Respected regulatory commentator Andy Tarrant has published a paper on the challenges of removing the communications barriers to cross border trade throughout the EU: a key focus of INTUG. The paper focuses on how regulatory governance in telecoms is failing to ensure that the inputs necessary to facilitate cross-border supply chains are provided.
Dr. Tarrant points out that, in the previous round of European legislation, national regulators were able to forestall pressure for mandatory requirements to ensure that such inputs were made available by giving the impression that the voluntary collective body of the national regulators (NRAs) would encourage the NRAs to progress the issue.
Under pressure from INTUG and others, the ERG and its successor BEREC carried out research and produced non-binding recommendations. Once the threat of new legislation died away, in 2011, the activity by the NRAs ceased and they have ignored the voluntary recommendations.
Representatives of some national regulators have also argued that cross-border services do not exist and that therefore they should not be forced to provide the wholesale access that would support such services. However, work by economists, and in particular by the OECD, shows that this outlook is incorrect, and is based on a misunderstanding of modern trade.
Dr. Tarrant notes that telecoms infrastructure and services contribute less to GDP than e-commerce, and that both are likely to be trivial in comparison to the role that cross-border networks play in the production of all goods and services which contain cross-border inputs. He observes that 38% of people employed in the UK in the production of goods and services exported to the EU are engaged in supplying intermediate inputs that are re-exported.
Previous research sponsored by INTUG, and conducted by Indepen and WIK, demonstrates that the growth lost within the EU by a failure to facilitate the seamless connectivity that underpins cross-border trade, is substantial. EU Commission studies have failed to capture this loss, because the methodology used focuses on the growth gained through rolling out the broadband of underperforming European economies to the level of the countries with the highest broadband penetration.
However, this methodology only tells us what the gain would be if a series of fragmented national markets operated at best practice, whereas INTUG’s research shows the common gains should multi-nationals and other organizations re-engineer business processes and practices based on the ability to operate a single efficient communications system throughout the EU.
The NRAs were given the opportunity to “self-regulate” in this matter, and have failed to do so. There is now a strong argument that the Council of Ministers and the European Parliament need to set in place rules obliging NRAs to ensure that telecoms regulation supports the ability of businesses to operate effectively and efficiently within Europe. The European Parliament has already said that it will seek better regulatory governance in the new legislative round.
The author argues that the UK in particular ought to be in favor of revision of regulatory governance due to the strengths of companies based in the UK in providing cross-border services, in selling e-commerce and in operating multi-site businesses across the EU.
NRAs may try to characterize such rules as a loss of their sovereignty to Brussels in order to defeat the move. However, Dr. Tarrant shows that the political institutions have moved in the past in the pharmaceutical sector to ensure that NRAs cooperate effectively to create common rules that support businesses. He sets out in the paper how the lessons learnt there could create an institutional mechanism that recognizes the role of the NRAs but constrains them to develop common European-wide solutions that would benefit business users.