The EU regulatory framework for electronic communications: relevance and efficiency three years later

Communications & Strategies, Jan, 2006 by Audrey Baudrier

Abstract: In 2002 the European Union implemented a new regulatory framework to oversee electronic communications services and networks across Europe. Three years down the line, the multiplicity of players and the quasi-contractualisation of their relations through the Framework Directive have complicated European regulatory governance structure. Is the implementation of the new regulatory framework relevant and efficient? This paper uses transaction costs to try and find an answer to this question.

Key words: Regulatory governance structure, transaction costs and temporal specificity.

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Three years ago the European Union implemented a new regulatory framework to regulate electronic communications services and networks across Europe. However, the multiplicity of players and the quasi-contractualisation of their relations through the Framework Directive have complicated European regulatory governance structure. Is the implementation of the new regulatory framework relevant and efficient?

This question relates to the debate that followed the implementation of the new European regulatory framework for electronic communications adopted in 2002. This, in turn, points to the need for an economic analysis of the relevance and the efficiency of the regulatory governance structure. The answer to this question may determine the scope and objectives of the future review of the regulatory framework to be conducted by the European Commission in the course of 2006.

To understand what is at stake here, regulation needs to be considered in the context of the regulatory changes that have affected the organization of the electronic communications industry, an issue that is covered in the first section. The complexity of the regulatory governance structure raises the question of its relevance and its efficiency in the light of the concepts of transaction costs, which is covered in the second section. In the third part of the paper, our analysis shows how time matters and how the temporal specificity of the regulation device has an impact on the relevance and the efficiency of the European regulatory governance structure.

* Genesis and consequences of the European regulatory framework for electronic communications

The changes in the electronic communications sector over the last twenty years have been accompanied by a transformation in the regulatory coordination of these activities. The majority of EU member states have completely or partially privatised their national public operators and founded a national system of market regulation. These institutional changes, generally driven by the rapid evolution of electronic communications technologies and the structure of demand for services, led to an in-depth reorganization of public authorities. At the end of the liberalization process promoted by the European Commission at the end of the 1990s, the economic organization of the electronic communications industry shifted from a monopolistic sector to an open and regulated one, governed at the same time by competition and other socio-economic objectives. Thus, regulation has appeared as a new mode of public action.

Unlike the model of the Federal Communications Commission in the United States of America, there is no supranational institution to regulate electronic communications services and networks across Europe. The first feature of the European institutional environment lies in the complex interplay of institutions that are involved in the regulatory process. This process is deeply rooted in the subsidiarity principle (1), which makes it possible to take national market specificities into account. The second feature lies in the articulation between rules, which are mainly defined at the European level (treaty, directives and sector regulations)--and the actions of regulatory authorities--whose scope of activities is mainly national. The implementation of the regulatory framework is consequently entrusted to two different types of institutions: governments and national parliaments charged with transposing it into national legislations; and national regulatory authorities, whose mission is to implement the framework on a daily basis. This duality has led to the emergence of new forms of cooperation across Europe, without, however, exhausting the need for regulation functioning on a European level.

The European Regulators' Group in the field of the electronic communications networks and services (E.R.G.), which brings together the national regulatory authorities of 32 European countries (2) and the European Commission, is an example of the development of consultative bodies that have conferred a growing role to national regulatory authorities. The E.R.G. was set up as a forum aimed at advising and assisting the European Commission in the field of electronic communications. It enables cooperation between national regulators and the European Commission and, serves as a body for reflection, debate and advice on the implementation of the electronic communications framework as required by article 7(2) of the Framework Directive.