EC mulls changes to universal service directive

On 2 March 2010 the EC launched a public consultation on revising the Universal Service Directive for the new digital era. The objective is to find the best approach to ensure that basic telecoms services are available to all EU citizens. The EC is seeking views on key areas including basic concepts of universal service, access to broadband, national flexibility, and a coordinated EU approach to financing. The consultation will run until 7 May 2010. After a period of lengthy delay we expect new legislative proposals to finally come this year.

Universal service is one of the key issues in protecting and enhancing the rights of telecoms service consumers. The current EU rules on universal service for telecom date from 2002 and guarantee that Europeans have access to public telephone networks and to services such as “functional Internet access”. Although the EC reviewed the scope of universal service in 2005 and 2008, conclusions were not substantially different from the previous review and thus the overall scope of universal service was left unchanged.
Nevertheless, in light of technological and economic developments (such as fibre deployments and the emergence of LTE and Wimax), these rules and the current scope of the Universal Service Directive (USD) need to be updated for the digital age. In the 2002 directive, neither mobile nor broadband fall within the existing scope of the USD. In European markets, there has been significant substitution of mobile for fixed voice telephony, and increased uptake of broadband, both of which must be taken into account. This raises questions about the concept of universal service – in particular, whether it should be extended to cover broadband access. Certainly many national governments seem to think so.
Access to broadband a fundamental right
As governments of most developed markets have outlined national broadband plans, universal broadband has naturally become part of their digital strategies. In Europe, Switzerland was the first country to include broadband access as part of its USO in January 2008. Thereafter, Finland, France, the UK, and Spain have set out plans for countrywide broadband provision in their digital strategies. Finland has enforced broadband at 1Mbps as a legal right, and the UK's Digital Britain report sets out a 2Mbps universal service commitment to be achieved by 2012 (for further details, see our report ‘A comparison of digital strategies for economic recovery’). Recently a new government body, Broadband Delivery UK, was established to be responsible for implementing the 2Mbps universal service commitment.
Ensuring universal access to broadband is not just a regulatory tool for competitiveness and economic growth, but is also important in terms of consumer rights and welfare. As early as 2006, the EC released a Communication on bridging the broadband gap, and in 2008 it called for further efforts to ensure “broadband for all” in Europe, in order to reduce the digital divide and ensure consumers in remote and rural areas have access to broadband.
For these remote and rural areas, deploying fixed-line infrastructure is both challenging and expensive: increasingly, wireless technologies provide new means of delivering broadband. Achieving universal broadband therefore requires careful attention to be paid to a number of policies, from ensuring that adequate spectrum is available to guaranteeing that financing mechanisms are in place – whether this be state aid or initiatives based on public–private partnerships.
Financing USOs will become complicated
At least two issues make the financing of an extended universal service obligation complicated. First, contributions to the universal service fund (USF) need to expand to wider industry players. Under the current arrangements in Europe, generally only traditional fixed telephony and wireless providers have to pay into the USF, whereas in the US, the FCC expanded universal service contribution obligations to VoIP providers in 2006. This might provide a useful example for the EC, and encourage it to consider changing the current mechanism of the USF.
Second, as we outlined above, there are various regulations and policies that must be navigated, including state aid rules, national broadband plans (and the funds provided by governments), and spectrum policy (digital dividend frequencies and UMTS900). These will bring fundamental changes to the calculation of costs of the USO and financial contributions to the USF.