Seven Deadly Sins Of Electronic Communications Regulation In Ireland

Author:Mr Tom Carney
Profession:Dillon Eustace

1. Introduction

The utopian internal market where obstacles to the provision

of electronic communications services are eliminated is

attractive. Consumers benefit from choice and quality for

effectively priced communications services while electronic

communications providers enjoy fairer competition and greater

legal certainty.

EU internal market rhetoric offers much. Electronic

communications providers are tantalized by promises of

effective free movement, regulatory barrier elimination and

fairer competition. True, some success has been achieved.

Certain inter-state barriers to market integration have been

reduced. But, the current legal framework for pan-European

electronic communications networks suffers from serious design

defects. Flawed national administrative and regulatory

practices continue to frustrate providers, retard competition

and fetter competitiveness at national, EU and international

levels. Operators continue to face significant obstacles to

cross-border electronic communication service provision.

Burdensome and defective regulatory frameworks generate legal

uncertainty and raise unnecessary costs for business.

Inefficient national administrative procedures continue to

hinder growth.

Europe's regulatory framework for electronic

communications is bedeviled by seven deadly sins. Their cost

should be assessed financially in terms of provider revenue

lost and international competitiveness undermined. On the

international stage, the effectiveness of the EU regulatory

framework must be measured objectively against the extent to

which EU legislation allows, facilitates or even requires

Member States to establish and/or maintain dubious regulatory

practices at the cost of commercial efficiency.

2. Sin 1: Contemporaneous ex ante regulation &

ex post competition management

The contemporaneous application to the same sector of ex

ante regulation and ex post competition rules is

wrong. It breeds legal uncertainty and imposes unnecessary

resource burdens on electronic communications providers.

It is not fair that undertakings in regulated sectors are

obliged to do business while being subject to two sets of

competition management requirements, those of the regulators

and those of the general competition authorities. When compared

to their US counterparts, EU electronic communications

providers are at a distinct disadvantage. US sector regulation

(as a rule of thumb) precludes application of all anti-trust

rules in markets supervised by the national telecommunications

regulator. Network and service markets falling within the

regulatory competence of the Federal Communications Commission

("FCC") are immune from the enforcement jurisdiction

of the competent US anti-trust enforcers, the Department of

Justice and the Federal Trade Commission ("FTC").

Under the US Telecommunications Act, 1996 only when the FCC

declares a particular market (over which it held regulatory

competence) competitive can that market revert to the sphere of

competence of the Department of Justice and/or the FTC. FCC

regulated providers can allocate resources efficiently to

pursue business plans and implement regulatory compliance

strategies within the well-defined walls of the applicable

telecommunications legislation. US providers enjoy legal

certainty. So long as US providers satisfy FCC requirements,

they remain insulated from the enforcement activities of the US

anti-trust authorities. Ireland (as also the EU) relies on

three models to manage competition in the market place: merger

regulation, ex ante sector regulation and ex

post competition enforcement. Merger regulation is the

system providing for ex ante control of market

structures by a competent state authority which is

designed to prevent or disable the future development of

anti-competitive behaviour within those pre-defined

market structures. Ex ante sector regulation is the

framework for regulation of (anti-) competitive

behaviour by a competent state authority according to

specific rules pre-defined in legislation and having regard to

pre-defined market structures. Ex post competition

enforcement is a regime for ex post punishment of

anti-competitive behaviour, which has already occurred

within relevant market structures defined ex

post by a competent state authority. Active in the Irish

electronic communications sector at the same time, the

Competition Authority enforces national merger rules and ex

post competition laws while the EC Commission enforces the

2004 EC Merger Regulation and the Commission for Communications

Regulation ("Comreg") supervises the ex ante

regulatory framework.

Bernstein's well-worn description of the cycle of

regulation through birth, growth, maturity and death of a

regulator may usefully put the development of the regulatory

model for communications into context. There should be a

staggered move through sector specific regulation, from

state-controlled provision of network and services to the

general ex post management of competition between

private undertakings by competent competition authorities.

Sector specific regulation when enforced must preclude ex

post competition management.

The central theme of any model for the effective management

of competition in the EU's communications sector must be

legal certainty. The costs of over-regulation are real for

those supervised by more than one regulator. Providers already

regulated by national communications regulators must pursue

business plans while also looking over their shoulder to avoid

prosecution by the ex post competition managers.

Application of the EU's 2004 Merger Regulation estops

enforcement of general EC and national competition rules. Irish

sector specific regulation should also exclude enforcement of

the general competition rules until such time as regulated

electronic communications markets are deemed competitive by the

regulator, as happens in the United States.

3. Sin 2: The imposition of dominance criteria

A sector is said to be regulated when the behaviour of its

economic operators is managed by an independent body within

pre-defined market structures having regard to pre-defined

legal obligations with the goal of achieving fair competition

in those market structures which sector,...

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