By Gerry Oberst

This column noted in January that the European Union (EU) is in the midst of reviewing and restructuring its entire telecommunications regulatory structure, in the so-called “1999 Review.” The European Commission unveiled many of those reforms in April, and subsequently held a series of public hearings and meetings in Brussels to continue the reform process.

The Commission released five proposed new directives (the equivalent of laws that EU member states must then implement). These directives set a framework for regulation and addressed the four specific topics of licensing, access and interconnection, universal service and data protection. A promised decision on spectrum was not yet available by press time, nor was an updated directive on liberalization of the market yet released.

This review will have large implications for satellite networks and services. There are reasons for the satellite industry to applaud the thrust of the 1999 Review, but there also still are reasons to urge the Commission and the EU to go further along the path of regulatory simplification.

In mid-May, at its public hearing, the Commission took questions and comments on the items that were available from the large audience (estimated at up to 500) in the Brussels Charlemagne Center.

On licensing, the major message from the Commission was that it wants to achieve across the board simplification of licensing structures in the EU. The starting point for this move is to provide that all electronic communications services and networks should be covered by a general authorization with notification procedures only. This means that operators would not need to obtain advance approval to start their networks or services. Moreover, the directive would limit the types of conditions that EU countries could place on the general authorizations, in an effort to simplify and streamline the regulatory process.

The major exception to this approach is that operators using radio frequencies and numbers would still have to obtain individual rights of usage. The satellite industry– through the Satellite Action Plan (SAP)–strongly intervened at the hearing to note that there is not always reason to require individual licenses for use of satellite spectrum, and said that in this respect the proposal is a step backwards. The SAP argued there is no reason to require individual licenses, which require advance filing and approval, unless there is the possibility of harmful interference.

The Commission stressed that a big part of the reform package is to insist that EU countries implement harmonized allocations and assignments of spectrum. This raised a cheer from the satellite industry, which encouraged the Commission to foster the use of all harmonization tools that might be appropriate and useful, such as one stop shopping arrangements through the CEPT structure or licensing exemptions.

There also was a lot of discussion at the hearing on fees, with much comment that the auction prices for next generation mobile systems in the United Kingdom had gotten excessive. The SAP continued the campaign against auctions at the hearing, expressing its opposition to using auctions as a fee mechanism for the satellite sector. The SAP argued that it is not possible to develop auction strategies or rationally value the spectrum if there is a series of sequential auctions across the community, with each EU country auctioning it off.

The proposed licensing directive would give the Commission authority to seek harmonization of fees. The current system is entirely unharmonized, so any moves towards cleaning it up would be most welcome. For example, to provide the identical service, a satellite operator might pay over $50,000 in France, a percentage of revenue of around 0.2 percent in Spain, about $6,000 for the first 100 terminals in the United Kingdom, and nothing at all in the Nordic countries!

EU countries would still be allowed in the proposed licensing directive to impose fees for the right to use scarce resources, such as frequencies, “which reflect the need to ensure the optimal use of these resources.” Other provisions allow regulators to use auctions and administrative pricing of spectrum as a means of promoting “efficient use of radio frequency.” Neither of these critical terms–“optimal use” or “efficient use”–is defined. The satellite industry urged the Commission to consider some limit on these terms, as they otherwise appear to allow unlimited and highly disproportionate fees for the right to use spectrum.

The 1999 Review is a big step in the correct direction, but there are many steps in the EU political process before the Commission’s proposals become law. The satellite industry will insist at each of these steps that the valid interests of the industry be recognized.

Gerry Oberst is a partner in the Brussels office of the Hogan & Hartson law firm. He is the chairman of the SAP regulatory working group and participated in the May hearing in Brussels. His email address is [email protected].