decades of ease law interpreting the E.C. Treaty, so it ‘could not be changed without changing the Treaty itself. Secondly, the notion of SMP applies to “operators, ‘which are legal entities. Dominance, on the other hand, applies to “undertakings,” an economic concept. The differ- ence is that in assessing dominance, competition law does not distinguish between @ company and other members of the same group which have a common owner.'° To give a simple example, if Acme Telecom (a fxed operator) owns 400 per cent of Acme Mobile (a mobile operator), then the ‘two companies can be considered together for the competition, concept of “dominance”. However, if they have separate licences they might be treated as separate operators under the telecommunications directives, depending on the legal sys- tem in the country in question. ‘Thirdly, the rules in the Telecommunications Directives are (obviously enough) limited to the telecommunications sector, The competition rules, on the other hand, cover the whole economy. This means that the mules in the tele- communications directives are more detailed and specific competition lew is necessarily more a question of general principles. Next, when it comes to assessing SMP, the Directives limit the exercise to four markets, all defined in advance.** Obviously, such pre-defined markets may be overtaken by technical changes: the boundaries of the market as defined in legislation may no longer exactly match the market in reality. IFanother product appears which is actualy a substitute for a market defined in legislation, there is the risk that ignoring the substitute gives a misieading impression of the whole market. They ate also very generalised and may include under one heading a range of activities that might mote usefully be considered separately as the market becomes more competitive in different areas at different speeds (e.g. intemational trafic and domestic trafic are both covered by the term “fixed public telephony services"). in competition cases, by contrast, the market is defined on a case-by-case basis by a cous, by a national competition authority orby the European Commission. This brings its own problems of procedure (eg. how to bring evidence of economic data before a court) and is obviously slower than taking a pre- defined market forthe directives. However, itis more likely to be technologically neutral. Having defined the market, the next question is to assess the degree of market power held by the operator or under- taking in question, Both dominance and “significant market power” (SMP) are ways of measuring the economic power ‘which a particular operator holds in its market. The present 30 Case 170/83 Hydrocherm % Andreot! [1984] ECR. 2999; 1985) 3CMLR 224, 11 These ate fixed public telephony nenworks/services; mobile public eleghony neoworksiservices; leased lies, and the national ‘market for interconnection, The fist three markers are expliciy denied in Annex | t Diecve 97/33 on inteconnecton; the fourth is mentioned in Article 7(2) ofthe Directive, [G00] CLR ISL 3 © SWEET & MAXWELL UMFTED {AND CONTRIBUTORS]DOHERTY : COMPETITION LAW AND SECTOR-SPECIFIC REGULATION : [2001] CTLR. 227 text of the directives requires NRAS to consider the following factors in deciding on SMP: “the organization's ability to influence market conditions, its tamover relative to the size of the market, its contro of the means of access to end-user, its access to financial resources and its experience in providing, products and services in the market"! This list covers many, Though not all, of the factors which would be relevant in assessing dominance. > Howeveritis much harder to show dominance than SMP. ‘The directives set the threshold for SMP at about 25 per cent market share, although it is possible to have SMP below that, figure or possibly not have it slightly above it.* While market, share is not the only criterion in competition law, it is still important. There is a presumption of dominance for a market share of 80 per cent*s but thisis not necessarily conclusive. As a result, many lawyers would consider that a finding of dominance is not safe below 80 per cent macket share, ‘The difference between SMP and dominance is vividly ilustrated by a recent judgment which held that Eircell, which was the first mobile operator to offer its services in Ireland, does not have a dominant position, * although it has been designated as having SMP, Table [: Comparison between SMP and. dominance SMP Dominance Defined in legislation => | Defined in Treaty => not Council and Farliament —_ easily changed can change Applies to “operators” | Applies to “undertakings” egal entities) {economic concept) Applies to specific sector | Applies to whole economy Special obligations defined | Special obligations defined in legislation => detailed, er case-law => open, specific rules defined in general principles advance veloping over time ‘Mackets defined in Markets defined case by advance => may be case => more likely to overtaken by technical _ zechnologically neutral changes ‘Markets defined in ‘Markets defined by cour legislation ‘competition authority/ Commission Lower degree of market | Higher degree of market power power Comparison between SMP obligations and duties of a dominant undertaking If an undertaking has a dominant position, how do its obligations compare with those of an SMP operator? Not only. 12 Acie £(3) of Directive 97/33 on interconnection, 15 See the Commission notice on market definition, 0, 1997 37208. 14 Aticie (3) of Ditective 97/55 on tnserconnection. 15 Case C-82/86 Abzo x. Commission [1991] 5.CR. 13389; [1995] 5 CMALR. 215, pare. 60. 16 Meridian Communications Led v. Elcell Lid (1999 No. 5306 P), High Court, O'Higgins, judgment of Ape 5, 2001. In an earlier judgment of October 4, 2000 in the sarae case, the court held that there was no prof of joint dominance benvéen ell and Seat Digifone, o the obligations differ in content, but they also differ in philosophy. The telecommunications directives impose spe- ial obligations on an SMP operator in order to change its behaviour ex ance. It can therefore be required to do things such as publish prices and lodge documents with the national regulatory authority without any suggestion that it has ‘breached the law. Although the competition rules imply some obligations on a dominant undertaking, they are most often used ex post to punish behaviour which has already hap- ‘pened. As a result, the case law applying competition princi- ples is most clear on defining what a dominant undertaking is not allowed do rather than any positive dury it may have. ‘The duties ofa SMP operator are found in theee different directives covering leased lines, interconnection and univer- sal service. At the tisk of simplifying, they boil down to half a-dozen main obligations: (1) A SMP operator has a general duty to offer its services and cannot refuse to sell to a willing purchaser {unless there are objective technical reasons). '7 (2) ASMP operator may not discriminate in the terms ‘on which it sells its products, so if it sells a particular product to oae customer it must sell the same to any ‘other at the same price. In particular, the SMP operator ‘must offer products to third patties on exactly the same terms as it offers them to its own subsidiaries or even different pans of its own company (e.g. if there is a wholesale arm dealing with other operators and a retail ‘arm dealing with the public, the retail arm is not to be advantaged) 18 (3) A SMP operator may not bundle two products together (ce. force customers to buy product A if they want product B, where there is no link between the v0). (4) A SMP operator is subject to price regulation. Its prices must be transparent and cost-oriented.2° (5) Tb reinforce this, it must submit its accounts to independent scrutiny, but also keep its accounts in such a way as to show the activities of separate parts of its business as if they were free-standing entities.** (6) The SMP operator must provide certain information to the NRA (7) The SMP operator is subject to quality rules.25 To an extent, a dominant undertaking has similar duties in competition law. However, the duties are usually less wide and less specific. For example, a SMP operator hae a general duty to sell its product to anyone who wants it, and give access to its network, It is much more difficult to identify any such general duty to deal in competition law. Although some commentators pizced high hopes in the “essential facilities” 417 Directive 97/38 on interconnection, O, 199/32, Aricles $12) and 7(4); Directive 92/44 on leased lines, 0. Li66/27 (as amended by Drective 97/51, OJ. 1295/25) Amticle 7; Direcuve 98/10 on voice telephony and universal service OJ. L101/24, Amicle 15(1). These directives wil be called the Interconnection Ditestve, Leased Lines Directive and Voice Directive, respectively. 18 Interconnection Directive, Aricle 6(a); Leased Lines Direcive, Arte 8(2). 29 Interconnection Ditective, Article 7(4)—if the operator has SMP {in fixed markets. 20 Leased Lines Directive, Amile 10(1); Interconnection Dizecive, Amicle 7(2)—this does not apply to mobile operators unless they ‘eave SMP in the interconnection market. ‘21 Interconnection Directive, Anicles 7(8) and 8(2): Leased Lines Directive, Article 10(2), ‘22 interconnection Directive, Anicies 6(c) and 7(3); Leased Lines Directive, Anicle 142), 25 Voice Disectve, Articles 12(1) and 15(1). (BOON) CTL BILE BO SHEET x MAXWELL UMITEO [AND CONTRBUTORS]228 DOHERTY : COMPETITION LAW AND SECTOR-SPECIFC REGULATION : [2001] CTLR. doctrine as a mechanism to force dominant operators to sell or to grant access to their property,2* the European Court of Justice has taken a sceptical view.?* As a result, a dominant undertaking can refuse to sell where a SMP operator can- not. ‘The mules on discrimination are broadly similar, although in competition law, discrimination between clients is only unlawfll if it places one client at a competitive disadvantage compared to the othec?* As a result, itis lawful to discrim- inate between consumers who do not compete with each other. This proviso is not found under the Telecommunica- tions Directives which provide that SMP operators must, provide “similar conditions in similar circumstances” for organisations “providing similar services” but do not explic- ily say that the customers must be in competition with one another.” Both sets of rules forbid tying or bundling (ie. refusing to sell product A unless the customer also buys product B). However, the competition rules only forbid the type of arrangement requiring a client to buy products which “by their nature or according to commercial usage” have no connection with the products which the client wants to buy.2* ‘The telecommunications rules do not have a similar excegtion for “commercial usage” so it might be argued that they go further than the competition rules. Itis perhaps the area of pricing which most clearly shows how the telecommunications directives are more detailed ‘than the competition rules. Under the telecommunications dicectives, an operator with SMP must offer prices which are “transparent” and “cost-oriented.” Although the term “cost- oriented” might not appear to be very precise, and “transpar- ency” might leave some scope for interpretation, the Directives still impose much more detailed rules than com- petition law, and are backed up by detailed guidance from the European Commission. In competition law, dominant undec- taking may not offer prices which are “excessive” or “preda- tory” (and obviously the mule against discrimination mentioned above prevents discriminatory prices). But what exactly are “excessive” or “predatory” prices? The only ‘guideline in the case law is that prices are excessive if they ‘bear “no reasonable relation to the economic value of the product supplied.”=* This implies a comparison between the cost and the selling price. However, this leads to a severe problem of proof: ‘most dominant underakings will not have the detailed cost accounting data which SMP operators must produce in the telecommunications field. As a result, courts and the Commis- sion have only found excessive prices where there is a 24 See, eg, Larouche pp. 165-217 and Wolf Sauter “The Fucure Regulatory Framework for Convergence”, hitp./wwrlaw.warvic, _aculvlawschooVparalle taba. 25 Case C-T/9T Oscar Bronner v. sedtgprine [1998] ECR. 17791. See this author's article “just what are essential faclties?™ (2001)'38 common Market Law Review, 597. 26 Amide 82(b}, E.C. Treaty: itis an abuse to “apply dissimilar ‘conditions to equivalent wansacions with other trading partis, ‘theteby placing them at a competitive disadvantage.” For example ‘in Case T-508/93 Thera Ladbroke SA ¥. Commission [1997] ECR. 1-923; [1997] 5 CM.LR. 309, a dominant undertaking apolied dliferenr conditons to cients in Selgium and Germany, but since the relevant market was national these were not in competition with ‘each ocher, and so there was no abuse. 27 Directive 97/55 on Interconnection, 0.) L199/32, Anicle 6(2);, Directive 92/44 on Leased Lines, 0.j. L165/27 (as amended by Directive 97/51, 04. 1295/23) Article 8(2). 28 Amie 92(¢) EC. Teayy. 29 Case 27/75 Untted Brands v. Commission [1978] E.CR. 207: [3978] CCALLR. 429, para. 250. comparison fiom another market or else where the true cost, is known. The Telecorunications Directives also impose obliga- tions on SMP operators which do not apply to other opera- tors. For example, SMP operators ate required to make certain information available to the public or to competitors, and also tothe national regulatory authority. Non-SMP operators have much fewer obligations. In competition law, a competition authority may have a power to request information.** How- ever, the duty to provide information and submit to searches, is no greater for dominant undertakings then for others. Finally, competition law has no direct equivalent of the quality rules which can apply to an SMP operators 2? Table 2: Contents of special obligations*> Duty of SMP operator | Duty of dominant undertaking Special obligations ecial obligations intended ifended toe 3 punish ‘Shavlouter behaviour ex ance post Special obligations ceque | Special cblgatons focbid certain action cenain action — onli Sbigalions to act General duty to offer products and give access ‘to network, Narrower duty to deal {essential facilities doctzine) ‘Non-discrimination ‘Similar Prices to be transparent —_| Pricing mules less clear: and cost-oriented avoid excessive or predatory ptices or price iscrimination, but case- law not always specific Cost accounting, going ‘No equivalent (other than beyond the level of detail | general company law) required by company law Publish information ‘No equivalent (other than general. company law) Provide information to No equivalent (other than NRA general powers of search, etc.) Quality rules No equivalent Comparison between the two sets of rules In conclusion, it is clear that the sector-specific nules impose duties which’ do not always have an equivalent in the 30 See Larouche, pp. 251-255. 51 For example, the Commission can request information under ‘Articles 11 and 14 of Regulation 17/62, or Amices 11 and 13 of, 4064/89 on menger control. in ieland, section 20 of the CCompeition Act 1991 gives the Compeition Authorsy powers of 132 Thereare explicit quality nulesin Articles 12(1) and 13(1) ofthe ‘Yoioe Directive. It could be argued that reducing the quality of a ‘product or service, or fling to meet orders, might be an abuse ofa dominant poston. However, this would be a case of deteocating ‘quality rather than failure to meet absolute quality standards, on ‘walsh competion law is sent, 35 For a similar comparson, though with diferent contents, soe Larouche, p. 297. [pte] CLR issu 8 SHEET & MAXWELL UMITED [AND CONTRIBUTORS)DOHERTY : COMPETITION LAW AND SECTOR-SPECIFIC REGULATION : [2001] CLR. 229 competition rules, and when the two sets of duties are compared the obligations in the sector-specifc rules are more detalled, ‘To be entiely fai, it should be said that competition law also contains rules which are not found in the sector-specfic tules.** However, it is striking that the abuses which are given most prominence in standard textbooks (tying, dis- crimination, price abuses, etc.) each have an equivalent ‘under the Telecommunications Directives. It should also be noted that some Competition Directives co Decisions ace also extremely detailed. The Competition Directives could have limited themselves to abolishing bar- tiers to free trade, but in some cases they laid down specific rules, with timetables for putting in place alternative systems. More specific decisions, especially in merger control, have imposed very detailed conditions as part of the merger clearance process. For example, when the Swedish telephone incumbent (Telia) wanted’ to merge with its Norwegian counterpart (Telenor) one of the conditions of clearance was that both would aliow “local loop unbundling,”S® Such condi- tions are actually concessions offered by the parties if the ‘Commission raises serious doubts over the transaction, so the parties have every incentive to produce a credible and ‘workable proposal. However, it is interesting that the rules developed by the parties and accepted by the Commission®> were actually far more detailed than the subsequent sector- specific regulation adopted a year later” ‘As a consequence, some writers have doubted whether there is any real difference between “competition” and “sec- tor-speciic regulation.”** However, there are some sector- specific rules which cannot be replicated by competition law alone, and there is no indication that the need for these will disappeaz As examples of niles which competition law cannot repiace, Garzaniti suggests universal service, afford- able pricing, data protection, safety and environmental rules, rules on pluralism and diversity and protection of minors™*; Kerf and Geradin add interconnection and number portabil- ity. ‘The New Zealand experience offers an interesting paral- Jel: when the telecommunications monopoly was abslished, there were no sectorspecific rules and no regulator. AS a esult, the new entrants were forced to negotiate on a 54 the rule that venatons ligation can in some circumstances ‘be an abuse: Case T-111/96 IT Promedia NV ¥. Commission [1998] ECR 2997. ‘55 TR “Toca Joop” is the cable connecting an individual telephone subsctber to dhe nearest point of interconnection ‘with the man telephone nezwork atthe local ‘Because each subsribee thas an individual cable, this “last ale” of netwack is accepted tobe the most dificult for new entrants to replicate, “Local foep unbun- ing” implies chat the network owner must share or give up ‘ovmership of cable, so that new entrants can ofr thelr services across the cable 36 Gammision Deceion of October 18, 1999 cake M1459 Tear 537 Regulation 288772000 on unbundled access 0 the lca loop, 05, 36/4 38 See, eg, Paul Nihoul, Convergence tn Ewpean Commu- nications case study on the relationship beeween regulation and compedcion (Law), bitpel/wwrn ip org/2_1999/p_ved- doc_12_1999 him, Larouche, p. 64% Christophe Humpe *Con- vergenor in the European Communications Seeox—an Analysis" (2000) 1 feurnal of Neowork industries, 188, 216, 59 Laurent Gaczanl, Telecommunications, Broadcasting and the ‘ncernet: EC Compeciton Lavw and Regulation (Swee: & Maxwel, London, 2000), p. 277. 40 Mickel Kerf and Damien Geradin “Post-Libereization chal- lenges in Telecommancations: Balancing Antius: and. Secir- Sete Reuaton” (2000) 25 ural oF Hor Compenton, 27, commercial basis with the incumbent operator: interconnec- tion and number portability proved especially difficult, with Jengthy disputes on the principles which should govern the price for interconnection.** Three different courts came up with three different pricing formulae, and the final court of appeal, the Privy Council in London, simply encouraged the partes to return to the negotiating table—“hardly a solution tothe problem at hand and not very good value for money for ‘an estimated legal expenditure of NZ $8 million per pro- tagonist."** Moreover, although there were no sector-spevifc rules in New Zealand, the government did obtain certain promises from the incumbent operator about pricing levels so the new entrants were not left to competition law alone.** It is interesting to note that New Zealand is now moving towards establishing a telecommunications regulator, after an enquiry concluded that a regulator and sector-specific rules ‘would be beneficial * All this suggests that competition alone is not the solution, and the Commission does not suggest that it will be. Indeed, in July 2000 the Commission proposed legislation ‘which inserted new sector-specific rules where there had been none before (e.g. on unbundling the local loop or awarding spectrum). Proposals for Change ‘This leads us to examine the Commission's proposals for new legislation. A number of directives had included a mechanism by which the Commission would review their implementation after a number of years.** The Commission also took the view that some of the directives needed to be adapted or even repealed once full liberalisation was established. The 1999 Review The result was 2 Commission policy document, generally called the 1999 Review. This set out a vision for the future of the telecommunications sector (and the media/oroad- casting sectors which increasingly overiap with telecommu- nications.)*” As competition increased, the Commission 4{ Michel Kec! and Damion Geradin “Post-Liberaizacion chal lenges in Teecommunications: Balancing Antinust and Secio- ‘Specie Regulation” (2000) 23 journal of Werld Comperician 27, a2, 42 Warren Pengily “Access o essential faites: a unique antitrust experiment in Ausualle” (1998) 43 Aneteruse Bulletin 519, 525. ‘The case in question was Telecom Corporation of MZ Ltd Clear Communicators fd 1998) 1 NZLR. S86 43 See pae I] of Mikon Muelle, On the Frontier of Deregulation: tien Zahid ‘ccommanicons and the Pobi of tron necting Competing Networks (Reason Public Policy Institute, Policy Study No. 177, May 1994) ape/hww.ppi ocg/pcivatizaton’ pst77.himl. 44 Ministerial Enquiry into telecommunications, final report, Sep- tember 27,2000. Texts relating to the enquiry can be found at ht ‘Awnwwcteleingaingovin/. The New Zealand Government's response i8_ at htp-//www.med govt nz/pbttelecarveesponse! {index hl and a press release announcing new legislation (May 2, 2001) is at hup//www.med govenz/pbutelecom/minis- 20010502 hia 45 Ate 8, Drective 90/387; Article 25, Directive 97/15; Amicle 22,2), Diectve 97/38. 446 Commission communication “Towards a new feamework for Eletronic Comaurications infestructare and associated services* COM (1999) 559, November 10, 1999. For the text, see hxp:/ ‘eazopa.ea.inssPO/infosocielecompoicy/teview99/reviewSSen. al, 427 This article foouses on telecommunications. For an examination of the effect of the 1999 review on the broadcasting sector, see Michael Libertus. “The EU Framework for Elecsonic Gonmunates and be Cin, Prone fe a Decion on 4 Regulatory Framework for Radio Spectrum Policy in the Commu Aity—Concems of and Consequences for public Broadcasters in the (POOH) CTL, SSUE Be SWEET & MAOOWRL LMTED {AND CONTRIBUTORS)230 DOHERTY : COMPETITION LAW AND SECTOR-SPECIFIC REGULATION : [2001] C-TLA. proposed to abandon some elements of sector-specificregula- tion which were no longer nevessary, and leave mote to ‘competition law. ~The exiting legislative framework was primarily designed to ‘manage the transition to competition and was therefore focused on the creation of a competitive market and the rights of new entrants. The new policy framewock will seek to reinforce competition in all market segments, paricufarly at local level. tt should be designed vo cater for new, dynamic and largely unpredictable mackets with many more players than today. "ine with the results of the debate on convergence, the Cominis- sion foresees a light regulatory approach for’ new service markers, while ensuring that dominant players do not abuse theic market power. Regulation implemented as a proxy for competion wil be reduced as markets become more com- petitive. Regulation will therefore be progressively Limited to areas where policy objectives cannot be achieved by competi- thon only.~** ‘The proposal was therefore to simplify the existing sector- specific directives (reducing the number of directives from 26 +o six).*? The Commission suggested that sector-specific rules should be rolled back as competition strengthens, with the ultimate aim of controlling market power via competition. Taw The 1999 Review also suggested that the threshold of matket power required to trigger SMP obligations should be raised. For onerous duties, such as obligations to supply unbundled and cost-oriented interconnection services, or obligations conceming non-discrimination, the obligation should not appiy to operators who meet the competition ctitetia for dominance. For other cbligations, eg. obligations to negotiate acness, the threshold could continue to be the present degree of market power (Ce. 25 per cent market share).* The Commission invited comments on this proposal: ost replies felt that there should be a single tigger for extra, obligations rather than two as proposed by the Commis sion.®? However, there was disagreement on what the trigger should be. The Commission summarised the views as fol- lows: “Fixed new entrants and most regulators called for the obliga~ tions currently applicable to SMP operators to be maintained, arguing that if regulatory obligations such as cost-orentation ‘were imposed only on dominant operators, new entrants would face real dificulties competing with incumbents. They also argued that in markets where there was joint dominance but where no player was dominant on its own, regulators would have no taols tp combat that market pawer Several commenta- tors raised conoem about the measurement of matket share, polnting out that where it was measured by value, incumbent ‘operators’ market share was far lower than where measured by volume Supporters of using the concept of dominance as a thresh- ‘ld for ex ance regulatory obligations argued that focusing on Optimists wil say that this is necessary to allow a smooth transition from sector-specific regulation to competition law. Either way, the vo sets of rules will continue to overlap in a very interesting way in the future. 72, Report AS-0053/2003, Febmuary 7, 2001. 73 International Telecom "Users Group Durope, Position Paper INTUG | 2000/068; hap./wnewiingnevews/eropeltare- [BOON] CLA. SUE 0 SWEET & MAXWELL LEITED [AND CONTRIUTORS]NEWS SECTION: CONTENTS : [2001] TLR. No November 2001 COMPUTER AND TELECOMMUNICATIONS LAW REVIEW VOLUME 7 : ISSUE 8 : 2001 : ISSN 1357 3128 COMPUTER CRIME New Zealand Legistation—Crimes Amendment Bill (No. 6)—computer misuse: An ‘update N- 143 ELECTRONIC Luxembourg COMMERCE Electronic Government—sill on internet voting Legislation—Digital Signatures: e-Signature Regulation adopted Legistation—Bill on E-Money Institutions N- 142 Netherlands Criminal Lev—toterne: cite pomograpty N= 142 Implementation of E.U. Directives in the Netherlands: an update N= 143 Singapore Electronic Government—Singapore Goverment passes new rules on how political parties can use the internet during the election period N= 14s Training—infocomm training framework N-146 United Kingdom Legistation—Oftel changes consultation procedure N-150 usa Contract Law—Enforceability of “browse wrap” licences N-153 TELECOMMUNICATIONS Luxembourg Regulation—Access to public property N-142 New Zealand Data Protection/Privacy—Draft Telecommunications Privacy Code = N- 144 ‘Singapore FegulationIDA approves StarHub plan to fulfil local access network obligation through merger with Singapore Cable Vision N=146 Spain Regulation—Mobile Telephony: provision by Xfera of GPRS services N= 147 Regulation Resolusion ofthe CT of August 92001, regaring amend ments on the Reference Interconnection Offer (“RIO”) published by ‘Telefonica de Espaiia, S.A.U. (“Telefonica”) N-147 Regulation—Resolution of the CMT of July 19, 2001, regarding the net cost of the provision of the Universal Secvice by Telefénica N-148 Regulation—Orders of August 2, 2001, publishing Resolutions of the Delegated Commission of the Government for Economic Affairs, whereby of some services of Telefénica are fixed N-149 Regulation—Resolution of the Secretariat of State for Telecommunica- tions and the Information Society, of July 21, 2001, approving the provision of ADSL services to consumers by ‘Telefonica de Espaiia, SAU, N- 149 Regulation—Oxder of July 12, 2001, amending the Ministerial Order dated ‘March 21, 2000, whereby the assignation of intemet domain names under the country code corresponding to Spain (.es) is governed N- 149 [oto CLA ISUE 8 © SWEET A MAXWELL LIMITED [AND CONTHBUTERSNA NEWS SECTION: CONTENTS : [2001] CTLR. Halted Kingdom 1 ‘ Regulatic I changes consultation procedure N-150 Regulation—Consultation on the provision of fixed telephony services ‘Regulacion—Dial-up narrowband internet access market Regulation—Broadband fixed wireless assets N-152 MEASURES TABLE European Community Computing, Telecommunications and Related Measures N-155 (2b) CCL SUE a SYEET 8 MAXWELL URITED AND CONTRIBUTORS)EDITORIAL BOARD AND COUNTRY CORRESPONDENTS: [2001] CLLR, Neti News Section Epitor ‘suuox sToxES Tato Lyons London Epitor Epiroriat Apvisory Boarp 1.7 MieHLE RENE BENEY CARR CRIs PARKER Coneutalaw Santer Dieta Equipe Co, Limited dinburgh and London Loner Reading ROBYN DURIE ELIZABETH ANN STATON Lnksters & altzsce Freshfields Brackhais Deringer Lender London CLVE GRINGRAS PAUL TAYLOR Olsvang Orchard Tondoe Lendoa Country CorRESPONDENTS Austraua RICHARD ZEITERMANN Japan ANNE FITZGERALD ‘Wikiason, Backer, Knauer and ‘TERUO Dot ‘aia ‘Waseda Unversity TETER eowaRD anki ain he ubert Tobin KARL H. 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BOOKEY ‘Wilkinson, Barker, Knaver & Quinn ‘Washington DC JORN R. KING Krobbe, Martens, Olson & Bear een ru ANDREAS BARTOSCH Gleiss Hoots Lutz & Hirsch Brussels SIMON M. TAYLOR Allen & Overy, ‘London ROGER TUCKETT enmieg Europe Raitel BV Brussels[Noy EDITORIAL BOARD AND COUNTRY CORRESPONDENTS: [2001] C.TLR. PUBLISHING cur @sweetandmarcwalleok ‘This journal should be cited as 2001} C-TLR. 000 ISSN 1357 3128, Published by Sweet & Maxwell Led “Typeset by Inveractive Sciences Lid, Gloucester Printed and bound in Great Britzin by ‘The Headway Press. Reading CONTRIBUTIONS ‘The Editorial Board welcomes ‘conuributions wo die Law Review. All material should be submitted in ‘typescript form, on A4 paper in double line spacing, together with a disk if available, nd sent to: Greg Smith, CLR. 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(© SYVEET& MADOWVELL LMTED (AND CONTRIBUTORS[NEWS SECTION: NATIONAL REPORTS : [2001] CLAN 141 Nationa Reports LUXEMBOURG ELECTRONIC COMMERCE Electronic Government BY on reenet aang ELECTRONIC COMMERCE Legislation Cigna! sprawres eSgnotse Regdeon ator AlLuxembourg M.P. has recently introduced a Bill intended to allow remove internet at local, general and European elections (the “Bill, purpose of this Bill is to provide more convenient access to the ballots and ultimately 10 improve voter tumout by offering an additional method of voting: indeed one of the key advantages to ftemet voting shat ti nt consaained by geography, Voting is not limited to the area in which the election takes place. This means that voters who traditionally may nothave been able to participate in elections (Ze residents in retrement homes, disabled persons) would now-—intheory—be able to do so ‘The voting process provided by the Bill can be summarised as follows: At the ls Stage a voter who wishes to use tis option will have wo submit a declaration to the local authorities prior to the election, He will then receive a password allowing him to log on to the election system. On election day, the voter Vill Tog on to the system and identify himself with his digital signature. Once the system acknowledges that the voter is eligible to vote, the voter is presented with a blot containing ls of candidates. The voter makes his choice and cass his ballot online, The ballot is encrypted ggittavels over the internet to protec the secrecy and inet ofthe vox. When the centze receives the ballot, the voter's name and the ballot are deposited in two separate ballot boxes. E-vores are finally counted and integrated into overall total votes. The full text in French of this Bill can be accessed at: http://coumtien.chd.lu/ famesets/role htm, ‘On June 1, 2001, Luxembourg’s Government took an important step towards the full implementation of e-commerce in the Grand Duchy by the enactment of a regulation (Réglement Grand-Ducal) which sets forth the legal framework for digital signatures (the “Regulation”). This Regulation completes and implements the | on e-commerce recently adopted in Luxembourg (the Electronic Commerce Act, 2000). Largely drawn ffom E.U. Directive 1999/93, this Regulation sets out the requirements which musl be met by electronic signanures in order to offer sufficient relabiy and inegiy saleguacts. These nude requtrements regarding qualified ‘certificates and are aimed at accredited certification providers who deliver such qualified certificates, Only digital signatures created by a secure signature creation device and ‘supported by qualified certificates represent a signatuce under the Luxembourg civil law (as a manuscript signature). However, an electronic signature may rot be rejected by a judge for the sole reason that itis presented in electronic form, that it is not based upon a qualified certificate issued by an accredited certification service provider, or that it was not created by a secure signature creation device. This is a cons of the free use of cryptography techniques in Lux- embourg, Accredited certification providers are those who comply with the requirements stated by law and thus receive accreditation from the accreditation authority. A significant part of the obligations incumbent on certification providers are laid down in the Electronic Commerce Act whilst the Regulation specifies the Kind of information to be provided in qualified certificates, This information includes, ineer alia: a note specifying that the delivered centficate is a qualified certificate; ¢ Menucaon ofthe ceriicaton provider who delves the cetcate ° signatory’s name or pseudonym; © the certifcate’s validity period. (G00) CLR SSUE | SWEET & HARWELL LMITED [AND CORTHIBLTORS]