Liberalisation of Telecommunications Industry in Berckistan - Essay Example

The Government of Berckistan has decided to liberalise its telecommunications industry. Currently the incumbent operator, BerckTel, is part of the Post Office and has the oversight of any regulatory issues, notably in spectrum management and international coordination. The Government wants to sell BerckTel to international investors and intends to provide a framework for competition. You are asked to draft a paper outlining the legal issues that may arise on liberalisation and explaining what regulatory structure, if any, should be in place for the telecommunications industry." 1. Introduction The expansion of the recent financial crisis has caused severe pressures in economies worldwide. The reform of existing market structure would be an effective solution for the limitation of the effects of recession in the international market. The regulatory framework developed by national and international authorities in regard to the freedom of entrepreneurial activities is not standardized. In most countries, the close control of the market is regarded as a more effective strategy against the global recession. However, under certain terms, radical changes in the existing market practices are required aiming to increase the power of local economy. In Berckistan, the local government has decided that the liberalization of the country’s telecommunications industry is necessary in order for the efficiency of the local market to be increased. The response of the sector’s competitors, especially of the BerckTel – the industry’s major operator – need to be taken into consideration. The policies required for the establishment of the relevant plan are examined in this paper. Emphasis is given on the regulatory issues of the particular initiative taken into consideration the fact that the country is a member of the European Union. The legislation and the case law related to this activity will be examined; reference will be made both to the national and the European Union law and legislation. It is proved that the chances for success of the specific project are high. However, it is necessary that measures are taken in advance for the limitation of resistance related to the reform of existing market structure. Any potential dispute would be addressed using the relevant national and European Union legal framework. 2. Liberalisation of telecommunications industry in Berckistan – regulatory framework The understanding of the term liberalization is necessary in order to identify and evaluate the aspects of the particular activity. In accordance with a definition provided in Digicel (St Lucia) Ltd & Ors v Cable & Wireless Plc & Ors [2010] liberalization is ‘the process of opening up the market to competition’.1 The liberalization of telecommunications industry in Berckistan should be based on an appropriately customized regulatory framework. The rules of the European Union should be taken into consideration – at least, those ratified by the country. On the other hand, the National law would be also used in order to ensure fairness in competition across the country. For this reason, current section has been divided into three sub-sections: in the first section, the European and the National Law related to competition – directly or indirectly – in the telecommunications industry is presented. At the next level, a series of issues that tend to appear in such cases are highlighted – using the European and the local case law. Finally, a potential route of action is suggested taking into consideration the issues discusses in the first and the second sub-sections. 2.1 Competition law in European Union and UK The control of competition across the European Union is developed through a series of legislative texts established by the European Union legislators. The European Union law is of primary importance for the successful completion of such plans within the member states. However, it is necessary that the relevant European Union laws are ratified by the member states; otherwise, there is no obligation of the National Courts to apply these legal orders on relevant cases. Two of the key legal texts for the development of entrepreneurial activities in the member states are the following ones:’ a) the article 49 (ex 43) – freedom of establishment and b) the article 56 (ex 49) – freedom to provide services - of the Treaty of Amsterdam’ (European Commission, 2010). Apart from these general rules, other legal orders have been established in the context of the European Union law in regard to the development of competition among member states.2 Such legal rules are indicative the following ones: the European Communities (Electronic Communications Networks and Services)(Access) Regulations S.I. No. 305/2003 and the Telecommunications (License Modification) (Paging Operator Licenses) Regulations 2000 No. 1715. Particular attention should be also paid on the Article 81(1) EC (where the commercial plans, which are prohibited in the context of the common market, are described), the Regulation No.1/2003 (where the meaning of compatibility between the practices of the National Courts and the European Union rules is explained) and the article 3 of the above Regulation (1/2003) which describes the aspects of the relationship between the article 81(1) EC and the National Laws – it is made clear that the decisions of National Courts may not set restrictions on the application of article 81(1), i.e. their decisions should be aligned with the provisions of article 81(1) EC3. On the other hand, particular rules have been established by the European Legislative bodies in regard to the liberalization of services in the telecommunications industry; these rules should be respected by the National Courts – again under the influence of the principle 81(1) EC.4 Such rules are the following ones: a) the Commission Directive 90/388/EEC (1990) - competition in the markets for telecommunications services, as amended by Commission Directive 96/19/EC (1996) and b) the Directive 1995/5/EC - radio equipment and telecommunications terminal equipment.5 In the context of the National law, the liberalization of the country’s telecommunications industry should be based on the Communications Act 2003 (c. 21), the Competition Act 1998 and the Enterprise Act 2002 (c. 40). The National courts and the Court of Justice of the European Communities have established a specific framework of action in regard to the enhancement of competition within various industries. The case law on which this framework is based is presented (even indicatively) in the next section – reference is made to a series of critical decisions regarding competition across European Union. 2.2 Issues that need to be addressed in regard to the internal market – case law In case that an international investor shows interest in undertaking the BerckTel, then the fees imposed in the authorization part of the specific procedure need to be carefully reviewed. In accordance with the article 6 and 11 of the Directive 97/13 the fees imposed by member states on the authorization procedure – reference is made to undertakings developed within member states – have’ to cover only to the administrative costs related to the specific procedure’6 and cannot refer to other costs which can potentially result from the specific initiative. On the other hand, member states have the power ‘to extend the terms of authorization’7 in case that this practice is considered as necessary for the successful completion of the relevant procedure. On the other hand, the local authorities may intervene in the procedure – especially in case that a violation of the national law is identified. However, their intervention should be developed in accordance with specific rules being aligned with the principles of the European Union law as it is applied on the particular case. It is assumed that the validity of measures suggested by the national authorities cannot be doubted if they are within the borders set by the European and the National law. An indicative example is presented in the case of Carphone Warehouse Group Plc v British Sky Broadcasting Ltd [2009] where the Court held that the establishment of price controls by the Office of Communication was within the powers of the specific authority8. Particular attention should be paid on the level of concentration established in the national market – the market of Berckistan – as a result of the undertaking of BerckTel by international investors who may also wish to invest on other firms on the particular industry. The criterion on which the undertaking of BerckTel by international investors should be based is described in the ‘Article 2(2) of Council Regulation (EEC) No 4064/89 of 21 December 1989’9. In accordance with the above article, the level of concentration acceptable in the market of a member state would be such that could not adversely affect the competition in the sector involved. At the same time, the prohibition of ‘the abuse of a dominant position within the meaning of Article 86 of the [EC] Treaty’10 is absolute – meaning that ‘no prior decision to that effect is required’.11 From a similar point of view, the potential establishment of dominant position by a firm in the country’s telecommunications industry should be examined. Such dominant position could be established by acquiring the BerckTel (which is the country’s major competitor) when there is already control on other firms of the particular industry – either directly or indirectly. The specific issue has been examined in the case France Telecom v Commission (Competition) [2007]. In the above case the Court held that the establishment of dominant position by a firm should be examined in regard to the level of competition created in a specific market in the context of an undertaking.12 It should be noted that the proceedings of the Courts in regard to the hearing of such cases are based on the common market needs. This means that the Court is willing to support the parties towards the achievement of a fair trial. This trend has been made clear in the case of VIP Communications Ltd v Office of Communications & Anor [2009]. In the above case, the Court had the discretion to allow or not the amendments on the initial application of VIP Communications – in accordance with the decision of the Court in another, similar, case. The Court accepted the relevant request of VIP Communications Ltd on the basis that ‘any opposition to that amendment should be dealt with in conjunction with the application to reject the appeal under Rule 10’13. The importance of the case in economic terms has been also taken into consideration by the Court to develop this decision. The government of the country under examination has to review the conditions of the local telecommunications industry and submit its proposals in regard to the framework of the liberalization process, which should be used for the liberalization of the country’s telecommunications industry. In any case, the decision of the government may be reviewed by the relevant authorities – as of the alignment of the decision with the existing National and European Law. Such issue has appeared in the case of Tesco Plc v Competition Commission (Judgment and Annexes) [2009] where the right of the Office of Fair Trade to ask the Commission to check the practices of a specific business (based on the article 131(1) of the Enterprise Act 2002) was set under examination. The power of the European Commission to intervene in such cases can be also established in the article 3(1) EC where it is noted that ‘the activities of the Community are to include a system ensuring that competition in the internal market is not distorted’.14 In the case that more markets are affected then the decision of the Commission on a competition-related case has to be developed ‘by reference to the conditions on each of the markets liable to be affected by the merger notified’.15 Moreover, not all claims made in regard to the limitation of competition need to necessarily refer to the harm of consumers. In fact, in the case of Bookmakers Afternoon Greyhound Services Ltd & Ors v Amalgamated Racing Ltd & Ors [2008] the Court held that ‘agreements which restrict competition might or might not result in harm to consumers’.16 Another aspect of the unfair competition within member states is the fact that ‘the parties that suffered damages because of the infringement of EC Competition rules may ask for fair compensation’.17 In this context, the economic effects of wrong decisions in regard to Competition within member states can vary. The limitations set on competition through the EU rules mentioned above should not be regarded as restrictive to the development of business activities across EU. In fact, the enforcement of control on competition across EU has led to the increase of competitiveness of its market within the international community (Papadopoulos, 2010, p.265). Through a similar point of view, Sauter (1997) notes that the EU competition rules reflect the integration of the European common market (Sauter, 1997, p.26). 2.3 Framework of the liberalization process Particular attention should be paid on the effects of the liberalization process on the local market. In accordance with Glader (2006) the decrease of competition within a country can lead to ‘higher prices for inferior products and services’ (Glader, 2006, p.9). On the other hand, the EU competition rules are based on a series of factors; thus interpreting these rules by referring only to economic criteria would lead to false assumptions (Pozdnakova, 2008, p.8). However, it is noted by Monti (2007) that the economic effects of commercial activities are likely to be taken into consideration by the Courts. This trend is reflected through the following fact: Courts are expected to avoid ‘challenging agreements that yield efficiencies’ (Monti, 2007, p.47). In any case, it is suggested by Nikolinakos (2006) that full liberalization cannot be achieved unless measures are taken in advance for the enforcement of the rules governing the competition (Nikolinakos, 2006, p.56). Another point that should be taken into consideration when developing the framework of liberalization of the telecommunications industry in the specific country has been the fact that a series of changes occurred in the local telecommunication industry from 1980 onwards.18 In accordance with the issues discussed above, the liberalization process of the telecommunications industry in Berckistan should be developed in the following phases: a) in the first phase, the conditions of the local market and the European market (referring to similar industries) should be reviewed by the local government, b) at the next level, a regulatory framework should be developed setting the terms of the liberalization of the country’s telecommunications industry. The following issues should be taken into consideration at this point: b1) the rules included in this framework should be aligned with the relevant EU law (as explained above), b2) the interests of all parties – businesses and consumers – should be addressed, b3) measures should be included for the enforcement of these rules, b4) the decrease of prices in the particular industry should be a criterion when developing the relevant rules; however, the specific provisions should not be based only on economic criteria; c) in the third phase of the plan, the discussion with the market’s representatives would help to make necessary amendments to the suggested plan of action; d) in each last phase, the plan should be developed – under the monitoring of local authorities. 3. Conclusion The freedom of governments worldwide to develop any plan required for the support of the national economy cannot be doubted or limited. However, in the context of the European Union a different mode of legislative activity operates. The measures taken by the member states in regard to one or more industrial or social sectors need to be aligned with the relevant provisions of the European Union Law. This dependency is not necessarily negative. In fact, under certain terms, the intervention of the European Union authorities can ensure the success of plans established in the markets of the member states. The power of the local governments to administer the national market cannot be restricted. However, all such decisions are set under the examination of the EU authorities – mostly if the performance of the markets of other member states is affected. Especially for the EC law it is noted that the specific part of the EU law is ‘of broad application’ (Landolt, 2006, p.1). This means that its enforcement across member states cannot be easily controlled as it is regarded as an indispensable part of the common market; this is a fact that should be taken into consideration by the government in Berckistan when proceeding to the liberalization of the country’s telecommunications industry. References/ Bibliography Buckley, J. (2003) Telecommunications regulation. IET Cahill, D., Cooke, J., Wils, W. (2004) The modernisation of EU competition law enforcement in the European Union: FIDE 2004 national reports. Cambridge University Press Dannecker, G., Jansen, O. (2004) Competition law sanctioning in the European Union: the EU-law influence on the national law system of sanctions in the European area. Kluwer Law International Goodman, W. (2006) Telecommunications policy-making in the European Union. Edward Elgar Publishing Koenig, C., Bartosch, A. (2009) EC competition and telecommunications law. Kluwer Law International Kokkoris, I. Lianos, I. (2009) The reform of EC competition law: new challenges. Kluwer Law International Landolt, P. (2006) Modernised EC competition law in international arbitration. Kluwer Law International Larouche, P. (2000) Competition law and regulation in European telecommunications. Hart Publishing Mollers, T., Heinermann, A. (2007) The enforcement of competition law in Europe. Cambridge University Press Monti, G. (2007) EC competition law. Cambridge University Press Motta, M. (2004) Competition policy: theory and practice. Cambridge University Press Nikolinakos, N. (2006) EU competition law and regulation in the converging telecommunications, media and IT sectors. Kluwer Law International Papadopoulos, A. (2010) The International Dimension of EU Competition Law and Policy. Cambridge University Press Pozdnakova, A. (2008) Liner shipping and EU competition law. Kluwer Law International Reich, N. (2005) Understanding EU law: objectives, principles and methods of community law. Intersentia Sauter, W. (1997) Competition law and industrial policy in the EU. Oxford University Press Schenk, T. (2007) EU Competition Law and Policy. GRIN Verlag Schwarz, T., Satola, D. (2000) Telecommunications legislation in transitional and developing economies. World Bank Publications Schwarz, T., Satola, D. (2000) Telecommunications legislation in transitional and developing economies. World Bank Publications The EU Single Market (2010) European Commission, available from < http://ec.europa.eu/internal_market/services/principles_en.htm> Van Bael, I. (2005) Competition law of the European Community. Kluwer Law International Legislation Broadcasting Act 1990 (c. 42) Communications Act 2003 (c. 21) Competition Act 1998 (c. 41) Enterprise Act 2002 (c. 40) European Communities (Electronic Communications Networks and Services)(Access) Regulations S.I. No. 305/2003 The Telecommunications (License Modification) (Paging Operator Licenses) Regulations 2000 No. 1715 The Telecommunications (Interconnection) Regulations 1997 No. 2931 The Telecommunications (Voice Telephony) Regulations 1997 No. 1886 Case law [United Kingdom House of Lords, United Kingdom Competition Appeals Tribune (CAT), England and Wales High Court, Court of Justice of the European Communities] Atlantic Container Line & Ors v Commission (Competition) [2003] EUECJ T-191/98 (30 September 2003) Bookmakers Afternoon Greyhound Services Ltd & Ors v Amalgamated Racing Ltd & Ors [2008] EWHC 1978 (Ch) (08 August 2008) British Telecommunications Plc v Office of Communications [2004] CAT 23 (9 December 2004) Carphone Warehouse Group Plc v British Sky Broadcasting Ltd [2009] CAT 30 (23 November 2009) Deutsche Telekom v Commission (Competition) [2010] EUECJ C-280/08 (14 October 2010) Digicel (St Lucia) Ltd & Ors v Cable & Wireless Plc & Ors [2010] EWHC 774 (Ch) (15 April 2010) Floe Telecom Ltd v Office of Communications [2006] CAT 17 (31 August 2006) France Telecom v Commission (Competition) [2007] EUECJ T-340/03 (30 January 2007) General Electric v Commission (Competition) [2005] EUECJ T-210/01 (14 December 2005) GlaxoSmithKline Services v Commission (Competition) [2009] EUECJ C-501/06_O (30 June 2009) Office of Fair Trading v W. Austin & Sons & Ors [2005] CAT 25 (6 July 2005) Qualcomm v Commission (Competition) [2009] EUECJ T-48/04 (19 June 2009) Sempra Metals Ltd v. Revenue & Anor [2007] UKHL 34 (18 July 2007) TeliaSonera (Competition) [2010] EUECJ C-52/09 (02 September 2010) Telecom Italia (Freedom to provide services) [2008] EUECJ C-296/06 (21 February 2008) Tesco Plc v Competition Commission (Judgment and Annexes) [2009] CAT 6 (04 March 2009) T-Mobile Netherlands & Ors (Competition) [2009] EUECJ C-8/08_O (19 February 2009) VIP Communications Ltd v Office Of Communications & Anor [2009] CAT 23 (17 July 2009) Read More