The Regulatory Framework for European Telecommunications Markets Between Subsidiarity and Centralization

This paper discusses the advantages and disadvantages of centralizing regulatory competences in the European telecommunications sector. As is demonstrated, political economy suggests that an over- rather than an underregulation of telecommunications markets has to be expected. This tendency has been strengthened by the allocation of competences under the current regulatory framework which endows the European Commission with far reaching veto rights under the so-called article 7 procedure. In order to delimit the risk of overregulation through institutional safeguards, it should be easier for regulators to deregulate than to regulate a market. Current suggestions and ambitions by the Commission to extend its veto right or to establish a European regulator for telecommunications should be dismissed. Instead, we suggest limiting the Commission’s veto rights to (a) markets, in which regulation creates significant cross-border externalities, and (b) cases where national regulators do not move into the direction of deregulation. If, however, a national regulator decides to deregulate a market, the Commission’s ex ante veto right should be abandoned (but ex post intervention by the Commission still be possible) in order not to hamper deregulation which tends to be the desired result, in principle. In addition, we argue that the “insufficiency of competition law”-criterion of the three-criteria-test needs to be taken more seriously than has been so far by national regulators.