Common features of community law regulation in the network-bound sectors

Common Market Law Review

Volumn 38, Issue 1, 2001, Pages 87-129

  Slot, Piet Jan ^a   Skudder, Andrew ^a  

^a LEIDEN UNIVERSITY   (Netherlands)

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EID: 0035583664     PISSN: 01650750     EISSN: None     Source Type: Journal    
DOI: 10.1023/A:1005629507818     Document Type: Article

References (110)

1. The authors acted as General Rapporteur for this conference on the topic of "Community law (including Competition law) affecting "networks" (telecom, energy, and information technology) and its consequences for the Member States.
2. The authors would like to express their thanks to the national rapporteurs for an extensive and invaluable volume of information which can be found at the FIDE website: http://www.bitline.fi/fide.
3. 2nd Report to the Council and the European Parliament on Harmonization Requirements. Directive 96/92/EC concerning common rules for the internal market in electricity, SEC 1999/470; Report to the Council and the European Parliament on Harmonization Requirements Directive 98/30/EC concerning common rules for the internal market for natural gas, COM (1999) 612; 5th Report on the Implementation of the Telecommunications Regulatory Package, COM (1999) 537 Final.
4. EC Commission: "Towards a new framework for Electronic Communications infrastructure and associated services. The 1999 Communications Review" COM (1999) 539.
5. EC Commission: "Services of General Interest in Europe" COM(2000) 580, Brussels, 20 Sept. 2000. The Communication clearly responds to the changing political climate calling for a more benevolent treatment of such services. Its objective is twofold: first, to provide further clarification on the respective roles of different levels of public authorities and of the competition and internal market provision applied to services of general interest. Second, to develop further the European framework relating to the good functioning of services of general interest in line with Art. 16 EC.
6. Directive 91/440, O.J. 1991, L 237/25, lays down the basic rules for unbundling the management of the railway structure and the provision of the transport services. Directive 95/18, O.J. 1995, L 143/70 provides rules for the Community railway licence. Directive 95/19, O.J. 1995, L 143/75, gives rules for the allocation of capacity and users' charges. Notwithstanding these rules, liberalization has so far not been implemented. A Commission proposal for amendment of directive 91/440 aiming at the actual liberalization has so far not been adopted, O.J. 2000, C 116/21. A good overview of liberalization in the air transport sector is given by Van Houtte, "Air Transport", in Geradin, The liberalization of State Monopolies in the European Union and Beyond (Kluwer, the Hague, 2000), pp. 67-98.
7. This position is recognized at Community level in Art. 26(1) of Directive 98/30 on natural gas, which provides for an exemption from the main obligations of the legal regime laid down by the Directive. See O.J. 1998, L 204/1.
8. Commission decision of 10 Dec. 1982, British Telecom O.J. 1982, L 360/36; confirmed in Case 41/83, Italy v. Commission, [ECR] 1985, 873. The most straightforward confirmation of the Commission's powers in this respect came in Case C-202/88, France v. Commission, [1991] ECR I-1223.
9. Commission decision of 16 Jan. 1991, O.J. 1991, L 28/32.
10. A glance at the major EC competition law books at the time suffices. See also the overview by Slot, "Energy and Competition" 31 CML Rev. 511-547, 1994. By contrast, the recent book on The EC Law of Competition, edited by Faull and Nickpay (OUP Oxford, 1999) (and written by Commission officials) has extensive chapters on energy and ONP communications. These chapters discuss competition law in the context of and together with the present regulatory framework.
11. Regulation 2790/99, O.J. 1999, L 336/21.
12. O.J. 1999, C 270.
13. EC Commission, "White Paper on Modernization of the Rules Implementing Articles 85 and 86 of the EC Treaty", O.J. 1999, C 132/1.
14. EC Commission, "Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87" COM (2000) 582, Brussels 27 Sept. 2000. If and when enacted, this new regulation will replace Regulation No 17.
15. A proposal to amend the R&D block exemption, the specialization agreements and the respective guidelines, drafts published in O.J. 2000, C 118/3 et seq.
16. See e.g. Grewlich, "'Cyberspace': Sector-specific regulation and competition rules in European Telecommunications", 36 CML Rev., 937, at 951, where he states: "Sector-specific ex ante regulation appears to have the merit of better protecting the fragile position of new entrants in markets which were previously sealed off and, at 963,; "On the other hand, ex ante sector-specific regulation makes is possible to go considerably further than general competition law in regulating access."
17. The Commission did publish "Guidelines on the application of EEC Competition rules in the telecommunications sector" (O.J. 1991, C 233) and a "Notice on the application of the competition rules to access agreements in the telecommunications sector" (O.J. 1998, C 265/2) but both tend to outline the division of competencies between competition law and sector-specific law rather than developing competition law concepts in such a way as to replace sector-specific regulation on questions such as access, for example.
18. OPTA stands for "Onafhankelijke Post en Telecommunicatie Autoriteit" (Independent Authority for Post and Telecommunication).
19. See Joined Cases C-395 & 396/96P, cmB v. Commission, 16 March 2000 and the annotation by Stroux in this Review (37 CML Rev., 1249-1264). On the issue of collective dominance, see also the introduction to section 3 infra at p. 20.
20. On the other hand, it is interesting to note, that the Commission has, in its recent proposal for a "Directive on access to, and interconnection of, electronic communications networks and associated facilities" decided that the concept of "Significant Market Power" (SMP) should be "redefined on the basis of the competition law concept of dominance." (at p. 4). This may well have the effect of reducing the utility of even the sector-specific regulation in this field, as the threshold of "dominance" is typically higher than the old concept of "significant market power" which was set as a market share of 25%. It remains to be seen how the new Directive will be interpreted, but this could well diminish further the control of access and interconnection.
21. Nikolanikos, "Access Agreements in the Telecommunications Sector - Refusal to Supply and the Essential Facilities Doctrine under EC Competition Law", (1999) ECLR, 399. Cf. Temple Lang, "Defining legitimate competition: Companies' duties to supply competitors and access to essential facilities", (1994) Fordham International Law Journal, 437.
22. Nikolanikos, "Access Agreements in the Telecommunications Sector - Refusal to Supply and the Essential Facilities Doctrine under EC Competition Law", (1999) ECLR, 399. Cf. Temple Lang, "Defining legitimate competition: Companies' duties to supply competitors and access to essential facilities", (1994) Fordham International Law Journal, 437.
23. Case C-7/97, Bronner v. Mediaprint, [ECR] 1998 I-7791.
24. Ibid. at para 41. See also the annotation by Hancher, 36 CML Rev., 1289-1307.
25. Supra note 4.
26. COM(2000) 393, 12 July 2000.
27. See note 17 supra.
28. Cases C-157/94, Commission v. Netherlands; C-158/94, Commission v. Italy; C-159/94, Commission v. France; C-160/94, Commission v. Spain, [1997] ECR I-5699, 5789, 5815 and 5865. See also the annotation by Slot in 35 CML Rev., 1183-1203.
29. Joined cases C-147 & 148/97, Deutsche Post AG, Judgment of 10 Feb. 2000, nyr. See also C-209/98, C-209/98, Entreprenørforeningens Affalds/Miljøsektion (FFAD), nyr.
30. Even though the electricity judgments do not excluded the possibility that the burden of proof for undertakings under Art. 86(2) will be more severe than for the Member State, the reasoning of the ECJ in the Deutsche Post judgment would seem to exclude this.
31. Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, O.J. 1999 L 83/1.
32. Joint cases T-298, 312, 315, 600, 607/97 and 1, 3, 6 & 23/98, Alzetta and others v. Commission, Judgment of 15 June 2000, nyr. The judgment discusses an aid measure in the inland transport cabotage market. The CFI, in para 143, ruled that such an aid has to be considered as an existing aid. Thus such an aid can only be challenged by the Commission if it is an aid scheme, since individual aid cannot be challenged ex post. The intricate relation between liberalization and State aid has been highlighted by the Commission in its 1994 Guidelines for the application of Article 92 and 93 to State aid in the aviation sector, O.J. 1994, C 350/5.
33. Directive 96/92/EC concerning common rules for the internal market in electricity, O.J. 1997, L 27/20.
34. Directive 98/30 concerning common rules for the internal market in natural gas, O.J. 1998, L 204/1.
35. See note 30.
36. This agreement between the Dutch distribution companies and the four production companies contains a collective take-or-pay obligation for the distribution companies amounting to the estimated annual aggregate fixed costs of the Dutch production sector.
37. Commission Decision 1999/796/EC, O.J. 1999, L 319/34.
38. See Commission Decision 1999/791/EC, O.J. 1999, L 319/1 (UK); Commission Decision 1999/792/EC, O.J. 1999, L 319/6 (France); Commission Decision 1999/793/EC, O.J. 1999, L 319/12 (Luxembourg); Commission Decision 1999/794/EC, O.J. 1999, L 319/18 (Germany); Commission Decision 1999/795/EC, O.J. 1999, L 319/30 (Austria); Commission Decision 796/EC, O.J. 1999, L 319/34 (Netherlands); Commission Decision 1999/797/EC, O.J. 1999, L 319/41 (Spain); Commission Decision 1999/798/EC, O.J. 1999, L 319/47 (Denmark). Almost all requests for a derogation were rejected since they did not contain a measure which would constitute a derogation from chapter IV, VI or VII of Directive 96/92. These measures should be assessed under the rules for State aid. Only two measures, one by Germany and one by the Netherlands, were accepted as derogations. The requests clearly show the close relationship between the regime of Art. 24 and the rules on State aid.
39. See Commission Decision 1999/791/EC at para 36, O.J. 1999, L 319/1.
40. Case C-387/92, xxx Bance de Credito, [1994] ECR I-877; the procedural aspects of aid measures qualifying for the exemption are discussed in Case T-106/95, FFSA, [1997] ECR II-229.
41. Joint cases 67,68 and 70/85, [1988] ECR 219.
42. O.J. 1993, L 199/84.
43. Directive 94/3, O.J. 1994, L 164/4.
44. EC Commission, Proposal for a directive of the European Parliament and of the Council co-ordinating the procedure of entities operating in the water, energy and transport sectors, COM (2000) 276, 10 May 2000.
45. The Public Utilities Directive, Directive 90/531 as amended by Directive 93/38, defines in Art. 2(1) the entities that are covered by its scope. There are three types of entity: Public Authorities - (Contracting authorities) - State, regional or local authorities, bodies governed by public law, or associations formed by one or more of such authorities or bodies governed by public law. A body is considered to be governed by public law where a) it is established for the specific purpose of meeting needs in the general interest, not being of an industrial or commercial nature, b) has legal personality and c) is financed for the most part by the state, or regional or local authorities, or other bodies governed by public law, or is subject to management supervision by those bodies, or has an administrative, managerial or supervisory board more than half of whose members are appointed by the State, regional or local authorities, to other bodies governed by public law. Public Undertakings - an undertaking, over which public authorities may exercise, directly or indirectly, a dominant influence, by virtue of their ownership, financial participation in the entity, or the rules that govern it. Entities granted "Special and Exclusive Rights" - rights deriving from authorizations granted by a competent authority of the Member State concerned, by law, regulation, or administrative action, having as their result the reservation for one or more entities of the exploitation of one of the covered utility activities. In particular where a) for the purpose of constructing relevant networks or facilities it may take advantage of the procedure for the expropriation or use of property or may place network equipment on, or under to over the public highway and b) in relation to the activity of supplying water, electricity, gas or heat through a network, an entity supplies a network operated by another entity which enjoys relevant special or exclusive rights.
46. Case C-44/96, Mannesmann Anlagebau, [1998] ECR I-73; Case C-360/96, Gemeente Arnhem, [1998] ECR I-6821.
47. Supra note 3.
48. Supra note 4.
49. At para 4.8.2.
50. The "Dienst Uitvoering en Toezicht Energie" or "DTe"; see Hancher and Lavrijssen, "De eerste Gaswet: Bestaande structuren in een nieuw jasje", 48 SEW, (2000), 236.
51. Further examples can be cited, such as the position in Austria where the NRA in the Telecom sector has been given limited competence and as a result several matters such as the advertising methods of operators come under the scope of the competition rules, which can only be enforced by the competition authority. There is no formal basis for co-ordination between the two authorities. Furthermore, in Switzerland the competition authority is also exclusively competent to apply the competition rules. There is no rule prohibiting the competition authority to apply such rules also in the telecom sector. The competition authority has applied competition law to secure access to TV cables. As of yet there are no specific regimes for the electricity and the natural gas sector.
52. COM (2000) 393 at Chapters II and III.
53. The Fifth Report on Telecommunications, supra note 3, provides the following list of transborder issues: - the comparatively low level of harmonization in particular of the Community licensing and interconnection regimes represents a barrier to the single market; - the wide divergences in the way in which Community rules implemented at national level raise further barriers; - in view of concerns in the market that universal service funding schemes constitute a barrier to market entry, there is a need for a rigorous assessment of the real net costs of universal services; - there are disparities in consumer protection across the EC due to differences in the way in which consumer interests are dealt with by individual Member States and differences in treatment depending on the telecommunications service in question; - the current framework does not explicitly address issues such as special schemes for internet access, to the safeguards to be applied to avoid possible distortions of competition arising from the integration of voice/data and fixed/mobile services.
54. The Second Report on Electricity, supra note 3, mentions the following obstacles for cross-border trade of electricity; insufficient interconnector capacity; cross-border tarification and settlement; the need for a common policy towards third countries; regulation of the electricity networks at the European level; ensuring a level playing field in the European electricity market, this includes the problems posed by differing environmental standards, standards for nuclear decommissioning, and taxation.
55. The Gas Report, supra note 3, lists the following obstacles and issues: interoperability of gas networks, this includes question of gas quality, odorization, network specifications; balancing regimes; capacity constraints; tarification of transmission access; gas trade with third countries; indirect taxation; environmental regulation.
56. COM (2000) 386.
57. Ibid. at p. 2.
58. Ibid. at p. 3.
59. WTO, Agreement on Telecommunications Services (Fourth Protocol to General Agreement on Trade in Services), Geneva, 15 Feb. 1997, 36 ILM (1997) 354.
60. Supra note 16 at p. 964.
61. See Council Decisions 97/838/EC of 28 Nov. 1997 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services, O.J. 1997, L 347/45.
62. These may be gleaned from the internet: http://www.encharter.org.
63. See the discussion above in section 2.2.
64. See e.g. preamble (7) of Commission Recommendation of 25 May 2000 on unbundled access to the local loop (2000/417/EC), O.J. 2000, L 156/44.
65. See the recent case law on the extension of the notion of collective dominance to oligopolistic markets such as Cases C-69/94 and C-30/95, French Republic, Société Commerciale des Potasses et de l'Azote and Enterprise Minière et Chimique v. Commission (Kali & Saltz) [1998] ECR I-1375 and Case T-102/96, Gencor Ltd v. Commission, [1999] ECR II-753.
66. Supra note 3.
67. COM(2000) 386. The proposed new regulatory framework consists of seven proposals for new Directives. These are: Proposal for a directive on a common regulatory framework for electronic communications networks and services (COM (2000) 393), Proposal for a directive service and users' rights relating to electronic communications networks and services (COM (2000) 392), Proposal for a directive on access to, and interconnection of, electronic communications networks and Associated facilities (COM (2000) 384), Proposal for a directive concerning the processing of personal data and the protection of privacy in the electronic communications sector (COM (2000) 385), Proposal for a directive on the authorisation of electronic communications networks and services (COM (2000) 386, Proposal for a regulation on unbundled access to the local loop (COM (2000) 394) and Proposal for a decision on a regulatory framework for radio spectrum policy in the European Community (COM (2000) 407).
68. Ibid. at p. 1.
69. The 1999 Communications Review, COM (1999) 539.
70. Ibid. at p. vii.
71. Infra at pp. 34-35.
72. Although even here cross-subsidization could be avoided if the general financing schemes authorized by Art. 5 of the Interconnection Directive (Council Directive 97/33/EC, O.J. 1997, L 199/52) were to be implemented by the Member States. See further the discussion infra at pp. 37.
73. COM (1999) 537 Final at p. 18.
74. See the special study, ordered by the Commission, by Haubrich and Fritz, "Study on Cross-Border Electricity Transmission Tariffs", Aachen, April 1999. Available at Commission DG Energy Website (http://europa.eu.int/comm/energy/en/elec_single_ market/florence/cbett.en.pdf). At p. 56 they provide a concise summary of the position as it stands: "Up to now, settlement of cross-border telecommunications service is done according to the so-called accounting rates that are negotiated bilaterally between system operators each year. The originating operator who collects charges from his customer pays to the terminating operator an agreed amount per minute of traffic, know as the settlement rate, which is normally about half the accounting rate. In contrast to electricity transmission, telecommunication services in opposite directions do not cancel out each other. However, balancing of opposite services between each two operators is done annually to calculate net payments. . . However, there is broad agreement that bilaterally negotiated accounting rates are neither cost-oriented not suitable in a market of increase third party access to network facilities. For this reason, it is discussed to introduce fixed tariffs for each of the cost elements. This would result in transaction-based total charges."
75. Supra note 3.
76. Supra note 73.
77. Florence, 30-31 March 2000.
78. Deutsche Post, supra note 28.
79. Significant market power is defined in Council Directive 97/33/EC on interconnection in telecommunications in Art. 4(3) as "an organization shall be presumed to have significant market power when it has a share of more than 25% of a particular telecommunications market in the geographical area in a Member State within which it is authorized to operate. National regulatory authorities may nevertheless determine that an organization with a market share of less than 25% in the relevant market has significant market power. They may also determine that an organization with a market share of more than 25% in the relevant market does not have significant market power. In either case, the determination shall take into account the organization's ability to influence market conditions, its turnover relative to the size of the market, its control of the means of access to end-users, its access to financial resources and its experience in providing products and services in the market."
80. Tariff rebalancing is the process of re-apportioning prices for a service to correspond with the cost of providing that service. Traditionally, the prices charged by incumbent operators bore little relation to the actual costs involved, but rather tended to be determined by the elasticity of demand for a given service. Thus, a large amount of cross-subsidization occurred between services, and the aim of tariff rebalancing is to remove such practices by aligning charges with costs. This policy may well have negative consequences on the domestic market where customers in remote and expensive areas to service may not be in a position to afford the actual costs of the service provision. Thus Art. 3 of Directive 98/10/EC obliges Member States to maintain, in the light of progressive tariff rebalancing, the affordability of the services designated as universal services by that Directive, if necessary by special or targeted tariff schemes or by the implementation of price caps or geographical averaging.
81. At p. 14, emphasis added.
82. At p. 21, emphasis added.
83. Services Directive (90/388/EEC) (O.J. 1990, L 192/16); Interconnection Directive (97/33/EC) (cited supra note 71); Voice Telephony Directive (98/10/EC) (O.J. 1998, L 101/24); Mobile Directive (96/2/EC) (O.J. 1996, L 20/59); and the Full Competition Directive (96/19/EC) (O.J. 1996, L 74/13).
84. COM(2000)384. See supra note 66.
85. Gaswet, (2000) Staatsblad, 305.
86. Dutch report at p. 31.
87. Finnish report at p. 20.
88. Ibid.
89. COM (1999) 537 final.
90. Ibid. at p. 14.
91. On the French doctrine see: Chevallier, Le service public (Presses Universitaires de France, 1987); Muriel, Diclionaire économique et juridique des services publics en Europe (Paris, 1998, ASPE Europe). Freedland and Sciarra (Eds.), Public Services and Citizenship in European Law. Public and Labour Law Perspectives (OUP 1998), cited in Devroe, "'Universele dienstverlening' als nieuwe manier van denken?", (2000) SEW, 82 et seq.
92. Interconnection Directive cited supra note 71; Voice Telephony Directive cited supra note 82; Services Directive cited supra note 82.
93. Directive 98/10/EC Art. 3.
94. Ibid. Art. 16.
95. Ibid. Art. 17.
96. Ibid. Art. 3.
97. COM(2000)392 at p. 2. See supra note 66.
98. Portuguese National Report at p. 2.
99. COM (2000) 392.
100. Ibid. at p. 17.
101. See supra note 27.
102. Title 1 of the new French electricity law provides for PSOs. Law of 10 Feb. 2000, J.O.R.F. of 11 Feb. 2000, p. 2143.
103. Cf. note 3 supra.
104. See supra note 5. There is no indication as to how the Commission will assess these PSOs. Although Art. 3(2) of the electricity Directive does not say so, it must be assumed that Member States cannot implement the PSOs prior to the Commission's approval. This raises the usual questions about the legal nature of notification procedures in Community law that have been raised in the context of Art. 95(4 and 5) EC and Art. 8 of Directive 83/189. See Weatherill, "Compulsory notification of draft technical regulations: The contribution of 83/189 to the management of the Internal Market", 16 YEL (1996), 129.
105. COM (2000) 393.
106. Ibid. at p. 3.
107. Ibid.
108. Ibid.
109. Cf. the above discussions on high bandwidth access.
110. E.g. the fact that in many Member States national licences are still required and that the licensing conditions still differ widely.