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Scope of the Universal Service in Telecoms: 2008 EC report

25 September 2008
by eub2 -- last modified 25 September 2008

How can the EU ensure broadband Internet access for all Europeans? This is the main question raised in a European Commission report today. From 2003-2007 broadband use in the EU tripled to 36% of households. However, 7% of the EU's population are still not connected (30% in rural areas). There are striking gaps in the EU: 100% of the population is covered in Denmark, Luxembourg and Belgium, but more than 60% in Romania (75% in rural areas) do not have broadband access. Even in strong economies such as Italy and Germany, 18% and 12% respectively of the rural population are not covered. With broadband increasingly important in daily life, policy tools like radio spectrum management and mobile satellite services should accompany a broad debate about the universal service in telecoms – a safety net guaranteeing a minimum level of services, such as connection to a phone network and basic Internet access, filling basic needs that the market does not.


What is universal service?

Under the EU Telecoms rules, universal service is a safety net for achieving social inclusiveness. It ensures that basic communications services of good quality are always available at an affordable price, even if the market does not provide them under normal commercial conditions. This set of basic services, which are already available to the great majority of citizens and considered essential for participation in society, is called ‘universal service’.

The EU law defines universal service as "minimum set of services, of specified quality to which all end-users have access, at an affordable price in the light of national conditions, without distorting competition".

These rules are set by the Universal Service Directive of 2002 which is part of the EU Telecoms rules.

What is the scope of the current Universal Service Directive?

The current scope of universal service consists of (1) a connection to the public telephone network at a fixed location and (2) access to publicly available telephone services where the connection enables voice and data communications services - at narrowband speeds – with functional access to the Internet.

In addition, universal service provision covers services that are closely associated with basic telephony: phone directories and directory enquiry services, public payphones and special measures for disabled users and people with low income (such as making public pay telephones accessible to the disabled and providing directory enquiry services free of charge for blind people).

Does the current Universal Service Directive cover only fixed telephone services?

No, mobile or wireless technology can be also used as a means of meeting the universal service obligation. EU rules are not based on fixed telephony only. The principle of technological neutrality allows universal service providers to use any technology, whether wired or wireless, which is capable of delivering the service at a fixed location.

What are the Member States' obligations under the EU rules?

Member States must ensure that all citizens in their territory, regardless of geographical location, can avail themselves of the defined set of universal services. This means finding the most efficient means of guaranteeing that these universal service obligations are met. This can be done by giving all potential service providers an opportunity to fulfil them, but if the market fails to deliver the defined service an obligation to provide it may be imposed on providers.

So far, sixteen Member States have designated providers of universal service on the basis of the Directive, while Germany and Luxembourg have not because universal service is already provided by the market. The remaining nine countries have transitional arrangements.

How is the provision of universal service financed?

When universal service financing schemes are put in place, one group of customers is essentially subsidising another, by paying more for their services, since ensuring the provision of a defined minimum set of services to all consumers at an affordable price comes at a cost. There are two ways to finance universal service: Member States can finance any net costs of universal service obligations by using public funds (under transparent conditions) or by setting up a sector-specific fund to which all market players would have to contribute.

At present, universal service funds have been activated in five Member States, but compensation is paid out only in France, Italy and Romania.

Can broadband be financed under universal service schemes?

Broadband internet access does not currently fall under the scope of universal service and cannot therefore be financed under universal service schemes. Member States are, however, free to mandate a range of services extending beyond the minimum universal service obligations – such as high-speed internet access – but any undue burden associated with them must be borne by the Member States, for example through general taxation, and not by market players.

What else is the Commission doing to make sure that broadband is more widely available?

As outlined in the Commission's Communication “Bridging the Broadband Gap” of March 2006, several EU policy and financial instruments are available to Member States, including structural and rural funds, to bring broadband to less-developed areas (usually scarcely-populated, rural and remote areas), where the market is failing to invest in adequate infrastructure. For example, it is estimated that in 2007-13, the EU Structural Funds will invest around €15 billion (4.4 % of total spending) in support of information society projects. Over €2.3 billion will be spent on communications infrastructures, mainly broadband networks. The Rural Development Fund can also be used for this purpose.

Member States may use public funding (such as loans, grants to public and private partnerships, fiscal incentives to subscribers) to support broadband in under-served areas, as long as the schemes are well-justified and proportionate to remedy a well-defined market failure, as well as to meet cohesion objectives, and are in compliance with requirements for open access and technological neutrality and with competition, including State aid, rules. The Commission views the use of public funds for broadband deployment in these circumstances favourably, and has already approved 38 projects for compliance with State aid rules to date.

List of European Commission decisions on State aid to broadband (pdf)

In the telecoms reform proposals of November 2007, the Commission also proposes to review the management of radio spectrum in the EU Member States. This should facilitate the roll out of wireless services in Europe, especially of high speed wireless broadband connections which also reach less populated and rural areas.

Why does the Commission periodically review the scope of universal service?

Technologies and services evolve over time as do market developments and people's needs. The Universal Service Directive therefore requires the Commission to review the scope of universal service every 3 years in particular by examining whether mobile and/or broadband services should be included within the scope. The first review was conducted in 2005/06.

Under what conditions can new services, such as mobile telephony and broadband, be included as universal service?

The Universal Service Directive sets out considerations for including new services – such as mobile communications and broadband access (high–speed internet access) – within its scope. Such considerations include: whether a minority of consumers would be excluded from society by not being able to use a service available to and used by the majority; inclusion provides general benefit to all consumers that would not exist otherwise.

Addition of new services would only be warranted if the market fails to deliver a service that has become necessary for normal participation in society.

What are the main results of the review of the scope of universal service?

The review examines in particular mobile and broadband communications and finds that:

  • There is at present no need to extend universal service requirements to mobile communications. Analysis of the latest market data reaffirms the conclusion of the 2005/2006 review: competition on the mobile communications market in the EU already gives consumers widespread, affordable access to mobile communications, thanks largely to affordable pre-paid packages that offer low-income consumers a basic connection. European consumers can now buy a low usage basket of domestic mobile services (€ 13.69 monthly on average) for less than the cost of monthly rental of a fixed line (€14.90).
  • Coverage of broadband networks is very high in most Member States, being available, on average, to 90% of the EU population. Use of the internet is now approaching the level of a service used by the majority, with 49% of EU households using the internet, 36% of which are on broadband (corresponding to 20% of the total EU population). However, especially in rural areas, in Greece and in some of the newer Member States, broadband coverage continues to be underdeveloped, reaching partially only 10-20% of the population. This is why the Commission's report opens a new debate on how to achieve broadband for all Europeans by 2010.

Why does the Commission open a European debate on the future of universal service and what are the main questions put forward?

The increased take-up and importance of broadband in daily life raise questions about the universality of access to telecoms services (which will increasingly be provided over high-speed networks like broadband) in the future, especially in under-served areas. The Commission believes that in the EU key services such as telecommunications must be widely available to citizens and businesses at an affordable price and specified quality, regardless of their geographical location.

Today's Commission report therefore asks a series of questions in order to open a substantial debate to discuss the alternative approaches to universal service in the context of "broadband for all" in the course of 2009.

The key questions address the following issues, in short:

(1)To what extent can today’s competitive telecoms markets be considered sufficient to provide universal access, taking into account:

  • the fixed-to-mobile trend, which could indicate that the current universal service obligation limited to access at a fixed location is becoming less relevant;
  • that the market is delivering broadband to a rapidly rising proportion of the population, indicating that broadband might well follow the same track as mobile telephony in becoming near-universal through market forces over the medium term.

(2)If satisfactory access to the internet is seen progressively as meaning access beyond a narrowband connection, should we reconsider the interpretation of the existing rules, particularly concerning data rates "sufficient to permit functional internet access"? It should also be considered whether a more dynamic and technologically neutral interpretation of this wording requires changes in legislation.

(3)If broadband is seen increasingly as a universal service, would it be more appropriate to formally amend the scope to include broadband? Is the concept of functional internet access still a valid one?

(4)Is the current definition of the universal service obligation flexible or, conversely, too prescriptive, taking into account the different levels of market development across the EU-27?

These questions should be seen against the background of more detailed questions about the role and implementation of the universal service obligation in an overall “broadband for all” policy. This comprises, for example, the questions concerning common European criteria and implementing arrangements to minimise distortions of competition, and ensuring access to and easy use of electronic communications for vulnerable persons (such as disabled and older users) that would be comparable to the levels enjoyed by the majority of users.

The Commission will issue a Communication in the second half of 2009, summarising the debate. It may be followed up in 2010 with concrete proposals if there are needs to update the Universal Service Directive.

What has the Commission done to ensure that universal service obligations are met?

The Commission closely monitors the implementation of universal service obligations in all Member States. If a Member State does not respect EU rules, the European Commission can open an infringement proceeding against it to remedy the situation. This can eventually lead to the case being referred to the European Court of Justice (ECJ).

The Commission has already launched 17 infringement proceedings on issues related to universal service. 11 of those were initiated due to non-availability of comprehensive directory and directory enquiry services. All but one of these Member States (Portugal) has started to provide these services after the cases were launched.

The principle of non-discrimination when choosing the operators to provide universal service has also been addressed by the Commission. Infringements were launched against France, Hungary, Finland, Portugal and Spain. The last two are still pending.

Infringement proceedings against Belgium and Spain were also launched to address the lack of conformity with the rules on financing universal service.

What are the next steps?

This Communication sets out reflections for the future role of the universal service in the telecoms sector. It provides the basis for a discussion that would allow all stakeholders (e.g. national regulators, companies, consumer associations) to express their views in the course of 2009. The Commission will therefore examine whether, on the basis of these contributions, concrete proposals should be made to update the Universal Service Directive in 2010.

Source: European Commission

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