“a joint burden laid upon us all”*: advocate general on universal service financing

Posted on June 22, 2010 | Filed Under public services

In Belgium, all telephone service providers have to offer special “social” tariff options as part of a universal service obligations (other universal service obligations are placed only on specific providers). The costs for these special tariffs are distributed amongst all operators in relation to their share of “social tariff”-customers. This has sparked national litigation in Belgium, leading the Belgian Constitutional Court to ask the ECJ for a preliminary ruling; concurrently the Commission started an infringement procedure. In both cases, the advocate general today delivered his opinion (the cases - in part - touch similar, but not excactly the same issues and therefore were not joined).

In the case C-389/08 Base and others v. Belgacom the advocate general made clear that the legislator is no regulator: article 13 of the universal service directive 2002/22 provides that it is the task of national regulatory authorities (NRAs) to decide whether or not an undertaking is subject to an unfair burden (due to universal service obligations). The legislature of a Member States must not take that decision for the regulator. And most certainly it must not do so in retrospective, declaring - as was the case in Belgium - in 2007 that the law passed in 2005 had been preceded by an evaluation of the “unfair burden” (not for the simple reason that no one believes that anyway, but because NRAs have to be notified to the Commission in advance). Of course, the cases C-424/07 Commission v. Germany and C-82/07 CMT come to mind (and are cited by the advocate general).

In C-222/08 Commission v. Belgium, the advocate general also points out that there was no individual and concrete assessment of the “unfair burden” and he also joins the Commission’s view that intangible benefits have to part of equation to determine the net cost of universal service obligations.

*) Shakespeare, King Henry IV, Part 2, Act V Scene 2

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“Confusion now hath made his masterpiece!”* Advocate general reprimands Council and Commission

Posted on June 17, 2010 | Filed Under fundamental rights

Today’s opinion of advocate general Sharpston in the joined cases C-92/09 Schecke and C-93/09 Hartmut Eifert do not provide new insights into the validity of the data retention directive, as Sharpston declined to answer the two questions addressing this issue that had been put to the ECJ by a German administrative court. According to Sharpston, the “curiously phrased” and “somewhat convoluted” questions should be declared inadmissible because they are purely hypothetical.

The other questions, concerning the validity of regulations requiring the publication of personal data of farmers receiving EU subsidies, are not as hypothetical (but go beyond the the core content of this blog). Just briefly:

  • “The importance of transparency is firmly established in EU law.” (para 66)
  • “However, sometimes (as here) transparency may have to be weighed against another competing objective.” (para 70).
  • “as a matter of principle a person applying for funding from a public body such as the European Union … cannot be required, solely as a condition of obtaining that funding, to forgo a fundamental right” (para 85).
  • “Promoting transparency is, in principle, a legitimate basis for interfering with the rights to privacy and the protection of personal data. …  I am therefore prepared to accept that in principle – and I stress those words – some degree of interference with the rights to privacy and to the protection of personal data in order to promote transparency of the democratic process is ‘necessary in a democratic society’ because it corresponds to a pressing social need.” (para 94)
  • BUT:  Is the interference proportionate? “The vague (if not actually contradictory) nature of the objectives that the institutions say they are pursuing does not permit the conclusion that the measures put in place satisfy the proportionality test.” (paa 118)
  • “In my view, the institutions have not given the Court an explanation that, upon examination, stands up to scrutiny. I do not think that the Court should rubber stamp legislation that refers quite correctly to general principles that are eminently desirable, but – when more specific explanation is sought in order to enable the Court to perform its judicial function – reveals the level of confusion and inter-institutional incoherence that has emerged in this case.” (para 123, emphasis added)

*) Shakespeare, Macbeth, Act II Scene 3

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“And yet my SKY shall not want”*: European General Court finds for Murdoch, orders Berlusconi’s Mediaset to repay state aid granted by Berlusconi’s government

Posted on June 15, 2010 | Filed Under competition/mergers/state aid

From a purely legal viewpoint, it seems to be quite a basic vanilla state aid case: a member state grants subsidies to consumers to buy products, favouring a particular enterprise over its competitors. The Commission then receives complaints by the competitors, examines the measure and finds that the subsidies, which had not been notified to the Commission, constitute state aid and have to be repaid. Then the (major) beneficiary files action at the EU General Court to get the Commission decision annulled (and does not succeed).

But as the aid in question was handed out by a Berlusconi government, favouring (indirectly) Berlusconi’s media conglomerate Mediaset over (amongst others) its rival Sky Italia, media have referred to it as a “media tycoon battle”. The judgment given today by the General Court in the Case C-177/07 Mediaset SpA v. Commission confirms the Commission decision of 24 January 2007 (case site). If you like personalisation, you can call it a victory for Murdoch - his Sky Italia had filed complaints with the Commission and intervened in the Court proceedings on the Commission side - over his rival Berlusconi.

I don’t think the judgment would attract all that much interest if it weren’t for the involved parties, and I don’t think there is anything extraordinary to it in points of law. But the General Court seems to be very aware of potential media interest in the case: it is rare that for a General Court judgment there is a press release in seven languages from the Court, and equally rare that the judgment is available on the same day in probably pretty much all EU languages  (I have not checked all of them, but it is available in Maltese, Bulgarian, Greek, Latvian, Lithuanian, Estonian, Hungarian, so I guess all efforts have been taken to ensure broad media coverage around the European Union).

But of course it is nice to read that - I am paraphrasing - a Berlusconi company should not have trusted in the legality of the aid a Berlusconi government has shelled out (in the judgment, it is worded a little bit different: “A diligent business operator should have known not only that the measure at issue was not technologically neutral, but also that it had not been notified to the Commission and had not been authorised.”)

*) Shakespeare, King Henry V, Act III, Scene 7 (capitalization added)

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“high respect and rich validity”* - ECJ: Roaming Regulation valid

Posted on June 8, 2010 | Filed Under communication technologies

The European Court of Justice today gave judgment in the case C-58/08 Vodafone and others and confirmed the validity of the roaming regulation. Just as the advocate general in his opinion of 1 October 2009, the Court came to the conclusion that the legal basis (article 95 EC [now article114 TFEU]) was correct, the measures were proportionate and the principle of subsidiarity had not been infringed.

As to the legal basis, the Court notes that there was a high level of retail charges, that this was a persistent problem that could not be solved by NRAs, and that there was pressure for Member States to take measures. Such national measures in turn would have been likely to lead to a divergent development of national laws.

“As regards the functioning of the roaming market […]  and taking into consideration the considerable interdependence of retail and wholesale charges for roaming services, it is clear that a divergent development of national laws seeking to lower retail charges only, without affecting the level of costs for the wholesale provision of Community-wide roaming services, would have been liable to cause significant distortions of competition and to disrupt the orderly functioning of the Community-wide roaming market, as is clear from recital 14 in the preamble to Regulation No 717/2007. Such a situation justified the Community legislature’s seeking to protect the proper functioning of the internal market”. 

As regards the principle of proportionality, the ECJ points out that the Community legislature must be allowed broad discretion, yet must base its choice on objective criteria. The Court then examines the history of the roaming regulation and comes to the conclusion, that the introduction of ceilings for retail charges “must be considered to be appropriate for the purpose of protecting consumers against high levels of charges” and “that regulation of wholesale charges alone would not have had a direct and immediate effect for consumers. By contrast, only the regulation of retail charges could improve the situation of consumers directly.” The Community legislature therefore “could legitimately take the view that regulation of the wholesale market alone would not achieve the same result as regulation such as that at issue, which covers at the same time the wholesale market and the retail market, and that the latter was therefore necessary.”

In Nr 69 of the judgment, the Court states:

“Finally, in the light of the importance of the objective of consumer protection within the context of Article 95(3) EC, intervention that is limited in time in a market that is subject to competition, which makes it possible, in the immediate future, to protect consumers against excessive prices, such as that at issue, even if it might have negative economic consequences for certain operators, is proportionate to the aim pursued.” [emphasis added]

To me it is rather striking that the Court in its legal reasoning only in this paragraph makes mention of the limited duration of the measure. The advocate general, in contrast, had dwelled on that issue more explicitely (in Nr 42 of his opinion):

“Moreover, the existence of a sunset clause reduces its impact on the rights of the economic operators. Such clauses ensure that the Community legislature will periodically reassess its interventions in areas, such as roaming, that are undergoing rapid social and economic change. [footnote omitted] If the Community legislature were to extend the price controls or make them permanent, that decision would also need to be proportionate and additional reasons would need to be presented to justify it.” 

This of ocurse is not just an academic issue: the roaming regulation meanwhile has been amended and the original “sunset” (30 June 2010) has been extended by two years to 30 June 2012. So according to the advocate general, in a possible future case it would be necessary to examine whether there were sufficient “additional reasons” for the prolongation. The Court - limiting itself strictly to the issue to be decided in the present case, the  original version of the regulation - remains silent on that matter. Still, considering that the Court in its legal reasoning only makes one almost fleeting reference to the “intervention limited in time”, I would expect that the extension until 2012 should not make the regulation invalid (after all, it is still “limited in time”).

Finally, subsidiarity does not pose a problem either:

“As is clear from recital 14 in the preamble to the regulation, the interdependence of retail and wholesale charges for roaming services is considerable, so that any measure seeking to reduce retail charges alone without affecting the level of costs for the wholesale supply of Community-wide roaming services would have been liable to disrupt the smooth functioning of the Community-wide roaming market. […] the Community legislature could legitimately take the view that it had to intervene at the level of retail charges as well. Thus, by reason of the effects of the common approach laid down in Regulation No 717/2007, the objective pursued by that regulation could best be achieved at Community level.”

*) Shakespeare, All’s Well That Ends Well, Act V, Scene 3

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“ever precise in promise-keeping”*?: open and vague ministerial promises do not constitute state aid

Posted on May 24, 2010 | Filed Under communication technologies

The General Court delivered judgment on 21 May 2010 in the joined cases T-425/04 France v. Commission, T-444/04 France Télécom v. Commission, T-450/04 Bouygues v. Commission, T-456/04 AFORS Télécom v. Commission, annulling Commission Decision C(2004)3060.

The origins of the case go back to 2002,when France Télécom (FT) was in a rather difficult economic situation and French authorities - representing the majority stockholder - issued a series of public declarations. Most notably, the Minister of the Ecomony declared that “the shareholder State will act as a prudent investor and were FT to encounter difficulties, we would take the appropriate measures … I repeat that were FT to face funding problems, which is not the case today, the State would take the necessary decisions in order to overcome them”. The Commission had viewed these declarations, together with an offer by the French State of a shareholder loan for FT (a 9 billion Euro credit line), as state aid and incompatible with teh Treaty.

The General Court agreed that the statements of the French authorities did confer a financial advantage on FT, as they had had a decisive influence on the reaction of the ratings agencies. However, the Court came to the conclusion that there had not been a transfer of State resources. “On account of their open, imprecise and conditional nature, in particular as regards the nature, scope and conditions of possible State intervention in favour of FT, the statements made from July 2002 onwards cannot be construed as a State guarantee or be interpreted as containing an irrevocable commitment to provide specific financial assistance to FT.” (quote taken from the press release; the judgment is available only in French; the relevant paragraphs are 268 to 289).

*) Shakespeare, Measure for Measure, Act I, Scene 2

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“Brief, then; and what’s the news?”*: update on ECJ cases

Posted on May 9, 2010 | Filed Under communication technologies

1. ECJ-Judgment of 6 May 2010 in the case C-545/08 Commission v. Poland: no specific regulatory obligations without prior market analysis:

The result of this case, decided by the Court without prior opinion of the advocate general, does not come as a surprise: specific regulatory ex ante-obligations on providers of electronic communications networks and services must not be imposed without having conducted the market analysis procedure, as laid down in article 16 of the framework directive: 

“Il convient de rappeler, à titre liminaire, que, conformément à l’article 16 de la directive «cadre» ainsi qu’aux articles 16 et 17 de la directive «service universel», les ARN ne peuvent imposer des obligations réglementaires ex ante aux entreprises déterminées comme étant puissantes sur un marché pertinent donné qu’après avoir effectué une analyse dudit marché. ” (paragraph 47 of the judgement; an English version is not yet available).

The Polish regulator had - in 2006 - imposed the obligation for cost oriented end user tariffs for broadband internet access on the incumbent operator, without following the market analysis procedure beforehand. The Commission started an infringement procedure and obviously Poland had very little chance to defend this action of the regulator. Nevertheless, it tried to do its best by maintaining that this newly imposed obligation was still covered by the transitional rules in article 27 of the framework directive, as it more or less extended the obligations for cost orientation of end user tariffs from voice telephony to broadband access. And as both services after all use the same “last mile”, for instance line maintenance costs could not be attributed to either voice telephony or broadband access.  The ECJ did not buy into this, as the regulatory framework had entered into force in Poland on 1 May 2004, and the obligations existing under the old regulatory framework did not cover broadband.

2. New cases for the ECJ:

Just to make you aware of new telecoms and broadcasting cases already at the Court or on their way to the Court:

In C-52/10 Eleftheri Tileorasi A.E. ‘Alter Channel’ and Konstantinos Giannikos  the question is put to the ECJ whether, under the TV without Frontiers-directive, the provision of payment or of consideration of another kind is a necessary defining element of the intention to advertise (in the context of ’surreptitious advertising’).

C-71/10 Ofcom addresses environmental information under the directive 2003/4/EC, related to the precise location of mobile phone base stations in the UK.

And the data retention directive is coming back to the ECJ from Ireland, this time not by the Member State, but from the High Court (see here and here for the decision); the exact wording of the request for a preliminary ruling still has to be decided.

And at the General Court COLT France challenges a state aid decision by the Commission concerning a broadband network in Hauts-de-Seine department (T-79/10 COLT Télécommunications France v. Commission (Annulment of Commission Decision  C(2009) 7426 final of 30 September 2009 [state aid N 331/2008 — France]).

3. Judgments  coming up:

From my “This year’s top three cases”-list, two will be decided soon:

My “number 3″, T-425/04 France v. Commission, T-444/04 France Télécom v. Commission, T-450/04 Bouygues v. Commission, T-456/04 AFORS Télécom v. Commission, a state aid case concerning recapitalisation of France Télécom, will be decided on 21 May 2010. [update 13 May 2010: sorry - but the case disappeared from the ECJ’s calendar again, so we will have to wait a little longer, but I still expect it to be decided before summer - and another update: even though it didn’t show up on the Court’s public calendar just a week ago, it wa decided nonetheless - see this post].

And “number 2″, C-58/08 Vodafone, on the validity of thearticle 4 of the roaming regulation is coming up for judgment on 8 June 2010. My “number 1″-case, just to remind you, is C-280/08 P Deutsche Telekom AG, where on 22 April 2010 the advocate general delivered his opinion; see here).

Opinions of the advocate general are coming up on 1 June 2010 in C-222/08 Commission v. Belgium and C-389/08 Base and others v. Belgacom, both dealing with universal service in Belgium. [update 13 May 2010: again, these two cases were dropped from the ECJ’s calendar]

*) Shakespeare, King John, Act V, Scene 6

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“One fire drives out one fire”*: explaining the blogs’ downtime

Posted on May 9, 2010 | Filed Under communication technologies

This blog was down - the server could not be reached - for a few days some two weeks ago, and for another three days just this week. The reason in both instances was, quite simply, if unlikely: fire. The blog is hosted on the servers of the Vienna University of Economics and Business, and by some very unfortunate coincidence, a fire ravaged through the transformer room already two weeks ago; then when the all systems had come back, there was another fire, reportedly due to faulty repair work after the first fire. Now electricity is restored and even the non-essential servers are all running again. The university is coming back to business as usual, on campus as well as in the virtual world, such as here in this blog.

*) Shakespeare, Coriolanus, Act IV, Scene 7

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“Our expectation hath this day an end”* - advocate general on Deutsche Telekom margin squeeze

Posted on April 22, 2010 | Filed Under communication technologies

Can there be a legitimate expectation that the European Commission would follow a national telecommunications regulatory authority (NRA) in its assessment of a margin squeeze situation? No, says advocate general Mazák in his opinion, delivered today in the Deutsche Telekom magenta margin squeeze case (C-280/08 P Deutsche Telekom AG) - because even though the NRA is “obliged like all organs of the State to respect the provisions of the EC Treaty”, it is not the competition authority, but responsible for regulating the telecommunications sector. The NRA decides whether an operator “satisfies the provisions of regulation” “the first barrier).

“Article 82 EC [now Article 102 TFEU] represents a second barrier and – independently of the obligation to respect the provisions of the EC Treaty imposed on [the NRA] – it falls within the competence of the relevant competition authority, in this case the Commission, to decide where necessary whether that second barrier was respected or not.”

The advocate general, after carefully exmanining the finer intricacies of margin squeeze, including the burden of proof, then comes to the conclusion that the ECJ should dismiss Deutsche Telekom’s appeal.

*) Shaekspeare, King Henry V, Act III, Scene 3

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When “I used to work in telecommunications” is not enough: US Supreme Court debates texting

Posted on April 21, 2010 | Filed Under communication technologies

Slightly off topic, but nice: Justice Scalia of the US Supreme Court used to take pride in his past experience in telecommunications (he served briefly as General Counsel in the Office of Telecommunications Policy, Executive Office of the President, in 1971-1972). In the oral argument in Bell v Twombly he tried to impress Counsel with the explicite statement: “I used to work in the field of telecommunications” (p 49 of the transcript). And of course. Scalia wrote the Court’s opinions in MCI v AT&T and Verizon v Trinko.

But today, in the argument on a privacy case, Ontario v. Quon, it showed that his telecommunications experience might not have equipped him with an understanding of how texting works. Neither Chief Justice Roberts nor Justice Scalia obviously knew that when a text message from a mobile device is sent to another mobile device, it does not go directly (without being routed over a network and processed there) to this device. Here’s an excerpt from the transcript, starting at page 48:

“CHIEF JUSTICE ROBERTS: Again, it depends upon their reasonable expectation. Do any of these other people know about Arch Wireless? Don’t they just assume that once they send something to Quon, it’s going to Quon?
MR. DAMMEIER: That’s — that is true. I mean, they expect –
CHIEF JUSTICE ROBERTS: Well, then they can’t have a reasonable expectation of privacy based on the fact that their communication is routed through a communications company.
MR. DAMMEIER: Well, they — they expect that some company, I’m sure, is going to have to be processing the delivery of this message. And –
CHIEF JUSTICE ROBERTS: Well, I didn’t — I wouldn’t think that. I thought, you know, you push a button; it goes right to the other thing.
MR. DAMMEIER: Well -
JUSTICE SCALIA: You mean it doesn’t go right to the other thing?
(Laughter.)
MR. DAMMEIER: It’s — I mean, it’s like with e-mails. When we send an e-mail, that goes through some e-mail provider, whether it be AOL or Yahoo, it it’s going through some service provider, just like when we send a letter or package, it’s going through — some provider is going to move that for us, until it gets to the recipient.
…
CHIEF JUSTICE ROBERTS: So we have to assume for your argument to succeed that they know this goes somewhere else and then it is processed and then it goes to Quon.
MR. DAMMEIER: Yes, but I think in today’s — I think in today’s society that’s — that’s a
reasonable assumption to make. One -
JUSTICE CALIA: Yeah, I didn’t know. ” (emphasis added)

The WSJ Law Blog already made fun of this (“Our Tech-Savvy Supreme Court”), as did Adam Liptak in the New York Times.

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“Be not afeard”*: costs and disincentives for number portability

Posted on April 16, 2010 | Filed Under communication technologies

Article 30 (2) of the Universal Service Directive 2002/22/EC states that “National regulatory authorities shall ensure that pricing for interconnection related to the provision of number portability is cost oriented and that direct charges to subscribers, if any, do not act as a disincentive for the use of these facilities.” (the recently adopted reform package did not change that in substance, the wording now - as amended by directive 2009/136/EC - is “that direct charges to subscribers, if any, do not act as a disincentive for subscribers against changing service provider”).

But how do you define the limit for direct charges, so that they will not act as disincentive - that subscribers will not be afeard** to change subscribers while keeping their number? Could you, for instance, just ask consumers which price they were willing to pay for the service? This is what the Polish Regulator did. And as the price charged by the mobile operator Polska Telefonia Cyfrowa sp. zoo was higher than what consumers where willing to pay, the regulator imposed a fine on the operator. In the judicial proceedings that ensued, the Polish Supreme Court asked the European Court of Justice for a preliminary ruling: “Is Article 30(2) of Directive 2002/22/EC … to be interpreted as meaning that the competent regulatory authority of a Member State, when ensuring that direct charges to subscribers do not act as a disincentive for the use of the additional facility of porting numbers, has an obligation to take account of the costs incurred by mobile telephone network operators in providing that facility?”

In this Case C-99/09 Polska Telefonia Cyfrowa v. UKE, advocate general Bot delivered his opinion (not yet available in English) on 15 April 2010. His conclusion is that when national regulatory authorities have to decide whether direct charges act as a disincentive to subscribers, they have to take into account - in a manner they see fit [”de la manière qu’elles jugent la plus appropriée”] - the costs that are incurred in connection with number portability.

The conclusion may not be surprising, even if in some member states operators currently are not allowed to charge anything to the subscriber wishing to change operator (advocate general Bot thinks - cf paragraph 72 of his opinion - that such a requirement is not compatible with the directive). What is more surprising, at least to me, is how the advocate general gets to his conclusion: by seeking and finding “principles” for price regulation in telecommunications directives starting with the ONP-framework directive 90/387/EEC (!), which is of course not in force any more and did not set any principles for enduser tariffs. But this does not matter to the advocate general, who also refers to several other historic directives as well, and also to the judgment of the ECJ in the case C-152/07 - 154/07, Arcor ao (which dealt with issues concerning the old ONP-interconnection directive and the ONP-competition directive).

I am less than convinced that just because at different times in telecommunication regulatory history there were (different) approaches to cost oriented tariffs, the “direct charges” for number portability also have to take costs into account, even though in the wording of Article 30 this is not explicitely expressed. It may well be so, but I’d like to see a reasoning more to the point [and by the way: the death of advocate general Colomer and the end of term for advocate general Poiares Maduro mean that the ECJ lost two AGs that were well versed in telecommunications law].

On the other hand, of course, defining the threshold of a “disincentive” just by taking a consumer survey hardly seems to satisfy a rule of law-concept, especially if fines are imposed on operators whose charges are above the average “disincentive-threshold”. The advocate general spells that out very clearly in paragraphs 61 to 69 of his opinion.

What I find interesting is the repeatedely emphasized “margin of appreciation” of the regulatory authority (”marge d’appréciation”, paragraphs 30, 39, 41, 53), which should not be confused with its discretionary power (”pouvoir discrétionnaire”), as the advocate general points out in paragraph 54. I am quite sure we will see more of these margin of appreciation/discretion-issues in the future.

*) Shakespeare, The Tempest, Act III, Scene 2.

**) As I do not know any Shakespeare text using the word “disincentive”, I had to stick with “afeard” for my title-quote.

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