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Euro regulators braced for EU watchdog battle

European regulatory policy under spotlight

European regulators are bracing for some intensive discussions later this year when they meet to review the European Commission's regulatory policy for the telecommunications sectors.

A mixture of new and old ideas, including the separation of networks from services, and the creation of a European telecom regulator, will spark the debate, industry insiders say.

A spokeswoman for the Commission declined to comment on the issues ahead of the talks, which are expected to begin in late October or November.

Both new and incumbent network operators are calling for greater consistency in regulating the European Union's huge telecom market. Harmonised regulation, they argue, will make it easier to offer new services such as VoIP (Voice over Internet Protocol).

Some experts suggest broader roles for the Commission and the European Regulators Group (ERP), which consists mostly of local agencies that advise the Commission on telecom regulation.

"There is an uneven quality of regulation across Europe," said Ilsa Godlovitch, director of regulatory affairs at the European Competitive Telecommunications Association (ECTA), which represents competitors to former telephone monopoly operators. "Maybe an enhanced role for both the Commission and ERP is the solution."

But most national regulators worry that the Commission may seek to revive interest in establishing a powerful, cross-border European telecom regulatory agency, either by creating an entity or transforming ERP into the telecom watchdog.

Talk of creating an EU telecom regulator arose in the mid-1990s in the early years of market liberalisation and surfaced again in 2002 during a review of EU regulatory policy.

"A new European telecom regulator is unnecessary and would be counterproductive," said Rudolf Boll, a spokesman for German network regulator Bundesnetzagentur. While acknowledging a need for consistent regulation, which ERP can help achieve, Boll argued that when it comes to implementation, local regulators can better regulate local markets.

UK telecom watchdog Ofcom has a similar opinion. "ERP has recognised the need for greater consistency in European telecom regulations and as a member of ERP, we are working on processes to achieve that consistency," said Ofcom spokesman Simon Bates.

Another hot regulatory topic will be the separation of networks from the services that run on top of them. Across the EU, most regulators have implemented local loop unbundling, a complex regulatory mechanism by which rivals lease fixed-line access from former state-owned telephone operators and run their own services over them.

Some groups, including ECTA, would like to see regulators also introduce 'functional' network separation. Functional network separation requires facilities-based operators to set up a separate unit within the company to manage and sell network services, such as local-loop access.

Bending to pressure from the local regulator, BT became the first European operator to put its infrastructure business into a new unit, called Open Space, and have it sell network services back to BT as well as rivals. Regulators in Italy and Sweden are considering prescribing functional network separation for their incumbent operators as well.

"The aim of functional network separation is to create more pricing transparency," ECTA's Godlovitch said. "European Commissioner Viviane Reding would like to see this model, and ERP views it as useful."

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