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, upon deregulation, may

    be managed ex-post by general competition authorities. To use a

    football analogy, the boundaries of the playing field, the

    well-resourced teams and the less well-resourced teams must all

    be clearly identified in advance of the competitive fixture. A

    referee should manage the game and everyone should know the

    rules in advance.

    The effective enforcement of behavioural rules within the

    ex ante regulatory framework requires that national

    regulatory authorities must be able to name those players who

    possess market strength and those who don't. Clear rules

    must exist for regulators to designate those players having

    significant market power in relevant markets. To promote the

    growth of smaller players and to cultivate competition and

    market entry, those who possess networks and market strength

    should face more onerous legal obligations within the

    parameters of the regulatory structure. Such obligations

    usually take the form of ex-ante rules requiring from

    larger market players business separation (where vertically

    integrated), mandatory access, non-discrimination, transparency

    and price orientation.

    To identify the players with...

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