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Article 7a of the EU telecoms Framework Directive: first thoughts on second guessing a second guess

James Allen Partner, Consulting

Regulation

For several years, the European Commission has had a role in reviewing and approving the decisions of national regulatory authorities (NRAs) in relation to ex-ante regulation of electronic communications in the EU. This 'Article 7' process allowed the Commission to veto inappropriate market definitions or findings of SMP. If the Commission decided that the decisions were incorrect, then it could object via a 'serious doubts' letter, a sparingly used device that often caused the NRA to rethink and withdraw their decision even before an ultimate veto. Minor issues were not subject to serious doubts letters, but were commented upon by the Commission. These comments became a kind of policy guidance instrument, making clear to the NRAs how the Commission intended to handle some of the more-complex issues. Reading these comments became a form of 'Kremlinology' whereby the Commission's intentions could be gauged as they changed over time. Not all of the Commission's comments were very well made: a problem probably caused by a lack of resources, experience and time in the relevant small section of the Commission (it has only one month to respond). Nevertheless, the Article 7 process did not apply to the remedies (for example, the form of price control imposed), where the NRAs retained a good deal more autonomy.

In the December 2009 changes to the EU Directives, this process has been modified to allow the Commission to oversee the remedies imposed. In this 'Article 7a' process, the Commission may issue 'Phase 2' letters regarding its reasons that the draft decision (including remedies imposed) would create a barrier to the internal market or its serious doubts as to its compatibility with EU law. The new process is that the Body of European Regulators for Electronic Communications (BEREC) (a collegiate body of the NRAs with a project office based in Riga) investigates and if it agrees with the Commission, the NRA has two options: to modify or withdraw the measure to take the Commission's comments into account, or to keep its draft decision. Taking utmost account of the views of BEREC, the Commission can then either lift its reservations, or issue a recommendation requiring the NRA concerned to amend or withdraw the draft remedy.

Recent changes 

Two major changes have arisen. Firstly, the Commission has recently issued a significant number of 7a 'Phase 2' letters. Each of these requires BEREC to respond within six weeks. Insiders have told us that this is placing a significant burden on the NRAs (which provide the manpower to BEREC); given the restricted duration, the process requires NRA experts to make decisions (about whether they agree with the draft BEREC approach) within days, even if the relevant expert in that NRA is on leave or fully busy in their own country. Many NRAs do not have sufficient resources to contribute fully.

Secondly, BEREC has always agreed with the Commission – until last month, when it disagreed with half of the Commission's reasoning in a case related to mobile termination in France. This is probably a positive development overall, showing that the system of 'checks and balances' can work. Nevertheless, BEREC is making rapid decisions about issues that are important and have wider implications than the narrow cases involved, which could lead to bad precedents being set. Again, specialists are now required to interpret these decisions in order to work out the relevance for other cases. A process that would allow BEREC to reflect for slightly longer (once the relevant working group had developed an initial position) or re-examine major issues as part of its wider work programme would reduce the risk arising from the very short timescales.

For more information on these cases, the process or the implications, please contact James Allen, Partner.