Thursday, November 15, 2007

European Telecom Market Authority (ETMA aka EECMA) a threat to checks and balances in the EU

The proposed European Telecom Market Authority (aka EECMA or European Electronic Communications Market Authority) is an utter disaster for the democratic functioning of the EU and the balance of powers in the EU. It will:
  • not address the fundamental problem of an imbalance in power,
  • increase the lack of democratic oversight of telecommunications decisions at the EU level,
  • seriously devalue the role of national regulators ,
  • ruin the quality of rules and regulations and finally,
  • there was no demand for it.
I will try to sketch the context and the formal situation first and than explain how it works in practice, then why the new European Telecom Market Authority will have the negative effects that I suspect and lastly what I think needs to be done.

As you may know, the EU proposed changes to the current telecommunications regulatory framework. This framework is the basis for the telecommunication laws in each of the EU member-states. The current framework is quite good, certainly compared to eg. the US telecommunication laws, but a review has been held and some proposals have come from the Commission. Most of it is evolutionary and not revolutionary. There is however one controversial proposal, which is the European Telecom Market Authority.

The proposal
The EC propose to establish an organization of about a 120 people reporting to the European Parliament and tasked with:

  • "ensuring that the 27 national regulators work as an efficient team on the basis of common guiding principles;
  • delivering opinions and assisting in preparing single market measures of the Commission for the telecoms sector;
  • improving the accessibility of telecoms services and equipment for users with disabilities;
  • monitoring closely the use of the single European emergency phone number, 112, and identifying remaining obstacles;
  • facilitating cross-border EU services in relation to rights-of-use for scarce resources such as spectrum and numbers, and enabling operators wishing to do so to use a single European area code for their services;
  • addressing network and information security issues."
The Commission is of the opinion that we need such an organization, since the national regulators (NRA) in the member states haven't all been swift, consistent and effective. This is undeniably the case and some in cases nations have just been downright horrible and wrong, like Poland, where the deputy minister was head of the independent regulator and Germany with its Regulatory Holiday for its poor incumbent Deutsche Telekom, which is building something that uses VDSL2, but is a service instead of a network and therefore according to the German regulator not subject to regulation. However, member states getting it wrong doesn't mean the Commission/ETMA should take over and even less that it would be good at it.

The Current Situation

A longer description can be found here. Currently when a national telecoms regulator issues a ruling it has to notify this with the Commission and the Commission can then raise "Serious Doubts" or even Veto a ruling. The Commission has nothing to say on the actual remedies, though it would love so. Now when serious doubts are raised the NRA will have to consider those and take them into account into its ruling, if the Commission is still not happy, than it can veto the measure. If the NRA is unhappy, it can go the European Court of Justice and wait 4 years for a solution. Also the European Regulators Group (ERG) can be asked for an opinion to advice in a dispute between NRA and Commission.

Reality has a tendency to be different that what you read in the law. I've taken to game theory quite alot lately and laws are the rules of the game, but they don't explain how the game is played in reality. The current game is unbalanced and completely tilted towards the Commission. What happens is the following:
  • The Commission comes asking what your proposed regulations are. It will then informally and verbally tell you what is wrong and that you need to fix it. At that moment civil servants NRA's and ministries internally will have a serious problem already. Directors want something fixed, ministers are wondering what parliament will think.
  • The Commission will also want to see the proposed remedies, regardless of the fact that they are not allowed to rule on it. If they don't like the remedies, they will not like the ruling. <\
  • If the Commission raises 'Serious Doubts', the press will be informed. There might be an official point of view, but informally it's a spin war. The Commission answers to no one. The NRA and national government will have to fight of the press and parliament. The press figures that the government is wrong from the get go and in parliament the opposition is having a field day. At this point most political figures will buckle and give in to the Commission.
  • If the Commission vetoes the governments decision than the government is in big problems. The minister clearly has failed, the NRA is incompetent. This will result in debates in parliament and again politicians will cave in.
  • The internal discussions within the Commission on the subject can reflect national and EU-level political discussions to such an extend that it is hard to distinguish between reason and politics.
  • The ERG can be asked for an opinion, but the Commission is not bound by it and it caries little political weight. It has a tendency to side with the Commission when the Commission is very clearly correct (eg. Germany Regulierungs Ferien) and only sometimes against the Commission, when it is clear the Commission is wrong. In the former case the Commission will cite everywhere that it is right and cite the opinion widely. In the latter case the Commission will brush of those incompetent NRA's.
  • A government will not have any place to go until a final ruling by the Commission. When there is a ruling it can stand in line at the European Court of Justice, which is a group of intelligent but very slow judges. It currently takes 4 years to get a ruling.
So there you have it. A NRA can be right, but in order to be acknowledged as right it takes 4 years. At which point the ruling is irrelevant. In the mean time there is a stale mate or worse the country issues the ruling according to the decision of the Commission and just continues the lawsuit out of principle. So should you wonder why NRA's and Commission often agree, there you have it.

The fundamental problem

The fundamental problem of telecoms regulation in the EU is not incompetence at the national regulator as the EC claims, its the inbalance in power, partially caused by the long time it takes to appeal a decision of a nation and the difference in context a NRA operates in compared to the EC. The ETMA will not solve this problem, but only will make it worse.

ETMA will not be under the oversight of the Commission, but will report to Parliament. There is however no mechanism to prevent the Commission meddling heavily into the operations of ETMA. ETMA can now deflect any direct attention away from the Commission, while the Commission can still run it from a distance. This gives the EC more power in a subtle way. It will not improve the position of the nations, because for an appeal they still can go to the ECJ in Luxembourg. So you got a perpetrator, a fall guy and forever to wait for justice.

Increasing Democratic oversight

As said in the previous paragraph, ETMA will deflect attention away from the Commission, giving the Commission more power in a more subtle way.Parliament is toothless vehicle, because it cannot dictate what ETMA will do, just oversee that it is doing something. The European Parliament just isn't equipped to deal with direct intervention of the Commission in ETMA. Normal ways of indirect democratic oversight of the Commission is also out of the question. These ways are normally barterring and bribing, because the Commission needs the Member States on other issues. The Commission is now impervious to barterring and bribing, because it can deflect any just criticism towards ETMA. Now barterring and bribing are already bad, but this doesn't add oversight, just an extra layer of confusion.

Devalue the role of national regulators
The Commission will use ETMA to lay down dictates of how to regulate. It will require each nation to do exactly the same as elsewhere, regardless of the local situation. Yes the EC will tell you differently, but the Commissions actions against The Netherlands on the cable sector will show you differently. The Dutch cable sector is different than anywere else because of having 98% homes passed and 95% of the people subscribed to analogue and/or digital tv. Knowing this, national regulators will be wiser than to "Think Different". They will auto-conform without ever considering a different option.

Injure the quality of rules and regulations
When conformance becomes the rule, regulators will loose the appetite to properly research their national markets and identify proper actions in line with the national situation. This will make both the Commission and the NRA complacent. The Commission will argue that it's always right because everybody follows it, through ETMA of course. The NRA's will go grow complacent by just copying ETMA.

Lack of demand for ETMA
There is no clear demand for establishing an ETMA with 120 people. These people are going to do stuff already done in the Commission and at eg. ENISA at the moment. Chances are that it will be all new people, who will duplicate the Commission's work. 120 people doing nothing will want to do something and that will lead to more meddling, bright ideas, windows dressing, useless reports and infighting.

A solution is not easy, but would need to consist of these elements:
- Quick dispute resoluton at the ECJ (6 months). This will make the ECJ relevant and remove time as a weapon from the EC.
- Strengthening of the ERG. If a majority of the ERG agrees with the Commission, than the Commission must be right and the other way round. It's hard for any party to broker a deal with 14 nations to get a favorable ERG ruling.
- Strengthening ENISA to tackle security problems, where they are. The problem is not in the network and the cause is not the telco. So establishing a CTO at ETMA will not help.
- Accessibillity and 112 emergency are already done at the Commission. They are not purely problems of the IT sector and could be handled through normal channels of the Commission.
- Cross Border problems should be dealt with by a proposal of the Commission and a decision by the Member states and not by ETMA

In the coming days I will work through the papers more. I hope to have a look at what a provider of electronic communications networks and services is, Net Neutrality and functional separation.

Update November 21st 2007: For a moment I thought I had misjudged the Commission and that ETMA would actually have something real to say. I thought the 27 regulators would have full voting power and that the Commission would be subject to the opinion of the Board of Regulators. But I've read the regulation and it turns out the Board of Regulators can only issue a non-binding opinion, much like the ERG now. So they are toothless fluffy paper tigers, no chance that he Commission might hurt themselves on the Board of Regulators. Oh well, it's good to know the world is still a sphere and pigs don't fly.


John Middleton said...

fascinating analysis and I agree completely - total power grab by the Commission, centralisation of decision-making which is unnecessary and will only complicate matters.
Look forward to reading some more of your analysis of the proposals...

John Middleton said...

I think the adminstrative structure of the thing is quite worrying as well. The 'Admin Board' basically is the thing in control, setting the work programme, budget etc. It has six appointees from the Council and six from the Commission - how much more political can you get? One of the Commission's main drives is to get political independence of national regulators - but the Authority itself will be the most political beast of all! Crazy!

Anonymous said...

National Telecom Regulators do not have enough powers to tackle such issue as EU-wide telecom market. EU agency is the way forward, no matter how hard you try advocating the control within national bureaucracies. Administration on EU level is 27 times more efficient than national administration.