How near is telecoms in Europe to a 'true' digital single market?

The legal landscape of European telecommunications law has remained lively since the European Electronic Communications Code (EECC) entered into force on 21 December 2020 and consolidated the existing regulatory framework of five individual directives into one comprehensive directive with 127 articles and 325 explanatory recitals.

In February 2024, Thierry Breton, the former EU commissioner for internal markets, released a white paper, “How to master Europe’s digital infrastructure needs?”, analysing the challenges Europe faces in the rollout of future connectivity networks. The paper presents scenarios to attract investments, foster innovation, increase security and achieve a "true" digital single market. Breton’s newly appointed successor Henna Virkkunen has been tasked by Ursula von der Leyen to continue his work.

Regulatory fragmentation

A central point of the paper is that the achievement of these goals – namely, attracting investment and creating a true digital single market – is hindered by the fragmentation of the existing regulatory framework for telecommunications.

The analysis found that up to €200 billion of investment is required to achieve the EU's gigabit connectivity and 5G targets and that private investment is needed to mobilise this enormous amount. However, private investors will only be incentivised to invest in corresponding infrastructure projects, if these investments can be justified by the expectation of sufficiently high profit margins.

Currently, the European electronic communications sector does not meet these expectations; in fact, the opposite: there is a lack of market confidence in the potential for sustainable long-term growth in revenues. One of the reasons for this is the sector’s fragmentation and hence the lack of market participants with sufficient scale.

Investment thresholds

The white paper explains that the largest investors have minimum thresholds for their investments because of their limited capacity to manage and monitor their portfolio, which means there are less financiers competing for smaller investments than for larger ones, resulting in less favourable conditions.

It states that "the relative cost of administering large investments is lower than for smaller ones thus investors can offer better conditions (i.e. lower expected return). Increasing the size of investments projects can reduce the financing costs and make projects feasible that would otherwise not be financially viable.

"One reason for the smaller size of European investment opportunities, compared to the US, is the fragmented nature of the European telco markets. The integration of national markets could be an opportunity to tap into a larger potential pool of investors and financing conditions for electronic communications investments."

Diverging national rules?

The market’s fragmentation is in part due to diverging national rules imposing obligations, as regards, for instance, network security, lawful interception, data retention or localisation of security operations centres. As a result, providers – with a few exceptions, such as Deutsche Telekom or Vodafone – are not operating networks in more than one Member State and cannot benefit from respective scaling effects and, hence, increase their profitability to a degree at which large-scale financiers would be interested.

The analysis seems surprising, in light of the EU legislative effort to unify the telecommunications market, namely the EECC. Under the current framework, key terms of European telecommunications law are aligned. For instance, the basic description of what is an "electronic communications service" does not materially differ between large European Member States, such as Germany, France, Spain, Italy and Belgium, and even the separated UK.

What is an 'electronic communications service'?

The EECC states that: "an 'electronic communications service’ means a service normally provided for remuneration via electronic communications networks, which encompasses, with the exception of services providing, or exercising editorial control over, content transmitted using electronic communications networks and services".

These are for three types of services: internet access service, interpersonal communications service; and services consisting wholly or mainly in the conveyance of signals such as transmission services used for the provision of machine-to-machine services and for broadcasting.

The EECC has not completed the harmonisation of the legal terminology that is essential for the applicability of the legal obligations. This applies in particular to the term "publicly available": the full regime only applies if a service is publicly available. However, the EECC does not provide a respective definition; therefore, the different Member States have created their own definitions and respective interpretations.

'Public' and 'private' definitions

The respective differences become apparent, when comparing the definitions used by the Member States along with the UK, as its telecommunications laws are still mainly based on European law, though the UK is no longer an EU Member State.

Belgium

There is no definition of the term “publicly available” included in the Belgian Electronic Communication Act. However, the Belgian Institute for Postal Services and Telecommunications has provided some guidance on when it considers a network to be “public” or when it considers an electronic communications service to be “publicly available”. This will be the case when such network or service is openly offered on the market and not only to a predetermined group of users (that is, a closed user group). 

France

The French postal and electronic communications code does not expressly define the term "publicly available" as set out in the EECC, but provides for a definition of networks open to the public and includes this notion in the definition of operator: “any natural or legal person operating an electronic communications network open to the public or providing an electronic communications service to the public.”

In other words, the natural or legal person that does not provide a network open to the public or an electronic communications service to the public is not an operator and should not be subject to the regime and obligations applicable to them.

This position is echoed by Arcep, the French supervisory authority, which states, in a practical guidance paper that, when a company that has a private network that is only aimed for its own use and is addressed to a closed group of users, it will not be considered as an operator.

Arcep specifies that a private network is a local network that meets the specific connectivity needs of some companies and organisations; for example, in the industrial, mobility or infrastructure sectors. These networks are not intended to be used by the public (but only a closed and limited number of individuals). 

Germany

"Publicly available telecommunications services" means telecommunications services available to an undefined group of (natural or legal) persons. “Public”, therefore, means that the service is not only available to a limited group of people. No definition exists for “limited group of people”. The opinion of the Federal Network Agency, the supervisory authority for the telecommunications market in Germany, is that a service is not provided only for a limited group of people, if the respective provider would offer the service to any paying subscriber. For the establishment of a limited group, further additional associative elements must be added, such as if the services are provided within a group of companies. (Incidentally, in Germany, the legislator uses the term "telecommunications services" instead of "electronic communications services" for reasons of legal history, and the terms are to be understood synonymously and do not lead to differing interpretations.)

Italy

The Italian Electronic Communications Code does not expressly define the term "publicly available", but recognises electronic communication services for “private use”. This means network installation activity or, also jointly, the operation of electronic communication networks or services that are carried out either in the exclusive interest of the holder of a general authorisation for the provision of electronic communication service and for traffic between terminals of such holder or for the private use of a beneficiary of the electronic communication activity. 

Spain

The Spanish Electronic Communications Act (SECA) does not expressly define the term "publicly available" as set out in the EECC, instead using two equivalent terms to refer to this definition (that is, "disponible al público" and "disponible para el público"). While no specific definition, context or guidance is provided as to specific notion at stake, an interpretation that considers the intent and purpose of the SECA would reasonably define "publicly available" as those electronic communications services that are not self-provided or limited to the communication within one or several privately-owned premises if they are owned by the same entity. 

United Kingdom

There is no formal definition or guidance on what constitutes a "publicly available" service. However, when the Communications Act was introduced in 2003, Oftel, Ofcom's predecessor, stated that a "publicly available service is one that is available to anyone who is both willing to pay for it and to abide by the applicable terms and conditions. The provider will not have imposed an upper limit on the class of potential customers other than those that arise from technical or capacity constraints". It is, therefore, generally understood that a landlord does not provide a publicly available service to its tenants because use of the service is not open to everyone and is dependent on a prior relationship between the parties. Conversely, a service available to members of the public may only have one customer because others have not chosen to take the service up. However, other customers would not be prevented from taking up the service.

One upshot of this difference of definitions would be that a telecommunications service that may be subject to only a few obligations in the UK may be faced with a wide range of obligations in Germany.

Osborne Clarke comment

The question of whether former EU commissioner Breton’s initiative will lead to a unified market in the near future and end the fragmentation cannot be answered yet. Even though the initiative has received positive responses, important voices exist that emphasise the advantages of the current regulation.

For instance, private associations like Bitkom, the industry association for the German information and telecommunications sector, encourage and support the white paper’s aim to remove national barriers to encourage operators to launch cross-border services.

However, Member States such as Germany emphasise that the current regulatory regime has brought considerable benefits for competitors and consumers and that the benefits, therefore, must be safeguarded in the future.

Consequently, companies in the electronic telecommunications market that intend to operate throughout the EU Member States cannot rely yet on a unified European telecommunications market. In order to provide services EU-wide, they will have to align their service offering closely to the respective telecommunications law of the Member States in which they want to operate.