17th September 2019 UKCTA RESPONSE
Submitted by email only to: EECC@culture.gov.uk
UKCTA is a trade association promoting the interests of fixed-line telecommunications companies competing against BT, as well as each other, in the residential and business markets. We advocate regulatory outcomes designed to serve consumer interests, particularly through competition to Ofcom and the Government. Details of membership of UKCTA can be found at www.ukcta.org.uk. We welcome the opportunity to comment on DCMS’consultation “Implementing the European Electronic Communications Code”. There are some aspects of the consultation, notably switching, on which there is no single point of view within UKCTA and so none has been expressed in this response. A number of our members intend to submit their own responses which will no doubt expand on those aspects on which we have been unable to comment.
This response is structured as follows:
• Timing of consultation and Brexit queries
• Access and investment incentives
• End-User Rights
• Network Security and Resilience
Timing of consultation and Brexit queries
Since 2016, UKCTA has been engaged in dialogue with the Government on the implementation of the Code, stressing the importance of implementing it in such a way as to ensure in so far as possible, that UK based communications providers can continue to operate within a common regulatory framework, and to minimise the extent to which regulatory divergence from the EU adds bureaucracy and complexity to the compliance burden. We therefore welcome this consultation in the sense that it indicates that the Government does intend to implement the Code, but it is framed on the assumption that the UK will leave the EU with a Withdrawal Agreement in place. We are concerned that this may not in fact happen if the UK faces what is commonly termed a “no-deal Brexit”.
Would it not make more sense to extend the term of the consultation to allow parties to respond in the light of the facts as they stand rather than on what was assumed to be the case at the time the consultation was drafted? We believe there is much to be said for continuing the consultation to allow parties to respond in the context of the much more likely scenario of a no-deal Brexit.
Our greatest concern is that this is a consultation which has been overtaken by events. As drafted the unwritten assumption is that the UK would leave the EU with an agreement in place with the EU and therefore with a transition period to allow the transition from EU to purely domestic laws. Since then it has become apparent that the most likely outcome is now that the UK will leave the EU on entirely different terms. Even if a deal is concluded it is likely to be different from that which was envisaged when the consultation was drafted.
We urgently need to understand what is planned if there is no deal in place and the UK leaves the EU on 31st October 2019. What does the government plan to? What regulatory regime will our members have to plan to follow? We believe that now it is clear that there is a real chance of Brexit happening without a deal, that the Government ought to extend the consultation period so that companies know what the situation is and allow them to respond accordingly. This of course only deals with the immediate implementation of the Code. Of equal concern to our members is what is intended for the future? If the Code is implemented now does the Government intend this only as a short term measure pending divergence in the future for example as part of the price of concluding a trade deal with the United States?
In short, we are keen to understand how the government believes our industry will be regulated post 31 October in the event that no withdrawal agreement is implemented by that date.
Access and investment incentives
Article 3 – General Objective to promote deployment of VHCNs
We question the need for the proposals advanced by the Government - is there not enough scope within the provisions of the Code to achieve the desired objectives? Why is it felt there is any need to supplement those provisions with UK specific gold plating? We believe that Option 2 (transposing the minimum requirements of the Code) has enough scope to allow the UK to deliver the desired outcomes without the potential to distort the market and competition which Option 3 might entail. We would urge the Government to adopt Option 2.
Article 22 – Geographical surveys of network deployments.
The issue of transparency of network deployment has been a problematic one for a number of years with concerns in particular among new entrants that lack of visibility of Openreach’s deployment plans made it difficult to invest with any great confidence in their own networks.
While we accept that there is a need for greater transparency in relation to deployment plans and rollout, we are concerned that this Article introduces an additional reporting burden, particularly for smaller providers. As with all such requirements, DCMS and Ofcom need to consider the proportionality of requests for such data, as well as the risks of handling such highly confidential information. Whoever collects the data, must also protect the data, and should ensure that the survey provides only a high level overview, so that the information on availability of connectivity by operator does not distort competition.
Additionally, and as noted above, we have been speaking for some time with Ofcom about the relatively poor state of business broadband provision in the UK and also the lack of available information about where such services are in fact provided.
There are also genuine concerns within the business community, and across the range of communications providers serving them, that business users are underserved by fibre-based broadband. Evidence suggests that coverage in business areas is strongly lagging behind residential areas – yet most businesses need good, high-speed broadband services and do not want to pay for expensive alternatives such as dedicated leased lines.
These concerns are compounded by the lack of publicly available data on business broadband connectivity. The most recent Ofcom Connected Nations report states that “[s]uperfast broadband coverage has increased to 94% of homes and businesses, up from 91% last year”. However the underlying data in the report does not appear to include larger businesses, which means the scale of the issue is not widely understood or recognised by policy-makers. Indeed the widespread citing of figures such as these give policy makers a false reassurance that the needs of the business community are being adequately met. As a result we believe that there is little appreciation of the dilemma faced by businesses who often find that decent broadband is not available. While the figures involved are no-longer 100% current, the FT neatly summarised the scale of the issue last year. (1) We believe that this is a serious problem which the Government ought to consider when considering what is the most suitable regulatory framework for the UK in the future.
Article 61 - Powers and responsibilities of the national regulatory and other competent authorities with regard to access and interconnection
The EECC allows for the imposition of “symmetric obligations” as meant under Art. 61 (3). More specifically National Regulatory Authorities (“NRAs”) may impose obligations upon reasonable requests to grant access to certain network elements where this is justified on the ground that replication of these elements is economically inefficient or physically impracticable. BEREC will publish guidelines on this specific topic by 21 December 2020.
We note that DCMS is not consulting on this Article at this time, and therefore we urge DCMS to ensure that it waits and follows the guidance from BEREC to ensure harmonisation across Europe, in order to avoid any unnecessary national deviations.
Article 67 – Market Analysis Procedure
The extension of the market review period to 5 years (Art. 61, (5)) indeed provides more legal certainty and greater stability, but does come with some risk of regulation becoming outdated or inappropriate over the course of the market review.
The recitals of the EECC rightfully leave it to the NRA’s discretion to decide on whether market changes in the intervening period require a new analysis. This address the concerns that remedies that has been imposed for 5 years but do not fit the market characteristics anymore jeopardize competition and the internal market. This is particularly true at a time of great change in the UK market e.g. Wholesale Line Rental (“WLR”) withdrawal, IP transition, competitive network expansion etc..
We urge DCMS to put in place in national law the provisions made in Art. 61(5) the possibility for the regulator to have the freedom to decide on whether market changes in the intervening period require “a new analysis” (as foreseen in Recital 177). In the UK for example, this could be useful for Ofcom as it pursues a move to greater deregulation to encourage investment as well as broad and uncertain charge controls.
Similarly, we urge DCMS to allow Ofcom the power to require reasonable notice periods for products that may be withdrawn through deregulation so as to limit the impact on end-users, as per Art. 67 (2). This is considered further in Recital 168 of the EECC, in which NRAs are obliged to ensure that the parties affected receive an appropriate notice period. The EECC allows NRAs to determine specific conditions and notice periods in relation to existing agreements. Again, given the upcoming change in the UK market, this may prove to be a useful regulatory tool to minimise impacts on consumers, customers and providers alike.
Article 75 – Termination Rates
We note that DCMS highlights the new rules on EU-wide termination rates, yet does not ask any consultation questions. UKCTA seeks clarification from DCMS as to what impact it envisages such rules will have on the UK market, how any implementation will be handled and whether action is required from communication providers.
Similarly, as raised at the beginning of this response, it is unclear how such an EU-wide rate will work post-Brexit. As above, we seek clarification on the envisaged impact of Brexit on this section of the Code and whether DCMS believes industry will need to take any action.
Articles 76 and 79 – Co-investment commitments
With regard to Art. 76, we support the promotion of Very High Capacity Networks (“VHCN”) by offering commitments when co-investing in the roll out of such networks, but care should be taken to ensure that the VHCN objective does not interfere with the promotion of competition. This has been acknowledged in the EECC by allowing NRAs to address competition problems by imposing, maintaining or adapting remedies.
While Ofcom producing guidance would be helpful (as per DCMS’ suggestion in the consultation), we urge Government to ensure that full, market-wide impact assessments form part of the decision making process, as per recital 206.
Impact Assessment on Access Provisions
The detailed answers to questions 6-11 in the consultation are company specific and cannot therefore be answered by an industry body such as UKCTA however we would note here that with the move from a three to a five year market review cycle, particularly at a time when great change is anticipated, we believe the regulator must be able to revisit decisions and remedies when it becomes apparent that events have not gone as anticipated, for example where a remedy is simply not functioning as intended.
Consumer and End-user definitions and impacts
There are also other issues not covered in the consultation which are of very real concern to UKCTA. Chief among these is the continued policy confusion about the needs of domestic consumers and business customers, particularly large businesses. More generally, we also have concerns about the gradual creep of regulation to include greater numbers of business customers both large and small and the impact that might have on providers who choose to provide services in these markets.
The European Electronic Communications Code does not envisage that residential and large business customers should be treated the same way. Rather the intention in the Code is to differentiate the needs of different types of customers and that large businesses should not be subject to the same regulatory requirements as residential consumers. This is clearly shown in Art.105 as a whole, where the focus is on consumers and small and micro-enterprises. In particular, recital 259 of the new Code notes that “larger enterprises usually have stronger bargaining power and do, therefore, not depend on the same contractual information requirements as consumers".
Unfortunately the welcome distinction between these categories of end-users is not consistently reflected throughout the end-user rights provisions of the Code. While in some provisions larger enterprises have been rightfully carved out, in others larger enterprises unfortunately are still captured. We see this as a missed opportunity for better regulation, but see a clear role for DCMS on this point.
We urge DCMS to carefully test the necessity and proportionality of applying certain consumer protection provisions to larger enterprises. In our view these tests should lead to a correction of some of the end-user protection provisions whereby larger enterprises will be carved out.
If for whatever reason a general carve out of larger enterprises is not feasible, DCMS should carefully describe in the explanatory memorandum to the national law what the key distinctions are between the different categories of end-users, and that based on these distinctions, any proposal to impose regulation on a particular group of end users must consider the specific need for protection of each category of end user and ensure that any obligations applied do not impose an unjustified burden. Ideally this should include the notion that it would be reasonable and understandable that in their enforcement practices NRAs use their discretion to focus on those categories that need protection the most. This leads to a situation in which larger enterprises are de facto being carved out, as currently already is the case in some MSs for the end-users provisions e.g. how Ofcom has approached the implementation of Art. 105(3) - see for example paragraph 9.26 of the Ofcom decision. (2)
This is not a problem unique to the Code since there is of course a history of confusing definitions in this area in UK regulation. We suggest that the Government ought to use the implementation of the Code to try to clarify the situation and define once and for all the boundary between consumers and businesses so the enterprise providers can clearly establish those rules with which they must comply. The Code provides numerous options for national governments to carve out small businesses from certain provisions but there is nothing similar for large businesses – we think this is one area where the Government could usefully clarify the wording found in the Code.
It is also far from clear to us where the division of responsibility between Ofcom and DCMS lies in relation to the Code. We note that DCMS appears to consider “end-users” to exclude businesses, whereas this is not the interpretation of Ofcom (and who themselves have several interpretations and definitions for consumers, customers, small businesses etc.).
Of particular concern are the following Articles in the End-User Rights section with regard to this lack of clear distinction:
- Article 102 (3) – Simplified Contract Summary
We note that Article 102 (3) requires the Commission to adopt implementing acts specifying a contract summary template to be used by providers in fulfilling their obligations under this provision. We are seriously concerned about the practicality of this and the impact of such provisions on our members’ operations. We urge both Government and Ofcom, to the extent that they are afforded any discretion, to take a proportionate approach to implementation and enforcement of compliance. Such an approach should seek to achieve an appropriate balance between providing consumers with necessary information, avoiding consumer “information overload” and avoiding over-burdening providers.
We believe that an obligation to provide only a simplified contract summary, which includes the essential terms in an attractive and easily readable manner, is the best way to ensure that consumers are suitably informed. In this regard, we support the Commission’s proposed general approach to the template – including the emphasis on both readability for consumers, and flexibility for providers to draw attention to differences in their offerings. We do, however, have concerns about the amount of information that is required to be included in the template – particularly in light of the font size and length limitations.
- Article 103 – Transparency, comparison of offers and publication of information – Business providers should be carved out of this condition as business customers do not require this contractual information in this manner. The comparison tool should also focus on consumer services.
- Article 104 – Quality of Service – Business providers should be carved out as this information tends to be included in SLAs for such customers, and are mostly individually negotiated.
- Article 105 – Contract duration and termination - UKCTA members are also concerned about the provisions on maximum contract length. While enterprise providers are carved out of some of this Article which is good, the Code appears to be grouping all products together with mobile airtime maximum contract lengths without considering the impact on businesses and their providers. In fact, Ofcom is already proposing an extension of a 24 month contract limit to contracts entered into by micro-businesses, small businesses and not-for-profit organisations in the context of their work on mobile handset and airtime contracts without carrying out any impact assessment. Unlike mobile customers, most smaller and medium sized businesses operate their procurement programmes on a three year term – a regulatory requirement which changes this will cause chaos not only for large businesses but those providing them with services. In addition, large enterprise is included wrongly in paragraphs 3, 4 and 6 covering various requirements around contract termination, notice periods and compensation. Bringing larger enterprises within the scope of these paragraphs is disproportionate and unnecessary, as they do not reasonably require this type of protection. Mostly larger enterprises have highly complex solutions which are designed for a specific timeframe with tailor-made, negotiated terms and prices and specific contract termination clauses. Larger enterprises and their providers generally use specific contract renewal processes to investigate new terms and conditions and prices for when the original contract duration expires. Larger enterprises should therefore be excluded.
- Article 106 - Provider switching and number portability – Remarkably no distinction has been made for larger enterprises. Although we support efforts to ensure that transfers are simplified and run smoothly, it is worth noting that larger enterprise solutions are generally extremely complex. Providers that serve larger enterprises should in cooperation with their larger enterprise customers have the freedom to agree upon tailor-made transition arrangements and processes without being constrained by a process developed by NRAs under paragraphs 6 to 9.
Other End-User Rights Articles
Question 28 – Bundling
We do not agree with the Government’s assessment that there is limited potential for regulatory clash. As identified in the consultation, the potential for this arises when a provider bundles together communications and non-communications services. There are a number of providers who do this, some of them such as SSE, Shell, and Utility Warehouse are major brands with significant numbers of customers. We cannot understand why the Government feels, without offering any explanation, that there is little scope for regulatory crossover. We think that for the reasons set out in the consultation, it is potentially confusing for consumers if Ofcom were to be in a position where it would be regulating their gas or electricity services as well as their phone and broadband.
Each of the Regulatory regimes concerned is highly complex requiring with each sectoral regulator developing specialised knowledge and experience in their particular sector. If Government has identified a need for different regulators to work together then this ought to be developed systematically rather than being implemented in an inconsistent manner on a case by case basis.
We are concerned that not only could these proposals prove consuming both for consumers and the regulated providers but that the additional burden of dealing with overlapping regulations and regulators could ultimately reduce innovation and result in fewer new products being introduced.
If the policy intent is to stop customers being ‘locked-in’ to bundles, we do not believe that empowering regulators to act on a cross sectoral basis is the correct solution, instead we believe that the issue should be addressed by requiring providers to better inform consumers by providing them with full and transparent information during the sales process.
Universal Service Obligations
We are concerned that the principle of a special tariff may be extended beyond the context of Universal Service. While we understand that affordability is an important issue, it is unclear to us how this might be done. We would not be comfortable with the idea that Ofcom would have the power to require all providers to provide some form of social tariff which might not be aligned with their commercial strategy.
Network security and resilience
It would be helpful for the Government to provide greater clarity to industry on whether the new TSRs will be introduced under Articles 40 and 41 of the Code or under other domestic legislation, and if so on what timescales.
In any case, whatever legislation the Government proposes to introduce, it should be risk-based, flexible, robust, embrace collaboration and promote innovation-friendly and technology-neutral solutions.
Article 31 – Right of Appeal
This Article provides for an appeals process and calls for it to be an "effective mechanism" in which "the merits of the case are duly taken into account", which clearly indicates a full merits process, not just a judicial review process.
In the UK, the appeals provisions were reduced in the Digital Economy Act 2017, removing the full merits standard from UK legislation, with the promise that the EU Directive would always be available as a back-up. On EU exit, such a possibility will fall away.
UKCTA therefore urges DCMS to set out how it will ensure that Article 31 is implemented in UK law. Such a mechanism is critical to holding the regulator to account and ensuring the functioning of the UK telecoms market.
We are aware that Ofcom is proposing to publish a consultation in November which will detail its proposals in relation to implementation of the Code. This will cover a large number of more detailed aspects of the Code which the DCMS consultation does not address. We expect that this consultation will seek to extend some existing and impose some new obligations on providers through the General Conditions. The concerns we have expressed above regarding the timing of this consultation and Brexit are equally applicable to the proposed Ofcom consultation.
The subject matter of the consultation, the future regulation of the electronic communications sector, is of fundamental importance to the future economic well being not only of the industry but of the UK. In addition to the detailed policy issues highlighted above, we are concerned about the timing of this consultation. Given that events have materially altered the circumstances since the consultation was drafted, we would urge the Government to take the time to canvas opinion from industry once the UK has actually left the EU by extending the time allowed for comment or perhaps by undertaking a supplementary consultation after 31 October 2019.