Seventh Report on the Implementation of the Telecommunications Regulatory Package

/ Updated on 04.03.2002

Communication of the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions

- Summary and principal conclusions
The seventh report on the implementation of the telecommunications regulatory package, adopted by the European Commission on November 28, indicates that the telecommunications services sector is remarkably buoyant, as regulatory principles defined by the European Union continue to be implemented. Nonetheless, on the eve of adoption of the new regulatory framework - known as the '1999 Communications Review' - a number of regulatory bottlenecks remain - a source of concern for Community authorities.

With this report, that is published annually, the Commission charts the progress of competition within the EU's 15 Member States, on the basis of contributions provided by National Regulatory Authorities (NRAs), telecommunications services providers and operators and by professional associations and consumer associations.

The 7th report, with data up until September 2001, states that the combined national markets of the fifteen Member States will expand to an estimated 218 billion in terms of revenue by end 2001, representing a growth of
9.5%. This is a fall of three percentage points over actual growth in 2000, but a slight increase over the rate of 9% forecast in the previous implementation report.

The fastest expanding segment in revenue terms is again mobile services, which is expected to account for 38% of the combined EU telecommunications markets in terms of revenue. The average penetration rate in the European Union is now 73%, with rates at 75% or higher in seven Member States. The fixed telephone service and data and leased lines segment represent around 51% and 11% respectively, of total revenue. The average level of Internet penetration in EU households was around 36% in
June 2001, with significant oscillations within the EU, varying between Sweden with around 64%, compared with a level in Greece of just under 12%.
Competition is bringing prices for consumers down overall, and incumbent operators market shares by retail revenues have fallen since liberalisation on
average by 10% for local calls and by around 20% for long distance and 30% for international calls.

The new regulatory framework, that will introduce more flexible regulatory mechanisms, will place additional responsibilities on NRAs, which need to reinforce their powers and above all their ability to resolve disputes rapidly. Divergence in the application of the current regulatory framework also highlights the need to improve transparency and co-ordination mechanisms between national regulatory authorities.

The report describes a generally positive panorama, and focuses on seven main concerns:

1. Opening competition in the local network - in particular in terms of implementation of the Regulation on local loop unbundling (LLU), where progress is unsatisfactory, thus undermining the provision of generalised low-cost high speed internet access. The Commission believes that solutions for this situation include the definition of binding deadlines and credible penalties by NRAs.

2. Interconnection - call termination charges in mobile networks remain excessive and reveal a wide range between Member States. Flat rate interconnection for Internet access should also be encouraged.

3. Leased lines - absence of cost orientation and lengthy delivery times undermine broadband Internet access and development of e-commerce.

4. Tariffs Tariff - distortions and price squeezes persist. Regulatory authorities are advised to apply greater rigour in verifying operators' cost accounting systems.

5. Numbering - the full range of carrier selection and pre-selection services are still not available in all Member States.

6. Rights of way - This question affects above all new operators and the roll-out of third generation mobile services. National Regulatory Authorities are urged to remove uncertainties.

7. Consumer protection - the monitoring of consumer issues should be strengthened, in particular in terms of monitoring of service quality, price transparency and contract issues.

- The telecommunications sector in Portugal
As with the other 14 EU Member States, a chapter of the report provides a detailed analysis of the telecommunications sector in Portugal, based on topics covering the national regulatory authority, the regulatory framework and national markets; the licensing regime; tariffs and interconnection; local access; the roll-out of third generation mobile systems; tariffs and cost accounting; leased lines and rights of way.

The Portuguese telecommunications market, liberalised since January 2000, has 20 public telecommunications network operators and 13 fixed telephone service providers licensed. The level of competition has steadily increased to reach 19% for international calls and 12% for long-distance calls in only a year.

A reform of the Instituto das Comunicações de Portugal, which will be named ICP-Autoridade Nacional de Comunicações (ANACOM) from January 6, 2002, is envisaged, principally to reinforce its powers and independence.

The interconnection regime in Portugal is one of the areas where the Commission identifies significant improvements since the publication of the 6th Report. The document highlights the significant reduction in PT's new interconnection prices that are now in line with the EU average, while identifying the need to alter the interconnection structure of PT's network, which should take place in the beginning of 2002. The Commission also approves the resolution of the problem of 'off-net'/'on-net' calls by ICP's intervention, but notes that the implementation of this decision has been slow. In relation to the Internet access regime, the report focuses upon ICP's decision of June 2001 that permits access via flat-rate tariffs, underlining the fact that, for the first time, a decision by ICP has motivated a legal appeal by the incumbent operator.

In terms of the main vulnerabilities of the telecommunications sector, the document emphasises the following: mobile termination rates are still too high, focusing that for the regulator, mobile telephony should not be subsidised by fixed-to-mobile calls; there is a low level of competition in the local network (due to financial difficulties of operators) and in leased lines (a segment where high prices are combined with poor service quality and slow delivery times); a commercial offer of the local loop is not available; and finally, Portugal Telecom's cost accounting system needs to be improved, in order to establish the principle of cost orientation. 
To obtain the full report