1&1 Internet AG
Dr. Mario Rehse Senior Manager Government Relations
Neustädtische Kirchstraße 8 10117 Berlin Fon +49 30 8103152-8820 Fax +49 30 8103152-8822 firstname.lastname@example.org
Vorstand: Henning Ahlert, Ralph Dommermuth, Matthias Ehrlich, Robert Hoffmann, Andreas Hofmann, Markus Huhn, Hans-
Henning Kettler, Dr. Oliver Mauss, Jan Oetjen, Martin Witt
Aufsichtsratsvorsitzender: Michael Scheeren, HRR Montabaur 6484 Westdeutsche Landesbank Düsseldorf, BLZ 300 500 00, Konto 4865564 - Nassauische Sparkasse Wiesbaden, BLZ 51050015, Konto 803 072 000
Position paper on the proposal for a regulation laying down measures con-
cerning the European single market for electronic communications
Berlin, 10th December 2013 With 13.27 million customer contracts, 1&1 Internet is a global leader amongst web hosting providers and one of Europe’s leading Internet service providers, serving consumer, business and developer users. 1&1 Internet has operations in the UK, Germany, Austria, France, Spain, Poland, Italy, Mexico, Canada and the United States. In Germany, 1&1 Group also offers a range of broadband and mobile access products. On September 11, 2013 the European Commission released a proposal for a comprehensive reform package creating a European single market for electronic communications. The draft presented several reforms related to the European telecommunications market which were omewhat significant changes compared to the former regulatory approach. These were assessed with a critical view by many stakeholders, especially by BEREC. Committees of the European Parliament released draft opinions at the end of November criticizing many points and proposing alternatives. In this context, 1&1 Internet AG is pleased to take the opportunity to submit its assessment of the current draft. In particular, the biggest critic of the parliamentary rapporteurs, as well as the opinion of BEREC, emphasize that the timetable of the Commission is clearly too ambitious regarding the profound steps to be taken during the implementation of the regulation. The possible impacts of the regulation require a detailed analysis and in-depth policy review and discusion. For this reason, the regulation shall not be negotiated and released too quickly just because of the upcoming European Parliament elections in 2014. 1.
The draft regulation proposes full harmonization with a sudden time scale since the last telecommunications directive dates back to 2009 and was applied to the German law in 2012. The Single Market Regulation shall introduce provisions that are directly applicable for Germany. This approach, as opposed to previous legislative instruments, does not leave any flexibility of implementation for the member states.
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The regulation fails to take into consideration characteristics related to market competition in certain member states. Furthermore, it favors for a “one-size fits all” approach that will likely be unsuitable in many respects. These changes are serious and complex, at the same time, the switch of the regulatory objective is so dramatic that is should be warned against. Also, considering the expiring legislative term of the European Parliament and the upcoming change in the European Commission, one should be warned of any rushed actions. To this end, a comprehensive analysis and discussion with all stakeholders should be carried out in order to put emphasis on special market characteristics. This should highlight that establishing a quasi-oligopoly in Europe will lead to twisted competition in certain member tates. This is not a desirable objective and will not be convincing from a consumer perspective. In this respect, one shall agree with the proposal of the rapporteur of the ITRE-Committee (especially Amendment 48) and that of the rapporteur of the CULT-Committee that a detailed evaluation of the existing regulatory framework should be conducted and in every case regimes should be carefully adjusted. 2.
Regulatory approach & telecoms market recommendation
The most important change related to the extent and quality of competition on the European telecommunications market is that new regulatory objectives were developed and specific proposals were built upon them. These adjustments will ultimately change the regulatory framework. By promoting “European champions”, the international competitiveness of a few, European-wide active, telecommunications companies shall be encouraged. The subsequent changes in the regulatory framework which take no account of national competition may jeopardize the entire structure of the German and European telecommunications market. In this respect, one shall agree with the rapporteur of the ITRE-Committee stating that regulation of domestic markets should not be cut back in favor of international competitiveness (Amendment 55). Simultaneously, the reform may diminish all aspects of regulatory and economic security which plays a significant role for companies and their investors. It aims to change the reference point to a European view. Therefore, current-market leading companies would be treated differently in their own national markets despite their unchanging size and market hare. Probable consequences of this would be market consolidation towards a small number of large providers. In addition, the level of competition would decrease thus damaging this major driver of innovation, efficiency and consumer friendly offers.
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Even today all telecommunications companies are able to offer services in every member tate. However, they may refuse to do so not just due to regulatory obstacles but because of corporate strategy, legal framework and economic aspects. The economic constants (such as fixed costs for construction and maintenance of infrastructure) will not change due to European scaling of companies. The demand for fixed lines naturally occurs at consumer residence or at company location. Therefore it is completely useless for the end user whether the provider is active in other European countries or not. A competitive market is crucial in order for an offers quality to be maximized. Presumably, big market participants, which were strengthened by the recent consolidation, will expand their position on the European telecommunications market. On the other hand, only a few bigger providers will dominate the European market at the expense of national competitors, ultimately leading to rising prices on the telecommunications market. 3.
Single EU authorisation (Article 3 to 7)
The implementation of a single EU authorisation based on single notification system in the Member State of the main establishment would pose a threat of Forum-Shopping. Furthermore, it may lead to uneven and twisted competition. National regulatory authorities would not be able to shape their own national competition. Companies on the same market would be monitored by different national regulatory authorities. This problem can be observed in case of data protection supervision since purposeful Forum- Shopping and extremely differing regulation levels were caused by the applied territorial principle. Taking into consideration all the national characteristics dominating the telecommunications market, weaker authorities would certainly cause weaker competition on a national level. 4.
Provision of wholesale products (Article 17-20)
Based on the Commission’s proposal, the market-specific development of wholesale products shall not be carried out by national regulatory authorities anymore since the EU Commission wants to define specific wholesale products for the future. Thus the European Commission turns away from the previous practice to let national regulatory authorities define wholesale products based on their domestic market’s specifics of competition and demand. In case of Germany, this would have a negative impact on the availability of regulated wholesale products in a fixed network. From a competition angle, the “European virtual broadband access product” being promoted by the EU Commission is not an adequate substitute for unbundled subscriber lines. Particularly the opportunity to obtain unbundled access to copper-wire pairs enables every company to reach end-users with infrastructure and specific offers. Giving up this access
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would decrease the potential of value creation, strengthen the dependence on marketleading companies and reduce the existing infrastructure competition in Germany. The access to an "assured service quality (ASQ) connectivity product" is tied to the condition that only those companies get wholesale product access which itself (as network operators) provide this connectivity product (Article 19(2)). This completely excludes an important part of competition, namely the service competition merely on wholesale basis. This competition has been the main pillar and driver of innovation on the broadband market in Germany over the past years and it has contributed significantly to broadband expansion through the charges for whole-sale products. An intensive service competition is the only reliable engine to establish future broadband markets and to develop existing markets so that networks can amortize through rapid utilization. Moreover the service competition has promoted innovation in the telecommunications industry due to quality and price advantages. Especially, regulatory impulses are required just as much as before in order to improve service quality for end users and by doing so support competitors, such as 1&1, to put their distinctive customer service focus successfully into practice – as this was showed by the experience over the past years. A unified whole-sale product will not assure sufficient quality of complex processes such as changing provider or fault elimination. The rapporteur of the ITRE-Committee suggests to completely delete the specifications for unified, European wholesale products (Amendments 22 to 29, 59 with respect to the deletion of 1 (3) c, 66, 67, 99, 100). From the perspective of the 1&1 Internet AG this is an appropriate proposal. Europe-wide unified wholesale products may be useful for providers who actually pursue a trategy for Europe-wide service offers. To maintain national competition, the known and uccessful wholesale products are needed. Therefore, the Europe-wide wholesale products proposed by the draft regulation should be introduced as supplements to existing regulated wholesale products and not as substitutes for them. In order to maintain competition on the German telecommunications market, the access to bundled and unbundled, high-quality and competitive wholesale products has to be assured. 5.
Net neutrality (Article 23)
1&1 is committed to net neutrality in the sense that distortion of competition or any retriction of use should not occur as a result of favoring for own services or discriminating against other ones. It is welcomed that the draft regulation clearly states that volume caps do not impair net neutrality, but belong to the price and supply consideration of access providers. Similarly to different broadband offers, volume limitations are differentiators in the field of competition; consequently as long as it is done transparently they are absolutely
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legitimate. However, all services should be treated equally in terms of data usage. In this respect the draft regulation needs to be improved. The clear legitimization of special services is acceptable providing their impact on competition is investigated and regulation only affects fields where competition may be at risk. In particular, special treatments should not hinder competition or create lock-in effects from a user perspective. In this respect the draft regulation of the Commission needs to be clarified. 6.
Graduated response systems
There were several political discussions in the past concerning the role of internet service providers in illegal contents such as child pornography, copyright infringement or illegal gambling. According to Article 23(5) reasonable traffic management measures are allowed to prevent or impede serious crimes. These kinds of measures are not appropriate to prevent any serious crimes without deleting the source. Furthermore, they raise issues related to data privacy and secrecy of telecommunication. In this regard, this debate should be treated carefully foregoing the above cited passage. Furthermore, the proposal of the rapporteur of the ITRE-Committee (Amendment 32 and 105) should be followed. 7.
Consumer protection (Article 25-30)
Consumer rights were recently regulated in the Universal Service Directive in 2009 and implemented in the German Telecommunications Act (TKG). Such an immediate change of the legal regime without any significant reason would destroy the trust in legislator and associated economic planning security. Based on the Commission’s proposal the general scheme of the consumer protection framework would be changed in several ways and the suitable implementation processes of the member states would be replaced by Europe-wide unified regulations. In this respect, the approach of the IMCO-rapporteur should be preferred namely adjusting existing guidelines, if not at all foregoing new regulations (Amendment 13-43).
Switching process According to Article 30(4) the receiving provider of electronic communications shall lead the switching and porting process. However, in practice it cannot be expected that the receiving provider takes responsibility for the whole process on its own. According to § 46 of TKG the responsibilities are rather carefully divided by taking advantage of possible implementation methods of the directive. Based on national regulation those companies affected by § 46 of TKG already developed systems, processes and interfaces which are not congruent with the present requirements. Further change to these processes would produce new expenses and
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presumably lead to friction loss. This would not be in favor of consumers, wasting efforts with no results.
The information requirements of Article 26 of the draft regulation are basically in line with those of Article 20 of the Universal Service Directive which were successfully implemented in the German law by § 43a TKG. However, the concrete duties preented in the draft are more excessive. Therefore the intended transparency may be undermined by sheer amount of information. In addition to that, providers have already adapted their processes to the catalog of the German TKG. Adapting to the differing text of the draft regulation - that would immediately apply - could create coniderable obstacles without increasing the level of protection for consumers. The rules related to contract period – especially the right to terminate the contract after a six months period according to Article 28(2) of the draft regulation – seem to violate contractual freedom. Moreover, this seems to overrule the opportunity laid down in the first sentence of Article 28(1) of the draft regulation namely that contracts may be concluded for a duration of 24 months. The permission of Article 28(2) although being in line with remaining EU consumer rights would therefore no longer have a foreseeable effect.