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Dutch ruling highlights wider EU legacy issues following telecoms regulatory reform

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A recent ruling by a Dutch court has clarified an important point in relation to the enforceability of legacy national market decisions for fixed and mobile call termination following EU’s regulatory overhaul in the telecommunications industry, and the decision has wider EU impact, a legal expert has said.

The case involved a Dutch telecommunications company, which successfully challenged an administrative order made by the Dutch Authority for Consumers and Markets (ACM) before the Rotterdam district court. The judge found that the Dutch telecommunications legacy market decision for fixed and mobile call termination was unenforceable under the EU’s new regulatory framework for the telecommunications industry, which is known as the ‘European Electronic Communications Code’.

The EU Electronic Communications Code (EECC) entered into force in December 2018. Member states were given until 21 December 2020 to complete the national implementation. It marks a complete overhaul of rules and regulations for the electronic communications sector, which aims to harmonise regimes across the single market and modernise the EU regulatory framework.

Jeroen Schouten of Pinsent Masons, an expert in technology, media and telecoms (TMT), said the ruling is significant not only for operators in the Netherlands but also for telecommunications national regulatory authorities (NRAs) and telecommunications operators across the EU, because the requirements of “the EU Electronic Communications Code are essentially invalidating legacy market decisions”.

“Every time there is a major overhaul of a regulatory framework, there will be significant legal, business and practical consequences. NRAs and telecommunications operators across the EU need to take note of the ruling and take action to adapt to the new regime,” said Schouten.

In reaching its decision, the Dutch court considered a particular delegated EU regulation introduced in December 2020 that sets a single maximum EU-wide mobile voice termination rate and a single maximum EU-wide fixed voice termination rate. According to the court the intent of the regulation appears to be that these ‘regulated fees’ replace the measures that were part of legacy ‘market decisions’ for fixed and mobile call termination under the old regulatory framework for telecommunications, which aim to create level playing fields in the related defined market in the EU through the ‘ex ante’ regulation.

'Ex ante' regulation is where certain markets are identified as containing features that hinder competition and where some businesses in that market are subjected to particular conditions on the way they can operate in an effort to promote better competition as a result. The fixed and mobile call termination market was one of them as the recipient network is generally considered to be dominant for receiving calls.

The appellant in the case, OneCentral faced enforcement action by the ACM for violating the access obligation of its market decision on fixed and mobile call termination services as the telecommunications company refused to provide direct interconnection to a third party.

The court said that with the adoption of the EU-wide rates for call termination, the European Commission no longer qualifies the market for call termination as a market for ‘ex ante’ regulation. The judgment made it clear that “if the national authorities nevertheless consider imposing ex ante obligations, they should carry out the three-step test contained in Article 67, paragraph 1 of the EECC or – alternatively - adopt the rules as referred to in Article 61 paragraph 2 of the EECC”.

The three-step test that the ACM would have to conduct, the court explained, involves: high and non-temporary barriers to entry of a structural, legal or regulatory nature are present; there is a market structure that does not tend towards effective competition within the relevant period, given the state of infrastructure-based and other competition underlying the barriers to entry; and competition law alone is not sufficient to adequately address the identified market failure. “The substantiation requires a new analysis of the market, so that until that analysis is completed the ACM cannot proceed to enforce the prevailing market analysis decision,” said the judge.

Although the Dutch market decision for fixed and mobile call termination has formally retained its validity, because of the Telecom Code, ACM could not proceed to impose the additional market regulation measures currently in place without first doing the described market analysis.

Explaining the implications of the Dutch ruling on national regulators, Schouten said: “Local EU NRAs can only impose more extensive ex ante regulation for the fixed and mobile call termination market if they have performed the three-step test and the outcome of the test merits the additional regulation, or have set rules on access and interconnection using the powers provided by article 61(2). In the absence of a completed three step test or the rules, the old market decision can no longer be enforced.”

This case is not only relevant to the telecommunications sector in the Netherlands, but also has wider EU impact, as the reasoning used by the court can be applied across the board in the EU. 

“If other jurisdictions have similar market decisions and their regulators have not yet used article 67(1) or 61(2), their market decisions are effectively no longer enforceable. This is also what the Rotterdam court decided. For the Netherlands, this means, for example, that direct interconnection as a regulatory measure can no longer be enforced. Local regulators in the EU should consider performing the test or set rules on access and interconnection. For operators, all ancillary measures in this market, in addition to the rate regulations, will no longer be valid,” he said.

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