Nick Pimlott, solicitor in the Communications Group at Field Fisher Waterhouse LLP, examines what’s in store for 2007 on the regulatory front.
This year promises yet another packed regulatory agenda for the mobile sector across Europe. The seemingly endless stream of initiatives from both the European Commission and national regulators presents both opportunities and threats for established operators who are still attempting to turn the investments made in 3G into reliable revenue streams. Equally, opportunities for new entry with innovative applications and services are looking stronger than at any time since the 3G auctions of the early 2000s.
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The key themes for 2007 will very much build on the foundations that have been laid over recent years. Spectrum liberalisation and trading will push ahead across the EU with the UK, which has pioneered these developments, leading the way. Consumer protection will also be prominent with the expected adoption of the EU Roaming Regulation, along with initiatives to bring SMS termination and 3G voice calls within the net of call termination regulation. Security is also an issue that is never far from the surface. The mobile industry along with the communications sector generally, will have to contend with the implementation of the Data Retention Directive adopted in March 2006 and which is due to be implemented into national legislation by 15 September 2007. The mobile sector also needs to keep abreast of developments in audio-visual content regulation as the revised Television Without Frontiers Directive makes it way through the European legislative process.
Liberalisation
Spectrum liberalisation has been one of the key issues in mobile regulation for a number of years. At its heart is the simple proposition that markets, rather than regulators, are better placed to decide what the most efficient use of the spectrum is. However implementing liberalisation poses significant challenges. These are both technical – ensuring that liberalisation does not create unacceptable degrees of interference or disputes between users – and economic – balancing the benefits of liberalisation against the interests and expectations of those operators and equipment manufacturers who have made large investments under the old regime. There are also legal obstacles – some bands are allocated either by international agreement or by the EC to particular technologies and services.
Key developments in spectrum liberalisation in 2007 will be:
• Major consultations by Ofcom and the European Commission on what to do with the spectrum released as part of the switchover to digital television between 2008 and 2012 (the “Digital Dividend”). In the UK digital switchover is expected to release 112 MHz of spectrum in the so-called “sweetspot” between 200 MHz and 1 GHz. There are a large number of potential uses of this spectrum and Ofcom, in line with policy of liberalisation, is not proposing to choose between them but rather to release the spectrum by way of auction on a technology- and service-neutral basis. It has recently launched a consultation on how the spectrum should be packaged and on auction design with the first auctions anticipated in the second half of 2008. The European Commission, consistently with the proposals in its Review of the EU Regulatory Framework for Electronic Communications Networks and Services in June 2006, can be expected to adopt a similar approach.
• Further development of the notion of “spectrum usage rights” which Ofcom issued a consultation on in April 2006. One of the challenges of liberalising use of the spectrum is ensuring that interference environment is not materially impaired. Ofcom’s proposals for spectrum usage rights would seek to define permitted emission levels at frequency and geographic boundaries. Further technical work is needed to ensure that the proposals are robust and Ofcom does not propose to introduce this approach into existing licences when they are liberalised. It plans instead to trial spectrum usage rights in one of the forthcoming auctions of new spectrum, probably 1452 MHz- 1492 MHz or 2500 MHz – 2690 MHz.
• Liberalisation of 2G mobile licences may become a reality in 2007 enabling 2G mobile operators to use 3G technologies in the GSM spectrum. This has been held up by legal difficulties – the GSM Directive mandates GSM technology in the 900 MHz mobile spectrum, but moves are afoot to amend this. The difficult question of whether 2G operators should pay for these valuable additional rights and, if so, how, will also need to be confronted.
Consumer protection
On the consumer protection front the most important and controversial issue is the impending EU Roaming Regulation. This initiative to bring down international roaming charges, which appears to have become almost a personal crusade on the part of Commissioner Viviane Reding, is expected to become law in summer 2007. The proposed regulation, which was issued in July 2006, would link the wholesale charge that the visited network may make to the roaming customer’s home network to an EU-wide average of regulated mobile termination charges. The retail margin that the home operator of the roaming customer may charge is capped at 30%. EU Regulations are directly applicable in the Member States without the need for national implementing measures so the price caps could take effect as soon as the legislation is passed. National regulators will have a role to play in enforcement. Short of giving away roaming for free, it is not clear what the industry can do to stop this particular juggernaut.
2007 may be the year in which SMS termination gets caught in the regulatory net. The European Commission’s Review of the EU Regulatory Framework proposed including SMS in the market for mobile call termination and the French regulator has already imposed price caps on the wholesale SMS termination charges of Bouygues, SFR and Orange. Ofcom is proposing to follow suit with a review of the SMS termination market in the course of 2007/8.
For voice call termination, the key issue will be the inclusion of voice calls terminating on 3G networks in the price controls on termination. The question of whether operators should be entitled to recoup some of their 3G licence costs through the regulated termination charges is likely to be a hot potato. Ofcom’s proposal for a modest uplift for 3G licence costs has already met with the Commission’s disapproval.
Data retention
On a slightly different tack, both mobile and fixed operators will have to contend in 2007 with the implementation of the Data Retention Directive (2006/24/EC) which is due to be implemented into national law by 15 September. This Directive harmonises the rules for the retention of communications data across the EU in order to assist the fight against terrorism and organised crime. The Directive imposes specific obligations on communications providers to retain data call information data, and does not cover the contents of communications but “communications data” (ie the caller and called party, the time, date and duration of the call, the type of call, the user’s equipment, and in the case of mobile the location of the mobile equipment). The actual retention periods may be set by Member States but the Directive sets the lower and upper limits of six months and two years.
Content regulation
Finally, the Television Without Frontiers Directive is in the process of being “modernised”, which means amongst other things that it is being extended to cover services and technologies it did not previously cover. The proposal currently extends content regulation beyond linear television broadcasting to video-on-demand and other online television-like services irrespective of the delivery platform. This will no doubt mean that many mobile television services will fall within the regulatory net.
The proposal reserves the toughest regulation for so-called “linear” services which are those where the service provider decides on and sets the schedule of when programmes are transmitted. Non-linear services where the user decides when a programme is transmitted on the basis of a selection provided by the service provider are to be subject to a lower level of regulation.
The formal adoption of the legislation is expected to proceed in May 2007 with a national implementation expected within two years thereafter.