Europaudvalget 2016
KOM (2016) 0590
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EUROPEAN
COMMISSION
Brussels, 3.10.2016
SWD(2016) 303 final/2
PART 2/3
CORRIGENDUM
Annule et remplace le SWD(2016) 303 final.
Suppression des liens vers des documents externes.
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposalsl for
a Directive of the European Parliament and of the Council establishing the European
Electronic Communications Code (Recast) and
a Regulation of the European Parliament and of the Council establishing the Body of
European Regulators for Electronic Communications
{COM(2016) 590 final}
{COM(2016) 591 final}
{SWD(2016) 304 final}
EN
EN
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1
2
ANNEXES
6.1 ANNEX 1 - Procedural Information
6.1.1 Identification;
This Staff Working Paper was prepared by Directorate B 'Electronic Communications Networks and
Services' of Directorate General 'Communications Networks, Content and Technology'. The RWP
reference of this initiative is 2016/CNECT/XX.
This Staff Working Paper is accompanied by the Fitness Check SWD for the current regulatory
framework conducted in the context of the REFIT programme assessed not only in terms of
achievement of the original goals, but also in view of potential simplification and reduction of the
regulatory burden.
6.1.2
Organisation and chronology:
Several other services of the Commission with a policy interest in the review of the telecom
framework have been associated in the development of this analysis. The Telecoms Framework Inter-
Service Steering Group met for the first time on the 7 May 2015.
A second Telecoms Framework Inter-Service Steering Group meeting took place on 9 July 2015
A third Telecoms Framework Inter-Service Steering Group took place on 26 January 2016 .
A fourth Telecoms Framework Inter-Service Steering Group Impact Assessment Steering Group took
place on 14 April 2016 to discuss a draft evaluation report and the problem definition of the IA.
Comments were received by 21 April 2016.
A fifth Telecoms Framework Inter-Service Steering Group took place on 30 May 2016 to discuss the
draft Impact Assessment
In the ISSG, chaired by SG, DG CONNECT, was flanked by DG DIGIT, DG COMP, DG JUST, DG
GROW, DG ECFIN, DG FISMA, DG TAXUD, DG TRADE, DG RTD, DG JRC, DG SANTE, DG
EMPL, DG EAC, DG NEAR, DG ENV, LS, DG REGIO, DG HOME, DG ENER, DG AGRI, DG
MOVE, EUROSTAT, EPSC.
DG Connect also benefited from the support received by the JRC Information Society Unit for the
assessment of the model elaborated for the IA support study
SMART 2015/0005
presented in section
4.11 and Annex 5..In particular, the analysis carried out by JRC concluded that "the
consultants
constructed a CGE model with a rich sectorial and geographical setup (8 sectors and 4 representative
countries). Also, the policy considered in the analysis is entered into the CGE model through
immediate costs are introduced in the form of (private and public) investments and public
expenditures. In addition the sector TFP is adjusted following the estimated impacts from KPIs. This
seems a fine way to capture the economic impacts from the policy considered".
6.1.3
Regulatory Scrutiny Board
This staff working document will be discussed at the regulatory scrutiny board meeting of 7 July
2016.
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6.1.4
Evidence
The options considered in this impact assessment were designed by taking into account the following
main inputs:
(i)
(ii)
(iii)
the contributions to the Telecom Framework Review public consultation, a
summary of which is attached in Annex 2 to this report.
the BEREC opinion on the review of the regulatory framework released on 10
December
2015
335
,
The three review studies (delivered together with this Impact Assessment report) are:
(iv)
(v)
(vi)
"Support
for the preparation of the impact assessment accompanying the review of
the regulatory framework for e-communications" (SMART 2015/0005)
Regulatory, in particular access, regimes for network investment models in Europe"
(SMART 2015/0002)
Substantive issues for review in the areas of market entry, management of scarce
resources and general consumer issues"
(SMART 2015/0003).
The Impact assessment was carried out on the basis of interim study results of the three review studies
quoted above. Finalisation is planned at this stage by the end of July 2016 for SMART /002, by end of
August for SMART 003 and by the end of September for SMART/005.
Other recent DG Connect studies in the field of Electronic communication:
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
"Review of the scope of universal service" (SMART 2014/11),
"Study on future trends and business models in communications services and their
regulatory impact" (SMART 2013/0019),
"Identification and quantification of key socio-economic data for the strategic
planning of 5G introduction in Europe" (SMART 2014/0008)
"Economic and Social Impact of repurposing the 700MHz band for wireless
broadband services in the European Union" (SMART 2015/0010),
'Costing the New Potential Connectivity Needs' (SMART 2015/0068)
"Impact of Traffic Offloading and Technological Trends on the Demand for
Wireless Broadband Spectrum" (SMART 2012/0015)28,
"Spectrum Policy. Analysis of Technology Trends, Future Needs and Demand for
Spectrum in line with Article 9 of the RSPP" (SMART 2012/0005)27,
Survey and data gathering to support the Impact Assessment of a possible new
legislative proposal concerning Directive 2010/13/EU (AVMSD) and in particular
the provisions on media freedom, public interest and access for disabled people,
The other relevant sources quoted in the document are indicated in the bibliography and range from
academic papers to industry figures and estimates.
6.1.5
External expertise
The European Commission sought external expertise on the technical field as well as on the socio-
economic impacts of the options presented above. The Commission contracted WIK-Consult, Ecorys
335
See; http://berec.europa.eu/eng/document_register/subject_matter/berec/opinions/5577-berec-opinion-on-the-review-of-
the-eu-electronic-communications-regulatory-framework
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and VVA Europe to support the preparation of this impact assessment accompanying the review of
the regulatory framework for e-communications. In the framework of the study an expert panel of top-
level, globally recognised and reputable specialists (scholars, experts in the field). was organized to
provide feedback on the preliminary conclusions reached by the consultants concerning the impact of
planned changes to the e-communications framework.
A
high level expert panel
was held on 30 May 2016 conducted in the framework of study SMART
2015/0005. Participants were Prof. Joan Calzada, Prof. Frédéric Jenny, Prof. Brigitte Preissl, Prof.
Luc Soete, Prof. Reza Tadayoni, Prof. William Webb, Prof. Brett Frischmann, Prof. Eli Noam.
Experts profiles and a report of the discussion are presented in Annex 13.
In addition to the review and other studies quoted above also the following EC studies in the field of
Electronic communication were considered
"Identification of the market of radio equipment operating in license-exempt frequency bands to
assess medium and long-term spectrum usage densities" (SMART 2014/0012),
"Eurobarometer household survey on eCommunications" - SMART 2014/0014,
"Investigation into access and interoperability standards for the promotion of the internal market
for electronic communications networks and services" (SMART 2014/0023) a study on the
'standardisation' of wholesale access products
"Mapping of Broadband and Infrastructure Study" (SMART 2012/0022),
"Mapping broadband infrastructures and services (phase II)" (SMART 2014/0016),
"Impact of Traffic Offloading and Technological Trends on the Demand for Wireless Broadband
Spectrum" (SMART 2012/0015)28,
"Spectrum Policy. Analysis of Technology Trends, Future Needs and Demand for Spectrum in line
with Article 9 of the RSPP" (SMART 2012/0005)27,
"Study in support of the preparation of an impact assessment to accompany an EU initiative on
reducing the costs of high-speed broadband passive infrastructure deployment" (SMART
2012/0013).
"Steps towards a truly Internal Market for e-communications in the run-up to 2020" (SMART
2010/0016),336
"Study on the socio-economic impact of bandwidth" (SMART 2010/0033),
"Broadband coverage in Europe in 2013" Updated on an annual basis (SMART 2013/0054),
"Broadband retail broadband access prices in 2013" Updated on an annual basis (SMART
2010/0038),
"Challenges and Opportunities of Broadcast-Broadband Convergence and its Impact on
Spectrum and Network Use" (SMART 2013/0014),
"Use of commercial mobile networks and equipment for mission-critical high-speed broadband
communications in specific sectors " (SMART 2013/0016),
"Study in support of the preparation of an impact assessment to accompany an EU initiative on
reducing the costs of high-speed broadband passive infrastructure deployment" (SMART
2012/0013).
6.2 ANNEX 2 - Stakeholders and Public Consultation
6.2.1 The stakeholders engagement strategy
A continuous and active stakeholder engagement strategy was devised and followed for the evaluation
and review of the regulatory framework for electronic communications networks and services. From
the outset key ideas for evaluation and reform of the regulatory framework were outlined in a public
roadmap
337
that followed the Political Guidelines
338
of the new Commission and the subsequent DSM
336
https://ec.europa.eu/digital-agenda/sites/digital-agenda/files/final_report_internal_market_ecom.pdf,
http://europa.eu/rapid/press-release_IP-12-193_en.htm?locale=en
337
http://ec.europa.eu/smart-regulation/roadmaps/docs/2015_cnect_007_evaluation__elec_communication_networks_en.pdf
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Communication
339
. The published roadmap explained what the Commission was considering,
describing the scope of and outlining the main change drivers underpinning this initiative and
announced further details of stakeholder consultation strategy. This fed into the subsequent
consultation activities, ensued an inclusive process with all interested parties having an opportunity to
contribute.
A dedicated 12 weeks open
public consultation
was launched on 11 September 2015 that gathered
inputs for the evaluation process in order to assess the current rules and to seek views on possible
adaptations to the framework in light of market and technological developments and thus contributing
towards the DSM. The consultation document was both broad and detailed, eliciting extensive inputs
from consumers, providers of electronic communications networks and services, national and EU
operator associations, civil society organisations, broadcasters, technology providers, Internet and
online service providers, undertakings relying on connectivity and wider digital economy players,
national authorities at all levels, national regulators and other interested stakeholders. Inputs provided
include stakeholders affected by the policy, those who have to implement it and those with a stated
interest in the policy. The consultation gathered a total of 244 online replies from stakeholders in all
Member States as well as from outside the Union.
On 11 November 2015, halfway through a public consultation process,
public hearing
was organised
in Brussels as well as broadcasted online
340
. This offered an opportunity for in-depth discussions on
issues outlined in the public consultation document, allowing for reasonable time to formulate and
gather effective feedback from all relevant stakeholder groups, allowing the collection of all relevant
evidence (comprising data/information) and views.
During the consultation process broad public events were combined with more targeted consultation.
This in particular relate to a serious of consultation events held with sector regulatory community that
is entrusted with key supervisory and implementing tasks stemming from the regulatory framework.
Following a series of such events and at the request of the Commission, BEREC provided an input to
the evaluation and the review process and published its opinion in December 2015
341
. In addition, the
RSPG had provided its opinion on DSM and the Framework Review
342
.
In parallel to the public consultation, and as part of such targeted consultation efforts, on 7 October
2015 the Commission convened a
dedicated meeting of e-Communications Administrations High
Level Group,
comprising representatives of the relevant ministries. At this meeting national
authorities shared their views and discussed challenges, focusing on the need to develop the fixed and
wireless connectivity networks of the future and to drive take-up and innovative services across
Europe.
As part of the evaluation process the Commission has also contracted a number of studies.
Implementation of these studies encompassed public workshops that allowed stakeholders to
comment and provide feedback to the ongoing evaluation work.
Several such public workshops took place that allowed cross checking of findings and verifying
inputs and assumptions.
On 6 April 2016 was held in the Commission's premises a public workshop to validate the interim
findings a study Smart 002/20015 conducted by WIK, IDATE and Deloitte on "regulatory, in
particular access, regimes for network investments models in Europe" in the context of the
338
339
http://ec.europa.eu/priorities/publications/president-junckers-political-guidelines_en
http://europa.eu/rapid/press-release_IP-15-4919_en.htm
340
https://webcast.ec.europa.eu/public-hearing
341
http://berec.europa.eu/eng/document_register/subject_matter/berec/opinions/5577-berec-opinion-on-the-review-of-the-
eu-electronic-communications-regulatory-framework
342
http://rspg-spectrum.eu/wp-content/uploads/2013/05/RSPG16-001-DSM_opinion.pdf
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preparation of the regulatory framework for electronic communications networks and services. The
workshop was attended by 60 external participants – not counting the team of consultants, from the
main European industry associations of the sector, from the telecom industry, e.g. operators, service
providers, vendors, business users, OTTs, banks and local governments, as well as representatives
from BEREC and national regulatory authorities.
On 2 May 2016, a public workshop was held at Commission premises to validate the interim findings
of a study conducted by WIK, CRIDS and Cullen on "Substantive issues for review in the areas of
market entry, management of scarce resources and general end-user issues" (SMART 2015/003) in
the context of preparing the review of the EU regulatory framework for electronic communications.
The workshop was attended by around 100 external participants representing EU and national
sectorial industry associations, electronic communications network operators and service providers,
cable network operators, broadcasters, consumer interest associations, vendors, business users, as well
as members of RSPG, Member States and National Regulatory Authorities.
In addition, the Commission responded positively to numerous requests to participate and update on
the review progress at conferences, seminars and workshops, keeping open exchange with all
stakeholders.
The consultation strategy followed by the Commission allowed the widest possible dissemination of
information and allowing stakeholders for a reasonable time to formulate and gather effective
feedback on all key elements of both the evaluation and the review process. This among other
included problem identification, subsidiarity and the need for EU action, outlining possible policy
response and anticipating impacts of such response. The consultation strategy followed ensured that
both general principles and the five minimum standards were respected and met. The results of these
consultation activities are summarised in the published synopsis report
343
which is annexed to this
report.
6.2.2
The outcome of the public consultation
The synoptic report summarising the main outcome of the public consolation carried out for the
review of the telecoms framework has been published in April 2016.
6.2.2.1
Introduction
The consultation on the regulatory framework for electronic communications networks and services
was launched to gather input for the evaluation process in order to assess the current rules and to seek
views on possible adaptations to the framework in light of market and technological developments,
with the objective of contributing to the Digital Single Market Strategy.
The consultation targeted consumers, providers of electronic communications networks and services,
national and EU operator associations, civil society organisations, broadcasters, technology providers,
Internet and online service providers, undertakings relying on connectivity and wider digital economy
players, national authorities at all levels, national regulators and other interested stakeholders. The
consultation gathered a total of 244 online replies from stakeholders in all Member States as well as
from outside the Union. The consultation elicited both consolidated contributions from umbrella
organisations and individual contributions from various stakeholders.
343
https://ec.europa.eu/digital-single-market/en/news/full-synopsis-report-public-consultation-evaluation-and-review-
regulatory-framework-electronic
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The participation of different stakeholder categories was overall balanced with stakeholders from the
wider digital economy actively responding as well as consumer groups, public authorities and
electronic communications networks and services providers. This includes stakeholders affected by
the policy, those who have to implement it and those with a stated interest in the policy. Online
contributions by public authorities (national administrations and sector regulators) were relatively
fewer than the inputs of electronic communications network or service providers or wider digital
economy market actors. Among
stakeholders representing electronic
communications networks and services
providers, different clusters of economic
actors with diverse economic power
gave input – traditional/incumbent
operators, alternative operators.
This report uses the above categorisation
of stakeholders in presenting converging
or differing views on issues addressed in
the consultation. The contributions of
the stakeholders who gave their consent
to publication are available
online.
This
report also takes account of BEREC's
344
input to the evaluation and the review
process provided at the request of the Commission, the RSPG
345
opinion
on DSM and the Framework
Review and some 20 other contributions received outside the online consultation as well as feedback
received via the dedicated
public hearing
dedicated to this review . The BEREC opinion was
published in December 2015, and can be found on this
website.
This analysis does not represent the official position of the Commission and its services and thus does
not bind the Commission.
The input gathered corresponds to the objective of the consultation in both assessing the performance
of the regulatory framework to date and also providing insights about possible adjustments in order to
respond to market and technological advancements and prospective challenges.
344
345
Body of European Regulators for Electronic Communications
Radio Spectrum Policy Group
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6.2.2.2
Analysis of responses
The analysis in subsequent sections of this report is based on inputs received by different stakeholder
categories.
6.2.2.2.1
Objectives and overall performance
In terms of the
effectiveness,
it is acknowledged by most stakeholders (consumer
organisations,
Member States, operators, regulators, other)
that while the framework has been successful in
bringing more competition in the market and promoting the interests of EU citizens, it was less
successful in promoting the internal market.
On the objective of achieving the internal market, most respondents indicated a moderate
contribution. Alternative operators generally perceive the framework as having set the right
environment for the internal market to develop. Conversely, several incumbents are rather negative on
this point and also some small players point out that the provisions of the framework are not apt to
foster cross-border deployments. Many respondents have stated that this objective has not been
achieved owing to the lack of a consistent approach by NRAs (national regulatory authorities), with
some of them being seen as more willing and ready to enforce framework provisions than others.
Hence this objective can be considered as only partially achieved.
The framework's contribution to the objective of protecting the interest of European citizens is rated
more positively. Most stakeholder groups (alternative operators, incumbents, others) consider that the
framework has contributed moderately to citizens' rights and interest.
Alternative operators and
small fibre operators
tend to attribute a more significant impact on EU citizens' interests, while
several incumbents
are rather negative on this point, considering that the interest of the European
citizens has been promoted only to a certain extent, owing to the hurdles to investment in NGA
allegedly caused by access regulation.
Some large operators
and entities wonder if the interest of
citizens has been harmed by the focus on lower tariffs rather than on network quality. Finally, the
sparse contributions by
private individuals
have a much more negative character, with 8 out 12
pointing to little or no impact at all.
In terms of
efficiency
and whether the costs involved were reasonable, there was a somewhat negative
perception. Larger operators (incumbents
and those with mobile arms)
consider that the
administrative and regulatory costs borne have exceeded the results achieved.
Alternative operators
believe, on the contrary, that the benefits have exceeded the costs, underlining that competition,
economical offers and several clear consumer benefits would not exist without the framework and that
access regulation is necessary and proportionate.
Some alternative operators
underline the value of
having a stable, predictable regulatory regime, whilst also highlighting some unnecessary costs: the
costs of market analysis for termination markets where the outcome of the analysis in any event is
stable, the cost of questionnaires, the overlap of tasks of public authorities, the lack of harmonisation
in consumer regulation including data protection and data retention, of universal service obligations.
In terms of
relevance
of the framework and whether EU action is still necessary, the general
perception is that framework is still necessary and there is a consensus amongst
incumbents and
alternatives, large and small, consumer organisations. Alternative operators, consumer
associations, wholesale operators
underline that competition cannot be maintained without ex ante
regulation and that full duplication of network infrastructures is not realistic. Most
incumbents
argue
for a simplified access regulation (limited to fixed infrastructures, with only one access product, based
on commercial negotiations and dispute resolution rather than on ex ante cost orientation). Some
operators
and
equipment manufacturers
argue for a progressive transition to ex-post competition
law. Many respondents groups support the relevance of the framework for network and service
security.
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In terms of
EU added value
and whether similar progress could have been achieved at national or
regional levels,
most operators
highlighted the importance of competition for increasing choice and
transparency, lowering prices and bolstering consumer rights.
Incumbents
acknowledged the role of
the framework in liberalising monopolies. Many respondents highlighted a risk of fragmentation due
to national implementing measures and of incoherence with other regulation and competition law.
Equipment vendors
in particular acknowledged the role of the framework in promoting competition.
While the desire to deregulate in one form or another is present in almost all categories of
contributors, albeit not equally, none of the contributions concludes that full repeal of the framework
is warranted. Consumer protection rules and universal service were the subject of widely
contradictory opinions from different stakeholder groups, with disabled user group noting that without
the framework, many measures to facilitate a disabled person's access might not have happened. In
terms of process, there were calls from some operators for a full harmonisation to address
fragmentation.
Connectivity is the overall converging theme in many contributions across different stakeholder
groups, with many suggesting that it should be a more prominent focal point in the revised
framework. Including investment as one of the objectives, however, divides the respondents. In
particular,
consumer organisations, alternative operators
and
regulators
fear that this could be
seen as undermining the current competition objective.
Incumbents
and many
mobile operators
stress the increased need for connectivity and investment but diverge in the proposed solutions.
Connectivity to the benefit of end-users as an overarching objective to which competition, internal
market and investments provide the means, could be considered as a central theme supported by most
stakeholder groups.
1.1. Network access regulation
Extensive inputs were received from all of the major fixed and converged fixed/mobile electronic
communications providers active in the EU, whether they are former monopolies, small or large
access seekers relying on their networks, or independent fixed infrastructure owners including cable
and independent fibre networks.
Good connectivity is perceived as a necessary condition to achieve the Digital Single Market, with
many respondents pointing to the need for policy measures and possible adjustments to current policy
and regulatory tools to support the deployment of infrastructure in line with future needs.
6.2.2.2.2
Evaluation of the network access regulation
Amongst stakeholders from the industry, the positions expressed on network access and
interconnection regulation, including the current SMP-based approach, can be divided in two blocks,
with on the one hand operators whose business model predominantly relies on access (and who
strongly support the current ex-ante regulatory approach) as well as broadcasters, and on the other
hand the incumbents (who call for a reform of the regulatory regime in place). Cable operators are
supportive of the role that the SMP regime has had to promote competition, but warn that overly
aggressive regulation could hinder infrastructure deployment.
The main argument from alternative operators and their national and European trade associations is
that regulated access and interconnection have driven competition, innovation and investment and that
with the ongoing shift to NGA networks the needs for SMP-based regulated access to broadband
networks will remain acute. In addition, they submit that the current regulatory approach provides
NRAs with the right level of flexibility. Telecom users are also strongly in favour of the current
access regulation, with the exception of one business users association which considers that the
emphasis should be put on service competition rather than on the underlying infrastructure, and that
the sharing of infrastructure should be emphasised.
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On the other hand, incumbents consider that the access regime in general is a deterrent to investment
in NGA networks, does not provide enough predictability, and is a burden for operators and
regulatory authorities with high administrative costs. They claim in particular that promoting
infrastructure investments by enabling competition downstream (first by the imposition of wholesale
remedies and then by encouraging access seekers to gradually build their own infrastructure closer
and closer to end customers), the so called "ladder of investment" approach, has failed, in particular
when applied to NGAs, and that a lighter regime should be put in place with a focus only on situations
where monopolistic conditions persist. The need to incentivize investment is raised by many
incumbent operators. While many mobile operators also follow this line of thought, some of the
mobile operators support the regulatory approach in place.
Regulators consider that the current approach drives investment. On the other hand, some responding
Member States call in general for a pro-investment regulatory regime, estimating that the current ex-
ante SMP-regulation is outdated and should be adapted, with some suggesting that it should enable
NRAs to apply a more flexible approach for imposing symmetrical obligations of access to high-
capacity networks.
With respect to the interconnection of voice, mobile operators and certain incumbents call for a
phasing out of the ex-ante regime in place, arguing that the IP-based delivery of voice services is
modifying market circumstances. MVNOs have an opposing view on the matter, on the ground that
terminating networks will always remain a bottleneck. OTTs consider that interconnection rules are
needed to avoid discrimination.
Many of the
access seekers
consider that the current rules were effective in addressing single
dominance. This view is also shared by
consumer organisations
and part of the
regulatory
community.
Those operators in principle agree with the existing scope of access remedies, while
raising issues with its implementation in detail. On the other hand
incumbent operators
consider that
the full set of access remedies is often imposed mechanically, without cost/benefits assessment and
without regard to modulation according to actual problems identified. Intrusive access remedies,
imposed at all levels of the "ladder of investment" hamper investments in modern networks.
Moreover, the broad provisions concerning access regulation contained in the current framework
allows NRAs to engage in product micro-management, business case design and steering market
outcomes. This is said to cause significant delays in delivering new technologies and network
upgrades.
6.2.2.2.3
Review of the network access regulation
The majority of
Member States/public authorities
that have responded highlight the positive effect
that the implementation of the Framework has had on the market and the role of competition in
promoting investments. However, there is an acceptance that updating the framework will be
necessary, for reasons varying from promoting investment in next-generation infrastructures,
responding to technological and market changes and diminishing administrative costs. Some Member
States argue for flexibility in the application of incentives to meet future challenges at a national or
sub-national level.
Access seekers
and some other operators also call for greater guidance to be given
to NRAs to analyse sub-geographic markets to increase consistency. There are also calls from certain
Member States, which perceive limits in dealing with oligopolistic market structures, for a greater role
for symmetrical rules.
Regulators
broadly underline the achievements of the current system but argue
that some flexibility may be needed, for instance by considering more prominently symmetrical
obligations or by simplifying the regulatory approach to the termination rates markets.
Among
operators,
the responses of the two largest groups of stakeholders (incumbents on one side
and access seekers on the other) correspond to the general lines of the two groups: the first advocating
a de-regulatory push in the name of changed market dynamics and the risks involved in future
investment plans, the second defending the link between competition and investments and calling for
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a protection of access rights to legacy networks as well as to upgraded networks, where they fear that
a deregulatory approach would lead to the loss of the welfare gains achieved so far by the regulatory
framework. Those seeking further deregulation resist ideas that they fear may result in an increase of
the regulatory burden, particularly in relation to regulatory measures that may lead to the continued
regulation of markets even in the absence of proven market power. On the other hand, those that rely
on regulation resist proposals that imply establishing a link between investment incentives and a
lighter regulatory approach, as they fear that upgraded networks will become increasingly inaccessible
and that broadband markets will become increasingly concentrated or even re-monopolised. In each
case, however, the general approach is typically also accompanied by a recognition that regulated
networks and their related markets have changed, leaving scope for adaptations.
In relation to the simplification of access products and focussing on key access points,
network
owners
responded in favour of a drastic simplification to a single access product (if at all necessary),
whereas
access seekers
insist on the importance of different access products to compete at the retail
level. On the other hand,
access seekers
reject the idea that retail market considerations should be the
focus of wholesale regulation, an idea that is strongly supported by
network owners,
who consider
that continued wholesale regulation is not justified if retail markets are competitive.
In relation to different treatment of legacy copper networks (whether pure copper access networks or
upgraded FttC networks with copper sub-loops) to incentivise upgrades, operators invoked the
principle of technological neutrality and leaving the market to decide how to best meet demand.
However, a number of contributors consider that copper-based solutions will not represent a credible
alternative in the long term.
Investors
in FTTH solutions and some
access seekers
call for a
recognition that the risk involved in rolling out fibre to the premises is higher than upgrading copper,
so that regulatory incentives, if any, should not include FttC solutions.
Regulators
also propose the
idea that any risks specific to a particular new investment network project should be considered if
wholesale tariffs are subject to regulation, in order to allow the operator a reasonable rate of return on
adequate capital employed.
Network owners
request discretion to decide whether and how to continue to use copper assets (full
copper loop or sub-loop), whereas
access seekers
request guarantees that physical access to copper
networks will continue to be guaranteed. While a majority of respondents, including
regulators,
would not agree to mandating the switch-off of copper networks where fibre is present, they still see a
role for regulators to manage the transition where switching off copper makes economic sense, with
copper networks owners
advocating minimal intervention, and others rather invoking public
intervention to preserve competition (e.g. transitional migration regime).
With regard to co-investment models, many stakeholders can see the advantages of co-investment for
increasing the reach of NGA networks, for example, in less densely populated areas. Their views
however differ on the related regulatory regime. While
incumbents
favour co-investments on
commercially negotiated terms,
access seekers
call for strict conditionality to ensure fairness and
openness of the co-investment.
The responses overwhelmingly affirm the important role that civil engineering plays in the roll-out of
NGA. Some
Member States
and a number of
infrastructure owners
don't see the need to further
intervene to ensure access to civil engineering falling within the scope of the Cost Reduction
Directive (2014/61/EU). However,
alternative operators
highlight the importance of detailed SMP
obligations, beyond the general obligations in that directive. Furthermore,
incumbent operators
call
for symmetrical access to in-house wiring.
There is broad alignment between
regulators, Member States
and many others that longer review
periods (compared to the current mandatory three years) would be beneficial, particularly in stable
markets such as termination rates.
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Regarding measures aimed at facilitating the roll-out of high-speed networks in the most challenging
areas, responses were cautious with regards to any first mover advantages (to operators that are
willing to roll out next generation networks in challenge areas).
Access seekers
and
consumer
associations
warned about the risk of re-monopolisation, whereas
network owners
challenged the
proposition that a risk of strategic overbuild can be defined and distinguished from competition. Some
Member States
highlighted the need for local responses to sub-national competitive and investment
challenges, indicating openness to consider approaches to incentivise first movers on a geographical
basis, subject to suitable safeguards being built in. In supporting first mover incentives,
vendors
and
wider digital economy players suggest a concession model, with some operators noting that in such a
case regulators should be able to define a period in which the network operator is allowed to use its
network exclusively. Most stakeholders agreed that any first mover advantage should be subject to
safeguards against re-monopolisation. Wholesale-only models (which may counterbalance fears of re-
monopolisation) found the support of
equipment vendors and smaller/fibre-only network
operators,
but
operators in general and public authorities
disagree on whether such models would
have a positive effect on investment.
On oligopolistic markets, on the basis of BEREC's recently adopted report, all respondent
regulators
and
some Member States
are calling for the widening/strengthening of regulatory powers to deal
with new duopolies or oligopolies (where such market structures lead to sub-optimal market
outcomes) albeit still with a high threshold for intervention. Some propose symmetrical regulation as
a possible solution. Some alternative operators also raised concerns about the adequacy of approach
under the current SMP test and guidelines to tackle joint dominance or "tight oligopoly" market
structures. However, many operators warn of the risk of over-regulation if ex ante regulation tools are
broadened, without a clear economic underpinning, to tackle oligopolistic conditions beyond the
current joint dominance test, as set out in Annex II of the Access Directive and the SMP Guidelines,
or beyond the current threshold for applying symmetrical rules.
6.2.2.2.4
Spectrum management and wireless connectivity
The importance of wireless connectivity and wireless broadband, and its link and complementarity to
a very high capacity fixed connectivity is acknowledged in consultation responses. Industry is
supportive of a more co-ordinated approach and looks for additional certainty in investment and
possibilities to develop throughout the EU new wireless and mobile communications including 5G.
Member States generally underline the achievements in the field of technical harmonisation, and the
need for additional coordination to be bottom-up and voluntary; some of them call for a better balance
between harmonisation and flexibility. There is widespread recognition of the importance of more
flexible access and use of spectrum in the future from both operators and public authorities, although
disagreeing about how to realise this.
6.2.2.2.5
Evaluation of the current rules on spectrum management
While a majority of respondents consider the current regime to have significantly contributed to
promoting competition, almost half say it has only moderately achieved the aims of providing market
operators with sufficient transparency and regulatory predictability, promoting citizens' interests and
ensuring effective and efficient spectrum use. A third of respondents considered that the current
regime had only a minor impact on keeping the administrative burden appropriate and on promoting
the Internal Market.
A majority of respondents that spans public authorities, regulatory and trade bodies both in and
outside the electronic communications sectors, MNOs, converged and satellite operators, user
associations and vendors, consider the current regime to have contributed to harmonised conditions
for the availability and efficient use of spectrum. Member States and regulators have in particular,
been consistent supporters of this position. More reserved views are found among broadcasters and
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other respondents, notably from the transport sector. The regime has been significantly more effective
for new bands than for bands still requiring freeing.
There is a general perception among several respondents (converged operators, operator associations,
vendors) that technical harmonisation has worked well and that the involved actors (RSPG,
RSC/CEPT and the Commission) have delivered. Even those parties seeing little or no benefit from
the existing regime (M(V)NOs, cable, converged operators, non-ECS associations) acknowledge the
achievements in technical harmonisation, but stress persistent regulatory fragmentation. Points of
criticism concern the ineffectiveness in addressing interference issues (transport) and ensuring usage
efficiency.
As for the selection processes for limiting the number of rights of use, industry respondents, including
operators and vendors, criticize a lack of consistency as well as sometimes unnecessary restrictions of
usage rights. Some respondents recognise coherence of application in the sense of certain rules being
widely used, while results still differ (converged operators, ECS associations). A majority of
respondents (spanning ECS and non-ECS associations, M(V)NOs, converged operators and vendors)
considered that the lack of coordination of selection methods and assignment conditions has impaired
the development of electronic communications services. The authorisation methods most often
mentioned as efficient for wireless broadband were auctions and general authorisations.
While respondents comprising broadcasters, mobile operators, associations of mobile and alternative
operators, regulators and vendors consider that inclusion of spectrum provisions in several
instruments should not per se impede their effective interpretation and/or implementation, several
respondents including incumbent operators and some Member States nevertheless consider a single
instrument to be potentially more effective, stressing the benefits of applying the same set of rules to
all spectrum users, which is also supported by most vendors and operators/associations, subject to the
rules being consistently applied.
6.2.2.2.6
Review of spectrum management rules
Regarding objectives and principles,
most economic actors and some Member States
seek more
consistency in spectrum management to increase legal certainty and spectrum value, and to secure
greater transparency and predictability for investment, in particular on licence durations, pricing and
availability of spectrum. There is also large support from public authorities to remove barriers to
access harmonised spectrum across the EU, in order to foster economies of scale for wireless
innovations and to promote competition and investment, as well as to avoid cross-border service
impairments.
Operators
also stress problems - in particular, late access to spectrum, high reserve
prices, inefficient spectrum packaging, spectrum left idle and lack of long-term vision.
The majority of respondents consider that spectrum assignment procedures have a significant impact
on structuring the mobile markets and their competitive landscape, e.g. number of operators, price,
network investment, and consumer prices. Some (generally
large operators)
criticise the use of
assignment measures as indirect means to ex ante regulate the market (through caps, reservations)
without the associated objective criteria. Others (vendors,
some regulators)
also consider that
additional factors such as regulatory conditions (e.g. access obligations for MVNOs) and historical
national market development have a similar structuring impact.
Most responding
Member States, broadcasters and alternative operators associations
insisted on
national specificities and are generally satisfied with the current framework. While public authorities
could envisage limited coordination through common deadlines for making a band available or the
common definition of certain general principles, many economic actors seek greater harmonisation of
award methods and procedures (need and timing of spectrum release and selections, general principles
and objectives, transparency, ex-ante competition assessment, refarming conditions, timing of
advanced information to market participants, measures to promote use efficiency, spectrum
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packaging) so as to enhance legal certainty, support investments, promote competition, provide more
clarity to manufacturers and support economies of scale.
Member States
expressed much resistance
regarding coordination of spectrum valuation and payment modalities, while many
operators
oppose
fee disparities and excesses, and in general support greater coordination of assignment processes.
Most
vendors
supported harmonisation for predictability and a robust end-to-end value chain, but
warn that timetables alignment should not delay early movers.
Assignment conditions generally are considered as heavily impacting investment and business
decisions, competition and the single market. Most
operators
agree on the need for more consistent
binding assignment conditions to increase investment predictability, and in particular to support and
ensure objective, transparent and non-discriminatory treatment of operators, transparency and
alignment of timing and conditions of licence renewals, longer licence duration, flexibility to trade,
lease or share, technology and service neutrality limits, refarming conditions, technical performance,
use-it-or-lose-it clauses and interference mitigation before assignment decisions are taken. On the
contrary, there is strong opposition to harmonise or even use wholesale access conditions from
operators
and to a certain extent to harmonisation of coverage obligations from
Member States.
For
broadcasters,
decisions on criteria and conditions should remain at national level to consider local
specificities or media pluralism and cultural diversity. Some also insist on the need for compensation
in case of refarming.
Member States
reject full harmonisation but are open to a more common approach to spectrum
management, some could accept a peer review of national assignment plans as well as a certain level
of harmonisation or approximation of conditions and selection processes. A number of Member States
expressed their desire to remain flexible to support early take-up of new technologies and to
adequately balance harmonisation and flexibility in order to be able to adapt to market demand.
Most public and commercial respondents are calling for flexible or shared access to spectrum to meet
future demand, in particular for 5G, preferably on a voluntary basis;
vendors
and
operators
insist on
exclusive or licensed shared access for quality purposes.
Broadcasters
raise interference issues and
thus urge for careful selection of compatible sharing usages; in addition, some point to their
incapacity to at the same time compete for spectrum and meet cultural targets if flexibility is purely
market-based.
On refarming, a large majority including operators, vendors and their associations as well as
responding Member States and regulators seek further facilitation, notably on a voluntary basis except
in cases of inefficient use. The large majority of operators, vendors and their associations consider
that longer licence duration would be helpful in this regard. Most operators see a need to protect and
give priority to existing users to safeguard investments or avoid interference, while a minority
believes that appropriate spectrum pricing, trading and auctions can address this issue. When
facilitating refarming, some seek a careful balance between flexibility and preservation of
harmonisation.
With regard to facilitating deployment of denser networks, many respondents pointed to obstacles -
lengthy permit process, high administrative fees for back-haul provision, inappropriate fee structure,
lack of harmonisation of management of electromagnetic fields' emission - to the roll-out of small
area access points needed for mobile services, while some
Member States
disagree. Many market
actors and public authorities consider that a general authorisation regime would foster innovation and
competition both for services and end-devices and should include access rights to public and private
property to build a network.
Vendors
seek a common definition of small-area wireless access points
and the harmonisation of technical characteristics about their design, deployment and operation.
While opinions are divided as to whether end-users should be entitled to share access to their Wi-Fi
connections with others as a key prerequisite for the sustainable deployment of denser small cell
networks in licence-exempt bands, many public authorities and private respondents supported the
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deployment of commercial/municipal Wi-Fi networks in public premises, while seeking appropriate
regulatory safeguards for a.o. liability or exposure to EMF. Some operators reject such idea as
network roll-out could be facilitated via various forms of public-private partnerships, many stressed
that any such public support should be technologically neutral.
With regard to public protection and disaster relief (PPDR), a majority of respondents reject the
inclusion in licence conditions of obligations of service quality and resilience of network
infrastructure to enable a dual use of commercial mobile networks for PPDR, as MNOs' individual
business models do not combine easily with stringent PPDR requirements, and therefore should be on
a voluntary commercial basis only and based on net neutrality rules. Some operators believe that
providing PPDR services via commercial networks would be economically more efficient than
funding a separate network for PPDR services.
6.2.2.3 Sector-specific regulation for communications services
6.2.2.3.1 Evaluation of the current sector specific regulation for electronic communications services
With regard to the effectiveness of the current regulatory framework in ensuring a high level of
consumer protection, the clear majority of respondents (Member
States, telecom operators
and their
associations, broadcasters, vendors and OTT providers)
believe that the current framework
contributed to effectively achieving the goal of ensuring a high level of consumer protection in the
electronic communications sector across the EU.
Member States
noted that in general the framework
had positive effects on the protection of consumer rights regarding traditional electronic
communication services (ECS). In particular, provisions related to contracts and those facilitating
change of provider (switching) have diminished unfair lock-in practices and ensure a high level of
consumer protection.
Users and ECS/ECN associations,
as well as the majority of
operators
consider that the existing rules have delivered good outcomes and high levels of consumer
satisfaction.
Many respondents, however, consider that the current regulatory framework has failed to deliver
consumer protection with respect to emerging services, which are based on new technological
developments and currently fall outside the remit of the sector-specific rules. Most responding
Member States
support specific requirements to be applied to all communications services
irrespective of the provider ("traditional" telecom operators or "new" OTTs) in order to avoid risks of
(a) insufficient customer protection, (b) a lack of clarity, and (c) confusion among consumers who
might mistakenly believe that their communication is protected by sector-specific rules.
Some
telecom operators
think that the current provisions have become outdated with little substantial
value for consumers, except for basic provisions on emergency services, number portability and
interconnection and argue that competition in the sector would allow for the removal of regulation.
Regarding provisions constituting a particular administrative or operational burden, a majority of
respondents (mainly
operators and their associations)
believe that there are administratively or
operationally burdensome provisions. The biggest concerns are expressed regarding different and
overlapping legal frameworks, e.g. Consumer Rights Directive (CRD); Universal Service Directive;
Unfair Commercial Practices Directive. Some respondents argue that this leads to over-regulation, too
detailed provisions, and inconsistency of rules. Some
alternative operators
consider the application
of end-user protection rules to business customers as burdensome. According to other
incumbents
and their subsidiaries
almost the entire Universal Service Directive is burdensome.
With regard to provisions to be repealed, the majority of respondents (mainly
telecom operators
and
their associations,
a
few broadcasters, vendors and OTTs and a Member State)
have identified
certain sector-specific end-user rights’ provisions, which they consider are no longer relevant. These
include provisions such as contract rules which are covered by various other directives, in particular
the CRD. Regarding the maximum contract duration, some
telecom operators
suggest either an
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application of these rules also to OTT communications, or their abolition. One
telecom operator
suggests the repeal of Art. 34 USD as out-of-court dispute settlements are also addressed in the
Directive on Consumer Alternative Dispute Resolution (ADR) and the Regulation on Consumer
Online Dispute Resolution (ODR). Some
operators
suggest the repeal of the provisions on printed
directories and public payphones. Some
Member States, mobile operator association, EU and
national consumer associations and a trade union
have not identified any provision to be repealed.
With respect to provisions protecting disabled end-users, the USD contains specific requirements
under the universal service obligation (USO) and regarding the equivalence in access and choice. The
majority of the respondents (telecom
associations, telecom operators, users' associations, an
association of users with disability, other NGOs, regulators and Member States)
found that the
current regulatory framework has been effective in achieving these goals. Several
operators and
NGOs
stated that the relevant Art. 23a is too weak ("Member States shall encourage"), it leaves too
much discretion ("where appropriate") and does not contain financing provisions. They consider that
it has therefore been only moderately effective in achieving the goals of providing equivalent access.
As a consequence, an inconsistent diversity of approaches has developed across the EU.
Incumbent and larger operators
raised the financing issue. Initiatives designed to improve
accessibility of services to disabled people should be borne by the public authorities. If any
contribution is required from the sector, it should be requested to all players, including OTTs, in
proportion to their incomes and the number of users (“responsibility-sharing based on a
proportionality principle”).
With regard to the efficient implementation of number portability (NP) provisions, a large majority of
respondents consider that the current NP provisions allow significantly or moderately for their
efficient implementation. However,
operators
criticised the diversity of approaches, and of technical
means put in place, in various Member States. In some Member States, there is no common database
of ported numbers and in a few of them direct routing of ported calls is still not available. Some
operators and their associations
argued in favour of a receiving provider-led porting process. Some
respondents stated that the current NP obligations are not well suited to new services such as M2M or
IoT.
With regard to the relevance of 112 provisions to ensure an effective access to emergency services, a
large majority of respondents agreed with the significant relevance of the scope and requirements of
the current regulation of access to emergency services.
National authorities
are also in line with this
trend. The
telecom industry
highlights the importance of reliable access to emergency services that,
in view of the technical standards and legal arrangements in place today, can be provided today only
through ECS.ECN/ECS argue that access to 112 obligations should be imposed on OTTs as well, if
technically feasible. A large number of stakeholders consider that all the voice services perceived by
the users as substitutive to the current PSTN voice service and which also give access to E.164
numbers should be subject to the same obligations regarding the access to emergency services. In the
same vein
regulators
support an obligation on all communication services (including OTTs) that give
access to numbers in the numbering plan.
As regards the effectiveness of network and service security rules in achieving their objectives, over
half of all respondents (including several
Member States,
most
telecom operators
and some
vendors)
consider that the rules have been effective. A minority (one
Member State, a
few
telecom
operators
and some
associations of operators)
found them ineffective. More than a third of the
respondents (many incumbent and alternative telecom operators and associations, several ENISA-
member national authorities) underlined the need to involve the complete Internet value chain
(including OTT services, software and hardware).
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6.2.2.3.2
Review of the sector specific rules for communications services
With regard to the scope of the future rules and the need for sector-specific regulation of
communication services, the majority of respondents including
BEREC, Member States, several
associations of broadcasters, of cable operators and of alternative operators, consumer
associations, cable players and OTTs
note that there is still a need for sector-specific regulation of
communications services as ECS have become an essential service in every person's life, crucial to
ensuring a well-functioning society and economy. Therefore sector-specific rules are still considered
necessary for sustainable competition, innovation, a healthy low concentration of providers' market
power and also to guarantee that consumers can reap the benefits of such competition. Several areas
were listed, where sector–specific regulation is still needed: retail Internet access services, numbering,
end-user protection, universal service obligations, roaming and downstream availability and
accessibility of a wide variety of audio-visual services etc. Nevertheless, several of those respondents
prefer horizontal to sector-specific regulation wherever possible. A few of them, however, oppose the
inclusion of OTTs within the scope of such rules, because there remain fundamental differences
between the telecoms market and the market for Internet applications and content, and applying the
same detailed sector-specific obligations would be a disproportionate burden for a highly dynamic
industry sector.
Regarding the revision of the current ECS definition,
BEREC, several Member States, most
operator associations, most incumbents, some cable players, all user associations and some
broadcasters
consider that the current definition of ECS should be reviewed owing to the increasing
uncertainty on the scope of the definition of ECS related to "conveyance of signals", the inconsistent
regulatory obligations for similar services and the convergence of communications services. Several
respondents emphasised that a future-proof definition needs to be end-user-centric, the key factor
being substitutability from a customer perspective. Those opposing revision of the definition, (some
Member States, OTTs, software and equipment vendors, cable operators, some broadcasters
and a few individuals),
argue that the concept of ECS has proven itself and changes may create
regulatory, legal and investment uncertainty. According to some stakeholders, instead of including
OTT services in the definition of ECS, the current regulatory requirements on traditional electronic
communications providers should be loosened. In
OTTs'
view, if the definition is reviewed, the
difference between Information Society Services and telecoms networks should be maintained.
The majority of respondents (some
Member States, operator associations, most incumbents and
vendors)
are of the opinion that for consumers OTT services are a functional substitute for traditional
ECS. The minority of respondents (some
Member States, a few operators, OTTs and consumer
and user associations)
submit that OTT services are functionally different from ECS. The majority of
respondents (Member
States, regulators, most incumbents, alternative operators, associations,
trade unions, vendors)
are of the opinion that all functionally substitutable communications services
should fall under a new common definition, but have significantly varying positions on the types of
obligations that should apply to services falling within such a definition.
The minority of the respondents (several
Member States, NRAs, some associations, broadcasters,
OTTs, a few cable and fixed players)
suggest maintaining the "conveyance of signals" criterion in
the definition of ECS. For broadcasters that criterion helps in distinguishing telecommunications from
audio-visual services. However, the majority of respondents (several
associations, most MNOs,
most incumbents and few software and equipment vendors)
do not consider "conveyance of
signals" as a necessary criterion. Rather, the lack of clarity in the ECS definition, when assessing
whether services “consist wholly or mainly in the conveyance of signals”, opens the door to different
interpretations and inconsistencies. According to
BEREC,
it "is worthwhile to examine whether it is
still an appropriate distinguishing factor."
With regard to the elements of the ECS definition related to transmission services in networks used
for broadcasting,
all broadcasters and their associations, alternative operators and their
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associations, many fixed and converged fixed/mobile operators, an equipment vendor and
private individuals
advocate that these should continue to be considered as ECS. For
broadcasters,
excluding transmission services from the definition would mean that they are omitted entirely from
the telecom framework, undermining important legal protections for broadcasting (e.g. transmission
obligations). For some respondents "transmission services in networks used for broadcasting" should
not be considered as ECS. They argue that in the light of the convergence of the legacy broadcasting
transmission services and internet media services (including broadcasting), the transmission of the
service is platform-based and no longer network-based and any reference to services provided on a
network has to be eliminated.
With regard to a possible differentiation between managed and best-effort services in the ECS
definition, the majority of respondents (incumbents and
alternative
operators and their
associations,
vendors and broadcasters)
prefer no differentiation between
managed and best-effort
services in the
ECS definition as such a differentiation would facilitate circumvention of the rules by opting for 'best
effort provision' free of obligations. As to the question whether sector-specific regulation should be
limited to Internet Access Service, there is almost no support for such reduction, with only a few
exceptions.
Regarding the application of sector-specific provisions (end-user and other) to the IAS,
telecom
operators, industry associations and vendors
agree that as a general rule only horizontal
competition and consumer law should apply to internet access service and that, if any sector-specific
provisions are needed, these should apply to all other digital services. Almost all
national
authorities,
user
associations, OTTs, some broadcasters and IT service providers
see a need for
further end-user rights in relation to IAS in addition to those included in the proposal for the Telecoms
Single Market Regulation, although in many cases these stakeholders do not provide detailed
arguments to explain this position.
On the issue of definition of communication services, a significant number of respondents
(incumbents
and alternative operators)
emphasise that in an "all IP" environment network
interconnection is to be distinguished from the interoperability of services as users would be tied to a
single connectivity provider but not to a single communications service provider any more.
Some respondents do not believe that there is a need to apply the existing, as well as any further end-
user rights, to communication services (some
Member States, a large number of mobile, fixed, and
cable operators, and OTTs).
The main argument put forward by them is that horizontal regulation
(consumer and data protection), together with competition-law tools, should suffice. Those who were
in favour of having end-user rights applicable to communication services are mostly
Member States
and consumer protection bodies,
while
alternative operators
suggested that full harmonisation is
needed for contractual information, transparency measures, contract duration, switching, and bundles.
Several associations, most broadcasters, a few incumbents and converged fixed/mobile players
consider that there are new sector-specific end-user protection issues that need to be addressed. Among
the areas listed are: bundling of contracts and their impact on switching; communications contracts
with subsidised equipment; continuity of service (telephone or internet) when switching; control of
consumption; contract termination in case of the tacit extension of contracts; rights of the end-users
when relocating; improved rules for end-users with disabilities, findability of public-interest content.
Finally,
regulators and others
indicated that some new end-user protection concerns can be
anticipated in relation to services which are substitutable to traditional ECS, including access to
emergency services, network resilience, cyber security and interoperability between different digital
services, , transparency, protection of data confidentiality and privacy.
Trade unions, consumer organisations, vendors and directory services
expressed support for
specific rules with regard to voice services for end-users. These contributions highlighted the
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importance of availability (call to emergency services, functionality during power outages and
disasters) and the importance of voice quality as a distinctive characteristic. Some
mobile operators
considered voice-specific requirements still relevant, noting the need to ensure interconnection and
access to emergency services, while others noted the importance of requirements such as data
retention/lawful intercept. In general most
incumbent operators
would prefer horizontal regulation,
while maintaining the possibility of a few specific requirements (such as emergency services) and
consumer information was noted as safeguard measure. Directory service providers noted a risk that
without a specific requirement (Art. 25 USD), operators might not provide them with subscriber
information on a fair, objective, cost-oriented and non-discriminatory basis.
Half of the respondents (some
Member States, broadcasters, a few telecom operators and
consumer protection bodies)
are of the view that providers of communication services as newly to
be defined should potentially be subject to an SMP-based regulatory regime, if they can limit
competition, based on a market analysis and consistent with the non-discrimination principle. Those
disagreeing (some
Member States, associations of incumbents, alternative and mobile operators,
vendors and OTTs)
highlighted the existing high level of competition, market dynamics and
diversification of providers, and stated that competition law and horizontal consumer protection offer
sufficient protection in this regard.
There is a majority support ranging from
national authorities to mobile operators and incumbents,
to extend the scope of the access obligations to emergency services to best-effort services. At the
same time, it is recognized by all stakeholders that minimum quality of service should be ensured for
emergency communications and best-effort communication cannot provide the end-to-end quality that
managed services can. Some
operators
support imposition of a general obligation to give access to
emergency services, adapted to the quality of service requirements that each type of services
(managed vs. best-effort) can provide.
Regarding numbering resources
and assigning numbers directly to M2M users,
most MNOs,
including smaller ones,
highlight that this solution raises many implementation and security issues
and risks of fraud, could exhaust national numbers, would endanger interoperability and end-to-end
connectivity. There is a clear consensus that to cope with the numbering needs of M2M in the future, a
clear framework for extra-territorial use of numbers is necessary to ensure sufficient numbering
resources. A majority of respondents see a demand for over-the-air provisioning of SIM cards for M2M
communications, and to a lesser extent for end-users' own devices later on. However, the idea of
regulatory promotion of over-the-air provisioning is not supported, with the argument that it should be
up to the markets to decide on specific technological options.
While there is a majority view that transmission obligations imposed on electronic network operators
(must carry rules) and rules related to electronic programme guides should be adapted to new market
and technological realities, there is sharp disagreement as to how such adaptation should be conceived.
Extension of the current rules is supported by some
Member States
and most
broadcasters,
whereas
most
telecom operators
are in favour of reducing the scope of the rules.
Public service broadcasters
consider that the future scope of rules should extend to interactive and non-linear services, should also
cover hybrid TV signalling and should apply on a technologically neutral basis to all distributors of
audio-visual content, not only to ECNs. Telecom
operators
call for a level playing field between
broadcasters and online platforms and call for improving access to content rights. Some
cable and
telecom operators
call for complete removal of must carry obligations or at least to limit them to the
main/most essential general interest channels.
Commercial broadcasters, one telecom operator
and a
citizen consider that the current provisions are adequate.
Media regulators
and some
telecom
and
cable operators
consider that the presentation and the order
on navigation interfaces is crucial for user choices of audio-visual content and that ensuring non-
discrimination of general interest content is sufficient.
Public service broadcasters
consider that
Member States should be competent to ensure 'findability' of general interest content on user
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interfaces of significant networks and audio-visual platforms and that regulated EPGs should be
included in new TV sets. A
pay-tv provider
considers that prominence of content could also be
improved by better referencing/tagging of national and European offers. Several
telecom operators
point to the need for broadcasters to be obliged to make real-time signalling available, in order for
EPGs to work satisfactorily.
6.2.2.4 The universal service regime
6.2.2.4.1 Evaluation of the current rules on universal service
The majority of
Member States and regulators
agree that universal service has been effective and
efficient in safeguarding end users from the risk of social exclusion, while
most of the operators
see
little or no impact and efficiency at all. Proponents of universal service argue that the availability of
certain basic services increased and that services became affordable and accessible to all. Opponents
claim that (1) the universal service regime has become outdated; (2) the high level of competition for
fixed and mobile services ensures the affordability of tariffs and not the regulatory obligation; (3) the
calculation of net costs have been fraught with controversy, challenges, and appeals; and (4) the
overall administrative burden and regulatory uncertainty have been very high, for a regime which has
not produced major benefits.
As for coherency with other rules, the majority of
Member States
agree that universal service has
been coherent with other provisions of the framework and state aid, while most of the
operators
see
little or no coherence at all.
The vast majority of
operators
consider that this review should be the opportunity to redefine or
completely reconsider the universal service regime (including its financing), with many claiming that
it has become obsolete.
Member States
mostly claim the need to maintain a universal service
scheme, with flexibility at Member State level on funding and on broadband.
Regulators
support
maintaining the status quo.
6.2.2.4.2
Review of the universal service rules
With regard to the scope of universal service most respondents consider that the current scope is
outdated because it was shaped in a context of market liberalisation and since then market conditions
have drastically evolved, with more competition and choice available to consumers.
There is a general acceptance among the respondents to exclude public payphones and comprehensive
directories and directory enquiry services from the scope. Due to availability of mobile telephony and
internet, there is no usage of or demand for public pay phones.
Regulators
acknowledge a decreasing
demand/usage for public pay phones but argue that Member States should retain flexibility to include
pay phones within the scope. As for directories, the availability of the same information through the
internet is a further competitive alternative. However, some directory and local search providers
underline that access to data risks being refused in the future, absent a universal service obligation
guaranteeing access to directory enquiry services.
Concerning the provision of telephony services at a fixed location,
operators
mostly agree that this
inclusion in the universal service scope is no longer necessary, because various types of players are
providing voice services (mobile, VoIP) on a competitive basis while
regulators and Member States
mostly claim the opposite.
With regard to the inclusion of
broadband within the scope of universal service,
while most
operators and their associations
have no doubts about the positive impact of broadband on social
and economic life, they claim that USO is not the right instrument to foster broadband deployment. In
any case, if broadband were to be included in the US regime, it would have to be revised substantially.
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Respondents supporting both in and out options (mostly
Member States and regulators)
submit that
Member States should retain the flexibility to make the choice at national level.
Most
operators and their associations, several Member States and regulators
consider that
broadband under universal service bears high risks of market distortions and cost inefficiencies. In
particular, industry funding is considered too distortive. The risk of lowering incentives to invest,
crowding-out effects, delays in network expansion and unpredictable large financial transfers between
competitors (if industry funding is used) are considerable. Instead, an investment-friendly regulatory
framework, lowering of deployment costs, demand stimulation, and well-designed public subsidy
schemes targeted at cases of clear market failure (evaluated by an impact assessment) should be used
for fostering broadband instead of USO. Many also highlight the need to promote competition and
commercial investment via regulatory tools. The use of such other public policy measures should be
based on timeliness (so as not to come in too early to disrupt or crowd out private investments),
proportionality, non-discrimination and technological neutrality.
As to how broadband should be defined if included: those favouring the speed aspect (consumer
groups, several Member States, media players, operators)
consider it a simpler and more neutral
parameter.
Media players
argue for sufficient speeds to deliver media content. Those favouring the
criterion of the use of certain types of services (ECS/N
associations)
generally feel that it is more
flexible, able to evolve with time, more technologically neutral and has a more direct link to social
inclusion. Some players are wary of setting the speeds based on the average speeds used by the
majority of the population, so that the speeds are not set at a high level. With regard to the list of
essential services, most of the respondents agree that the list of services should be based on what is
necessary for social (digital) inclusion, but they have varying views on what set services this would
entail.
With regard to financing universal service,
most
operators and associations
agree that the most
appropriate and equitable way of financing the universal service, in particular in light of the
possibility to include broadband within the universal service, would be through public funds.
Broadband for all should be supported through general taxation since it is a general public interest
goal that benefits society as a whole. The scope of universal service should be defined narrowly,
representing only
a safety net
in a market-driven sector. Many
operators
state that industry funding,
especially when limited to operators, is disproportionate. The use of public funds would have the
advantage of limiting the risk of setting too high targets for the universal service and is the only way
of ensuring that Member States properly weigh the needs against costs because of the need of
reducing public expenditure and maximising public economic welfare. The high uncertainty of the
right to compensation in the present universal service system and the difficult enforcement that led to
numerous disputes/litigations are a considerable weakness to be eliminated.
Several actors considered a combination of public funding and industry funding acceptable with the
majority of respondents
however specifying that providers of on-line content, applications and
services should contribute, given they are the biggest beneficiaries of access.
Broadcasters
warned
against the redirection of resources from audio-visual content, innovative online services and digital
skills activities to the financing of infrastructure, since availability of such content is an important
determinant for the development of broadband networks.
According to
regulators,
the current funding mechanisms for USO remain relevant and that
flexibility should be retained, allowing Member States to choose the appropriate mechanism.
Most market actors and regulators
agree that universal service is not the right instrument to foster
very high-capacity connectivity for public places. Market forces deliver these services and other
public funding policies should be used because the service is of public interest. Only a small minority
of respondents (satellite
operators)
agree that universal service should play a future role in to help
realise public interest objectives, but this should be financed by public funds.
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Most market actors,
Member States and consumer organisations
submit that obligations related to
disabled end-users should be incorporated in horizontal law. Respondents stress that any obligations
should apply equally to all market players. Through the broader implementation of the provisions of
Article 23a of the Universal Service Directive, a wider choice of services and tariffs for disabled users
could be achieved. According to
regulators,
specific provisions for disabled end users are already
included in the national regulatory frameworks of many Member States. Measures in the Directives
should continue to be flexible enough to adapt to the situation of each country.
6.2.2.5 Institutional set-up and governance
6.2.2.5.1 Evaluation of the current institutional set up and governance structure
The perception as regards NRAs' independence is generally positive, in particular those safeguards
applicable to independent NRAs. This perception is supported by different kinds of stakeholders, in
particular public and private, including
operators
(mostly
incumbents as well as some alternative
operators and trade associations).
Just over half of the respondents consider that there is generally a sufficient degree of coherence in the
application of the regulatory framework by the various institutional players (NRAs, BEREC, the
European Commission). This idea was supported by
public authorities, especially regulators
and
approximately
half of the operators.
Some operators propose to reduce the overlapping competences
at EU and national level and to reduce and prioritise the objectives of the framework.
BEREC's role is positively perceived in relation to the Art.7 procedure, roaming, net neutrality, M2M
communications and advice to EU Institutions. While more than half of respondents (including
national regulators) considered that BEREC has achieved its main objective, a group of
incumbent
operators,
on the contrary, considered that BEREC has not achieved its main objective, arguing that
flexibility is overall favoured compared to harmonisation/consistency of application and that BEREC
has a tendency to support over-regulation. Some
operators
stated that BEREC should be constituted
as a supervisory authority independent from national interests or that it should be a proper EU
regulatory authority with decision-making powers.
Some respondents submit that BEREC’s current institutional set-up results in it opting for greater
flexibility at national level or the lowest common denominator instead of focusing on a more
consistent or harmonised approach for the single market, and therefore, BEREC's Positions and
Guidelines are sometimes just descriptive documents and not a collective commitment or a
development of best practice guidelines. Suggested proposals for addressing this include: allowing
BEREC to make binding decisions, appointing board members for four years, establishing a Director
appointed by the Board, more adequate funding, reassessment of the location of the BEREC Office,
more consistent launch of consultations, longer consultation periods and introducing a two-stage
consultation process on key policy matters. There were also calls for a stronger advisory role to the
Commission, more pro-activeness, and improved transparency and stakeholders' involvement.
As regards consistency of market regulation, just over half of the respondents answered that the
Art.7/7a process had been effective in achieving greater regulatory consistency, while a third were of
the opinion that this process had little or no effect on consistency. In the first category of positive
responses, there were many
alternative operators, FTTH-operators
and some
incumbents and
MVNOs.
Also those
regulators and Member States
who responded were largely positive. With
regards to areas which could be improved, many respondents who were generally positive suggested
that the entire process could be streamlined, made less burdensome for all stakeholders and that the
Commission's role vis-à-vis remedies (under Art.7a) should be strengthened, either by a veto power,
or by a so-called double-lock veto (i.e. regulators would be required to withdraw the draft regulatory
measures if BEREC agrees with the Commission's serious doubts).
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Those who disagree, are mainly
incumbents
as well as some
individual respondents.
The main
arguments brought forward for this view differ widely. On one hand, it is criticised that the current
process does not lead to enough consistency. On the other hand, some respondents complained that
the current system attempts a 'one-size-fits-all' approach not taking sufficient account of the need for
different solutions in different Member States, i.e. not giving regulators enough discretion.
Regulators
challenged the need to ensure further regulatory consistency and the link between the lack
of consistency and the current institutional set-up.
Regulators
state that access markets are
intrinsically local and the nature of competition is not homogeneous either for supply or demand
reasons.
As regards the current spectrum governance, the technical side of harmonisation is seen by most
respondents to be working well with its aim of harmonising the least restrictive conditions. There is
criticism of the present system's capability to bring the actual services into being in a coordinated and
timely manner.
There is significant support for the role of RSPG in assisting and advising the Commission on radio
spectrum policy issues, with some respondents promoting it for a status similar to BEREC. The
interplay between national experts and the European format is seen to work well. In particular,
vendors would like the RSPG deliberations to be more open to industry participation.
6.2.2.5.2
Review of the institutional set-up and governance structure
Institutional set-up for market regulation
Almost half of the respondents agree that the current institutional set-up at EU level should be revised
in order better to ensure legal certainty and accountability. Respondents call for i) a clearer division of
powers between the different institutions (to avoid overlapping), ii) making sure that institutions are
accountable for their decisions (both politically and legally), iii) a high level of transparency in
decision-making (improved stakeholders' involvement). The arguments brought forward for change,
however, differed considerably. On the one hand, a group of mainly
incumbent
operators proposed
more discretion for NRAs with a reduced role of the Commission (or BEREC), highlighting the need
for taking account of national circumstances. On the other hand, a number of voices have called either
for an increased role of the Commission to ensure consistency (through a veto for remedies, for
example), or even the establishment of a pan-EU regulator.
The regulatory community
was of the
view that there are benefits associated with all NRAs having a common toolkit and flexibility to
determine which tools to use, in particular in view of the increasing complexity of the sector.
Amongst those who favoured a revision of the current institutional set-up, proposals differed from
BEREC adopting a limited advisory or benchmarking role (giving opinions and giving assistance to
NRAs where needed, providing timely technical guidance, etc.) to turning it into an EU regulatory
authority with proper decision-making power. Some respondents called for strengthening BEREC's
role within the Art.7 procedure and also for improving coordination rather than implementing
institutional changes. Some incumbents and
alternative operators
submit that BEREC in its current
form has shown a limited ability to act strategically and in the interest of EU competitiveness and, in
particular, for the development of the single market. Further it was alleged that it does not contribute
to the objectives of the framework in a satisfactory manner. Most respondents (all
types of operators
and public bodies)
considered that the current EU consultation process can be streamlined. However,
in the detail as to how this could be done the respondents vary considerably. Whilst some respondents
call for more NRA discretion (and a less prominent role for the Commission), others ask for full
harmonisation measures, at a minimum regarding the termination markets. In addition, a shift from
ex-ante
to
ex-post
control is proposed, rendering an Art.7 procedure less relevant. Among those who
disagree (largely
alternative operators),
most argue that the current process is well-balanced and has
proved effective.
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Some
incumbents
advocate for dividing competence between EU and national levels, making
BEREC redundant, arguing that stronger compliance or a more binding nature of BEREC guidance
would not be appropriate. On the contrary, some
alternative
operators supported a stronger role of
BEREC within the Art.7 procedure and the strengthening of its influence on the scope of remedies in
case of a veto of the Commission. The sentiment as regards whether BEREC should be given more
executive tasks or binding powers is generally negative (including the
majority of operators as well
as public authorities).
Some respondents are concerned by the lack of accountability of BEREC
because it has a 'de
facto'
significant influence on national regulatory decisions and decisions by the
Commission.
The majority of the respondents disagreed with the establishment of an EU Agency with regulatory
decision-making powers for all the different areas (market regulation, EU spectrum management, end-
user protection and other). Some respondents, mainly
operators,
recommended that an EU agency
should be responsible for services of the EU single market or for issues such as consumer protection,
content, service platforms, whilst NRAs should continue dealing with local issues (e.g. network
access). As regards spectrum and numbering there was a call for more harmonisation, but there were
divergent positions as to whether these issues should be dealt with by an EU agency.
The regulatory community
expressed its view against further harmonisation and indicated that
differences in regulatory approaches can be beneficial where they allow experimentation and
innovation (leading to the discovery of new best practices). Respondents were divided as to whether a
common EU approach would add value in addressing the differences in the regulatory approach
chosen by NRAs for individual markets in similar circumstances.
The regulatory community
also
notes that, in the wider digital ecosystem, it is particularly important to adopt a “light touch”
regulatory approach so as not to undermine investment and innovation. In principle, there could be
more room for co-regulation and self-regulation mechanisms. According to
regulators,
while this
kind of innovative and “softer” approach to regulation can be effective, where it is pursued it will be
important that its details are defined “bottom-up”, through the direct involvement of the affected
stakeholders.
Consumer associations
called for caution and considered that co-regulation and self-regulation
should only be used on very specific issues and under strict conditions, such as: strong independent
governance of the self-regulatory scheme, oversight and enforcement across the sector, and the
presence of effective sanctions in cases of non-compliance.
As regards BEREC and the BEREC Office, almost half of the respondents had identified provisions in
the framework which in their opinion should be revised. Proposals put forward include longer or
extendable mandates for the BEREC Chair, relocation of the BEREC Office and definition of the role
of BEREC in drafting Recommendations. Some
national regulators
considered that the governance
structure is satisfactory but suggested a number of proposals for the mandate (consultation by the
Commission on legislative initiatives, new responsibilities as regards connectivity objectives, more
involvement in the area of spectrum through the exchange of best practices in the design of auctions
and beauty contests and monitoring of coverage and QoS), deliverables (binding acts in limited
circumstances, reinforced data collection) and functioning (simplification of the role of the
Management Committee, establishment of an office in Brussels).
Consumer and civil society organisations
referred to the need for better collaboration of BEREC
with consumer organisations, civil society organisations and individual operators in addition to
operators' associations as well as with other bodies/agencies such as ERGA and ENISA. The
regulatory community
has also identified the need to strengthen the cooperation with other networks
of regulators established in adjacent economic sectors.
NRA status and competences
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There is overall support for strengthening NRAs' independence, in particular by ensuring i) complete
separation between ownership of providers and regulatory tasks, ii) political independence in
particular in cases of restructuring, iii) control of adequate human and financial resources and iv) no
political appointment of Board members.
Alternative operators
stated that NRAs' independence may
also be affected when sector-specific NRAs are merged with other authorities. Respondents favoured
that the powers of NRAs are extended to areas such as State Aid, consumer protection and
coordination of spectrum policies.
The regulatory community
stressed the need of aligning the
minimum competences (including end-user protection) of NRAs to those of BEREC.
A clear majority of respondents considered that NRAs should have a role in mapping areas of
investment deficit or infrastructure presence because they are vested with the necessary powers to
access relevant information and have the necessary expertise, as well as independence. Those opposed
to such a role contested as a matter of principle any public interference with investment. There is
strong support to a revision of the framework to better accommodate the role of NRAs regarding state
aid, notably i) identification of target areas, ii) setting access price and access obligations, iii) ensuring
better coherence between state aid and ex-ante regulation and iv) resolution of disputes. A few
respondents propose that the role of NRAs regarding mapping of infrastructures or setting target areas
must be limited to provide technical assistance to the relevant competent authorities or to being
consulted.
Most
operators
indicated the need to revise several aspects of the general authorisation conditions,
strictly interlinked with some general substantive choices on the scope and extent of regulation on
ECNS (level playing field), in order not to hinder the cross-border provision of electronic
communications services and networks. Several operators suggested a specific lighter regime for
some categories of services (best efforts OTT, business services, small cross-border providers) in
order to reduce cross-border obstacles. Other suggestions included the harmonisation of Mobile
Network Codes conditions, reducing the scope of national discretion in setting the conditions attached
to rights of use, and a common notification template.
The principle according to which established and non-established operators should be subject to the
same rules in the country of provision was stressed by several respondents. The extension of
notification requirements to OTTs as well as the harmonisation of a notification template and
administrative simplification (online submission, single language version, one-stop-shop,
harmonisation of categories of services) were suggested, in particular by business users and
cross-
border providers.
On numbering, most respondents do not consider it necessary to allocate more executive powers to
BEREC, in particular since numbering is a national competence and existing harmonisation at
CEPT/ITU/COCOM level seems to be working. On the contrary, some
operators
did not exclude the
power to grant pan-EU numbers for specific services (M2M).
Institutional set-up for spectrum management
With regard to spectrum governance, in order to serve the future wireless connectivity needs of the
EU, a common EU approach to governing spectrum access was welcomed by respondents in order to
enable technologies to be used seamlessly, but respect for spectrum as a national asset is required.
Delays in availability of spectrum and fragmentation between conditions of use in different Member
Stated were noted. Some respondents promoted a stronger role of the Commission. Some respondents
disagreed and stressed the national character of spectrum policy.
As regards spectrum management,
the regulatory community
encompassing both BEREC and
RSPG was of the view that the EU already benefits from substantial coordination and harmonisation
processes, and no further EU-level coordination procedures are necessary. However, RSPG showed
openness to a peer-review mechanism as regards spectrum assignment.
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As regards the need for binding guidance on certain aspects of assignment procedures and conditions,
there was a split between
regulators
and (mainly)
broadcasters
that preferred a national approach
and telecoms operators that supported a certain level of binding guidance. Most respondents
supported the Commission issuing Recommendations (Art.19 FD) on assignment conditions and/or
procedural aspects, often qualifying it with basing any Recommendation on an RSPG/RSC process.
The majority of respondents supported the idea of establishing a mechanism similar to that set by
Article 4 of the Radio Spectrum Decision for certain key assignment parameters, at times pointing out
the need to choose between this process and the one under Art.19 FD.
There is little demand for mandatory
pan-EU or regional assignments.
Most respondents questioned
the need for EU-wide licences. A preponderance of answers viewed assignment as a national matter.
Any wider geographical scope should involve the Member States with some respondents viewing it as
a Council matter.
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6.3
ANNEX 3 - Discarded options
The following annex presents the options discarded that were not assessed in terms of impacts and
provides a rationale of the reason why they were not retained. The topics included below are further
investigated in the IA support study, SMART 2015/0005.
6.3.1
Access regulation
Full deregulation of telecoms networks;
Full deregulation of telecoms networks similar to the
system that applied following market liberalisation in New Zealand and now applies in the US.
This option was considered in light of the fact that when it was first introduced, it was envisaged
that the framework would enable a gradual roll-back of regulation with eventual reliance on
competition law. However, a full deregulation was discarded due to the disruption it would bring
to the industry (although option 4 describes a sunset-clause scenario).
Regulation of non-collusive oligopolies on the basis of a unilateral effects test similar to the
one used under the European Merger control regulation.
This approach has been considered
by some NRAs and new entrants in the market as an alternative to the finding of joint SMP, or
‘joint dominance’, as a basis for imposing regulatory remedies to redress market failures on
oligopolistic markets. It should be kept in mind that oligopolistic market structures in network
industries are likely, and in certain cases efficient, market outcomes. They are also the result of
the market liberalisation over the past twenty years. It is thus far not clear on what economic
grounds such an additional concept could be identified, and the merger-specific concept of
unilateral effects is not adequate. BEREC has raised this issue, but has recognised that the
underlying economic assessment approach is not yet clear. As criteria for such a new intervention
threshold are difficult to establish and therefore the risk of overregulation and further regulatory
fragmentation increases, it does not seem appropriate to increase the regulatory burden by
deviating from the current significant market power test.
Any competition concerns that may arise could be alleviated by facilitating alternative
infrastructure roll-out through symmetric access for strictly non-replicable assets and by
providing long enough transitional periods when regulation is removed. Furthermore, the
future
revision of the current guidelines on market analysis and the assessment of significant
market power (SMP guidelines)
is intended to bring more clarity on the criteria for the finding
of joint dominance, based on the experience with the Article 7 case practice and relevant
jurisprudence, which would assist NRAs to identify joint dominance. For this purpose, the present
SMP Guidelines need to be reviewed in line with the developments of EU law, with the aim of
further clarifying the tools for the correct application of this concept in the electronic
communications sector.
The experience in applying the principle of collective dominance by NRAs is limited. Since 2002,
less than ten cases proposing a joint SMP finding have been notified to the Commission (out of
more than 1,800 notifications in total), primarily in mobile origination markets (Market 15 of the
2003 Recommendation on Relevant Markets). The reasons for this could be manifold and will be
explored when SMP guidelines will be reviewed.
Mandatory structural separation of former monopolies; this option would entail a
mandatory breakdown of the incumbent telecom operator.
Under this option a structurally
separate operator supplies dark fibre on a wholesale –only basis and cannot compete on services.
The ownership of the two operators would then be distinct. The model would follow the
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1664251_0028.png
experiences being developed in New Zealand
346
, Australia or Singapore. The current regulatory
framework already contains a procedure for exceptional measures, potentially beyond voluntary
separation. Thus, on the basis of the Access Directive, structural separation is a remedy which is
already available to NRAs. The concrete legal basis, would be Art. 8(3) for forms of separation
going beyond the functional separation foreseen in Art. 13a. Although this measure has been
advocated by a number of competitive and fibre operators in the public consultation, a mandatory
structural separation would impinge on the existing ownership rights and it was decided not to
pursue this option as a central part of the EU-level policy prescriptions. The proportionality of
such a measure would be put into question by the fact that voluntary separation is already
promoted by the measures described in chapter 4.
Mandatory copper switch off.
This option was discussed because
competitive
pressure from
legacy copper networks can be considered as one of the barriers to NGA deployment. Some MS
have trialled copper switch-off and operators have already announced the de-commissioning of
local exchanges and copper network switch-off in order transfer their customers base to their
NGA platform only. To date, however, no copper switch-off was mandated in any MS. Network
owners strongly opposed it in the public consultation the mandatory nature of such a move which
would cause disruption in network management. A mandatory copper switch-off was judged as
not feasible for proportionality and legal reasons, but a clearer and more predicable mechanism
can be provided to the incumbents who decide to switch off copper network, as envisaged under
option 3 for access.
Explicitly reducing legacy copper access charges
with the aim of incentivising incumbents to
deploy FTTH/B and switch-off the copper network. This strategy to accelerate the deployment of
fibre by regulated incumbents was proposed by alternative operators during the course of the
development of the 2013 Recommendation on cost methodologies and non-discrimination and not
retained.347 This option was rejected on the basis that it could make copper-based access relatively
more attractive compared with fibre-based access (to both access-seekers and consumers), and
therefore impede investment in and the migration to higher speed offers, which would ultimately
provide better quality, social and economic benefits.
Remove the special competences for the Commission to recommend and ultimately mandate
ECNS standards and to rely fully on the mechanisms established for general ICT
standardisation.
The instruments provided by ECNS legislation have been used very carefully by
the Commission since the last amendment of the Framework Directive in 2009. There have been
no changes to the list of voluntary standards and there have been no standards mandated. The
Commission has only issued a mandate to ETSI in the area of emergency call location. It had
therefore to be considered to remove the special competences of the Commission related to ECNS
standards. However a November 2011 study conducted for the EC
348
identified substantial
benefits from greater standardisation of solutions within the EU. While this could in principle be
achieved under the mechanisms established for general ICT standardisation
349
, the possibility to
encourage and ultimately mandate the use of ECNS standards could help fostering the process.
The ongoing work in the area of emergency call location might also benefit from the possibility –
once the work is finished and a standard has been established - to encourage its use. Furthermore,
the second impact assessment interim report by WIK/Ecorys
350
, explains that voluntary
standardisation may not be sufficient in the area of wholesale products used for business access
products, in particular when provided cross-border. It would therefore appear not to be
346
347
In Australia and New Zealand structural separation has been imposed in combination with massive public investment.
A discussion of this point can be found in section 6.1.2.2. of the IA accompanying that recommendation
http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2013/swd_2013_0329_en.pdf
348
Ecorys/TNO/TU Delft (2011) ‘Steps towards a truly internal market for electronic communications’
https://ec.europa.eu/digital-agenda/en/news/steps-towards-truly-internal-market
349
Regulation
1025/2012
EC
on
European
Standardisation,
see
http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:316:0012:0033:EN:PDF
350
Annexed to this document, p35, the importance of standardisation in this area is also highlighted on p40 and p97.
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appropriate to remove the special Commission competences in the area of ECNS standards.
Moreover, technical adaptations to the current provisions can be used to ensure that BEREC
expertise can be relied upon when the Commission issues mandates to European standardisation
organisations (ESOs) and to clarify the details of the procedure which would apply before the
Commission makes the use of a specific ECNS standard mandatory.
6.3.2
Spectrum
Several options have been envisaged or have been suggested by a few respondents to the public
consultation but will not be further considered at this stage .
Full harmonisation,
in the directive on all aspects of spectrum assignment, and especially of the
method to determine and/or collect spectrum fees; fee determination and collection has always
been considered as a national regalian competence. Therefore in regard to these elements
coordination should be limited to the main criteria used by MS when determining and collecting
fees and avoid revenue maximisation being used as the primary objective and criterion.
Implementing measures would be more suitable to enhance coordination in the definition of these
and other key spectrum assignments elements.
Creation of a single EU spectrum license
which would be granted by an EU body be it the
Commission or an agency. Besides the fact that this would only be justified in case of truly pan-
European services relying on spectrum (which to date have not emerged except for satellites), it
would be very difficult to create from a legal point of view and the principle has proven to be
politically unacceptable; even the implementation of a coordinated solution which required
similar national licenses to be granted to commonly selected applicants by the MS themselves has
been very difficult to put in place (see MSS case).
Grant delegated powers to the Commission
to further define harmonised conditions for
assignment of spectrum: as these are national competence, MS would possibly be less keen to
accept such a procedure and would possibly prefer the use of implementing decisions through
comitology. Moreover delegated acts are not always suitable from a substance point of view.
Universal Service
6.3.3
Connectivity to a network at all locations:
This option is to enhance the focus of universal service
on individual end- users and to provide connectivity to a network in all locations (by contrast to the
current provision at a fixed location, which may be restricted to user’s primary location or residence).
This option is discarded because the expected deployment cost to deliver connectivity at all locations
were much higher than the cost to deliver connectivity at the end-user's primary location or residence.
The universal service cost needs to be kept at what is necessary to achieve a minimum safety net, with
other tools being prioritised to enlarge both fixed and mobile coverage.
Terminate the universal service regime:
Taking into account the current social, economic and
technological developments, this option suggests terminating universal service completely. This
option could be accompanied by the introduction of horizontal accessibility obligations on all
providers to ensure equivalence of access and choice for disabled users. This option is discarded
because universal service is still considered a valid concept by most stakeholders (i.e. MS, NRAs,
consumer organisations and most of industry players) and there are identifiable affordability needs
for the most vulnerable sections of the population even under competitive market conditions, which
can be met at limited cost.
Provision of very high-capacity broadband networks in public areas and places of specific
public interest as an addition to Options 3 and 4:
As an additional measure to Options 3-4, it has
been suggested providing very high-capacity broadband networks in public areas and places of
specific public interest such as schools, universities, libraries, education centres, digital community
centres, research centres, health care centres and town halls. Such provision under USO would
apply when private and other public investments do not deliver, and would be financed from public
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funds due to its general social benefits. This option is discarded because there are other EU and
national policies supporting NGA deployment in such specific places (for instance, ERDF,
GÉANT) and because USO cannot be considered a suitable instrument to foster high capacity
connectivity by comparison to private investment, PPP or other public policy instruments (e.g.
public procurement for public-service needs).
Changing the national financing regime in addition to other financing options under options
3-4:
In addition to other approaches, this option suggests establishing a system administered at EU
level which would permit contributions to be distributed across MS. This would allow to bridge
digital divide between less developed and more developed broadband areas. The providers
established in one MS only may be targeted more effectively. This option is discarded because it
requires significant changes to the institutional setup (i.e. delegating powers to the existing entity or
creation of a new entity for administration of the financial scheme at the EU level) that might be
difficult to achieve. Also, the suggested processing of the financing requests will result in a heavy
administrative burden.
Changing the financing regime in addition to other financing options under Options 3-4 by
setting national user levies:
In addition to other approaches, this option suggests setting national
user levies via direct surcharge on user invoice. This could also be another option for a social
solidarity scheme within the context and rationale of universal service where broadband were to be
included in universal service. While this approach should be relatively simple to manage, any
approach that targets subscribers directly elevates the retail price and risks both undercharging and
overcharging and impeding broader digital take-up.
6.3.4 Services and end-user protection options
6.3.4.1
Services
No sector-specific regulation for services in the future:
This option would consist in abolishing
provisions related to services from the Regulatory Framework. As a consequence of this measure,
there would not exist any sector-specific consumer protection that is not desirable given the highly
technical nature of telecommunications services. General consumer protection rules would not
suffice to protect consumers sufficiently in all respects.
6.3.4.2
Numbering
Adapting the EU framework on numbering to address the competition issue on the M2M
market, and creating (E.164 and E.212) European numbering ranges to promote a single
market for M2M:
This option would complement the option 3 under numbering. A European
numbering solution could provide the additional numbering resources necessary for M2M in
Europe, with M2M-adapted and common requirements, and a country-agnostic use within Europe
adapted to cross-border operating M2M applications. However past experience with ETNS and the
results of the public consultation did not reveal a preference for a European numbering range.
Therefore this option is not pursued at this stage. However, building on the current provisions of
the framework with regard to further harmonisation of specific numbers or numbering ranges a
mechanism is foreseen which allows for introducing a common EU-level numbering space in the
future in case extra-territorial use of national numbering resources is not sufficient to meet the
increasing demand.
6.3.4.3
Must carry and findability
Extending the scope of must carry obligations to OTT services.
This option would extend
the scope of operators on which must carry obligations could be imposed to OTT providers.
In case broadcasters, and more generally any content provider would provide their content via
OTT services, net neutrality provisions (in particular Art 3(1) and 3(3) of Regulation (EU)
2015/2120) ensure that broadcasters as end users of Internet access services can distribute
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1664251_0031.png
their content to their viewers without discrimination. It is therefore not necessary to extend
the potential scope of must carry rules to OTT services.
Extending the scope of EPG obligations and introduce regulatory safeguards to improve
findability.
This option would extend the scope of existing EPG access and presentational
obligations by modifying the definition of an EPG, which could include services and facilities
providing access to on-demand content and recommendation engines. It would be envisaged
to define at EU level the scope of possible measures under national law. Online viewing will
continue to grow and larger PSBs will have little difficulty in finding a prominent place in
app stores as well as on equipment installed at consumer premises or hand-held equipment.
Regional and local PSB will have more difficulty in this respect. Cooperation with larger
PSBs to carry niche content in their apps (possibly imposed by national governments) is a
possible solution. In addition, niche content providers can develop alternative routes to gain
exposure via social media strategies. Extending EPG obligations would not impose a great
additional burden on OTT platforms as many of the essential platforms (like app stores and
streaming platforms like YouTube and Daily Motion) include content of public interest in
their current navigation facilities anyway. MS have already the possibility under national
legislation to introduce prominence obligations on online service providers.
351
So far, MS
have not made use of this possibility and the public consultation on the ECNS review has not
revealed any concrete concepts how such obligations could be conceived.
The considerations outlined above (platforms already provide navigation facilities + lack of action at
national level) put into question whether such obligations would be necessary and could achieve their
intended purpose. It would therefore appear to be premature to define at EU level the scope of
possible measures under national law and the option has therefore been discarded at an early stage of
the analysis.
6.3.5
Institutional governance
Commission powers to regulate markets directly
This option would mean the transfer of powers from national level (NRAs) to EU level
(Commission). This option was discarded at an early stage as, even though it would likely serve to
increase consistency, it does not meet political feasibility, the subsidiarity requirements and the need
to build some flexibility into the system to efficiently ensure that national circumstances can be
adequately addressed and taken into account.
Not having an EU agency at all: substituting the BEREC Office by secretarial support functions to
the Board of regulators to be provided by the Commission
This option, which is currently used for other EU bodies --- COCOM, RSPG or ERPG – could help in
avoiding the application of the detailed set of rules that applies to all EU agencies (financial,
staff/implementing rules, procurement, reporting, etc.) to a small organisation such as the BEREC
Office. However, it was discarded as these difficulties could also be overcome by the option of
establishing an EU agency carrying out certain regulatory tasks (not only a support function) with the
additional benefit of ensuring more autonomy.
Moreover, the political feasibility of this option is not guaranteed as the European Parliament in its
DSM report has called the Commission to ensure that a more efficient institutional framework is in
place by strengthening the role, capacity and decisions of BEREC in order to achieve consistent
application of the regulatory framework. In particular, the need to improve the financial and human
resources and further enhance the governance structure of BEREC was highlighted.
351
See Commission Staff working document AVMSD impact assessment, p.52
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Merging BEREC with the European Network and Information Security Agency (ENISA)
In 2007 the Commission proposed the establishment of a new agency building on the telecoms
advisory group ERG and taking over the functions carried out at the time by ENISA. The option of
following a similar approach with the current proposal, in particular in view of the discussions of the
Inter-Institutional Working Group on decentralised agencies' resources
352
, was considered. There are,
however, several reasons which would not make it a feasible option at this stage, in particular the fact
the two bodies have become in the meantime well established organisations with increasingly growing
mandates (see e.g. Regulation (EU) 2015/2120 and current proposal for BEREC tasks and the tasks
assigned to ENISA, which has time definite mandate, in the Directive 2016/1148/EU on security of
network and information systems) which are not overlapping. Moreover, the nature of the tasks that
BEREC and ENISA would carry out are rather different in terms of the intensity of human and
financial resources needed and the type of relationship needed with stakeholders (ENISA counts with
a Permanent Stakeholders Group). Therefore, only minimum synergies (in the area of administrative
and budgetary matters, not specifically related to ENISA) could be expected to be derived from a
merger scenario.
Although the two agencies fall under the remit of DG CONECT and could be considered by some that
the tasks of BEREC and ENISA are related, contents-wise the two domains of cyber-security and
telecoms are different. Telecoms is an important infrastructure but ENISA deals with any network
infrastructure (not only the public ones that fall within BEREC remit) and any hardware and software
(that are outside BEREC remit). In particular, ENISA advises on cybersecurity in energy networks,
aviation networks, financial networks, health networks, etc.
Additionally, there are significant disadvantages to that option, as the representatives at Management
Board level are different: telecoms NRAs for BEREC and predominantly representatives from
ministries (telecoms, defence ministry, prime minister's office) or national agencies/offices focused on
cyber security or information security for ENISA
353
. Also the consideration of the need to align the
BEREC/BEREC Office structure with the 2012 Common Approach makes it difficult at this stage to
consider, in addition to the significant governance changes needed, a possible merger with other
existing agencies.
The possible disconnection of the proposal for a BEREC Regulation from the proposal for a European
Communications Code would not ensure the achievement of the goals foreseen in the telecoms
review. The institutional proposals derived from the analysis carried out in the relevant substance
areas and it is pretty much interlinked (the current BEREC structure is not suitable for the new tasks
in the enlarged mandate – not sufficient resources, no voting rights for Commission, limited role for
the Administrative Manager, etc.). It is a package which not only concerns BEREC but other
institutional elements (NRAs, other competent authorities, RSPG, COCOM, Commission powers,
etc.), thus it could not be addressed in isolation or be delayed.
6.4
ANNEX 4 - Who is affected by the preferred options and specific impacts on stakeholders
This annex describes the practical implications of the preferred options identified in the Impact
Assessment for the Review of the Framework for electronic communications for representative
groups likely to be directly or indirectly affected by the legislation including electronic
communication network and service providers, Over-the-Top players, SMEs and consumers,
Ministries, National Regulatory Authorities and Spectrum Management Authorities.
For each stakeholder group, we discuss the relevant impacts of the preferred options, the key
obligations that will need to be fulfilled and when these might need to be fulfilled in order to comply
352
353
Analytical fiche n
o
3: Efficiency gains and synergies.
Only for two Member States a representative of telecoms NRA is the representative at ENISA Management Board.
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with obligations under the revised framework. Wherever possible, we also indicate potential costs that
may be incurred in meeting those obligations.
The opportunities and challenges presented by the proposed revisions to the electronic
communications framework are described in the following table.
It is envisaged that consumers and SMEs will be the greatest beneficiaries of reforms to the electronic
communications framework. These stakeholders will benefit from greater availability and choice in
very high speed fixed and mobile connectivity, as well as an increased focus on the affordability of
broadband and measures enabling them to defray the costs for newly installed fibre connections.
Consumes and SMEs will also benefit from an extension in privacy and security protections for OTT
services and improved switching for broadband bundles. Multi-national businesses should also benefit
from more consistent standards for high quality connectivity cross-border.
Although they will need to meet tighter privacy and security standards, new (including European)
players in the OTT and IoT space should also benefit from improved broadband connectivity as well
as provisions, such as maximum harmonisation of consumer protection rules and cross-border number
utilisation which should foster the scaling up of service provision across the EU.
The package includes several measures which should benefit electronic communication network
providers which intend to invest in high speed networks. Such investors should benefit from increased
attention to duct access and symmetric access to non-replicable assets such as in-building wiring –
which are core elements facilitating the deployment of high speed networks. They should also benefit
from the potential to defray connection costs over a longer period. Finally, the revisions to the
Directive will explicitly recognise the important role that wholesale only models and co-investment
play in supporting sustainable competition in the market. Such models will be subject to lighter touch
regulatory controls. Incumbent operators which have been subject to tight regulatory controls on
wholesale access, may also receive regulatory relief in areas where there is effective competition or
where they make genuine co-investment offers.
Electronic communication network providers of all kinds should benefit from the increased certainty
and reduced administrative costs associated with longer periods between market reviews (of 5 rather
than 3 years except where there are material differences in the market situation). However, in
countries which do not yet pursue such strategies, there may be additional effort required to submit
mapping data to the NRA (to enable the geographic targeting of regulation) – and for operators with
SMP to make duct access operational and adapt product specifications for business access to meet
standardised requirements (following a suitable period).
The proposed revisions to the framework entail measures to increase reliance on general
authorisations for spectrum, speed up spectrum assignment and foster consistency in assignment and
core licence conditions. These provisions are broadly beneficial to electronic communication network
providers and should reduce costs, improve spectrum availability and facilitate multi-national
operations and service provision.
Operators offering broadband Internet access will need to meet more stringent requirements relating
to transparency and quality of service. However, they will benefit from a streamlining of the rules
applying to other electronic communication services. All operators should also benefit from a planned
removal of redundant universal service obligations and switch away from sectorial levies which
should reduce the regulatory burden on designated universal service providers and more widely
reduce administrative cost.
Member States should benefit from the greater broadband diffusion, consumer trust and associated
economic benefits associated with the preferred policy options. It is also possible, but not assured, that
streamlining of regulatory approaches (such as the consolidation of mapping responsibilities) could
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save costs at a national level. However, where not already the case, Ministries will need to ensure
adequate resourcing and empowerment of NRAs, and the introduction of a minimum remit for
independent National Regulatory Authorities may require a transfer of certain responsibilities in a few
member states.
NRAs will benefit from the changes in a number of ways. Their independence and empowerment will
be reinforced, and certain NRAs would benefit from an expanded remit concerning consumer
protection and/or market-shaping aspects of spectrum. Burdens from market analyses should be
reduced by extending the period between reviews. NRAs will also play a more formal and decisive
role in an enhanced BEREC. However, NRAs will also need to conduct more geographically targeted
reviews, and will need to ensure they have adequate expertise to take on a more extensive remit in
relation to infrastructure, investment and quality of service mapping, as well as ensuring that
regulation is adapted to support infrastructure competition (if not already the case).
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Table 20 - Summary stakeholder impacts
Opportunities
More geographically targeted access regulation
Lighter regulation in presence of co-investment or wholesale
only business models
Savings from less frequent market reviews
Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
Faster access to spectrum, greater regulatory certainty concerning
spectrum assignments and more consistent usage conditions
Lower spectrum access cost and regulatory burdens in bands
subject to general authorisation
Fewer consumer protection obligations regarding electronic
communication services resulting in administrative savings
Elimination of redundant USO obligations and abolition of
sectoral funding leading to reduced administrative cost and
financial burden
Operational duct access, co-investment and wholesale only
incentives support more sustainable competition
Standardised business wholesale products foster cross-border
entry and competition
Savings from less frequent market reviews
Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
Faster access to spectrum, greater regulatory certainty concerning
spectrum assignment and more consistent usage conditions
Lower spectrum access cost and regulatory burdens in bands
subject to general authorisation
Fewer consumer protection obligations regarding electronic
communication services resulting in administrative savings
Abolition of sectoral USO funding leading to reduced financial
burden
Greater focus on infrastructure competition and regulatory
targeting supports commercial flexibility
Challenges
�½
Requirement to supply infrastructure/investment
mapping data for market reviews and operationalise
duct access (where not already applied)
�½
Greater (commercial) pressure to invest in
infrastructure due to additional infrastructure
competition
�½
Need to standardise business wholesale products
(given due notice)
�½
Further obligations concerning Internet access (to aid
transparency QoS and switching)
Incumbent fixed
mobile
telecommunication
operators
and
Alternative fixed
mobile
telecommunication
operators
and
�½
Less regulation of short-term fixed access rental
�½
Greater pressure to invest or co-invest in own NGA
infrastructure
�½
Requirement to supply infrastructure/investment
mapping data (where not already the case)
�½
Further obligations concerning Internet access (to aid
transparency QoS and switching)
Alternative (cable and
fibre)
infrastructure
�½
Requirement to supply infrastructure/investment
mapping data (where not already the case)
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investors
Operational duct access may support network expansion
�½
Greater use of symmetric obligations for non-
replicable assets (where not already the case)
Measures to extend contract duration for connections in
challenge areas, as well as regulatory support for wholesale only
�½
Further obligations concerning Internet access (to aid
models, are likely to benefit municipal and regional fibre
transparency QoS and switching)
investors
Savings from less frequent market reviews
Increased efficiency in engagement with bodies handling e-
comms regulation due to converged set-up
Fewer consumer protection obligations regarding electronic
communication services resulting in administrative savings
Abolition of sectorial USO funding leading to reduced financial
burden
Greater availability and quality of fixed and mobile bandwidth
�½
Switching and portability procedures currently
supports OTT and IoT service delivery and innovation
existing for EC(N)S need to implemented by OTTs
that interconnect with E.164
Reduced barriers to entry and expansion for OTT and IoT firms
due to maximum consumer protection harmonisation, and
�½
Privacy and security obligations need to be
provisions to foster cross-border use of numbers
implemented by all OTTs
Increased efficiency in engagement with bodies handling e-
�½
OTT that interconnect with E.164 potentially subject
comms regulation due to converged set-up
to levies for administration of regulatory authority
OTT and IoT providers
SMEs
Greater availability of and choice in very high bandwidth
�½
Smaller electronic communication providers may be
connectivity with continued choice and value in basic broadband
less well placed to invest or co-invest in infrastructure
Improved affordability for fibre connections through defraying
�½
Potential new obligations and NRA contributions for
connection charge
small OTT in relation to E.164 interconnection,
privacy and security
Potential to connect business sites cross-border boosted through
standardised wholesale offers
Reduced barriers to entry and expansion for smaller OTT and IoT
firms due to maximum consumer protection harmonisation, and
provisions to foster cross-border use of numbers
Lower cost of access to spectrum (through greater use of general
authorisations and best practice in assignment conditions) leading
to greater access for smaller electronic communication
companies
Greater predictability and trust amongst SMEs as users of ECS
and OTT, improved transparency concerning IAS
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Reduced USO contributions for small suppliers (where
Consumers
previously captured)
Increased ease of engagement, reduced administrative burdens
due to converged governance
Greater access to and choice in high quality broadband
�½
Potentially less detailed obligations on some ECS, but
connectivity
practical implications limited since consumer
protection would be covered by horizontal rules or
Improved affordability for fibre connections through defraying
addressed through competitive markets
connection charge
Greater availability and innovation in services relying on 5G and
future generation wireless technologies
Accelerated fast mobile broadband
Greater predictability and trust amongst users of ECS and OTT
due to extended privacy and security measures
Increased ease of switching in relation to bundled offers
Greater end-to-end connectivity and access to emergency
services when using OTT interconnecting with E164
Member States
Improved transparency concerning IAS
Potentially improved access to affordable broadband
Streamlining of regulatory approaches and governance at national
�½
Ministries will need to ensure adequate resourcing and
and EU level should drive synergies and may enable cost savings
empowerment of NRAs (where not already the case),
and governance changes may require a transfer of
The proposed changes should support the diffusion of fixed and
certain responsibilities in some member states
mobile connectivity, thereby supporting economic development
and social welfare
NRAs will see a reinforcement of independence and
�½
NRAs not already pursuing such strategies will need
empowerment as well as a harmonisation of their remit to
to ensure competence in mapping, ensure the effective
provide a more converged regulatory approach (for example in
operationalization of measures to ensure infrastructure
relation to consumer protection and broadband mapping
competition in broadband, support the deployment of
(including for state aid and broadband cost reduction)
broadband in challenge areas and provide
standardised solutions for business access
NRAs will play a more formal and decisive role in EU policy-
making through the enhanced BEREC
NRAs will benefit from a longer period between market reviews
reducing administrative costs and enabling longer-term decision
making
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6.4.1
Implications for telecommunications network operators and service providers
6.4.1.1 Access Provisions
Under the preferred option for access (Option 3 NGA+), telecommunication network operators
and service providers will be affected by adaptations to the market analysis process. This may
affect telecommunications operators differently depending on whether they are incumbent
operators, which are subject to SMP obligations, alternative operators which may rely to a
degree on regulated wholesale access, or other competitive operators making use of their own
network infrastructure.
6.4.1.1.1
Access provisions and operators subject to SMP obligations
Economic impacts
Incumbent operators which are today typically subject to SMP regulatory obligations are
expected to benefit from better motivated, more targeted and, in some instances, less onerous
regulatory obligations resulting from a requirement for NRAs to place greater focus on retail
market failure prior to intervention and from more granular geographic market analyses which
may result in deregulation in some areas. Incumbents may also benefit from greater flexibility
(for example in price setting) and reduced costs resulting from potential reduction on regulatory
access obligations in cases where they propose adequate co-investment or commercial offers, or
where they pursue voluntary structural separation.
The preferred option is also expected to increase commercial incentives on incumbent operators
to invest in upgrading networks in order both to protect their market share and to compensate for
the loss of wholesale revenues in a more competitive environment, as well as to benefit from the
proposed lighter regulatory treatment for new upgraded networks. As a result, it is expected that
following transposition and implementation of the legal provisions, CAPEX intensity amongst
incumbent operators in countries which have not already undertaken significant network
upgrades to VHC connectivity may increase.
Administrative impacts
Changes to the market review process are likely to result in certain administrative requirements,
as well as change in the nature of access obligations resulting from a shift in focus towards
infrastructure based competition (in countries where this is not already the case). Specifically, in
the early stage, immediately following the adoption of a revised framework and during an
estimated period thereafter of around 3-5 years, incumbents in countries which are not already
subject to such obligations may have the additional requirements to submit infrastructure
coverage data and plans concerning infrastructure deployment to support mapping by the NRA.
It should be noted that such obligations are only incremental to the data collection exercises that
already exist or are planned in many member states, as described in the study (SMART
2012/0022) on the mapping of broadband and infrastructures,
354
and (when combined with
planned guidance in this area) should ideally serve to streamline and bring some coherence
between data collection for market analysis purposes and the transparency obligations that exist
in what may currently be viewed as separate exercises. For example, the Cost Reduction
Directive already includes obligations to provide information concerning civil works to be
performed in the next 6 months (Article 6 Directive 2014/61/EU) – relevant for investment
mapping, while reporting obligations are already undertaken to undertake investment mapping in
the context of State Aid schemes for broadband.
354
See Table 5-1 https://ec.europa.eu/digital-single-market/en/news/mapping-broadband-and-infrastructure-study-
smart-20120022
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Measures to operationalise duct access and symmetric obligations aimed at sharing non-
replicable assets
The greater focus on infrastructure competition in the framework is likely to result (for those
Member States not already pursuing such strategies) in a shift towards passive access and greater
attention to symmetric obligations concerning non-replicable assets. This may require
incumbents to provide information on availability of duct access, and potentially automated
systems to support ordering, provisioning and repair, in cases where duct access is feasible and
would be proportionate, but is not already fully operational. For incumbents in countries where
such obligations are not yet fully effective the operationalization of duct access could result in
one-off costs as well as ongoing costs associated with maintaining an online database for duct
access availability and meeting access requests (if not already incurred)..
355
Moreover, administrative costs from the operationalization of duct and symmetric access may be
offset if these obligations result in infrastructure competition, which enables the relaxation or
removal of downstream asymmetric (SMP) access obligations.
Standardised wholesale offers for business
Incumbents may also be affected by requirements to move towards standardised wholesale offers
for business access, in areas where such access is required.
356
The study SMART 2014/0023
357
assessed the impact of such a requirement, and concluded that while (some not readily
quantifiable) costs may be incurred in adapting product offers, systems and processes, these
could be mitigated by a phased introduction of the obligation, permitting these changes to be
introduced during a refresh of systems. NRAs could determine the timing of such a required
change subject to national circumstances, but for the benefits to be realised introduction should
be subject to a deadline, which could be determined in Implementing Guidelines associated with
the revised Framework.
Extension of market review period
Another planned change to the market review process is a reduction in the frequency of market
reviews, which would be required every 5 years rather than every 3, with the potential for an
interim review if needed in light of changed market circumstances. This change should in
principle reduce the administrative burden involved in supplying market and operational data to
the NRA and preparing information for cost modelling purposes. However, these cost savings
are unlikely to be significant in the context of sector revenues, and it is possible that this change
could negatively impact incumbent operators if it results in obligations being in place for longer
than under the current cycle (although the reverse is also possible, in cases where regulatory
obligations are withheld, for example on newly installed infrastructure in the presence of
reasonable co-investment offers).
6.4.1.1.2
Access provisions and Alternative operators
It is anticipated that the increased focus on measures to boost infrastructure competition and
foster investment is likely to impact the business models of alternative operators, supporting a
355
However, it should be noted that duct access and symmetric obligations are already operational in several member
states including Portugal, Spain and France, while there are ongoing initiatives to operationalise duct access in
countries such as the UK, which should be complete before the framework review comes into effect. See for instance
Feb 2016 Ofcom Digital Communications Review Statement http://stakeholders.ofcom.org.uk/telecoms/policy/digital-
comms-review/dcr-feb-16/
356
For example, where there is no prospect of effective infrastructure-based competition
357
Investigation into access and interoperability standards for the promotion of the internal market for electronic
communications
https://ec.europa.eu/digital-single-market/en/news/investigation-access-and-interoperability-
standards-promotion-internal-market-electronic
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move to more self-sustaining models based on investment, co-investment and/or longer term
remedies or commercial solutions.
As this model is likely to involving upfront commitments, this may entail greater initial capital
expenditures for these alternative operators, which would be offset in subsequent years by lower
operational expenditures as business models shift from rental towards investment, co-investment
or risk sharing arrangements. Engagement in infrastructure build or long-term agreements is
likely to provide greater predictability for alternative operators than the current short-term
arrangements, although it will also entail greater upfront risks.
In turn, as and when alternative operators invest in their own VHC infrastructure they may be
subject to obligations to provide data concerning existing and planned fibre deployment as part
of the expanded mapping process. They may also be subject to symmetric obligations for the
sharing of in-building wiring or wiring up the first distribution point, in countries which do not
already pursue such approaches, although it should be noted that such obligations are already
operational under the existing framework in some countries
358
..
Precise cost impacts on alternative operators willing to invest in own infrastructure resulting
from changes to the framework are difficult to estimate. However, the expectation is that the
greater focus on infrastructure-based competition in NGA and VHC may result in different
(more capex-intensive) business models for entrants, rather than increased costs overall.
As regards the standardisation of wholesale offers for business end users, changes to incumbent
systems may also imply a need for adjustments to access-seekers’ ordering and repair processes
and systems, which could be made after a suitable period determined by the NRA as discussed
above. On the other hand, standardised offers should lower barriers to expansion for operators
which do not have nation-wide coverage in specific countries.
Finally, alternative operators which currently make use of wholesale access would, like
incumbent operators, also benefit from reduced administrative costs associated with longer
market review periods, although these administrative savings are not expected to be very
significant as compared to other categories of costs and savings considered in this chapter.
6.4.1.1.3
Access provisions and other competitive operators
Cable operators and regional fibre investors are unlikely to be significantly impacted by the
proposed changes to the market analysis process. Nonetheless, these operators are expected to
benefit from an enhanced focus in the framework on infrastructure competition and more
geographically targeted regulation. Specifically, they may be able to exploit operational duct
access and symmetric measures to expand their existing footprint, and they may also benefit
indirectly from the possible relaxation of SMP obligations in certain areas where infrastructure
competition emerges, if this results in greater potential for pricing flexibility and tailoring of
products and bundles to specific customer groups for the market as a whole.
Regional fibre investors including municipal investors may also benefit from specific provisions
within the NGA+ option which aim to identify underserved areas that may offer deployment
opportunities for this operator group, as well as benefiting from measures which are designed to
hold operators to account as regards their investment declarations as made in the context of the
geographical surveys conducted by the NRAs..
358
Symmetric obligations on in-building wiring and terminating segments on all operators are possible under the
current Framework and are already operational and in place in countries such as Spain, France and Portugal.
Furthermore, under the cost reduction directive, any owner or user of in-building physical infrastructure should meet
reasonable requests for access in view of deploying high-speed electronic communications networks.
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On the other hand, VHC networks built by these operators may become subject to symmetric
obligations as regards sharing of in-building wiring or the non-replicable terminating segment,
which will entail additional cost. However, it should be noted that in several countries, these
rules are already in place, and it is envisaged under proposed revisions to the framework that
operators could be exempted from such obligations if they operate wholesale only business
models.
Like other operators they would benefit from reduced administrative costs resulting from
extended market review periods, but may need to supply additional information in order to
facilitate infrastructure mapping by the NRA, in those countries which have not already pursued
such procedures.
6.4.1.2
Spectrum provisions
The preferred spectrum option emphasises the need to prepare Europe for the future deployment
of 5G and to speed up access to spectrum resources. The preferred spectrum option (Option 3:
binding criteria) introduces (amongst other provisions) common criteria for most relevant
elements of spectrum assignments such as for example timing of awards, license duration and
coverage, a greater focus on general authorisations versus individual licenses and provisions to
facilitate the deployment of small cells and Wi-Fi. These provisions affect network and services
providers in terms of speed and access to spectrum resources across the Single Market and the
cost of such access. Under the preferred option these common criteria would be binding on
Member States.
6.4.1.2.1
Common assignment criteria and licence conditions
Mobile Network Operators (MNOs) are some of the main users of spectrum and they will
therefore be affected by common assignment criteria and obligations attached to rights of use
(e.g. license duration, spectrum caps, timing of assignment, methods for determining coverage
obligations, etc.). The nature of the impact will depend on the specific decisions taken at EU
level which are not specified in the option and are subject to negotiation.
However, it is already clear that under the preferred option, compared with the baseline, all
mobile network operators will be subject to more consistent conditions to access and use
spectrum resources across the Single Market. This will likely generate greater regulatory
certainty and foster the development of a level playing field across the EU. For instance, if the
regulatory framework specifies that e.g. spectrum auctions should reflect a due balance of
overall spectrum objectives, this should bring greater consistency in the conditions that will
govern spectrum assignment across the Union.
6.4.1.2.2
Greater focus on general authorisations over individual licenses
A greater focus on general authorisations is likely to significantly reduce access costs to
spectrum resources thus making spectrum available to smaller companies which cannot afford
purchasing exclusive access under individual licenses e.g. in an auction.
Operators who are already present in multiple countries would benefit because they could have
access to the same frequencies all over Europe, with similar conditions. Such a system would
rapidly speed time to market, as there would be no decisions needed (either at national or EU
level) on which operator obtains which spectrum. Furthermore, consistency of usage conditions
could be improved (e.g. if a harmonised EU band plan was agreed to) and costs would be
reduced compared with traditional assignments.
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6.4.1.3
Universal service provisions
The preferred option with regard to universal service is Option 3 (incremental adaptation to
trends with the focus on broadband affordability). This option foresees exclusion of payphones
and accessory services from the universal service scope at the EU level. The universal service
scope shall cover PATS and affordable broadband at least at a fixed location meaning that
Member States may introduce affordability measures also by mobile (connection at least at a
fixed location) at the national level. At the EU level, broadband can be defined by referring to
certain services to be accessible via the connection (web-browsing, eGovernment, VoIP etc.).
This option would ensure only the
affordability
of broadband (i.e. affordable retail pricing
measures), that shall be ensured at least at a fixed location, thus allowing Member States the
possibility to include affordability measures by mobile, while its availability shall be further
promoted by other policy tools (incentives to private investment, state aid, etc.). Availability of
broadband can be ensured only at a fixed location. Minimum harmonisation would be applied at
EU level, such that Member States could enhance the basic services baskets. Member States may
also decide, in exceptional circumstances, to support availability of broadband additionally to its
affordability. The preferred financing option is through general budget as a more equitable, fair
and least distortive way of funding of the provision of universal service.
ECS providers are likely to benefit from the revision of universal service according to Option 3
as it will likely reduce the uncertainty and administrative and financial burden on them. For
instance, they will not be obliged to provide pay phones that are considered redundant and
largely function at loss. Financing through public funds is easier to implement so that it will
lessen administrative costs and will contribute to a fairer distribution of costs and benefits of the
universal service provision among all market participants with less distortion to competition.
6.4.1.4
Provisions relating to electronic communications services
The preferred option regarding services (option 4) reduces, for services other than the IAS, the
burden relative to a number of USD obligations for ECS providers regarding contractual rights,
transparency, quality of services (QoS) monitoring, and out-of-court dispute resolutions.
Additional costs might be attached to the role that access network providers might have in the
standards that enable the routing of emergency calls from OTTs to numbers in the PSTN
network. Option 4 also introduces a number of new obligations for ECN providers applying to
IAS regarding transparency, QoS, and switching to other providers (including facilitated
switching process). The preferred option regarding numbering saves telecom operators from
inefficiencies in relation to extra-territorial use of numbers. The option on must carry/EPG does
not impact on telecommunications network and service providers.
6.4.1.4.1
Reductions in obligations regarding ECS
In relation to overlapping consumer protection provisions, telecom operators will be relieved
from unnecessary administrative and compliance costs regarding contractual rights,
transparency, quality of services (QoS) monitoring, and out-of-court dispute resolutions. It is
however not possible to estimate the overall costs for telecom operators of complying to
potentially redundant rules.
In a survey among telecom operators organised in the context of this impact assessment, telecom
operators indicate having to incur higher compliance costs resulting from existence of the rules
that overlap with horizontal rules and/or rules having become redundant due to market forces.
The overlapping information requirements create additional burdens for businesses that have to
check all sets of requirements for any small or national differences and engage with two different
sets of regulators in relation to enforcement. Activities that drive administrative burden and are
related to complying with sector specific obligations regarding contractual terms and
transparency are (amongst others):
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Activities related to regulatory/legal discussions with authorities on the terms of
obligations;
Activities related to assuring proper implementation of elaborate guidelines for
marketing and sales (including specific provisions in contracts, in scripts for sales, in
supporting IT, etc.);
Other activities involved with assuring internal compliance with regulation;
The need to inform customers about the corresponding regulatory provisions have the
effect of making sales activities more lengthy and complex;
Similarly, discussions with suppliers and partners (device suppliers, resellers) are made
complex and imbalanced by the constraints on contracts terms;
Activities involved with in potential litigations;
Public Affairs involved in potential public controversies relating to the compliance with
the rule.
In addition, specific resources may be dedicated to answering questions and to regularly
updating online information in order to comply with transparency obligations. Telecom operators
found it difficult to provide robust calculations of all compliance costs.
6.4.1.4.2
Introduction of new obligations regarding IAS
The reduction in enforcement and compliance costs regarding ECS will partially be undone by
the additional obligations applying to IAS regarding transparency (related to consumption
monitoring and comparison tools), QoS (reporting and, when criteria are not met,
fines/compensation/termination of contracts), and switching (facilitated switching process).
6.4.1.4.3
Changes with regards to extra-territorial use of numbers.
Compared to the base scenario a number of management complexities and implementation costs
may be prevented, such as: “Network
testing, functional testing, billing verification, table
updates (in switches, STPs, HLRs, billing systems, etc.) [which] would need to be performed by
the operator and each of its roaming partners.”
359
More streamlined extraterritorial usage would
allow operators to gain efficiency by benefiting from economies of scale granted by the Single
Market. Thus operators can provide cross border services without the need to change numbers.,
and can enter new markets without requesting a block of numbers in that country. At the same
time, current bilateral arrangements for extraterritorial use (resulting in an equally burdensome
costs for operators and roaming partners) may be replaced by a more harmonised governance
structure that is much less burdensome on operators. This may require a possible extension of the
activities (and costs) of BEREC as well as costs related to coordination with CEPT. However,
these costs are likely much lower than the costs of the currently required multiple bilateral
agreements between NRAs and telecom providers.
6.4.1.5
Governance provisions
The preferred option for Governance (option 3) involves the alignment of the remit of
Regulatory Authorities at national level, as well as the extension of BEREC’s remit to
encompass responsibility for market-shaping aspects of spectrum assignment and to take certain
normative powers in relation to developing implementing guidelines (which would be adopted
by the Commission) as well as playing a deciding role in enabling a Commission ‘decision’ in
relation to case by case assessment of remedies (under an expanded article 7a process). BEREC
would also perform the peer review of national spectrum assignment procedures.
This consolidation of responsibilities for market-shaping measures in fixed and mobile networks
as well as service regulation is likely to have a positive impact especially for those electronic
359
http://www.attglobalpolicy.com/wp-content/uploads/2014/06/ATT-Comments_BEREC-M2M-Project-Team-_19-
June-2014.pdf
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communication network and service providers, which are converged and/or operate or aspire to
operate cross-border. Converged regulatory responsibilities should lead to more coherent
decisions, while greater consistency at EU level may enable cross-border suppliers to achieve
cost savings from reduced regulatory variation.
Notwithstanding these potential benefits to electronic communication operators however,
increased consistency which reduces barriers to access or service provision between member
states, may pose competition challenges for operators which currently have a strong position in
national markets.
360
6.4.1.6
Overview table
The following table summarises the changes obligations per subject area and associated practical
implications and costs.
360
For example, in the context of interviews for SMART 2015/0002 and SMART 2014/0023, multi-
national business end-users claimed that incumbent operators aimed to protect national markets.
Additional cross-border competition from OTT players might also pose a challenge to the service revenues
of traditional electronic communication providers.
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Table 21 - Practical implications of preferred options for telecommunication network and service providers
Changed obligations
Access
-
-
-
-
Longer market review periods
Requirement to demonstrate retail
failure
Infrastructure mapping
Greater infrastructure competition
focus involving duct access,
symmetric rules, incentives for co-
investment, long-term commitment
Potential for non-imposition of
access obligations on new high
capacity networks deployed on the
basis of an open co-investment offer
Standardised wholesale remedies for
business end users
Harmonised assignment criteria and
licence conditions (e.g. license
duration) in all markets
Greater use of general authorisations
rather than individual licenses
Practical implications
-
Costs
Potential savings from less frequent
market reviews ~€28m
Other costs e.g. mapping difficult to
quantify and vary depending on
whether rules are already in place
Standardised wholesale products may
involve set-up costs if/where they
require changes to systems and
processes, but these costs could be
mitigated by phased introduction.
Operational costs for multi-national
providers should be reduced
-
-
Reduced admin burden for market
-
reviews due to longer periods, focus
on
commercial
rather
than
-
regulatory solutions, but increased
burden in some countries for
mapping, duct access, greater focus
-
on symmetric rules for non-
replicable assets
Requirement
to
standardise
specifications
(and
potentially
certain systems) for wholesale
products designed for business
-
Spectrum
-
-
-
Services
numbering
and
1. Less obligations regarding ECS:
Transparency
Contractual rights
QoS
Dispute resolution
2. More obligations regarding IAS
More consistency across the Single
market
-
Greater regulatory certainty
-
Definition of coverage that is better
suited to a wireless environment
(e.g. not based on households but
based on share of time the service is
available)
-
Faster access to spectrum
-
More efficient use of spectrum
A number of activities/resources can be
downsized as a result of 1), such as:
Regulatory affairs, Legal advice,
Customer Care, IT-Resources, Product
development,
Product
lifecycle
management, Terms and conditions
-
-
Lower cost of access to spectrum
leading to greater access for smaller
companies
Reduction in administrative costs
associated
with
assignment
procedures
1) and 2) lead to a net relief of
administrative burden.
No information
implications of 3).
on
the
monetary
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Transparency
QoS
Switching
management, Billing.
A number of activities resources will be
re-introduced as a consequence of 2)
3. Different arrangements for extra-
territorial use of numbers
Compared to the base scenario
inefficient bilateral agreements on extra-
territorial use of numbers are replaced
by a more efficient system.
A number of management complexities
and implementation costs relate to
roaming may be prevented.
Affordability measures for broadband at Reduced administrative burden due to Reduced administrative costs
clearer and easier to implement funding
least at a fixed location
mechanism
Potential cost savings due to exclusion of
Abolition of sectorial funding, instead
pay phones and accessory services for
financing through public funding
Reduced financial burden due to EU-28 – (pay phones alone – 1 bn euro
exclusion of redundant services at the annually)
EU level and introduction of public
funding
Cost of affordable broadband at a fixed
location – from 147 mln euro to 436 mln
euro per annum for EU-28
-
Merged
institutional
structure
-
Greater policy alignment
-
Coherence
in
regulatory
covering access, services and
-
Increased institutional alignment on
responsibilities
should
benefit
aspects of spectrum at national and
converged players while greater EU
fixed and mobile regulation and
EU level
consumer protection
consistency
should
reduce
administrative costs, especially for
-
BEREC to take prime responsibility
cross-border providers, but may
for the drafting of implementing
increase cross-border entry and
guidelines
service competition, challenging the
service revenues of traditional players
USO
Governance
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6.4.2 OTT providers and non-telco
6.4.2.1 Access and spectrum
Changes to access and spectrum rules do not entail any changes to obligations for OTT providers.
However, as for other sectors of the economy, but likely to an even greater degree, OTT providers
will benefit indirectly if the preferred options lead to greater deployment of fixed and wireless
network and technology and greater take-up among consumers across the Single Market.
Similarly, greater coordination of spectrum assignments under the preferred option does not directly
affect users in industries that might develop 5G applications and services. However, if this option
leads to successful and fast deployment of 5G in Europe it will constitute a significant growth
opportunity in some sectors (e.g. automotive, transport, health, utilities, and others) and for consumers
who benefit from the resulting innovations by way of greater safety, energy efficiency, and
environmental sustainability, etc.). In addition, a greater focus on general authorisations could put
spectrum resources within the reach of operators who are not at present able to purchase exclusive
access.
In terms of other current spectrum users such as broadcasters, the preferred option does not have any
direct impact since it focuses on assignment criteria and usage conditions for the provision of
electronic communication services other than broadcasting rather than on allocations of spectrum
bands. Of course, future deployment of 5G will affect all current spectrum users - both in terms of
spectrum demand and supply, as well as in terms of optimal allocation of spectrum to different uses.
These considerations go beyond the assignment criteria and usage conditions in the preferred option.
6.4.2.2
Universal service
The adoption of Option 3 for universal service will reduce the number of unconnected households and
improve access to a number of enhanced communications services. Due to these developments, OTT
providers are likely to benefit from the inclusion of affordable broadband in the universal service
scope as they can make better use of the increased connectivity and reach a larger pool of users.
6.4.2.3
Electronic communication services
The preferred option regarding services (option 4) introduces additional administrative burden for
OTT providers that use numbering resources as they will be subject to additional sector regulation.
All communications services providers (regardless of the technology used, this includes OTTs) will
experience an increased administrative burden in relation to complying with rules on security and
privacy. The preferred option regarding numbering does not impose additional administrative burden
on OTTs/IoT. OTTs may, however, have easier access to numbering ranges. The option on must
carry/EPG does not impact on OTTs.
The ERG 2007 guidelines indicate that NRAs may subject OTT voice services that interconnect with
the number regime to certain obligations. However, these guidelines are not binding and SMART
2013/0019 concludes that many NRAs do not follow these guidelines in practice. Under option 4, the
obligations become binding and will have to be enforced by NRA’s for all OTT services that make
use of the numbering regime (i.e. including OTT messaging services). As such, compared to the
baseline, the administrative burden may increase for OTT providers that use numbering resources as
they will now be subject to the same regulation. Most of the obligations and costs (except those
related to accessing emergency services) would be associated only with paying customers, as direct
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revenues
361
largely relate to customers paying for interconnecting with the numbering plan. There is
no quantitative information available on the size of the impact.
OTT services that make use of numbers (like Skype, Viber, or Google Voice) will be subject to the
same obligations with regards to interoperability, end-to-end connectivity, and number portability.
Since interconnection with the numbering regime is already part of the respective service, the
obligation to provide interoperability and end-to-end connectivity will have little to no impact on
current business models of the respective OTTs. With regards to portability (and associated activities
to facilitate the switching process) it is not clear to what extent OTTs are currently de facto subjected
to obligations. Following the ERG 2007 guidelines they could be, but in practice they are often not
362
.
Under option 4, it becomes explicitly clear that OTTs will have to be subjected to portability
obligations and this may have an impact on compliance costs, but we don’t have information on the
size of this effect.
In addition, Article 12 and 13 of the Authorisation Directive would also apply to respective OTTs,
which implies that NRAs may levy administrative charges. While following the ERG 2007 guidelines,
NRAs could already impose such levies on OTTs that interconnect with the numbering regime, in
practice this is not the case. The financial burden differs per Member State, but the size is relatively
small. For example, in Italy the charges under Article 12 may add up to a maximum of 0.2% of
turnover
363
. For a mobile operator with an annual ARPU of 250 to 400 EUR, this boils down to an
average annual burden of €0.65 per paying customer.
Finally, OTTs would also be obliged to provide access to PSAPs, as far as this is technically feasible.
In some Member States (such as the Denmark, Finland and UK) such functionality is already
enabled
364
in other Member States this is currently not the case. There is no information available on
the size of the costs.
All OTTs (regardless of the technology used) will experience an increased administrative burden in
relation to complying with rules on security and privacy and this may imply that some of the current
OTT business models may need to evolve. It cannot be expected from past experience that the costs
would be unreasonable compared to the benefits.
6.4.2.4
Governance
The preferred Governance option (option 3) envisages that the responsibilities of all NRAs would be
aligned with that of BEREC, and would therefore cover inter alia issues relating to sector specific
consumer protection. Alignment of governance mechanisms as well as maximum harmonisation and
greater co-ordination at EU level is likely to benefit OTT players which frequently operate in a multi-
national or even global environment.
6.4.2.5
Overview table
The following table provides an overview of the practical implications of the preferred options on
OTT players and other non-telco users of electronic communication networks.
361
not accounting for the indirect revenues as a result of e.g. integration in the wider MS Office suite in the case of Skype In
/ Out
362
SMART 2013/0019 and additional interviews with NRAs in relation to this study.
363
As indicated in the answers to the consultation by an Italian telecom operator
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Table 22 - Summary of impacts on OTT
Changed obligations
Practical implications
Costs
Access
Spectrum
USO
Services
numbering
Na
Na
Na
and For E.164 OTTs
-
-
-
-
Interoperability
Interconnections
Portability
Access to emergency services
Na
Na
Na
na
na
na
Interoperability and interconnection are Extended obligations may entail
some additional costs. No detailed
currently already in place.
estimate possible
switching and portability procedures
currently existing for EC(N)S need to
implemented by OTTs that interconnect
with E.164
Privacy and security obligations need to
be implemented by all OTTs
For all OTTs
-
-
NRA financing
Privacy & security
Governance
Additional administrative obligations Costs for NRA financing likely to
and costs
vary by member state, but
experience suggests limited. No
detailed estimate possible
Alignment of responsibility for sectoral May affect relevant bodies for Streamlining of consumer protection
service regulation
engagement in certain MS
responsibilities and increased EU-
level guidance should allow reduced
engagement cost
246
OTT potentially captured within levies
for financing NRAs, where relevant
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6.4.3 SMEs
6.4.3.1 Access and SMEs
Micro enterprises and smaller enterprises outside central business districts (including small businesses
in rural areas) are likely to be important beneficiaries of strategies which boost the widespread
deployment of fibre, as these organisations may today be under-served compared with larger
corporations which may already have fibre connectivity installed to their premises. For example, the
UK NRA Ofcom found in the context of research conducted in 2015
365
that a significant minority of
SMEs had had less favourable experiences with broadband, including a lack of widespread superfast
broadband availability, a concentrated retail market structure, and dissatisfaction in relation to quality
of service.
In addition to potentially benefiting from the installation of higher speed broadband, small businesses
should benefit from a choice in high speed offers either as a result of infrastructure competition or
otherwise through co-investment or regulated access (in the absence of co-investment offers).
Competition in standard broadband services via regulated access will also remain. Small businesses
which have or aspire to multi-national operations should also benefit from measures to ensure
consistent product and service specifications, which should increase competition in the provision of
cross-border services in addition to supporting seamless service characteristics.
366
The preferred option for access envisages that payments for newly installed very high capacity
connections in rural areas (which might not otherwise be economic) could be defrayed over a longer
period than 24 months,
367
while maintaining the current rules for contract duration for service
contracts. This could support affordability of VHC connections for SMEs that may not be able to pay
high costs up front. It is not envisaged that the potential for longer term payments for the installation,
would impact customers’ rights as regards switching service providers.
Finally, the provisions on mapping of quality of infrastructure, will have a positive effect on SMEs, as
they entail the publication of this data. Businesses will therefore be able to gauge in advance the status
of connectivity (by means of line-specific tests and not by headline speed) in a given area. This will
be useful for instance when setting up a new business or relocate an existing one.
There are few electronic communication network providers that could be characterised as SMEs with
fewer than 250 employees, as the capital and resources required to install and operate networks mean
that most providers are larger in scale. However, smaller players may exist, for example in the
installation of regional networks or the provision of targeted electronic communication services, and
certain providers with scale across the EU such as suppliers of business communications, may
nonetheless operate at small scale in individual national markets. These providers would in principle
be subject to the same rules as other electronic communication providers with attendant advantages
and costs as described in section 4.5 except that, as today, NRAs are required to ensure that
obligations are ‘proportionate and justified’ in light of the objectives.
368
More specifically, smaller
regional fibre investors are likely to benefit from an increased focus on infrastructure competition,
while business providers (which may have small scale in individual countries) will benefit from
standardised wholesale offers. Smaller alternative operators serving the mass market which rely
primarily on regulated access will be able to continue to offer competitive broadband services at
standard speeds (on the basis of regulated wholesale access in cases where SMP persists). However,
they may be less well placed to invest or co-invest in their own VHC network infrastructure than
larger scale players.
365
366
http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/sme/bb-for-smes.pdf
The impacts of consistent wholesale offers are described in more detail in SMART 2014/0024
367
The currently allowed period under Article 30(5) Universal service and User Rights Directive
368
Article 8 Access Directive
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Smaller OTT players are not directly affected by network access obligations, but would benefit from
the additional capacity that may result from the focus on supporting infrastructure deployment.
6.4.3.2
Spectrum and SMEs
Under the preferred spectrum option, a greater focus on general authorisations over individual
licenses has the potential to open up spectrum resources to smaller companies which are not at present
able to purchase exclusive access. In addition, many of the end-user businesses which will benefit
from accelerated access to spectrum and introduction of 5G will be smaller companies. By opening
access to spectrum resources and accelerating 4G and 5G coverage across the Digital Single Market,
the preferred spectrum option will facilitate innovation and entrepreneurship which benefits primarily
(though not only) start-ups and smaller companies. For instance, there might be companies aiming to
bring innovative new applications to market that rely on 5G availability and reliability in sectors such
as utilities, automotive and transportation or e-health.
6.4.3.3
Universal service and SMEs
There are likely to be few implications of the universal service option on SMEs as the proposals aim
specifically to target broadband affordability for remote or vulnerable consumers. However,
affordable broadband home connections may also support the development of self-employment and
micro-organisations.
6.4.3.4
Services and SMEs
The preferred option as regards services creates more equality in regulatory treatment as obligations
on security and privacy would now apply to all types of communication services (telecom and OTT),
regardless of how they are provided. There may be some costs to smaller OTT providers which would
need to meet extended obligations (which are difficult to quantify). However, the changes would also
provide greater regulatory certainty for all players, as well as increased trust for SMEs as end-users of
OTT services, potentially thereby supporting increased take-up of OTT services including European
OTT start-ups.
A further important benefit which is especially relevant to OTT start-ups is the proposal to apply full
harmonisation for sectorial consumer protection rules. This should reduce barriers for scaling up in
Europe (by reducing regulatory heterogeneity) to the benefit of start-ups entering as new players
shaping the IoT value chain. As users of communication services, SMEs are not covered by horizontal
consumer protection rules, yet they still enjoy a certain degree of protection through competitive
markets. Furthermore, SMEs in new digital value chains (e.g. IoT) enjoy more trust and predictability
as regards the scope of the Regulatory Framework, contributing to confidence in future planning and
investment. SMEs in all sectors will be more inclined to embrace IoT applications and services as
these can now be purchased at lower prices and higher quality (including better guarantees for being
always and everywhere online). This will give more room for innovations by SMEs within the IoT
value chain as well as in other sectors.
6.4.3.5
Governance and SMEs
Changes to Governance will not impact SMEs directly, but may benefit cross-border operations for
smaller businesses supplying and using electronic communications services by ensuring consistent
application of the rules and by requiring interaction with fewer interlocutors.
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6.4.3.6
Overview table
The following table summarises the changes obligations per subject area and associated practical
implications and costs.
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Table 23 - Practical implications of preferred options for SMEs
Changed obligations
Access
-
Greater infrastructure competition
focus involving duct access,
symmetric rules, incentives for co-
investment, long-term commitment
Potential for longer contract
duration for connectivity
Obligations for the publication of
broadband QoS data
Standardised wholesale remedies for
business end users
Practical implications
-
-
Costs
na
-
-
-
-
-
-
Spectrum
-
-
Faster access to spectrum
-
Greater use of general authorisations
rather than individual licenses
-
Services
numbering
and
-
-
-
-
-
Clarity with regards to the scope of
the Regulatory Framework
More equivalence in approach to
ECS and OTT providers offering
ostensibly equivalent services
Maximum harmonisation:
Less obligations regarding ECS:
Transparency
Contractual rights
QoS
Dispute resolution
More obligations regarding IAS
-
Greater access to and choice in high
-
quality broadband connectivity
Improved affordability for fibre
connections
through
defraying
connection charge
Better availability and competition
in
cross-border
business
connectivity
(also
benefiting
providers)
Greater transparency on line quality
Smaller electronic communication
providers may be less well placed to
invest or co-invest in infrastructure
Lower cost and improved potential
-
for smaller firms to access spectrum
Facilitate
innovation
and
entrepreneurship amongst services
relying on 5G and future generation
wireless technologies
For SMEs as customers
-
Greater predictability and trust
amongst SMEs as users of ECS
and OTT
-
Improved
transparency,
affordability
and
quality
concerning IAS
-
Less barriers to embrace new
digital applications and services
(notably IoT).
-
The reduction in sector specific
obligations (regarding ECS)
na
-
-
Extended OTT obligations
and potential contribution to
NRA financing may imply
some cost increases for
SME suppliers – level
difficult to estimate
Max harmonisation for
consumer protection should
reduce compliance costs
250
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1664251_0054.png
-
-
Transparency
QoS
Switching
Potential contribution to NRA
admin costs
Clearer and Improved arrangements
for extra-territorial use of numbers
may impact negatively on SMEs
since equivalent horizontal
obligations only apply to
consumers. However, SMEs
will enjoy protection through
competitive markets.
For SMEs as suppliers
Increased
consistency
and
reduced barriers to cross-border
provision
-
Potential contribution to NRA
(but may be subject to
threshold)
-
Potential new obligations (in
relation
to
E.164
interconnection, as well as
privacy and security)
Sectorial contributions excluded for Reduced contributions for SMEs as - Potentially reduced costs for SME
broadband USO
suppliers
suppliers in member states which
applied sectorial financing
-
Alignment of responsibility for Increased coherence in fixed, mobile
-
service
regulation,
greater
consumer protection and market- and
consistency
shaping spectrum regulation
Greater consistency may reduce
administrative cost for multi-
national companies
-
USO
Governance
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6.4.4 Consumers
6.4.4.1 Access and consumers
Consumers in countries and areas currently lacking infrastructure competition (including rural areas)
are likely to be the main beneficiaries of measures to support the deployment of VHC networks. This
may lead to the availability of broadband services with significantly higher quality than is available
today. In addition, consumers will benefit from a continuation of the degree of competition in existing
broadband services (as access obligations offering quality levels equivalent to those prior to new
infrastructure deployment will remain). This is unlikely to alter the current pricing dynamics for
broadband currently experienced in Europe.
From experience in countries such as France and Portugal, it is also expected that consumers will
benefit from competition in high speed offers and affordable prices resulting from infrastructure
competition or co-investment in very high capacity infrastructure. In cases where infrastructure
competition or co-investment does not materialise as expected, such choice can and should also be
preserved through regulated wholesale access. Experience from countries which have pursued a
similar approach to that advocated in the preferred option, including France, Spain and Portugal,
suggests that pricing for VHC broadband is likely to be reasonable.
369
Affordable prices for VHC broadband are likely to be supported not only by competition in the
provision of high bandwidth services, but also as a result of continued support for competition in
copper-based networks , which is likely to result in ‘anchor’ prices for standard speeds, which
constrain the levels offered for higher speeds. Econometric analysis in the context of SMART
2015/0002 also tend to confirm that access regulation for standard broadband (through local loop
unbundling) can have an influence on prices for NGA and VHC broadband, which in turn support
take-up.
370
The preferred option for access envisages to enable the cost of the (network) connection to be
defrayed over a longer period than the current contract duration (24 month) while maintaining the
current rules for contract duration for service contracts.
371
This could support affordability of VHC
connections for customers that may not be able to pay high costs up front. It is not envisaged that the
potential for longer term payments for the installation, would impact consumers’ rights as regards
switching service providers.
Finally, the provisions on mapping of quality of infrastructure, will have a positive effect on
consumers, as they foresee the publication of these data. Consumers and businesses will therefore be
enabled to know in advance the status of connectivity (by means of line-specific tests and not by
headline speed) in a given area. This will be useful for instance when setting up a new business or
relocate an existing one or when moving to a new house with additional effects in terms of house
prices, repopulation, relocation of economic activity which in turn will drive more demand for
connectivity.
6.4.4.2
Spectrum and consumers
While the spectrum options do not directly impact on end-consumers /citizens, greater and faster 4G
and 5G coverage will enable consumers across the Single Market to benefit from advanced wireless
data services and innovative applications resulting in particular from the deployment of 5G . These
applications are likely to cover sectors as diverse as e-health , automotive / transportation and utilities
, all of which potentially affect a large share of EU citizens. In addition, common methods for
determining coverage obligations and improved connectivity across the DSM will contribute to
369
370
See SMART 2015/0002
See
SMART
2015/0002
–
also
discussed
in
interim
presentation
slides
http://www.wik.org/fileadmin/Konferenzbeitraege/2016/Public_Workshop_April/Public_Workshop_slide_presentation.pdf
371
Article 30(5) Universal service and User Rights Directive
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reducing social inequalities (e.g. by fostering digital inclusion). Finally, the introduction of 5G
services is likely to create a significant number of jobs (estimated at 2.39m across the EU)
6.4.4.3
Universal service and consumers
The preferred option for universal service is likely to have positive implications for end-users (and
particularly consumers) by reducing the number of unconnected households (currently 20% to 30% of
households), especially in rural and remote areas, where cost is the main reason for not subscribing.
This would allow for an improved access to essential e-services (eGovernment, VoIP, ebanking etc)
and would enhance citizens’ social participation and their exercise of fundamental rights, for instance
right to information, right to conduct business and right to education. For vulnerable groups of
consumers (those on low incomes, elderly, those that are less mobile or less able to leave home due to
carer responsibilities), affordable broadband is likely to reduce social isolation, improve sense of
community and promote social inclusion.
6.4.4.4
Services and consumers
Suggested measures focussing on potential bundling related lock-in problems and other measures
supporting transparency and switching will support end-users’ protection and freedom of choice
which will have a positive impact in terms of affordability and/or quality for the end-user. People with
a preference for privacy, confidentiality and/or security are more likely to be included in participating
in popular and innovative communication networks. The options for consumers to reach PSAPs
(when technically possible) will increase, however, while only a few OTTs seek to interconnect with
the numbering regime, the impact is limited.
Although the number of rules dealing with sector specific consumer protection would reduce, this
would not be at the expense of consumer protection. Rules are abolished only if respective consumer
issues are sufficiently protected by horizontal rules and/or if they are sufficiently protected by
competitive constraints imposed on market players.
6.4.4.5
Governance and consumers
Changes to governance will not impact consumers directly, although consumers will indirectly benefit
from greater connectivity, cross-border entry and competition that may result from more effective co-
ordination at EU level.
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6.4.4.6
Overview table
Table 24 - Practical implications of preferred options for consumers
Changed obligations
Access
-
Greater infrastructure competition
focus involving duct access,
symmetric rules, incentives for co-
investment, long-term commitment
Potential for longer contract duration
for connectivity
Obligations to publish QoS mapping
data
Faster access to spectrum
Greater use of general authorisations
rather than individual licenses
Equivalence in approach to ECS and
OTT providers offering ostensibly
equivalent services
Measures to reduce bundling-related
lock-in
Interoperability, emergency service
access and portability requirements
for OTT interconnecting with E164
Less obligations regarding ECS, but
More obligations regarding IAS
Transparency
QoS
Switching
Practical implications
-
-
-
Greater access to and choice in high quality
broadband connectivity
Improved affordability for fibre connections through
defraying connection charge
Greater transparency over quality of service
Costs
-
na
-
-
Spectrum
-
-
-
Services
and
numbering
-
-
-
-
-
-
-
Greater availability and innovation in services
-
na
relying on 5G and future generation wireless
technologies
Accelerated fast mobile broadband
Greater predictability and trust amongst users of na
ECS and OTT due to extended privacy and security
measures
Increased ease of switching in relation to bundled
offers
Greater end-to-end connectivity and access to
emergency
services
when
using
OTT
interconnecting with E164
Improved transparency concerning IAS
Potentially less detailed obligations on some ECS,
but practical implications limited since consumer
protection would be covered by horizontal rules or
addressed through competitive markets.
a positive impact in terms of affordability and/or
quality for the end-user
-
-
-
-
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1664251_0058.png
USO
- Focus on broadband affordability at
least at a fixed location
-
Alignment of responsibility
sectoral service regulation
-Potentially improved access to affordable broadband
na
Governance
for
-
Increased
ease
of
administrative burdens
engagement,
reduced
-
na
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6.4.5 Member States' authorities
6.4.5.1 MS and Governance
The proposed changes to the EU framework for electronic communications would require
transposition into national legislation, and will entail certain changes to the institutional set-up in
countries which do not already implement the revised structures and procedures as well as changes at
EU level. Specifically, at national level, NRAs remit would be subject to minimum harmonisation (to
cover inter alia market-shaping spectrum assignment issues and sector specific regulation in areas
such as consumer protection). Likewise, at EU level the preferred option would give BEREC an
expanded remit for market-shaping aspects of spectrum assignment and services alongside access, as
well as increased responsibilities including responsibility for developing implementing guidelines and
an enhanced role in the article 7a process on remedies as well as a peer review role on market-shaping
aspects of spectrum assignments. These changes may have the following implications for member
states’ responsibilities and budget.
Taking into account factors which may reduce costs as well as those which increase them, the
preferred option is projected to result in costs which are similar to the status quo (see discussion in the
detailed chapter on Governance in SMART 2015/0005). However, in a scenario where the projected
efficiencies are only partially achieved, the preferred option could entail additional costs of around
€5.5m across the EU, with costs varying for different countries. The implications of the adapted
governance structure on member states’ responsibilities and budget are described in more detail
below.
6.4.5.1.1
National level
An important change at national level will be the allocation of responsibilities in the field of consumer
protection and spectrum awards design under the framework to those NRAs
372
which do not currently
have such responsibilities. This affects a subset of member states.
373
If it entails a transfer of
responsibilities for existing tasks, cost implications may not be significant.
The preferred option also entails a requirement to ensure appropriate resourcing for NRAs both to
conduct their duties at a national level, and contribute to the expanded remit of BEREC.
Additional expenses are expected to vary between member states, depending on the current resourcing
available to the NRAs, but across the EU overall additional expenses for the resourcing of NRAs are
expected to be minimal.
Based on an additional 20FTE from NRAs across the EU contributing to BEREC (in addition to the
current estimated 49FTE),
374
and a 50% increase in contributions from national authorities
375
to EU
spectrum co-ordination (concerning the design of auctions and market-shaping measures), the
increased cost to NRAs for BEREC contribution is estimated at €2m in the EU 28 under the preferred
option.
Certain NRAs may also need greater resourcing in order to adequately perform duties such as market
analyses under the revised framework including the proposed requirement for infrastructure mapping.
372
373
Independent National Regulatory Authorities within the meaning of article 3 Framework Directive
According to data from Cullen, NRAs in Denmark, Estonia, Latvia, Malta, Poland and Spain do not currently have
responsibility for consumer protection, while NRAs in Netherlands, Spain, Cyprus and to some extent Slovakia and Portugal
do not have primary responsibility concerning regulatory aspects of spectrum management
374
Based on BEREC interview
375
Today contributions are made to the RSPG by various bodies at national level, but would under the revised framework
proposals be made by NRAs as regards spectrum auction design and market-shaping measures
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However, as elaborated in the detailed analysis of impacts resulting from changes to the access regime
conducted under SMART 2015/0005, the additional mapping obligations are only incremental to the
advanced mapping initiatives that already exist in many Member States. Such mapping processes may
already have been developed for market analysis purposes, for the implementation of transparency
measures required under the Cost Reduction Directive (such as advance notification of civil works)
and to meet reporting obligations for identification of white areas through investment mapping before
notification of State Aid schemes. Indeed, it would be recommended for those national
administrations which have not already done so, to streamline these ‘mapping’ processes under the
remit of NRAs, which should ensure that the assessments are coherent, and may ultimately reduce
complexity and cost.
Other policy approaches such as extended market review periods and standardised wholesale
specifications for certain products with EU-level relevance, could also be expected to reduce costs for
NRAs on average.
Moreover, the introduction of greater co-ordination concerning certain aspects of spectrum
assignment, may result in reduced resourcing requirements for the management of spectrum resulting
in a reduced overall national burden associated with regulation of the electronic communication sector
at national level.
If costs for the application of non-spectrum aspects of regulation are broadly stable (taking into
account positive and negative factors), but spectrum-related resourcing could be reduced by an
average of 1FTE per member state due to greater co-ordination, the average estimated reduction in
national costs for application of the electronic communication framework as a whole would be around
€2.6m per annum across 28 Member States, but not necessarily equally distributed, since resourcing
levels vary widely.
6.4.5.1.2
EU level
As regards EU co-ordination, the reinforcement of BEREC’s responsibilities and its structure to
conform with the 2012 Common Approach will entail increased annual costs of an estimated €7m
compared with the status quo. This increased cost could be met from the EU budget
376
. The preferred
option bundle may also entail increased resourcing requirements for the Commission (especially
relating to the proposed spectrum assignments peer review) with an estimated budgetary implication
of around €0.6m.
At EU level, Ministries would continue to play a role in comitology bodies such as COCOM.
6.4.5.2
MS and Services
In general, sector specific rules would be followed by the NRA and the attribution of horizontal rules
would be at national discretion. Some Member States might opt to give all consumer questions
relevant for a sector to the sector specific regulator. Options with regards to numbering and with
regards to must carry/EPG do not require actions from ministries, besides transposing new rules
(regarding the assignment of MNCs to non-MVNOs, and regarding extra-territorial use of national
numbers) into national law.
6.4.5.3
MS and Universal service
Adoption of Option 3 for universal service will have slight implications for ministries of some
Member States where ministries share the relevant competences with NRAs (for instance, in Austria,
376
Some EU agencies are partly financed by fees but no specific tasks carried out by BEREC which could be subject to a fee
paid by the beneficiaries of those tasks have been identified.
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Estonia, Finland, France, Italy and Greece). In such countries, there will be new requirements with
regard to the definition of the scope of universal service and universal service obligations at the
national level, because Option 3 foresees only PATS and affordable broadband for the scope. Yet,
depending on the national distribution of competences, ministries may retain the task of defining
broadband at the national level (for example, by reference to specific communications services) as
well as to assess affordability. Nevertheless, flexibility of Member States will be preserved due to a
minimum harmonization at the EU level, i.e. the accessible communications services basket can be
enhanced at the national level and broadband affordability can be expanded to at least at a fixed
location. In addition, if a need is demonstrated at national level, Member States would have the
possibility to include the availability component in the universal service obligation and to maintain
services, which are currently part of USO at the respective national level (i.e. payphones and
accessory services). There is a further limitation of discretion of Member States as regards the choice
between different financing options, if public funding (as opposed to optional funding from the
industry) is mandated at the EU level.
6.4.5.4
Overview table
states is shown in the following table.
An overview of the impacts for member
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1664251_0062.png
Table 25 - Practical implications for Member States
Obligations
Access
-
Steps to be taken
Costs
-
Spectrum
-
-
Extension of market review periods, more
-
detailed
reviews
(including
mapping),
harmonised wholesale specifications
BEREC to develop Implementing guidelines on
adapted market analysis process and standardised
wholesale products
EC to adopt implementing Decisions subject to
-
RSPG input and comitology
BEREC to play role in peer review of spectrum
-
assignment
Services
and
numbering
-
In general, sector specific rules would be
-
followed by the NRA and the attribution of
horizontal rules would be at national discretion.
Some MS might opt to give all consumer
questions relevant for a sector to the sector
specific regulator
Defining the scope of functional internet access
Implementing affordable universal service
Ensure adequate resourcing of NRAs to Increased costs of ~€2m (+20FTE across EU28)
conduct market analyses and contribute to support NRAs in contributing to BEREC,
some increased costs also to ensure effective
to BEREC
NRA resourcing where not currently the case,
but may be balanced by potential for reduced
costs from extended market reviews
Ensure adequate resourcing of NRAs to Some additional costs to support spectrum co-
ordination (see governance), but overall
contribute to BEREC/ RSPG
potential saving of approx. €2.6m across EU28
for ECS spectrum management if co-ordination
reduces resourcing requirement (by 1FTE) at
national level
Ensure adequate resourcing of NRAs
-
Limited impact as the responsibilities of
NRAs in enforcing current sector specific
obligations can be downsized as a result of
the preferred option.
USO
-
-
Governance
-
-
-
Harmonised minimum remit for NRAs to include
-
consumer protection and market shaping aspects
of spectrum
Expanded remit for BEREC to encompass
consumer protection, spectrum and alignment of
-
structure with Common Approach
Peer review process for spectrum (involving
-
BEREC, EC)
NRAs already have significant
responsibilities
on
technical
implementation of universal service,
only a (slight) adjustment of them will
be necessary
Transfer responsibilities for consumer
protection and market shaping aspects
of spectrum to NRAs (where not
already lying with independent NRA)
Potential increased contribution to
BEREC and EC costs
The overall cost of specifically attributing
certain US implementation responsibilities to
NRA is likely to be neutral
Removal of sectorial funding possibility
Cost of transferring responsibilities between
national authorities may be limited
Estimated increased costs of reinforced EU co-
ordination ~€4.4m for enhanced BEREC, and
~€0.6m for Commission (although potential
national savings from spectrum co-ordination
described above)
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6.4.6
National regulatory authorities (NRAs) and spectrum regulatory authorities (SRAs)
Under the preferred option bundle, NRAs will have full responsibility for implementation of
regulatory rules under the EU framework for electronic communications including those associated
with consumer protection and market-shaping aspects of spectrum assignment. This will entail an
expanded remit and associated resources for those NRAs which do not already have these
responsibilities.
377
NRAs will also need to make additional contributions to the output of an enlarged
BEREC. This may have the following practical implications.
6.4.6.1
NRAs and Access regulation
As regards implementation of the framework at a national level, the market analysis process will be
adapted to include infrastructure mapping, greater consideration of duct access and clarifications in
relation to the application of symmetric obligations, as well as co-investment and other commercial
arrangements, prior to mandating obligations for access on the basis of SMP. NRAs can already adapt
market analysis processes on a voluntary basis to reflect this approach, but will be obliged to follow
this approach in the reviews subsequent to the adoption of the revised EU framework for electronic
communications. These additional considerations – and especially mapping and the potential greater
focus on duct access and symmetric remedies may imply additional effort and resource for those
NRAs which have not already undertaken such analysis, especially in the first review process
following the application of the revised framework. However, many NRAs or regional authorities
already conduct mapping assessments thereby reducing the additional burden entailed by such an
obligation (see SMART 2015/0002 and section 2 (access) of the detailed Impact Assessment, while
the required effort in relation to duct access and symmetric remedies should be reduced in subsequent
reviews.
The preferred option also provides a role for NRAs in identifying ‘challenge’ areas, holding operators
accountable for the provision of misleading information concerning their deployment plans. This may
result in greater engagement by NRAs with the process of broadband state aid allocation, which also
involves the identification of areas in which NGA deployment is unlikely.
However, in addition to measures which may increase resourcing requirements for certain NRAs,
there are measures which are likely to reduce the effort needed. Market reviews will be required only
every 5 years as opposed to 3 years as currently,
378
and the introduction of standardised wholesale
remedies for example in relation to business access, will avoid duplicate processes for the
specification of new wholesale remedies, and simplify the imposition of remedies (in cases where
such remedies would be appropriate).
NRAs will need to be effectively resourced not only to fulfil their national functions under the
electronic communications framework, but to contribute to an expanded BEREC, which will have
responsibility for the development of implementing guidelines as regards issues such as infrastructure
mapping and the development of standardised wholesale offers to support business communications.
NRAs would also contribute via BEREC to an updated article 7a process whereby a Commission veto
on remedies would be possible in circumstances where BEREC agrees.
Some of the changed requirements are likely to result in increased budgetary and resourcing
requirements for a subset of NRAs. These include obligations to ensure adequate resourcing,
responsibility for market shaping aspects of spectrum and consumer protection (where not already the
377
According to data from Cullen, NRAs in Denmark, Estonia, Latvia, Malta, Poland and Spain do not currently have
responsibility for consumer protection, while NRAs in Netherlands, Spain, Cyprus and to some extent Slovakia and Portugal
do not have primary responsibility concerning regulatory aspects of spectrum management
378
The 2014 Recommendation on Relevant Markets susceptible to ex ante regulation also involves two fewer markets than
the previous 2007 Recommendation, which should also entail reduced effort as the markets removed from the list are
progressively deregulated
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case), and the requirement to conduct robust mapping exercises in relation to market analyses (where
not already the case). Additional contribution to BEREC would also need to be resourced.
However, many NRAs already have sufficient resourcing, scope and undertake detailed mapping, and
as discussed there are other aspects of the preferred package that may result in cost savings. Cost
implications for changes to NRA duties under the preferred option (excluding spectrum) may
therefore be considered neutral on average, although with variations amongst member states.
6.4.6.2
NRAs and Spectrum
In terms of the preferred spectrum option, NRAs would also need to have sufficient resources to deal
with the spectrum assignment selection processes and the related peer review and to engage with
BEREC accordingly. However, increased co-ordination of certain aspects of spectrum assignments at
EU level, may allow for cost savings in spectrum management to be made at national level. For
example, an estimated €2.6m could be saved across the EU, if greater spectrum co-ordination
permitted a reduction in spectrum management staffing of 1 FTE per member state.
6.4.6.3
NRAs and Electronic Communication Services
Under the preferred option, NRAs indicate that the impact on enforcement costs for consumer
protection is not a major issue. Abolishing the rules that overlap with horizontal rules would not bring
any savings in terms of the enforcement costs; either because they are currently already enforced by
competent authorities or because MS may decide to give responsibility for enforcing horizontal rules
to the NRA. Moreover, while NRAs may reduce a number of activities related to transparency and
QoS monitoring in relation to ECS, a number of these activities need to be re-introduced to enforce
similar type of obligations imposed on IAS.
The obligations imposed on OTTs that provide communications services with regards to security and
privacy may require additional activities to guide OTTs in implementing obligations (which may
include legal enforcement activities). While OTT business models are EU-wide it may require
coordination of activities at BEREC. The preferred option as regards numbering makes current
procedures with regard to extra-territorial use of numbers much more efficient. This may require an
increase of activities as it may lead to more applications for extra-territorial use of numbers.
Moreover, the ability of non-M(V)NOs to apply for MNCs may also require more resources for
NRAs. With regards to must carry and EPG, there is no impact on NRAs.
6.4.6.4
NRAs and Universal service
NRAs will be responsible for monitoring the national market evolution of functional internet access
and voice communications. NRAs will also continue to keep the tasks related to assessing the possible
unfair burden from the universal service provision and the calculation of the net costs.
An
overview
of
the
implications
for
NRAs
is
shown
in
the
following
table.
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Table 26 - Practical implications for NRAs/SRAs
Obligations
Access
-
Steps to be taken
Implement revised market analysis
process in market reviews following
application of the framework to be
conducted on 5 yearly basis.
Conduct
infrastructure
mapping
exercises
(where
not
already
implemented)
Investigate and where appropriate
apply measures to make duct access
and symmetric access to non-
replicable assets effective
Include additional assessment e.g. of
co-investment, commercial offers,
prior to imposition of any additional
SMP remedies
Implement standardised wholesale
solutions
(after
adoption
and
following suitable period)
Take on new responsibilities and
provide necessary resources
Engage with spectrum advisory board
Costs
Difficult to precisely estimate and likely to
vary between NRAs as some may already
comply with the spirit of the preferred
option, while others require further
resourcing in order to do so.
Given balance between positive and
negative cost impacts, overall impact may
be neutral
-
-
-
Longer market review periods,
-
requirement to demonstrate retail
failure
Infrastructure mapping
Greater infrastructure competition
-
focus involving duct access, symmetric
rules, incentives for co-investment,
long-term commitment
-
Standardised wholesale remedies for
business
-
-
Spectrum
-
-
Negotiate assignment criteria and usage
-
obligations which would form part of
EC implementing decisions
-
Adopt system promoting general
authorisations over individual licenses
-
-
Greater EU co-ordination in spectrum
assignment processes and licence
conditions
requires
additional
engagement with RSPG but may allow
cost savings estimated at ~€2.6m based
on reduction of 1FTE per SMA on
average
Transfer
of
certain
spectrum
competences to NRAs in countries
where not already the case considered
cost neutral
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Services
numbering
and
1. Enforcement of obligations on IAS and
ECS
2. Assist OTTs in implementing security
and privacy obligations
3. Enforcement of new OTT obligations
4. Operationalise new (more efficient
procedures) regarding roaming and
extra-territorial use
5. Clear possibility to assign numbers to
non-M(V)NOs
1. Adapt activities in enforcement of
some IAS and ECS obligations
2. Interact with OTTs, coordinate
with BEREC, legal challenges.
3. Integrate enforcement of OTT
obligations into current operations
4. Intensify cooperation between
NRA's as the relevance of cross
border aspects may increase
5. Increase resources as number of
applications may increase
Net impact of 1 and 2 is likely zero
Impact of 2 is mostly during a brief
transition
period
following
implementation of option 3. It requires
coordination with other NRAs and
may involve legal challenges.
Impact of 4 is negligible
4 and 5 may require some additional
resources because increased efficiency
may lead to an increase of the number
of applications (where the current nr of
applications is close to zero)
USO
-
-
Governance
-
-
-
-
NRAs
already
have
significant
responsibilities
on
technical
implementation of universal service, only
Monitoring market evolution
a (slight) adjustment of them will be
Net-cost calculation
necessary
BEREC to develop Implementing
-
Contribute to expanded BEREC and
guidelines on adapted market analysis
RSPG responsibilities
process and standardised wholesale
products
EC to adopt implementing Decisions
subject to RSPG input and comitology
Double-lock veto on draft SMP
remedies under Article 7
BEREC to play role in peer review of
spectrum assignment
The overall cost of specifically attributing
certain US implementation responsibilities
to NRA is likely to be neutral
~€2m per year (for an additional 20FTE)
contributing to BEREC (over current
estimate of 39FTE) and some additional
contribution to RSPG
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6.5
ANNEX 5 - Analytical models used in preparing the impact assessment.
6.5.1
Modelling the gains from intervention
The impact of the preferred policy options is estimated quantitatively using a mix of econometric and
computable general equilibrium (CGE) techniques. The algorithm for performing the impact evaluation
is presented very generally in the figure below. As a first step, the evaluated impact in terms of
effectiveness and efficiency of the proposed policy measures is translated into quantitative (where
possible) key performance indicators (KPIs).
To provide a link between the KPIs and the macroeconomic framework, econometric estimates of the
effect of the indicators on certain macroeconomic variables are performed. These are complemented by
other estimates, based on relevant economic literature. Finally, the evaluated impacts are fed into the
CGE modelling framework as an input shock and the effects are multiplied and spread across the entire
economy through the model system of equations. The impact is evaluated quantitatively by means of
comparison of a baseline (largely extrapolation-based) and relevant alternative scenarios for the
preferred policy options in each of the considered policy areas.
The choice of a CGE modelling framework for the estimation of the macroeconomic gains from
intervening is justified by the suitability and widespread use of this type of models for evaluation of the
impact of policy interventions. As the behaviour of various economic agents, such as consumers and
different businesses, is explicitly modelled, this framework provides also estimations on the impact of
the evaluated changes on different types of stakeholders, as well as the economy as a whole (through
aggregate measures such as GDP or welfare). As the model is recursively-dynamic in its nature, it
allows us to estimate also the transition paths for the macroeconomic variables, where, for the purposes
of the current impact assessment, we have considered the cumulative impacts up to 2025.
6.5.2
Assumptions and limitations of the modelling approach
The modelling approach relies on the assumptions that the selected KPIs reflect sufficiently enough the
expected developments in each policy area and that the estimated econometric relationship with the
total factor productivity (TFP) will not change as a result of the implemented policies. The
implementation of a CGE framework is also based on the following assumptions:
▫
▫
No change in the input-output structure of the economies modelled. As already discussed, in
the context of the current evaluation this implies that the estimated impacts are very
conservative, where there is potential for higher benefits in case of disruptive technologies and
innovations.
Constant share of public investment with respect to the gross value added in the absence of
policies
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▫
▫
▫
Constant share of sectorial public investment with respect to the total capital expenditures of
the government in the absence of policies
Assumptions about important model parameters, which are presented in detail below in the
current macroeconomic modelling annex. They are calibrated in order to ensure a plausible
trajectory of the macroeconomic variables in the baseline.
Also, in order to present estimates of the magnitude of the estimated impacts in nominal terms,
we have also adopted the assumptions that in the baseline scenario annual GDP growth in the
EU will be 2%, while employment will increase by 0.3% per annum and finally, that annual
growth in gross fixed capital accumulation will be around 5%.
More generally, it is important to note that there are limitations on what can be estimated on the basis
of the model. Specifically, we note that the implementation of the preferred policy options might have a
significant boost on innovation and ultimately lead to disruptive growth. By their definition, however,
such structural economic changes cannot be estimated ex ante. Therefore, the estimates presented
below should be treated as a lower bound on might be practically achievable in case the implemented
policies facilitate the development and application of disruptive technologies with an important
implications on a wide variety of businesses and, eventually, on the economy as a whole.
The achievement of a structurally different economic growth however will be strongly dependent on
the ability of the business to absorb efficiently and effectively new technologies and benefit to the
highest extent from the competitive advantages such technologies might provide. More generally, the
impact of the proposed policies will be also contingent on the application of relevant innovation
policies.
Finally, as a recommendation for an ex post impact assessment, a dynamic study of the behaviour of
the various businesses at firm level before and after the introduction of the proposed policy changes in
the e-communication regulatory framework and the respective legislative and institutional setups might
provide useful insights. Also, if feasible, a large scale study with richer regional specifications might
have high value added, as territorial variations might prove significant.
6.5.3
6.5.3.1
Impact of the proposed policy options on the KPIs
Access
The economic literature recognizes the positive effect of improved broadband access and uptake for
achieving higher productivity and economic growth. Policy options in this domain relate to measures
fostering the adaptation of the existing infrastructure to be 'fibre-ready' and provide stimulus for the
development of the single market.
While the implementation of the policy options will be associated with significant CAPEX costs and
transition periods, they should also lead to higher-speed broadband access and improved business and
consumer climate.
6.5.3.2
Spectrum
As pointed out in the relevant section, spectrum has important implications on the deployment on
mobile and fixed wireless networks, as well as on mobile competition, thus on the quality and prices of
the services provided. Policy options, related to spectrum consist mainly of different degree of
harmonization (more or less binding rules) of the regulatory framework on spectrum management,
ranging from maintenance of the current status quo to full harmonization.
The enhanced harmonization of the spectrum regulations should lead eventually to higher speed due to
realized economies of scale and investments and improved transparency and certainty for the end
consumers.
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It will, however, also lead to higher regulatory costs and various implementation-related expenditures.
It will require a certain transition period and, in case of higher harmonization, will reduce the flexibility
of the national authorities to conduct policies.
6.5.3.3
Services
Electronic communication services regulations need to be streamlined to level the playing field for all
market participants, while ensuring the safe and continuous provision of the services. Various policy
options are being considered, related mainly to identification of redundant regulations and/ or extension
of some of the existing rules to all market participants and specification of the role of the National
Regulatory Authorities and of BEREC.
The implementation of the envisaged measures might cause some additional administrative costs but
should in the end promote competition in the sector and, at the same time improve the business climate
through optimized regulation. In the end consumers are expected to benefit from higher quality and
more securely provided e-communication services.
The problem with the must carry and EPG is also related to the provision of e-com services. However,
the regulation of the access of public service broadcasters to online platforms falls out of the E-
communication regulation and will not be considered in the current impact assessment.
6.5.3.4
Numbering
The problem with the numbering is closely related to the observed trend of expansion of the M2M
applications and possible negative implications of solutions implemented only at national level. The
policy options considered are related to the establishment of a common basis for extra-territorial use of
national numbers throughout the entire EU and the use of M2M across borders.
Implementation costs for some of the policy options considered might be significant, but they should
eventually lead to a boom in the development of M2M applications and, thus of innovations and
economic growth.
6.5.3.5
Universal Services
Universal services have important social impacts and therefore it is essential to ensure that their scope
and coverage is aligned with the societal and technological developments. The policy options
considered in this respect comprise of exclusion of certain services from the US scope, which have
become redundant (payphones, directories and directory enquiry services), inclusion of broadband
affordability and, possibly, availability and, thirdly, adjustments in the pool of US contributors.
Optimizations in the scope of the universal services and contributors will enhance efficiency and
effectiveness in the provision of these services, leading possible to lower financial burden for the
contributors and better alignment of the US with the current technological, societal and economic
developments in the EU.
6.5.4
Impact of the KPIs on some macroeconomic variables
The literature review of the impact of the various policy areas considered under this study, shows a
multitude of studies assessing the effect from broadband access and uptake and some evidences on the
impact of 4G on economic growth, productivity and employment. Estimations of the macroeconomic
impact of high-speed broadband are however still limited in number and scope.
As can be inferred from the introductory section to this annex, the approach followed consists of
estimation of the impact mainly on total factor productivity (TFP) and predominantly the effect from it
to the other macroeconomic variables through the CGE model. To this end, we have constructed a two-
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factor productivity function, where economic growth is explained by the contribution of capital (public
and private) and labour (skilled and unskilled). Contrary to the typical estimation of the TFP as a
residual in the production function, we have adopted the approach, used in GSMA and Deloitte
(2012)
379
, where Stochastic Frontier Analysis (SFA) is used to proxy total factor productivity as a
measure of efficiency. The main advantage of this approach to TFP estimation is that it allows for
decomposition of the TFP into two analytically useful components: 1. technical progress over time and
2. different efficiency levels, measured as deviations of the respective economies from the (maximum
achievable) production frontier.
380
The results of the SFA estimation are given below.
As a first step, TFP was estimated by regressing GDP in volumes against the two typical production
factors – capital (������������) and labour (����������������), respectively measured as cumulative investments,
assuming a 10% depreciation rate, and employment. The remaining variables take into account the
economic crisis after 2008 (dummy variable
����������������������������),
evolution of the GDP in time (����������������), i.e.
technical progress, a constant (Intercept) and country fixed effects. The parameter
�������������������� ∈ [0,1]
estimates the proportion of total residual variance, which is attributed to inefficiencies. Meanwhile
����������������������������
measures the sum of the variances in the error components (inefficiency and statistical
noise).
381
Variable
(Intercept)
log(CAP)
log(EM)
dCRISIS
sigmaSq
Gamma
Time
BE
BG
CY
CZ
DE
DK
EE
EL
ES
Estimate
3.37
0.09
0.97
-0.03
0.00
0.80
0.13
0.09
-1.62
-0.24
-0.72
-0.26
0.22
-0.72
-0.39
-0.35
Significance
***
*
***
***
**
***
***
***
***
.
***
*
***
***
***
***
Variable
FI
FR
HR
HU
IE
IT
LT
LU
LV
PL
PT
RO
SE
SI
SK
UK
Estimate
0.07
-0.10
-0.83
-0.89
0.27
-0.24
-0.78
1.04
-0.87
-0.98
-0.63
-1.35
0.13
-0.46
-0.68
-0.22
Significance
*
***
***
***
**
***
***
***
***
***
***
***
***
***
*
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
The results indicate much bigger elasticity of output to labour (0.97) as compared to capital (0.09) and
show returns to scale, which are close to constant (the sum of the coefficients in front of capital and
labour inputs is 1.06). If estimated only on the subset of Eurostat data for 2000-2007, the elasticities of
output to capital and labour are much more balanced, standing respectively at 0.45 and 0.46. The
estimation results show a positive time trend in national income with an elasticity of 13% and the
downturn from 2008 is estimated to provide a negative contribution to GDP of around 3%.
379
GSMA and Deloitte, 2012, "What Is the Impact of Mobile Telephony on Economic Growth?", Report prepared for the
GSM Association, available at: http://www.gsma.com/publicpolicy/wp-content/uploads/2012/11/gsma-deloitte-impact-
mobile-telephony-economic-growth.pdf .
380
The method and data used are described more in length below in the chapter devoted to the Elaboration of the
methodology.
����
2
381
2
2
Technically,
����
2
= ����
����
+ ����
����
and
=
����
⁄
2
, where are the variances in the assumed distributions of the inefficiency (����) and
����
statistical noise (����) components in the error term.
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The mean efficiency for the dataset, including 28 EU MS in the period between 2000 and 2015 stands
at 0.88, where fixed effects are calculated negative mostly for the converging economies (highest for
Bulgaria and Romania) and positive for the highest income countries in the EU – Luxembourg and
Denmark, but also for Ireland.
Once efficiencies are estimated, they are used as proxy for the total factor productivity and are
regressed against:
▫
▫
▫
Heritage index of economic freedom
ℎ����������������������������
��������
, which is mostly used as a proxy of the
regulation effectiveness and efficiency and, more generally of the business and consumer
climate.
4G mobile broadband coverage (as % of all households)
������������_������������������������
��������
Average broadband connection speed
��������������������
��������
Finally, as no data for Croatia was available for the speed of connection, it was excluded from the
estimation panel.
Variable
log(heritage)
log(mbb_ltecov)
log(speed)
AT
BE
BG
CY
CZ
DE
DK
EE
EL
ES
FI
FR
Estimate
382
0.225
0.003
0.021
-1.169
-1.166
-1.207
-1.142
-1.216
-1.174
-1.193
-1.234
-1.091
-1.153
-1.179
-1.137
Significance
***
**
***
Variable
HU
IE
IT
LT
LU
LV
MT
NL
PL
PT
RO
SE
SI
SK
UK
Estimate
-1.176
-1.210
-1.099
-1.285
-1.187
-1.253
-1.160
-1.191
-1.212
-1.153
-1.263
-1.200
-1.163
-1.224
-1.191
Significance
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
The estimation results indicate significant impact of economic freedom of the total factor productivity
(elasticity of 0.225), including also important governance aspects. Higher broadband speed and
expansion of the LTE mobile broadband also turned out to be statistically significant, though their
coefficients are much lower - 0.021 and 0.003 respectively.
382
The country fixed effects are all negative due to the lack of constant in the equation specification.
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In addition to the results for the entire economies, sectorial production functions were also estimated.
As sectorial breakdowns for Croatia were not available on the Eurostat website, it was excluded from
the panel. The table below summarizes the results of the estimates performed for the seven sectorial
aggregates that are incorporated in the CGE model for estimation of the macroeconomic impact
383
.
Variable
(in logs)
heritage
mbb_lteco
v
speed
TOTA
L
0.225
0.003
0.021
**
*
**
**
*
AGR
LOWMA
N
0.058
0.005
**
*
0.032
**
**
*
HIGHMA
N
-0.163
0.003
0.035
*
**
**
*
ENERG
Y
0.107
-0.006
-0.136
**
*
0.300
0.001
-
0.078
Variable
(in logs)
heritage
mbb_ltecov
TRANS
TELECO
M
-0.123
-0.020
ECOM
SER
speed
0.0000002
-
0.0000000
4
-0.0000009
**
-0.412
0.012
*
**
*
**
*
0.141
0.003
.
*
**
*
-0.139
0.072
0.012
**
Sector abbreviations: AGR – agriculture, LOWMAN - low-tech manufacturing, HIGHMAN - high-
tech manufacturing, ENERGY - energy sector, TRANS - transport, TELECOM - telecommunications,
ECOM - other electronic communication-related services, SER - Other services.
384
Based on these estimates, we have assumed the following coefficients for the impacts in the CGE
model, taking into account both the statistical significance of the coefficients and the logics behind the
estimates. The table below summarizes the elasticities of the total factor productivity to the KPIs, used
for the subsequent estimations:
Variable
(in logs)
heritage
mbb_lteco
v
speed
AG
R
0.22
5
0.00
3
0.02
1
LOWMA
N
0.225
0.005
0.032
HIGHMA
N
0.225
0.003
0.035
TELECO
M
0.225
0.003
0.072
ECO
M
0.225
0.012
0.072
ENERGY
0.225
-
0.0000000
4
-
0.0000009
TRANS
0.225
-
0.0000000
4
-
0.0000009
SER
0.22
5
0.00
3
0.02
1
383
384
Estimates in grey are not statistically significant.
The definition of the sectors is discussed in length in the section, describing the structure of the CGE model.
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As estimated, the impacts of connection speed and 4G mobile broadband coverage on the sectorial total
factor productivity is higher in the e-communication services (ECOM and TELECOM) and
manufacturing and much less – in transport and energy sectors.
6.5.5
Overall macroeconomic, social and environmental impacts
Having established a link from the policy options, through the KPIs to some macroeconomic variables
and parameters allows us to perform an overall macroeconomic impact assessment. To this end, we
have constructed a CGE model, which is run for the three modelled economies (Germany, Czech
Republic and Bulgaria), selected based on a cluster analysis, taking into account the digital and
economic development and the size of the economies.
Each of these three economies is inhabited with a government, eight production sectors and a single
representative household, maximizing its utility from consumption, skilled and unskilled labour and
savings, given its budget constraint. The economic sectors comprise of agriculture, low-tech
manufacturing, high-tech manufacturing, energy, transport, telecommunications, other electronic
communication-related services and other services. Each of them maximizes its profit, based on its
production technology. The government is formalized through its budget constraint. The link with the
foreign sector is made through the invest-savings balance. Armington and constant elasticity of
transformation aggregation functions are used to determine the quantity and relative price of the
imports and exports.
The model is static in its essence, as all optimizing agents choose their optimal values only for the
current period. However, the model features also some transitional dynamics, defined through the
capital accumulation equation and an equation for total factor productivity growth.
The quantitative modelling approach can be schematically presented as in Figure 1. The next Figure 2
presents an overview of the impact mechanisms of the preferred policy options. To simulate the impact
of the preferred policy options on the economy, shocks to the TFP have been introduced. Their
magnitude is estimated based on the expected size and timing of the of the respective KPIs and their
identified econometric relationship with TFP. Most of the shocks were introduced in 2020 and had
impact already in 2021. Exceptions include accelerated fibre scenario, where impacts begin to be felt in
2019 as market analysis processes are voluntarily adapted in anticipation of the modification of the
electronic communications framework and the 5G spectrum scenario, where impacts are not
experienced before 2021, on the expectation that 5G technologies will not be ready for service before
that date.
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Figure 30 - Overview of the quantitative modelling framework
Impact on the well-being of the society as a whole
EU regulatory frame-
Country-specific
work for electronic
developments and
communications
regulations
Intervention
logic
Government
Key policy
indicators
Impa
o n ca ct
pi
dema tal
nd
ct
Impa P
F
on T
on
a ct
ing
Imp spend
lic
pub
Taxes
G
b u o ve r
dg
e t n me
ba nt
lan
ce
Savings-investment
account
Ta
x
es
v
Foreign sa
Transfers
Econometric
model
Intermediate
consumption
Economic
sectors
Ho
us
o
eh
ld
s
in
av
gs
ings
Final consumption
Unskilled and skilled labour
Impact on consumer preferences
Households
Imports of consumer goods
Foreign sector
Imports of investment goods
and raw materials
Exports
Investment
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Figure 31 - Overview of the impact mechanisms of the preferred policy options.
Costs
Policy options
option
Preferred policy
Immediate benefits
Direct macroeconomic
impact
Private
investments in
TELECOM
and ECOM
sectors
Second-round macroeconomic benefits
(-)
Government
balance
(-)
Access
Public
expenditures
Increased
competition
Public admin
expenditures
Spectrum
Improved
business
climate
Private
investments
Sevices
Improved
quality of
services
Public
investments
Numbering
Impetus on
innovations
Universal
services
Social benefits
Public current
and capital
expenditures
(+)
Economic
growth
(+)
Public
revenues
(+)
Higher speed
(-)
Savings-
investment
balance
Productivity
gains
+ Sectoral
changes
(+)
(+
)
Consumer
utility from
ECOM and
TELECOM
services
Competitive
advantages
Private
consumption
(-)
)
(+
)
(+
(+)
Employment
(+)
Social impacts
Imports
Environmental
impacts
Exports
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6.5.6
Access
Simulation results, based on the preferred policy scenarios
The impacts on broadband download speed from the implementation of the preferred policy
options with respect to access are summarized in Figure 3 below:
Figure 32 – Broadband speed increases under different scenarios
Under both alternative policy scenarios, connection speed growth is expected to exceed that of
the baseline, respectively by an average of 3 percentage points in the accelerated fibre scenario
and twice higher in the all fibre scenario. In the accelerated growth scenario deviations in
connection speed growth amount to 6 p.p. in 2025. In the all fibre scenario, the gap in growth
increases to 22 p.p. by 2025.
In the
accelerated fibre scenario,
the impact on GDP is expected to be positive by 0.06%
already in 2021 and deepen to 0.54% by 2025. The impact will not be evenly spread across all
EU economies. Specifically, the middle group of countries will benefit most from the proposed
policy changes, while the group of less economically and digitally advanced economies is
expected to gain slightly less than the average from the increase in average connection speed.
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From the supply side, private capital increases are expected to have the highest contribution to
economic growth, while the increases in labour will be modest (around 0.01%). Generally,
employment is expected to decline somewhat in the TELECOM sector, and, as this sector uses
skilled labour more intensively, overall growth in skilled labour is projected to be marginally
lower as compared to the unskilled labour. In the less digitally advanced economies the
replacement of the labour factor with higher productivity is expected to be more intensive and
therefore in these economies the overall employment growth will be marginal as employment is
expected to decline slightly also in the manufacturing sectors.
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Figure 33 – Production factors
In terms of GDP composition by final use components, expectedly the highest deviation in the
alternative scenario as compared to the baseline will be recorded in investments, as they are
typically more volatile and respond more quickly to positive economic developments. In 2025
the cumulative deviation of investments against the baseline will amount to 0.9%.
Figure 34 – GDP by final use components
In contrast, consumption growth will be much more moderate - the deviation will amount to
0.4% in 2025. With respect to the external sector, exports will increase faster than imports and
thus the current account will improve.
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Figure 35 – Current account balance, % GDP
As the largest impact from higher broadband connection speed was estimated in the electronic
communication sectors, they also exhibit the highest growth in value added, where other e-com
services increases slightly more than telecom due to the very low share of the former in total
gross value added. Manufacturing is also expected to benefit largely from higher connection
speed, while the impact on transport and energy will be much lower, around 0.2% in 2025, thus
contributing to the achievement of greener and more sustainable economic development.
Figure 36 – Gross value added by sectors in 2025
With respect to other important macroeconomic variables, relative prices of the e-
communication sectors are expected to decline, thus exercising downward pressure on inflation.
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Finally, it should be noted that the realization of the preferred policy options is also associated
with some costs. For access policies, it has been estimated that the achievement of the
accelerated fibre scenario is associated with a need for investment of EUR 92 bn for EU 28. If
we assume that half of it is covered with public resources and financed through foreign
borrowing and if it is divided equally in the years between 2018 and 2020, than this public
spending is estimated to have an initial positive impact on GDP of around 0.1% from the
demand side. However it will also imply worsening of the government budget balance and the
external balances of the EU member states. This public spending is not expected to have a
significant long-term impact on employment or consumption. In the much more ambitious
scenario, where a total of EUR 200 bn is to be invested, the impacts are similar only scaled up
around 2 times.
In case all investment costs are covered out of public resources, GDP grows by around 0.22% in
2018-2020, but afterwards budget and consumption restrictions induce small declines of GDP as
compared to the baseline scenario. In the initial years of public investment, it also induces
private capital formation, where the latter increases by 0.2% and 0.3% respectively in 2019 and
2020 as compared to the baseline.
In the
all fibre scenario,
macroeconomic developments are largely the same, only scaled
upwards. The deviation in GDP from the baseline in 2025 will be as high as 0.95%, fuelled by
larger investment by 1.5% and 0.7% expansion in consumption as compared to the baseline.
Meanwhile, higher exports as compared to imports will determine the improvement in the
current account balances. In this scenario, employment in the less advanced economies in the EU
is already expected to decline on the account of lower job creation in the e-communication and
manufacturing sectors.
Table 27 - Percentage deviations in the all fibre scenario as compared to the baseline in the main
macroeconomic variables.
2021
GDP
Public capital
Private capital
Skilled labour
Unskilled labour
Investment
Consumption
Export
Import
Current account
0.07%
0.00%
0.00%
0.00%
0.00%
0.15%
0.05%
0.10%
0.08%
0.26%
2022
0.23%
0.00%
0.01%
0.01%
0.01%
0.43%
0.16%
0.30%
0.25%
0.71%
2023
0.45%
0.02%
0.03%
0.02%
0.02%
0.80%
0.31%
0.58%
0.48%
1.27%
2024
0.67%
0.04%
0.07%
0.02%
0.03%
1.15%
0.46%
0.87%
0.72%
1.78%
2025
0.95%
0.08%
0.12%
0.02%
0.02%
1.54%
0.67%
1.23%
1.00%
2.39%
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Table 28 - Percentage deviations in the all fibre scenario as compared to the baseline in the gross
value added in 2025.
Gross value added Advanced
AGR
ECOM
HIGHMAN
LOWMAN
SER
TELECOM
TRANS
ENERGY
0.87%
2.81%
1.36%
1.08%
0.77%
2.39%
0.43%
0.32%
Intermediate Less advanced
0.88%
2.46%
1.39%
1.04%
0.77%
2.47%
0.45%
0.18%
0.80%
3.14%
1.15%
0.88%
0.74%
2.49%
0.34%
0.39%
278
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Spectrum
The impacts from the implementation of the preferred policy options with respect to enhanced
mobile broadband aspects of 5G
385
are summarized in the table below:
Table 29 – Impact from the preferred policy option
Year EU eMBB
baseline
2021
8.3
2022
27.0
2023
59.1
2024
79.4
2025
85.9
2026
89.0
2027
92.0
2028
95.0
2029
98.0
2030
100.0
5G
Coverage
under Estimated
Option 3
70.0
93.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
eMBB
5G
coverage
under
In the 'no change' policy scenario full eMBB coverage will achieved only in 2030, while under
Option 3, a 100% coverage might be expected to be established in only 4 years (from 2020 up to
2023). If we assume that the impact on total factor productivity from eMBB aspects of 5G will
be of the same magnitude as that of 4G, then it will have an effect on GDP of 0.16% in 2025.
The impact will be highest in 2021, when almost 3/4 of the eMBB coverage will be realized. In
terms of variations between EU countries the intermediate and less economically and digitally
advanced countries are expected to benefit more from enhanced mobile broadband.
385
5G as a network of networks will consist in different scenarios (i) enhanced mobile broadband (eMBB) (ii) massive
machine-to-machine communications (very dense networks) and (iii) ultra-reliable and low latency networks. The
coverage requirements of two specificities of 5G networks ie density and latency, will not reach 70% of EU
population by 2020. However, as the economic gains are modelled on the gains assessed from LTE, a comparison with
eMBB is considered to be more relevant. Other aspects of 5G which support IoT may in turn unlock further disruptive
growth opportunities as discussed in the overview to the study
279
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Similar to the simulations, based on access policies, faster coverage will have an important
impact on capital and a marginally positive effect on employment.
Production factors
(percentage difference in the alternative scenario as compared to the
baseline)
0,20%
0,18%
0,16%
0,14%
0,12%
0,10%
0,08%
0,06%
0,04%
0,02%
0,00%
2021
Public capital
2022
Private capital
2023
Skilled labour
2024
Unskilled labour
Again, gross fixed capital formation will expand most, by 1.9% in 2021 and 0.5% in 2025, while
consumption dynamics will be much smoother. In contrast to the access scenarios, in this
spectrum-related scenario import will grow slightly faster than export, leading to a nearly
balanced external sector.
GDP by final use components
(percentage difference in the alternative scenario as compared to the
baseline)
2,00%
1,80%
1,60%
1,40%
1,20%
1,00%
0,80%
0,60%
0,40%
0,20%
0,00%
2021
Investment
2022
Consumption
2023
Export
Import
2024
0,5%
0,6%
0,5%
0,3%
0,3%
0,3%
0,2%
0,9%
0,8%
0,7%
0,5%
0,2%
0,2%
0,1%
1,2%
1,9%
E-communication sectors again will benefit most from higher eMBB coverage, this time
followed by low-tech manufacturing and the production of electricity, thermal energy and gas.
280
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Gross value added by sectors in 2025
(percentage difference in the alternative scenario as compared to the
baseline)
0,50%
0,45%
0,40%
0,35%
0,30%
0,25%
0,20%
0,15%
0,10%
0,05%
0,00%
Advanced
AGR
ECOM
HIGHMAN
Intermediate
LOWMAN
SER
TELECOM
Less advanced
TRANS
ENERGY
Services – efficiency gains
The policy options in this area will have positive impact mainly on regulatory efficiency and
effectiveness in the electronic communication sectors. However the magnitude of this impact is
not directly quantitatively measurable. In order to overcome this difficulty, we have used the
results of a study by Haidar (2012)
386
, which indicates that impact of a more significant
regulatory reform on the growth rate of GDP per capita is 0.15% on average. We have assumed
that such an impact will be channelled through improved TFP in the e-communication sectors
and by means of iterations estimated that an average increase in GDP growth rate of 0.15
percentage points is associated with a 4% annual increase in TFP in the TELECOM and ECOM
sectors, starting from 2020.
Under this scenario, GDP is expected to be by 0.74% higher than the baseline in 2025. However,
this scenario will be associated with somewhat lower investment (or postponed consumption) at
the expense of higher current consumption growth. Due to the fact that services policies will
have direct impact on the TFP in the e-communication sectors only, it is associated with higher
increases in skilled labour.
Table 30 - Percentage deviations in the services scenario as compared to the baseline in the
main macroeconomic variables.
2021
GDP
Public capital
Private capital
Skilled labour
Unskilled labour
Investment
Consumption
Export
Import
Current account, % GDP (ppt)
386
2022
0.27%
0.01%
0.01%
0.04%
0.07%
0.30%
0.25%
0.26%
0.16%
0.07
2023
0.42%
0.03%
0.01%
0.08%
0.09%
0.29%
0.40%
0.43%
0.24%
0.14
2024
0.57%
0.07%
0.01%
0.14%
0.11%
0.12%
0.55%
0.63%
0.29%
0.25
2025
0.74%
0.11%
-0.02%
0.20%
0.13%
-0.30%
0.70%
0.87%
0.31%
0.40
0.13%
0.00%
0.00%
0.01%
0.04%
0.20%
0.12%
0.12%
0.08%
0.02
Haidar J. I. (2012) "The impact of business regulatory reforms on economic growth",
Journal of The Japanese and
International Economies,
26 (2012), pp. 285-307.
281
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The variation in the responses of the EU MS economies is larger in this scenario as well. The
groups of less economically and digitally advanced economies, in particular, stands out as this
scenario estimates a relatively higher increase in public investment in these economies, crowding
out private investment. Also, in this cluster of EU MS the expansion in skilled labour is expected
to outweigh significantly that of the unskilled labour.
Table 31 - Percentage deviations in the services scenario as compared to the baseline in
investment, labour and consumption by clusters of EU Member States in 2025.
Investment, labour and consumption by types of EU economies in 2025
(percentage difference in the alternative scenario as compared to the baseline)
2,00%
0,00%
Public investment
-2,00%
-4,00%
-6,00%
-8,00%
Private investment
Skilled labour
Unskilled labour
Consumption
Advanced
Intermediate
Less advanced
6.5.6.1
Cumulative impact
Generally, for all assessed scenarios GDP is expected to increase compared with the baseline,
with an anticipated
GDP uplift of 0.16% in 2025 for spectrum policies
compared with the
baseline and a
GDP uplift of 0.54% for access policies
based on the more conservative
‘accelerated fibre’ scenario.
The cumulative impact up to 2025 is expected to be significant due to the expected supply side
impacts, which are built up over time. More positive economic developments will have a
significant impact on investment, while the effects on consumption with be more moderate,
along with the life-cycle hypothesis for consumption smoothing. In the access scenarios the
effects are larger for the intermediate and the most economically and digitally advanced
economies in the EU, which have the potential to capitalize best the benefits from applying the
preferred policy options, and for the least advanced economies in the EU, which start from a
lower base. In the spectrum scenario, intermediate economies are expected to perform better
against the remaining EU countries, as 5G will most probably induce more investments both in
the e-communication sectors and manufacturing.
We also find
some positive employment impacts from access and spectrum policies (around
0.02% higher than the baseline),
while the efficiency gains potentially driven by reforms
fostering
digital services, might result in increases in employment of up to 0.15%
compared
to status quo.
282
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Table 32 - Impact of assessed scenarios on GDP, consumption, investment and employment
GDP
2021
2025
Accelerated fibre
Advanced
Intermediate
Less advanced
EU28
All fibre
Advanced
Intermediate
Less advanced
EU28
Services-efficiency gains
Advanced
Intermediate
Less advanced
EU28
Spectrum
Advanced
Intermediate
Less advanced
EU28
Cumulative
Advanced
Intermediate
Less advanced
EU28
0.06%
0.07%
0.06%
0.06%
0.08%
0.08%
0.07%
0.07%
0.11%
0.11%
0.22%
0.13%
0.00%
0.00%
0.00%
0.00%
0.17%
0.17%
0.28%
0.19%
0.54%
0.57%
0.52%
0.54%
0.96%
1.00%
0.91%
0.95%
0.62%
0.67%
1.25%
0.74%
0.16%
0.23%
0.16%
0.16%
1.32%
1.46%
1.93%
1.45%
Consumption
2021
2025
0.04%
0.04%
0.04%
0.04%
0.05%
0.04%
0.05%
0.05%
0.10%
0.05%
0.23%
0.12%
0.00%
0.00%
0.00%
0.00%
0.14%
0.09%
0.28%
0.16%
0.38%
0.35%
0.40%
0.38%
0.66%
0.62%
0.71%
0.67%
0.63%
0.49%
1.12%
0.70%
0.12%
0.14%
0.12%
0.12%
1.13%
1.00%
1.66%
1.22%
Investment
2021
2025
0.14%
0.12%
0.08%
0.13%
0.16%
0.14%
0.10%
0.15%
0.30%
0.62%
-0.44%
0.20%
0.00%
0.00%
0.00%
0.00%
0.44%
0.73%
-0.36%
0.33%
1.11%
0.66%
0.22%
0.89%
1.92%
1.09%
0.34%
1.54%
1.38%
3.06%
-8.80%
-0.30%
0.48%
0.74%
0.24%
0.47%
2.91%
4.33%
-8.62%
0.96%
Employment
2021
2025
0.00%
0.01%
0.00%
0.00%
0.00%
0.01%
0.00%
0.00%
0.02%
0.01%
0.06%
0.02%
0.00%
0.00%
0.00%
0.00%
0.02%
0.02%
0.06%
0.03%
0.03%
0.02%
-0.03%
0.01%
0.04%
0.03%
-0.05%
0.02%
0.14%
0.21%
0.16%
0.15%
0.01%
0.04%
0.01%
0.02%
0.18%
0.26%
0.13%
0.18%
Source: Ecorys
6.5.7
Earlier literature on modelling e-communications and ICT
Overall, the economic literature acknowledges that e-communications and ICT are an important
driver of growth in the long-run, mainly through higher productivity. EC White paper on
"Growth, competitiveness, employment: The challenges and ways forward into the 21st
century"
387
and US International Trade Commission study on the "Global competitiveness of
U.S. Advanced Technology Manufacturing Industries"
388
already in the early 1990s draw
attention to the development of the information society as a key driver of growth and
competitiveness. Later studies, such as a study by OECD on "Globalization of Services and
Jobs"
389
and an UN paper from 2007
390
also indicate that efficient IT has become crucial
infrastructure for improvement of the tradability of certain services and for long-term economic
development.
Recently, there has been a multitude of studies, which either estimate the trends in the
development in e-communication services or the socio-economic benefits from higher
connectivity. The first group of studies incorporates either the construction of some measures of
digitalization or other indexes for IT readiness or use, like the 2013 "Global Information
Technology Report 2013: Growth and Jobs in a Hyperconnected World", edited by Beñat
387
388
http://europa.eu/documentation/official-docs/white-papers/pdf/growth_wp_com_93_700_parts_a_b.pdf
https://www.usitc.gov/publications/332/pub2434.pdf
389
http://www.oecd.org/site/tadicite/50287724.pdf
390
United Nations, 2007, "Technology, globalization, and international competitiveness: Challenges for developing
countries" in Industrial Development for the 21st Century",
http://www.un.org/esa/sustdev/publications/industrial_development/full_report.pdf
283
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Bilbao-Osorio, Soumitra Dutta and Bruno Lanvin
391
, or some market analysis, such as the Telco
2015 report
392
.
The aforementioned 2013 Global Information Technology Report, in addition to the provision of
various measures of technological readiness and digitalization, also identifies a significant
favourable impact of digitalization of GDP per capita and for curbing unemployment. Sectorial
impacts in the same paper show profound and accelerating effects of digitalization, which lead to
modification of the business models and lower barriers to entry, enhanced communication and
service provision to customers, optimization of the production process and streamlined
operations of the companies. The Global IT report from 2013 also provides evidence of the 3G
penetration on economic growth, as well as on the social and economic impacts the electronic
healthcare records.
Based on the above-mentioned studies, there is a general acknowledgement of the fact that the
development of electronic communication services has a significant positive impact on trade,
productivity and GDP. More specifically, the economic literature outlines the following impacts
of the enhanced use of e-communications:
Human capital.
The impact is channelled through two mechanisms: 1. an enhanced use
of e-communications would require more skilled labour and 2. the use of e-
communications makes information more easily available and favours more flexible and
distance learning.
Labour mobility, business costs and environment.
The use of video conferences or
other means of distance communication enables individuals to work from distance and
reduces both operating costs for the respective businesses and the traffic in the transport
network.
Disintermediation and reduced transaction costs.
The use of e-communications
allows for shortening the supply chain in the provision of a large number of goods and
services.
Social benefits,
like connection of excluded regions (e.g. rural regions) and gaining
collective power (e.g. by using social media). However the effect on employment is not
always unambiguous: sometimes technological progress might lead to less intensive use
of labour or facilitate outsourcing to countries with cheaper labour.
Introduction of
new products and services.
With the use of e-communications
more time becomes available
for leisure or work.
E-communications
fosters innovation.
With respect to the methodological approach to the estimation of the social, economic and
environmental impact of various policies, affecting the e-communication sector, there is a
multitude of modelling alternatives. Recently applied methods include mostly econometric
modelling, but also computable general equilibrium (CGE) models and even dynamic stochastic
general equilibrium (DSGE) models.
393
391
392
http://www3.weforum.org/docs/WEF_GITR_Report_2013.pdf
Telco 2015: Five Telling Years, Four future Scenarios, IBM,
http://public.dhe.ibm.com/common/ssi/ecm/gb/en/gbe03304usen/GBE03304USEN.PDF
393
DSGEs have become a popular tool for economic modelling, but they are still limited to a highly stylized
representation of the economy due to the challenges related to their numerical solution. Taking into account the need
to design a multi-sector model for the implementation of the current impact assessment, the development of a large-
scale DSGE model will be too ambitious within the scope of this project.
284
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6.5.8
Econometric modelling
Examples of the
econometric modelling
approach are:
Czernich et al. (2009)
394
specifying a production function, assuming that increased use of
broadband services has a positive impact of the total factor productivity in the economy.
In their estimations, however, they use instrumental variables to control for the
broadband penetration already achieved. Thus, an increase in the broadband penetration
rate by 10 p.p is estimated to contribute to annual GDP growth per capita by 0.9-1.5 p.p.
It should, however, be taken into account that the results of this study cannot be directly
used in our work, as they relate more to increased coverage, rather than to higher speed
access. Nonetheless, this study could be useful from a methodological point of view.
Spiezia (2012)
395
constructs a production function, where three types of ICT investment
are incorporated: computer, software and communication. It is then estimated
econometrically for 26 industries and 18 OECD countries for the period between 1995
and 2007. ICT investments are found to contribute to economic growth by 0.4-1 % per
annum.
Oliner et al. (2007)
396
and Jorgenson et al. (2008)
397
providing an estimation of the
impact of information technologies for the productivity increases in the US by including
both IT and intangible capital in a growth accounting framework.
Regeneris' investigation, performed in 2012 for UK's largest communication services
supplier BT also provides econometric evidence on the impact of increased broadband
speed on welfare (measured by the gross value added) and employment due to enhanced
business performance, new business creation and better home working opportunities.
Mölleryd's
398
paper builds on a model used for estimation of the social and economic
benefits from the development of an open, operator-neutral fibre network in Stockholm.
It provides useful estimates of the benefits of high-speed broadband on economic growth
and firms productivity. The study also finds evidence that high-speed broadband
networks can potentially substitute some transport services, create employment
opportunities and even provide more efficient home care services.
DSGE modelling
6.5.8.1
Seeking to account for more general macroeconomic effects from the reforms, related to the
digital agenda of the EU, Lorenzani and Varga (2014)
399
augment the EC
dynamic general
equilibrium model
QUEST III. The estimated policies include competition and investment-
enhancing policies in the radio spectrum, enhancement of the professional e-skills, deepening of
the e-Commerce and increased fixed broadband take-up. They find a positive impact of over 1%
on long-term economic growth of the reforms that have already been implemented and potential
for additional 2.1% in case the Digital Agenda for Europe targets are achieved.
394
Czernich, N., O. Falck, T. Kretschmer and L.Woessmann (2009), “Broadband Infrastructure and Economic
Growth”, CESifoWorking Paper, No. 2861, Munich
395
Spiezia V. (2012) “ICT investments and productivity: Measuring the contribution of ICTs to growth”, OECD
Journal: Economic Studies, vol. 2012/1.
396
Oliner, S. D., D.E. Sichel and K.J. Stiroh (2007), "Explaining a Productive Decade",
Brookings Papers on
Economic Activity,
1, 81-151.
397
Jorgenson, D. W., M.S. Ho and K.J. Stiroh (2008), "A Retrospective Look at the US Productivity Growth
Resurgence",
Journal of Economic Perspectives,
22(1), 3-24.
398
Mölleryd G., 2015, "Development of High Speed Networks and the Role of Municipal Networks",
OECD Science,
Technology and Innovation Policy Papers No. 26,
OECD.
399
Lorenzani D. and J. Varga (2014) “The Economic Impact of Digital Structural Reforms”, EC economic papers
529/September 014.
285
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6.5.8.2
CGE modelling
CGE models
are less frequently used to study the economic, social and environmental impact of
electronic communications but they present a number of advantages in case multiple countries or
multiple sectors need to be incorporated. As a most recent example of this type of modelling,
Christensen (2015)
400
presents a multi-country, multi sector dynamic computable general
equilibrium model, where ICT and R&D are imbedded in the production function.
Khorshid and El-Sadek (2012)
401
also develop a CGE model with a focus on the ICT sector for
Egypt, where they base their estimations on a social accounting matrix, which aim is to capture
the impact of the ICT on the other economic sectors, as well as on the labour and capital demand
and on the income distribution. As a result, they provide estimates of the impact from four
policies – 1. Measures to increase ICT investment, 2. Policies, specifically targeted to achieve
growth in the ICT sector, 3. National training, reorientation and capacity building program
leading to an enhanced factor productivity and labour efficiency in the economy as a whole
based on advanced ICT and 4. Foreign exchange policy to promote ICT exports to the outside
world.
Finally, Moon et al. (2000)402 use the ORANI-F model, calibrated to the Korean economy, but
rather than estimating the impact of ICT, they only make projections on the structure of the
Korean economy by sectors and draw implications about the development of the ICT sector in
terms of growth, export share, composition by subsectors, etc. However, this study has the merit
of providing a reference classification of the ICT activities.
6.5.9 Elaboration of the methodology
6.5.9.1 Estimation of the production function with stochastic frontier analysis
If we take into account that the production function is defined as the function, which transforms
given inputs into the maximum output quantity, then the actual output will be either at the
production possibility frontier or below it. Therefore, the output can be estimated as a function of
the production function, taking into account also possible inefficiency and stochastic shocks
403
:
ln ���� = ln ����(����) − ���� + ����,
(SFA1)
���� ≥ 0
where
����
is the output,
����(����)
is the production function, where the input
����
is an argument,
���� ≥ 0
are inefficiencies and
����
is the error term. The latter equation is equivalent to
���� = ����(���� ). ����
−����
. ����
����
(SFA2)
and allows us to define the following measure of output-oriented technical efficiency:
�������� =
����
����(����).����
����
=
����(����).����
−����
.����
����
����(����).����
����
= ����
−����
(SFA3)
400
Christensen M.A. (2015), "A CGE Model with ICT and R&D-driven Endogenous Growth: A Detailed Model
Description",
Joint Research Centre technical reports,
Report EUR 27548 EN.
401
Khorshid M. and A. El-Sadek (2012) “A Multi-sector ICT Economy Interaction Model for Egypt: The Path to
Information Society”, International Conference on Policy Modeling 2012.
402
Moon S-W, Y. Kim and D-P. Hong (2000), " The Economic Importance of the Information and
Communications Technology (ICT) Industry in Korea: A CGE Approach", presented at the 3rd Annual Conference on
Global Economic Analysis.
403
Meeusen, W. and J. van den Broeck, 1977, "Efficiency Estimation from Cobb-Douglas Production
Functions
with
Composed
Error",
International
Economic
Review
18:435-444.
Aigner, D., C. Lovell and P. Schmidt, 1977, "Formulation and Estimation of Stochastic Frontier Production Function
Models",
Journal of Econometrics
6:21-37.
286
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We have estimated the above econometric model by maximum likelihood estimator with time-
varying efficiencies, available in package 'frontier' under the R software. The error term follows
a normal distribution with zero mean and constant variance and the inefficiencies
����
are assumed
to be independently distributed according to a positive half-normal distribution:
2
����~����(0, ����
����
)
2
����~����
+
(����, ����
����
)
These standard assumptions ensure that the distribution of
−���� + ����
is skewed to the left so that
the difference between actual and optimal production
ln⁡ ����) − ln⁡ ����(���� ))
stays negative.
(
(
Based on a dataset for the 28 EU economies
404
, we have estimated a production function, relating
GDP to capital and labour:
ln(����
��������
) = ����
0
+ ����
1
. ln(����
��������
) + ����
2
. ln(����
��������
) + ����
3,����
. ����������������������������
����
+ ����
4
. ����������������������������
����
+ ���� + ����
��������
,
(SFA4)
where
����
����
stands for GDP in constant 2010 prices of country
����
in period
����
(����
∈ [2000,2015]), ����
��������
is employment,
����������������������������
capture the fixed effects for each of the EU28 MS and
����������������������������
����
is
added to account for the economic crisis, starting from 2008 onwards. The capital
����
��������
is defined
as:
����
��������
= 3. ����
����1995
. ∑
����−1995
(1 − ����)
����
+ ∑
����−1−1995
(1 − ����)
����
����
��������
,
����=0
����=0
(SFA5)
���� ∈ [1996,2015]
Assuming a depreciation rate
���� = 0.1,
the assumption of the capital-to-GDP ratio in the base
1995 year becomes irrelevant from 2005 onwards.
As a second step we then regress the derived efficiency terms against the Heritage Index of
Economic Freedom and variables, related to the development of the e-communication services in
the EU:
ln(������������
��������
) = ���½
1
. ln(ℎ����������������������������
��������
) + ���½
2
. ln(������������_������������������������
��������
) + ���½
3
. ln(������������������������������������
��������
) +
���½
4,����
. ����������������������������
����
+ ����
��������
,
(SFA6)
In the above formula,
ℎ����������������������������
��������
stands for the Heritage Index
405
, intended to measure the
developments in terms of rule of law, size of the government, regulatory efficiency and openness
of the economy as key contributors to total factor productivity. Among others it can also be used
as a proxy to measure of the effectiveness and efficiency of the regulation.
The variable
������������������������������������
��������
measures the average download speed. Finally, the impact of the
4G mobile broadband coverage (as % of all households)
������������_������������������������
��������
also proved to be
statistically significant.
In the estimation of the impact of e-communications on the total factor productivity we also
tested specifications including other key variables from the Digital Agenda Database
406
, such as
the Herfindahl-Hirschman Index on broadband competition, investments in the telecom sector,
market share of leading operator (in % of active SIM cards) and share of the individuals
interacting online with public authorities in the past 12 months. They however proved either
404
405
406
Eurostat, National Accounts (ESA2010) statistics.
http://www.heritage.org/index/
https://digital-agenda-data.eu/datasets/digital_agenda_scoreboard_key_indicators
287
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1664251_0091.png
statistically insignificant, or had the wrong sign. These problems are largely due to the short time
series available for most of the considered indicators, covering post-2008 crisis period, when
unsteady GDP growth rates and, at the same time, significant improvements in digital agenda
indicators were observed. Attempts to add other variables to control for the crisis were largely
not very successful either.
6.5.9.2
C.2. Cluster analysis for the selection of representative economies
The model features a regional breakdown to allow for assessment of the impact of the proposed
policy options not only for the EU as a whole, but also taking into account the differences
between the EU MS in terms of digitalization, overall economic development and size of the
economy.
As inclusion of all 28 EU MS economies increases exponentially the dimension of the model, we
decided to cluster the EU countries according to the dimensions, mentioned in the previous
paragraph and select a single representative economy from each of the identified clusters.
The variables, which were used to identify each cluster, are the following:
▫
▫
The Digital Economy and Society Index (DESI), compiled by the EC
Gross domestic product
The number of clusters was set to 6, based on the so called elbow method – number of clusters is
plotted against the percentage of variance explained (see the figure below).
The number of clusters to be used is selected based on two criteria:
1. Keep the number of clusters as small as possible
2. Choose the number of clusters so that adding another cluster does not improve the explanation
of the differences significantly.
Based on the above figure, we had to select either 4 clusters, but the grouping of the countries
into 4 distinctive clusters resulted in a separate group, consisting of Luxembourg alone. So, for
efficiency reasons, we resorted to 3 clusters.
The clusters were selected with the Ward method for hierarchical cluster analysis, based on
minimization of the within-cluster variances. As a result the following clusters were identified:
288
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1664251_0092.png
To obtain a better idea of the groups of countries, employed in the model, we have depicted each
of the countries along the clustering criteria, where colour codes were introduced to distinguish
the six clusters.
Generally, one can identify a group of 11 countries ( LU, DK, SE, FI, NL, BE, UK, DE, IE, AT,
FR), which have very developed economies and rate very high in terms of digital development.
The second cluster consists of the largest share of the countries, which joined the EU in 2004.
They are slightly worse in terms of digitalization and economic development – LT, EE, MT, PT,
CZ, LV, SK, SI. The group of the least developed countries in terms of economy and
digitalization consists of Bulgaria, Romania, Greece, Cyprus, Italy, Hungary and Poland.
Based on the identified clusters of countries, we have selected the following three representative
economies modelled in the CGE framework:
Germany
Czech Republic
Bulgaria
They are viewed as 'typical' representatives of their groups, where no special economic or
political circumstances have been observed in the past years.
289
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1664251_0093.png
6.5.9.3
C.3. Computable general equilibrium model: outline
We model an economy, which consists of the three representative regions/ countries, selected as
a result of the cluster analysis, and rest-of-the-world, where eight types of products are being
produced using private and public capital, unskilled and skilled labour.
Each
economic sector
operates under perfect competition, maximizing its profit, subject to its
production technology. The sectorial production functions are defined as Constant elasticity of
substitution (CES) production functions. They take as production factors private and public
capital
������������
and
������������,
skilled labour
����
and unskilled labour
����.
max
����
������������
,����
������������
,������������
������������
,������������
������������
(������������
������������
. ��������
������������
− ��������
��������
. ����
������������
− ��������
��������
. ����
������������
− ����������������
��������
. ������������
������������
−
����������������
��������
. ������������
������������
)
(CGE1)
s.t.
��������
������������
=
��������
��������
�������� ����
��������
����
������������
(���½
��������
. ����
������������
+ (1 −
��������
����
�������� ������������
��������
���½
��������
). ����
������������
)
��������
1
(CGE2)
������������
������������
≥ 0
����
������������
≥ 0
,
⁡����
������������
≥ 0
,
������������
������������
≥ 0
,
where
����, ����
and
����
represent respectively the
����-th
economic sector,
����-th
region and
����-th
time period.
In other words, we have unconstrained maximization problem and a definition of the value
added
��������
������������
:
��������
��������
�������� ����
��������
max
����
������������
,����
������������
,������������
������������
,������������
������������
(������������
������������
. ����
������������
(���½
��������
. ����
������������
��������
����
�������� ������������
��������
���½
��������
). ����
������������
)
��������
1
+ (1 −
− ��������
��������
. ����
������������
−
��������
��������
. ����
������������
− ����������������
��������
. ������������
������������
− ����������������
��������
. ������������
������������
)
(CGE3)
The
household
derives utility from final consumption
����
������������
and savings
����
��������
and disutility – from
the two types of labour
����
������������
and
����
������������
. The introduction of labour as a control variable in the
household problem (i.e. endogenous labour supply) allows for modelling the link between
technological progress and labour supply.
max
����
������������
,����
������������
,����
������������
,����
��������
(∑
����
����
��������
. ln ����
������������
− ∑
����
����
����
(CGE4)
s.t.
∑
����
����
������������
. ����
������������
= (1 − ��������
����
) ∑
����
(��������
������������
. ����
������������
+ ��������
������������
. ����
������������
+ ����������������
������������
. ������������
������������
) + ������������ ∗ ����
��������
+ ��������
����
−
����
��������
(CGE5)
����
������������
≥ 0,
����
������������
≥ 0
,
⁡����
������������
≥ 0
,
����
������������ ����+1
����+1
− ∑
����
����
����
����
������������ ����+1
����+1
+ ����. ln ����
��������
)
290
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1664251_0094.png
The
government
revenues consist of receipts from direct and indirect taxes, interest on its
assets
407
and income from public capital. It spends on government consumption, transfers to the
households and capital expenditures. The difference between government revenues and
expenditures constitutes the government budget balance:
��������
��������
= ����
��������
− ����
��������
=
������������
����
. ∑
����
(��������
������������
. ����
������������
+ ��������
������������
. ����
������������
+ ����������������
������������
. ������������
������������
) +
∑
����
����
��������
.
����
������������
. ����
������������
(1+����
��������
)
+ ∑
����
����������������
������������
. ������������
������������
+ ������������ ∗ ��������
��������
−
(CGE6)
(∑ ��������
������������
. ����
������������
+ ��������
��������
+ ��������
��������
)
����
For the
foreign sector,
we have adopted the Armington assumption, which contradicts the
conventional Heckscher and Ohlin foreign trade theory, but provides explanation on the
following facts:
many commodities are imported and exported from a single country simultaneously;
even at the most disaggregated level, most countries produce in all product categories
and thus specialization in a single product, for which the country has comparative
advantage, is not possible;
the assumption takes into account the different substitution elasticities between the
commodities, produced in the country and the imported ones and therefore allows for
estimation of the changes in the relative prices of the imported goods and services.
To apply the Armington assumption, a composite product
����
������������
is defined, which quantity is
determined as a CES function of the quantity produced in the country for the domestic market
��������
������������
and imports
��������
������������
.
����
������������
= ����
����
(���½
����
. ��������
������������
����
+ (1 − ���½
����
). ��������
������������
����
⁡)
−����
−����
−1⁄
����
����
(CGE7)
where
����
����
is a scale parameter,
���½
����
measures the share of imports and
����
����
is an exponent, which is
1
equal to
− 1.
It is constrained to satisfy
−1 < ����
����
< ∞
to ensure that the
����������������������������������������⁡��������⁡������������������������������������������������
respective isoquant is convex, i.e. that we have a decreasing technical rate of substitution.
The domestic prices, respectively are determined by calculation of the optimal ratio between
imported and domestically produced goods and services:
��������
������������
��������
������������
=(
��������
������������
��������
��������
1−���½
����
.
���½
����
)
1⁄
1+����
����
(CGE8)
In a similar manner the substitution between the products, produced for the domestic market and
for exports is described through a constant elasticity of transformation function (CET). The CET
is almost identical to the above CES function, defined for the combination of domestically
produced and imported commodities, with the exception of the elasticities of substitution, which
are no longer negative.
407
Is government assets are positive, then it receives interest, if not – it pays interest on its debt.
291
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1664251_0095.png
��������
����
= ����
����
(����
����
. ��������
����
����
+ (1 − ����
����
). ��������
����
����
⁡)
(CGE9)
����
����
1⁄
����
����
Here
−1 < ����
����
< ∞
to ensure a concave isoquant.
Again, the optimal relationship between exports and products for the domestic market is
calculated:
��������
����
��������
����
=(
��������
����
1−����
����
��������
����
.
����
����
)
1⁄
����
����
−1
(CGE10)
To complete the external sector, foreign savings
��������
��������
are estimated as the difference between
foreign sector revenues from imports and interest on its assets and incurred expenditures from
exports, where
����
is an index for the respective external trade partners.
∑
����
∑
����
��������
��������
. ��������
����������������
+ ��������
��������
= ∑
����
∑
����
��������
��������
. ��������
����������������
+ ������������ ∗ ��������
��������
(CGE11)
We also specify the usual equalities between total quantity supplied and used, defining the link
between the make and use tables in the national accounts:
��������������������⁡��������������������������������⁡�������������������������������� = ����
������������
=
��������������������⁡��������������������������������⁡����������������⁡⁡⁡⁡⁡⁡⁡⁡ = ∑
����
��������
����������������
+ ����
������������
+ ��������
������������
+ ��������
������������
+ ��������
������������
+ ��������
������������
and savings equals investment:
̅̅̅̅
��������
. ��������
������������
=
����
������������
(����
��������
+ ��������
��������
+ ��������
��������
+ ��������
��������
− ������������ ∗ (����
��������
+ ��������
��������
+ ��������
��������
) − ∑
����
����
������������
. ����
������������
−
��������
∑
��������������������
��������
)
(CGE13)
����
����
������������
(CGE12)
where
��������������������
��������
is a dummy variable, added to ensure that the system of equations becomes
functionally independent (which is not the case otherwise, due to Walras law). To close the
model, an additional equation for each region is defined by normalizing the prices to the overall
price level in the respective region:
������������������������
��������
= ∑
����
����
��������
. ����
������������
(CGE14)
As specified, the model is static in its nature, as all agents optimize only in the current period
����⁡
and not over the entire time horizon of the simulations. However, the model allows also for
transitional analysis by incorporating a capital and asset accumulation equations and constant
growth of total factor productivity to capture some of dynamic in changes to the "state of the
world":
����������������
������������+1
= (1 − ����). ����������������
������������
+ ������������
������������
����������������
������������+1
= (1 − ����). ����������������
������������
+ ������������
������������
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��������
��������
����
������������+1
= (1 + ��������
����
). ����
������������
����
��������+1
= (1 + ror
r
). +����
��������
��������
��������+1
= (1 + ror
r
). +��������
��������
��������
��������+1
= (1 + ror
r
). +��������
��������
293
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1664251_0097.png
6.5.9.4
C.3.1. Sectorial and skill breakdowns
Sectorial disaggregation
In the selection of the disaggregation by economic sectors, we largely follow Christensen (2015).
The classification of the low-tech and high-tech manufacturing sectors is made following the
Eurostat classification
408
. In addition to this division of the manufacturing activities, we also
specify the telecom, energy, transport and other e-com activities separately due to their
importance for the impact assessment. Thus the economic sectors covered include:
1.
2.
3.
4.
5.
6.
7.
8.
Agriculture
Low-tech manufacturing
High-tech manufacturing
Energy sector
Transport
Telecommunications
E-communication services
Other services.
Skill disaggregation of labour
As specified the sectors use labour with very different qualification. If we assume the ILO
classification based on occupations
409
, where the occupations are mapped by skill, using the
following transition key:
Skill level
ISCO-08 major groups
1 Managers
2 Professionals
3 Technicians and Associate Professionals
4 Clerical Support Workers
5 Services and Sales Workers
6 Skilled Agricultural, Forestry and Fishery
Workers
7 Craft and Related Trades Workers
8 Plant and Machine Operators and Assemblers
9 Elementary Occupations
0 Armed Forces Occupations
(from 1 to 4, where 4 is the highest)
3+4
4
3
2
2
2
2
2
1
1+2+4
For the modelling purposes, we have grouped skill levels 1 and 2 into unskilled labour and skill
levels 3 and 4 into skilled labour. In this way over 4/5 of the labour employed in agriculture and
transport are unskilled. The share of unskilled labour in low-tech manufacturing and services is
respectively around 2/3 and 1/2 and for the telecommunications and other e-communication
services – between 1/4 and 1/3.
408
http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:High-
tech_classification_of_manufacturing_industries
409
International Labour Office, 2012, "International Standard Classification of Occupations ISCO-08", Geneva,
available at:
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_172572.pdf
294
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6.5.9.5
C.3.2. Data sources and transformations
The inputs to the model consist of three major types: statistical data, estimates of some of the
parameters for the model, based on identified relevant studies and information on the policy
options considered, based on the input from the EC and a review of the development of the
relevant legislative and institutional framework.
In order to perform simulations with the specified model, it is calibrated with some
representative data about the groups of countries identified in the cluster analysis (described in
the next section). The latter, together with the envisaged econometric estimations of particular
parameters, also require detailed data about the e-communications services sector. Additionally,
data on the main socio-economic variables has been collected.
Below, a list of all used sources of information is provided. Data for the econometric estimations
was used in logarithms.
Data
Source
Used for
Supply-use tables for all EU
Eurostat, Supply, Use and Construction of the social
Input-Output tables
accounting matrices for the
MS economies
CGE model.
Annual Construction of the social
Main
revenues
and
Eurostat,
expenditure aggregates for the
government finance statistics accounting matrices for the
CGE model.
government
GDP and components by final
Eurostat, National accounts
use, income and production
accounts
(including
by
economic
sectors),
employment population and
per capita
Employment by occupation
Eurostat, Detailed
LFS
statistics
and economic activity
employment
Econometric estimations of the
impact of the KPIs
SAM
and
parameters
calibrations for the CGE model
Cluster analysis
annual Estimation of the skilled and
on unskilled labour supply in the
CGE model
Exports and imports by
Eurostat, EU trade since Construction of the social
accounting matrices for the
trading
partners
and
1988 by SITC
CGE model.
commodities
Data on KPIs, related to the e-
EC Digital Agenda Key Econometric estimations of the
indicators dataset
impact of the KPIs.
communications
Heritage index
Heritage
foundation Econometric estimations of the
webpage:
impact of the KPIs.
http://www.heritage.org/inde
x/explore
Cluster analysis for the
identification of the regions in
the CGE model
Data on DESI index
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6.5.9.6
C.3.3. Calibration
The majority of the parameters are calculated from the social accounting matrices, constructed
for the implementation of the computable general equilibrium model, respectively for Germany,
Czech Republic and Bulgaria. They are computed backwards, so as to reproduce some of the
equations in the model for the base year, taking the variable values as given.
Another big group of parameters are also calibrated based of historical data for the respective
economies. Finally, there is also a group of parameters, which are set, based on economic
literature review. The model proved robust with respect to most of them with the exception of
the
elasticities
in
the
Armington
and
CET
aggregation
functions
(
������������
��������
⁡and ����������������
��������
). They were adjusted to achieve a better reproduction of the baseline
trajectories.
Param
Setting of the value
eter
�����������½����
��������
0.99 (i.e. practically corresponds to Cobb-Douglas function)
������������
��������
0.99 (i.e. practically corresponds to Cobb-Douglas function)
������������
��������
0.99 (i.e. practically corresponds to Cobb-Douglas function)
������������
��������
0.20, adjusted to reproduce plausible economic development trajectory in the baseline
����������������
��������
0.20, adjusted to reproduce plausible economic development trajectory in the baseline
����
���½����
Calculated values of the share of labour in gross value added (SAM)
������������
����
����
������������
Calculated values of the share of unskilled labour is total labour (SAM)
����
����
Calculated values of the share of public capital in total capital (SAM)
������������
����
����
������������
Calculated from equation (QMQD) in the base year (SAM)
����
������������
��������
Calculated from equation (QEQD) in the base year (SAM)
⁡���½�
���½����
������������
���½�
����
������������
���½�
����
������������
����
���½�
������������
(�����������½����
��������
− ����)
⁄
�����������½����
��������
(������������
��������
− ����)
⁄
������������
��������
(������������
��������
− ����)
⁄
������������
��������
(������������
��������
− ����)
⁄
������������
��������
(����������������
��������
− ����)
⁄
����������������
��������
Calculated from equation (LAGGR) in the base year (SAM)
Calculated from equation (KAGGR) in the base year (SAM)
Calculated from equation (QAGGR) in the base year (SAM)
Calculated from equation (QPAGGR) in the base year (SAM)
���½�
������������
��������
���½�
����
������������
���½�
����
������������
���½�
������������
���½�
������������
��������
����
296
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Calculated from data on employment by occupation and economic activity (from 2008
onwards, NACE Rev. 2) from Eurostat
Calculated from equation (ICSH) in the base year (SAM)
Calculated from equation (VASH) in the base year (SAM)
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Calculated from equation (QPSH) in the base year (SAM)
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Calculated from equation (QTEQ) in the base year (SAM)
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Calculated from equation (KEEQ) in the base year (SAM)
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Calculated from equation (IDEM) in the base year (SAM)
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Calculated from equation (IPUSH) in the base year (SAM)
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Set as the share of current account in GDP in the base year
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Set as the share of consolidated government budget balance in GDP in the base year
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Set as the share of savings in GDP in the base year, adjusted to reproduce plausible
economic development trajectory in the baseline
Calculated from the SAM as a ratio between revenues from direct taxes and the
respective tax base
Calculated from the SAM as a ratio between revenues from indirect taxes and the
respective tax base
0.025
Calculated from equation (HCONS) in the base year (SAM)
Calculated as the share of consumption of product I in total consumption in the base
year (SAM)
Calculated from equation (NSUP) in the base year (SAM)
Calculated from equation (HSUP) in the base year (SAM)
2.3436, based on Mandelman and Zlate (2011)
410
1 (the parameter has a scaling effect and simulations with different values did not show
impact on the results)
Calculated from equation (IbarEQ) in the base year (SAM)
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Calculated to reproduce a plausible economic development trajectory in the baseline
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Set at very low levels, in line with the current trend of very low interest rates
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Calculated from equation (PNORM) in the base year (SAM)
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Calculated from the respective use tables in the base year
6.5.10 List of abbreviations and equations in the CGE model
6.5.10.1 List of indices
Abbreviation
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Definition
sectors
products
regions
time periods
410
Mandelman F. and A. Zlate (2011), " Immigration, Remittances and Business Cycles", Federal Reserve
Bank of Atlanta.
297
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6.5.10.2 List of parameters
Abbreviation
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Definition
Elasticity of substitution in the CES production function
Elasticity of substitution in the labour aggregation function
Elasticity of substitution in the capital aggregation function
Elasticity of import substitution (Armington)
Elasticity of transformation
Share of value-added to labour in activity j
Share parameter in the labour aggregation function
Share parameter in the capital aggregation function
Share parameter in the composite supply Armington function for i
Transformation function share parameter for i
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Exponent parameter for the production function
Exponent in the labour aggregation function
Exponent in the capital aggregation function
Exponent in the composite supply Armington function for i
Transformation function exponent for i
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Shift parameter in the labour aggregation function
Shift parameter in the capital aggregation function
Shift parameter in the composite supply Armington function for i
Transformation function shift parameter for i
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Share of unskilled labour in total labour supply
Quantity of i as intermediate input per unit of output of j
Value added per unit of output of j
Yield of commodity i per unit of activity j
Quantity of commodity i as trade input per unit of i1 produced and sold
domestically
Share of public investments in GDP
Share of investment demand for product i in total investment
Share of public investment in sector j
Share of foreign savings to GDP
Share of budget balance to GDP
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Share of private savings to GDP
Capital utilization rate
Implicit direct tax rate
Implicit indirect tax rate
Depreciation of capital
Share of commodity i in the consumption of household
Weight of commodity i in the CPI
Weight to disutility from unskilled labour in hhd utility function
Weight to disutility from skilled labour in hhd utility function
1 over Frisch elasticity of labour
Weight of utility to savings in the hhd utility function
Shift parameter in the investment aggregation function
Rate of return
Consumer prices level in the base year
Change in stocks in value terms (for the base year calibration)
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6.5.10.3 List of variables
Abbreviation Definition
Endogenous variables
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Total factor productivity in the production function for activity
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Value added in sector
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Value-added price of activity
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Quantity of unskilled labour demanded by activity
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Quantity of skilled labour demanded by activity
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Total labour employed in activity
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Quantity of public capital demanded by activity
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Quantity of private capital demanded by activity
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Price of non-skilled labour in activity
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Price of skilled labour in activity
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Price of public capital in sector
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Price of private capital in sector
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Intermediate consumption of product
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in activity
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Gross output in activity
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Price of gross output in activity
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Quantity of product
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produced domestically
Total quantity of commodity i produced domestically
Price of total quantity of commodity i produced domestically
Quantity sold domestically of domestic product
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Domestic price of domestic output
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Domestic price of domestic output
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including trade and transport margins
Quantity of commodity demanded as trade and transport margin
Composite price of product
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Composite supply of product
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at domestic market
Imports of product
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Exports of product
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Consumption of commodity
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by household
Household savings
Total investment demand
Investment demand for product
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Change in stocks of product i
Composite investment goods price
Sectoral investment
Public investment in activity
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Abbreviation
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Definition
Private investment in activity
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Total public capital stock in sector
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Private cumulative assets
Foreign cumulative assets
Government cumulative assets
Government capital expenditures
Government revenues
Government expenditures
Budget balance
Foreign savings
Walras variable (zero at equilibrium)
Exogenous variables
Transfers from the government to the household
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6.5.10.4 Complete list of model equations
Production function
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Constant elasticity of transformation function for the domestic-export aggregation
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Government equations
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Capital and investment equations
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 kom (2016) 0590 - Ingen titel
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