Telecom tariffs: from the competition policy to regulation

By Claire Bravard | 9 May 2013

To quote this document: Claire Bravard, “Telecom tariffs: from the competition policy to regulation”, Nouvelle Europe [en ligne], Thursday 9 May 2013, http://www.nouvelle-europe.eu/node/1689, displayed on 18 October 2017

It is hard for us to remember how we used to live without mobile phones. To reach our friends we had to call them on their landlines. Yes madam, a “landline” with underground wires. This was a very stressful moment for the youth of the time. “Uh...Hello Mrs O'Ryan, can I talk to... Jenna? Please...”, followed by a mini heart failure. Hopefully, the dawn of a new era came soon enough and the mobile phone was born.

Today, there are more than 656 million individual subscriptions in Europe (counted as the number of active SIM cards in the EU and EEA). The 2011 Report of the European Mobile Industry Observatory estimates that 89% of Europeans have a mobile phone, for many users hold more than one subscription.

In ten years, mobile phones have become a transgenerational and transclass good, particularly in Europe, where the penetration rate is higher than in Japan or the US. The mobile phone has hence become the most democratized device of the 21st century. The EU has been a decisive actor in promoting cheaper prices and consumer rules.

The EU competition policy:  Opening up markets and fighting against oligopolies

The DG Competition, also known as the DGIV, is one of the rare DGs to have acquired early on its own source of regulatory power. The Single European Act, signed in 1986, aimed to deepen the Single Market and promote free movement of goods, but also services, capital and workers. Hence, the Competition Policy became the Commission's main tool to break state monopolies and private oligopolies in order to open up national markets to promote European trade.

Naturally, network utilities like other services were very soon concerned. But similarly to electricity or transports, network utilities have two specific aspects. First, they are often considered as a public good. Second, they rely on a very expensive infrastructure and are prone to natural monopolies. Consequently, opening access to competition for telecommunications was a very complicated business.

As from 1998, telecommunication networks were progressively opened to competition from landlines to other “electronic communications”.

From Introducing a dose of Regulation...

The Directive 2002/21/EC of 7 March 2002 on a common regulatory framework for electronic communications networks and services, generated a new hybrid model between the EU competition rules and ex ante regulation in the telecommunications industry. National regulatory authorities (NRAs) in every Member State have to analyse 18 product markets chosen by the Commission which potentially have significant market power (SMP). If it is so, the MSs should adopt ex ante regulation to promote transparency, non-discrimination and even allow price controls. The aim here was to break down old institutional obstacles but also to elaborate new regulations to counter market failures which could as well hamper trade.

...To creating price caps

Whilst progressively opening markets of telecoms on national levels had had the expected effect, prices were surprisingly high when consumers had to travel in another EU country. Four years after the re-regulation directive, telecom companies had failed to bring down roaming prices in order to reflect the real cost of providing this service. Indeed, the telecommunication industry in Europe was still very much divided along national lines and maintaining high roaming prices compensated for the relative losses in benefits from opening national markets to competition.

In 2006, after consultations with consumers and NRAs, the Commission made a proposal to modify the directive of 2002. After many years of talks and deliberation, and periods of monitoring (letters were sent to major CEOs of the European telecoms industry), it was decided that a much stronger stand by the EU was necessary for results were failing to appear. In 2009, the EU decided to cap the prices of texting, calling but also of going on the internet whilst within another EU country. It was decided that the price caps should be progressively applied in order to give time to the telecoms industry to readjust.

In four years, roaming prices have considerably diminished by 14 cents to make a call and receiving one by 11. Of course, receiving a text is free throughout the EU. Next step? As from next year, consumers will be able to choose the company of their wish when travelling abroad and not the one provided by their national server.

So where are you going next summer?

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