The National Regulatory Structure Against the Background of the European Regulatory System

The telecommunication sector is influenced by various political powers: The European Parliament, together with the European Commission, fosters the European integration process in network-based markets and uses alternative strategies to align national regulatory systems. National governments support this European integration strategy. However, they follow also national aims which are not necessarily in line with the European integration process. Finally, sub-national governments know of the importance of telecommunications for regional economic development and, therefore, seek to attract (support for) infrastructure investments. In this paper, I analyze the intermediate role of national governments between pan-European aims and national and sub-national aims. I first consider pan-European regulation guidelines and instruments to tackle the integration process. One key vehicle in this context are the Regulatory Packages which should provide guidelines during the transition of European telecommunication markets from monopolistic national markets to integrated European-wide competitive markets. National lawmakers transform these guidelines to national laws taking into account national specificities and national regulators control their adoption to markets. However, national governments have been (and still are) engaged in national telecommunication markets in multiple roles: Former monopolists were under governmental control for a long period of time even after the liberalization and, in many countries, governments still keep the majority of shares today. Meanwhile, governments have a strong impact on strategic regulatory decisions and, finally, see the availability of an adequate telecommunication infrastructure as a major requirement for economic growth. For internalizing the growing positive externalities provided by the availability of telecommunications, public support in infrastructure projects is a key pre-requisite. Comparing the situation across alternative member states shows that the ambiguous roles of governments had a strong impact on the development of competition in telecommunication markets after the liberalization. Based on early experience shortly after the liberalization, the European Commission seeks to separate the alternative roles of governments from each other. However, the practical implementation is a major challenges even ten years after the liberalization. As the infrastructure is the key input for providing telecommunication services, comprehensive investments require an integrated regulatory approach where incentives to invest and to operate the infrastructure have to be controlled and enforced by regulators with adequate decision powers to support the European integration process. This issue becomes even more relevant when taking into account the importance of telecommunications in the European economic growth process after the financial crisis. I discuss the role of the government bearing in mind market-oriented competition arguments which mainly demand the separation of the roles of the governments and also more macroeconomic oriented arguments which demand an integrated guidance taking into consideration the key role of telecommunications for other sectors. Finally, I consider the alternative approaches in the light of the latest Regulatory Package which was installed in December 2009 and discuss the role of governments under these new guidelines.

Veith, Tobias (2010), The National Regulatory Structure Against the Background of the European Regulatory System, ZEW Discussion Paper No. 10-089, Mannheim.