Giovanna De Minico » 9."The Asymmetrical Regulation on Telecommunications (2002 EC Directives)". (Lezione tenuta all'Università di Leicester 2007)

EU regulatory framework

Framework Directive (2002/21): introduces a model of asymmetrical rules.

a) What is a defeat of market?

b) What does “asymmetrical regulation” mean?

c) What is the final aim of the asymmetrical regulation?

d) In what is it new?

Go on

Examples of defeats from Framework Directive:

Art. 9: “Obligation of transparency”
1. National regulatory authorities may… impose obligations for transparency in relation to interconnection and/or access, requiring operators to make public specified information, such as accounting information, technical specifications, network characteristics, terms and conditions for supply and use, and prices.
2. In particular where an operator has obligations of non-discrimination, national regulatory authorities may require that operator to publish a reference offer, which shall be sufficiently unbundled to ensure that undertakings are not required to pay for facilities which are not necessary for the service requested, giving a description of the relevant offerings broken down into components according to market needs, and the associated terms and conditions including prices. …..

Art.10: “Obligation of non-discrimination”

1. A national regulatory authority may, in accordance with the provisions of Article 8, impose obligations of non-discrimination, in relation to interconnection and/or access.
2. Obligations of non-discrimination shall ensure, in particular, that the operator applies equivalent conditions in equivalent circumstances to other undertakings providing equivalent services, and provides services and information to others under the same conditions and of the same quality as it provides for its own services, or those of it subsidiaries or partners.

About asymmetrical regulation

What does “asymmetrical regulation” mean:

Concept: it regulates substantially different situations in different ways (principle of substantial equality).

How? It creates a unilateral duty for the incumbent in favour of new entries.

End objective: it creates conditions of competitive market similar to those which a competitive market would produce on its own.

Examples from Access Direttive (2002/19): art.12. “Obligations of access to, and use of, specific network facilities”
“A national regulatory authority may, in accordance with the provisions of Article 8, impose obligations on operators to meet reasonable requests for access to, and use of, specific network elements and associated facilities, inter alia in situations where the national regulatory authority considers that denial of access or unreasonable terms and conditions having a similar effect would hinder the emergence of a sustainable competitive market at the retail level, or would not be in the end-user’s interest.
…(b) to negotiate in good faith with undertakings requesting access”

Assessment on “fictio iuris”

In short, the asymmetrical regulation is able to create a fictio iuris:

In other words, it means to allow new entrants equal access to the ex-monopolist network inputs at the same conditions given to the ex monopolist’s own companies.
So we must ask: Is equal access to indipendent and non indipendent clients equivalent to the assignment of the network to a public indipendent body, extraneous to negotiations on the downstream market?

Evidence:

The answer to our question is: NO
The reasons for this answer:
a) The existence of a vertically integrated operator, who exploits the synergies between integrated network and the provision of services.
b) Evidence of failure: abuse of power (art. 82 TCE) on the wholesale market.

Definition of an Asymmetrical rule

End objective:
An asymmetrical rule must create the conditions of competitive market similar to those which a competitive market would produce on its own.

1. “Creating a pre-condition of the competitive market rather than a substituting regulation for competition… Necessary when antitrust cannot successfully maintain competitive market place” (S. Breyer).
2. From C.R. Sunstein: “In such cases, market are the problems, not the solution. One goal of the advocates of antisubordination is to restructure market arrangements so as it put disadvantaged groups on a plane of equality – not by helping them to be “like” members of advantaged group, but by changing the criteria themselves. …Here the conventional test of discrimination law – is the member of the disadvantaged itself group “similarly situated” to the member of the advantaged group? – reflects inequality, since it takes the norms and practises of the advantaged group as the baseline against which to measure inequality” (After the rights revolution, Harvard, 1990, p. 64).
3. Reduction of the regulatory burden allowing the only rules necessary to a competitive market (on “lighter regulation” see: European Commission, COM (2007) 334 final).

Legally relation between Asymmetrical Regulation (A.R.) and Antitrust Law (Ant.)

A.R. =Rules ex ante in order to prevent the incumbent’s dominance degenerating into an abuse of power.

Ant.= Rules ex post. They only act when abuse of the dominant position has taken place in order to allow the market to return to efficiency (see, G. De Minico, 2008)

A.R.= Precautional rules in order to prevent that dominance could be involved in abuse. (on this, for a good synthesis cf. A.de Streel)

Ant.= Repressive rules in order to punish the incumbent that has committed an abuse.

A.R.= Increases the level of competition.

Ant.= Keeps the status quo of the market.

In facto relation between A. R. v. Ant.

How did the asymmetrical rules behave in facto ?

1. In facto, A.R. has failed as a pre-emptive discipline of the antitrust law.

2. It has not been ex ante.

3. It has been unable to improve the level of competition.

4. It has turned into an iper-regulation.

5. See: Autorità Garante della Concorrenza e del Mercato, Relazione sull’attività svolta al 2004, Roma, 2005, pp. 14 ss.

Bibliography:

The letterature on this iusse is rather vast. For some early collections see: L J H F Garzaniti, Telecommunications, Broadcasting and the Internet: EU competition Law and regulation, Sweet & Maxwell, 2 nd, 2003; P Nihoul and P Rodford, Eu electronic communications law, Oxford University Press, 2004; I Walden and J Angel, Telecommunications law and regulation, Oxford University Press, 2005; K Jones and F Carlin, ‘EU competition law in the electronic communications sector’, in J. Scherer Baker &McKenzie LLP and Frankfurt (eds.), Telecommunication laws in Europe,Tottel, 5 th, 2005.

For a wider concept of asymmetrical discipline, see: T Prosser, The limits of competition law. Markets and public services, Oxford University Press, 2005.
On this theme, see also: D Gerardin and M Kerf, Controlling market power in telecommunications: striking the right balance between antitrust and sector specific rules and institutions, Oxford University Press, 2003.

Willing, see: G. De Minico, The 2002 EC Directives Telecommunications, in E.B.L.R., 3, 2000.