From Telecommunications Liberalization to Net Neutrality Rules: A Longitudinal Institutional Analysis of EU Communications Policy (Studien der NRW School of Governance) 3658330139, 9783658330132

Citation preview

Studien der NRW School of Governance

Simon P. Rinas

From Telecommunications Liberalization to Net Neutrality Rules A Longitudinal Institutional Analysis of EU Communications Policy

Studien der NRW School of Governance Reihe herausgegeben von Christoph Bieber, NRW School of Governance, Universität Duisburg-Essen, Duisburg, Deutschland Andreas Blätte, NRW School of Governance, Universität Duisburg-Essen, Duisburg, Nordrhein-Westfalen, Deutschland Karl-Rudolf Korte, NRW School of Governance, Universität Duisburg-Essen, Duisburg, Deutschland

Die Studien der NRW School of Governance sind eine praxisorientierte Schriftenreihe, die einen wichtigen Beitrag zur modernen Regierungsforschung leistet. Sie dokumentiert die Forschungsergebnisse der NRW School of Governance und bietet zugleich ein Forum für weitere wissenschaftliche Arbeiten aus ihrem thematischen Umfeld. Das Interesse gilt der Komplexität politischer Entscheidungsprozesse in den Bereichen Politikmanagement, Public Policy und öffentliche Verwaltung. Untersucht werden die praktischen Bemühungen rational handelnder Akteure ebenso wie die Wirkungsweise institutioneller Koordinationsmechanismen auf der Landes- und Bundesebene. Mit dem Fokus auf ethische Aspekte werden aber auch neue, bisher vernachlässigte Fragestellungen des modernen Politikmanagements wie moralbegründete Argumentations- und Entscheidungsvorgänge sowie ethische Beratungsorgane thematisiert. Die Reihe veröffentlicht Monographien und Konzeptbände, die frei eingereicht oder auf Anfrage durch die Herausgeber der Schriftenreihe verfasst werden. Auf eine sorgfältige theoretische Fundierung und methodische Durchführung der empirischen Analysen wird dabei ein besonderer Wert gelegt. Die Qualitätssicherung wird durch ein anonymisiertes Begutachtungsverfahren sichergestellt.

Weitere Bände in der Reihe http://www.springer.com/series/12350

Simon P. Rinas

From Telecommunications Liberalization to Net Neutrality Rules A Longitudinal Institutional Analysis of EU Communications Policy

Simon P. Rinas Berlin, Germany Diese Arbeit wurde von der Fakult¨at f¨ur Gesellschaftswissenschaften der Universit¨at Duisburg-Essen als Dissertation zur Erlangung des Doktorgrades Dr. rer. pol. genehmigt. Name der Gutachter: 1. Prof. Dr. Christoph Bieber 2. Prof. Dr. Michael Kaeding Tag der Disputation: 22.09.2020

ISSN 2626-2843 ISSN 2626-2851 (electronic) Studien der NRW School of Governance ISBN 978-3-658-33013-2 ISBN 978-3-658-33014-9 (eBook) https://doi.org/10.1007/978-3-658-33014-9 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Responsible Editor: Stefanie Eggert This Springer VS imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Foreword

Die vorgelegte Dissertation ist in einem fließenden Prozess zwischen Wissenschaft und Praxis entstanden, aus beiden Bereichen sind wesentliche Impulse in dieses Projekt geflossen. Ein unerwarteter Pfad und doch sehr passend zum verschlungenen Gegenstand, dem europäischen Institutionendickicht. Begonnen hat Simon Rinas diesen Weg als Promotionsstudent an der NRW School of Governance, fortgef¨uhrt wurde das Projekt am Berliner Humboldt Institut f¨ur Internet und Gesellschaft, ein Zwischenstopp als Elternzeitvertretung f¨uhrte zur auch 2020 noch einzigen Professur in Deutschland mit der Zuschreibung „Internet und Politik“, worauf ein längeres Intermezzo in der IT-Branche folgte. Oft f¨uhren ähnliche Weggabelungen zu einem vorzeitigen Projektende – hier aber nicht und das ist gut so. Trotz des massiven Technikwandels, der den Untersuchungszeitraum zwischen 1982 und 2018 bestimmt hat, behält Rinas nicht nur die zentralen technologischen Einschnitte und Wendepunkte im Blick, sondern setzt sie auch in Bezug zur theoretisch entwickelten Perspektive auf Institutionalisierungsprozesse. So gelingt es ihm auf überzeugende Weise, eine Verbindung zwischen Interesse zur Modellierung mehrerer miteinander verbundener Politikprozesse auf europäischer Ebene und einem moving target auf der Phänomenebene herzustellen. Die Untersuchung ergänzt und erweitert damit die wenigen, bisher vorliegenden Arbeiten, die sich mit Entwicklungen in Deutschland entstandenen „Politikfeldes Netzpolitik“ auseinandersetzen. Die Dissertation ist eine sehr gelungene Auseinandersetzung mit der Entwicklung der europäischen Kommunikationspolitik. Es hat der Studie nicht geschadet, dass das untersuchte Material nicht nur aus der Sicht eines unbeteiligten Forschers, sondern – zumindest zeitweise – auch aus der Perspektive eines

v

vi

Foreword

Stakeholders betrachtet wurde. Oder anders gesagt: der Autor weiß viel, manchmal sogar zu viel, u¨ ber die Argumentationsmuster mancher beteiligter Akteure. Die intime Kenntnis des Feldes zeigt sich auch an unerwarteter Stelle, wenn etwa in einem Schaubild zur Netzneutralität der politisch allzuoft u¨ bersehene cat content Ber¨ucksichtigung findet. Rinas verlässt sich auf die „klassischen“ Formen der Textarbeit und Dokumentenanalyse, auf jüngere Formen einer automatisierten Textanalyse verzichtet er. Daraus resultiert vielleicht ein kleiner Nachteil gegen¨uber anderen Untersuchungsansätzen, die komplexe Politikentwicklungsprozesse vielleicht besser abbilden können. Doch die hier vorgelegte akribische Auseinandersetzung mit dem Material lässt dies vergessen, die Ergebnisse werden souverän verdichtet zu einer „Phasenheuristik“ in der europäischen Kommunikationspolitik, stets abgeglichen mit den vorab entwickelten theoretischen Perspektiven. Das Resultat ist eine chronologisch aufgebaute, sehr deskriptiv und detailliert angelegte Darstellung der Entwicklungsschritte einer europäischen Kommunikations- bzw. später Digitalpolitik. Es gelingt eine produktive Erinnerung an fr¨uhere Texte zum Information Highway aus den 1990er Jahren – schon einmal stand die Genese einer neuen medialen Infrastruktur im Blickpunkt und deren politisch-ökonomische Rahmung als schwer zu kategorisierende „Netzwerke neuen Typs“. Ein zentrales Ergebnis ist für Rinas ein sich langsam, aber konsequent vollziehender institutioneller Selbstfindungsprozess. Die beiden auf die j¨ungere „Internetisierung“ der EU-Kommunikationspolitik zielenden Abschnitte können auch als zwei eigenständige Analysen der wichtigen Institutionalisierungsepisoden gelesen werden. Dabei ist es bezeichnend für den Stand der technologischpolitischen Debatte, dass der Begriff des content erst mit dem Aufkommen der Internetkommunikation eine substantielle Rolle u¨ bernimmt – zuvor stand das technisch-ökonomische product im Vordergrund. Die vorliegende Untersuchung nimmt diesen Paradigmenwechsel wahr und findet so eine zentrale Dimension digitaler Kommunikationspolitik, die längst wesentlich vielschichtiger und komplexer geworden ist als zu Beginn des Untersuchungszeitraums in den 1980er Jahren. Rinas registriert den Aufstieg des users als wichtige Akteursposition, die auch zunehmend den Anspruch auf Repräsentation erhebt – sich dabei jedoch gegen immer neue institutionelle layer behaupten muss. Es überrascht daher nicht, dass dieser Bereich hinter den Macht- und Entscheidungsspielen von IT-Konzernen, dem Br¨usseler Lobbying- Universum, (nationalen) Regulierungsbehörden und den langsam aufwachsenden EU-Fachagenturen zur¨uckbleibt. Die hier vorgelegte Analyse verleiht dieser empirisch oft beklagten Tatsache ein solides Theorie-Fundament.

Foreword

vii

Gerade in dieser Bedeutungsverschiebung von product zu content, von einer technisch-ökonomischen Perspektive hin zu einer stärker kommunikativinhaltlichen Sichtweise, zeigt sich die nächste Entwicklungsstufe des untersuchten Politikfeldes. So mag die Institutionalisierung als eine funktionale Arbeitsteilung zwischen europäischen und nationalen Akteuren zwar recht fortgeschritten sein, die beständige Weiterentwicklung der Technologie und vor allem deren gesellschaftliche Aneignung erfordern eine kontinuierliche Anpassung. Das ist Simon Rinas nicht entgangen, denn die j¨ungste Institutionalisierungsphase ist für ihn unabgeschlossen. Wohin aber führt der Weg? Neben der weiteren Differenzierung schließt er die Möglichkeit der drift, des Abschweifens ins Unklare, nicht aus – was die digitalpolitischen Großmächte USA und China vermutlich freuen würde. Und tatsächlich steht nicht weniger als das Konzept einer „digitalen Souveränität“ zur Disposition, das ein Schlaglicht auf die jeweiligen Kompetenzen der drei Konkurrenten wirft. Es braucht nicht viel Fantasie, um die Zukunft dieses Wettstreits in den Fragen der Steuerbarkeit von K¨unstlicher Intelligenz zu verorten. Dabei können sich europäische Akteure auf ein inzwischen vorhandenes Set von Regeln und Normen stützen – immerhin. So kommen ganz praktische Themen zur Wiedervorlage, die in den Jahrzehnten zuvor schon einmal verhandelt worden sind – wie etwa die (nur scheinbar triviale) Frage, ob es ein koordiniertes Zusammenspiel nationaler Behörden, einen Austausch zwischen nationaler und EU-Ebene oder eine zentrale, supra-staatliche Regelungskompetenz braucht. In der präzisen Beschreibung und treffsicheren Analyse solcher Prozessabfolgen im Bereich der europäischen Kommunikationspolitik liegt ein großer Gewinn der Untersuchung – Europa ist in Fragen der Digitalpolitik schon weiter, als es selbst vermutet. Nun braucht es Persönlichkeiten, die das erkennen und ausnutzen. Für die Herausgeber Duisburg im Dezember 2020

Prof. Dr. Christoph Bieber

Acknowledgements

Die vorliegende Dissertation hat auf ihrem Weg hin zur Fertigstellung – ebenso wie ihr Verfasser – viele Abzweige und so manchen Umweg genommen. Ich möchte an dieser Stelle zuvorderst Prof. Christoph Bieber danken, der diesen Prozess trotz struktureller Unwägbarkeiten mit Gelassenheit und einem Blick für die vielseitigen Chancen begleitet und geprägt hat. So manche gute Idee und so mancher gewagte Schritt wäre ohne dies nicht zustande gekommen. Und so gilt dieser Dank sowohl für die konstruktive Betreuung während der Promotion als auch für die Bereitschaft, an vielen Stellen darüber hinaus zusammenzuarbeiten. All diese unterschiedlichen Etappen waren und bleiben auch ein persönlicher Gewinn. Daneben möchte ich Prof. Michael Kaeding für die kritische Beschäftigung mit der Dissertation als Zweitgutachter sowie Prof. Karl-Rudolf Korte und Prof. Andreas Blätte für die in positiver Weise anspruchsvolle Disputation danken. Ihnen allen und vielen mehr gilt auch der Dank, mich während des Studiums an der NRW School of Governance / Universität Duisburg-Essen auf die akademischen und beruflichen Schritte vorbereitet zu haben. Außerdem möchte ich dem Team des Humboldt Instituts für Internet und Gesellschaft in Berlin für das initiale akademische und intellektuelle Umfeld danken, in dem diese Dissertation von den ersten Ideen hin zu einem Konzept gewachsen ist. Für mich als Individualpromovierender war die Einbindung in einen strukturellen, multidisziplinären Kontext bisweilen herausfordernd, insgesamt jedoch in jeder Hinsicht gewinnbringend. Meiner Familie und meinen Freunden gebührt Dank für das unbegrenzte Verständnis im Angesicht mannigfaltiger Unsicherheiten: Habt Dank, dass ihr euch immer dafür interessiert habt, wie es um die Dissertation steht, aber nicht immer gefragt habt. Zuletzt danke ich Marc – für alles.

ix

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Where is the Internet in a World of Telecommunications? . . . . . . 1.2 The Research Field . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 6 8

2 Institutionalism in the 21st Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Introduction: Bringing Institutions Back in . . . . . . . . . . . . . . . . . . . 2.2 EXCURSUS: The Origins of Institutions . . . . . . . . . . . . . . . . . . . . . 2.3 Institutions Do Matter! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 A Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.2 The Logic of Appropriateness: Institutions as Taken for Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.3 The Logic of Calculus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.4 Ideational Approaches: Bringing Institutionalism Together? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.5 Actor-Centered Institutionalism . . . . . . . . . . . . . . . . . . . . . . . 2.4 Rules as Institutional Intermediates . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Institutional Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1 The Institutional Focus on Stability . . . . . . . . . . . . . . . . . . . 2.5.2 Allegiance to Rules and Institutions . . . . . . . . . . . . . . . . . . . 2.5.3 The Role of Gradual Institutional Change . . . . . . . . . . . . . . 2.5.4 Five Mechanisms of Change . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.5 Institutional Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 What is an Institution, Then? Learnings from Institutionalist Triangulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 Applying Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 15 20 22 22 25 29 34 36 37 45 45 49 50 53 55 58 65

xi

xii

Contents

2.7.1 The Study’s Question . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7.2 Propositions and the Logic Linking Data to Propositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7.3 Units of Analysis and Criteria for Interpreting the Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 EU Communications Policy in the Era of Telecommunications . . . . . 3.1 The European Single Market: Between Re-Regulation and Liberalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.1 ‘The European Single Market Programme’ . . . . . . . . . . . . . 3.1.2 EC Competition Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.3 The Liberalization of Network Industries and the Incubation of Technological Advances . . . . . . . . . 3.1.4 Interim Conclusion: The Prospects of the European Single Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Common Market Objectives for the European Telecommunications Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 Cooperation Instead of Standardization: Common Market Issues Before 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 Liberalization in the US and in European Telecommunications Markets . . . . . . . . . . . . . . . . . . . . . . . . 3.2.3 The ECJ as an Agent Promoting EC Telecommunications Liberalization . . . . . . . . . . . . . . . . . . . 3.2.4 The Green Paper on a Common Market for Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Liberalizing European Telecommunications Markets . . . . . . . . . . . 3.3.1 Terminal Equipment: The Inception of Liberalization . . . 3.3.2 Liberalizing Networks and Services . . . . . . . . . . . . . . . . . . . 3.3.3 Regulatory Challenges in Liberalized Telecommunication Markets: Establishing NRAs . . . . . . . 3.3.4 Liberalization Under the Maastricht Treaty . . . . . . . . . . . . 3.3.5 The Full Competition Regime: Adjustment and Re-Regulation in a Semi-Liberalized Market . . . . . . . 3.4 Interim Conclusion: The Advent of EU Communications Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.1 Phase I: Institutional Displacement . . . . . . . . . . . . . . . . . . . 3.4.2 Phase II: Institutional Layering . . . . . . . . . . . . . . . . . . . . . . .

65 66 69 73 73 74 77 80 82 85 86 89 90 91 100 100 102 108 109 112 115 115 120

Contents

4 EU Communications Policy in the Era of Electronic Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Technological Convergence Promoting EU Communications Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 The Lisbon Strategy Introducing OMC . . . . . . . . . . . . . . . . 4.1.2 The 1999 Framework Communication . . . . . . . . . . . . . . . . . 4.2 The 2002 Framework: Hardening the Institutional Setting . . . . . . 4.2.1 The Framework Directive 2002/21/EC . . . . . . . . . . . . . . . . 4.2.2 The Access Directive 2002/19/EC . . . . . . . . . . . . . . . . . . . . 4.2.3 The USO Directive 2002/22/EC . . . . . . . . . . . . . . . . . . . . . . 4.2.4 The Authorisation Directive 2002/20/EC . . . . . . . . . . . . . . 4.2.5 The Question of Significant Market Power . . . . . . . . . . . . . 4.2.6 A New Start for the Lisbon Strategy . . . . . . . . . . . . . . . . . . 4.3 The 2006 Framework Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Interim Conclusion: Further Institutional Layering Through Increased Vertical Depth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Advent of Internet Communications in EU Communications Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 The Institutional Context of the Internet . . . . . . . . . . . . . . . . . . . . . 5.2 Internet Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 The Information Society Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 The Bangemann Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.2 The Information Society Action Plan . . . . . . . . . . . . . . . . . . 5.4 Europe 2020, a Digital Agenda for Europe and the Digital Single Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 The Net Neutrality Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.1 The Innovation Conundrum . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.2 The Pivot of Non-Discrimination in a Two-Sided Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 The EU and the Net Neutrality Debate—Prologues to EU Internet Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6.1 The 2006 Review and Net Neutrality . . . . . . . . . . . . . . . . . . 5.6.2 Net Neutrality Evaluation: A Phase of Transition . . . . . . . 5.7 Interim Conclusion: Digitalization Policy and the Conversion in EU Communications Policy . . . . . . . . . . . .

xiii

129 129 130 131 133 135 138 139 141 141 143 143 148 155 155 157 163 163 168 169 174 175 178 183 183 187 193

xiv

Contents

6 EU Net Neutrality Rules: You Can’t Have the Cake and Eat It, Can You? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Introduction: Enhancing Telecom Single Market . . . . . . . . . . . . . . 6.2 Public Consultations and Impact Assessment . . . . . . . . . . . . . . . . . 6.3 The 2013 Connected Continent Proposal . . . . . . . . . . . . . . . . . . . . . 6.4 The Legislative Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4.1 Divided Support and Substantial Opposition . . . . . . . . . . . 6.4.2 The European Parliament’s Opinion . . . . . . . . . . . . . . . . . . . 6.4.3 EP Elections and the Council Conclusion . . . . . . . . . . . . . . 6.4.4 Trilogue Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 The Final Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 The BEREC Guidelines and the Commission Review . . . . . . . . . . 6.6.1 BEREC Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6.2 The Commission Review COM(2019) 203 and the EECC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7 Interim Conclusion: Risking Institutional Drift Through Non-decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199 199 202 208 213 213 216 223 227 231 240 240 244 246

7 Conclusion: Upcoming Challenges for EU Communications Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Context Matters: A Window of Opportunity for Institutional Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Rules Matter: The Pivot of Sedimented Rules . . . . . . . . . . . . . . . . . 7.3 Actors Matter: The Role of Institutional Entrepreneurs . . . . . . . . . 7.4 Institutions Matter: Institutional Change as a Basis to European Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Outlook: Technology Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

259 260 266

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

275

257

269 273

Abbreviations

ASQ BEREC BT CENELEC CEPT CoR CULT DG DSM EC ECFR ECJ ECSC ECTA EEC EECC EECMA EESC EP ERG ERT ESC ESPRIT ETSI

Assured Service Quality Body of European Regulators for Electronic Communication British Telecommunications Comité Européen de Normalisation Electrotechnique Conférence Européenne des Administrations des Postes et des Télécommunications Committee of Regions Committee on Culture and Education Directorate General Digital Single Market European Communities/Community Electronic Communications Regulatory Framework European Court of Justice European Coal and Steel Community European Competitive Telecommunications Association European Economic Community European Electronic Communications Code European Electronic Communications Markets Authority European Economic and Social Committee European Parliament European Regulators Group European Round Table for industrialist European Standardisation Committee European Strategic Program on Research in Information Technology European Telecommunications Standards Institute

xv

xvi

EU GAP GATT GDP GERT IAP ICT IMCO IRG ISDN ISP ITRE ITTF ITU JURI LIBE NN NRA OECD OLP OMC ONA ONP OSI POTS PSDN PSDS PSO PSTN PTT RACE REGI RSPG SEA SEM SMP SOGT TA TED

Abbreviations

European Union Groupe d’Analyse et de Prévision General Agreement on Tariffs and Trade Gross Domestic Product Group of European Regulators in Telecoms Internet Access Provider Information and Communications Technology Committee on the Internal Market and Consumer Protection Independent Regulators Group Integrated Services Digital Network Internet Services Provider Committee on Industry, Research and Energy Information Technologies Task Force International Telecommunications Union Committee on Legal Affairs Committee on Civil Liberties, Justice and Home Affairs Net Neutrality National Regulatory Authority Organisation for Economic Co-operation and Development Ordinary Legislative Procedure Open Method of Coordination Open Network Architecture Open Network Provision Open Systems Interconnection model Plain Old Telephone Service Packet-Switched Data Network Packet-Switched Data Service Private Service Operator Public Switched Telephone Network Postal, Telegraph and Telephone Service Research for Advanced Communications in Europe Committee on Regional Development Radio Spectrum Policy Group Single European Act Single European Market Significant Market Power Senior Officials Group on Telecommunications Telecommunications Administration Terminal Equipment Directive

Abbreviations

TO ToR TSM UK US

xvii

Telecommunications Operator Treaty of Rome Telecom Single Market United Kingdom (of Great Britain and Northern Ireland) United States (of America)

List of Figures

Figure 3.1 Figure 3.2 Figure 4.1 Figure 4.2 Figure 5.1 Figure 5.2 Figure 5.3 Figure 6.1 Figure 6.2 Figure 7.1

Telecommunications networks and services under the full liberalization regime, 1998 . . . . . . . . . . . . . . . . The institutionalization process of EU communications policy – Phase 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Telecommunications networks and services incl. local loop unbundling, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The institutionalization process of EU communications policy – Phase 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circuit-switched and packet-switched networks . . . . . . . . . . . Three layers of internet communications . . . . . . . . . . . . . . . . The institutionalization process of EU communications policy—Phase 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The (EU) 2120/2015 net neutrality regime . . . . . . . . . . . . . . . The institutionalization process of EU communications policy—Phase 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The institutionalization process of EU communications policy—all phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114 127 135 154 158 160 198 236 255 272

xix

List of Tables

Table 2.1 Table 2.2 Table 2.3 Table Table Table Table

2.4 3.1 3.2 3.3

Table 3.4 Table Table Table Table

3.5 4.1 4.2 4.3

Table 5.1 Table 5.2 Table Table Table Table Table

5.3 5.4 5.5 6.1 6.2

Institutional rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Streeck/Thelen (2005: 31) Institutional change: five types of gradual transformation . . . . . . . . . . . . . . . . . . . . . . . . Institutionalist definitions—Peters (2005) and Lowndes (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Units of analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treaty of Rome, Articles 2 and 3 . . . . . . . . . . . . . . . . . . . . . . Treaty of Rome, Articles 86, 90 and 100 . . . . . . . . . . . . . . . . Council Decisions in the Field of Telecommunications since 1984, COM(87) 290, Figure 3.1 . . . . . . . . . . . . . . . . . . Differences in ONP liberalization between the US and Europe, GAP (1988: 18–9) . . . . . . . . . . . . . . . . . . . . . . . . TEU, Article 129b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Directive 2002/21/EC, Article 7 . . . . . . . . . . . . . . . . . . . . . . . . Directive 2002/19/EC, Article 2 . . . . . . . . . . . . . . . . . . . . . . . . The regulatory framework on electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Different standardization models in the US and Europe . . . . Bangemann Report (High-Level Group on the Information Society 1994: 23) . . . . . . . . . . . . . . . . . . . Directive (2002/21/EC), Article 8 . . . . . . . . . . . . . . . . . . . . . . List of BEREC documents on net neutrality . . . . . . . . . . . . . European Parliament Resolution on net neutrality . . . . . . . . . COM(2013) 627, Article 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . COM(2013) 627, Article 24 . . . . . . . . . . . . . . . . . . . . . . . . . . .

44 55 61 71 75 79 100 105 111 138 139 146 161 164 184 190 191 209 211

xxi

xxii

Table 6.3 Table 6.4 Table 6.5 Table 6.6 Table 6.7 Table 6.8 Table 6.9 Table 6.10 Table 6.11 Table 6.12

List of Tables

3278th Council meeting Transport, Telecommunications and Energy (Council 2013c: 11) . . . . . . . . . . . . . . . . . . . . . . . Procedure 2013/0309/COD, leading to Regulation (EU) 2015/2120 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EP Amendments to COM(2013) 627, Art. 2 and Rec. 45 . . . Council Presidency of 14 November 2014 on net neutrality (Council 2014b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3350th Council meeting Transport, Telecommunications and Energy (Council 2014c: 8) . . . . . . . . . . . . . . . . . . . . . . . . Comparison of opinions of EP, BEREC and Council to COM(2013) 627 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3rd TrilogueAmendment to the Council Mandate, Regulation (EU) 2015/2120, Art. 3(5) . . . . . . . . . . . . . . . . . . . Regulation (EU) 2015/2120, Art. 2—Definitions . . . . . . . . . . Regulation (EU) 2015/2120, Art. 3—Safeguarding of open internet access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulation (EU) 2015/2120, Art. 5—Supervision and enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

215 217 222 225 225 226 230 233 234 239

1

Introduction

1.1

Where is the Internet in a World of Telecommunications?

‘The EU regulatory framework for electronic communications (telecommunications) is formulated as a set of policy objectives, which national regulatory agencies implement with the help of instruments defined at the European level. Regulation must be based on sound economic analysis (as opposed to technology or history), and it is meant to be used only when it provides added value over the application of competition law. The regulatory framework is intended to be robust and sustainable without constant legislative intervention. In a sense, the discussion of network neutrality is a good test of these principles.’ (Larouche 2009: 24)

What Larouche calls a good test of principles shall be the basis to the present dissertation. The world of communications has significantly changed over the last four decades—even more profoundly during the last decade. Whereas massive regulatory changes starting in the late 1970s fostered telecommunications liberalization in the US and in Europe, the changes that have occurred since the 2000s were the result of a technological evolution. Not only did liberalization foster technological convergence but also technological development promoted the digitalization of communications services and networks. The advances of internet technology eventually facilitated the virtualization of communications technology and thereby accelerated the vast utilization of internet communications. As its role for society and economy continuously increases, the Internet, without any doubt, significantly changes the way consumers utilize communications networks and services. While traditional communications based on closed systems, the Internet built on open interfaces. Technological evolution has favoured the latter. Fundamental pressure on incumbent communications services and network providers © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_1

1

2

1

Introduction

eventually started to challenge both economics and politics of the underlying infrastructure. To assume peaceful co-existence between internet-enabled content, applications and services and traditional communications services soon turned out to be short-lived. During the past decade, internet-enabled services increasingly challenged traditional communications services threatening incumbents’ business model in the telecommunications sector. Mainly unregulated and increasingly substitutive internet-enabled services and applications massively utilize traditional communications infrastructures. In effect, internet technology became a major economic, societal and political driver to services and application innovation. Internet access is eventually about to replace telephony as the basic utility for all communications (Crawford 2012). Schejter and Yemini’s analysis of the regulatory regime covering media and telecommunications in the US concluded that regulating the Internet under an ‘old media’ regime appeared to be inappropriate: ‘The Internet provides a unique venue for civic engagement, exposure to information, and opportunity for education. The established frameworks that guide the regulation of traditional media are not necessarily suitable for this new form of communication because they fail to address its multi-participant character (as opposed to the limited-participant technologies of “old media”), and the abundance created by its innovative technological form (as opposed to the scarcity which characterized “old media”). Here arises the urgent need to address this debate in its appropriate context.’ (Schejter/Yemini 2007: 139)

To scrutinize this urgent need for the EU context motivated the present dissertation. Ever since, infrastructure not only served the transportation of resources, but it also facilitated rule-making justified by the infrastructure’s mere existence. The study of infrastructure intends to scrutinize ‘who is harmed, who is forgotten, who is unserved, and how research might rectify the situation’ (Sandvig 2013: 93; Star 1999). It is a question on how technology, which has developed and ossified in the past, is perceived and understood in a contemporary context (Sandvig 2013: 93) without neglecting the necessary ‘sense of time’ (Edwards et.al. 2007: 8). The combination of societal, social, political, legal, and practical perspectives on a current problem distinguishes infrastructure studies from other fields: ‘Understanding the nature of infrastructural work involves unfolding the political, ethical, and social choices that have been made throughout its development’ (Bowker et.al. 2010: 99). These political and societal choices effectively shaped the technological and infrastructural development also in the field of communications policy. Whereas ‘the Internet is an increasingly global phenomenon which has not been subject to any government intervention historically, the EU represents an important locus for regulatory efforts with various economic and social

1.1 Where is the Internet in a World of Telecommunications?

3

goals in mind’ (Halpin/Simpson 2002: 287). The present dissertation takes into account these conclusions when aiming at explaining the latest transformation in EU communications policy. In order to understand advances, challenges and backlashes it is important to unveil the respective temporal and sectoral embeddedness of today’s EU communications policy. Over the past three decades, two main ruptures1 have affected communications infrastructure in Europe: First, the politically induced abolition of state monopolies in tele-communications. Second, the economically and technologically driven virtualization of communications based on the evolution of internet technology. While the EU had established a comprehensive regulatory framework on communications technology that addressed communications services and networks defined in the context of traditional telecommunications, it had also implemented measures to promote the information society based on the evolution of internet technology. Yet, the preliminary observation concludes that the present EU communications policy does not any longer reflect communications reality in the internet age. The research question deduced from this observation focuses on the institution of EU communications policy being subject to contextual transformation: How does the institution of EU communications policy respond to the changing institutional context that ultimately represents a new communications reality? The idea for the present dissertation was mainly influenced by institutionalist theory. The thesis proposes that there is a functioning institution within an institutional context that became subject to transformative pressure by an emerging institutional context, which creates societal, economic and political pressure eventually leading to the urgent need to act. When in the 1980s the European Commission started to engage in telecommunications policy in the European Community2 , the telecommunications sector was characterized by national monopoly. The most vivid argument justifying national (state) monopoly defined network industries as natural monopolies, which had been an instrument of power for national governments (Geradin 2006: 2; Vogel 1996: 27). In the early 1970s, criticism by economics, lawyers and policy-makers 1 Noam

(2010)—applying a technology-deterministic approach—refers to three generations of telecommunications: (state) monopoly, liberalization and privatization, virtualization and transformation to carriers of mass media. For the present research interest, it appears effective to focus on the ruptures changing the respective status quo. 2 By 1 November 1993 the Maastricht Treaty converted the European Community into the European Union. In the following, I will claim the term EU communications policy as this reflects the current institution to be analyzed. In every chapter that is clearly assigned to either the EC or the EU I will use the corresponding term but will maintain the term EU communications policy.

4

1

Introduction

claimed that ‘while some market segments in network industries […] certainly have natural monopoly features, others are contestable’ (Geradin 2006: 2) and should be opened to competition, which intended to abandon exclusive rights. The changing mindset facilitated the discussion about liberalizing network industry sectors. In 1983, the European Commission eventually fostered liberalization and promoted various measures establishing fully liberalized markets. Regulatory frameworks and specific policies had been implemented, amended and replaced in order to adapt to technological, economic and societal developments. The subsequent history of EU communications policy followed a path of liberalization by re-regulation. The former bundling of services and networks in tradition telecommunications had been unbundled3 and the policy of convergence allowed networks other than telecommunications to compete on infrastructure level.4 While services and networks were opened to competition, a regulatory regime was maintained to safeguard competition. The invention of the Internet preceded telecommunications liberalization in the EU by decades. In the 1960s, the US government funded the development of a decentralized network that should serve military purposes and was later opened for academic use. When the internet became popular to mass usage, it eventually started to infiltrate the world of traditional communications. Dependent on the transmission of data, it initially co-existed with traditional communications services. Internet-enabled applications and services established in the network that was initially built for telecommunications. Despite this development the economic role of data transmission had largely been neglected in the beginning. Whereas voice line services and networks remained key in communications, technological advances of internet technology promoted innovation to incumbent voice line and data transmission. The virtualization of communications networks facilitated the development of new overlay services on top of traditional communications services and networks. Ultimately, the advances of overlay services started to become traditional communications’ fiercest competitor. The regulation-based institution

3 In

traditional (state monopoly) telecommunications networks and services were bundled in a way that the company that owns the network exclusively provides the services running on this infrastructure. Unbundling means the separation of services from networks in order to enable competing service providers on a specific infrastructure. 4 Convergence means that different technologies are technologically and legally able to substitute each other. In telecommunications convergence means opening up the infrastructure market to companies proving networks based on other technologies than telecommunications, primarily cable networks. As a result, the EU legislative framework replaced the term telecommunications by the term electronic communications.

1.1 Where is the Internet in a World of Telecommunications?

5

of traditional communications policy faced a technology-based institution invading the former. The clash of institutions from these different institutional contexts eventually resulted in the conflict about net neutrality, which represents the underlying architecture of internet communications. This conflict is necessarily being addressed by policy-makers in the US, in Europe and on EU level. In response, the European Commission in 2013 proposed ‘first-ever EU-wide protection of net neutrality’ as part of the Connected Continent legislative package. To derive from institutionalist theory, a ‘core assumption is that the translation of structures into political action and action into institutional continuity and change, are generated by comprehensible and routine processes. These processes produce recurring modes of action and organizational patterns. A challenge for students of institutions is to explain how such processes are stabilized or destabilized, and which factors sustain or interrupt ongoing processes’ (March/Olsen 2008: 5).

The question will be whether the established modes of action are capable of coping with the new challenges. In his 2017 net neutrality study Marsden (2017: 215–6) concludes that both policy-making in the internet age and the scrutiny of internet related regulations requires the combination of social sciences and technical science: ‘Integrating social and technical sciences has been vital both to the innovation engine that the Internet represents and its success. Now that the Internet […] is becoming the growth engine for the post-industrial economies, these lessons need to be reinforced throughout policy making, notably in both the assessment of regulation and the use of regulation of technology funding.’ Whereas regulation in the institution of EU communications policy served institutional robustness, the technological and economic changes in the institutional context imposed transformative pressure on this robustness. The consequences resulting from the pressure between robustness and transformation shall be scrutinized in the following. When analysing EU communications policy in the Internet age from an institutional perspective, the above ruptures translate into two phases relevant for the subsequent analysis: the emergence and hardening of the institution of EU communications policy in the aftermath of the first rupture and the adoption of the net neutrality discourse in the EU, which eventually culminated in EU net neutrality rules, subsequent to the second rupture. The question is whether net neutrality—representing a basic set of institutional rules in internet communications—constitutes disruptions in the existing institution or whether the established structures continue the respective institution in an advanced policy area.

6

1.2

1

Introduction

The Research Field

A lot of analysis has been conducted on EU telecommunications policy. Likewise, scholars have scrutinized the EU policy regime on electronic communications and on net neutrality. Yet, most studies did not approach the technological transformation that inheres EU communications policy throughout its entire existence. Nor has this been approached from an institutionalist perspective. The present dissertation adopts previous research and addresses EU communications policy from an institutionalist perspective, which provides for both contemporary application of institutionalist theory and the analysis of institutional change facing a current time problem. Furthermore, this dissertation provides a comprehensive analysis of an EU policy field currently in transformation, as it covers EU communications policy from the 1980s liberalization efforts to EU telecommunications policy to EU electronic communications policy to EU internet communications policy. The present dissertation focuses on the specific institutional change processes, which result from political and technological advances in the field of communications. It thus reflects the pivotal observation that the present EU policy framework on electronic communications does not any longer mirror communications reality in the internet age. Another objective of the dissertation is to contribute to the debate on digitalization policy and thereby provide a political science contribution to the scrutiny of emerging technologies. With regards to institutionalist theory a lot of studies have been conducted either on theory building or on applying theories on specific phenomena. Particularly historical institutionalist scholars have striven for comparative analyses: When scrutinizing differences in working-class organizational strength among Western countries, Bo Rothstein exemplified that institutionalist approaches can bridge the gap between structural analyses and actor-oriented analyses (Rothstein 1992). Ellen Immergut has shown that the rules of the game imposed by institutions are as fundamental to national health policy making in France, Switzerland, and Sweden as the actors’ seizure of these rules derived from their interests (Immergut 1992). Whereas institutionalist thinking has produced an at least three-fold new institutionalism, scholars recently accelerated innovation (Schmidt 2008) and some plead for a comprehensive approach in order to adequately cover complex phenomena in the institutional world (Lowndes/Roberts 2013). The present dissertation represents an attempt to cover the institutionalization of EU communications policy from a comprehensive institutionalist perspective. While some scholars conducted comprehensive studies on EU telecommunications and electronic communications policy (Baskoy 2008; Michalis 2007), there have also been detailed studies covering an institutionalist perspective on

1.2 The Research Field

7

these policies (Schneider 2001; Goodman 2006). Nevertheless, most studies did not yet approach the technological transformation that the internet has caused on communications from an institutionalist perspective. Moreover, studies on the institutionalization of the internet did mostly cover Internet Governance and thus a global perspective on the phenomenon. Tuna Baskoy (2008) provided an economic study on EU competition law in the telecommunications sector. Her research comprehensively described the development from liberalization to the convergence of communications and the role competition law played in this context. Likewise did Larouche (2000) in his legal study on the liberalization of the telecommunications sector. In a much more detailed approach Larouche described the different concepts of the regulatory regimes that led to the liberalization of networks and services. Also, there are recent studies on the issue of EU net neutrality rules and the respective legislative process. Particularly Marsden (2017) provided fruitful procedural insights after the respective legislations had been adopted both on EU level and in national contexts. In his book on network neutrality Marsden defines net neutrality as a policy phenomenon from the internet environment that eventually translated into regulation in Europe and beyond. Marsden’s work has been a fruitful source for the present dissertation and the underlying research interest. Other scholars, mainly from the discipline of law, had been occupied with the regulation of the Internet and implementing net neutrality rules. With reference to the relation between competition law and net neutrality regulation, Maniadaki (2015; 2019) provided a comprehensive law analysis of the remits of EU competition law. Maniadaki (2015) takes into account different concepts of net neutrality and explains the interference with different concepts of EU regulation. The pivotal research interest thereby is the constituting role of competition law. The fact that Maniadaki’s book was published when the EU net neutrality regulations was still not adopted does not hamper the overall contribution to the topic. To disclaim particularly the analysis of EU net neutrality rules, this dissertation represents no advocacy for specific net neutrality rules. The following observations, interpretations and analyses serve to illustrate EU communications policy in the Internet era and to shed light on the institutional rules applied in this context. The analysis of the EU net neutrality approach does not intend to reflect a personal opinion. Furthermore, it did not seem effective to particularly focus on the development and regulation of mobile communications. While there are specific issues to mobile communications,5 the respective analysis would provide no added value to the overall analysis. 5 i.a.

does zero-rating specifically apply on mobile communications.

8

1.3

1

Introduction

Method

To focus on a specific policy issue—EU communications policy—and its constituting components, thereby addressing a broad problematized policy phenomenon of a contemporary event (George/ Bennet 2005: 78), justifies conducting a case study analysis as the most favorable approach (Yin 2009: 15). While a single case study presents a naturally limited scope, the dissertation shall facilitate generalization under specific conditions. Starting from an institutional understanding rather based on characteristics than formations, the theoretical preliminaries shall serve to identify different policy measures, procedures and interactions attached to the overall policy. As ‘[r]egulation does not only rely on legal control over a certain environment but rather on a quartet of legal control, architectural control (also in terms of technological construction), social norms and economic forces’ (Lessig 1999; Marsden 2017: 220), the dissertation will deduce institutional explanations from a comprehensive institutional perspective and thus benefit from versatile institutional approaches. This also means to reflect the blind spots in institutionalist theory caused by reductionism (Lieberman 2002: 698). Not only will the insights from theory review existing approaches on institutional change but it will also identify different logics and patterns in new institutionalism. The deductiveinductive approach shall facilitate the explanatory capacity of institutionalism within the remits of the present dissertation. As the present dissertation intends to identify the causes for institutional change or stasis and thereby deduce the effects of exogenous intrusion from the institutional context, particularly stimulated through the emergence of new structures attached to the context of internet communications, a structural analysis appears to be appropriate. On the basis of the theoretical preliminary, the dissertation will conceptualize a framework that best explains the elements of institutional change within the scope of the underlying research question. The empirical analysis will then reconstruct the emergence of the institution of EU communications policy and will approach institutional change assuming path dependence due to regulatory legacy, effective and abortive conduct between actors and actors, rules and structure on the basis of cognitive and normative rules and narratives that shape the historicity of the institution. The strength of a single issue case study lies in a detailed description that enables a precise analysis of (public) policies (Schneider/Janning 2006:41). When doing so, ‘descriptions should be holistic and comprehensive and should include “myriad dimensions, factors, variables, and categories woven together into an idiographic framework”’ (Gray 2009: 255). Yin identifies exploration, description and explanation as the three purposes of case study research (Yin 1989:15–6).

1.3 Method

9

The dissertation will stress the explanatory purpose that concludes from exploration based on a qualitative content analysis and description of the respective structures. Following Yin’s as well as Gray’s approach, single case studies can be distinguished into holistic or embedded case studies (Gray 2009: 256; Yin 1989: 46). While the former examines overall aspects of one global issue, potentially neglecting detailed analysis of possible sub-units, the latter includes sub-units to the analysis of the global issue. Both types enable a broad analysis as a ‘case study is the method of choice when the phenomenon under study is not readily distinguishable from its context’ (Yin 1993:3) and at the same time focus on the details of the chosen case, which highly corresponds with institutionalist theory. As the dissertation intends to explain and thereby understand a comprehensive phenomenon—transformation of EU communications policy in the internet era—, it opts for a holistic single case study as the structure in question draws on historicity and inheres a broad institutional context. To unfold the potentials of a single case study opens sound and differentiated insights into the processes and structures within the field but requires a detailed analysis of the theoretical framework underlying the case study (Schneider/Janning 2006: 41–44; Blatter et al. 2006; George/Bennett 2005). Yin emphasizes that the process of theory-building is crucial when conducting a case study. The underlying theoretical framework defines the propositions to both the units of analysis and their interpretation (Yin 1989: 35). Thereby, theory serves two steps: it facilitates data collection as it tightens the scope and it enables generalization of outcomes (Yin 1989: 38; Gray 2009: 264). Furthermore, case studies serve as an explorative research instruments that are able to empirically assess and develop theoretical approaches, terms and concepts (Gerring 2004). As the environment of EU policy-making is a highly complex system exceeding the specific interest of the present research it is necessary to simplify reality to a model that serves the specific interest of the present dissertation (King/Keohane/Verba 1994: 49f.). While illustrating phenomena and inference through the theoretical filter, research models fulfill the function of selecting as well as constructing the research object (Schneider/Janning 2006: 42). As Yin points out a ‘research design should include five components’ that are deduced from theory (1989: 35) and will be identified in chapter 2: 1) 2) 3) 4) 5)

a study’s question, its propositions, its units of analysis, the logic linking data to propositions, and the criteria for interpreting the findings.

10

1

Introduction

The case study approaches a longitudinal analysis that covers the time period between 1982, when the European Commission successfully started to implement telecommunications policy as a policy issue on Community level, and the end of 2018.6 The analysis of EU policies on internet communications is partly interwoven with the implementation of EU telecommunications policy from a timely perspective. Thus, there will be timely parallel streams being analytically differentiated in order to access both structural contexts separately. The research scope will end with the 2018 BEREC review of the net neutrality rules and the 2016 BEREC guidelines. It will not cover the European Electronic Communications Code (EECC), adopted on 17 December 2018. EECC could be subject to subsequent analyses that focus on the continuation of EU communications policy. As the present research interest focuses on the two conflicting institutions, the implementation of EU net neutrality rules is of specific relevance. At the same time, the case study will have to consider the time period before 1982 in order to illustrate the roots of the 1982 development—especially with regards to EU competition policy: ‘rich, unstructured knowledge of the historical and cultural context of the phenomena with which they want to deal in a simplified and scientific way is usually a requisite for avoiding simplifications that are simply wrong’ (King/Keohane/Verba 1994: 43). The analysis will provide a background of 60 years of EU integration (1958–2018) with a special focus on 36 years (1982–2018) of EU communications policy. Defining independent and dependent variables faces an inherent problem to institutionalist theory: ‘Institutionalist theory conceptualizes institutions both as independent and dependent variables’ (Keohane/Martin 1995: 46). The relevant institution frames the institutional setting and actors’ behavior and is likewise altered through actors’ conduct. In order to identify of the independent variable, the research question could be re-shaped: How does the institutional context facilitate transformative processes in the institution of EU communications policy? To reflect this question highlights the institutional context, which—as will be explored—plays a significant role for the institutional change in question. In consequence, the institution of EU communications policy is the dependent variable as its character depends on the institutional context and the inherent setting shaping it. That implies the assumption, that the development of the institution occurs within direct or indirect institutional borders that restrain or enable the specific character of the policy issue. However, the institution itself shapes actors’ behavior and is being shaped by it. 6 Surrounding

analysis.

phenomena are considered if they serve the understanding of the overall

1.3 Method

11

A crucial step when conducting a case study is data gathering or—more profound—the collection of evidence (Stake 1995; Yin 1984). With reference to Yin (1984: 84–5) there are six sources of evidence to case studies (documents, archival records, interviews, direct observations, participant-observations and physical artifacts), of which the first two will provide for the structural and procedural analysis. The scope is primarily limited to EU-level actors as they represent the pivotal actors of institutional rule-making. Also, the analysis will include actors that are empowered by these pivotal actors. While there is research on insights into individual actors’ conduct in specific phases of EU communications policymaking, the depth of the present analysis is prohibitive to assessing individual level behavior. Thus, a meso-level analysis, which corresponds to the theoretical approach, will focus on collective actors as the effective scope of analysis. Also, the analysis prefers official sources over background information to both facilitate falsification and limit the scope to the analytical capabilities. Therefore, the formal and informal rules of the game will be deduced from the codification of these structures and procedures within the various legal documents as well as from the actors’ conduct actually involved. While scrutinizing primary documents—EU Treaties, official communiques, recommendations, legislative texts and court decisions—as pivotal sources, the analysis will also take into account archival records and prior studies on the research object. Further, the actual rules of the game following informal procedures and individual conduct need to be identified and integrated into the analysis. Therefore, prior studies on informal procedures and path dependent rule-making—such as trilogue negotiations—shall help identify the instances where these procedures occur. As Pearson and King and Keohane illustrate, ‘the field of science is unlimited; its material is endless’ (Pearson 1892: 16; King/Keohane 1994: 9). In addition to the selection of possible data, Yin emphasizes three principles in order to make data a valid and reliable source of evidence: using multiple sources, creating a data base and maintaining a chain of evidence (Yin 1984: 95–103). With reference to the components of an effective research design mentioned above, the essence extracted from the material strongly depends on the propositions operationalized by theory. Thus, the first step of the empirical analysis will be to map a valid image of the institutional context within which EU communications policy has established. That is necessary to adequately contextualize the respective institution. Only the precise understanding of the institutional context, its historicity, structural exposure and interactions, will be capable to capture the character of institutional transformation. The structural and procedural analysis will start by elaborating the liberalization of the telecommunications markets in the European Community. As

12

1

Introduction

telecommunications policy was the first phase of EU communications policy the fact of re-ordering this market by re-regulation is a crucial landmark for analyzing EU communications policies until today. Chapter 3 will provide an overview over policies made during the process of liberalization and necessarily the achieved institutionalization in this field. While much content might accumulate, this will be thereafter condensed on the very institution—and institutional rules— that forecast relevance for EU communications policy. While attempting to make sense of complex phenomena, the perceived complexity depends on the ability of simplifying it and ‘specify outcomes and explanatory variables in a coherent way’ (King/Keohane/Verba 1994:10). The objective is to describe the institutional setting and thereby illustrate the institutional foundations for the subsequent institutional development. The challenge will be to both identify potential ruptures in a dynamic process and to reflect this process as part of the institutional context. A synthesis of structural and actor-centered perspectives prevents the analysis from a holistic arbitrariness, while at the same time enabling to identify regularities and differences (Schneider/Janning 2006: 37). To describe the findings shall account for visualizing historical paths, networks and institutional rules. The exploration of the development over time will illustrate the process of institutional transformation and eventually explain the anticipated ruptures. Chapter 2 provides the theoretical basis to the analysis. After describing the evolution of new institutionalism in political science, this part describes contemporary advances in institutionalist theory. It operationalizes propositions, analytical units, the logic linking analytical findings to propositions and the criteria for interpreting the findings in order to prepare the subsequent analysis. This also includes explanations for institutional change. Institutionalist approaches have gained leverage in political science, which led to further research particularly on the emergence and change of institutions. Institutionalist scholars have adopted to versatile trends in political science while maintaining an institutional perspective. Although this evolution blurred the definition of institutions, this broadened scope has proven fruitful for the present analysis. The chapter will conclude with a systemic definition of institutions that copes with contemporary institutional understanding and will facilitate the case study analysis. Chapters 3 to 6 provide the case study divided into four sections. The first section explores the advent of EU communications policy and thus provides for the institutional basis to the subsequent analysis. It reflects the liberalization of EC telecommunications markets and the establishment of the regulatory framework for telecommunications. The second section attaches to these developments and analyses the conditions that eventually established institutional stability. In practice, this section scrutinizes the technological and regulatory developments that motivated the review of

1.3 Method

13

the telecommunications framework leading to the establishment of the regulatory framework for electronic communications. Section three defects from this linearity and explores the emergence of a changed institutional context that causes transformative pressure on the institution of EU communications policy. After a concise introduction to internet technology, the Information Society narrative, the Digital Agenda for Europe and the advent of broadband policy will be explained. The fourth section eventually attaches to the findings from the first three sections explaining the institutional ruptures caused by economic and technological pressure from the institutional context eventually leading to the advent of a vague EU internet communications policy. The conclusion reflects the findings and eventually identifies institutional ruptures based on conflicting ideas, norms, narratives and organizations that hardened in the particular institutional setting. While the institution of EU communications policy accounts for relative stability, this stability rather results from adaption to change than from stasis. The conclusion gives insights in the institutional conditions that safeguarded this stability and provides an outlook on the challenges ahead.

2

Institutionalism in the 21st Century

‘Political scientists no longer think in the either/or terms of agency or structure, interest or institutions as the driving forces: now, virtually all serious students of the discipline would say it is a matter of a judicious blend of both […] it is a matter of analyzing behaviour within the parameters set by institutional facts and opportunity structures.’ (Goodin/Klingemann 1996: 10–1)

2.1

Introduction: Bringing Institutions Back in

Do institutions matter? This question motivated the revival of institutionalist thinking in political science after almost four decades of behaviorist fashion in social sciences. Today, institutionalism maintains its role as one perspective aiming at understanding political life, providing an alternative to approaches on ‘rational actors’ and ‘cultural community’ (March/Olsen 2008: 4). Back in the mid-1950s, the behaviorist turn had dissolved contemporary institutionalist predominance in political science, which until then upheld the role of the nation state in politics, eventually encouraging institutionalists to reconsider basic assumptions of their theory (Lowndes/Roberts 2013: 29). Institutionalism before the behaviorist turn had represented a structuralist way of thinking that focused on formal entities, such as administrative structures, legislation, and the state as the dominant entity. The pivot of legalism had constituted a perspective on formality emphasizing that constitutional and formal structure determined individual behavior. Although having assumed mutual influence between agency and structure, institutionalists had focused on holistic macro-level analyses, including history as an imperative to © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_2

15

16

2

Institutionalism in the 21st Century

understanding contemporary politics. Eventually, a normative objective of improving politics inhered the structural understanding of old institutionalism (Rhodes 2008: 94–99; Peters 2005: 6–11). The increasing theoretical reception of behaviorist approaches, starting in the mid-1950s, claimed a massive maladaptation of societal processes and the role individual and group behavior played in social interaction. Behaviorists claimed that institutionalism lacked the capacity to explain the ever-stronger correlation between individual behavior in informal contexts and policy outcome (Macridis 1963: 47; Thelen/Steinmo 1992: 4; Drewrey 1996: 191). In consequence, the analytical perspective in social sciences shifted from formal attributes explaining political outcome to ‘informal distributions of power, attitudes, and political behavior’ (Thelen/Steinmo 1992: 4). The focus on micro-level explanations of politics eventually ousted the relevance of political institutions in the same way as it rejected the state as a comprehensive factor to political order. The polity’s capacity to explain political processes was suspended from the actual policy arena (Blondel 2008: 716). As March and Olsen put it: ‘In most contemporary theories of politics, traditional political institutions, such as the legislature, the legal system, and the state, as well as traditional economic institutions, such as the firm, have receded in importance from the position they held in earlier theories of political scientists’ (March/Olsen 1989: 1). Instead, behaviorist thinking emphasized the role of informality and individual choice in society. In behaviorist approaches, outcome optimization was key to politics, which caused manifold consequences for understanding political life. The negligence of the polity dimension as a factor contributing to political outcome ‘obscured the enduring socioeconomic and political structures that mold behavior in distinctive ways’ (Thelen/Steinmo 1992: 1). As behaviorists in political science conceptualized individual or group behavior as the key element in the political process, moral individualism and the focus on conflicting individual interests replaced institutions as a guarantor for collectively binding meaning and conflict resolution (March/Olsen 1983: 734); institutions became ‘empty shells’ (Shepsle 1989: 133) or ‘essentially artifacts: they are created by groups and individuals to help them secure their interests and achieve their goals’ (Atkinson 1990). The determining role of ‘purpose, direction, identity, and belonging’ (March/Olsen 1989: 6) in the process of decision-making was largely neglected in favor of the pivotal role of policy-making and resource allocation. In behaviorist approaches symbols, as institutional signifiers, became instruments in the process of decision making: ‘Control over symbols is a basis of power, like control over other resources […]; and the use of symbols is part of a struggle over political outcomes’ (March/Olsen 1984: 738; c.f. Pfeffer, 1981; Cohen 1974). Policy

2.1 Introduction: Bringing Institutions Back in

17

making became a process of optimum resource allocation that determined individual or group behavior on the basis of self-interest and outcome-orientation. Action was understood as resulting from complex, interlocked individual preferences; individual behavior and political decisions were conceived as the cause to polity. Institutions merely aggregated political phenomena from the micro level molding them into structure (Shepsle 1989: 134; Lowndes 1996: 183). Thus, they became a dependent mean for justifying and controlling political decisions and power over resources (Meyer/Rowan 19771 ; Edelman 1964; Pfeffer 1981; Cohen 1974). This unilateral causal link from agency to structure cemented the polity dimension as epiphenomenal to the political process—a sole reflection of society, within which ‘politics mirrors its context’ (March/Olsen 2008: 6; March/Olsen 1983: 735; March/Olsen 1989: 1; Lowndes 1996: 183; Hall 1994: 39; Easton 1968). In consequence, congressional researchers Cooper and Brady in 1981 claimed that ‘[o]ur ability to handle questions that posit individuals […] as the units of analysis is far greater than our ability to handle questions that posit institutionalized collectivities in complex environments as the units of analysis’ (Cooper/Brady 1981b: 994). Meanwhile, behaviorist assumptions had to cope with a critical number of biases when explaining rational individual behavior: when information is all but comprehensive, human anticipation of conduct cannot be completely accurate and forecast of decisions’ consequences becomes unstable as preferences change over time (Crozier 1964; Nisbet/Ross 1980; Kahneman et.al. 1982). Ambiguity, inconsistency and uncertainty limiting deliberate decision-making were not dissolved by the mere assumption of individual choice. Whereas a complex environment of uncertainty through informational and predictive limitation as well as ever more complex realities evolved, the focus on individual preferences resulted in a bias of knowledge and calculus (March/Olsen: 1983: 737). Despite these setbacks, individualist scholars aimed at replacing former, rather descriptive institutionalist approaches by developing theory in political science based on behaviorist observations and exclusively individualist assumptions. Antinormative patterns as well as a definition of politics as an epiphenomenal process constituted a unilateral causal link from agency to structure and thus accounted for mere inputism (Peters 2005: 12–5). From an institutionalist perspective, behaviorist approaches tended to be contextual, as politics mirrored its context, reductionist, as solely conducting micro-level-analyses, utilitarian and instrumentalist, as assuming individual utility and outcome maximization as superior to the framing capacity of structural contexts, and functionalist, as neglecting the role 1 This

article was revised in 2004; cf. References.

18

2

Institutionalism in the 21st Century

of history when relying on historically unique solutions dependent on optimum outcome rather than explaining potentially inefficient, path dependent outcomes (March/Olsen 1984: 735; Krasner 1988: 68; March/Olsen 1989: 2f.; March/Olsen 2008: 6). The behaviorist turn, to some account, was an anti-movement to the old institutionalism. The ever more complex environment and the more resourceful and larger institutional contexts advancing in political life eventually helped institutions regain importance in academic research starting in the 1970s (March/Olsen 1983: 734). Notwithstanding this development, behaviorist approaches had established an important school of thought providing fruitful evidence to subsequent developments in institutionalist theory. Although new institutionalism certainly was a reaction to atomistic and asocial assumptions regarding human conduct (Lowndes 1996: 183; DiMaggio/Powell 1991: 2; Hall/Taylor 1996: 936), it explicitly considered the former concerns and thus embraced behavioristic ideas as regards the role of the individual (Peters 2005: 1). Whereas old institutionalism was seeking for structures to explain political life, new institutionalist approaches likewise addressed the inherent performance of political systems. March and Olsen stated that ‘collective action should become […] the dominant approach to understanding political life. Further, the relationship between political collectivities and their socio-economic environment should be reciprocal, with politics having the option of shaping society as much as society does of shaping politics. Only with this more institutional and multi-faceted conception of politics, it was argued, could political science really be able to understand and explain the complex phenomenon which we have chosen for our subject.’ (Peters 2005: 17 f.)

The key to contemporary institutionalist theory was the capacity of new institutionalism to integrate both structure and agency in contrast to the old institutionalism and the subsequent behavioristic approaches. New institutionalist scholars shifted the analytical focus in various ways: from organizations to rules, from formality to informality, from static to dynamic conceptions of institutions, from submerged values to a value critical stance, from holistic to disaggregated conceptions of institutions, and from independence to embeddedness (Lowndes 2010: 66). New institutionalist thinking enriched the scope of understanding political life to a larger environment of temporal and structural contexts (Heclo 2008). With reference to behaviorist dominance in social sciences scholars also developed different institutionalist approaches independent from each other (Hall/Taylor 1996: 936 f.). In 1994, at the Annual Meeting of the American

2.1 Introduction: Bringing Institutions Back in

19

Political Science Association in New York, Peter Hall and Rosemary Taylor presented four basic institutionalist branches, which they eased to three in their 1996 article: historical institutionalism, rational choice institutionalism and sociological institutionalism2 (Hall/Taylor 1996; Weingast 2002; Koelbe 1995). Although the typology prevailed among the discipline, scholars were far from a common understanding. Kato for example argued that sociological institutionalism can be neglected in favor of bounded rationality institutionalism3 (Kato 1996: 554). Amenta and Ramsey further neglected rational-choice institutionalism in favor of a political institutionalism (Amenta/Ramsey 2010: 15) and Peters even described six different institutional approaches including the three above (Peters 2005: 19 f.).4 In addition to that, scholars in political science lately revived the role of ideas to institutionalist thinking.5 By establishing a new ‘commitment to the significance of institutional arrangements’ (Lowndes 1996: 183) the rediscovery of institutions as independent variable has caused innovation in the field of institutionalism (e.g. Schmidt 2008; Hay 2008; Ansell 2008; Owen-Smith/Powell 2008; Peters 2005; Lowndes 1996). Governance theory, for example, conceptualized institutions as the structuring element of complex reflecting governance regimes (Straßheim 2009; Quack 2005; Peters 2011). Benz further argues that the polity dimension within governance defines an institutional structure that links elements of hierarchy, negotiation systems, and competition mechanisms (Benz 2004: 21). Likewise do the economics of conventions (Jagd 2007: 78)6 . Functional institutional arrangements, which again influence collective and individual behavior, constitute societal coordination mechanisms that are eventually governing the production of public goods (Grande 2012) and social interaction (Nee 1998) within complex systems. Facing 2 The

term sociological institutionalism sometimes appears under different frames, often as normative institutionalism. Initially, Hall and Tayler also elaborated bounded rationality institutionalism. 3 Hall and Taylor cut out this type when publishing their approach in 1996. 4 Peters additionally elaborates empirical institutionalism, sociological institutionalism (while he distinguishes between normative and sociological institutionalism), and international institutionalism. 5 This list is far from conclusive and only represents the most common and most established approaches to institutionalism in political science. For further elaboration on empirical institutionalism and international institutionalism see Peters (2005), for network institutionalism see Ansell (2008), and for feminist institutionalism see Krook and Mackay (2011), Kenny (2007), and Chappell (2006). Constructivist, discursive, or ideational institutionalism will be introduced later in this chapter. 6 ‘According to economics of convention, it is necessary to reconsider the concept of institution and the issue of the stability and coherence of social practices’ (Jagd 2007: 78).

20

2

Institutionalism in the 21st Century

this diversity, institutionalist scholars claimed that there was not a ‘unified body of thought’ (Hall/Taylor 1996: 936) addressing institutionalist thinking but single institutionalisms being subsumed under the same ‘intellectual umbrella’ (Peters 2005: 18). Peters yet argued that ‘there is a sufficient core to justify these approaches being considered one broad, if variegated, approach to politics’ (Peters 2005: 164). Today, approaches differ in the degree of institutional or individual autonomy, the individual’s motivation to comply with institutions, or the particular capabilities and shape of institutions within the institutional environment. Whereas theoretical innovation in the field of institutionalism provided for manifold inquiry, the present dissertation can only focus on few albeit crucial aspects of new institutionalist thinking. The most influential will be presented in the following. The objective of the theoretical chapter is to deduce the similarities under this intellectual umbrella rather than to analyze the differences between the various typologies of institutionalism. The assumption is that beyond the differences there is common ground defining the characteristics of institutions providing for a comprehensive institutional analysis. Since for the present research interest it is important to understand the endogenous and exogenous sources and effects of institutional conflict, it will focus on findings that explain why institutions gain or lose allegiance and thereby provoke institutional change. Unearthing the sources of allegiance shall support to analyze the presumption that in the present EU communications environment not only two different institutions but also two divergent institutional logics collide. With reference to DiMaggio and Powell further inquiry will be based on these findings: ‘The new institutionalism is interested less in describing formal structures and constitutions, and more in unearthing the deep structure and “rules of the game” which influence political behaviour’ (Powell 1991: 5).

2.2

EXCURSUS: The Origins of Institutions

In 1966, on the height of the behaviorist turn, Peter L. Berger and Thomas Luckmann published their essay on The Social Construction of Reality as a ‘systematic, theoretical treatise in the sociology of knowledge’ (1966: v). Berger and Luckmann presented an approach on the genesis of knowledge based on individuals’ mutual acknowledgement of common action. As a matter of fact, the text does not reflect a political science approach and is far from being the basis to institutionalist theory. Nevertheless, there is value in the very micro-level perspective through which Berger and Luckmann explain the genesis of institutions from an individualistic ankle—especially bearing in mind new institutionalists’ consideration of

2.2 EXCURSUS: The Origins of Institutions

21

behavioristic approaches. The abstraction of individual action in an institutional world ascribes relevance to institutions in an individualistic world and provides an early understanding of institutions as dependent and independent variables in society. The central argument of institutionalization is that through the continuous (re)production of reality by ascribing meaning to action (1966: 66) individuals constitute social order that is hardened in an institutional world (1966: 60). The key concept is reciprocal typification of habitualized action outlined in Section II of the book. To routinize actions as standard operating procedures—habitualization—both narrows individual choices and frees individuals from the ‘burden’ of alternative actions (Berger/Luckmann 1966: 53). As individuals do not act detached from each other, they rather perform action in a social situation of common interest—which is not necessarily a common action. When individuals evaluate the other’s action and adapt to it, Berger and Luckmann claim a reciprocal typification of action. Reciprocity in these regards makes action predictable and accounts for expectable outcome of what happens in social situations: interaction. Through recurrent interaction, reciprocal typifications of habitualized action constitute institutions that in turn become the permanent solution to a permanent problem in the given collectivity of individuals (1966: 70). The process of institutionalization occurs in any area of collective relevant conduct based on a social situation of common interest and as a consequence subsumes individual action under social control. Recurrent interaction over time ascribes relevance to historicity as a procedural feature in institutionalization. With reference to the book’s initial objective, historicity makes institutions appear as given, unalterable and self-evident and thereby constitutes knowledge (Berger/Luckmann 1966: 59). In consequence, historicity detaches institutions from their primal collectivity and thereby establishes roles external to specific individuals. Historical institutions thus create and thicken a given reality over generations.7 In a social world, historical institutions over time gain objectivity which translates into objectivated human activity in the institutional world (Berger/Luckmann 1966: 60). The thereby constructed institutional world executes coercive power on individuals through control mechanisms attached to institutions and the force of objectivized institutional facticity. Whereas this reality is constituted external to the individual and might even seem opaque and intransparent, it is at the same time potentially understandable and is being internalized into the individual’s consciousness of society. 7 Berger

and Luckmann exemplify their thoughts by a tribe that passes knowledge to succeeding generations while the creation of the initial knowledge blurs (1966: 59).

22

2

Institutionalism in the 21st Century

The reaction of individuals towards the institutional arrangement is crucial for the persistence of the very arrangement. Individuals tend to produce a cohesive biographical framework between the different institutional contexts they are associated with and integrate the logic of the institutional order into their collective knowledge (1966: 63–5). The institutional world, thus, provides socially shared universes of meaning among actors. However, individuals’ potential alienation from institutional facticity challenges the authority over the definition of specific institutions, which is a potential source of conflict and competition and might eventually lead to institutional transformation or decline. Although Berger and Luckmann did not specify the quality of the parameters used—i.e. of what quality is institutional authority or coercion?—their conclusion is quite helpful for further inquiry: the institutional world is a system of order to the individual, which combines a cluster of characteristics ascribed to institutions. The limitation of choices, the predictability of action, the social control of conduct, and the stability of a given interrelation are central issues when assessing the quality of political institutions in an institutional world. As will be shown later, in institutionalist theory the institutional world is approached through the concept of institutional context. At the same time, institutional persistence is not given per se. Individuals’ must—due to versatile sources of allegiance—attach to institutions in order for them to remain relevant. Whereas individuals do not exist outside any institutional context, institutions cannot exist outside the legitimacy of individuals that sustain them.

2.3

Institutions Do Matter!

2.3.1

A Synopsis

To re-establish institutionalist thinking in social sciences in the 1970s was a scattered development. As has been mentioned above, new institutionalism has established a variety of institutionalist approaches within institutional thinking. One reason was a common critique of behaviorist theories among various groups of scholars in different disciplines (Lowndes/Roberts 2013: 29). Aiming at constituting an institutionalist approach, scholars have been more or less attached to the old institutionalism while at the same time have integrated more or less of behavioralist thinking. DiMaggio and Powell illustrated the controversies between scholars: ‘Do institutions reflect preferences of individuals or corporate actors, or do they represent collective outcomes that are not the simple sum of individual interests?’ (DiMaggio/Powell 1991: 9) Most scholars particularly

2.3 Institutions Do Matter!

23

addressed the structural deficits of behaviorist thinking and thereupon started to rebuild institutionalist approaches; others have integrated rational actor models in their institutionalist explanations (March/Olsen 1984; Heclo 2008: 733; Easton 1968). March an Olsen (1989: 2) identified institutionalist ideas in research papers ranging from local government, national administration and legislature over budgets, public policies, political elites and corporatism to the matter of statehood (Kjellberg 1975; Robins 1976; Ashford 1977; Jessop 1977; Scharpf 1977; Wright 1977; Hanf/Scharpf 1979; Schmitter/Lehmbruch 1979; Therborn 1980; Berger 1981; Cooper/Brady 1981a; Olsen 1981; Padgett 1981; Skowronek 1982; Shepsle/Weingast 1982; Heclo 2008). Also, in economics, public law and sociology institutionalist approaches regained relevance (Williamson 1975; Akerlof 1980; DiMaggio/Powell 1983; Thomas et.al. 1987; Smith 1988). March and Olsen’s objective to conceptualize a new institutionalist thinking in social sciences made their 1984 article ‘the foundation for the resurgence of institutional theory in political science’ (Peters 2011: 80). They inter alia de-emphasize the centrality of micro-level, choice-focused individuality of actors in favor of the autonomy of political institutions without neglecting the role of the individual in politics. The central concept in the new institutionalism, coined by March and Olsen in 1984,8 based on the claim of institutional autonomy: ‘The claim of institutional autonomy is necessary to establish that political institutions are more than simple mirrors of social forces’ (March/Olsen 1989: 18). New institutionalism stressed the relevance of institutions as independent variables and emphasized the role of political institutions as political actors. For March and Olsen to claim that institutions are ‘political actors in their own right’9 (March/Olsen 1984: 738) was a claim of institutional coherence and autonomy (March/Olsen 1989: 17). Whereas former behaviorist approaches hollowed out the role institutions played in politics and offset structure outside society, new institutionalist thinking brought polity back into society. In new institutionalist approaches, structure—law, contracts, hierarchies, standard operating procedures, professional codes and social norms—regained its framing capacity (Akerlof 1980; March/Olsen 1984: 738). Krasner argued that the core of institutionalist theory was ‘the derivative character of individuals and the persistence of something […] over time’ (Krasner 8 The

ideas of the 1984 article had been enhanced in the 1989 book. Both issues have been extraordinarily influential in political science. Many scholars (i.a. Lowndes 2010: 63; Blondel 2008: 720) claim that sociological (or normative) institutionalism initially coined by March and Olsen ‘served as the foundation for the resurgence of institutional theory in political science’ (Peters 2011: 80). 9 March and Olsen argue that the design of political institutions, such as the appellate court, define interests and are the structures to standard operating procedures.

24

2

Institutionalism in the 21st Century

1988: 73). Individual choice in an institutional context was understood as channeled through institutional order, which provided beliefs and norms, procedural routines and particular structural contexts surrounding individual behavior (March/Romelaer 1976; Powell 1978; Levitt 1988; Tyack 1976; Rommetveit 1976; Weiner 1976; March/Olsen 1989:29). New institutionalism eventually was determined to become ‘a theory of how polity comprehends, changes, and maintains a relationship with its environment through its institution’ (March/Olsen 1989: 160).10 A cornerstone of doing so was to understand how institutions and actors interacted with politics. Whereas old institutionalism treated polity as the determining factor to individual behavior, behaviorists described political phenomena as the exogenous aggregate of individual or group preferences. In new institutionalism, polity is not any longer seen as exogenous to preferences, resources and the rules of the game, but being constitutive to the political context; ‘[p]olitical institutions not only respond to their environments but create those environments at the same time’ (March/Olsen 1989: 162). By shaping and even establishing processes internal and external to the specific polity, institutions create a structural system of order, which represents a repertoire of procedures of formal and informal nature diminishing uncertainty and ambiguity of individual choice. Whether this order is part of the resolution of collective action dilemmas or constituted a set of collectively binding conventions is subject to a differentiated understanding in new institutionalist theory (Hall/Taylor 1996: 940). Likewise, different conceptions of structure-agency reciprocity inhere institutionalist approaches. Quack, for example, argues that institutions fulfill two functions: a regulative and a symbolic. In their regulative function they constrain or enable behavior. In their symbolic function institutions become values for society. As ‘sedimented public codes’ (Schuppert 2005; Quack 2005: 347) institutions represent knowledge about the experiences and interpretations of the past and give orientation about future preferences and abilities. As Berger and Luckmann (1966: 103) put it: ‘The symbolic universe also orders history. It locates all collective events in a cohesive unity that includes past, present and future. […] All the members of a society can now conceive of themselves as belonging to a meaningful universe, which was there before they were born and will be there after they die.’

10 The empirical motivation that caused the refocus on institutions furthermore bases on the change in the governance of public services (Lowndes 1996: 181). The theoretical mean to analyze these new institutions hence advanced the interest in new institutionalisms (Lowndes 1996: 182).

2.3 Institutions Do Matter!

25

These values result from societal and political interaction and as such are coined by the particular distribution of power among the participating actors. Although institutions frame or regulate behavior, scholars agree on the fact that they do not determine it at last11 (Quack 2003: 347; March/Olsen 2008: 8). They rather incentivize, impede or prohibit a particular behavior—also through potential sanctions. Institutions eventually become sedimented when actors internalize their values as desirable or integrate the cognitive interpretation into their worldview (Quack 2003: 348). Whereas institutions provide ‘a structure of routines, roles, forms, and rules, [which] organize a potentially disorderly political process’ (March/Olsen 1989: 52) ‘the basic goal of all concerned is to move toward theories that demonstrate how social interests and political institutions jointly determine political outcomes’ (Moe 1987: 236–7).

2.3.2

The Logic of Appropriateness: Institutions as Taken for Granted

Aside outlining the conditions for institutional autonomy, March and Olsen (1984; 1989; 2006) developed an approach particularly addressing the normative influence on the nature of human conduct: ‘[T]he behavior of institutions, and the individuals who comprise them, is shaped by a “logic of appropriateness” that is composed of values, symbols, methods and routines that an individual learns as a member of the institution’ (Peters 2011: 80). The embeddedness of individual conduct in the institutional world in sociological institutionalism (DiMaggio/Powell 1991: 10) exceeds the mere provision of a constraining or enabling environment; it is of a normative nature12 without which individual conduct can neither be understood nor explained. In a cultural approach, interaction between individuals and institutions determines the condition of individual utility and preference (Koelbe 1995: 232). As Gerber and Jackson put it in opposition to calculus approaches, ‘[t]he role of institutions in developing preferences may be more important than their role as aggregator of these preferences’ (Gerber/Jackson 1993: 654). Addressing the analytical capacity of different institutional logics, Crawford and Ostrom argue that 11 March and Olsen (2008: 8) state: ‘The openness in interpretation means that while institutions structure politics and governance and create a certain “bias” (Schattschneider 1960), they ordinarily do not determine political behavior or outcomes in detail.’ 12 DiMaggio and Powell state that sociological institutionalists ‘find institutions everywhere’ (DiMaggio/Powell 1991: 9).

26

2

Institutionalism in the 21st Century

‘[t]he grounds for looking at institutions as norms rest on an assumption that many observed patterns of interaction are based on the shared perceptions among a group of individuals of proper and improper behavior in particular situations. To understand why some regularized patterns of interaction exist, one needs to go beyond immediate means-ends relationships to analyze the shared beliefs of a group about normative obligations.’ (Crawford/Ostrom 1995: 583)

In order to understand March and Olsen’s approach as well as other cultural approaches it is important to understand that the nature of institutions lies in an inherited or learned contract on appropriateness subliminally agreed upon between actors as well as actors and institutions. This contract may neither be explicit nor reciprocal, but it gains validity through the expectation of reciprocal appropriate behavior.13 As DiMaggio and Powell put it: ‘The constant and repetitive quality of much organized life is explicable not simply by reference to individual, utility maximizing actors but rather by a view that locates the persistence of practices in both their taken-for-granted quality and their reproduction in structures that are to some extent self-sustaining.’ (DiMaggio/Powell 1991:9)

March and Olsen understand individuality as evaluating a situation in reference to the individual’s role-specific self-reflection and the appropriateness of a certain action in the given situation; meaning that individuals do not freely choose between different alternatives but depend on the interpretations attached to the institutions they inhere. Action gains institutionalized value through compliance with rules and routines. Allegiance to rules results from the role of appropriateness for individual conduct. Individuals are—more or less—rather bound by a contract of expected appropriate behavior than by outcome-oriented decision-making (March/Olsen 1989: 22–3): ‘institutions are imagined to organize the polity and to have an ordering effect on how authority and power is constituted, exercised, legitimated, controlled, and redistributed. They affect how political actors are enabled or constrained and the governing capacities of a political system. Institutions simplify political life by ensuring that some things are taken as given. Institutions provide codes of appropriate behavior, affective ties, and a belief in a legitimate order.’ (March/Olsen 2008: 8)

Although there are rationalizing explanations for appropriate behavior, such as altruism (Kurz 1978) or reciprocity (Axelrod 1980), these approaches limit the explanatory scope of appropriateness to the individual level. March and 13 c.f.

Berger and Luckmann in a previous section.

2.3 Institutions Do Matter!

27

Olsen instead state that appropriateness ‘for a particular person in a particular situation is defined by political and social institutions and transmitted through socialization’14 (March/Olsen 1989: 23). Individuals rather do what is most appropriate in a specific situation than what might promise the best consequences (March/Olsen 1989: 23). Appropriateness becomes a factor of calculus and a matter of identity. Individuals ‘define themselves in terms of those identities, they act to fulfill them rather than by calculating expected consequences’ (Simon 1965: 115; March/Olsen 2008: 9). In these regards, scholars observed the paradox that participants of decision-making processes are rather interested in the process of decision-making than in the decision itself (March/Olsen 1984: 741–2; DiMaggio/Powell 1991: 3).15 Rules and routines might be detached from a particular experience but inherit compliance through the reflection of historical experiences. Thereby, they become accessible to actors that might not have experienced the initial rulemaking (March/Olsen 1989: 38). In consequence, March and Olsen ascribe the outcome of politics to integrative institutions: intrinsic structures and rules of appropriate behavior. But how do individuals and institutions identify what is appropriate? Appropriateness subsumes a variety of institutional patterns and identities that are integrated for various reasons. March and Olsen’s concept of appropriateness bases on trust in reciprocal behavior—similar to expectations in habitualized action. Individuals identify appropriate behavior and comply with rules or routines on the basis of the respective situation and their concept of identity (Jepperson 1991: 146; Stinchcombe 1986: 905). Trust in appropriate behavior sustains structures of rules and routines that struggle between conformity and potentially conflicting interpretations of appropriateness as different actors learn different rules of appropriateness by socialization (March/Olsen 1989: 37). Appropriate objectives of action or appropriate processes constitute legitimacy of the rules in question. March and Olsen state that ‘[b]y shaping meaning, political 14 As Meyer et.al. (1987: 12) argue ‘a central concern of our analysis is the way in which the institutional structure of society creates and legitimates the social entities that are seen as “actors”. That is, institutionalized cultural rules define the meaning and identity of the individuals and patterns of appropriate economic, political, and cultural activity engaged in by those individuals.’ 15 March and Olsen (1984: 741–2): ‘The pleasures are often in the process. Potential participants seem to care as much for the right to participate as for the fact of participation; participants recall features of the process more easily and vividly than they do its outcomes; heated argument leads to decisions without concern about their implementation; information relevant to a decision is requested but not considered; authority is demanded but not exercised’.

28

2

Institutionalism in the 21st Century

institutions create an interpretive order within which political behavior can be understood and provided continuity’ (March/Olsen 1989: 52)—be it symbolic, historical, normative or organizational order16 . Whereas rule-bound behavior— supported by routines—facilitates the interpretation of life in a way that they constrain action17 , the rules themselves are subject to individual evaluation. On the other hand, routines—as part of habitualized action—apply rules in order to frame this evaluation process: ‘Much of the behavior we observe in political institutions reflects the routine way in which people do what they are supposed to do. […] Institutions have a repertoire of procedures, and they use rules to select among them’ (March/Olsen 1989: 21–2). Actors seem to comply with rules in order to facilitate their interpretation of life. Thus, individuals attach to alternative ‘identities, interests, values, and worldviews’ (March/Olsen 1989: 23). Likewise, they are constrained in the process of their particular attachment depending on their position in a specific situation. March and Olsen further elaborate the role of meaning constructed and interpreted within institutional contexts (March/Olsen 1989: 39–52). Institutions frame the cognitive environment of actors by specifying what is imaginable in the given context. In these regards, institutions provide ‘cognitive scripts, categories and models that are indispensable for action, not least because without them the world and the behaviour of others cannot be interpreted’ (Hall/Taylor 1996: 948). Recent approaches to sociological institutionalism emphasize the cognitive dimension of institutions. If meaning as the means to individual compliance with action develops within institutional contexts, actors’ preferences for a certain action become endogenous to institutions. Thus, actors’ preferences are highly affected by the institutions they are embedded in through socialization: ‘[p]references and meanings develop in politics […] through a combination of education, indoctrination, and experience. They are neither stable nor exogenous’ (March/Olsen 1984: 739). Understanding that individuals see and like what is to be seen and liked, what is expected to be seen and liked and what they expect to see and like (March/Olsen 1989: 41–2) illustrates that institutions constitute roles and duties

16 They quote for symbolic order Meyer and Rowan (1977), Pondy (1978), March (1981), Pfeffer (1981a), March and Olsen (1983); for historical order Etheredge (1976), Olsen (1976a), Levinthal and March (1981); for normative order Kreiner (1976), Olsen (1976b), Rommetveit (1976) and Stava (1976); and for organizational order Egeberg (1987) and Olsen (1983). 17 ‘Routines help avoid conflicts; they provide codes of meaning that facilitate interpretation of ambiguous worlds; they constrain bargaining within comprehensible terms and enforce agreements; they help mitigate the unpredictability created by open structures […]’ (March/Olsen 1989: 23).

2.3 Institutions Do Matter!

29

as well as self-images18 : ‘[w]hen they act as a social convention specifies, individuals simultaneously constitute themselves as social actors, in the sense of engaging in socially meaningful acts, and reinforce the convention to which they are adhering’ (Hall/Taylor 1996: 948). Another source of compliance is formalized or non-formalized sanctions. The execution of sanctions might be formal adjudication or informal exclusion from a group of actors or exclusion from the institution’s domain. As Peters argues from a logic of appropriateness, ‘in effective institutions the sanctioning and enforcement processes are built into the structures themselves through socialization’ (Peters 2005: 37); or, put differently: ‘[p]rograms adopted as a simple political compromise by a legislature become endowed with separate meaning and force by having an agency established to deal with them’ (March/Olsen 1984: 739; Skocpol/Finegold 1982). In summary, cultural approaches that refer to the logic of appropriateness address institutions as ‘not simply equilibrium contracts among self-seeking, calculating individual actors or arenas for contending social forces. They are collections of structures, rules and standard operating procedures that have a partly autonomous role in political life’ (March/Olsen 2008: 4). On this basis, institutionalist approaches that applied the logic of appropriateness advanced in recent years. As sociological institutionalism provided a broad definition of institutions integrating symbolic, cognitive and moral patterns (Hall/Taylor 1996: 947), ideational aka discursive approaches to institutions have been developed taking into account the premises of normative institutionalism but at the same time understanding institutions as a meta-level of reciprocity.

2.3.3

The Logic of Calculus

The major difference between the logic of appropriateness and the logic of calculus is their understanding of the role structure plays for individual conduct. The logic of calculus presumes that the institutional influence remains exogenous to individual preferences and thereby channels individual behavior without affecting preference building as such. In consequence, it is not the actors’ preferences that are affected but the allowable behavior resulting from these preferences. Crawford and Ostrom argue that ‘[t]his view places the responsibility for a social order on

18 Immergut argues that behavior is not the output of individuals’ real preferences. It is rather an alternative of the real preferences that fits the structural context (Immergut 1998: 6–7).

30

2

Institutionalism in the 21st Century

the individuals who are part of that order’ (Crawford/Ostrom 1995: 583). The following section illustrates the role equilibria play in rational choice institutionalism and historical institutionalism. Rational choice institutionalism Rational choice scholars in new institutionalism ‘seek to explain characteristics of social outcomes on the basis not only of agent preferences and optimizing behavior, but also on the basis of institutional features’ (Shepsle 1989: 135). The starting point to overcome mere individualism of behavior was Congressional research that highlighted the role of institutions for reducing transaction costs (Hall/Taylor 1996: 943). North discussed the role of transaction costs as a reason for individuals to group interests within institutions: In order to enforce, challenge or benefit from rules, collectivities inherit the role of grouping individuals and thereby accumulating interests in order to achieve common objectives (North 1990: 5). Common objectives in an institutional world can also be to ‘economize on transaction costs in a world in which information is costly, some people behave opportunistically, and rationality is bounded’ (DiMaggio/Powell 1991: 4). In addition to that, rational choice institutionalism assumes a utility-maximizing rational actor that is confronted with a collective action dilemma19 (Hall/Taylor 1996: 945). Therein, institutions contribute to the limitation of uncertainty in the production of outcome and support actors to act strategically in a world of limited alternatives and bounded rationality: ‘Institutions structure such interactions, by affecting the range and sequence of alternatives or the choice-agenda or by providing information and enforcement mechanisms that reduce uncertainty about the corresponding behaviour of others and allow “gains from exchange”, thereby leading actors towards particular calculations and potentially better social outcomes.’ (Hall/Taylor 1996: 945)

Institutions are understood as a game form that establishes the context within which strategic optimizing behavior occurs; actors’ preferences as such are not determined by institutions as they are situated exogenous to the institutional structure (Hall/Taylor 1996: 939; Lowndes/Roberts 2013: 35). Although institutions do not affect individual preference-building, they do affect the transformation of preferences into outcome. Put differently, ‘institutions affect means, not goals’ (Premfors

19 Scholars typically highlight the role of institutions for the resolution of the prisoner’s dilemma.

2.3 Institutions Do Matter!

31

2004: 17, cited in Lowndes 2013: 35)20 . Taking into account the context of institutions constraining action, Immergut describes actors behaving strategically when aiming to balance the constraining effects on their preferences: ‘Moreover, because political actors are aware of the effects of these rules, they will attempt to cast their votes or to manipulate the rules in such a way as to achieve their most-preferred outcome. Consequently, voting […] expresses not the true preferences of voters but an indeterminate amalgam of honest and strategic voting. And the aggregation of these votes into a decision is not a simple sum of honest preferences but a result of the specific decision rules in play’ (Immergut 1998: 13).

Since individuals perform utility-maximizing behavior based on fixed preferences they seize institutions as elements structuring individual interaction and solving collective action dilemmas, such as free riding, from a collectively superior position. This is achieved by influencing the range of possible choices or by providing information to facilitate decision-making (Hall/Taylor 1996: 945). The ‘process of institutional creation usually revolves around voluntary agreement by the relevant actors; and, if the institution is subject to a process of competitive selection, it survives primarily because it provides more benefits to the relevant actors than alternate institutional forms’ (Hall/Taylor 1996: 945). Referring to Moe’s utilitarian theory of political institutions (Moe 1987) Krasner understands institutions as ‘constraining individual actors by eliminating the viability of certain options and influencing resource availability’21 (Krasner 1988: 69). Whereas institutions constrain access to information and channel individual behavior in the matters of choice making, they also improve social outcome: ‘Rational choice institutionalism in particular recognizes the need to overcome collective action problems and to develop mechanisms for making individual behavior more predictable. Given that rational choice theorists begin with an assumption about the source of individual behavior, they can predict more readily the likely outcomes of any particular choice of institutions. In particular, there is an assumption that a particular set of institutional design choices will produce certain patterns of outcomes.’ (Peters 2011: 83)

20 Premfors, R. (2004) ‘The Contingency of Democratization: Scandinavia in Comparative Perspective’, in papers to the Conference in Honour of Robert Dahl, Contingency In The Study Of Politics, Yale University, 3–4 December 2004. 21 ‘A stable outcome is one in which none of the individual actors have an incentive to change their behaviour’ (Krasner 1988: 69).

32

2

Institutionalism in the 21st Century

However, Meyer and Rowan state that ‘conformity to institutionalized rules often conflicts sharply with efficiency criteria’ (Meyer/Rowan 2004: 86; cf. North 1990: 61–9). Historical institutionalism Whereas scholars argue that historical institutionalism is situated between cultural and calculus approaches, its idea of individuals remains that of a strategic actor. Weingast argues that there is potential in bringing together rational-choice institutionalism and historical institutionalism (Weingast 2002: 693). Nevertheless, the basic assumption in historical institutionalism is that decisions of the past affect decisions in the present, which again affect decisions in the future (King 1995; Skocpol 1992; Pierson/Skocpol 2002; Hall/Taylor 1996; Peters 2005). The second assumption is that institutions maintain historically and institutionally grown asymmetries that affect the battle over resources and power among individuals. Historical institutionalist scholars explain distinctive political outcome by the fact that the institutional context within which action occurs ‘structures conflict so as to privilege some interests while demobilizing others’ (Hall/Taylor 1996: 937).22 Thelen, Steinmo and Longstreth23 claim that the institutional environment, by structuring policy-making, affects actors’ power in the given context but also influences actors’ roles and positions within this context (Thelen/Steinmo 1992: 3). While historical institutionalists agree with the rational choice institutionalist idea that institutions ‘provide the context in which political actors define their strategies and pursue their interests’ (Thelen/Steinmo 1992: 8), they also emphasize the role institutions play in framing these interests and preferences. It is not utility maximization in a given institutional context that defines action but rather rule-following satisfaction of interests. Preferences and resource allocation are thus not situational but depends on the institutional context: ‘If we want to explain social institutions […] in terms of the rationality of social actors, we commit ourselves to explaining them in terms of their preferences for these institutions’ (Knight 1992: 210). Historical institutionalists argue that individual preferences adapt to the respective bounded rationality, collective action, and institutional structures that individuals 22 Historical institutionalism bases on the concept of trans-national comparison. The initial question was why market structures or policy programs differ among countries while individual preferences were assumed similar. The answer to this question, for historical institutionalists, lay in the shape of the structural context. One started to re-discuss the role of the state in this structural context (c.f. Evans et.al. 1985). 23 In their 1992 book Structuring Politics, Thelen, Steinmo and Longstreth argue for an institutionalist approach that takes into account the role history plays for the constitution of institutions.

2.3 Institutions Do Matter!

33

face: ‘Preferences are formed by the institutional context and ought not be treated as fixed’ (Koelbe 1995: 232). Behavior, although being strategic, becomes bound by individuals’ worldview: ‘The strategies induced by a given institutional setting may ossify over time into worldviews, which are propagated by formal organizations and ultimately shape even the self-images and basic preferences of the actors involved in them’ (Hall/Taylor 1996: 940). Institutions thereby promote structures of (unequally) distributed resources and power (Knight 1992: 210). The position an actor holds in a given context becomes more important than the individual utility maximization; following societally defined rules becomes more important than selfinterest (Thelen/Steinmo 1992: 8). The behavior framed by an institutional context at any specific time even affects future preference building as its validity ossifies within the actor’s worldview (Hall/Taylor 1996: 940; Hattam 1993). The key explanation for bounded behavior in historical institutionalism is path dependence. The structural context frames behavior in the present but also cements decisions within polity over time. Thereby, decisions of the present frame future preferences just like decisions of the past frame current preferences. Historicity accounts for a structural mediation between institutional constraints, individual preferences, and political outcomes. The idea of temporal unique outcomes is being rejected as opaque when historical paths become able to explain inefficiencies due to sedimented preferences of the past shaping the institutional context of the present (Hall/Taylor 1996: 941–2). While historical causation limits functionalist explanations for behavior, it explains how institutions prevail change and even reproduce themselves independently from the initial event of emergence, sustaining power relations among individuals (Pierson/Skocpol 2002: 69924 ; Stinchcombe 1968). As historical institutionalism ‘pays more attention to the long-term viability of institutions and their broad consequences’ (Sanders 2008: 43), historical timing and sequencing make a difference for the outcome of politics and the properties of the path.

24 In general, Pierson’s and Skocpol’s article tries to illustrate the advantages of historical institutionalism over rational choice theory. The main arguments as refers to the present interest are listed here.

34

2

2.3.4

Institutionalism in the 21st Century

Ideational Approaches: Bringing Institutionalism Together?

Whereas both presented logics are not easy to combine, they share a common understanding about the relevance of rules, procedures, structures, and norms, which shape the expression and aggregation of political preferences, power, and political outcomes (Liebermann 2002: 699; Campbell/Pedersen 2001; Hall and Taylor 1996; Immergut 1998; Powel/DiMaggio 1991; Thelen/Steinmo 1992). Thus, Hay argued for an approach overcoming the distinction between calculus and culture. Criticizing the divergence of the established institutionalist approaches he presented a constructivist approach to institutionalism (Hay 2006). While Hay elaborated a perspective on disequilibria in agency-structure relations, he advocated the post-formative character of institutions: ‘for constructivists, politics is rather less about the blind pursuit of transparent material interest and rather more about both the fashioning, identification, and rendering actionable of such conceptions, and the balancing of (presumed) instrumentality and rather more affective motivations’ (Hay 2008: 64). Nevertheless, Hay’s description of the structure-agency relations recalls explanations found in both the logic of calculus and the logic of appropriateness: ‘Actors are strategic, seeking to realize certain complex, contingent, and constantly changing goals. They do so in a context which favors certain strategies over others and must rely upon perceptions of that context which are at best incomplete and which may very often prove to have been inaccurate after the event. Moreover, ideas in the form of perceptions “matter” in a second sense—for actors are oriented normatively towards their environment. Their desires, preferences, and motivations are not a contextually given fact—a reflection of material or even social circumstance—but are irredeemably ideational, reflecting a normative (indeed moral, ethical, and political) orientation towards the context in which they will have to be realized.’ (Hay 2008: 63–4)

Hay eventually withdraws the previously criticized dichotomy in institutionalist thinking (Hay 2006: 58–62; Lowndes 2010: 77). Although historical institutionalists have already shown openness for the framing capacity of ideas within the institutional context (Hall 1989, 1992; Hall/Taylor 1996: 942), other scholars used a post-formative or post-materialist perspective on institutionalism in order to elucidate normative and cognitive ideas symbolically represented through structure (Quack 2005: 347). Lieberman, for example, argued that the capacity of institutional approaches to explain political appearances is limited. While institutionalists took materialist assumptions like actors’ beliefs, preferences, knowledge, understandings and expectations for granted, they underestimated the relevance of ideas

2.3 Institutions Do Matter!

35

and causal stories. Lieberman pointed out that ideational approaches opposed the structural and organizational understanding of institutions due to their blind spots caused by reductionism. Instead, they rather focused on actors’ abilities to defy institutional constraints and transform institutional settings. He also challenged the focus on stability, order, and coherence in new institutionalisms and rather promoted a focus on institutional dynamics being able to explain change (Lieberman 2002: 697–8). Ideational institutionalism claims that if political science aims at explaining change it must consider both institutions and ideas as constituent elements. Since new institutionalist approaches conceptualize ideas as exogenous, non-constitutive variables, their explanatory power remained diffuse: ‘If institutionalism wants to remain relevant in political science, it must prove itself able to account convincingly for these changes that manifest themselves not simply in new policies but in fundamental new ideological bases for politics.’ (Liebermann 2002: 699) Liebermann considers any policy or politics being ‘situated within a variety of ordered institutional and ideological patterns’ (Liebermann 2002: 701; Orren/Skowronek 1994, 1996). Lieberman eventually emphasized the question how to endogenize multiple ordered patterns in a single explanatory framework. Vivien Schmidt argued for an amplified methodological toolkit that provides access to understanding the role of ideas ‘in constituting political action, the power of persuasion in political debate, the centrality of deliberation, […] values […], and the dynamics of change in history and culture’ (Schmidt 2008: 305). Discursive institutionalism aims at blurring ‘the boundaries among all three older institutionalisms’ (Schmidt 2008: 304). When analyzing employment policy, Margaret Weir as well as Desmond King highlighted the role of ideas for politics. Both state that actors link ideas, institutions, and policies and translate these ideas into language that eventually becomes action (Weir 1992: 189; King 1992: 242). On the basis of the assumption that ideas and discourses provide a dynamic institutional context that has transformative power and causal influence, Schmidt defines institutions as ‘simultaneously structures and constructs internal to agents whose “background ideational abilities” and “fore-ground discursive abilities” make for a more dynamic, agent-centered approach to institutional change than in HI. Next, we show that interests in DI are “subjective” rather than either “objective” or “material”, as in RI, but

36

2

Institutionalism in the 21st Century

nonetheless “real”. Third, we show that although DI has much in common with SI, norms in DI are more dynamic constructs.’25 (Schmidt 2008: 305)

This post-materialist view on institutions at a certain point tends to become poststructuralist, which seems paradox for an approach defining itself institutionalist. Discursive institutionalism—which is also constructivist and ideational—argues that ideas are constitutive to institutions in a way that they provide access to the new in the institutional world (Lowndes/Roberts 2013: 88). Whereas institutionalism mostly was about stability and inertia to change, ideas provided capacities to initiate change as they generated new cognitive and normative mind-sets. Through ideas, new roles of identity can be ascribed to actors, new fields of power can be opened, and new ways of influencing preferences can apply to the political process (Barnes et al. 2007: 54; Finlayson/Martin 2006: 159).

2.3.5

Actor-Centered Institutionalism

To exemplify institutionalist thinking must not neglect Scharpf’s actor-centered institutionalism. Fritz Scharpf in 1997 elaborated the actor-centered institutionalism (ACI) aiming at bridging the gap between ‘theoretical perspectives and the observed reality of political interaction’ (Scharpf 1997: 36). Scharpf stated that ‘we need a framework that conceptualizes policy processes driven by the interaction of individual and corporate actors endowed with certain capabilities and specific cognitive and normative orientations, within a given institutional setting and within a given external situation’ (Scharpf 1997: 37).26 ACI on that account does not mean to categorize a certain theoretical pattern of rules, but rather create a shorthand term to describe the most important influences on actors’ conduct: orientations and capabilities, constellations, and modes of interaction. For social science research, the assumption of institutions creating the conditions of common knowledge reduces the empirical information costs. The institutional setting provides an understanding of actors’ interactions, preferences, and perceptions and thus stands somewhere between generalized assumptions and description of individual cases (Scharpf 1997: 41): groupthink (Janis 1972), advocacy coalitions 25 For a brief introduction to discursive institutionalism see Schmidt (2008). HI means historical institutionalism, DI is discursive institutionalism, and RI is rational choice institutionalism. 26 Scharpf (1997: 48): ‘interaction-oriented policy research also has an evaluative dimension in identifying systematic deviation and their causes and a prescriptive dimension in contributing to the design of deviation-reducing institutional arrangements.’

2.4 Rules as Institutional Intermediates

37

(Sabatier 1987), epistemic communities (Haas 1992), policy learning (Jenkins Smith/Sabatier 1993). In reflection of the new institutionalism objective to dissolve the exclusiveness of individuality or institutionality, ACI aims to combine analyses of actor constellation with the analyses of modes of interaction. ACI assumes specific individual capabilities, preferences and perceptions, towards which institutions are the most important influential factor and source of information. As such, Scharpf defines institutions as systems of rules that structure actors’ conduct: ‘actors themselves depend on socially constructed rules to orient their actions in otherwise chaotic social environments’ (Scharpf 1997: 39).

2.4

Rules as Institutional Intermediates

The previous sections have shown that institutionalist thinking, regardless the borders of the respective institutionalist understanding, relies on the reciprocity between agency and structure, ascribes the outcome of politics both to agency and structure, locates agency within a structural environment framing action, ascribes significance to the temporal dimension and highlights the role of institutionalized meaning—be it of a cultural or calculus nature—for individual conduct.27 Beneath the diversity of definitions and explanations in the field of new institutionalism there is a common understanding of the relevance of rules in structural contexts (Lowndes 2010: 71). The proposition derived from these arguments is that structure matters (Peters 2011: 79) and that structure and agency reciprocally create intermediates translating ‘structures into political action and action into institutional continuity and change’ (March/Olsen 2008: 5). The following sections will focus both on these intermediates and the implications on institutional stability and change. Fritz Scharpf, for example, ascribed a crucial role to rules as he defines institutions as systems of rules28 : ‘A complete systematization [of institutions] would have to account for the full range of legal rules […] and it would have to include the full range of informal rules, 27 ‘In broad terms, an institutional logic is the constellation of beliefs and associated practices (the schemas and scripts) that a field’s participants hold in common. These packages of beliefs and practices are organizing principles and recipes for action. They have instrumental, normative, and cognitive implications’ (Owen-Smith/Powell 2008: 600). 28 Scharpf’s actor-centered institutionalism does not aim to categorize a certain theoretical pattern of rules, whereas it creates a shorthand term to describe the most important influences on actors’ actions: orientations and capabilities, constellations, and modes of interaction (Scharpf 1997: 39).

38

2

Institutionalism in the 21st Century

norms, conventions, and expectations that extend, complement, or modify the normative expectations derived from the “hard core” of formal legal rules’ (Sharpf 1997: 38).

Rules can be either formal or informal—structured or unstructured, respectively —, can be constructed or can evolve. For North, it is the formal rules or informal codes of conduct that mediate interaction between structure an agency as they set out the constraints forming the institutional framework and its evolution. Constraints include ‘conventions, codes of conduct, and norms of behavior to statute law, and common law, and contracts between individuals’ (North 1990: 6). For Shepsle, there are ‘[v]arious forms of patterned informal interaction, including coordinated agreements like which side of the road to travel, sharing rules like “split the difference”, and understandings like “tit for tat” (Axelrod 1984) and “taking turns” (Ward 1998), [that] constitute unstructured institutions’ (Shepsle 2008b: 28). Jack Knight defined institutions as ‘a set of rules that structure social interactions in particular ways’ (Knight 1992: 2) and over which the members of the relevant group share knowledge. From an economic perspective Douglas North characterized institutions as the rules of the game that are ‘the humanly devised constraints that shape human interaction’ (North 1990: 3). Both, calculus approaches and cultural approaches claim that ‘[t]he basic building blocks of institutions are rules’ (March/Olsen 2008: 8) constituting the connections that link action to structure in a specific context. Theorizing the role of institutions, March and Olsen conceptualized rules as the institutionalization of expected human conduct: ‘[r]ules and practices specify what is normal, what must be expected, what can be relied upon, and what makes sense in the community; that is, what a normal, reasonable, and responsible (yet fallible) citizen, elected representative, administrator, or judge, can be expected to do in various situations.’ (March/Olsen 2008: 8)

Greif observed that ‘institutionalized rules and the beliefs they help form enable, guide and motivate most individuals to adopt the behavior associated with their […] position most of the time’ (Greif 2006: 136). Oran Young further pursued that ‘[s]ocial institutions are recognized practices consisting of easily identifiable roles coupled with collections of rules or conventions governing relations among occupants of these roles. […] The rules or conventions that grow up around these roles and that constitute the superstructure of social institutions ordinarily encompass sets of rights or entitlements [...] as well as sets of behavioral prescriptions’ (Young 1986: 107).

2.4 Rules as Institutional Intermediates

39

Similarly, Peter Hall (1986) conceptualized rules as standard operating procedures attached to a specific institutional setting, recognized and agreed upon as well as followed by agents, and able to be explained in a research context.29 The variety of rules resulting from this extensive occupation with rules in different institutionalist approaches has been captured by March and Olsen in 1989—and sometimes described as abitrary (cf. Peters 2005): ‘By “rules” we mean the routines, procedures, conventions, roles, strategies, organizational forms, and technologies around which political activity is constructed. We also mean the beliefs, paradigms, codes, cultures, and knowledge that surround, support, elaborate, and contradict those roles and routines.’ (March/Olsen 1989: 22)30

The notion of reciprocal typification of habitualized action elaborated by Berger and Luckmann gains particular relevance in institutionalist thinking as it constitutes roles and rules as institutionalization of action. In fact, both calculus and cultural approaches claim that in institutional contexts ‘[t]he basic logic of action is rule following’ (March/Olsen 2008: 7; Ostrom 1986: 6). There is common ground in the fact that rules have a prescribing and configuring effect on actors’ behavior, that their effect is limited primarily but not solely to the institutional context they inhere, and that allegiance to rules affects the constitution of the associated institutional context. But there is more to rules than rule-following. Elinor Ostrom, for example, deduces the role rules play from the diversity of institutionalist approaches and eventually defines two characteristics of rules that corroborate the reciprocity between agency and structure: rules can be changed by humans in a way that rules ‘are the means by which we intervene to change the structure of incentives in situations’ (Ostrom 1986: 6) and rules have prescriptive force in a way that rule-breakers are held accountable for their actions. Thereby, the influence of rules on individual conduct is more profound than ascribing what to do and what not to do. Actors in an institutional context are both empowered by rules and constraint by rules. The messy, inchoate and disorderly institutional world imposes manifold rules on actors, which are themselves 29 Also, March and Olsen (1989) considered the concept of standard operating procedures: ‘Political democracy depends not only on economic and social conditions but also on the design of political institutions. Bureaucratic agencies, legislative committees, and appellate courts are arenas for contending social forces, but they are also collections of standard operating procedures and structures that define and defend values, norms, interests, identities, and beliefs’ (March/Olsen 1989: 17–8). 30 Elinor Ostrom in her 1991 review criticizes the lack of a definition due to the abundance of what an institution can be: ‘When strategies, beliefs, paradigms, cultures, and knowledge are included in the concept of rules, nothing much is left for choice’ (Ostrom 1991: 96).

40

2

Institutionalism in the 21st Century

part of different institutional contexts. In contemporary institutionalist theory the institutional world itself is a complex sphere albeit reducing complexity for the entrenched actor. Similarly, Crawford and Ostrom emphasize an understanding of institutions-as-rules31 that takes into account the expectation of particular conduct when interacting in social situations: ‘The grounds for looking at institutions as rules rest on an assumption that many observed patterns of interaction are based on a common understanding that actions inconsistent with those that are proscribed or required are likely to be sanctioned or rendered ineffective if actors with the authority to impose punishment are informed about them.’ (Crawford/Ostrom 1995: 583)

Blondel adds that ‘only if rules and procedures are “legitimized”, so to speak, by an organization whose “authority” the individual is prepared to recognize can they be also recognized’ (2008: 723). Three qualities can be deduced from the prescribing capacity of rules: rules forbid specific actions; rules allow a range of possible action within limits; rules require one specific action (Ostrom 1986: 7; Crawford/Ostrom 1995: 543). This differentiation has led institutionalist scholars to advance towards a specification of types of rules. Ostrom, for example, defines seven types of rules that influence behavior in an institutional context due to the structure of a situation that an individual faces (1986: 19)32 : 1) Position rules that specify a set of positions and how many participants hold each position. 2) Boundary rules that specify how participants are chosen to hold these positions and how participants leave these positions. 3) Scope rules that specify the set of outcomes that may be affected, and the external inducements and/or costs assigned to each of these outcomes. 4) Authority rules that specify the set of actions assigned to a position at a particular node.

31 Crawford and Ostrom distinguish between three institutional understandings: Institutions as equilibrium, institutions as norms, and institutions as rules (Crawford/Ostrom 1995: 583). 32 Ostrom elaborates that the structure of a situation an individual faces is represented by the set of positions to be held by participants, the set of participants in each position, the set of actions that participants in positions can take at different nodes in a decision tree, the set of outcomes that participants jointly affect through their actions, a set of functions that map participant and random actions at decision nodes into intermediate or final outcomes, the amount of information available at a decision node, the benefits and costs to be assigned to actions and outcomes (Ostrom 1986: 17).

2.4 Rules as Institutional Intermediates

41

5) Aggregation rules that specify the decision function to be used at a particular node to map actions into intermediate or final outcomes. 6) Information rules that authorize channels of communication among participants in positions and specify the language and form in which communication will take place. 7) Payoff rules prescribe how benefits and costs are to be distributed to participants in positions. Also, March and Olsen describe different types of rules defining the interaction between actors and actors and institutions, highlighting that ‘rules are connected and sustained through identities, through senses of membership in groups and recognition of roles’ (March/Olsen 2008: 8). These rules include those defining a specific procedure to be followed in a specific situation, those defining the conversion of inputs into outputs, those defining access to resources, or those regulating appropriateness of behavior in a specific sectoral and temporal context (March/Olsen 1989: 22). In correspondence to that, Shepsle argues that the institutional context defines the rules ‘according to which (1) players are identified, (2) prospective outcomes are determined, (3) alternative modes of deliberations are permitted, and (4) the specific manner in which revealed preferences, over allowable alternatives, by eligible participants, occurs’ (Shepsle 1989:135). Crawford and Ostrom typify institutional components in their 1995 article A Grammar of Institutions. Crawford and Ostrom provide a method as an analytical tool to institutions, which intends to operationalize institutional analysis on the basis of five components: First, attributes determine whom the institutional existence addresses. Second, deontic issues whether a specific behavior is permitted, obliged or forbidden (Ostrom 1986: 7). Third, the aim is the particular action or outcome that is addressed by the deontic issue. Fourth, conditions describe the context within which the deontologically prescribed aim occurs. And fifth, Crawford and Ostrom describe the sanction for alienation (Crawford/Ostrom 1995: 543). The brief synopsis of the variety of rules in institutionalist approaches illustrates that rules affect behavior along the entire chain of conduct. Rules affect the possibility of a certain behavior, determine procedures of action, define inputoutput relations, and specify the interpretation of outcomes. They provide a behavioral guide to a specific action or outcome within a particular context and determine consequences for alienation. By rules, institutions shape and organize interaction between actors and between actors and institutions. But their influence goes beyond that. By rules, institutions can create segregation between actors and promote cleavages within the entire system as they might privilege some actors over others in the way they affect behavior of different actors in a different

42

2

Institutionalism in the 21st Century

way. Institutions can also enforce interaction among segregated groups and across cleavages if necessary for change or persistence. By rules, institutions shape the localization of actors and the allocation of resources within the institutional world. Scholars have shown that there is a regulative dimension to rules (“What is my position and am I allowed to do with the resources I am able to hold?”) as well as a temporal dimension to rules (“How is my behavior affected by past decisions and how will present decision influence future decisions, the distribution of outcomes and my future position?”). In a nutshell, rules may be distinguished in what they forbid, allow, or require in a status quo, how they affect the process transforming resources and power from status quo to a future state and how they affect the interpretation of outcomes in the future. Knowledge about these rules, especially with regards to the procedure and the outcome of a specific action provides ‘[i]nterpretive coherence for the ambiguities of political life’ (March/Olsen 1989: 48). In effect, the actors’ position within the system of rules gains importance towards (political) action. Rule-following in an institutional context reduces uncertainty about the actors’ positions held in the status quo and the consequences of action in a specific structural and temporal context. The institutional context is composed of ‘an environment populated by other institutions organized according to different principles and logics’ (March/Olsen 2008: 14). Actors face a configuration of different interconnected rules among which alternatives are possible. Within this institutional framework, embedded in a whole set of rules affecting the particular structure of a specific situation, individuals ‘select actions from a set of allowable actions in light of the full set of incentives existing in the situation’ (Ostrom 1986: 6). Quack, in her article on institutionalization processes as part of governance analysis, emphasizes that actors are always challenged to adopt, identify and adapt to existing rules. This conclusion applies irrespective whether scholars consult a calculus or a normative approach. In the process of time, actors may opt for alternative actions and interpretations (Quack 2005: 354). Rule-following becomes a potential source of conflict that had already been identified by Berger and Luckmann (1966: 74), namely: What if the individual is member of different institutions that provide a different interpretation of the rules in question? ‘Disputes over professional jurisdiction generates uncertainty about which rules and routines are evoked in special situations’ (DiMaggio/Powell 1991: 29); ‘[a]mbiguity or conflict in rules is typically resolved […] by trying to clarify the rules, make distinctions, determine what the situation is and what definition “fits”’ (March/Olsen 1989: 161). Or, ambiguity is not resolved at all and leads to institutional ruptures. Put differently, institutionalization of action rests on persistent allegiance to rules over time in a context of social interaction. Actors must comply with rules

2.4 Rules as Institutional Intermediates

43

for the latter to sustain. Otherwise, institutions lose their effect on individual conduct and are exposed to potential decline. Notwithstanding actors’ alienation, institutional rules face rule takers that are at the same time rule benders and rule breakers: ‘rules exist to be broken as well as to be obeyed!’ (Lowndes 2010: 73; Lowndes/Roberts 2013: 105).33 Whereas coping with alienation from the institutions’ constraints—violation of rules—is a crucial indicator for institutional functioning, violations might be well calculated interactions in order to maximize individual or group benefits (North 1990: 4). Consequently, the quality of rules as constituting element for institutions lies in the social relevance of individual allegiance to them: ‘the important point about breaking institutional rules, formal or informal, is that actors know they are doing it. In this way the action is different from the other daily choices that individuals make in going about their business. Institutional rules, practices and narratives are not only recognized by actors, they are also subject to some type of “third party” enforcement.’ (Lowndes/Roberts 2013: 51)

Third party enforcement can also be historically detached from the status quo and thus be ossified into actor-intrinsic enforcement mechanisms. The effect of these enforcement mechanisms is ensuring or encouraging allegiance as well as punishing or deterring transgression (Lowndes/Roberts 2013: 51). Blondel makes a point when stating that ‘choice in politics is rarely individual, except if someone leaves the community to which he or she belongs, a move which is easily doable in the case of the membership of an association (“exit”), but is appreciably more difficult, in practice, with respect to the state. Second, much of politics concerns people not involved in the decisions taken’ (Blondel 2008: 722). While conventions are self-enforcing and organizations, due to their internal scope, are diadic, institutions are characterized by triadic enforcement mechanisms applying third party enforcement as a condition for institutional existence (Offe 1996: 203–4). In spite of that, Zucker applies a normative understanding of institutions claiming that ‘[n]o external motivation for conformity is necessary because norms which are central to institutions become internalized. The actor is internally motivated to do what he has to do’ (Zucker 1991: 84). Institutionalist scholars have shown the pivot of rules in shaping structureagency interaction. Rules shape actors’ possibilities to (inter)act; rules shape the capacity to change the context of interaction; rules even shape the capacities of 33 The structure-agent model, applied in most US policy analyses, assumes that the principal agent has the capacity ‘to design rules which coerce the rule taker into compliance’ (Lowndes/Roberts 2013: 91).

44

2

Institutionalism in the 21st Century

institutional effectiveness. As has been shown above, the shape of rules is as diverse as the constellations of structure-agency interaction: rules may enable or constrain action; they may determine actors’ positions, mechanisms of resource distribution or even the evaluation of outcomes; they may be formal or informal. Whereas different rules may reinforce one another, they are also likely to undermine each other (Lowndes 2013: 134). The list of categorizations is long. Taking into account the pivot of rules and the commonalities among the different institutionalist approaches, Lowndes and Roberts have suggested to differentiate between formal rules, informal practices, and narratives as the three types of institutionally derived constraints to human conduct (Lowndes/Roberts 2013: 53–69). The concise elaboration has also shown that allegiance to rules affects the constitution of institutions. Lack of allegiance is a potential source for institutional transformation. As Lowndes and Roberts put it: Institutions are only relatively stable ‘in so far as their stability is conditional on the continuing presence of particular forms of support’ (Lowndes and Roberts 2013: 42) (Table 2.1). Table 2.1 Institutional rules institutional context

source of allegiance

cause of action

intermediates translating between action and structure

other institutions constituting rules, enforcing scope, and binding actors

normative: inherent meaning

identification habitualization

cognitive: optimum outcome

evaluation of alternatives lock-in effects (temporal/situational)

third party enforcement

avoidance of exclusion avoidance of worse-off situations

rules, in the shape of norms, laws, codes of conducts, practices, narratives, and so forth, regulating resource distribution through formally and informally limiting what is possible

As the above chart illustrates, the typification of behavior, rules, institutions, norms and values on the basis of their underlying source of allegiance again leads to the dichotomy of cognitive and normative attributes. Whereas the cognitive dimension provides cohesion, coherence, comprehension, the logical and the necessary, the normative dimension accounts for basic values, appropriateness, and credibility. Habitualization and lock-in effects are a legacy from the past that enriches either dimension through reinforcement. Rules, e.g. paths, norms, narratives, and so forth, are intermediates arising from either dimension. As March

2.5 Institutional Change

45

and Olsen state: ‘The coexistence of the logic of appropriateness and the logic of consequences […] raises questions about how the two interact, which factors determine the salience of different logics, and the institutional conditions under which each logic is likely to dominate’ (March/Olsen 2008: 9). Third party enforcement may be underlined with norms of appropriateness and fear from sanctions but is itself a weak indication on allegiance. However, especially in large institutional context, such as EU communications policy, third party enforcement might play a crucial role as refers to expectable behavior and outcome. Lowndes and Roberts’ (2013) definition of rules testify that causes of action and modes can accumulate, meaning that sources of allegiance can accumulate depending on the situation, role and institutional context. The following chapter will elaborate institutionalist ideas on change and stability in institutional contexts.

2.5

Institutional Change

Although institutionalist theory for the main part of its revival was concerned with modes of stability, the contemporary interest in institutionalism is to explain change (Hay 2002; Lowndes/Roberts 2013; Peters 2005). While scholars emphasized that newer approaches to institutions already do rather focus on change than on stability (Quack 2005: 348), there still ‘is a need for improved understanding of the processes that translate political action into institutional change’ (March/Olsen 2008: 16). The following section will provide brief insights to concepts of institutional stability in new institutionalist thinking, predominant during the late 1980s and 1990s, and will eventually outline contemporary approaches on institutional change.

2.5.1

The Institutional Focus on Stability

For many institutionalist scholars representing institutionalist approaches during the 1980s and 1990s, stability was the main objective of political institutions as it provided a constant mode of expectability by mitigating complexity. Institutional change occurred either accidentally, by evolution, or through institutional design by strategic actors (Goodin 1996: 24–5; Rothstein 1998: 153). Institutionalist approaches suggested that institutions in general were stable and that change in general was followed by a period of relative stability. Powell argues that

46

2

Institutionalism in the 21st Century

‘change is neither frequent nor routine because it is costly and difficult. When change does occur, we contend, it is likely to be episodic, highlighted by a brief period of crisis or critical intervention, and followed by longer periods of stability or path-dependent development. […] Major changes often occur when legal or other rule-maintaining boundaries are relaxed.’ (Powell 1991: 197)

A concept that successfully attracted scholars’ interest considering institutional stability and change was the concept of equilibrium. Particularly historical and rational-choice institutionalists have adopted and further developed this concept. While historical institutionalists assumed a concept of punctuated equilibrium, rational choice institutionalists applied a concept of structure-induced equilibrium (Greif 2004: 933; Hall/Taylor 1996: 953; Thelen 1999: 397; Krasner 1984). For historical institutionalists periods of stability were ruptured by punctuated critical junctures that broke the existing path and created branches toward new potential paths (Hall/Taylor 1996: 942). Punctuations in these terms accounted for changes in the equilibrium but at the same time constituted the provisions for a subsequent equilibrium (Peters 2005: 77). The occupation with punctuated critical junctures illustrates an understanding of change that bases on continuously pursued paths: ‘The standard model of punctuated equilibrium assumes discontinuous change. Long periods of institutional continuity, where institutions are reproduced, are assumed to be interrupted only at critical junctures of radical change, where political agency (re)fashions institutional structures. In this view, institutions are the legacy of path dependencies, including political compromises and victories. Massive failure is an important condition for change.’ (March/Olsen 2008: 12)

Rational-choice institutionalists argued that the game of structure-agency interaction constituted an equilibrium that represented the one alternative that was not being rejected by a majority of individuals (Shepsle 2010: 6; Shepsle 1989: 136). The structure-induced equilibrium is a product of the distribution of individual preferences but also of the institutionalized collectivity of this individuality: ‘Structure and procedure combine with preferences to produce outcomes’ (Shepsle 1989: 137). Actors aim at maximizing their utility by creating institutions that, once set up, affect further action (Koelbe 1995: 232). The equilibrium is the institutionalized result of a game within which rational actors opt for accepting the behavioral prescriptions of the institutions in order to achieve rational outcomes—be it the reduction of transaction costs or the constraint of opponents. Institutions in this economic view gained a strategic dimension (Shepsle 2008: 1034):

2.5 Institutional Change

47

‘When these expectations about others’ behavior take on a particularly clear and concrete form across individuals, when they apply to situations that recur over a long period of time, and especially when they involve highly variegated and specific expectations about the different roles of different actors in determining what actions others should take, we often collect these expectations and strategies under the heading of institution.’ (Calvert 1995: 73-4)

Rather than understanding ‘an institution as an exogenously provided game form that induces equilibrium outcomes one might instead think of the game form itself as an equilibrium—as an endogenous product of a more primal setting, or what may be called an equilibrium institution’ (Shepsle 2008a: 1033). In addition to that, Krasner advocates a temporal dimension of institutions, which suggests that possible options exist at a specific time within the constraints established by decisions at an earlier stage of time. Institutions thus become a dependent variable in the respective context and an independent variable in any other context (Krasner 1988: 72). As refers to Shepsle, a high number of actors complying with an institution constitutes a robust equilibrium that in turn becomes a powerful constraint on individual behavior. Individuals comply with the institutional rules that form the equilibrium ‘because deviation will make the individual worse off than will adherence’ (Hall/Taylor 1996: 940). Nevertheless, strategic actors may decide to not comply with an established equilibrium and thus chose an unexpected, inappropriate or otherwise constraint off-the-equilibrium-path (Shepsle 2008a: 1034)34 . Critics claim that, notwithstanding the explanatory capacity of equilibria, ‘a focus on “critical junctures” may underestimate how incremental steps can produce transformative results’ (March/Olsen 2008: 12; Streeck and Thelen 2005). In most of the cases this would neglect the broader picture of temporal and spatial dependencies: ‘Usually, there is an internal aspiration level pressure for change caused by enduring gaps between institutional ideals and institutional practices’ (March/Olsen 2008: 12). Another source of institutional persistence is inertia. Institutions persist, ‘even if the circumstances that brought them about, and that may originally have justified them, no longer persist’ (Scharpf 1997: 41) or lose their optimum shape (DiMaggio/Powell 1991: 4). Inertia, even from a rational choice perspective, illustrates the detachment of institutions in an environment of structure-agency reciprocity. As for Shepsle institutions consist of equilibrated strategic behaviors, 34 ‘Downs and Rocke (1995: 77) complement this reasoning by suggesting that, instead of formal “exceptions” or “escapes” in a constitution, it is sometimes more effective simply to permit non-compliance, punish it, but to make these costs low enough that violations may occur from time to time in equilibrium. This may be simpler than struggling to craft exceptions in a more complete agreement’ (Shepsle 2008: 1049).

48

2

Institutionalism in the 21st Century

changes of the strategic context will cause institutional change. That might also reflect in formal procedures such as amendment procedures to i.a. legislations, suspension of rules, ex-ante escape clauses, secession or admission of new participants (Shepsle 2008a: 1043–6). With reference to March and Olsen (1989) and Hall and Taylor (1996) history might, thus, not be efficient: ‘once institutions are installed, and once actors have come to rely on their coordinating function, institutional change will be costly, and thus institutions are hard to reform or abolish’ (Scharpf 1997: 41). Krasner defined the tendency of institutions to persist over time as depending on vertical depth—the extent to which institutions define individual actors’ conduct—and horizontal linkage—the number of links to other institutions. Within this definition two observations are combined: First, institutions bind actors through commitment35 and second, institutions are bound to an institutional network. The more actors trust on the institutional capabilities and identify themselves with this institution the more stable it becomes and the more it is able to alter its environment and define actors associated with it: ‘the greater the number of links, the higher the level of institutionalization’ (Krasner 1988: 75). However, in a process of reciprocity, actors’ attachment to institutions also restrains the institution’s ability to change—‘the more individuals’ basic selfdefinitions are determined by a given institutional structure, the more difficult it will be for that institution to change’ (Krasner 1988: 74). Calvert also claimed that institutions are robust if a large number of actors complies with the institution: ‘It must be rational for nearly every individual to almost always adhere to the behavioral prescriptions of the institution, given that nearly all other individuals are doing so’ (Calvert 1995: 58). Institutions that are highly linked—width—and define a significant number of actors—depth—are seen to be taken for granted. Stability is strong, change becomes unlikely (Krasner 1988: 77).36 For this reason, March and Olsen state that ‘[t]echnical interdependence and physical sunk costs are partly responsible for institutional inertia’ (DiMaggio/Powell 1991: 10).

35 By define Krasner means ‘endowments in the form of property rights, utilities in the sense of preferences, capabilities in the form of material, symbolic and institutional resources, and self-identity in that the way in which individuals identify themselves is affected or determined by their place within an institutional structure’ (Krasner 1988: 74). 36 In order to assess whether there is a link between one institution and another, following Krasner, scholars have to ask if ‘a particular activity can be changed without altering anything else’ (Krasner 1988: 75).

2.5 Institutional Change

2.5.2

49

Allegiance to Rules and Institutions

One reason for individual commitment to institutions is that institutional stability is an expression ‘of the continuing ability of institutional rules to provide distributional advantages’ (Knight 1992: 210) when different individuals may face different benefits from complying with the same institution (Knight 1992: 177). Thus, compliance with institutions results from the provision of acceptable outcome even under changing circumstances or due to high transaction costs of change, which hinder alteration (Shepsle 2008a: 1038; Hall/Taylor 1996: 940). As institutions ‘establish the very criteria by which people discover their preferences […], some of the most important sunk costs are cognitive’ (DiMaggio/Powell 1991: 11); even more blunt: ‘individuals cannot even conceive of appropriate alternatives’ (DiMaggio/Powell 1991: 11). If an institution endures shocks to the environment or even a change of the equilibrium, it accounts for high robustness and a ‘self-generating institutional revision’ (Shepsle 2008a: 1040).37 The costs of institutional change depend on the lock-in of actors into these institutions and might rise to the extent that institutions become unlikely to change or diminish (Pierson 2004; Schneider/Janning 2006: 35). Rothstein argues that ‘[t]he value of the institutional approach may only emerge when it is combined with a more substantial theory from which we can draw hypothesis about why some agents, resources and institutions are more important than others’ (Rothstein 1998: 154). Whereas Hall and Taylor state that it is the institutional arrangement that disposes resources among actors (Hall/Taylor 1996), for March and Olsen ‘[p]olitical institutions affect the distribution of resources, which in turn affects the power of political actors, and thereby affects political institutions’ (March/Olsen 1989: 163). While there is unequal access to coercion capacity and resources, one source of institutional change is the ‘redistribution of the coercive and bargaining power within the institution’ and the related consent or withdrawal of acquiescence (Levi 1990: 402–3). Rothstein argued that ‘[o]ne thing powerful agents will try do is to change “the rules of the game” in ways which they believe will serve their interests in retaining and extending that power. […] This “doubling” of power will of course make it extra costly, or extra risky, for less powerful agents to challenge the established institutional order’ (Rothstein 1998: 153). Both the dysfunction and decrease of this ability as well as its permanence leads to social conflict within the 37 A radical approach is elaborated by Grafstein (1992) who states that institutions may prevent change as they themselves provide the corridors to act. If changing an institution lies outside the individuals’ capacity, change through actors’ behavior is unlikely.

50

2

Institutionalism in the 21st Century

institution if privileged actors aim to keep their privileges or non-privileged actors happen to commit to institutions competing with the status quo. The awareness for social inequality is likely to become a source for institutional disequilibrium; complex institutional arrangements privilege actors with large resources—of any kind—and simple rules with less exceptions promote equal chances of participation (March/Olsen 1989: 28). Whereas a ‘stable outcome is one in which none of the individuals actors have an incentive to change their behavior’ (Krasner 1988: 69), ‘[f]or the historical institutionalist perspective, the processes that have been institutionalized tend to push toward maintaining the current policies and programs of the structures’ (Peters 2011: 81). However, March and Olsen suggest an institutional dynamic that reflects constant competition among interpretations: ‘Institutions are not static; and institutionalization is not an inevitable process; nor is it unidirectional, monotonic, or irreversible (Weaver and Rockman 1993). In general, however, because institutions are defended by insiders and validated by outsiders, and because their histories are encoded into rules and routines, their internal structures and rules cannot be changed arbitrarily (March and Olsen 1989; Offe 2001). The changes that occur are more likely to reflect local adaptation to local experience and thus be both relatively myopic and meandering, rather than optimizing, as well as “inefficient,” in the sense of not reaching a uniquely optimal arrangement (March 1981).’ (March/Olsen 2008: 7)

2.5.3

The Role of Gradual Institutional Change

Contemporary institutionalist approaches address the issue of institutional change rather as gradual transformation than as sudden event. The equilibrium described in earlier, calculus-oriented approaches becomes a subject to change as contexts are likely to become more complex and actors as well as institutions are likely to adapt to environmental change: institutions ‘are the object of ongoing skirmishing as actors try to achieve advantage by interpreting or redirecting institutions in pursuit of their goals, or by subverting or circumventing rules that clash with their interests’ (Streeck/Thelen 2005: 19). The previous sections have illustrated that institutions are constituted by human conduct—either purposeful or by socialization. Furthermore, individual compliance with institutions has been defined as a crucial element for the latter’s persistence.38 As Lowndes and Roberts, Giddens, 38 Blondel eventually argues that institutions do not need support in order to maintain: ‘It seems prima facie unrealistic to tie the very existence of political institutions to the support which they might have: […] The way an institutional arrangement is shaped does not seem to depend on the support for that arrangement’ (Blondel 2008: 728). Whereas this argument

2.5 Institutional Change

51

and Tolbert and Zucker put it: ‘institutions are “instantiated” in the action of individuals—they do not have an objective existence beyond their effects upon actors’ behaviour’ (Lowndes/Roberts 2013: 75; Giddens 1999: 127; Tolbert/Zucker 1996: 179). If institutions exist in human conduct, institutional change is likely to be understood as deriving from agency: ‘both institutional stability and institutional change are products of human agency’ (Lowndes/Roberts 2013: 75, 143; Giddens 1999: 127). Although there is value in this assumption as institutions neither change nor emerge autonomously from human conduct, it is important to reflect the fact that institutions and actors always face an already existing set of rules, routines, institutions and actors’ commitments. If change is influenced by actors, institutions, their interaction and the context they inhere, the continuous interaction of these four elements creates constant adjustment of positions, roles and rules (Lowndes 2013: 140–1; March/Olsen 2008: 11; Streeck/Thelen 2005: 18; Djelic/Quack 2003b: 309–10; Hay 2002; Thelen 2004).39 As the previous section has elucidated, ‘institutional elements constitute an interrelated network of mutually supportive or antagonistic parts’ (DiMaggio/Powell 1991: 29). This assumption accounts for rules alike as it addresses actors’ preferences, institutional settings and the contexts, which institutions, rules and actors inhere. March and Olsen eventually claim that ‘changes are produced through some kind of encounter between rules (or action based on them) and an environment, partly consisting of other rules’ (March/Olsen 1989: 167). The presumption of an institutional world consisting of manifold interrelations between actors, institutions, rules and their context in a spatial and temporal dimension illustrates the multi-facetted dependence between these elements. As Rothstein puts it, institutions are ‘more like coral reefs with layer upon layer, and with no one agent or group of agents having decided how to arrange the structure of the whole. In different periods, different agents with different interests have established institutions, taking as their starting point the already existing system of institutions’ (Rothstein 1998: 152). In consequence, this multi-facetted environment causes both institutional stability through interdependence and potential for conflicting interpretations eventually leading to institutional change.

might be true considering sedimentation of meaning through history and the detachment of the institutional context’s dynamics from the single institution, it also neglects the fact that institutions are the product of reciprocal interaction within the institutional context. 39 Quack also argues that institutional change always is accompanied and affected by discourse (Quack 2003b: 347).

52

2

Institutionalism in the 21st Century

When action faces an environment where several elements affect action in a particular fashion, allegiance becomes a subject to conflict that affects the constitution of the associated institutions.40 March and Olsen concisely emphasize the relation between rules and change: As ‘[r]ules, routines, norms, and identities are both instruments of stability and arenas of change’ (March/Olsen 2008: 11), a situation of conflicting rules—within which individuals become aware of the institutions they follow—is a situation of potential change (March/Olsen 1989: 167). Knight states that rules ‘may be ambiguous and open to multiple interpretations’ (Knight 1992: 175), which creates uncertainty and becomes another potential source to institutional change. The more complex rules are the more ambiguous are their interpretations: ‘As people gradually get or lose faith in institutional arrangements, there are routine switches between institutional repertoires of standard operating procedures and structures. Reallocation of resources also impacts the capability to follow and enforce different rules and therefore the relative significance of alternative structures.’ (March/Olsen 2008: 12)

Correspondingly, Streeck and Thelen argue that ‘institutions require active maintenance […] to remain what they are […] in response to changes in the political and economic environment in which they are embedded’ (Streeck/Thelen 2005: 24). Quack explains that the maintenance and stability of institutions strongly relates to the stability of the scope covered by the institution. When competences change or the scope is under critique, the related institutions might face pressure to change. Even constitutions, which hold a high degree of stability, are subject to interpretation and adaptation to changing environments. Negotiations about the boundaries of institutional scope among actors directly affect the stability of the related institutions (Quack 2005: 362). Conflict, thus, exists both in individuals about the identification with alternative institutions and between individuals about the validity of particular institutional scopes. The limitation or expansion of scope becomes a constitutive or strategic momentum for institutional change (Quack 2005: 363).

40 ‘Contemporary welfare states appear to be in the process of redefining the appropriateness of different institutions, for instance the boundary between a sphere of solidarity based on universal citizens rights implemented through state bureaucracies, a sphere of self-interest and competition implemented through a price system, a sphere of organized interests and bargaining through a “corporatist” system, and a sphere of community values implemented through voluntary associations and citizens initiatives’ (March/Olsen 1989: 167).

2.5 Institutional Change

2.5.4

53

Five Mechanisms of Change

Streeck and Thelen, arguing that ‘there is a wide but not infinite variety of modes of institutional change that can meaningfully be distinguished and analytically be compared’ (Streeck/Thelen 2005: 1), elaborate five mechanisms of institutional transformation (Table 2.2): displacement of incumbent institutions through emergent institutions, layering, e.g. the transformation of an incumbent institutions through new institutional patterns within the institution, drift through defective adaptation of environmental change, conversion, e.g. the change of the institutions’ intention or purpose, and exhaustion (Quack 2003: 349; Streeck/Thelen 2005: 19–30). Each of these mechanisms shall briefly be elaborated. Displacement The existence of competing rules and contesting interpretations implies that existing institutional arrangements are never entirely coherent. Incumbent institutions that represent a dominant interpretation ‘coexist with other arrangements, created at different points in time and under different historical circumstances, that embody conflicting and even contradictory logics’ (Streeck/Thelen 2005: 20). The lack of rules regulating specific sets of action—particularly eliminating specific action— allows conflicting or competing rules, which often are rediscovered or activated alternative institutional forms, to emerge and thereby challenge the incumbent institutional arrangement. Change through displacement of the incumbent institutional arrangement becomes likely. Whereas displacement through defection is an endogenous process, displacement through invasion involves the influence of exogenous rules and practices. These two types are interrelated as ‘exogenous change is often advanced by endogenous forces pushing in the same direction but needing to be activated by outside support’ (Streeck/Thelen 2005: 22). The process of invasion is typically promoted by institutional engineering which occurs at the costs of loss of power and resources translating into compromise balancing deviant behavior (Deeg 2005). Streeck and Thelen highlight the salient character of institutional displacement and the reinforcing effect of parallel endogenous evolution and exogenous shock as a potential ‘foundation for a new logic of action’ (Streeck/Thelen 2005: 22). Displacement does not result in the decline of the existing institution. It rather allows decomposition when imposing ‘shifts in the relative salience of different institutional arrangements within a “field” or “system”’ (Streeck/Thelen 2005: 22). Layering As has been exemplified for institutional arrangements earlier in this chapter, every institution is composed of different elements, in particular rules. Whereas actors’

54

2

Institutionalism in the 21st Century

commitment can account for lock-in-effects, it can also gradually change through layering. Incumbent institutions might be too established to displace or change offensively. Thus, the process of adding different layers of rules, procedures, actors and narratives over time leads to a process of ‘differentiated growth’ (Streeck/Thelen 2005: 23). The gradual supplement of fringes to the core institution on the one hand maintains the existence of the incumbent. On the other hand, the more layers are amended the more the relation between incumbent and additional layers changes— in favor of the latter. Streeck and Thelen thus debate ‘to what extent the fringe and the core can peacefully coexist, or whether the fringe can attract enough defectors from the core eventually to displace it’ (Streeck/Thelen 2005: 24). Drift When changes in the institutional context, within which the institution is embedded, occur, stasis of the institutional status quo becomes a potential source of change that gradually endangers institutional stability. As changes in the institutional context provoke differences between institutional attributes and the practices of their implementation, institutional outcome discontinues to satisfy established expectations and institutions as such lose their binding capacity. The potential lack of adaptation to the institutional context can lead to gradual erosion of the specific institution. The incapability of closing gaps between institutional properties and environmental changes through ‘nondecision’ (Streeck/Thelen 2005: 25) or negligence eventually leads to a crucial decline in institutional importance. Relevant actors defect to another institution, while allegiance to the institution in question drifts. Although institutional inertia due to transformation costs or the maintenance of power structures might account for a certain degree of stability, gradual change is likely when contexts change and active maintenance is too costly or simply nonexistent. Conversion Changes in the institutional context or the power constellations across actors might promote the latter to engage in transforming institutional goals, functions, or purposes: ‘existing institutions are adapted to serve new goals or fit the interests of new actors’ (Streeck/Thelen 2005: 26). By conversion actors aim at actively adapting institutions to the gaps that occur over time between institutionalized rules and the practices that inhere reality in order to promote their (changed) preferences in the context of a changing environment: ‘The redirection of institutional resources may occur through political contestation over what functions and purposes an existing institution should serve’ (Streeck/Thelen 2005: 26). Streeck and Thelen emphasize the event in which ‘actors who were not involved in the original design of an institution and whose participation in it may not have been reckoned with, take it over and

2.5 Institutional Change

55

turn it to new ends’ (Streeck/Thelen 2005: 26). Over time, unintended consequences and the evolution of the institutional context, including actors and their embedding, naturally lead to these gaps. Political compromise and actors’ tendency to interpret institutions and rules echoing their self-interests further provoke ambiguities that eventually become a reason for conversion. Exhaustion Exhaustion is the state where an institution misses to adapt to change, lacks commitment, is absorbed in a newly emerging or competing institution, or simply lost its role in the institutional world. Exhaustion might be the most extreme version of institutional transformation (Streeck/Thelen 2005: 30).

Table 2.2 Streeck/Thelen (2005: 31) Institutional change: five types of gradual transformation

Definition

Displacement Layering

Drift

Conversion

Exhaustion

Slowly rising salience of subordinate relative to dominant institutions

New elements attached to existing institutions gradually change their status and structure

Neglect of institutional maintenance in spite of external change resulting in slippage in institutional practice on the ground

Redeployment of old institutions to new purposes; new purposes attached to old structures

Gradual breakdown (withering away) of institutions over time

Differential growth

Deliberate neglect

Redirection, Depletion reinterpretation

Mechanism Defection

2.5.5

Institutional Design

The debate about institutional change has also provoked interest in the question whether institutions can be designed. Scholars approaching this issue assume that actors know enough about the effects of specific institutional arrangements to engineer them in order to achieve a specific outcome. For example, there is comprehensive knowledge about the relation between democratization and the

56

2

Institutionalism in the 21st Century

elements of political systems. Engineering democratic political systems, thus, could be calculated. In contrast to that, arguments exist that institutional engineering provokes ‘the risk for mistakes leading to unexpected, contradictory and even perverse results’ (Rothstein 1998: 155) as the interwoven and autonomous character of institutional contexts must not be neglected. Referring to historical institutionalism, Pierson employs this argument when claiming that ‘actors may be in a strong initial position, seek to maximize their interests, and nevertheless carry out institutional and policy reforms that fundamentally transform their own positions (or those of their successors) in ways that are unanticipated and/or undesired’ (Pierson 1998: 30). Elster (1991) advocated that institutional engineering based on norms ‘such as shared conceptions of justice, for example, or norms about equality and fair treatment’ (Rothstein 1998: 156) in order to contextualize institutions in the very process of engineering. Also, Peters et al. stated that ‘ideas do matter a great deal in explaining institutional change. Institutions provide the structures and resources necessary for these ideas to change the course of policy’ (Peters et.al. 2005: 1296). Notwithstanding the gap between engineering intentions and unintended consequences, Streeck and Thelen have elaborated the role of unintended consequences as potential sources of change over time. Newer approaches argue that while actors can organize to strategically change institutions, ‘institutional designers never fully control the uses to which their creations are put’ (Thelen 2009: 491), which leads to the paradox of input-output-mismatch in institutional design. March and Olsen state that institutional engineers, which were mostly institutional gardeners, ‘can reinterpret rules and codes of behavior, impact causal and normative beliefs, foster civic and democratic identities and engagement, develop organized capabilities, and improve adaptability […]. Yet, they cannot do so arbitrarily and there is modest knowledge about the conditions under which they are likely to produce institutional changes that generate intended and desired substantive effects’ (March and Olsen 2008: 15).

Moreover, institutional design mostly follows a path of political compromise and creates distributions of power that become subject to contest as have been the challenged institutions in the first place (Lowndes/Roberts 2013: 176). Strategic institutional design also leads to a doubled feedback loop as actors aim to design institutions that shape the institutional context on the basis of an institutional context that has shaped the actors’ decision to design institutions (Hay 2002; Jessop 2007). March and Olsen suggested that ‘successful comprehensive [institutional] reform may depend on expanding the time horizons of reform efforts and buffering them from short-term fluctuations in attention’ (March/Olsen 1989: 99).

2.5 Institutional Change

57

Rules channeling access to specific resources should ascribe increased importance to the reform itself, should link to key policy issues, foster high-level priority, and establish the institutional reform as a ‘policy of its own’ (March/Olsen 1989: 99) with particular responsibilities executed by specific offices. March and Olsen exemplify the Nordic model for administrative change, which created and established a common commitment—‘shared understanding’—for the reform process over time (March/Olsen 1989: 108). In contrast to that, institutional reform in the public administration in the US and the UK in the 1980s was an effort of political agenda from the top-level of the particular government. The institutional setting thereafter had to deal with an externally motivated shock being implemented within the institutional structure, e.g. through economic pressure on public agencies during the privatization period in the UK (March/Olsen 1989: 103–11). In sum, institutional design might be possible and occurs, but it is subject to the same interrelation between actors, institutions, rules, and context as is institutional change in general. The illustration of these mechanisms of institutional stability and change is neither exhausting nor selective. It rather exemplifies the occupation with institutional change and potential transformative sources. It has become evident, that the interplay between actors, institutions, rules and the institutional context is a relevant mechanism for institutional transformation. After having analyzed the 1970s institutional change of British economic policy, Peter Hall concluded that whereas ‘economic developments, conflicts of interest among social groups, and new ideas all played a role’ (Hall 1992: 106), the institutional structure neither imposed a path towards a specific end nor did it enable, or permit, action leading to a radical change. The institutional context rather structured politics. And it structured politics in a way that the configurations between institutions, actors, rules, and the institutional context provoked change: ‘while we are used to thinking of institutions as factors of inertia tending to produce regularities in politics, some kinds of institutional configurations may be systematically biased in favor of change’ (Hall 1992: 107). Institutionalist thinking eventually intends to scrutinize dynamics that occur in the institutional world rather than stability or sudden change. To quote again March and Olsen’s 1989 contribution, institutionalist theory should become ‘a theory of how the polity comprehends, changes, and maintains a relationship with its environment through its institution’ (March/Olsen 1989: 160). As has also been shown in this section, institutional dynamics is derived from human conduct with human conduct not being autonomous. Whereas actors behave within an institutional setting, rules, and the institutional context on a strategic or normative basis, these strategies and norms are channeled or even derived from the institutional context they inhere. Thus, institutional dynamics

58

2

Institutionalism in the 21st Century

are a product of both the micro-level of agency and the macro-level of structure. As Streeck and Thelen have illustrated, change and stability depend on the institutional context and the actors inhering it. Information about consequences and future preferences are accumulated, generated and interpreted in institutions through rules: ‘Typically, taken-for-granted beliefs and arrangements are challenged by new or increased contact between previously separated polities or institutional spheres based on different principles’ (March/Olsen 2008: 15). Whereas ‘institutions are revealed through the action of individuals, shaping relatively stable patterns of behaviour’ (Lowndes 2013: 136), the environment of (emerging) competing interpretations of the world are likely prerequisites for actors to strategically change the respective institutions.

2.6

What is an Institution, Then? Learnings from Institutionalist Triangulation

While all presented approaches emphasize the relevance of the institutional context for policy outcome, they represent distinguished perspectives on the interaction between structure and agency. Agreeing on the structural influence on individual behavior, approaches differ regarding the intensity of this influence. Also, they differ in their explanation for institutional existence, which translates into different explanations for individual allegiance and structural change. The most individual-level explanation of the structure-agency-reciprocity is presented by rational-choice institutionalism. Although some scholars present a more sophisticated influence on individual preference-building, most scholars still emphasize the limiting or enabling character of institutions on strategic action. Individual preference-building remains external to politics and detached from polity; explanations on the temporal and habitual dimension remain scarce. On the other hand, rational-choice institutionalism accentuates the role of strategic individual behavior within an institutional context. Historical institutionalism enhances this strategic perspective on structure-agency relations by increasing temporal depth. The structure-induced equilibrium based on calculus is amended by a temporally derived structural equilibrium that eventually translates into habitual frames. While the structural context of the present and the past affects strategic behavior, past decisions also influence the corridor of action through structural inertia or cognitive habitualization. Both approaches assume a state of equilibrium providing certainty and stability in a specific institutional context. Whereas the logic of appropriateness does not strive for equilibrium, it presents institutions as ‘relatively invariant in the face of turnover of individuals and relatively resilient to the

2.6 What is an Institution, Then? Learnings from Institutionalist …

59

idiosyncratic preferences and expectations of individuals and changing external circumstances’ (March/Olsen 2008: 3). To date, new institutionalism struggles with the endeavor to present a coherent explanation of structure-agency reciprocity. Scholars, such as Peters (2005) and Crouch (2005), call for more rigor in explaining the relation between actors and institutions particularly with regards to institutional change. The divergence of institutionalist approaches has marked a phase in institutionalist theory that both fostered institutional relevance in politics and promoted the emergence of core assumptions and propositions in institutionalist thinking.41 After rediscovery and subsequent divergence of institutionalist thinking, Lowndes and Roberts identified a phase of convergence and consolidation in institutionalist thinking. Whereas different presumptions about the quality of institutional and individual influence on the structural context and the changes therein persist, some scholars start to refrain from limiting their explanatory capacity to the findings of one particular institutionalist approach. Considering the diversity of structural contexts that explain all behavior as resulting from embedded norms or that explain all change from strategic interaction seems neither sufficient nor fruitful for further inquiry. Instead, the assumption of a structural environment within which different institutional logics gain validity through providing different interpretations of the world seems an adequate theorization of institutional diversity. It might be possible that individuals behave in a specific way because their predecessors have done so successfully. Or, individuals behave differently from their predecessors as the world around them has changed and they feel obliged to follow specific values that influence their normative worldview. Or, they even weight their utilities against their values and decide either way in different contexts depending on the institutions that provide interpretation in a specific context. Strong institutions gaining allegiance or maintaining inertia prevail, while others, which fail to integrate or aggregate individual identification, decline. In doing so, explanatory efforts about the world focus on the structure itself. As Lowndes puts it, ‘through a process of theoretical triangulation, we arrive at a set of core propositions about institutions and institutional change’ (Lowndes 1996: 195) that copes with the explanatory variety in new institutionalist thinking. As Lowndes and Scott put it: ‘[i]n robust institutional arrangements, regulative, normative, and cognitive mechanisms work together to shape behaviour’ (Lowndes 2010: 77; Scott 2008: 51). As has been illustrated in the previous section, reciprocity between institutions and actors is linked to specific conditions. Actors commit to institutions for 41 Lowndes and Roberts call this phase divergence and division (Lowndes/Roberts 2013: 28–40).

60

2

Institutionalism in the 21st Century

a variety of reasons: some actors ascribe the best outcome for their interest to the allegiance to a particular institution; others are convinced about the quality of a specific institution; again others are socialized with a particular institution and remain therein for no reason but habitualization. Institutions, on the other hand, provide order in a ‘potentially disorderly political process’ (March/Olsen 1989: 52). They reduce complexity as they limit the amount of possible actions and increase certainty about future developments as they grant prospect of others’ behavior. Furthermore, the institutional world provides alternatives, among which to choose actors are potentially capable. Allegiance and alienation become strongly linked to the institutions’ capacity to aggregate or integrate individuals’ needs.42 The key to reciprocal interaction, however, is the influence actors and institutions execute on each other. As has been shown above, actors’ behavior affects the constitution of institutions, whether resulting from a decision on allegiance or alienation with a particular institution, habitualization or a willing action to create an institution in whatever way. Then again, actors are influenced in the way they behave vis-a-vis institutions through the existing institutional context, which limits the corridor for behavior and decision as well as it affects actors’ preferences towards their behavior through constituting identification with the institution in question. As Koelbe puts it, ‘[i]nstitutions matter in decision making because they set parameters to choice; they do not determine choice but influence it by setting limits; they provide certainty under conditions of uncertainty and thereby help to foster cooperative as well as repetitive (habitual) behavior’ (Koelbe 1995: 241). Crawford and Ostrom argue that ‘[r]enewed interest in institutions has, however, generated a simmering theoretical debate about what institutions are’ (Crawford/Ostrom 1995: 583). Blondel (2008) emphasized this problem as a key weakness in institutionalist approaches: ‘there appears to have been no concern in political science for the vagueness, to say the least, of what should come under the umbrella of the concept. It was as if the meaning of that concept was selfevident and we should immediately recognize an institution when we saw one.’ (Blondel 2008: 717) Highlighting the centrality of institutional autonomy, March and Olsen provided a wide range of what institutions can be and paved the way for an even broader understanding. When in the aftermath scholars of new institutionalism amplified institutionalist theory, they again enriched the comprehension of institutions. Whereas it seems that understanding institutions is rather an act 42 March and Olsen distinguish integrative and aggregative institutions. While the former are products of individuals’ utility the latter provides a normative environment with which actors can identify (March/Olsen 1989: 119–29).

2.6 What is an Institution, Then? Learnings from Institutionalist …

61

of understanding the output of institutional being than of understanding the institution itself, a definition of what an institution actually is must not neglect the inherent characteristics of institutions: ‘Institutions have a legitimacy beyond the preferences of individual actors. They are valued in themselves and not simply for their immediate purposes and outputs. Institutions may gain their legitimacy […] because of their link with a “sense of place”’ (Lowndes 1996: 182). Besides the manifold definitions of institutions, Peters (2005) and Lowndes (1996) offer four characteristics for an institutional approach to be peculiarly institutional (Table 2.3): Table 2.3 Institutionalist definitions—Peters (2005) and Lowndes (1996) Peters (2005)

Lowndes (1996)

The approach needs to provide a structural feature of society/polity: formal or informal institutions provide predictable interactions and relations and require regularities.

Institutions have formal and informal aspects. Institutions involve formal rules or laws, but also informal norms and customs. Unlike formal institutions, informal institutions are not consciously designed nor neatly specified, but are part of habitual action. Institutions may be expressed in organizational form, but also relate to processes—the way things are done.

It needs to assume (some degree of) stability Institutions have a legitimacy and show over time. stability over time. It must include the impetus on individual behavior: institutions must be of certain importance.

Institution is a middle-level (or ‘meso’) concept. Institutions are devised by individuals, but in turn constrain their action. They are part of the broad social fabric, but also the medium through which day-to-day decisions and actions are taken. Institutions shape human action, imposing constraints whilst also providing opportunities.

It must be able to see shared values and meanings among the members on an institution.

Institutions have a legitimacy beyond the preferences of individual actors. They are valued in themselves and not simply for their immediate purposes and outputs. Institutions may gain their legitimacy because of their relative stability over time, or because of their link with a “sense of place”.

62

2

Institutionalism in the 21st Century

As became evident in the prior sections of this chapter, a definition of institutions should be based on characteristics rather than on formations. The summary of institutionalist evolution has shown a significant common ground in the role of intermediates and legitimizes the suggested triangulation within the scope of institutionalist approaches. The aim of the present section is to put emphasis on these commonalities when identifying characteristics inherent to institutions. The proposition is that the reason for institutions to remain stable or to change results from actors’ allegiance or alienation with the institution in question shaped through events in the institutional context. Or, as Lowndes and Roberts put it: ‘any credible analysis of institutional change must examine three factors—institutions, actors and environments—and, of course, their interaction’ (Lowndes/Roberts 2013: 130). 1) Institutions matter The present chapter has shown that albeit the differences in institutionalist approaches, structure is understood as crucially influencing individual behavior. Not only is institutionalist theory able to ascribe relevance to both structure and agency but it also puts emphasis on the reciprocal interaction between actors and structure on a meso-level. It thus enriches the analytical perspective. When taking into account Lowndes and Robert’s claim for triangulation, institutionalist scholars may benefit from an amplified set of analytical tools for institutional inquiry. 2) Actors do matter, too Although new institutionalist thinking originates from different perspectives of the structure-agency continuum, over the past three decades a mediate position on this issue evolved. Whereas rational-choice institutionalist scholars increasingly considered the socializing capacity of the institutional context, sociological— and historical—institutionalist scholars ‘sought to “bring the actor back in”’ (Lowndes/Roberts 2013: 45). Immergut emphasized the reciprocity of actors and institutions when stating that ‘both components are necessary to our understanding of the past and to our role as the subjects of the future’ (Immergut 1992: 85). This view implies that actors are capable of not committing with institutions and that the context within which action occurs is crucial for the opportunities and capacities accessible to individuals: ‘actors should be conceived as possessing the capacity (if not always the opportunity) to act in their own right, aided or hindered by the institutional configurations which impinge upon them; and are potentially able to impose their will on their environment and on other actors.’ (Lowndes/Roberts 2013: 89)

2.6 What is an Institution, Then? Learnings from Institutionalist …

63

Institutionalism in its variety presents various explanations for actors to comply or not to comply with institutions; to rely on an institution’s stability, to strive for change, or even to establish new institutions. The actor’s position, its role and identity describe its capacity to act. Being exposed to a structural context explains the actor’s capacity and will to comply as well as its capacity to change or maintain the structures upholding these positions, roles, and identities. Actors being granted with power and resources through the configuration of a specific structural context seem to be less inclined to change or abandon this context. Actors being marginalized on the outside of politics, holding no power, seem to be incapable of changing their position. However, the capacity of rule-breaking or rule-shaping in a structural context composed of various supporting and competing rules enables actors to seize windows of opportunity and to shift allegiance through the means that the institutional context provides. A concise and more drastic definition of the relation between actors and institutions claims that ‘institutions are “instantiated” in the action of individuals—they do not have an objective existence beyond their effects upon actors’ behaviour’ (Lowndes/Roberts 2013: 75; Giddens 1999: 127), which does not neglect the embeddedness of actors within an institutional context. It rather emphasizes the paradox reciprocity between structure and agency, wherein institutions (and actors) are dependent and independent variables alike. 3) Institutions and actors create intermediates in order to interact: rules A broadly accepted communality is the relevance of rules as the element constitutive to institutions. The previous sections have discussed manifold descriptions of rules, procedures, narratives, organizations, and the like, which are capable to mediate between agency and structure. These intermediates guide actors through the institutional world as they base on a common agreement about the rules of the game or a common identification with the scope of appropriateness. Although direct interaction between agency and structure is unlikely, it has become evident that both agency and structure influence each other. Within an institution and in an institutional context rules can be—and are likely to be—attached to other rules and even affect actors’ allegiance to particular competing or supporting rules. Interaction in an institutional context creates outputs that reinforce or conflict with individual action and translates into factors safeguarding stability or striving for change. Lowndes and Roberts argue that ’we should study rules, observe practices, and interpret narratives’ (Lowndes/Roberts 2013: 69) when aiming at methodologically researching institutions. As has also been illustrated in the previous section, Berger and Luckmann elaborated that institutions are often detached from the individuals whose interactions

64

2

Institutionalism in the 21st Century

constituted them. The taken-for-granted-theorem is thus a basis for institutional historicity and a source for identification with a particular institution or an institutional environment. In this context, neither does it mean that actors cannot influence institutions, nor does it mean that institutions cannot change. Some institutions exist and are accepted while they ‘may have evolved in complex and possibly inexplicable ways shrouded in the mists of time’ (Shepsle 2005: 3). Jepperson elaborated the taken-for-granted theorem as a pattern that provides a functional or historical social account, although being distinct from comprehension, conscious awareness, and evaluation: ‘Institutions are taken for granted, then, in the sense that they are both treated as relative fixtures in a social environment and explicated […] as functional elements of that environment’ (Jeppeson 1991:147). In a cyclic interdependence, intermediates translate action into structure and structure into conduct. From an overall perspective, rules account for different effects on the structure-agency relation (Lowndes/Roberts 2013: 105–10): 1. 2. 3. 4.

allegiance to rules as a collective action establishes identities, in a structural context action faces opposing rules competing for allegiance, over time, allegiance to different supporting rules cumulates, strategic actors may apply a combination of allegiance to rules in order to achieve strategic outcomes, 5. rules constrain all the above-mentioned activities. 4) Context matters—even more Interaction between actors and structure by the means of intermediates does not occur independently from the institutional world they inhere. As has been described above, the institutional context reflects other institutions and institutional rules, while covering different scopes or domains of politics. This provides for a constant dynamic to the attached institutions, actors, and rules. Within the institutional context actors comply with different rules and commit to different institutions due to the roles and rules brought to them. As environments change, actors become aware of institutional incoherence; likewise, ambiguity can arise due to new roles and commitments in different institutional scopes or domains—competition and conflict occur. Whereas the institutions’ ability to change allows them to persist, they again change the institutional context within which other institutions are embedded. By adapting to environmental change institutions become agents influencing the process that made them change. The present section emphasized that an institutional analysis must consider institutions, actors, rules linking both and the institutional context comprising the aforementioned. As Pierson, Pierre and King state: ‘The challenge we must now

2.7 Applying Theory

65

confront is to develop an understanding of the complex relationships existing among institutions, ideas, and agency in explaining the trajectory of policy development. […] In particular, as we have demonstrated, there is a need to include more specifically the possibility of political conflict as a motivation for change’ (Peters et.al. 2005: 1297). Streeck and Thelen’s approach on institutional change has emphasized that the institutional context is a pivotal motor of change. What can we now be deduced from these findings? It appears that institutions are a status quo in a specific institutional context. Allegiance to institutions is not per se normative or cognitive, institutions rather comprise normative or cognitive interpretations. Institutions are subject to change in a constantly and gradually changing temporal and sectoral institutional context. In a nutshell, the findings from this theoretical outreach suggests the following as a definition for an institution: An institution is a status quo in a specific temporal and sectoral institutional context that is constituted in normative and cognitive sources of allegiance. The institution is built upon commonly accepted rules among a group of participants that commit to the institution’s rules on the basis of a (sedimented) common understanding of behavior which is not necessarily their own or their preferred behavior. Due to its temporal and sectoral embeddedness and its reliance on allegiance, institutions are potential subjects to constant and gradual change.

2.7

Applying Theory

This chapter presented the theoretical framework providing for the empirical analysis. The conclusions from theory shall now define the parameters and scope of the subsequent case study analysis. There will be aspects that are beyond the approach’s explanatory capacity. The following will define the study questions, its propositions, its units of analysis, the logic linking data to propositions and the criteria for interpreting the findings (c.f. Yin 2014).

2.7.1

The Study’s Question

Whereas institutions are embedded in temporal and sectoral contexts, they are also subject to the institutional world that represents the entire complexity of cognitive and normative allegiance and alienation. As has been illustrated above, actors and the rules systems they inhere are often entrenched in different institutions that

66

2

Institutionalism in the 21st Century

compete for allegiance. Institutional stability therefore depends on the institution’s capacity to remain relevant in a competing and potentially changing institutional world: ‘There are also situations where an institution has its raison d’être, mission, wisdom, integrity, organization, performance, moral foundation, justice, prestige, and resources questioned and it is asked whether the institution contributes to society what it is supposed to contribute. There are radical intrusions and attempts to achieve ideological hegemony and control over other institutional spheres, as well as stern defenses of institutional mandates and traditions against invasion of alien norms.’ (March/Olsen 2008: 15)

EU communications policy serves as a distinct case for the analysis of such radical intrusions. The entire institutionalization of EU communications policy was shaped by exogenous and endogenous pressure, engagement for and against change and, resulting from these frictions, a complex structural transformation: ‘once the dynamic logic of institutionalization is underway, it shapes the context in which actors […] define and pursue their interests’ (Sandholtz 1998: 4). According to the observed problem that today’s EU communications policy does not any longer reflect communications reality in the internet age and the theoretical background to this dissertation, the overall study’s question shall be: How does the institution of EU communications policy respond to the changing institutional context that ultimately represents a new communications reality?

2.7.2

Propositions and the Logic Linking Data to Propositions

The definition of the institution in question is a key proposition to the present research question. As stated above, an institution is a status quo in a specific temporal and sectoral institutional context. The institution of EU communications policy has maintained a relevant policy field, albeit constant change, over the last 40 years. Thus, it appears appropriate to claim that EU communications policy became the permanent solution to a permanent problem in the given collectivity of individuals (Berger/Luckmann 1966: 70). Also, the sectoral context, in which the institution is embedded, has changed over time as EU policy integration has continued and globalization as well as technological developments and digitalization have intensified. While the commonly accepted rules were both subject of and trigger for change in this changing institutional context, the sectoral embeddedness into EU procedural rules that guided policy-making accounted for

2.7 Applying Theory

67

procedural commitment. Although individual interests regularly opposed advanced rule-making, their allegiance to the underlying (sedimented) set of rules in the institution of EU policy-making has safeguarded the functioning of commitment structures—also during constant change. The research question as well as the study questions lead to four overall propositions for the subsequent study: 1) EU communications policy does not reflect communications reality in the internet age: Communications infrastructure has been developed under completely different technological and economic conditions than internet communications and thereby created a fundamental set of reciprocal typification of habitualized action. The incumbent institution is being challenged by a communications context that is able to dissolve the rights in place. Not only does this context disfranchise incumbent actors (Frischmann/van Schewick 2007: 387) but it also creates normative allegiance for this development. The ‘urgent need to address this debate in its appropriate context’ (Schejter/Yemini 2007: 139) that reflects in the net neutrality debate illustrates the incapability of the rules in place to cope with these contextual changes. However, while the observation claims that the existing institutional setting does not reflect the emerging context anymore, this does not necessarily have to lead to institutional exhaustion. 2) The institution of EU communications policy persists in the new institutional context: Ever since telecommunications policy had been institutionalized in the context of EU policy-making, it actively maintained the constant mode of endogenous and exogenous change. The reasons therefore are manifold, its development will be assessed in the following chapters. Whereas an institutions’ ability to change allows them to persist, they again change the institutional context within which other institutions are embedded. By adapting to environmental change institutions become agents influencing the process that made them change. Rothstein argues that in a mode of change ‘[o]ne thing powerful agents will try do is to change “the rules of the game” in ways which they believe will serve their interests in retaining and extending that power. […] This “doubling” of power will of course make it extra costly, or extra risky, for less powerful agents to challenge the established institutional order’ (Rothstein 1998: 153). The following will reflect the actions that provided for the institution’s continuity. 3) Network neutrality represents a policy adjustment to a technological change, which could eventually maintain the EU communications policy in the new context: Net neutrality rule-making is often meant to ease the pressure that

68

2

Institutionalism in the 21st Century

emerges from frictions between old and new communications realities. Adherence to incumbent rules often complicates institutional change; ‘[t]echnical interdependence and physical sunk costs are partly responsible for institutional inertia’ (DiMaggio/Powell 1991: 10). Ultimately, net neutrality rules could provide for a balancing interpretation to both adapt to the contextual changes and moderate the rights at stake: ‘Typically, taken- for-granted beliefs and arrangements are challenged by new or increased contact between previously separated polities or institutional spheres based on different principles’ (Berger and Luckmann 1967: 107–8; March/Olsen 2008: 15). Net neutrality will represent the basic principles of internet communications enshrined in the Internet architecture. 4) Institutional change in EU communications policy has advanced European integration: The advent of EU communications policy has significantly accounted for European integration. In line with single market ambitions, the initial liberalization efforts resulted in new competences on EU level inhering a new Union-level policy. Subsequent policy-making has gradually advanced this process despite opposition and phases of stasis: ‘Usually, there is an internal aspiration level pressure for change caused by enduring gaps between institutional ideals and institutional practices’ (March/Olsen 2008: 12). Deducing from the overall tendency to further integrate communications policy it seems more than likely that EU net neutrality rules will pursue this evolution towards a more or less transforming outcome. Theory has suggested that actors and institutions interact through a variety of intermediates. Since accumulation of these intermediates is likely in a process of habitualization, the specific set of i.a. norms supporting rule-making or procedures preventing opposition to rules is important for the analysis. A set of rules could e.g. guarantee powers to specific actors, prevail over potential alternatives in a given situation or maintain an inherited status that is detached from the specific reality but yet experiences allegiance. The analytical objective is to identify the intermediates that bind actors to institutions and thereby creates an outcome by enabling, constraining or binding actions. As these intermediates are created and attached to specific structures inside and outside the very institution, the planned mapping is necessary to illustrate findings in order to identify dependencies.

2.7 Applying Theory

2.7.3

69

Units of Analysis and Criteria for Interpreting the Findings

EU communications policy has been constituted by the overall liberalization efforts, the regulatory framework for telecommunications, the regulatory framework for electronic communications, the respective reviews, court orders, interpretation and guidelines and eventually the rules on net neutrality. It is furthermore embedded in the extensive institutional context of the EU political system, the institutional contexts provided by the member states as well as global technological and economic developments in the communications sector. As described above, the dissertation will approach the research question from a mesolevel perspective. It will neither analyze individual preferences and conduct nor will it assess the details of individual level processes. It will rather focus on collective actors and the procedures they conduct. Given the temporal scope and the contextual width of the analysis, this approach should reflect the reasonable granularity. With reference to the deductions from theory, five issues shall inhere the data set of the present study: agency, structure, intermediates translating action into structure and structure into behavior, the sectoral institutional context, and the temporal institutional context. The analysis will therefore identify the vertical depth of the institution, namely actors’ allegiance that exists in the particular institutional context, and deduce the horizontal linkage, i.e. the structure of competing and reinforcing allegiances within the institutional context, in order to identify the embeddedness of the institutions (Table 2.4). As Lowndes and Roberts as well as Hay and many others argue, institutionalist theory today meander between theory and empirical exploration, which requires constant reflection between both (Hay 2002: 46–7; Lowndes/Roberts 2013: 20–1). The analysis will focus on findings that explain institutional allegiance or alienation as the basis to institutional change. To unearth the sources of allegiance shall reflect the presumption that the present EU communications policy is subject to a changing institutional context based on a disparate institutional logic. The relevant scope for the dissertation is whether the institution of EU communications policy prevailed in a changing institutional context. Whereas institutional change is understood as multi-facetted, institutional decline is understood as a result from lagging allegiance. The concepts of vertical depth, horizontal linkage and cognitive and normative allegiance will provide for interpreting the findings.

70

2

Institutionalism in the 21st Century

In consequence, • the institution shall persist in situations where there is no alteration in vertical depth and horizontal linkage irrespective source and quality of allegiance (stasis); • the institution shall be potential subject to change if there is underlying deviation from allegiance of actors involved in the institution (drift); • the institution shall have changed if it increased vertical depth or horizontal linkage through adding rules, actors, structures (layering); • the institution shall have changed if it shifted its institutional setting within the sectoral context it inheres (displacement); • the institution shall have changed if the inherent goals, functions or purposes are redirected (conversion); • the institution decreases in vertical depths, horizontal linkage and allegiance (decline).

2.7 Applying Theory

71

Table 2.4 Units of analysis unit of analysis

that will be considered

that won’t be considered

Agency

− European Commission − Council of the European Union − European Council − European Parliament − Member states as represented in the Council and the European Council − Corporate and civil society interest groups − NRAs as collective actor BEREC

− Individual policy-makers − Individual member states − Individual corporate or civil society actors − NRAs as individual actors

structure

− regulatory framework for telecommunications, including reviews − regulatory framework for electronic communications, including reviews − the Treaties − the principles of the Internet architecture

− The European Electronic Communications Code (EECC)

rules

− Rules as represented by legislations, the Treaties or technology − Procedures as implemented in the context of the EU political system − Norms and narratives as constituted by resolutions, strategies, communications, etc.

− Processes that are invisible to the legal procedures irrespective trilogue negotiations, e.g. background talks

context

− EU communications policy − EU digitalization policy − EU internet policy

− Other policy areas potentially attached to those that will be considered: e.g. industrial policy, economic policy, social welfare policy, etc. − The EECC procedure

3

EU Communications Policy in the Era of Telecommunications

3.1

The European Single Market: Between Re-Regulation and Liberalization1

When in 1957 Belgium, France, Germany, Luxembourg, Italy, and the Netherlands established the European Economic Community (EEC), they already codified the development of a common market in the Treaty of Rome (ToR) (ToR: Art. 2) guaranteeing free movement of goods, persons, services, and capital in different policy areas. (Table 3.1) While policy-makers focused on tariffs and quotas and thereby fostered a customs union rather than a common market (Young 2010: 109; Balassa 1975; Pelkmans 1984), ECJ rulings in 1963 (Van Gend en Loos)2 and 1964 (Costa v. Enel)3 confirmed the direct effect and the supremacy of EEC law over national regulation (cf. Wood/Watson 2009: 81–3). Ever since, the European Community achieved an advanced stage of market integration in different policy areas. Despite considerable advances of the customs union starting in 1968, particularly non-tariff barriers obstructed economic integration. Moreover, the 1970s recession intensified member states’ attitude to protect their national markets. The remaining non-tariff trade barriers have proven for significant obstacles to EC-wide trade (Neal 2007: 128). The maintenance of trade 1 For

the difference between both see Vogel’s remarks (1996: 3). of the Court of 5 February 1963: NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration. Reference for a preliminary ruling: Tariefcommissie—Netherlands. Case 26–62. 3 Judgment of the Court of 15 July 1964: Flaminio Costa v E.N.E.L. Reference for a preliminary ruling: Giudice conciliatore di Milano—Italy. Case 6–64. 2 Judgment

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_3

73

74

3

EU communications policy in the era of telecommunications

barriers eventually resulted in a loss of economic growth due to market segregation. At that stage, the European Council meetings in Copenhagen in 1982 and in Stuttgart 1983 addressed the completion of the European Single Market aiming at opposing economic setbacks and enhancing global competitiveness. While mutual recognition and the customs union had already been established, the internal market was not yet to be completed. At the same time, European industry representatives from different sectors established the European Round Table for industrialist (ERT):4 ‘The creation of the ERT was an effort to have effective representation of industrialists’ interests at the European level’ (Michalis 2007: 105). As ERT directly approached the European Commission, it bypassed national networks between business and governments5 and formed an EC-level actor-network. Although ERT fostered a trans-national orientation on EC industry policy and thus lobbied a European economic order for the sake of industrial interests, internal conflict and national opposition impeded this endeavor. Both national governments and industrial players perceived increasing economic pressure from outside the Community. ERT eventually called for ‘technical harmonization and the opening up of public procurement’ (Michalis 2007: 107) in order to establish Community-wide economic champions being able to compete with third country competitors.

3.1.1 ‘The European Single Market Programme’ In 1985, the newly inaugurated European Commission prioritized the integration of the internal market. When on 14 June 1985 the European Commission published a White Paper on completing the internal market6 (COM(85) 310), it considered the results of the Copenhagen meeting three years ago. The European Community assented to the harmonization of all services and goods—nonetheless under EC competition law (McCormick 2011: 150). The White Paper identified three types of barriers that should be removed by the end of 1992: physical barriers, fiscal barriers and technical barriers.7 Although the EEC Treaty forbad 4 For

further elaboration on the ERT c.f. Cowles 1995.

5 As Michalis states, ERT’s first chairman and Volvo chairman Pehr Gyllenhammer maintained

‘a close working relationship’ with Commissioner Etienne Davignon (Michalis 2007: 105). the same day the Schengen Agreement was signed between the BeNeLux, Germany and France. 7 Especially the latter is relevant especially for the present context. A common market within which technological convergence is possible is the basis for a market of industries of scale, which eventually increase competitiveness. 6 At

3.1 The European Single Market: Between Re-Regulation …

75

Table 3.1 Treaty of Rome, Articles 2 and 3 Treaty of Rome (1957) Article 2 It shall be the aim of the Community, by establishing a Common Market and progressively approximating the economic policies of Member States, to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increased stability, an accelerated raising of the standard of living and closer relations between its Member States. Article 3 For the purposes set out in the preceding Article, the activities of the Community shall include, under the conditions and with the timing provided for in this Treaty: (a) the elimination, as between Member States, of customs duties and of quantitative restrictions in regard to the importation and exportation of goods, as well as of all other measures with equivalent effect; (b) the establishment of a common customs tariff and a common commercial policy towards third countries; (c) the abolition, as between Member States, of the obstacles to the free movement of persons, services and capital; (d) the inauguration of a common agricultural policy; (e) the inauguration of a common transport policy; (f) the establishment of a system ensuring that competition shall not be distorted in the Common Market; (g) the application of procedures which shall make it possible to co-ordinate the economic policies of Member States and to remedy disequilibria in their balances of payments; (h) the approximation of their respective municipal law to the extent necessary for the functioning of the Common Market; (i) the creation of a European Social Fund in order to improve the possibilities of employment for workers and to contribute to the raising of their standard of living; (j) the establishment of a European Investment Bank intended to facilitate the economic expansion of the Community through the creation of new resources; and (k) the association of overseas countries and territories with the Community with a view to increasing trade and to pursuing jointly their effort towards economic and social development.

technical barriers if not imposed for health and safety reasons (Art. 36), technical standards had not been harmonized on Community level. In consequence, this circumstance promoted de facto barriers as national standards—even if not legally binding—favor national market participants over foreign suppliers, potentially abusing Article 36. De jure, the 1979 Cassis de Dijon decision before the ECJ clarified the case by postulating the mutual recognition principle causing subsequent law cases on that account (Neal 2007: 132). As a result, mutual recognition and equivalence of standards eventually had been identified as the regulative norm

76

3

EU communications policy in the era of telecommunications

for an internal market. The White Paper built on former regulations on providing information in the field of technical standards and regulations (83/189/EEC) as well as a new approach to technical harmonization and standards (85/C 136/01). In the spirit of the 1968 customs union and the 1985 White Paper aiming at completing the common market for goods and services by the end of 1992, in 1986, the member states of the European Community signed the Single European Act (SEA), which entered into force in July 1987 and should foster the establishment of a common market (Woods/Watson 2012: 6–7). The objective was to finally complete the internal market referred to in Article 8a SEA8 by taking ‘the decisions necessary to implement the Commission’s program described in the White Paper on the Internal Market’ (SEA: Art 8a). Although the Schengen agreement had already been signed in 1985, it entered into force only in 1995 and was incorporated into Community law by the Treaty of Amsterdam in 1997. Nevertheless, the Schengen agreement accounted for guaranteeing the basic freedoms of movement foreseen in the agenda on completing the single market. As had been announced in the 1985 White Paper, removing physical, fiscal and technical barriers was at the core of SEA. Accounting for ‘the first major change to the treaties since the signing of the Treaty of Rome’ (McCormick 2011: 60), the implementation of SEA imposed major effects on the constitution of the Community. The free movement of goods, persons and services created the ‘single biggest market in the world’ (McCormick 2011: 60) and also delegated competence over diverse policy areas to Community level. SEA further gave legal status to the European Political Cooperation and the European Council and enhanced the power of the Council of ministers.9 It furthermore introduced common Community objectives, such as the creation of an economic and monetary union as well as to enhance cohesion in order to reduce the wealth gap among member states. With regards to new technologies and services, the White Paper elaborated that audiovisual services, information and data processing services, computerized marketing, and distribution services ‘can develop their full potential only when they serve a large, unobstructed market […] that necessitates the installation of appropriate telecommunication networks with common standards’ (COM(85) 310: 30–1). Despite these commitments, the White 8 ‘The Community shall adopt measures with the aim of progressively establishing the internal

market over a period expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 8b, 8c, 28, 57 (2), 59, 70 (1), 84, 99, 100a and 100b […]. The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.’ 9 In the following: Council.

3.1 The European Single Market: Between Re-Regulation …

77

Paper remained rather vague on the liberalization of telecommunications markets. As the Act was adopted in an environment of barriers in the shape of thousands of technical regulations and related standards slowing down or even hindering pan-European interoperability, the new approach to technical harmonization and standards (85/C 136/01) suggested that private standardization institutes, such as the European Standardisation Committee (ESC) and the European Confederation of Posts and Telecommunications Administrations (CEPT), should provide for technical standardization, whereas legislation should be limited to setting general objectives (McCormick 2011: 151). Most important for the present context were the pivot of competition law which eventually broke up national monopolies in network industries.

3.1.2

EC Competition Policy

When establishing the common market, ‘Commission efforts to coordinate negative integration, or the elimination of trade barriers between Member States, benefit[ted] tremendously from supranational EC law’ (Goodman 2006: 160). Article 90(3) empowered the Commission with ‘extensive authority to establish this system’ (ibid.) and even to issue binding decisions and directives unilaterally without requesting consent from the Council. During the negotiations of the Treaties of Rome, Belgium, Germany, Luxembourg, and the Netherlands had advocated for Article 90 aiming at preventing trade distortion, i.a. through Italy and France being home to strong public monopolies. In order to reinforce allegiance, the parties equipped the Commission with the competence to enforce compliance, however, without prejudice to the member states’ right to grant exclusive rights to public undertakings (Goodman 2006: 161). The legal completion of the European Single Market in 1992 eventually established an environment for economic action that—i.a. through mergers and acquisition—enabled European companies to become ‘world-size’ companies competing with economic champions from the US and Asia. The liberalization of the single market enabled takeovers of foreign companies by European companies such as the takeover of US Voicestream by Deutsche Telekom in 2000 (McCormick 2011: 158–9). Whereas the establishment of the single market was aimed to make competitiveness a top priority on the European agenda (McCormick 2011: 156), the Commission emphasized its primacy in competition law in the European Community. But competition law in the EC did not emerge from scratch. Most European countries, except Italy, had competition legislations before the foundation of the EEC. With the Treaty of Paris and the foundation of the ECSC in 1951, the parties

78

3

EU communications policy in the era of telecommunications

agreed on the prohibition of measures imposing trade restriction, discriminatory practices and unfair state subsidies in the area of coal and steel (Article 4; Baskoy 2008: 59). Although ‘US competition lawyers helped to draft the competition articles in the Treaty of Rome’ (Hix/Høyland 2011: 196), EU competition policy exceeds its US equivalent. Whereas the latter targets private sector firms, the former also includes state-owned and state-subsidized firms. Liberalization in Europe led to a significant withdrawal of state control as EU competition policy became a comprehensive economic approach. Articles 107 to 117 of the Treaty of Rome prohibited state aid to industries when these subsidies were able to undermine competition and trade among the EC. Subsidies were only deemed legit when aiming at stimulating the Community’s economy in its entirety (Hix/Høyland 2011: 196). In addition to that, the 1989 merger regulation ((EEC) No 4064/89) fostered this trend and strengthened the Commission’s capacity to act. Between 2002 and 2004, further regulations reformed EU’s cartel, merger and takeover policies aiming at reducing bureaucracy and increasing transparency regarding the decision-making process. Not only did EU competition policy serve as a promotor to liberalization, but it also became a flagship policy of the Community (Cini/McGowan 2009: 1), ‘which can be regarded as an “economic constitution” for Europe’ (Wilks 2010: 135). As such, EU competition policy influenced economic action within the Community and beyond. Although different scholars emphasize different aspects subsumed under EU competition policy, there are three main objectives: antitrust control, merger control, and state aid control (Hix/Høyland 2011: 196; McCormick 2011: 160; Wilks 2010: 137–8). Whereas competition law had been established within the member states, particularly cartelizing has not been understood as illegitimate action if aiming at securing national champions till the late 1960s. Even today, tensions between EU competition policy and national interests persist as the establishment of pan-European firms as global champions is still an ill-fated endeavor. While EU competition law rather targets the protection of competition on a national and sometimes even regional level, this focus in general tends to hinder the creation of European champions that could globally compete. Thus, EU competition policy, by not adopting a pan-European focus on competition, lags behind the completion of the European Single Market as a step toward international competitiveness (Table 3.2). Notwithstanding these setbacks, EU competition policy had a major effect on diverse policy areas by framing specific sectoral policies—such as telecommunication policy (Wilks 2010: 135). The political rationale in competition policy contains freedom of market actions and protection of consumer interests from powerful firms. In 2000, the Lisbon Strategy was installed to ‘finally complete

3.1 The European Single Market: Between Re-Regulation …

79

Table 3.2 Treaty of Rome, Articles 86, 90 and 100 Treaty of Rome (1957) Article 86 To the extent to which trade between any Member States may be affected thereby, action by one or more enterprises to take improper advantage of a dominant position within the Common Market or within a substantial part of it shall be deemed to be incompatible with the Common Market and shall hereby be prohibited. Such improper practices may, in particular, consist in: (a) the direct or indirect imposition of any inequitable purchase or selling prices or of any other inequitable trading conditions; (b) the limitation of production, markets or technical development to the prejudice of consumers; (c) the application to parties to transactions of unequal terms in respect of equivalent supplies, thereby placing them at a competitive disadvantage; or (d) the subjecting of the conclusion of a contract to the acceptance, by a party, of additional supplies which, either by their nature or according to commercial usage, have no connection with the subject of such contract. Article 90 1. Member States shall, in respect of public enterprises and enterprises to which they grant special or exclusive rights, neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular, to those rules provided for in Article 7 and in Articles 85 to 94 inclusive. 2. Any enterprise charged with the management of services of general economic interest or having the character of a fiscal monopoly shall be subject to the rules contained in this Treaty, in particular to those governing competition, to the extent that the application of such rules does not obstruct the de jure or de facto fulfilment of the specific tasks entrusted to such enterprise. The development of trade may not be affected to such a degree as would be contrary to the interests of the Community. 3. The Commission shall ensure the application of the provisions of this Article and shall, where necessary, issue appropriate directives or decisions to Member States. Article 100 The Council, acting by means of a unanimous vote on a proposal of the Commission, shall issue directives for the approximation of such legislative and administrative provisions of the Member States as have a direct incidence on the establishment or functioning of the Common Market. The Assembly and the Economic and Social Committee shall be consulted concerning any directives whose implementation in one or more of the Member States would involve amendment of legislative provisions.

the single market and to create “the most competitive and dynamic knowledgebased economy on the planet within ten years”’ (McCormick 2011: 162). The

80

3

EU communications policy in the era of telecommunications

strategy demanded an extensive amount of changes to national economic policies and thereby illustrated differences between the continental economic system and the Anglo-Saxon system. Whereas the former favors more state control, the latter favors greater freedom for market actors. As a result from these differences, in 2005, the Lisbon Strategy was transformed into the Europe 2020 Strategy, which focused on overall economic, educational, and environmental targets. The Europe 2020 Strategy will be scrutinized in more detail in the context of the Digital Single Market.

3.1.3

The Liberalization of Network Industries and the Incubation of Technological Advances

Before the process of liberalization was initiated, markets of network industries were foremost under state monopoly. The dominant argument for this setting based on the idea that network infrastructures were natural monopolies being characterized by indivisibility. The legal consequence from this perspective resulted in state ownership and exclusive rights for the monopolists. The monopoly status was often bound to the provision of the public service as a universal service among the entire territory. Thereby, the state could overcome social and geographic divide. Potential loss of profit due to service provision in unprofitable areas were reimbursed by the monopoly position in an undivided market, which allowed certain cross-subsidies compensating profitability gaps (Geradin 2006: 2; Vogel 1996: 27). Another reason for state monopoly in network industries was the sedimented belief that important or critical industries had to be consolidated under state control as particularly network industries account for the provision of critical infrastructure (energy, railway, telecommunication, etc.) and employ a high share of the national workforce. Historically, network industries were also strongly linked to public administration, which accounted for control and operation within the responsibility of one authority (Geradin 2006: 2; Vogel 1996: 27). In addition to that, uniform technical standards that serve a single integrated system especially in telecommunications, was easily to be established by one single provider rather than by multiple competing ones (Vogel 1996: 27) as an ‘increasingly important role of standardization is the reduction of costs by the creation of a larger market’ (Breton 1987: 166). Criticism increased when economists, lawyers and policy-makers in the early 1970s employed the argument that ‘while some market segments in network industries […] certainly have natural monopoly features, others are contestable’ (Geradin 2006: 2) and should be opened to competition, abandoning exclusive

3.1 The European Single Market: Between Re-Regulation …

81

rights. The basic idea was to separate infrastructure from services provided by that infrastructure (vertical unbundling). In a market where usually networks and services are operated and provided by an incumbent, competition faces different obstacles. First, establishing new networks often is a difficult and economically inefficient undertaking due to the incumbent’s advantages resulting from an existing network infrastructure. Second, market entrants, in terms of service providers that could eventually utilize the incumbent’s network might face discrimination against their services. Incumbents thereby might misuse their dominant position holding significant market power (SMP). A rational regulation in terms of competition eliminating incentives to discriminate seeks for entirely separating services from the network—namely complete unbundling: ‘In practice, the EC liberalization directives have […] opted for accounting and legal separation’ (Geradin 2006: 10)10 and thus have favored a relatively limited degree of separation (Knieps 2011: 348). Arguments that legitimized the maintenance of monopolies in network industries focused on cross-subsidies enabling the provision of universal services. Opponents claimed that the measurement of profitability gaps was too imprecise for legitimizing potentially crucial distortions of competition11 through granting exclusive rights (Geradin 2006: 3). The lack of competition in network industries, furthermore, was criticized as it produced high procedural costs and non-optimal quality—thus a lack of efficiency—to the detriment of the monopoly’s customers. Finally, the objective of establishing a single market was a major driver for liberalization in network industries in Europe. Only in liberalized markets where states must not grant exclusive rights to monopolies, competition and free movement of goods and services could unfold their potentials (Geradin 2006: 3). The first step in liberalizing network industries was to remove exclusive rights. While in some markets this required ‘complex political compromises’—due to the co-decision between the Council and the European Parliament comprised in Article 95 EC Treaty—, ‘in the area of telecommunications, the Commission managed to achieve quick results through its reliance on directives based 10 ‘From a more general perspective, liberalization has stimulated the creation of new products and services and, as a consequence, generated a range of new markets populated with new firms. While, for instance, the telecommunications sector was typically controlled by one or a small number of firms prior to liberalization, market opening reforms have allowed the entry of numerous new firms, large and small, providing new innovative services. Small firms without necessarily much capital and infrastructure, such as for instance Mobile Virtual Network Operators (MVNOs) in mobile telephony, have seized the opportunities created by regulatory reforms to create new business models and compete on the marketplace’ (Geradin 2006: 10 f.). 11 Experts preferred targeted subsidies financed by general taxation or specific compensation funds.

82

3

EU communications policy in the era of telecommunications

on Article 86(3) of the EC Treaty, which provides the Commission with the power to adopt directives by itself’ (Geradin 2006: 4). Whereas removing exclusive rights promises to establish competition, it also threatens substantive assets, such as universal services: ‘Universal service is generally considered of central importance to the EU model and its survival had thus to be guaranteed in the new economic context created by liberalization’ (Geradin 2006: 5). This issue was addressed separately in the process of liberalizing network industries and will be elaborated for telecommunications in the subsequent chapter. Moreover, liberalized markets should guarantee a level-playing field between market participants in order to safeguard competitive market structures. Regulation of former monopolistic markets therefore had to reduce incumbents’ economic advantages gained by infrastructure control, superior technical expertise, large cash reserves and an established relationship to the government resulting from long-term monopoly. Independent regulatory authorities are one necessary issue to break alliances resulting from monopoly positions. Whereas liberalization within the European Community was promoted on Community level, regulatory authorities should be established and act on national level in order to ensure adoption of regional differences: ‘Liberalization thus led to the creation of numerous new agencies in all Member States of the EU’ (Geradin 2006: 6). As of today, liberalization within the European Union has created an institutional arrangement that combines both regulatory flexibility on a national level and a central regulatory body on EU level. Aiming at fostering economic competition, regulation became subject to competition itself: ‘The institutional structure of the EU has thus permitted the reform process to be carried out on a harmonized but decentralized basis’, which not at least promoted competition among member states aka the different national regulatory environments12 (MayerSchönberg/Strasser 1999: 578). In summary, the regulatory framework of the European Single Market fostered a combination of competition and subsidiarity.

3.1.4

Interim Conclusion: The Prospects of the European Single Market

One interpretation of the European liberalization process concludes that the ‘old’ politics of integration developed to the ‘new’ politics of regulation (Young 12 The latter is relevant to attract private investment and foreign firms to national markets: Whose regulatory framework is attracting economic undertakings? C.f. MayerSchönberg/Strasser (1999: 582).

3.1 The European Single Market: Between Re-Regulation …

83

2010: 108). Whereas liberalization of network industries reduced the influence of national governments on the market, it created new and often more rules. As Mayer-Schönberg and Strasser put it in 1999, liberalization was everything but de-regulation. Liberalizing European markets from state monopoly and fostering competition in environments of artificial barriers and market dominance due to former state ownership required stronger regulation to ensure open markets and thereby competitiveness for new entrants (Geradin 2006: 6). Particularly the history of telecommunications markets therefore is a history of re-regulation13 (Mayer-Schönberg/ Strasser 1999: 565). Whereas new regulatory frameworks aim to ensure competition and prevent market failure, they themselves face the risk of market distortion due to state intervention and related policy failure.14 Thus, regulation is potentially threatened by tendencies of over-regulation. The endeavor to remove regulation when the regulatory need ceases is another crucial challenge once regulation is enforced (Knieps 2013: 3). Competition policy, which served as a key principle during the implementation of the European Single Market, emerged to both a pivotal norm in the legal system of the European Union and a core competence of the European Commission: ‘Competition Directorate has emerged as one of the most powerful instruments of the European Union’ economic policies’ (Neal 2007: 140). DG Competition ever since was in charge of evaluating whether i.a. a merger is able to promote or harm competition in the respective market. EU competition principles are imposed on national markets, which is a turnaround when comparing to former competition policy. While member states in the 1960s and later were eligible to promote national incumbents and provide state subsidies, competition in the ESM targets a competitive level-playing-field among all member states (Neal 2007: 140). However, assessing the progress of the implementation of single market legislations shows some remarkable results: by 1996, out of the 302 proposals in average 93.4% had been implemented on national level. As Neal states Germany was among the countries poorly adopting the EU legislations while Denmark, Sweden and the Netherlands exceeded average. Nevertheless, the target of implementing 98.5% of legislations remained unreached even until 2002 (98.2%). On the other hand, the Council necessarily continued to impose legislations on realizing the 13 Vogel (1996: 65): ‘liberalization and deregulation contradict each other more than they complement each other. The goal of liberalization–competition–requires more regulation, not less.’ 14 The choice of ex-ante and ex-post regulation – particularly in network industries—crucially determines market structures: ‘Although ex ante regulation will often eliminate or at least reduce the risk of abusive behavior, ex post application of competition may be needed to redress such behavior when regulation has not proved sufficient’ (Geradin 2006: 6).

84

3

EU communications policy in the era of telecommunications

ESM and thereby increased the number of legislations to be adopted on national level (Neal 2007: 138–9). As Vogel states, ‘[r]egulators are constrained in their actions simply because legislators may intervene’ (Vogel 1996: 14). Whereas national governments have agreed upon common EEC competition law in 1957, national economic policies aimed at protecting national markets due to power resources inhering nationally sovereign competences. Both actions result from different definitions of optimum outcome: competition law on EC level safeguards non-discrimination within the Community through enforcement mechanisms and national economic competence safeguards national power interests. The application of EC-wide competition law on the national level in a common market reinforced the former while it definitely diluted the latter. Whereas both a common market and competition law had been foreseen in the Treaty of Rome back in 1957, both issues were integrated over time and through the process of gradually adopting legislation targeting a common market that eventually became subject to competition law. As refers to Streeck and Thelen, a process of layering occurred from ECSC to European Single Market. Frictions in the process resulted from allegiance to and affiliation from the changes towards EC-wide application of competition law due to optimum outcome orientation both on EC level and on national level. The EC level eventually prevailed as it was able to bind actors (i.a. the ECJ) to its interpretation of the common market and its pivotal rule of competition law. For the European Single Market, a common understanding between European Commission and the European Court of Justice about the remits of the Community was key. Once founded, member states eventually adhered to the organizations and rules set out in the Treaties even when they imposed constraints on the member states’ national interests. Whereas the idea of a European Single Market based on the objective to develop Europe’s welfare and economic growth, the major driver of this idea has been the European Commission that thereby constituted a policy objective that became habitualized over time. Further market integration shaped political action and led to successive cohesion.

3.2 Common Market Objectives for the European Telecommunications …

3.2

85

Common Market Objectives for the European Telecommunications Sector

Telecommunications policy in Europe and the US has traditionally been based on the concept of (state)15 monopoly: ‘In European countries, the seemingly untouchable status of the PTTs had its roots in the longstanding conception of the telephone system as a natural monopoly and branch of the state’ (Sandholtz 1998: 144). Under the definition as a public service their status was often constitutionally guaranteed. Granting exclusive rights to public or public-private undertakings for providing and operating telecommunications networks and services has been the favorable approach for governments in order to safeguard the provision of public telecommunications service: ‘the telecommunications industry has been characterized by a high degree of regulation in the interest of universal access to the service, with priority to the domestic subscriber whose tariffs were kept low’ (Dyson/Humphreys 1990: 6). As Larouche claimed, ‘[t]he EC regulatory model was accordingly very simple: Member States were in charge of their respective telecommunications sector’ (Larouche 2000: 3). Since public telecommunications operators provided a public good in public command, rule-making, operation, and provision in the national telecommunications sectors in Europe was governed under the same entity, the Telecommunications Administration (TA). Regulation addressed only a very limited market. This arrangement, which specifically promoted and cemented a telecommunications monopoly, again fostered the state’s power over critical infrastructure, economically balanced the provision of the telecommunications universal service and facilitated the management of a natural monopoly. To claim that network industries, such as telecommunications, were natural monopolies was not the only reason for states to maintain state monopolies in this sector. First, critical infrastructure is best secured under state authority. The relevance of communications for military and internal security as well as the public interest characteristics of (tele-)communications made communications a ‘major component in the “logistics of power” of the state’ (Schneider 2001: 60; Mann 1986). Nation states provided public or state-owned enterprises with the monopoly to operate and provide telecommunications services nation-wide, while at the same time protecting their national markets in this sector. Second, network industries and mainly the telecommunications sector accounted for many employees and a significant part of GDP, which under monopoly was easily controllable 15 Whereas in the US AT&T accounted for a private monopoly, in Europe telecommunications monopolies were primarily state monopolies.

86

3

EU communications policy in the era of telecommunications

by the state. Third, the policy objective of universal telecommunications services was to be pursued politically. Whereas the provision of telecommunications as public service involved high costs and profitability gaps, monopolists were able to balance these costs due to undivided benefits in an undivided market. The political interest in universal telecommunications services easily corresponded with the maintenance of a state monopoly. The grant of exclusive rights to telecommunications monopolies therefore was a necessary consequence (Geradin 2006: 2). Since the 1970s, the claim of natural monopoly has been increasingly challenged. The lack of competition in markets of state monopoly caused a lack of innovation and high prices for consumers and other market participants depending on the respective services provided by state monopolies. Technological innovation in the information sector attracted political and economic attention following the belief that information technology could promote economic growth and productivity (Michalis 2007: 102). Although liberalization in the US and the UK eventually caused a rethinking in network industries across Europe and on EC level, traditionally strong telecommunications monopolies proved rather resilient to these changes.

3.2.1

Cooperation Instead of Standardization: Common Market Issues Before 1983

Before in 1977 the European Commission started to engage in the field of telecommunications, there was no telecommunications policy on Community level. Prior ambitions of the Commission to harmonize public procurement in the field of post and telecommunications administrations in 1968 failed due to member states’ concerns claimed in the Council. Although the Comité Européen de Normalisation (CEN), founded in 1961, and the Comité Européen de Normalisation Electrotechnique (CENELEC), founded in 1973, encouraged transnational coordination, the only organization recommending optional harmonization on national technical standards was the Conférence Européenne des Administrations des Postes et des Télécommunications (CEPT) founded in 1959 by the TAs of 19 countries across Europe (Baskoy 2008: 91; Natallichi 2001: 31). As member states opposed supranational authority in the field of telecommunications, CEPT was established outside the EEC ‘as an intergovernmental policy community with consensual, non-binding agreements over limited areas of policy’ (Goodman 2006: 50) integrating the six EC member states and 13 non-EC states (Sandholtz 1998: 149). CEPT did not seek to standardize on a European level but rather

3.2 Common Market Objectives for the European Telecommunications …

87

focused on cooperative standardization through information and comparability (Schneider/Werle 1986: 86–7). In the light of the prospected customs union, the Commission intended to define common tariffs in the telecommunications sector, on which the Council could not agree at that time. For the first time in 1974, the Council under the German presidency adopted a resolution on competition and standardization as well as harmonization in the field of data procession (C 86/1: 1).16 The Commission approached CEPT in order to establish regional standardization policies as part the overall harmonization policy. CEPT outsourced this task to a committee, which eventually failed due to national sovereignty concerns and the lack of competence to enforce national compliance on harmonization (Baskoy 2008: 92; Drake 1994: 85; Hawkins 1992: 344). When in 1977 the new Commission was inaugurated, it ‘was able to bring increased attention to the issues concerning Europe’s technology sector’ (Goodman 2006: 56). Although the Commission claimed the necessity of an EC level telecommunications policy, the Council again blocked this attempt. It was only in 1979, when the Commission again issued the topic, publishing a report on the role of networks in economic competition: European Society faced with the Challenge of new Information Technologies: A Community Response (Sandholtz 1998: 149). The Council eventually commissioned the Commission to propose further steps, which ‘allowed the Commission to appear as a legitimate actor in the telecommunications sector while not directly undermining the power of the Post, Telegraph, and Telephone (PTT) administrations’ (Schneider 2001: 62). Nevertheless, the Council did not respond in a way that would have allowed further pursuance of the issue. Whereas in 1980 the Commission opted for considering national TAs’ arguments (COM(80) 422)—the Commission at that stage could not have preceded without the national governments’ agreement—, the newly and for the first time directly elected European Parliament opposed it. Between 1977 and 1979, the Commission maintained the Information Technologies Task Force (ITTF), which discussed telecommunications issues with 70 professionals from the European telecommunications and information technology sector independently from the Commission’s Directorates General (Goodman 16 The Council of Ministers ‘[c]onsiders that it is desirable to prepare, in the medium term, a systematic Community programme to promote research, industrial development and applications of data processing. This programme would provide for the coordination of national promotion and Community financing in appropriate fields of joint European interest, with the central aim of ensuring that by the early 1980’s there is a fully viable and competitive European-based industry in all the fields concerned’ (Council Resolution of 15 July 1974 on a Community policy on data processing, Official Journal C 086/1).

88

3

EU communications policy in the era of telecommunications

2006: 57). In 1982, ITTF was formally institutionalized in order to prepare and launch the ESPRIT17 research program (Michalis 2007: 111).18 The task force was managed under DG Research and Development (then DG XII) and comprised representatives from DG Internal Market and Industrial Affairs (then DG III). In 1979, in order to achieve national TAs’ commitment to the Commission’s policy initiatives, the Commission established the Senior Officials Group on Telecommunications (SOGT), which was authorized to formulate principles for a European telecommunications policy. They included common standards and mutual recognition of type approvals in public procurement of telecommunications equipment and services, joint planning of new trans-national networks and services focusing on ISDN, mobile telephony, broadband networks and satellites and European research cooperation (Davids 1999; Lemstra/Gorp 2012). Other than ITTF, which represented industry professionals reporting to the Commission, SOGT represented national TAs and thereby accounted for an intergovernmental approach. In 1984, the Commission continued the successful ESPRIT program and also established the RACE19 program fostering research and development (R&D) in telecommunications technology. For the Commission’s purpose RACE was an important enabler for policy-making as it underlined the Commission’s relevance in the telecommunications sector, institutionalized supranational administration and budget in the field of communications, and intensified the Commission’s relation towards industry representatives favoring trans-national telecommunications policies (Sandholtz 1998: 150). In 1986, the Commission transformed the task force and former DG Information Market and Innovation into the new DG Telecommunications, Information Industry and Innovation (DG XIII) (EC Webgate)20 . Thereby, the Commission gradually and deceptively organized telecommunications policy as well as information technology policy as a policy field on Community level. Nevertheless, this development was only a preliminary to the institutionalization process. The far more important formal institutionalization of telecommunications policy on EC level occurred in a legally and institutionally more sophisticated—and binding—way.

17 European

Strategic Program on Research in Information Technology. Webgate: https://webgate.ec.europa.eu/fpfis/mwikis/ThinkTank/index.php/DG_Con nect (available 20/03/2017). 19 Recherche Avancée dans les Communications en Europe. 20 https://webgate.ec.europa.eu/fpfis/mwikis/ThinkTank/index.php/DG_Connect (available 20/03/2017). 18 EC

3.2 Common Market Objectives for the European Telecommunications …

3.2.2

89

Liberalization in the US and in European Telecommunications Markets

The liberalization of the European telecommunications markets from its beginning stood against the backdrop of completing the EC common market (COM(85) 310)21 . When in the 1980s the Commission decided to take action on liberalizing European telecommunications markets, it followed the promise of economic growth through competition: ‘Telecommunications companies, national telecommuni-cations authorities (PTTs) and telecommunications policy-makers became embroiled in a climate of technological optimism that could verge on hype’ (Dyson/Humphreys 1990: 3–4).22 Meanwhile, economic developments and political decisions in the US telecommunications and information technology markets increased pressure on European markets. The starting point to liberalization is presumed the big bang of liberalization in the US. When the bell monopoly had been broken up and the US administration started to liberalize the telecommunications market, in the aftermath the UK and Japan took efforts to liberalize and privatize their telecommunications markets, too (Schneider 2001: 62). Schneider (2001: 73) presents two reasons for the US to pioneer in this field: in the 1970s the US ‘had been technologically much more advanced than other countries’ and the institutional arrangement in the US had been less entangled with the state than it had been in European countries. For instance, the US telecommunications incumbent was already a private firm—partly under state control—and the regulatory authority was already independent from government influence. In the UK in 1975, liberalization had been—at least partly—recommended by a committee set up by the British government. It attested a lack of efficiency, a lack of responsiveness to customers’ needs and a lack of adoption of new technological services in the public post office. While the back-then British government refrained from substantial reform, in 1979 the Thatcher administration strictly and against internal and external opposition enforced liberalization on the telecommunications market.23 In the US, the 1982 Consent Decree facilitated AT&T to act internationally and a US court decision allowed IBM to enter telecommunications. Both decisions had implications in Europe: Whereas AT&T set up joint ventures with Philips in 21 see

also: COM(87) 290 final: 101.

22 In fact, ITTF reports regularly emphasized the threat of U.S. and Japanese firms toward the

European ICT industry (Goodman 2006: 59). 23 Nevertheless, until 1990 a duopoly policy was pursued which gave exclusive rights to the state owned incumbent British Telecom (BT) and its competitor Mercury. The duopoly was ended by the 1990 review. Whereas the UK market had been liberalized in the aftermath, BT’s significant market power persisted (Vogel 1996: 71–7).

90

3

EU communications policy in the era of telecommunications

the Netherlands and Olivetti in Italy, IBM contracted for building German videotext and providing a managed data network for British Telecom. The latter was eventually rejected by the British Department of Trade and Industry (Michalis 2007: 108). Nevertheless, foreign companies from liberalized markets started and continued to surge into European markets (Thatcher 2004: 289). As a result from these developments, national governments in Europe promoted national endeavors in order to cope with the extend of foreign competition and gradually leaped liberalization and re-thinking about natural monopolies (Thatcher 2004: 293). Whereas national governments re-evaluated national protectionism against international competition, the Commission was no longer ‘a lone voice urging common action in the field of advanced technologies’ (Michalis 2007: 110). When in 1983 the Commission consolidated its prior engagement proposing Community-wide objectives in the field of telecommunications, it eventually followed academic and economic analyses as well as political endeavors of liberalizing network industries in the US and in the UK (Geradin 2006: 1). A 1983 Commission Communication emphasized urgent problems in the Community’s telecommunications sector as well as the need for a Community-wide telecommunications policy (COM(83) 329). Moreover, the Commission defined action lines (COM(83) 573) and asked the Council to approve measures relating to the creation of a Community-wide market for telecommunications. A first phase should include expanding the terminal equipment market with regards to common standards, type approval and opening markets for Community-wide procurement of terminal equipment (COM(84) 277).

3.2.3

The ECJ as an Agent Promoting EC Telecommunications Liberalization

The ECJ ruling on British Telecom (BT) violating the Community’s antitrust provision in 1985 (C-41/83) was a milestone and a starting point to telecommunications liberalization in Europe. The case started with Commission Decision 82/861/EEC asserting that the public undertaking BT’s price schemes in the liberalized UK telecommunications market violated Article 86 of the Treaties by disadvantaging its competitors. While the UK government did not intervene in the decision in the first place, it was the Italian government that appealed to the ECJ. At that time, most member states’ governments opposed the application of Article 86 on the telecommunications sector. The UK government in contrast supported the Commission’s position (Goodman 2006: 161; Schulte-Braucks 1986;

3.2 Common Market Objectives for the European Telecommunications …

91

Michalis 2007: 144). Italy had no interest to liberalize its own telecommunications monopoly and so argued that telecommunications was a public service that was not bound by the antitrust provision of the Treaty. The ECJ rejected the argument stating that telecommunications was a commercial service although BT was a public undertaking and thus must not reserve certain activities for itself— telex in the present case (cf. Woods/Watson 2012: 676). The Court clarified that also undertakings that were not non-commercial had to comply with Article 86 (Altes 2000: 53). Moreover, the ECJ under case law recognized the Commission’s power outlined in Article 90(3) of the Treaty of Rome with regards to the application of competition law in the telecommunications sector (Knieps 2013: 1; Mayer-Schönberger/Strasser 1999: 573; Michalis 2007: 144; Schmidt 1998: 173). Resulting from this ruling, the Commission being backed by a court decision gained competence on applying EC competition law on telecommunications markets, although these markets traditionally served a general economic interest in the member states as has been outlined in Article 90(2). In addition to that, ‘[t]he decision sent a strong signal to the member states that the services market would be open to competition soon’ (Baskoy 2008: 94). It also paved the way to the 1987 Green Paper on the Development of the Common Market for Telecommuni-cations Services and Equipment (COM(87) 290). The Commission was henceforth empowered with the competence to follow up on private complaints from national telecommunications markets, i.a. as has been the case in terminal equipment monopolies in Germany, Belgium, Italy and Ireland (Michalis 2007: 145–6; Schmidt 1998: 173; European Commission 1987). The ruling confirmed the Commission’s autonomous right to issue decisions and directives on undertakings in the telecommunications sector without consulting the Council when applying Article 90(3). Whereas the Council can amend a potential Directive issued under Article 90(3) by unanimous vote, ‘proposals are rarely amended in practice’ (Mayer-Schönberg/Strasser 1999: 577) due to political and national diversity.

3.2.4

The Green Paper on a Common Market for Telecommunications

In 1987, in the aftermath of the ECJ ruling, the Green Paper on the Development of the Common Market for Telecommunications Services and Equipment ‘laid the groundwork for the Commission’s two-pronged strategy to coordinate the liberalisation and harmonisation of European telecommunications’ (Goodman

92

3

EU communications policy in the era of telecommunications

2006: 31). The document acknowledged that the dynamic development of technology and its transforming capacity with regards to services and equipment in the field of communications required an organizational reform in order to unfold the sector’s potentials. Technological diversification, new forms of access to information, growth in communication requirements, and the economic importance to cope with economies of scale made telecommunications a critical sector for Europe’s future development (COM(87) 290; Bauer 2014: 7; Larouche 2000: 4; Ungerer 2013: 15): ‘Telecommunications has taken 140 years to develop from a single service to a dozen services in the early eighties. The new technological capabilities will now lead to explosive growth and multiplication of services and applications within a single decade.’ (COM(87) 290: 7)

While the European telecommunications markets was coined by an environment of national markets implying national standards, national—foremost state governed—monopolies in voice line communi-cations and non-optimum service and innovation quality, liberalization of the telecommunications market in the US and privatization in the UK as well as the European Single Market objective for 1992 increased both pressure on national governments and opportunities for the European Commission to act (Ungerer 2013: 15). The Commission’s instrument of choice was once more competition law. Applying Article 2 of the Treaty in order to outline the overall objective to establish a common market, the Commission emphasized that ‘Member States are […] required to fulfil the goals laid down in Article 2 and to respect the Treaty as a whole’ (COM(87) 290: 180), particularly meaning Articles 85, 86, and 9024 , and ‘case law developed by the Court of Justice with regard to telecommunications and to other sectors’; referring to ECJ decision 41/83 the Commission ‘“regards the Member States’ postal and telecommunications authorities as commercial undertakings since they supply goods and services for payment” which are subject to the application of Community competition law’ (COM(87) 290: 181). Correspondingly, the Green Paper foresaw actions aiming at opening competition on the terminal equipment markets, opening access to incumbents’ networks, separating regulatory functions from operational ones, and finally applying EC competition law on all sectors and branches associated

24 The Green Paper also addresses Articles 30–37, 52–66, 100, and 110–116 all concerned with the establishment and maintenance of a common market.

3.2 Common Market Objectives for the European Telecommunications …

93

with communications (COM(87) 290: 4).25 Enforcing its ‘autonomous regulatory power’ (Schneider 2001: 63) on the telecommunications market, as had been confirmed by the ECJ in 1985, ‘[t]he European Commission promoted institutional adaption […] through the introduction of competition’ (Schneider 2001: 76). The Green Paper thus followed a twofold goal: First, the liberalization in the telecommunications markets and second, the promotion of ‘harmonization of national regulations’ (Pascuzzi/Rossato 2005: 70; Schneider 2001: 62). From the national perspective, the Commission thereby ‘shattered’ (Larouche 2000: 3) the existing regulatory model and overhauled the hitherto maintained institutional arrangement in the telecommunications sector. Whereas former national monopolies suddenly faced the process of liberalization induced on EC level, national markets faced the process of opening up to a common market. Pressure was exerted from both sides. The Green Paper emphasized the overall goal to establish a common market for telecommunications by 1992 and to settle consistency of the Community’s telecommunications markets by the end of 1987 responding to competitive pressure from Japan and the US. It therefore covered three overriding principles: 1) The opening of the telecommunications infrastructure and services markets to (transnational) competition, starting with the phased opening of the terminal equipment markets; 2) the separation between regulation and operation of telecommunications services by establishing independent national regulatory authorities (NRAs); and 3) the promotion of standardization in all areas of telecommunications (COM(87) 290: Ch. X). The Green Paper further foresaw to accelerate adoption of the proposals for ensuring the long-term convergence and integrity of the network infrastructure in the community, which suggested the rapid adaption of RACE26 and STAR,27 proposals for the introduction of digital mobile communications and the full application of the ISDN recommendation (86/659/EEC). New action lines were recommended, such as the substantial reinforcement of the development of standards and specifications in the community and the creation of a European telecommunications standards institute complementing CEPT.

25 The Green Paper also lists consultation efforts to be taken for the sake of creating new jobs in the emerging sector and the preparation of common positions for negotiation in international organizations, such as CEPT, ITU, GATT. 26 Research for Advanced Communications in Europe: A Community-wide R&D initiative aiming at promoting European champions in the field of telecommunications. 27 Council Regulation (EEC) No 3300/86 of 27 October 1986 instituting a Community programme for the development of certain less-favoured regions of the Community by improving access to advanced telecommunications services (STAR programme).

94

3

EU communications policy in the era of telecommunications

When approaching telecommunication systems, regulators first challenged the monopoly on terminal equipment existing in most countries. Starting in the US in 1956, the development of advanced terminal equipment in telecommunications28 provoked a regulatory transformation. The monopolist incumbent was apparently unable to provide innovative advances in the terminal equipment market. When consumers and producers called for liberalization, a 1956 US court decision allowed competitors of then monopolist AT&T to market. Newly developed microwave communications services substituting land-line communication networks in the US started to challenge AT&T’s monopoly on telecommunications networks in 1963; even more did satellite communications (Vogel 1996: 27). The development of advanced computer technology was another challenge for regulators and incumbents. Whereas digitization of information decreased transmission costs, facilitated the transmission of large quantities of information and thus enabled new communications services to evolve, computer communications was not at all regulated. Regulators hence faced a disharmonized regulatory regime for communications services (Vogel 1996: 28; Dyson/Humphreys 1990: 2 f.). In Europe, the liberalization of terminal equipment markets as well as liberalizing data and voice line services was an endeavor yet to be implemented following the 1987 Green Paper. The Green Paper, thus, foresaw the unbundling of telecommunications networks and terminal equipment through the rapid extension of mutual recognition of type approval29 to telecommunications terminal equipment. In a second phase, value added services should be opened to competition. The provision of voice line services30 remained a controversial throughout the process of liberalizing telecommunications markets. Resulting from member states’ concerns to loose influence on voice line services, the Commission considered voice line communications as exclusive rights provided by PTTs in the member states and did not impose liberalization measures on these services. In practice, the Commission would most likely not have been able to successfully implement liberalization on voice line services due to massive opposition from the Council and a potential unanimous opposition in the Council, which would eventually veto a Commission directive. Instead, the Commission opted for safeguarding national interests in an environment of massive upheaval in the telecommunications sector:

28 The

first terminal equipment was in fact the telephone.

29 Council Directive 86/361/EEC on the initial stage of the mutual recognition of type approval

for telecommunications terminal equipment. 30 Meaning: telephony.

3.2 Common Market Objectives for the European Telecommunications …

95

‘There is however in practice consensus between the Member States that voice telephone service is a basic service. Currently, this service is reserved in all Member States for provision by the Telecommunications Administrations.’ (COM(87) 290: 177)31

The Commission’s leverage for relieving exclusive rights for all other services, however, based on increased technological diversity and the global trend to establish competition on the services market (COM(87) 290: 9): ‘There are now many service functions and features that can be performed either by the public network or by a private network or the terminal equipment attached to the network. All countries are confronted by two options: – either to try to maintain the current regulatory framework which would imply imposing additional and permanent restrictions and regulations on the use of data processing equipment connected to the network – or to define the telecommunications regulatory framework more narrowly and to give more room for competition. The worldwide trend points towards the latter.’

Whereas voice line services remained under national exclusive rights regimes, data transmission was the first to be opened to competition. In the Green Paper, the Commission in particular addressed the convergence of satellite and cableTV network infrastructure with telecommunications networks in the course of network, data service and even voice line provision: ‘The long-term convergence of telecommunications with audio-visual technologies must be taken into account, in addition to the current convergence between the telecommunications and data-processing sectors. […] Where cable-TV network infrastructure and satellite communications are also used for two-way communications, close surveillance with regard to their relationship and interfacing with the overall telecommunications network will be needed, in order to ensure the long-term overall integrity of the telecommunications infrastructure.’ (COM(87) 290: 14)

31 In spite of that, the Commission acknowledged that a ‘stable “natural” boundary line between a “reserved services sector” and a “competitive services” sector (including in particular “value-added services”) is not possible. Due to technological development - the trend towards integration any definition (and reservation) of a service can only be temporary and must be subject to review if it is not to impede the overall development of telecommunications services’ (COM(87) 290 final: 177).

96

3

EU communications policy in the era of telecommunications

New lines of action identified the common development of new services such as teletext, videotext, packet-switched and circuit-switched data services, mobile communications and ISDN services. They foresaw a definition of a coherent European position on the future development of satellite communications in a time when satellite communications still had been expected as the next generation of mobile communications. According to Larouche, it is not clear why mobile communications had not been covered as subject to legal action in the Green Paper (Larouche 2000: 18). CEPT was scrutinizing the coordinated introduction of GSM, for which CEPT established the Groupe Spéciale Mobile (GSM) in 1982. In accordance with ISDN, GSM should provide mobile transmission of circuit-switched communications (87/371/EEC). Despite intergovernmental standardization efforts, GSM did not create a common European market for mobile communications. Instead, until 2016 it will have accounted for separated markets to the disadvantage of their users paying roaming charges (Michalis 2007: 156; Henten et.al. 2004: 198). To separate regulation from operation of telecommunications services and networks was a key objective in the Green Paper as ‘in a liberalized market, regulation is typically more important […] and to avoid conflict of interests should be carried out by an independent entity. These agencies have to be independent not only from the operators, but also from the government as the latter typically maintains some participation or economic interest in the incumbent’ (Geradin 2006: 6). To establish independent national regulatory authorities (NRAs) and provide them with the necessary rights and obligations was of crucial importance and accounted for key conflicts in EU communications policy as will be shown later. Transnational coordination since 1984 followed Council Recommendation 84/549/EEC concerning the implementation of harmonization in the field of telecommunications—the first jointly agreed instrument on EC level in the field of telecommunications (Larouche 2000: 3). In 1986, before the publication of the Green Paper, the Council had already adopted a Directive on the mutual recognition of type approval for telecommunications terminal equipment (86/361/EEC). Even before the 1987 Green Paper, this Directive accounted for increased efficiency and potential harmonization in the field of telecommunications terminal equipment as it identified common specifications among the Community and beyond. Standardization should pave the way to a European telecommunications and information technology sector, within which competition and cooperation could prosper—instead of maintaining multiple national sectors. Standards in telecommunications economic would reduce costs and promote economic growth. Whereas normation and mutual information had established as a recognized

3.2 Common Market Objectives for the European Telecommunications …

97

procedure during the 1960s, standardization became the first issue in Communitywide policy-making on telecommunications starting with terminal equipment (Baskoy 2008: 90; Shearman 1986: 152). In the course of the 1987 Green Paper, the European Commission integrated harmonization and standardization efforts from earlier years intending to consolidate prior efforts.32 In sum, the Commission clearly opted for partial liberalization in order to safeguard national interests. The measures announced in the Green Paper aimed for regulatory harmonization among member states and on Community level as well as liberalization in terms of the Treaty objective to establish a European common market (COM(87) 290: 8). With regards to the measures outlined in the Green Paper, the European Commission decided for a moderate solution to liberalization that should safeguard national competences in order to gain adhesion and ensure the implementation of key elements of liberalization. The actions proposed in the Green Paper over time converted to cornerstones of today’s liberalized telecommunications sector: ‘Given their importance and wide ramifications, regulatory changes in telecommunications can only be introduced progressively. Time must be allowed for present structures which have grown up historically over a long period, to adjust to the new environment. The major objective must be the completion of the Internal Market by 1992. Regulatory changes in telecommunications must take account of the views of all parties concerned, in particular private and business users, Telecommunications Administrations, the Administrations’ work force, new providers of services and the telecommunications and data-processing equipment industry.’ (COM(87) 290: 177)

The complete implementation of the measures outlined in the Green Paper until 1992 followed a Commission’s Communication adopted on 9 February 1988 (COM(88) 48) and agreed to by a Council Resolution on 30 June 1988 (1988/C 257/1). The communication proposed the following regulatory regime, which was eventually translated into Community law as will be described in the following:

32 i.a. the acceleration of the implementation of Council Directive (83/189/EEC) laying down a procedure for the provision of information in the field of technical standards and regulations.

98

3

EU communications policy in the era of telecommunications

 Acceptance of continued exclusive provision or special rights for the Telecommunications Administrations regarding provision and operation of the network infrastructure33 ,  Acceptance of continued exclusive provision or special rights for the Telecommunications Administrations regarding provision of a limited number of basic services, where exclusive provision is considered essential at this stage for safeguarding public service goals,  Free (unrestricted) provision of all other services.34 These objectives required the application of Treaty Articles 85 and 86 as well as Article 90 on TAs with regards to equipment and services not provided with exclusive rights and on all private undertakings in the sector. All undertakings providing equipment and services not covered under exclusive rights, either by private firms, public firms or either firm from other member states, which also includes monopolies from other member states, became subject to EC competition law. Competition was introduced despite maintaining exclusive rights for the time being. In order to ensure the application of this regulatory arrangement, the Green Paper already foresaw principles fostering competition in service provision by a Directive on Open Network Provision to be carried out by the Commission and SOGT (COM(87) 290: 23). The final framework directive was about to be enacted on 28 June 1990 through Council Directive 90/387/EEC on the establishment of the internal market for telecommunications services through the implementation of open network provision (Larouche 2000: 5–6). Nevertheless, these directives left much interpretation on national level (Michalis 2007: 148). As Sandholz stated, ’the Green Paper did not propose abolishing the PTT monopolies in voice telephony and the provision of infrastructure. The Commission definitely recognized the limits of the feasible. Even so, the document foresaw the end of the PTTs’ dominance’ (Sandholtz 1998: 151). At the same time, opposition from the Council was strong. Although the Commission had to seek compromise on some issues, it entered a path of rule-making eventually constituting new power structures in the telecommunications sector. When the Green Paper was finally adopted, the Council already foresaw a recommendation and a directive on pan-European digital mobile communication 33 Where a Member State chooses a more liberal regime, either for the whole or parts of the network, the short- and long-term integrity of the general network infrastructure should be safeguarded. 34 ‘Competitive services’ would comprise all services except basic services explicitly reserved for the Telecommunications Administrations.

3.2 Common Market Objectives for the European Telecommunications …

99

(87/372/EEC)35 , the implementation of the ISDN Directive (92/383/EEC)36 , a directive on the application of open network provision to leased lines (92/44/EEC) and a directive on the application of open network provisions (ONP) to voice telephony (95/62/EC), later repealed and replaced by Directive 98/10/EC on the application of ONP to voice telephony and on universal services for telecommunications in a competitive environment. Forecast on broadband communications underlined the political recognition of technological evolutions in the field of electronic communication and the Internet. Convergent access arrangements and standards to ensure both marketing of all TAs within the entire common market and provision of non-reserved services by private service operator (PSOs) on PTTs’ networks by non-switched transport services37 or switched services38 . ONP thus should become a critical rule to establish and safeguard competition in the entire market: ‘ONP aims to provide a network foundation […] in accordance with Community IT development initiatives, may be built’ (GAP 1988: 22). In summary, the Green Paper provided for two developments: First, it set out the starting point to full liberalization of telecommunications services eventually completed by Directive 96/19. Second, it emphasized the role of digitalization and advanced services, such as digital mobile communications and the ISDN Directive. It therefore accounted for a potential development of institutional layering in the future.39

35 Council Directive 87/372/EEC of 25 June 1987 on the frequency bands to be reserved for the coordinated introduction of public pan-European cellular digital land-based mobile communications in the Community. 36 Council Recommendation of 5 June 1992 on the provision of harmonized integrated services digital network (ISDN) access arrangements and a minimum set of ISDN offerings in accordance with open network provision (ONP) principles. 37 ‘Nonswitched services include leased lines, foreign exchange (FX) lines, and off-premises extensions (OPXs). With leased lines, two locations or two devices are always on, using the same transmission path.’ 38 ‘There are two main types of switched services: public and private. Switched public services include local calling, long-distance calling, toll-free calling, international calling, directory assistance, operator assistance, and emergency services.’ 39 ‘The proposals aim at progressively introducing full Community-wide competition to the terminal equipment market, and as far as possible and justified at this stage to telecommunications services.’

100

3

EU communications policy in the era of telecommunications

Table 3.3 Council Decisions in the Field of Telecommunications since 1984, COM(87) 290, Figure 3.1 Council Decisions in the Field of Telecommunications since 1984  Council Recommendation (84/549/EEC) concerning the implementation of a common approach in the field of telecommunications  Council Recommendation (84/550/EEC) concerning the first phase of opening up access to public telecommunications contracts  Council Decision (85/372/EEC) on a definition phase for an R&D programme in advanced communications technologies for Europe (RACE)  Council Resolution (86/C 160/01) on the use of videoconference and videophone techniques for intergovernmental applications  Council Directive (86/361/EEC) on the initial stage of the mutual recognition of type approval for telecommunications terminal equipment  Council Regulation (86/3300/EEC) instituting a Community programme for the development of certain less-favoured regions of the Community by improving access to advanced telecommunications services (STAR programme)  Council Directive (86/529/EEC) on the adoption of common technical specifications of the MAC/packet family of standards for direct satellite television broadcasting  Council Recommendation (86/659/EEC) on the co-ordinated introduction of the Integrated Services Digital Network (ISDN) in the European Community  Council Decision (87/95/EEC) on standardisation in the field of information technology and telecommunications

3.3

Liberalizing European Telecommunications Markets

3.3.1

Terminal Equipment: The Inception of Liberalization

In May 1988, Commission Directive 88/301/EEC on competition in the markets in telecommunications terminal equipment entered into force as a first legislative step towards telecommunications sector liberalization. With this directive, the Commission intended to abolish exclusive rights regimes in terminal equipment markets against the backdrop of extensive technological innovation in the telecommunications sector, ‘especially striking in the area of terminal equipment’ (88/301/EEC: (1)). The directive directly addressed national TAs’ sovereignty, which retained the privileges of former state monopolies in the telecommunications terminal equipment market. It emphasized the contradiction between prohibiting discrimination and restrictions against goods from other member states under Article 86 EEC and granting exclusive rights to TAs under Article 90(2) EEC: ‘The conditions for applying the exception of Article 90 (2) are not fulfilled’ (88/301/EEC: (11)) as terminal equipment does not contribute to member

3.3 Liberalizing European Telecommunications Markets

101

states’ general economic interest. Instead, granting exclusive rights in the terminal equipment market would distort competition in a common market. Whereas the directive did not consider networks and services, it required the elimination of quantitative restrictions in the terminal equipment markets between member states. The implementation of the terminal equipment Directive shortly after publishing the 1987 Green Paper is remarkable for another reason: Not only did the Commission abandon monopolies in the terminal equipment market, but it also applied Article 90(3) of the Treaty when issuing the directive as a Commission Directive even before the Council could comment on the agenda set out in the Green Paper. Through the application of Article 90(3) for legislating a directive in order to expand its competence to a former national domain, the Commission provoked member states’ opposition but at the same time claimed its autonomous competence vis-à-vis the Council (Schneider 2001: 63; Sandholtz 1998: 155–6). Whereas the UK—despite procedural concerns—welcomed liberalization efforts, Belgium, France, Germany40 , Greece and Italy even appealed to the ECJ arguing for two reasons: First, granting exclusive rights in the field of terminal equipment had not infringed the law of the Treaties; second, the Commission had exceeded its competence since only the Council could have adopted such a directive.41 After the 1985 ECJ decision, the Court in 1991 once more ruled in favor of the Commission (C-202/88)42 and strengthened its position with reference to the application of the Treaty’s competition law (Michalis 2007: 146–7; Schmidt 1998: 173): ‘It must be held in that regard that Article 90(3) of the Treaty empowers the Commission to specify in general terms the obligations arising under Article 90(1) by adopting directives. The Commission exercises that power where, without taking into consideration the particular situation existing in the various Member States, it defines in concrete terms the obligations imposed on them under the Treaty. In view of its very nature, such a power cannot be used to make a finding that a Member State has failed to fulfil a particular obligation under the Treaty. […] It must therefore be held that the subject-matter of the power conferred on the Commission by Article 90(3) is different from, and more specific than, that of the powers conferred on the Council by either Article 100a or Article 87.’ (C-202/88: 17, 25) 40 Germany

joined the appeal only due to procedural reasons. to Article 87 ToR. 42 Application for the partial annulment of Commission Directive 88/301/EEC of 16 May 1988 on competition in the markets in telecommunications terminal equipment. 41 Referring

102

3

EU communications policy in the era of telecommunications

The ruling furthermore limited granting exclusive rights under Article 90(3) in order to guarantee the successful implementation of the liberalization objectives outlined in the 1987 Green Paper (Braun/Capito 2009: 44). While the case illustrated the opposition between Commission and Council, it also revealed two opposing economic positions among the Community’s member states: those who opposed liberalization in the telecommunications market—led by France—and those favoring liberalization albeit being skeptical about the Commission’s enhanced competence—such as the UK, the Netherlands and Germany (Schneider 2001: 63). With regards to the technical propositions of terminal equipment, the Directive referred to Directive 86/361/EEC on the initial stage of mutual recognition of type approval for telecommunications terminal equipment in order to enable private undertakings to market and to compete in cross-border markets. In line with Directive 88/301/EEC, Directive 91/263/EEC on the approximation of the laws of the member states concerning telecommunications terminal equipment, including the mutual recognition of their conformity eventually ‘provided a framework for the mutual recognition of terminal equipment throughout the Community’ (Larouche 2000: 4). It emphasized the importance of mutually recognized standards, although it did not yet enforce common standards. Whereas the Commission paved the way to a common market, it yet remained reluctant to abandon exclusive rights in networks and services. Member states were still able to protect their national telecommunications monopolies in order to safeguard their general economic interest in PTT’s revenues and the provision of universal services. In the light of a Community-wide common market the politics of the terminal equipment directive threatened both the exclusive rights regime and national standards.

3.3.2

Liberalizing Networks and Services

Other than the Terminal Equipment Directive, the Open Network Provision (ONP) Directive was implemented in cooperation with national regulatory bodies.43 Although the Commission intended to formulate policies together with SOGT, national regulatory authorities impeded the Commission’s ambitions set out in the 1987 Green Paper. SOGT, comprising ‘a very limited number of participants, with resources and a shared interest in maintaining the status quo, maintained a balance of power over policy formulation’ (Goodman 2006: 76). Correspondingly, 43 It is remarkable in the process of formulating ONP that the Commission in close cooperation with national PTTs designed the provisions, while the terminal equipment Directive was designed, published and enforced without even consulting member states’ representatives.

3.3 Liberalizing European Telecommunications Markets

103

Goodman (2006: 77) quotes a study emphasizing that PTTs ‘dominate the process that is producing the conditions under which ONP will be provided, and are thus defining the conditions under which their future private competitors will operate’ (Analysys Consultants 1989: xi–xii). Since SOGT controlled formulating EC telecommunications policies until 1990, ‘early ONP proposals primarily reflected the interests of the PTTs […] and not the interests of those seeking access to PTT networks’ (Goodman 2006: 77). Whereas potential market entrants had not participated in establishing ONP policies44 , SOGT delegated the formulation of ONP proposals to the Groupe d’Analyse et de Prévision (GAP)—a sub-group of SOGT. On 20 January 1988, GAP eventually published a report on Open Network Provision in the Community with reference to the 1987 Green Paper. When in 1986 SOGT requested GAP to assess the US approach on Open Network Architecture, it intended to gain information on how to keep pace with the competitiveness of liberalized markets abroad—especially in the US and Japan. When extending the study period till the end of 1987, it was foreseen to particularly assess the ONP approach announced in the 1987 Green Paper (GAP 1988: 2). ONP should establish general conditions for the provision of PTTs’ networks to undertakings offering competitive services. While endorsing PTTs/TAs to offer services in competition to new private undertakings and thus extending market integration, the report’s definition of ONP strictly separated services foreseen for a competitive market and services that remained reserved under exclusive rights: ‘ONP is the mechanism to stimulate the development of non-reserved services provided both by the Telecommunications Administrations and by Private Service Operators [and] to promote fair competition between Telecommunications Administrations and Private Service Operators in the market of non-reserved services.’ (GAP 1988: 7)

The report further emphasized the scope of the related Directive and clearly stated that TAs safeguarded their privileges: ‘ONP should not lead to the gradual erosion of the current position of the Telecommunications Administrations in the overall market place’ (GAP 1988: 7). TAs and Private Service Operators (PSOs) clearly advocated conflicting interests. Notwithstanding this structural segregation, the report claimed that ‘TA’s would gradually extend their offerings under ONP on the basis of technological progress, telecommunication regulatory evolution, market demand, and technical operational and commercial viability’ (GAP 1988: 10). 44 Although the Commission held workshops on ONP draft proposals with market participants other than PTTs, neither did their opinion nor the results of the workshops influence the ONP policy-making process (Analysys Consultants 1989: xii; Austin 1994: 102; Goodman 2006: 78).

104

3

EU communications policy in the era of telecommunications

Thereby, ONP would account for a ‘natural evolution’ of telecommunications offerings that would result in the provision of all services under ONP gradually by 1992, ensuring competition and innovation in the telecommunications services market. The report based on contributions from TAs, manufacturers, user organizations, US telecommunications firms, the Commission and CEPT while at the same time integrating a GAP report on the progress of the US Open Network Architecture (ONA) as well as a study carried out under contract with DG XIII.45 It eventually recommended a step-by-step approach on the necessary measures while also suggesting to consult CEPT and ETSI as well as PTTs/TAs, PSOs, end users and the industry. It also suggested further studies on the application of ONP on access to leased lines, access to Packet Switched Public Data Networks, access to ISDN and the provision of frequencies (GAP 1988: 41–2). Furthermore, the report envisaged access to the local loop46 by users and PSOs not impairing PTTs’ network services. Nevertheless, the provision of services strongly intertwined with the network—such as voice telephony—remained reserved under the exclusive rights regime. Whereas the GAP report forecasted a development for ONP similar to the ONA regime in the US, the report and the subsequent directive cemented the gap privileging PTTs and undermining ONP’s potential for liberalized markets. While in Europe ‘a pragmatic theory of the social economy that envisioned public enterprises as instruments of public policy’ (Bauer 2014: 13) employed state action, neoclassical theory, within which regulation is the response to market failure, was the dominant position in the US (Table 3.4). Although, the Commission adopted this approach on the basis of its best practice on optimal intervention, it ‘deviated in one important aspect from its North American counterpart by integrating sector regulation with principles of competition law and antitrust economics’ (Bauer 2014: 13; Marcus 2003): ‘The tacit conceptual framework underlying this approach is that competition is superior to regulation and that regulation is a stopgap to avoid the abuse of market power. This is a far-cry from the model that had prevailed before, which saw collaboration between the public and the private sector as an integral part of overcoming the challenges of infrastructure provision at an affordable level and in a ubiquitous manner across space and demographics.’ (Bauer 2014: 14)

45 DG

XIII later became DG InfSo respectively DG Connect. connecting subscribers premises’

46 ‘circuits

3.3 Liberalizing European Telecommunications Markets

105

Table 3.4 Differences in ONP liberalization between the US and Europe, GAP (1988: 18–9) DIFFERENCES IN ONP LIBERALIZATION BETWEEN THE US AND EUROPE  Back bone networks and local loops in Europe are both organized by national TAs while in the US they had been separated.  When liberalizing the telecommunications market, US regulators faced one nation-wide market while in Europe regulators in 1987 faced twelve barely integrated markets.  In the US, the transmission of voice line historically was separated from the transmission of data and text; in Europe it was not.  Unbundling in the US had already been established, while in Europe TAs provided value-added services.  While in the US ONA applied to the former incumbents AT&T and Regional Bell Operating Companies (RBOC’s) that agreed on individual contracts for the provision of open networks, in Europe ONP applied on every undertaking—TA or PSO—offering non-reserved value-added services under common principles.

Changes in the regulatory context of some member states—the UK, Germany and France had already liberalized value-added telecommunications services and data services47 —and a compromise between the Commission and national governments facilitated the adoption of the Open Network Provision (ONP) Directive (90/387/EEC) together with the Services Directive (90/388/EEC) on competition in the markets for telecommunications services by the Council on 28 June 1990 (Goodman 2006: 80; Sandholtz 1998: 156). The Services Directive should open telex, radio and television broadcasting via telecommunications networks to competition. Once again, whereas member states in the Council could neither agree consensual nor by qualified majority, the Commission threatened to apply competition law in order to enforce the ONP Directive. The Commission thus incentivized consensus on the deliberate implementation of ONP rules in the member states (Goodman 2006: 107–8). The ONP Directive eventually laid down measures on opening telecommunications networks to competitive undertakings as a mean to establish the internal market for telecommunications services. Notwithstanding this consensus ‘ONP was viewed by users as a means of establishing the boundaries of TO48 reserved rights as a quid pro quo for TO acceptance of the more reform-minded Services Directive’ (Austin 1994: 101). The attached Services Directive (90/388/EEC) was a source of fierce debate. Despite the ongoing lawsuit on the Terminal Equipment Directive, the Commission approached liberalization of voice line services under Article 90(3) by a draft directive. Although 47 Data services had also been liberalized by the Netherlands and Denmark (Goodman 2006: 106). 48 Telecommunications Operators; equals PTT aka TA.

106

3

EU communications policy in the era of telecommunications

the draft legislation caused massive opposition from those member states that aimed at safeguarding their voice line services monopoly, the Council and the Commission managed to eventually balance a compromise, which resulted in the adoption and subsequent deliberate implementation of the provisions set out in the ONP Directive and easing the provisions set out in the Services Directive. The latter, applying Article 90(2), granted a temporal exception for voice line services from the Services Directive’s scope (90/388/EEC: (18)): ‘Article 90 (2) of the Treaty allows derogation from the application of Articles 59 and 86 of the Treaty where such application would obstruct the performance, in law or in fact, of the particular task assigned to the telecommunications organizations. This task consists in the provision and exploitation of a universal network, i.e. one having general geographical coverage, and being provided to any service provider or user upon request within a reasonable period of time. The financial resources for the development of the network still derive mainly from the operation of the telephone service. Consequently, the opening-up of voice telephony to competition could threaten the financial stability of the telecommunications organizations. The voice telephony service, whether provided from the present telephone network or forming part of the ISDN service, is currently also the most important means of notifying and calling up emergency services in charge of public safety.’

Whereas the Commission justified this exemption by member states’ general economic interest and the costs for the provision of universal services, this justification ‘did not reflect the real extent of ideological and material resistance to the liberalisation of voice telephony which had been evident in the majority of national Member States at the turn of the 1980s’ (Humphreys/Simpson 2005: 62). The Commission in 1992 stated that ‘[p]ublic voice telephony was excluded from the 1990 directive’s liberalisation of the market because of its importance for revenue generation and the maintenance of universal service’,49 which resembled arguments during the negotiations between the Commission and the Council. Despite this compromise, Spain—supported by France, which even sought individual exceptions from the ONP Directive –, Belgium, and Italy challenged the Services Directive but had been overruled by the ECJ decision in 199250 (Schmidt 1998: 173). Yet, both directives had been eased before national implementation.51 Instead of liberalizing voice line services the opposing parties finally agreed on 49 Competition Commissioner Leon Brittan’s speech at the Business Week Conference on the ‘Future of world telecommunications’, New York, 21 April 1992, quoted after Goodman (2006: 171). 50 Cf. joint cases C-271/90, C-281/90, C-289/90. 51 Cf. Austin (1994) for further elaboration.

3.3 Liberalizing European Telecommunications Markets

107

the liberalization of data services, which was codified in the Service Directive. As a trade-off, it accounted for non-discrimination in telecommunications services other than voice line services and thus ‘for the first time’ (Pascuzzi/Rossato 2005: 70) implemented a principle of liberalized markets: ‘Member States shall withdraw all special or exclusive rights for the supply of telecommunications services other than voice telephony’ (90/388/EEC: Art 2). Whereas the directive did not apply to telex, mobile telephony, paging, satellite services and mass communication services, such as radio for television, subsequent directives should apply on satellite services, the provision of non-reserved telecommunications services over cable television networks and mobile services (Naftel/Spiwak 2000: 274). In 1994, the Commission published an Analysis Report in accordance with Directive 90/387/EEC elaborating the application of ONP on intelligent network functions, network management, local loop, and broadband communications: ‘The Study concludes that for the next five years the Broadband market will be concentrated on data applications, principally for LAN interconnect, with ubiquity of access, quality of service and low costs being the primary considerations supporting a decision to subscribe to Broadband services on the part of many prospective users. After five years, when more extensive Broadband networks have been deployed, […] including video and multimedia applications, should become significant. The Study contends that the market for Broadband services is at present supply-constrained and that regulatory actions will be necessary to ensure that suppressed demand is released.’ (European Commission 1994)

In 1994, the Council eventually adopted the initial directive after conciliation had failed, not expecting the EP to find a majority to vote against it. However, the EP, within the six-week deadline, managed to organize a majority to reject the Services Directive52 (Stie 2013: 65). In the beginning of co-decision, cooperation and interdependence was not yet internalized to the procedures in force. Whereas co-decision intended to equalize legislative rights between the Council and the EP, ‘[t]he weaker EP struggled to win influence [and] the more powerful Council tried to minimise the former’s new-won formal clout’ (Stie 2013: 66). Both, the EP’s increased ability to form plenary majority and the high costs of failing conciliation made the EP and the Council agree on regular trilogue meetings prior to conciliation committee meetings (ibid.). The institutionalization of trilogue as an institutional procedure thus balanced the new (tendentiously unequal) power structure in order to save resources such as time and reputation. Aiming at completing a competitive single market for data and value-added services, the 52 Procedure

1992/0437/COD.

108

3

EU communications policy in the era of telecommunications

ONP Directive prepared a comprehensive legal framework on harmonization in the European telecommunications sector. Subsequent directives on leased lines53 , on the application of ONP on voice telephony54 , on broadening the scope of the services directive to satellite communications55 , on cable television56 and on mobile communications,57 on authorization of telecommunications networks and services,58 on interconnection in telecommunications59 as well as Commission Regulation on unbundled access to the local loop60 gradually implemented the transformation of the telecommunications regulatory framework towards the posterior framework for electronic communications (Ungerer 2013: 15–6)61 : ‘This directive established the procedure and timetable of the harmonization effort and represented the general framework of the regulations to come, which were designed to create a uniform legal environment in all Member States for telecommunication services’ (Pascuzzi/Rossato 2005: 72).

3.3.3

Regulatory Challenges in Liberalized Telecommunication Markets: Establishing NRAs

A key instrument when liberalizing state monopolies is to separate operational tasks from regulatory sector control. Although market liberalization required independent market control, EC member states refrained from deliberately delegating regulatory powers to Community level for the same reasons for which they had protected their national markets in the first place. Article 7 of the Service Directive (90/388/EC) in line with Article 6 of the Terminal Equipment Directive (88/301/EEC) mandated the establishment of independent National Regulatory Authorities (NRAs) in every member state (Larouche 2000: 6). Both Directives 53 Directive

92/44/EEC. 95/62/EEC, later replaced by Directive 98/10/EC. 55 Commission Directive 94/46/EC. 56 Commission Directive 95/51/EC. 57 Commission Directive 96/2/EC of 16 January 1996 amending Directive 90/388/EEC with regard to mobile and personal communications. 58 Directive 97/13/EC. 59 Directive 97/33/EC. 60 Reg. (EC) No. 2887/2000 on unbundled access to the local loop. 61 The subsequent 2002 regulatory framework on electronic communications considers these issues when outlining the 2002 Access Directive (2002/19/EC). 54 Directive

3.3 Liberalizing European Telecommunications Markets

109

outlined the framework within which the common market on telecommunications should develop. In addition to NRAs, the ONP Directive established a Communications Committee composed of NRA representatives that should eventually replace SOGT and GAP as an advisory body to the Commission. The Committee was also designed to ‘consult the representatives of the telecommunications organizations, the users, the consumers, the manufacturers and the service providers’ (90/387/EEC: Art 9). PTTs were henceforth not the only actors to be considered (Goodman 2006: 80). Experiences from subsequent consultations— introduced under Article 4 of the ONP Directive for a period of ‘not less than three months’—showed, that the newly involved actors seized the opportunity to issue their opinions during the policy-making process. As a further consequence from the separation of regulatory from operational powers, the Commission disempowered CEPT—representing national PTTs— from standardization issues. Instead, in March 1988, the Commission established the European Telecommunications Standards Institute (ETSI) on Community level intended to accelerate the development of European standards. Other than CEPT, ETSI represented administrations, public and private network operators, manufacturers, users and research institutes. Whereas ETSI’s objective was to ensure compatibility in information technology and telecommunications, its power resulted from establishing binding standards applying on all market participants within the Community and its common market (Besen 1990: 527–8). In summary, ’[l]iberalization thus led to the creation of numerous new agencies in all Member States of the EU’ (Geradin 2006: 15). Until 2009, when the EU Regulatory Body BEREC was founded, there had been successively 28 NRAs established within the Union (Bauer 2014: 12). It was only in 1997—one year before full liberalization—that the British, the Dutch and the Danish NRAs established the Independent Regulator’s Group (IRG) anticipating the Commission’s call for an EU Regulatory Authority (Michalis 2007: 157).

3.3.4

Liberalization Under the Maastricht Treaty

In 1993, the Maastricht Treaty entered into force including the objective to establish trans-European telecommunications infrastructures. The narrative context emphasized a new global technological challenge for the European economy and society, namely the Information Society. Accordingly, Article 129b of the Treaty (Table 3.5) equipped the Commission with competences to address this challenge and fulfil the Treaty’s telecommunications objectives by enhancing its authority in this field (Goodman 2006: 187; Bulmer 1993: 365). Moreover, when drafting

110

3

EU communications policy in the era of telecommunications

the White Paper on Growth, Competitiveness and Employment: The challenges and ways forward into the 21st century (COM(93) 700), the Commission seized its window of opportunity to further advance liberalization of the telecommunications sector. The White Paper identified ICT and information highways as a necessary mean to Europe’s global competitiveness in a changing world. Whereas SEA had been a promising step towards competition, the need to adapt to technological developments was identified equally important. These developments were ‘making the traditional distinctions, for example between electronics, information technology, telecommunications and the audiovisual sectors, increasingly obsolete’ (ibid.: 22). The White Paper envisioned convergence of former separated technologies, such as telecommunications and cable networks as well as data, voice line and audiovisual signal transmission. It also referred to the US term of ‘information super highway’—increasingly used by the Clinton/Gore administration during the early 1990s.62 The origins of the metaphor of a data highway for the digital society root in the announcement of the US administration for an initiative promoting a national information infrastructure (NII). The European reference to this initiative was set up in 1994 as part of the Bangemann Report, which again referred to the metaphor of a data highway (Bühl 1996: 13 f.). A common information area should address advances in information, hardware, components and software, physical infrastructure, basic telecommunications services, applications and users, which would be promoted through the prior liberalization of telecommunications markets. The White Paper also emphasized the role global competitiveness played for the adoption of policy measures towards technological promotion: ‘The economies which are the first to succeed in completing this change satisfactorily will have major competitive advantages. The USA and Japan are therefore attempting to speed up the process.’ (COM(93) 700: 95)

Again, the Commission occupied the narrative that in comparison to the US and Japan the EC lagged behind in information and telecommunications technology. In order to get member states’ awareness for this issue, the Commission in 1994 set up the High-Level Group on the Information Society, which published its report on ‘Europe and the global information society’ in preparation of the 1994 Corfu meeting of the European Council. The report outlined specific measures to 62 Also used in South Korea: Indeed, due to the ‘Information Super Highway’ project, rigorously pursued by the Korean government since 1995, South Korea became quickly one of the leading countries in transforming the world into an information society by the time of 2002 presidential election.

3.3 Liberalizing European Telecommunications Markets

111

be taken in order to face the digital transformation towards an information society. Whereas in the US the National Information Infrastructure covered efforts that addressed the rollout of internet technology, the dominant information infrastructure in Europe still was telecommunications networks. In fact, this circumstance accounted for national reservations against the Commission’s approach. Nevertheless, the White Paper reinforced the role of competition for the establishment of trans-European networks set out in the 1992 Treaty of Maastricht (Michalis 2007: 152). The emerging information society narrative, the Treaty objective of transEuropean networks in a single market and the technological evolution of the Internet stressed the institutional context within which Directive 96/19/EC on full competition in the telecommunications sector, the 1999 telecommunications review and the regulatory framework for electronic communications had been established. Notwithstanding these endeavors, the Bangemann report was a combined result of the Commission and private sector agents to further enhance liberalization: ‘The overtly neo-liberal perspective of the report, due in part to the agenda-setting role played by Directorate-General XIII (then called Telecommunications, Information and Exploitation of Research, now Information Society) of the European Commission and the influence of big business interests in IT and telecommunications policy, was that the creation of the information society should be left to market forces.’ (Halpin/Simpson 2002: 287)

Moreover, the ERT and other private interest groups—particularly from cable operators—intensified lobbying for further liberalization of the telecommunications sector, especially addressing the issue of infrastructure liberalization (Goodman 2006: 189–90; Grant 1993; Green Cowles 1995): ‘This episode also highlights the way in which the Commission uses interest groups to endorse EC intervention, thereby legitimising its policy initiatives and ensuring support for those initiatives’ (Goodman 2006: 188–9). Table 3.5 TEU, Article 129b Article 129b TEU 1. To help achieve the objectives referred to in Articles 7a and 130a and to enable citizens of the Union, economic operators and regional and local communities to derive full bene/it from the setting up of an area without internal frontiers, the Community shall contribute to the establishment and development of trans-European networks in the areas of transport, telecommunications and energy infrastructures.

112

3.3.5

3

EU communications policy in the era of telecommunications

The Full Competition Regime: Adjustment and Re-Regulation in a Semi-Liberalized Market

‘The regulatory model of the 1987 Green Paper […] was by and large valid until the adoption of Directive 96/19’ (Larouche 2000: 17). The regulatory framework until then constituted three elements of telecommunications—irrespective terminal equipment: infrastructure, reserved services and non-reserved services. As had been foreseen by Article 10(1) of Directive 90/388 in 1992, the Commission reviewed the regulatory framework and by the end of 1992 published a communication recommending ‘opening intra-Community cross-border voice communications to competition’ (Larouche 2000: 19; SEC(92)1048). In effect, this step would lead to full competition in the services market while infrastructure would remain under the provision of exclusive rights. Massive lobbying from end-users and providers of non-reserved telecommunications services led to a revival of the issue, which was postponed during the ONP process. Eventually, the Commission drafted a timetable covering inter alia the liberalization of alternative infrastructure for self-provision of services and liberalization of cable-TV networks for the provision of liberalized services by 1996 as well as the full liberalization of telecommunications services and a new framework for public telecommunications infrastructure by 1998 (Larouche 2000: 20; COM(93)159). In 1993, the Council accelerated the liberalization process when it agreed to implement full competition in traditional telephony by 1998 (1993/C 213/1). In a position turn, national telecommunications operators were the drivers of this development as they had been seeking international mergers and transnational alliances (Schneider 2001: 63). Whereas the Council refrained from adopting the recommendations on infrastructure liberalization, the Commission in 1994 published a Green Paper on the liberalization of telecommunications infrastructure and cable television networks (COM(94) 440)63 . The Commission’s favored approach envisioned parallel liberalization processes in infrastructure and services: while alternative infrastructure for self-provision of services should be liberalized immediately, just as non-reserved services provided on alternative infrastructure had already been liberalized, the liberalization of telecommunications infrastructure providing public voice telephony would accompany the overall liberalization of public voice telephony by 1 January 1998. Thus, ‘the use of infrastructure for telecommunications was liberalized to the extent these services themselves were liberalized’ (Larouche 2000: 21). 63 ’[I]n order to meet the deadline of 1 January 1995 set by the Council […], the Green Paper was published in two parts (Larouche 2000:20).

3.3 Liberalizing European Telecommunications Markets

113

Directive 95/51/EC, which amended Directive 90/388/EEC, should abolish restrictions on the use of cable television networks for the provision of liberalized telecommunications services and enable operation of broadcast undertakings on the telecommunications market. Not only did these provisions advance liberalization, but they also set a new cornerstone for media convergence in the access market for telephony. Followed by Directive 96/19/EC, which amended Directive 90/388/EEC, on the implementation of full competition in telecommunications markets, this package accounted for complete competition on the telecommunications market. Despite these advances, voice telephony had been exempted from de-regulation until 1996 to not threaten PTTs’ provision of telephony universal services. When Directive 96/19/EC entered into force, this policy changed and by 1998 full market competition was achieved (Mayer-Schönberger/Strasser 1999: 574). Parallel to that, Directive 97/51/EC established independent telecommunication operators when state owned and thus accounted for another market opening in the light of ONP. The application of competition law was key to the liberalization of the European telecommunications markets. Nevertheless, the regulatory instruments to achieve this objective was the directive—‘a battery of hard legislation has been developed, mostly in the form of directives, with the purpose of creating a Single European Market in telecommunications’ (Simpson 2013: 907). There has been no single Regulation in the process of liberalizing European telecommunications markets. As Larouche puts it: ‘The Commission has used its powers under Article 90(3) EC Treaty in order to liberalize the telecommunications sector through a string of Directives. Under those Directives, Member States were actually required to abolish special or exclusive rights granted to their respective public telecommunications operators (TOs) over telecommunications terminal equipment, services and infrastructure. Even if the wording of Article 90 EC Treaty does not expressly provide that the Commission may order the abolition of special or exclusive rights, the Court of Justice agreed with the Commission that the first liberalization Directives came within the scope of Article 90 EC Treaty. As a consequence of those Directives, the scope for State intervention in the telecommunications sector has been clearly outlined: special and exclusive rights are no longer feasible, and the application of Article 90(2) EC Treaty is in principle excluded, since the provision of services of general economic interest can be insured through competition-neutral means such as universal service funds.’ (Larouche 1998: 220)

1 January 1998 was meant to complete full competition on the market for telecommunications. The European Commission issued concerns about potential failure of successful implementation of the telecommunications regulatory framework

114

3

EU communications policy in the era of telecommunications

towards France, Belgium, Greece, Ireland and Portugal and launched infringement proceedings against Spain in 1997 as well as Belgium, Germany, Greece, France, Luxembourg, and the Netherlands in 1998 (Simpson 2013: 908). Moreover, ‘at the end of 1998, there were 89 infringement proceedings open against Member States’ (Pons 1999). In 2002, the last report on the Implementation of the Telecommunications Regulatory Package from the Commission before starting the telecommunications review concluded that ‘[a]fter four and a half years of liberalisation of telecoms services, the regulation put in place at national level is very substantially compliant with the EU framework’ (COM(2002) 695: 6).

Figure 3.1 Telecommunications networks and services under the full liberalization regime, 1998 (author’s figure)

In effect, the liberalization efforts had reduced the incumbents’ prerogative to provide telecommunications segments under exclusive rights. The Commission in negotiation with member states in the Council, supported by ECJ rulings and the Commissions’ respective power position, thus successively enhanced the number of actors affected by EU communications policy. The changed scope of EU communications policy opened the different segments of communications infrastructure to competition and adopted regulatory possibilities to technological capabilities. It enabled new actors to market, allowed the provision of alternative

3.4 Interim Conclusion: The Advent of EU Communications Policy

115

infrastructures, thus restraint incumbents’ market power and ultimately enhanced the group of participants to be considered in decision-making processes. From a technological and economic perspective, not only did incumbents’ competitors (new entrants) gain access to more of the incumbent’s market share but they did also get ever closer to the customer via the incumbent’s and via alternative infrastructure—yet, still protecting the incumbent’s local loop.

3.4

Interim Conclusion: The Advent of EU Communications Policy

3.4.1

Phase I: Institutional Displacement

Over decades, the institutional arrangement in the telecommunications sector was shaped by national monopolies; the institution of EC telecommunications policy was non-existing. Nevertheless, the Treaty of Rome had codified competition law and a reserved power for the Commission to take action under Article 90(3). It had also codified the objective to establish a common market, which eventually started to institutionalize on EC level. As a pivotal norm in the economic system of the EEC, competition had been codified in the Treaties in order to abandon non-competitive behavior of states and market participants. In 1982, the European Commission eventually enhanced the institutional scope of competition applying large resources in the institutional context. Although the Commission Decision did not impose any fines on BT,64 it explicitly applied EC competition law on a public undertaking. This expansion of scope had been contested by the government of Italy following the rules of again another institution—the constituency of the European Community—eventually leading to an ECJ ruling embedded in the very institutional context. The complaint of the Italian government activated the ECJ and eventually enforced a court ruling on the application of EC competition law in public telecommunications undertakings. Thus, the rules of competition have been successfully expanded to another sector increasing the power of one actor (the European Commission) through the interpretation of the rules in question (competition law) by yet another actor (the ECJ). The European Commission thereby has triggered the expansion of the institutional scope 64 ‘Notwithstanding these infringements, the Commission does not consider that a fine should be imposed on BT in view of the special circumstances of the case and of the matters referred to in paragraph 20 above, and because BT did not enforce the restrictions by disconnecting the facilities of the message-forwarding agencies’ (82/861/EEC, §45).

116

3

EU communications policy in the era of telecommunications

of competition to become a pivotal rule in the institutional context of telecommunications policy. Whereas ‘[s]uch hard legal action is likely to be effective eventually, though can be time-consuming, resource-intensive, politically contested and unpopular. If implementation non-compliance is quite widespread, it can also create a breadth of negativity likely to prove damaging to future policy initiatives with the goal of further Europeanization at their core’ (Simpson 2013: 902). In the present case, Italy and eventually all EC member states complied with this decision that eventually expanded the scope of the rules that enforced competition. The interplay between the European Commission and the ECJ made competition law a pivotal rule in European telecommunications policy—as it already was in the EC political system. Allegiance thereby based on the acceptance of the ECJ’s authority. Alienation was impossible without threatening the membership in the institution of the EC: ‘In the process of European integration, the European Court has taken an active, even forcing stance, gradually building a remarkable base of authority and effectively “constitutionalizing” the emerging European polity’ (Pierson 1998: 36). The institutional context to these developments was shaped by a global economic transformation towards liberalization of network industries—particularly in the US and the UK under a new government. The liberalization efforts in the UK telecommunications market promoted both an imbalance of economic models in the Community and a window of opportunity for the Commission to act as an entrepreneur towards liberalization. Whereas there were bilateral engagements between i.a. the US and EC member states, efforts in liberalizing telecommunications markets had significantly started to be successful only after the European Commission, backed by the ECJ ‘as a key supranational actor with a bias for furthering European integration’ (Goodman 2006: 63), took action in this field. Within this institutional context, the European Commission decided to both claim BT’s infringement of EC competition law and employ a narration about Europe’s lack of competitiveness in the global ICT environment, emphasized by the newly established expert group ITTF. Whereas the legal claim provoked juridical interpretation, the activation of third party agents underlined and eventually reinforced the intensifying economic pressure that affected policy-making on national and EC level: ‘the lure of the opportunities of economic globalization and concerns about maintaining national strength in this key aspect of the information and communications environment contributed to the rise of the EU as a policy environment for telecommunications’ (Sandholtz 1998; Simpson 2013: 905). The 1982 Commission Decision on BT’s price schemes and the resulting ECJ ruling institutionalized EC competition law and the Commission’s competence over competition rules as a cornerstone of EC telecommunications policy.

3.4 Interim Conclusion: The Advent of EU Communications Policy

117

In the light of the common market endeavors, which perpetuated the narrative of external economic challenges from the US and Japan, the Commission managed to draft the 1987 Green Paper and subsequently seize the newly activated competences in EC competition law. The terminal equipment directive eventually accounted for another critical juncture as it for the first time after the ECJ ruling in 1985 actually applied Article 90(3) to issue a Commission Directive on telecommunications and thereby exerted its new powers while at the same time interfering with existing power structures in the member states. Stone Sweet and Caporaso in their analysis of the relation between ECJ rulings and European integration even state ‘that the legal system operates in favor of those individuals and firms who are advantaged by European rules and regulation, and disadvantaged by national rules and practices’ (Stone Sweet/Caporaso 1998: 130). Victoria Hattam exemplified the role of institutions to political change on working class formation in the UK and the US and concluded that the role of the courts as interpretative instance had been crucial for institutional change in both countries. She claimed that not only the particular role of the courts as jurisdiction but also their embedding in the institutional context influenced their power within the structural context (Hattam 1992: 178–9). As Streeck and Thelen (2005) as well as Djelic and Quack (2005) argue with reference to institutional displacement in the multi-level shift of EC competition law, ‘an almost forgotten section of the European Treaty became “activated” by proponents of a type of liberalization that no one had envisaged when the law was originally written’ (Streeck/Thelen 2005: 22). The displacement of European telecommunications policy precisely illustrates the relevance of pressure stemming from the institutional context (external economic advances) and the Commission’s role as political entrepreneur. Although national authorities had not been eager to develop any EC level initiative on telecommunications, the European Commission repeatedly addressed the issue through different channels. Moreover, the Commission maintained two different relationships toward the telecommunications sector. On the one hand, it collaborated with national PTTs/TAs in intergovernmental platforms such as CEPT and SOGT. On the other hand, it established a supranational platform integrating European industry professionals such as ITTF. Thereby, the Commission was able to maintain cooperation with national authorities, upon which it relied in order to issue initiatives, and to yield results from supranational industry interests. Despite the failed initial attempts to establish telecommunications policy on EC level, the Commission managed to arrange a domain of influence through the establishment of epistemic communities (SOGT, ITTF) and research programs (RACE and ESPRIT) underlying and fostering the Commission’s competence in

118

3

EU communications policy in the era of telecommunications

the field of communications vis-à-vis an opposing block of member states represented in the Council. Notwithstanding this strategy, these relationships did not solely benefit the Commission as its relation towards ERT has illustrated. Compromise and balancing interests were the state of policy-making. Nevertheless, the final trigger enabling re-thinking telecommunications policy was gradual change against the backdrop of the external institutional context. Also, it is important to record that the Commission’s policy-making occurred in an environment that was shaped by a grand narrative of liberalization and the abolition of state monopolies—particularly in network industries: ‘EC telecommunications policy did not only follow the preferences of the majority of its member states but also the self-interest of its supranational institutions’ (Schneider 2001: 76). Without constant emphasis on economic pressure from liberalized markets, especially the US, the Commission would not have been able to promote initial steps on an EC-level telecommunications policy. Together with this narrative, technological innovation, the disintegration of the national monopoly paradigm, international liberalization endeavors in the services market, a recourse on Europeanization due to the single market program and the breakdown of national Keynesian economic consensus provided a trigger for policy development and institutional transformation (Michalis 2007: 142). The Commission’s Green Paper definitely accounts for the starting point to the disruption of national telecommunications markets. With reference to the ECJ decision, the Commission claimed exclusive competence on the application of EC competition law in the telecommunications sector, meaning the delegation of competence in this field to Community level. Moreover, it again referred to institutional context when claiming the need for organizational reform, meaning institutional displacement. The institutional context on national level faced a process of institutional displacement resulting from institutional engineering within a broader institutional context: As member of the European Community, every member state is bound to the rules set out in the Treaties. In the present case this accounts for the Treaty’s competition articles as well as the ECJ’s jurisdiction. When appealing the Commission’s decision on BT’s price schemes, the Italian government demanded an interpretation of the existing institutional rules through the ECJ, which comprises a responsible and powerful role in this institutional context. The court’s decision broadened the domain of EC competition law which directly affected the institutional context of every national telecommunications market as it inheres the institutional context of both the nation state and therethrough the European Community. Institutional multi-level ramification eventually led to institutional displacement on the national level and institutional emergence on Community level. The Green Paper eventually filled this opportunity gap with

3.4 Interim Conclusion: The Advent of EU Communications Policy

119

measures rearranging the institutions in place, deeply affecting the existing power structures. Whereas the Green Paper was yet the announcement of action, the subsequent legislative process should account for much more disruption. At this point, an excursus to March and Olsen seems relevant as the authors describe institutional change in Norway after the Ekofisk oil field discovery, which turned around Norway’s economic relation towards oil: ‘Prior to 1969, Norway imported oil. Its relation to the oil industry was almost entirely as an importer. For the most part, petroleum was subordinated as a source of energy to the abundant hydroelectric supplies of the country. After the Ekofisk discovery in 1969, it was clear that Norway could become an oil exporting country. Petroleum policy was a new field with an apparent lack of routines, and increasing political relevance. […] It was unclear how decisions on oil issues should be made, what institutions would handle different decisions, and where legitimate participants in various processes.’ (March/Olsen 1989:35)

Further: ‘The policy makers seldom considered several choice alternatives or examined their various consequences in any great detail. Rather, the government followed a few simple, experience-based rules and standard operating procedures. Oil issues were interpreted and decided in the light of established routines. The various state agencies used existing rules and routines rather than develop special rules. Important decisions thus appeared obvious, natural, and reasonable.’ (March/Olsen 1989:35)

For the European Commission, the process of contextual change accompanied by ‘significant technological turbulence and sectoral reorganization’ was a potential window of opportunity for agency or, in the present case, ‘for the EU in terms of becoming involved in new domains’ (Simpson 2013: 902). Just as Quack argues, the expansion of scope became a constitutive momentum of institutional change (Quack 2005: 363). The application of EC competition law on the telecommunications sector both established telecommunications policy as a policy area on EC level and constituted new rules in the institutional arrangement covering telecommunications policy on national and EC level. The fourfold interplay between the institutional context, the re-interpretation of existing rules in favor of the newly emerging institutional domain, the prointegrative bias of the ECJ as a resourceful actor comprising the power of interpretation, and the Commission’s will to shift established power structures accounted for the emergence of the institution of EC telecommunications policy.

120

3

EU communications policy in the era of telecommunications

The recognition of the Commission’s competence on competition actually empowered the Commission to legislate autonomously as the Council needed to vote unanimously to amend a draft legislation (Mayer-Schönberg/Strasser 1999). The fact that the European Commission executed competition law on a policy area in order to gain competence over this area is unique in telecommunications. Once in charge, the Commission took advantage of the changed institutional arrangement and further enhanced its competence (Geradin 2006: 4). Schmidt (1998: 174) further states that the ‘possibility of case-specific enforcement of European law played a crucial role. In procedures initiated by the Commission national governments are isolated, and therefore cannot block the demands as effectively as when all governments are confronted at once. The Commission is thus in a relatively good position to pursue single cases if it has the support of private actors for liberalization. This helps significantly when it subsequently attempts to broaden the policy to all member states. However, policy change based on case-specific measures is very cumbersome and drawn out, leading to a fragmented and uncertain legal order. Thus the Commission’s ability to impose a unitary policy on the member states through the use of Article 90 directives was at least as important.’

3.4.2

Phase II: Institutional Layering

The subsequent legislative efforts intended to harden the displaced institution through institutional layering. The balance between procedures of compromise in the course of the ONP Directive and authority under Article 90(3) in the course of the Services Directive illustrates the change of procedures in rule-making within a new institutional setting: ‘In fact, EU policymaking was a rather complex process in which governmental and nongovernmental actors of the different member states were involved at all stages. In addition, the strong commitment of such supranational European institutions as the European Commission and the European Court of Justice in this process indicates that the overall result should not be explained by intergovernmental bargaining alone. It clearly was overdetermined by the self-interest of the European Union as a relatively autonomous actor in this policy process.’ (Schneider 2001: 64)

Although ‘[a]t the macro level, […] the European Union moved from a six, nine, ten, or twelve–veto player system (depending on the number of countries that participated under the Luxembourg Compromise) to a three or two–collective veto player legislative system (from 1987 on)’ (Tsebelis 2002: 281), the network that

3.4 Interim Conclusion: The Advent of EU Communications Policy

121

supported the delegation of power to the EC level should not to be neglected. Aside the EC veto-players arguing over liberalization, interest groups accompanied the process of rule-making and thus framed the institution: ‘While there were specific forces emanating from the EU level to adjust domestic institutions to EU requirements, the EU itself did not create these pressures but played an important intervening or intermediary role in transmitting, channeling and amplifying adaption constraints at the global level into its regional context’ (Schneider 2001: 72). Sandholtz states that ‘increasing levels of cross-border transactions and communications by societal actors will increase the perceived need for supranational policymaking’ (Sandholtz 1998: 136). The behavior of national firms emphasizes this logic: while national (state) monopolies refrained from promoting EC level policies, national private firms and potential competitors (i.a. equipment manufacturers, new service providers and alternative network providers) supported liberalization. They became ‘transactors’ promoting European integration. The position of the particular interest groups illustrates the general power shift intensified through the legislative layering along the entire policy-making process (Baskoy 2008: 92). Whereas supranational organizations favoring Europeanization, such as the Communications Committee and ETSI, gradually gained power through the implementation of the different legislations, intergovernmental organizations that intended to maintain the existing power structures (CEPT, SOGT) lost their power position in the new institutional arrangement. Moreover, the establishment of NRAs empowered new actors on national level reinforcing the new order. To establish NRAs in the Europeanized and liberalized telecommunications sector accounted for two intentions: The implementation of EC rules on national level and the delegation of monitoring competences with regards to the pivotal rule of competition to national authorities. The continued processes of institutional displacement and layering had thus been cemented by the establishment of and allegiance to formal and organizational rules, also establishing and empowering new actors obliged to safeguard this institutional arrangement—namely NRAs and ETSI. The mixture of Community level supremacy granting national competence, although in the scope of the EC supremacy, accounts for a sophisticated strategy safeguarding allegiance without enforcing it through remote third parties: ‘the EU system relies on the implementation of regulatory obligations through national agencies. The advantage of this approach is that national authorities are closer to the regulated firms than European agencies would be. This may contribute to improve the quality of regulation.’ (Geradin 2006: 15)

122

3

EU communications policy in the era of telecommunications

For TAs, the establishment of NRAs meant to safeguard their power position and to become national level actors in the new institutional context. As a setback for transnational ambitions, the establishment of an EC level regulatory authority envisaged in the 1987 Green Paper failed as ‘national governments hoped to maintain control over the regulation of cross-border telecommunications’ (Goodman 2006: 138). Also, EC telecommunications re-regulation had unwrapped the technology behind telecommunications. First, on the infrastructure layer terminal equipment had been liberalized from state monopolies by the Terminal Equipment Directive. Second, the Services Directive in line with the Open Network Provision Directive opened the provision of telecommunications services—other than voice telephony—as well as the monopolists’ networks for services provision. ONP thus became a pivotal rule to establish and safeguard competition in the communications market and a core principle to be applied irrespective the subject to be regulated. Third, the 1993 review of the situation allowed the provision of voice line services on alternative infrastructure bundling services to networks again: ‘Entrants had the alternative option of primarily using the infrastructure networks of incumbents, thus transforming platform competition into a service competition. […] While it limited the vigor of intra-platform competition, inter-platform competition is often alive and well. Here, the different platform is either an incumbent from a related network industry, such as cable television, or it operates in an environment where there are no dominant incumbents such as in mobile wireless.’ (Noam 2010: 6)

The gradual transformation of market segments defined by technological segments broadened the institutional scope, within which new rules and procedures applied, new actors engaged, new power structures emerged and new paths in the institutional context established. The exclusive provision of telecommunications services and the bundling of the local loop in network provision appeared as the last bastion maintaining incumbents’ old power structures. Exclusiveness had been gradually curtailed until complete competition. With regards to the institutional transformation in the EC telecommunications sector the terminal equipment directive marked the advent of the institution of EC telecommunications policy. In an almost clandestine endeavor, the Commission gradually established the foundations to the subsequent developments irrespective the still powerful national monopolist markets. The 1982 decision together with the ECJ ruling started a process of institutional displacement through invasion and re-interpretation, seizing the changes in the European and global institutional context. The narrative of lagging behind global economies and the promise of economic growth through liberalization employed by the 1985 White Paper as well as the activation of ‘an

3.4 Interim Conclusion: The Advent of EU Communications Policy

123

almost forgotten section of the European Treaty’ (Streeck/Thelen 2005: 22)— namely the establishment of a common market—created an institutional setting within which the Commission was able to act. National governments faced both economic pressures from the global context on their national telecommunications markets and from the EC objective to establish a common market. As Sandholtz states: ‘The movement toward supranational politics here can hardly be exaggerated. The Commission and the Court essentially created a Commission power to abolish state monopolies. These normative and institutional changes shaped subsequent politics’ (Sandholtz 1998: 156). The details from the Terminal Equipment Directive, the Services Directive and the ONP Directive should illustrate the established ramification between networks, terminal equipment and different types of services in the distinguished European telecommunications markets and EC telecommunications policy in general. The different elements of telecommunications (networks, services and equipment) were entangled in a way that both privileged incumbents and impeded change. Opening the terminal equipment market (both nationally and trans-nationally) and the telecommunications networks and data services market to competition was a crucial step toward liberalized markets. It delegated a significant share of policy-making power to the EC level through institutional layering in the overall institutional arrangement—after initial displacement of the telecommunications policy institution to the EC level. The Commission performed as a tough negotiator empowered by the prior ECJ ruling in 1985, confirmed by further ECJ rulings that recognized the Commission’s competence set out in Article 90(3) also in the telecommunications sector: ‘The strategy of the Commission has been to change incrementally the existing two directives to include further areas. Thus, the liberalization of satellite services and equipment was included in October 1994; the liberalization of cable TV networks in October 1995; and the liberalization of other alternative networks followed in early 1996 as well as the full liberalization of services and networks from 1998 onwards.’ (Schmidt 1998: 173)

Yet, aside external economic pressures from the US and Japan, internal market pressures tended to be drivers for regulatory change in the member states. Large domestic corporate users as well as European equipment vendors claimed liberalization in order to achieve better prices and quality and to establish markets of scale. Private actors started to lobby for the Europeanization of telecommunications markets (Baskoy 2008: 95; Bauer 2014: 7; Humpreys 1990: 201; Dyson/Humphreys 1990: 4). Whereas the promise of a pan-European telecommunications market was tempting, fears from international competition remained

124

3

EU communications policy in the era of telecommunications

strong. Not only did US firms, which had been liberalized years before, demanded market access in Europe (Thatcher 2004: 289); open, unprotected markets could attract non-European firms as well as enable telecommunications administrations to buy non-European equipment. The latter significantly accounted for a changed rationale on liberalized markets: no longer did (long-term) national interest determine market behavior but did (short-term) commercial effectiveness (Baskoy 2008: 96; Gluntz 1989: 371). The process of EC policy formulation and implementation illustrates a twofold process. On the one hand, the Commission threatened to oust member states from the process of policy formulation by claiming the eventually habitualized application of Article 90(3). On the other hand, it sought joint policy-making as had been the case when formulating the ONP Directive. Thus, policy-making until 1990 was coined by a vague equilibrium between cooperation and dominance. Whereas cooperation occurred under a sophisticated regime dominated by national incumbents, which represented equilibrated power structures resilient to change, the Commission maintained a regime of potential dominance empowered by Article 90(3) and the ECJ’s binding interpretation, which supported the Commission’s objectives. The Commission—as an entrepreneur of change—maintained these power structure in the beginning as it needed member states’ allegiance. Moreover, the Commission itself was entangled in the existing power structures and was not able or willing to overcome them. It was only in 1990 that the Commission together with the member states and independent NRAs in the UK and partially in Germany and France initiated change and disempowered former power structure through external epistemic communities formulating the final ONP Directive. The latter significantly changed the power structure (Goodman 2007: 92) towards issue networks (Marsh/Rhodes 1992) or advocacy coalitions (Sabatier 1987). The case of the ONP Directive illustrates that actors were resilient to change due to institutionalized power structure, while changes in the institutional context incentivized actors to foster gradual change. The Commission acted as a strategic actor, which seized the institutional context and the changes therein, established epistemic communities, but at the same time depended on the corridor of potential action provided by the existing institution of (national) telecommunications policy. Allegiance to the new institutional setting was not a given. The ECJ as a resourceful actor in the means of interpretation in the institutional context of the European Community was able to enforce allegiance among conflicting parties. In the course of EC telecommunications liberalization, the ECJ has followed the (rediscovered) Treaty objective to establish a common market and thereby has

3.4 Interim Conclusion: The Advent of EU Communications Policy

125

agreed to the Commission’s interpretation of its remits. Member states’ opposition to the Commission’s initiatives seems prima facie paradox or naïve, given the fact that it was the member states that codified this objective in the first place. Two findings from institutionalist thinking is therefore necessary to adopt: First, when establishing institutions, actors are not able to capture the entire consequences or meaning of their action in the future. Second, other actors inhabiting the institutional setting might gain power over the interpretation of objectives to be achieved through the institution. In the course of changing these objectives, actors can create allegiance among other (resourceful) actors and thereby cause institutional displacement if the institutional context is advantageous. Lastly, SEA introduced a cooperation procedure as a new policy mode that empowered the EP to not only issue opinions but to claim a second reading in the legislative procedure, particularly on issues related to the single market (McCormick 2011: 91). The implementation of the co-decision procedure under the Treaty of Maastricht ‘grants the EP equal legislative rights next to the Council’ (Häge/Kaeding 2007: 342). However, the new procedure implemented an ultimate legislative prerogative for the Council, which could impose a ‘take-it-or-leave-it’ decision on the EP after conciliation had failed (Häge/Kaeding 2007: 344; Stie 2013: 65). While the new procedure prolonged the legislative process due to three readings each by the EP and the Council, the affected parties EP, Council and Commission ‘started to engage in informal negotiations before and between their formal readings’ (Häge/Kaeding 2007: 243) in order to facilitate agreements. As Häge and Keading outline this process benefits output legitimacy on the costs of input legitimacy65 , tending to endanger the latter’s role in the EU decision making process (Brandsma 2015: 301). The Council adapted to the new role of being a co-legislator to the EP, which would veto any attempt by the Council to circumvent this new situation as during the ONP legislation in 1994 (Roederer/Greenwood 2015: 1149). In summary, changes in the overall EU legislative arrangement provided new actors with power resources and at the same time made incumbent power actors to restructure their behavior in order to cope with the new environment. Two overall shifts can be identified in the institutional layering: horizontally, liberalization of the telecommunications sector broke existing institutional structures and vertically, the measures taken promoted Europeanization of telecommunications policy. Most important, the application of EU competition law together with the institutional context of liberalization and the economic challenges, its narration, interpretation, and adaptation, played a crucial role in these 65 For the period between 1999 and 2004, Häge and Kaeding show a significant decrease of conciliation procedures and an increase in early stage legislative decisions (2007: 345).

126

3

EU communications policy in the era of telecommunications

processes. The Commission acted as an institutional entrepreneur towards these two shifts. In the beginning, it was neither the industry nor customers or national governments who had claimed liberalization in the telecommunications market but the initiative of the Commission when imposing a decision on BT in 1982. As Streeck and Thelen testify for processes of liberalization in general, liberalization is a process of ‘disorganization’ (Offe 1985) of the institutions of organized capitalism. Thus, ‘liberalization always comes with, and is enveloped in, all sorts of countermeasures taken by “society”–or by specific societies in line with their respective traditions–against the destructive effects of free, “self-regulating” markets’ (Streeck/Thelen 2005: 4). That is why ‘it will always be balanced by newly invented institutions and methods of social regulation’ (ibid.). In sum, the interplay between institutional context, existing institutions, actors conducting institutional entrepreneurship, and rules being re-interpreted, procedures being implemented, norms being applied, and narratives being maintained, by displacement and layering has liberalized the European telecommunications sector. It created a new institution: ‘in only one decade telecommunications policy at the EU level [!] had developed from a non-issue to a central area of EC competition and industrial policy’ (Schneider 2001: 64). The scheme below illustrates the first phase of institutionalization and—with reference to Hix/Høyland (2011: 10)—the extent of supranational decisionmaking and the degree of policy integration. The scheme includes pivotal actors, important processes and procedures in terms of frameworks accompanied by respective legislations, pivotal rules that shape the overall rule-making (right column), and the institutional context (top row). The scheme will develop further throughout this study after each interim conclusion (Figure 3.2).

Figure 3.2 The institutionalization process of EU communications policy – Phase 1 (author’s figure; coordinate plane refers to Hix/Høyland (2011:10))

3.4 Interim Conclusion: The Advent of EU Communications Policy 127

4

EU Communications Policy in the Era of Electronic Communications

4.1

Technological Convergence Promoting EU Communications Policy

In effect, liberalization efforts had transformed the European telecommunications sectors in all member states. As Schneider concluded after comparing Germany, France and Italy, all telecommunications types (terminals, networks, data communications, leased lines, mobile communication) had become subject to competition, legal structures and capital had been—at least partly—privatized, and independent regulatory authorities had been established. Telecommunications policy in the EU had eventually been characterized by liberalization, privatization and re-regulation (Schneider 2001: 70–1). Whether and to what extent this resulted in policy coherence became part of an academic debate in the late 1990s (Vogel 1996). Taking into account the directive as the legislative instrument of choice in the telecommunications sector on Community level, variation was likely and in fact calculated. In order to achieve allegiance to the framework, the Commission put effort in monitoring and evaluating national implementation processes. Aside regulatory efforts, Schneider (2001: 72) argues that coherence in telecommunications markets also resulted from ‘technological necessity and economic efficiency’: ‘In this explanation scheme, the similar results in the different institutional reform processes are essentially related to economic and technological globalization, in particular to the recent revolution in communication and information technology’ (Schneider 2001: 72).

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_4

129

130

4

EU Communications Policy in the Era of Electronic Communications

After liberalization of former exclusive rights regimes, also cable providers, back then limited to the transmission of TV signals, urged into telecommunications. The strong diversity of TV transmission technologies (satellite, terrestrial, cable, etc.) accounted for both a lower share of cable technology with regards to households and a higher natural competition with regards to technology. To allow cable provider to provide telecommunications services opened inter-sectoral competition in the telecommunications market as it provided an alternative infrastructure that would eventually compete with the incumbent copper line telecommunications networks (and services) provider. Incumbents hence faced intra-sectoral competition on the service level through the ONP Directive and inter-sectoral competition through competing network technologies entering the market1 : ‘the development and implementation of the 1998 package helped to provoke further, related acts of integration in the telecommunications, information technology and broadcasting sectors’ (Goodman 2006: 223).

4.1.1

The Lisbon Strategy Introducing OMC

After a meeting in Lisbon on 23 and 24 March 2000, the European Council adopted the Lisbon Strategy to ‘finally complete the single market and to create “the most competitive and dynamic knowledge-based economy on the planet within ten years”’ (McCormick 2011: 162). Against the backdrop of globalization and the growing importance of knowledge-based resources, the strategy recommended massive changes in national economic policies. The strategy thus forecasted member states’ increased ambitions in the telecommunications sector. The evolution of the internet and associated economic and societal potentials shifted the political agenda towards more harmonization and liberalization in the communications sector.2 However, the Lisbon strategy neither foresaw any EU legislation or expenditure nor was it meant as a supranational initiative. It rather provided the coordination of commonly agreed objectives and indicators under the newly introduced open method of coordination (OMC).3 Whereas 1 The

96/19 regime did not entirely open competition to alternative infrastructure, only in so far as it provides own services. 2 The Communication inter alia emphasizes weaknesses in the field of services ‘particularly in the areas of telecommunications and the Internet’. 3 OMC is ‘an intergovernmental method of “soft coordination” by which Member States are evaluated by one another, with the Commission’s role being one of surveillance. The origins of the OMC can be found in the European Employment Strategy (now an integral element of the Lisbon strategy), where it provided a new framework for cooperation between Member

4.1 Technological Convergence Promoting EU Communications Policy

131

the liberalization of the European telecommunications markets and the respective establishment of the telecommunications regulatory framework were shaped by hard law, policy-making in the light of the successive EU regulatory framework for electronic communications based on soft-law following OMC: ‘the use of soft governance measures, such as benchmarking, peer review and “naming and shaming”, have been posited as possible alternative—but also complementary—solutions’ (Simpson 2013: 901). Although national implementation was voluntary, the Commission monitored and published evaluations of national progress. Encouragement, peer-pressure, and publication of score boards became the instruments of choice (Michalis 2007: 194). The implementation of OMC projected in the Lisbon Strategy balanced tensions between national decision-making and supranational decision-making, which required national implementation: ‘The use of soft governance measures by the EU in this aspect of telecommunications policy is also indicative of the Commission’s search for alternative policy measures to taking Member States to the European Court of Justice to secure compulsory compliance with legislation. However, soft governance is a complementary, rather than an alternative, policy tool to formal legal sanction.’ (Simpson 2013: 908)

OMC integrated subsidiarity in EU policy-making as it was meant to delegate rule-making to the member states and foster public debates about the policies in question. Non-binding guidelines for coordinated activities provided by the Commission and the Council should enhance competition among member states in order to fulfill common objectives. It thereby accounted for decreased transaction costs and better outcome. Notwithstanding these ambitions, the effectiveness of OMC depended on the policies being addressed (Benz 2007).

4.1.2

The 1999 Framework Communication

As Baskoy puts it, ‘[t]he final step in the field of liberalization was the opening up of local access networks to market competition as one of the building blocks of a new framework’ (Baskoy 2008: 110). In 1997, the Commission published the Green Paper on the convergence of the telecommunications, media States by directing national policies towards common objectives in areas which fall within the competence of the Member States, such as employment, social protection, social inclusion, education, youth and training. While the OMC can be used as a source of peer pressure and a forum for sharing good practice, evidence suggests that in fact most Member States have used OMCs as a reporting device rather than one of policy development’ (SEC(2010) 114 final: 21).

132

4

EU Communications Policy in the Era of Electronic Communications

and information technology sector, and the implications for regulation. Towards an Information Society Approach (COM(97) 623), which also foresaw a public consultation. The Green Paper addressed the transformation of the European telecommunications markets from monopoly to liberalized markets at that stage and emphasized technological developments demanding a framework exceeding mere telecommunications. Among others, it already forecasted open access to networks and end-users as well as regulatory harmonization on a legal definition of services to be carried over trans-European network infrastructure. The results from the consultation, held throughout 1998 and 1999 in two stages, concluded that ‘the convergence of technological platforms and network infrastructures was already a reality, and that similar regulatory conditions should therefore apply to all such infrastructures, irrespective of the types of services carried over them’ (IP/99/164). In spite of that, sector-specific rules were seen as a necessary instrument until full competition was established. One of the three key issues emphasized by the Commission after the consultation was ‘the access to networks and digital gateways’ (IP/98/733). These results in fact were a milestone in the transformation of the regulatory framework for telecommunications into a broader, more horizontal framework for electronic communications that reflects technological developments and safeguards ‘a balanced approach to regulation’ (IP/98/733). In 1999, the Commission launched a comprehensive review of the regulation implementing liberalization on the telecommunications market (COM(1999) 539), which also proposes a regulatory framework for ‘communications infrastructure and associated services’. The Communication testified technological convergence in the field of accessing (tele)communications infrastructure and services in the light of the 1998 completion of liberalization: ‘The existing legislative framework was primarily designed to manage the transition to competition and was therefore focused on the creation of a competitive market and the rights of new entrants. The new policy framework will seek to reinforce competition in all market segments, particularly at local level.’ (COM(1999) 539: v)

For the regulatory regime to be implemented, the Communication foresaw basic principles including technological neutrality, standardization enabling interoperability, a greater reliance on the general competition rules, interoperability for communications services and equipment and a legal framework for NRAs, i.a. covering the establishment of a new Communications Committee and a High Level Communications Group. The latter again raised concerns among member states and from the IRG, understanding the High Level Group as a regulatory competitor. Both issued that such a body would be diffuse and thus ineffective.

4.2 The 2002 Framework: Hardening the Institutional Setting

133

Whereas both feared potential decline of influence, IRG warned that member states, becoming part of the High Level Group, could exert too much influence on regulation. The Commission eventually dropped its proposal. In effect, the European Regulators’ Group (ERG) was established following the example of IRG (Michalis 2007: 199). Despite this compromise, the requirements set out for an EU level regulatory body that would comprise NRAs were subject to debate: ‘Membership in the ERG and independence of national regulatory authorities became two very contentious issues’ (Michalis 2007: 207). It was only in 2004 when the Commission achieved compromise and dissolved the issue. The ERG eventually served as a platform for NRAs to exchange positions and inform each other as well as the Commission (2004/641/EC). The Lisbon strategy eventually requested legislative action implementing the results from the 1999 Communications Review and completing full integration and liberalization of European telecommunications markets.4 With reference to the promotion of the information society, the strategy particularly claimed overall access to ‘inexpensive, world-class communications infrastructure’, competition and unbundling in the local loop, radio spectrum frequency for mobile communication and a ‘broadband’ universal service. The eEurope Action Plan should outline specific objectives (Lisbon 2000). As part of the window of opportunity provided by the Council’s mandate the Commission held a substantial consultation process and relied on an issue network of more than 120 industry representatives (Goodman 2006: 226).

4.2

The 2002 Framework: Hardening the Institutional Setting

Other than the telecommunications regulatory framework, which did not approach technological convergence as such (Larouche 1998: 221), the regulatory framework for electronic communications envisaged technological advances in converging information infrastructure. Technological neutrality became the necessary instrument to legally achieve these advances. The new regulatory framework

4 ‘the

Council and the European Parliament to conclude as early as possible in 2001 work on the legislative proposals announced by the Commission following its 1999 review of the telecoms regulatory framework; the Member States and, where appropriate, the Community to ensure that the frequency requirements for future mobile communications systems are met in a timely and efficient manner. Fully integrated and liberalised telecommunications markets should be completed by the end of 2001’.

134

4

EU Communications Policy in the Era of Electronic Communications

should regulate ‘markets, not technologies’ (Michalis 2007: 201). While the ‘ultimate potential competitors for the PTTs were actors who could build and operate telecommunications networks’ (Sandholtz 1998: 143), these actors now should gain complete access to the entire supply chain. Resulting from the communications review, the Commission, the Council and the European Parliament fostered unbundling the copper local loop, for which until then incumbents enjoyed exclusive rights, to promote competition and stimulate technological innovation in the last mile. In July 2000, the European Commission drafted Regulation (EC) No 2887/2000 on unbundled access to the local loop responding to conclusions of European Council meetings in Lisbon and Feira earlier in 2000. The Council, which claimed that the ‘lack of competition in this part of the market is considered a significant obstacle to the widespread provision of low-cost internet access’ (Council 2000), adopted the regulation in December 2000. An open local loop would then enable the competitive provision of broadband internet services to endusers (Michalis 2007: 194). To choose a regulation as the legislative instrument was a novelty in EU telecommunications policy as it left little space for national governments to adjust. The Commission requested NRAs to adopt appropriate measures in order to implement unbundling in the local loop. Whereas the local loop for copper technology should be opened to full competition, fiber technology was explicitly excepted from the scope of the regulation. Both the Commission5 and the Council intended to safeguard investments in fiber local loops through incumbents. Incumbents thus should deploy fiber optics without facing the threat to eventually lease these lines to competitors (Baskoy 2008: 111). While the legal separation between copper and fiber intended to safeguard investments in fiber roll-out, especially in the last mile, it also restored local loop monopolies in the access market (Figure 4.1). In 2000, the Commission proposed Directive COM(2000) 393, which should establish the common regulatory framework for electronic communications networks and services as has been suggested by the 1999 review. Just as the communication had announced in 1999, the framework included the adoption of the Framework Directive accompanied by four related directives that should complement the framework: (1) on authorizations and licensing, (2) on access and interconnection, (3) on universal services and (4) on privacy and data protection. These directives addressed discrimination and national protectionism, which should be eliminated from the communications market. As had been issued by the 1999 Communication Review (COM(1999) 539), five principles underlay the

5 cf.

Commission Recommendation 2000/417/EC.

4.2 The 2002 Framework: Hardening the Institutional Setting

135

Figure 4.1 Telecommunications networks and services incl. local loop unbundling, 2000 (author’s figure)

foreseen legislations: transparency, adaption to market developments, legal certainty, technological neutrality and subsidiarity. Moreover, the framework should be structured by Community-wide sector-specific legislation as well as Community’s competition rules. De Streel (2008: 725) even emphasizes that the 2002 regulatory framework eventually targeted six ‘good governance principles’: transparency, flexibility, European harmonization, proportionality, technological neutrality, and legal certainty.

4.2.1

The Framework Directive 2002/21/EC

The Framework Directive laid down the regulatory structure of the new legal environment in the field of electronic communications that should establish a single regulatory framework covering all communications networks and services. The framework explicitly omitted digital content transmitted over electronic networks: ‘It is necessary to separate the regulation of transmission from the regulation of content’ (2002/21/EC: (5)). The regulatory framework for electronic communication rather addressed the physical infrastructure as well as the services enabling

136

4

EU Communications Policy in the Era of Electronic Communications

the basic transmission of data for the information society: ‘The same undertaking, for example an Internet service provider, can offer both an electronic communications service, such as access to the Internet, and services not covered under this Directive, such as the provision of web-based content’ (2002/21/EC: (10)). The width of infrastructure being addressed by the framework accounted for technological convergence—and technological neutrality—as for the first time it included all infrastructures that were capable of transmitting signals: ‘electronic communications network means transmission systems and, where applicable, switching or routing equipment and other resources which permit the conveyance of signals by wire, by radio, by optical or by other electromagnetic means, including satellite networks, fixed (circuit- and packet-switched, including Internet) and mobile terrestrial networks, electricity cable systems, to the extent that they are used for the purpose of transmitting signals, networks used for radio and television broadcasting, and cable television networks, irrespective of the type of information conveyed’ (2002/21/EC: Article 2).

The Framework Directive emphasized once more the importance of the separation of regulatory and operational functions in telecommunications and defined independence as a matter of staffing, expertise and financial means (2002/21/EC: (11)). NRAs should take a key position as regulatory bodies independent from telecommunication operators. They should impose regulatory guidance under the provision of national and EU law and support the implementation of competition—particularly with regards to undertakings with significant market power (SMP)6 —and harmonization in the telecommunications markets. Therefore, NRAs were equipped with the competence to impose decisions affecting the provision and operation of telecommunications aka electronic communications services and networks. At the same time, they were obliged to consult ‘all interested parties on proposed decision’ and to ‘notify certain draft decisions to the Commission’ and other NRAs (2002/21/EC: (15)). NRAs’ decisions should safeguard technological neutrality,7 non-discrimination and competition as well as the efficient usage and provision of infrastructure in line with EU objectives. The Directive also announced to establish a common European regulators group as an instrument to Community-wide coordinate NRAs. The Framework Directive should define the relations within the regulatory context between NRAs, 6 i.e.

primarily incumbents that could rely on a sophisticated network and services infrastructure. 7 ‘that is to say that it neither imposes nor discriminates in favour of the use of a particular type of technology’.

4.2 The 2002 Framework: Hardening the Institutional Setting

137

member states, EU organizations and undertakings providing electronic communications. In order to safeguard consistent application of the regulatory framework the Commission should publish guidelines on market analysis and the assessment of significant market power under the scope of OMC procedures. In order to rectify NRAs decisions, the Commission attempted to codify a veto right on the decisions taken by NRAs, which caused a major conflict between the Commission—supported by the Parliament—and the member states represented in the Council: ‘The main issue dividing Council and Parliament during negotiations has been the so-called ‘transparency mechanism’ in Article 6. The Commission proposed that the Commission should have powers to require a national regulatory authority to withdraw draft measures in certain areas where those measures were contrary to Community law and the objectives set out in Article 7. Parliament strongly supported the Commission proposal in its first reading, sharing the Commission’s analysis that there was a need for a balancing harmonisation power, given the increased discretion delegated to national authorities under the new framework. The Council rejected this binding intervention power in its common position.’ (2000/184 (COD))

Whereas Article 7 of the Framework Directive outlined the measures to be taken in order to consolidate the internal market for electronic communications and emphasized the relevance of the National Regulatory Authorities (NRAs), Article 7(3) and 7(4) intended to safeguard the Commission’s veto power against decisions taken by the NRAs on definitions of telecommunications markets and significant market power. The Commission opted for a twofold strategy, namely empowering NRAs to gain allegiance during the drafting process and at the same time empowering itself through establishing substantial veto powers (Goodman 2006: 228). Whereas under the 1998 framework the Commission explicitly empowered NRAs in order to liberalize national markets; ‘[u]nder the current regime the pendulum has swung back somewhat, evident in the Commission’s powers under Art 7 of the Framework Directive’ (de Visser 2009: 482). Article 7 eventually maintained a Commission veto power accompanied by enhanced justification requirements (Table 4.1).

138

4

EU Communications Policy in the Era of Electronic Communications

Table 4.1 Directive 2002/21/EC, Article 7 Directive 2002/21/EC Article 7 2. National regulatory authorities shall contribute to the development of the internal market by cooperating with each other and with the Commission in a transparent manner to ensure the consistent application, in all Member States, of the provisions of this Directive and the Specific Directives. To this end, they shall, in particular, seek to agree on the types of instruments and remedies best suited to address particular types of situations in the market place.

4.2.2

The Access Directive 2002/19/EC

The Access Directive refers to directives on interconnection in telecommunications,8 on the application of ONP to voice telephony9 and to leased lines10 as well as to Commission Regulation on unbundled access to the local loop.11 It regulated the relation between telecommunications service providers, no matter whether they operate networks or seek interconnection/access to networks (Baskoy 2008: 111), and covers ‘networks that are used for the provision of publicly available electronic communications services’ (2002/19/EC: (1)). In order to complete the single market for telecommunications, the directive should safeguard non-discrimination in the access market and abandon restrictions preventing undertakings from freely negotiating access and interconnection arrangements. The interconnection regime complemented the SMP regime and should safeguard end-to-end connectivity: ‘As services (telephony, online content, etc.), may be provided to the end-user by different suppliers (telephony, online content, etc.), the idea is that all suppliers can access the network directly or ask third parties who access the network to deliver the services’ (Leal 2014: 510). As de Streel (2008: 723) argues, ‘[t]his regime has not been used very much to date because most interconnection issues have been dealt with under the SMP regime with the fixed and mobile termination markets.’ Interconnection necessarily extended competition on the networks and services market to the free choice of consumers (Table 4.2). Through interconnection rules consumers did not have to contract multiple telecommunications service providers on the market in order to connect to network termination points contracted to other providers. Consumers 8 Directive

97/33/EC. 98/10/EC. 10 Directive 92/44/EEC. 11 Regulation (EC) No. 2887/2000 on unbundled access to the local loop. 9 Directive

4.2 The 2002 Framework: Hardening the Institutional Setting

139

only needed one access line to one network operator aka Telecommunications service provider whilst being able to access any other network or service (Brown 2014: 361–2). The Directive furthermore emphasized the role of NRAs to intervene where there is no free negotiation possible due to significant market power of a dominant market player owning significant access networks to end-users. It thus established the rules for interaction between market participants and again delegated authority to the NRAs.

Table 4.2 Directive 2002/19/EC, Article 2 Directive 2002/19/EC Article 2 (a) ‘“access” means the making available of facilities and/or services, to another undertaking, under defined conditions, on either an exclusive or non-exclusive basis, for the purpose of providing electronic communications services. It covers inter alia: access to network elements and associated facilities, which may involve the connection of equipment, by fixed or non-fixed means (in particular this includes access to the local loop and to facilities and services necessary to provide services over the local loop), access to physical infrastructure including buildings, ducts and masts; access to relevant software systems including operational support systems, access to number translation or systems offering equivalent functionality, access to fixed and mobile networks, in particular for roaming, access to conditional access systems for digital television services; access to virtual network services’. (b) ‘“interconnection” means the physical and logical linking of public communications networks used by the same or a different undertaking in order to allow the users of one undertaking to communicate with users of the same or another undertaking, or to access services provided by another undertaking. Services may be provided by the parties involved or other parties who have access to the network. Interconnection is a specific type of access implemented between public network operators’.

4.2.3

The USO Directive 2002/22/EC

Directive 2002/22/EC on universal service and users’ rights intended to safeguard the provision of a ‘minimum set of services of specified quality to which all end-users have access’ (2002/22/EC: Art 1(2)). It referred to Article 95 of the Treaties and amended Directive 97/51/EC with regards to universal services. As ‘[u]niversal services provide politically volitional telco services at a socially desirable price’ (Knieps 2013: 4), regulatory measures had to bridge shortcomings in the politically foreseen provision of specific services. These provision gaps

140

4

EU Communications Policy in the Era of Electronic Communications

often resulted from profitability gaps, which is a particular problem in liberalized markets. In liberalized markets, public compensation in order to reimburse profitability gaps might distort competition. Although the directive required competitively neutral compensation,12 it did not resolve the overall problem, of which member states had warned during early stages of liberalization. The directive rather delegated the problem of compensation to NRAs. The services that should eventually be available to end-users in the liberalized market for telecommunications and electronic communications were defined in Article 4(2) of the directive: the ‘connection provided shall be capable of allowing end-users to make and receive local, national and international telephone calls, facsimile communications and data communications, at data rates that are sufficient to permit functional Internet access, taking into account prevailing technologies used by the majority of subscribers and technological feasibility.’ The draft Directive COM(2000) 392 required ‘data rates that are sufficient to permit Internet access’. The definition of ‘functional’ Internet access resulted from a compromise reached during the negotiation process, in which the EP proposed an ‘effective’ Internet access and eventually agreed with the Commission that member states should not introduce data rates ‘in excess of those available to the general public’ (SEC/2001/1407). In sum, the requirements remained vague— even unambitious—in general, had been limited to a single narrowband network connection as they specifically did not cover ISDN and thus did not cope with the otherwise envisaged information society services. Furthermore, NRAs should define the network termination point of the network and thereby determine whether terminal equipment was part of the network and under control of the network provider or whether terminal equipment was not part of the network and thus subject to a competitive market of users’ choice. The debate on compulsory routers again appeared in Germany in 2013.

12 The Directive states that ‘compensating undertakings designated to provide such services in such circumstances need not result in any distortion of competition, provided that designated undertakings are compensated for the specific net cost involved and provided that the net cost burden is recovered in a competitively neutral way’ (2002/22/EC: (4)).

4.2 The 2002 Framework: Hardening the Institutional Setting

4.2.4

141

The Authorisation Directive 2002/20/EC

The Authorisation Directive should guarantee market access for any undertaking aiming at providing telecommunications networks and services ‘upon notification’ (2002/20/EC: (3)), i.e. without particular permission through an authority.13 The directive should contribute to the ‘development of new electronic communications services and pan-European communications networks and services, and to allow service providers and consumers to benefit from the economies of scale of the single market’ (2002/20/EC: (7)). It thus intended to enhance competitiveness in the European Single Market for electronic communications, cope with technological advances and nonetheless incentivize new market entrants to access the market. Moreover, it emphasized the principle of technological neutrality: ‘Convergence between different electronic communications networks and services and their technologies requires the establishment of an authorisation system covering all comparable services in a similar way regardless of the technologies used’ (2002/20/EC: (2)). To enable cross-border undertakings, the directive should safeguard non-discrimination for the provision of electronic communications networks and services from other member states and through all technologies (including radio spectrum as it is used for transmitting electronic communication). The provision of electronic communication networks and services should be a market-driven process that should not be distorted by (over)regulation but be enabled by general authorization mechanisms (2002/20/EC: (7), (8) and (10) as refers to access negotiations).

4.2.5

The Question of Significant Market Power

In April 2002, the regulatory framework for electronic communications was formally adopted. Although competition had been successfully implemented in the European telecommunications sector, the issue of significant market power (SMP) remained pivotal (de Streel 2008: 723). The definition of relevant markets in order to guide regulatory SMP decisions provoked an extensive conflict about the procedures to be followed in the telecommunications sector in the first half of the 2000s. Competition in the local loop was dysfunctional even two years after the adoption of Regulation (EC) No 2887/2000, which was implemented in order to accelerate competition in the local loop. Although the regulation requested 13 Notwithstanding general market access, Directives 2002/19/EC and 2002/21/EC may apply on the undertaking notifying market access.

142

4

EU Communications Policy in the Era of Electronic Communications

either full unbundling or shared access, telecommunications incumbents maintained significant market power across the EU-wide copper market. They even maintained their actual monopoly status in markets where no alternative infrastructure, such as cable, provided access to telecommunications services. Whether incumbents were in a position of SMP was a question of market definition. While incumbents opted for a broad market definition covering the entire access market and all technologies, which would have concluded successful competition in the access market, market entrants claimed a distinct market for bitstream access corresponding to the provision of DSL over the incumbents copper technology.14 Two groups lobbied the decision on market definition in the EU: On the one hand, the European Telecommunications Network Operator’s (ETNO) together with the manufacturers, which feared a loss in market share in the case of increasing competitive pressure on their incumbent customers. This group employed arguments that new markets must not be subject to regulation and that strong regulation would impede investments and innovation.15 On the other hand, market entrants organized under the European Competitive Telecommunications Association (ECTA) together with IRG and the corporate users’ association (INTUG) claimed the definition of a bitstream market as a market entity to be regulated under EU legislation. The Commission’s recommendation eventually identified two markets: wholesale unbundled access and wholesale broadband market (Michalis 2007: 203–5). The new regulatory objective was the creation of competition in a broadened market of converging technologies. The framework eventually combined hard-law mechanisms—in form of five directives,16 one decision17 and the above-mentioned regulation18 —with soft-law measures including guidelines and recommendations19 following OMC. It thus accounted for a ‘key contributor to achieving the Lisbon goal of competitiveness’ (Michalis 2007: 209). The liberalization Directive (2002/77/EC) summarized the directives opening competition to

14 Bitstream access means the handover of a services provider’s traffic to the network of a (mostly incumbent) network operator in order to reach the formers customers in a situation where there is no physical connection to this customer. 15 These arguments literally have formed a narrative that claims validity until today. 16 2002/21/EC, 2002/19/EC, 2002/20/EC, 2002/22/EC, 2002/58/EC. 17 676/2002/EC. 18 Regulation (EC) No 2887/2000. 19 i.a. on the definition of product and services markets and the definition of significant market power.

4.3 The 2006 Framework Review

143

networks and services amending the 1990 Services Directive implemented under the EC regulatory framework for telecommunications20 (Goodman 2006: 234).

4.2.6

A New Start for the Lisbon Strategy

The 2004 Report Facing the Challenge issued by a High Level Group on the Lisbon Strategy (European Commission 2004)21 highlighted the interdependence between the knowledge society, the completion of the internal market and economic growth and was one last attempt to ‘making Lisbon work’ (European Commission 2004: 39). Despite these efforts and resulting from poor implementation of the objectives, in 2005, the newly inaugurated Commission initiated a new start for the Lisbon strategy as ‘there has simply not been enough delivery at European and national level [which] also results from a policy agenda which has become overloaded, failing co-ordination and sometimes conflicting priorities’ (COM(2005) 24). With regards to telecommunications and internet access the communication announced the adoption of the initiative i2010: European Information Society, which should stimulate growth in ICT and build on the eEurope agenda set out in the Lisbon strategy. The Lisbon Strategy was finally superseded by the Europe 2020 Strategy, which focused on overall economic, educational, and environmental targets (McCormick 2011:68).

4.3

The 2006 Framework Review

The European Commission successfully managed the implementation of the regulatory framework for electronic communications through a mixture of hard legislation, soft law, establishing independent regulatory bodies and, not least, employing the ECJ. When establishing the 2002 regulatory framework on electronic communication, the Commission institutionalized two mechanisms that eventually harmonized regulation in the market of electronic communication: First, the Commission’s power to ex-ante veto NRA decisions when affecting trade between member states22 and second, the coordination of NRAs 20 As refers to Satellite (94/46/EC), Cable (95/51/EC), Mobile (96/2/EC), Full Competition (96/19/EC) and Cable Ownership (1999/64/EC). 21 Facing the challenge. The Lisbon strategy for growth and employment Report from the High Level Group. 22 ‘As of August 2008, out of more than 770 NRAs draft decisions, seven have been vetoed and more than 30 have been withdrawn by the NRAs before a veto’ (de Streel 2008: 725).

144

4

EU Communications Policy in the Era of Electronic Communications

within ERG. As this approach followed ‘harmonized but decentralized’ regulation (Mayer-Schönber/Strasser 1999:578), de Streel concludes that the Commission implemented ‘harmonisation of regulatory approaches but not necessarily harmonisation of results’ (de Streel 2008:725). The transformation of regulatory authority in the process of the electronic communications framework on the one hand accounted for subsidiarity and an approach enabling regulation ‘carried out as close to the market as possible’ (Michalis 2007: 211). On the other hand, it strengthened the Commission through NRAs’ notification obligation and the establishment of ERG, which realized regulatory harmonization and institutionalized national coordination on EC level. The Commission thus enhanced its power vis-a-vis EU level institutions and national regulation though hard-law and soft-law measures as well as through its prerogative codified in the Treaty and recognized by the ECJ. In October 2003, the Commission had initiated infringement proceedings against Belgium, Germany, Greece, Spain,23 France, Luxembourg, the Netherlands and Portugal ‘for failure to notify transposition measures’ (IP/03/1356): ‘Following liberalisation of the European telecommunications markets in 1998, which has driven growth and innovation and the widespread availability of services to the public, the Commission now regards it as a priority to encourage timely transposition of the new framework for electronic communication. In addition to providing the legal predictability and regulatory flexibility necessary for continued investment in the sector, this will complement the eEurope objective of achieving competitive local access for internet services over broadband networks as cheaply as possible on a sustainable basis.’

Until 2006, when the review process of the framework started, the Commission had launched over 100 infringement proceedings against all member states but Denmark and Ireland. The ECJ eventually ruled against Belgium, Greece, France and Luxemburg ‘for failing to fullfil their obligations under the new regulatory framework’ (COM(2006) 68; Michalis 2007: 209). However, ‘[f]rom the perspective of Member States, it has provided enough added flexibility, alongside the scope for interpretation entailed in the hard telecommunications directives, to ensure that the ECRF has become one of the most established policy arenas of the EU’s varied activities. Thus, in this instance, the complementary use of hard and soft governance, though not entirely friction free, has proven itself able to play to national and EU level interests.’ (Simpson 2013: 909) 23 Whereas Spain had implemented the Directives in question, infringement proceeding against the other member states continued throughout December (IP/03/1750).

4.3 The 2006 Framework Review

145

In 2007, as part of the review process and after a public consultation launched by the 2006 communication the Commission issued both a proposal for a re-draft of the Universal Services Directive and amendments for the 2002 Authorisation Directive and the Framework Directive. Both proposals—the Better Regulation Directive (2009/140/EC) and the Citizens’ Rights Directive (2009/136/EC)— emphasized the role of content in the Information Society and applied the principle of net neutrality for the first time in the regulatory context of communications24 (Leal 2014: 507). The existing directive (2002/22/EC) should be amended through 1. NRAs’ ‘power to require from operators […] clear information on possible restrictions on access to all types of content and applications’ 2. A ‘transparency mechanism concerning possible restrictions on end-users’ choice of lawful content and applications in order to empower end-users to make an informed choice of services, thus allowing them to reap the full benefits of technological developments in the Information Society. 3. Granting NRAs ‘the power to prevent degradation of QoS by setting minimum quality levels for network transmission services for end-users. The possibility for the Commission to take implementing measures is intended to ensure, where appropriate, a minimum level of harmonization in this area’ (COM(2007) 698). Key elements of the review included proposals such as—again—to establish an EU level regulatory authority25 , again to extend the Commission’s veto rights with regards to NRA remedies, to further harmonize radio spectrum management and to delegate radio spectrum responsibilities to the foreseen EU level authority, to further harmonize universal service requirements, user rights, data protection guidelines as well as security aspects and to introduce functional separation as a new remedy available to NRAs (Haucap 2009: 464). Unbundling the local loop remained pivotal to the completion of competition in the communications market, also because in practice, unbundling proved a fruitful mechanism for enhancing competition: ‘There has been a significant shift in the pattern of access to incumbents’ networks over the year. New entrants are gradually shifting from resale and bitstream access towards local loop unbundling in the provision of broadband services. The growing demand for new services and the trend towards packages of services (such as “triple play”) has made unbundling a more attractive 24 Article

21 covers Quality of Service. the European Electronic Communications Market Authority (EECMA)

25 namely,

146

4

EU Communications Policy in the Era of Electronic Communications

option for new entrants’ (COM(2006) 68). After the regulatory framework for electronic communications had been implemented, there was no further action on service provision. Whereas the Commission emphasized the relevance of broadband networks, it neglected the the role of services for the regulatory framework on communications. Table 4.3 The regulatory framework on electronic communications

The regulatory framework on electronic communications  Directive 2009/140/EC (Better Regulation Directive)  Directive 2009/136/EC (Citizens’ Rights Directive)  Regulation (EC) No 1211/2009 (BEREC Regulation)  Directive 2002/21/EC (Framework Directive)  Directive 2002/20/EC (Authorisation Directive)  Directive 2002/19/EC (Access Directive)  Directive 2002/22/EC (Universal Service Directive)  Directive 2002/58/EC (Directive on privacy and electronic communications)  Regulation (EC) No 544/2009 (amending Roaming Regulation)  Regulation (EC) No 717/2007 (Roaming Regulation)  Recommendation 2007/879/EC (Recommendation on relevant markets)  Explanatory note to the Recommendation on relevant markets  Recommendation 2009/396/EC (Recommendation on termination rates)  Explanatory note to the Recommendation on termination rates  COM 2002/C 165/03 (SMP Guidelines)  Commission notice on the definition of relevant market (97/C 372/03)  Recommendation 2008/850/EC (Rules of procedure in Article 7 of the Framework Directive  Decision No 676/2002/EC (Radio Spectrum Decision)  Directive 2009/114/EC (amending GSM Directive)  Council Directive 87/372/EEC (GSM Directive)  Commission Decision 2009/978/EU (amending RSPG Decision)  Commission Decision 2002/622/EC (RSPG Decision)  Decision No 626/2008/EC (MSS Decision)

During the review process, the European Commission eventually addressed critique of the decisions taken by NRAs in the light of the 2002 regulatory

4.3 The 2006 Framework Review

147

framework. The decisions of the different NRAs were assessed as too incoherent among member states and presented poor quality with regards to precision, detail and timeline (Simpson 2013: 911; COM(2006) 334). The lack of coherence resulted from the fact that from a supranational perspective NRAs tended to impose different measures in similar situations and thereby in sum created a heterogenous sector under the same regulatory framework. To make things worse, national courts reinforced heterogeneity through incoherent decisions on NRAs’ measures. The objective of the regulatory framework to harmonize the electronic communications sector failed. Claims to establish a supranational regulatory body intensified (de Visser 2009: 482; COM(2006) 68: 10). However, ‘[t]he creation of a Euro-regulator has been the hydra of the regulatory debate since the beginning of liberalisation’ (de Streel 2008: 732). In November 2007, the Commission proposed a regulation (COM(2007) 699) that should transform ERG into a European regulatory body on communications—Namely, the European Electronic Communications Market Authority (EECMA). This proposal faced massive opposition from the Council. Whereas the Council in November 2007 agreed on the proposal, ‘several Member States expressed their doubts related in particular to the need for a creation of a new European Agency’ (C/07/274). Although the Parliament sought compromise proposing an eased alternative, BERT—Body of European Regulators in Telecommunications –, achieving compromise was difficult. Although ‘Member States wish to give the existing European Regulators Group (established under Commission Decision 2002/627/EC) a formal status, […] a majority of delegations were against establishing a new Community agency in this context’ (PRES/2008/354). In 2009, Regulation (EC) No 1211/2009 of the European Parliament and of the Council eventually resulted in a compromise that established the Body of European Regulators for Electronic Communications (BEREC), formerly discussed as Group of European Regulators in Telecoms (GERT) (2007/249 (COD)): ‘In particular, the Council adopted its common position with the aim of improving and bolstering existing structures, notably the European Regulators Group (ERG). The proposed new body is intended to replace the ERG and improve its functioning so as to ensure greater transparency and efficiency in the decision-making process. The Council has opted to give the ERG formal status in a Community regulation by laying down a more precise definition of its tasks, its functioning and its relations with the Community Institutions. The new body, designated GERT (Group of European Regulators in Telecoms), would not be a Community agency and would not have legal personality.’

148

4

EU Communications Policy in the Era of Electronic Communications

In summary, the EU has not established a pan-European agency for telecommunication networks, national authorities still supervise competition in telecommunication markets. At the same time, Regulation (EC) No. 1211/2009 established BEREC and installed an ‘“autonomous Office of the Body of European Regulators (BEREC)” which will facilitate cooperation between national regulatory authorities’ (Spindler 2014: 19). Whereas under the 2002 Framework it was the Commission to draft guidelines for NRAs to act, under the BEREC regime, this task was transferred to BEREC: ‘BEREC should replace the ERG and act as an exclusive forum for cooperation among NRAs, and between NRAs and the Commission, in the exercise of the full range of their responsibilities under the EU regulatory framework. BEREC should provide expertise and establish confidence by virtue of its independence, the quality of its advice and information, the transparency of its procedures and methods of operation, and its diligence in performing its tasks.’ ((EC) No. 1211/2009: (6))

BEREC succeeds the ERG and is the culmination point of foregoing efforts to establish a European regulator: ‘As the new authority for driving the EC liberalization agenda, BEREC has greater powers than its predecessor, the ERG (BEREC, 2012). It can make decisions on a majority vote, but it cannot compel a country to act. It remains to be seen whether the new powers for BEREC will strengthen or weaken the ability of the EC to press the NRAs to push ahead with the liberalization agenda.’ (Melody 2011: 231)

4.4

Interim Conclusion: Further Institutional Layering Through Increased Vertical Depth

The regulatory framework for electronic communications continued both the liberalization of European telecommunications markets and the Europeanization of communications policy within the Community. The directives implemented throughout the legislative process amended and partially replaced the existing rules and thus hardened the institutional layering. Not only did the process of layering cement the existing structures, the new or enhanced rules extended the institutional domain as well as the actors concerned in a process of further increasing vertical depth. The entire process was shaped by continuous advances towards more Europeanization—even under changed structural precondition in the institutional context, namely OMC and the pivot of soft-law. Existing rules had not been revoked; the amended layers were subject to compromise.

4.4 Interim Conclusion: Further Institutional Layering …

149

Despite advanced compromises, the actors in favor of intensified Europeanization of communications policy succeeded. The regulatory framework for electronic communications addressed the basics of a liberalized communications market and therefore implemented key principles on the basis of competition law. This approach strengthened the role of overall EU competition law and also the Commission’s role. It thereby made communications regulation ‘lighter, more flexible, technology-neutral’ (Goodman 2006: 216) and accounted for full liberalization along the entire supply chain of communications services and among the entire width of communications technologies: ‘the simple fact of digitalisation combined with new network technologies such as cable, satellite and mobile telephony— providing scope for a whole new range of networks and services—removed the justification for monopoly’ (Humphreys/Simpson 2005: 4). One of the principles was technological neutrality, which became pivotal to the new regulatory approach and a basic rule in the institution on the basis of competition law.26 Although changing the rule-making from hard to soft law, the implementation of technological neutrality particularly in the local loop required legal enforcement by NRAs and the ECJ. The ONP regime—being applied technologically neutral—is one option to leverage competition in a market shaped by former monopolies. To introduce technological standardization in order to enable convergence on the communications market demanded efforts on Community and member state level but refused technological and economic trajectories: ‘[T]he principles of technological neutrality, competitive neutrality, and provider neutrality that underpin European policy ease many boundary conflicts […]. Moreover, the potential for innovation embedded in a converged media sector is inspiring a main thrust within the Digital Agenda 2020’ (Bauer 2014: 14). As a matter of fact and as results from the telecommunications review process leading to the adoption of the regulatory framework for electronic communications, the European Commission created veto power over NRA decision as refers to telecommunications market definition and as refers to the definition of significant market power (SMP) (Simpson 2013: 910 f.). In spite of that, the mixture of hard and soft law also ‘involves interaction through opinion giving and recommendation making by the Commission. It also comprises the input of the new European level BEREC, albeit a body which is composed of NRAs, for the most part’ 26 In 2006, the Commission again justified technological neutrality by the need to foster competition in the telecommunications market: ‘It [the regulatory framework on electronic communications] is designed to take account of convergence, in that it deals with markets and not technologies. Markets are defined according to competition law principles, based on general demand and supply side considerations, and are independent of changes in the underlying technology’ (COM(2006) 334).

150

4

EU Communications Policy in the Era of Electronic Communications

(Simpson 2013: 914). However, de Streel argues that the regulatory framework accounts for a power shift toward NRAs that leads to ‘over-regulation because of the well-established problems of state bureaucracy implying that authorities have a tendency to increase their activities’ (de Streel 2008: 727). Whilst member states have remained reluctant, probably due to the fact that much of the policymaking capacity was already located on EU level, the power constellation to date thus remained that of a decentralized harmonization—with true harmonization in question. As has been shown above, the Commission executes power through the choice of directives, which lay out general framework principles to be implemented by member states (Mayer-Schönberg/Strasser 1999: 577 f; Geradin 2006: 16). Directives thereby set out minimum requirements to be implemented by member states. That is also the reason for asymmetric states of liberalization among member states. Despite these concessions, the Commission’s grasp for veto-powers outruling NRAs completes the picture of an EU-level power-player. Furthermore, member states have slowed down implementation: ‘For instance, on 21 April 2004, after nine months of delay and two warnings, the Commission decided to take […] Belgium, Germany, Greece, France, Luxembourg and the Netherlands to the European Court of Justice for failing to implement fully new rules on electronics communications’27 (Geradin 2006: 9). Whereas the new institutional arrangement privileged the power resources of the Commission, it also enabled actors other than PTTs to market. The promise of full competition nurtured ‘the hope that this approach—to regulate in order to deregulate—was temporary only’ (Noam 2010: 7). At the same time, the new rules were able to pervert the general objectives. While the benefits of a technologically non-neutral regulation are potentially high, the risks of regulatory error is high as well; put differently: ‘the higher the level of uncertainty surrounding technological evolution, the more it becomes important to make standards technologically neutral’ (Lovells 2014: 22). Until today incumbents occupy the narration that tight regulation would impede investments and innovation: ‘It is a stage in a migration, with a hypothesized ‘ladder of investment’ (Cave, 2006) that would move competitors from ‘piggybacking’ on the incumbent’s transmission network to become infrastructure providers of their own. But in that system of one platform and unbundling, there are disincentives to invest. They affect incumbents who shoulder the risk but share benefits. They also affect new entrants who can utilize the incumbent’s infrastructure instead of building their own networks.’ (Noam 2010: 7) 27 cf.

IP/04/510.

4.4 Interim Conclusion: Further Institutional Layering …

151

The Commission tried to balance the new institutional order by establishing organizational procedures to safeguard new institutional rules through NRAs and a dense legislative arrangement. However, new power structures emerged in this order as has been illustrated by the dispute between the Commission and the Council concerning the 1999 review. The Council eventually committed to broadening the regulatory scope of the telecommunications regulatory framework on the local loop and thereby agreed on further pursuing the path of liberalization. The latter was a by-product of the Council’s Lisbon strategy and the evolution of the institutional context. In the early 2000s the external economic pressure that had already triggered liberalization in the telecommunications sector in the first place proceeded. In 1991, the OECD claimed that the ‘strategic implications of IT […] standardization are now broadly recognized to be enormous because they will determine the future of individual firms, affect competitive advantages of countries, and even influence the development of whole technologies and their diffusion’ (OECD 1991: 9). Although the EU had advanced in market liberalization, the evolution of internet-enabled innovation and again the promise of economic growth on the basis of this new technology employed the narrative of the information society when repeatedly warning about the Community’s descent in global competition: ‘If Europe can embrace these changes by creating an environment which supports rather than holds back the process of change we will have created a powerful motor for job creation and growth, increasing consumer choice and promoting cultural diversity. If Europe fails to do so, or fails to do so rapidly enough, there are real risks that our businesses and citizens will be left to travel in the slow lane of an information revolution which is being embraced by businesses, users and by Governments around the World.’ (COM(97) 623: iii)

In addition to that, a closer institutional context, the establishment of the Lisbon strategy, transformed procedures in the EC, albeit not changing the mode of legislation. During the first decade, the primary legal instrument to regulate the telecommunications market was the directive, both as Commission Directive imposed under Article 90(3) and as Council Directive (Mayer-Schönberg/Strasser 1999: 576)—after the Lisbon strategy also under OMC. The Commission was able to utilize the institutional constraints, that ordinarily foresaw the coordination between Commission and Council, in order to apply rules stemming from the Treaty allowing the Commission to act autonomously. The Commission was, thus, both constrained by the institutional context and the actors inhering it and enabled to act through a particular institution (the Treaty). However, through the process of liberalization and policy making, ‘the Commission adjusted its policy

152

4

EU Communications Policy in the Era of Electronic Communications

style in accordance with the changed logic of appropriateness’ (Goodman 2006: 252). ‘The normative shift towards respecting subsidiarity throughout the EC institutions during the early 1990s affected the policy-making process and policy outcomes.’ (Goodman 2006: 253). Many authors testify an unconventional move of the Commission to adduct competition law in order to ‘Europeanize’ the field of telecommunication policy (i.a. Schneider 2001: 63). Liberalizing telecommunications markets had versatile goals. Ensuring global competitiveness was one of them. Another one as refers to the sake of communications was welfare. Communications has always been defined as public service and thereby been dealt with as public policy. That did not change after telecommunications markets had been liberalized and undertakings had been privatized. Quite the contrary had been the case. Regulation safeguarded the public interest in communications. On the European level, the regulatory frameworks on electronic communications balanced the power structures between the relevant actors. It furthermore invited interest groups—broadening adherence—to address initiatives through consultations—setting new rules—and steered soft governance. Self- and co-regulation became policy instrument of choice on national level and increasing criticism claiming inefficiency in the EU bureaucracy has shifted EU level policy-making towards ‘consultations, streamlining and simplification of legislation’ (Michalis 2007: 212). The new approach toward the Lisbon strategy in 2005 reflects these approaches and the Commission eventually launches a Communication on Better Regulation for Growth and Jobs in the European Union (COM(2005) 97). The analysis has illustrated that EU communications policy had established through a combination of institutional displacement and institutional layering. Former national policies had been transformed into a supranational policy through gradual and strategic shift of competence. Humphreys and Simpson, who scrutinized the ‘paradigmatic change in the regulation of the communication [sic!] sector’ (2005: 2), claimed that change in the European telecommunications sector resulted from a ‘complex interrelation’ (2005: 3) between the economic and technological transformation in the (institutional) context, change and maintenance of group interests and ideologies, and strong resources on EU level favoring Europeanization. Humphreys and Simpson (2005: 6) even claim that liberalization of telecommunications markets in Europe had followed a ‘bandwagon effect’ due to globalization and regulatory competition. National monopolies were ousted and displaced by a novel process of institutionalization. Whereas the legacy of national monopoly and the comprising power structures caused opposition during the process of displacement, the application and enforcement of stronger rules by resourceful actors with authority. After the displacement of the old institutional setting, the new institution was hardened through new layer of

4.4 Interim Conclusion: Further Institutional Layering …

153

rules and eventually increased allegiance through integration of new actors into the new institutional scope. Liberalization of telecommunication markets enabled technological evolution as a market-driven process which thereafter promoted digitalization of content. While state monopolies have vanished and liberalization had introduced open access and technological neutrality as key principles in information infrastructure, the subsequent era of ongoing liberalization and convergence in the communications market revealed a conflict running between incumbents and market entrants signified by old (copper) and new (alternative) technologies.

4

Figure 4.2 The institutionalization process of EU communications policy – Phase 2 (author’s figure; coordinate plane refers to Hix/Høyland (2011:10))

154 EU Communications Policy in the Era of Electronic Communications

5

The Advent of Internet Communications in EU Communications Policy

‘The Internet used to be all about communication, like the telephone network. […] Since the Web grew up, however, the Internet has become more about content than communication.’ (Tanenbaum/Wetherall 2011: 734)

5.1

The Institutional Context of the Internet

Technological development accounted for the advent of a new institution in the context of communications. The rules that constitute the Internet rest on technological decisions, economic considerations and not least community politics and governance processes. The global character of the Internet differs significantly from the national character of telecommunications. As a universal, almost borderless—since virtual—phenomenon, the Internet as such functions irrespective a dedicated physical infrastructure. While it certainly depends on a physical layer, it is per se technologically neutral. Ubiquity of content replaced ubiquity of infrastructure as the pivotal leverage in the Internet universe. The claim of a free and open Internet constituted this new institution in the context of communications. Despite being detached from infrastructure, the physical dependence thereon creates a conflict between two different economic, political and technical environments: ‘Whilst the Internet did not emerge from mainstream industrial and commercial structures of the communications industries, such as telecommunications and broadcasting, its characteristic features make it perhaps the most outstanding example of convergence between different parts of the Information and Communications Technologies (ICT) © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_5

155

156

5 The Advent of Internet Communications in EU Communications Policy

sector. Thus, inevitably, arguments in the debate on the Internet’s future governance have reflected well-established and current values from both broadcasting and telecommunications, some of which are oppositional in nature, notably regarding the approach to the regulation of communications content.’ (Halpin/Simpson 2002: 286)

Institutional change and the emergence of a whole new institutional context formed the basics of an ongoing institutional pressure in communications: ‘during the 1990s the growth of the Internet and a growing awareness of the implications of convergence of information technology, media and telecommunications, led to a new policy discourse around concepts such as the “Global Information Society”, the “Digital Revolution” and the “New Economy”; policy makers and economic actors engaged in a race to capture the benefits’ (Humphreys/Simpson 2005: 4). This development was both the basis for today’s infrastructural diversity and the starting point to its demotion. Other than telecommunications, which based on connection-oriented circuit-switching, internet communications has established a connectionless, decentralized packet-switching data transmission. Crowcroft highlights this perspective for the technological inertia of telecommunications systems: ‘Telecom systems were also the victim of an accidental decision, to emulate physical circuits that were necessary in the early telephony days with virtual circuits’ (Crowcroft 2011: 41). From an EU communications policy perspective, the Internet ratio eventually disrupts the rules valid for traditional communications networks and services. At the same time, internet-enabled services provide economic and societal benefits, which decision makers intend to harvest. Starting from that perspective the following analysis will focus on the effects of the internet ratio on the existing institution of EU communications policy. To understand the institutional conditions that shape policy-making in this potentially conflicting arrangement shall facilitate approaching the complexity of policy-making on emerging technologies. The following chapters will address the processes inside the EU political system with regards to coping with the institutional rules that inhere the Internet and might exhaust the existing institution of EU communications policy. The analysis will specifically respond to the impact of internet technology. Just as has been the case for telecommunications liberalization this context represents a global development. Madeline Carr directly points at the issue being raised in the present dissertation—however, with a broader focus: ‘The emergence of a global computer network and the intensification of our reliance upon it has been the source of some fascinating political challenges over the past two and a half decades. The Internet prompts debate about the relative merit of standards versus rules, of pluralism versus solidarism, of security versus privacy. And perhaps

5.2 Internet Technology

157

most significantly, it prompts debate about the value of these (and other) binaries and the necessity of thinking creatively about how to approach large technological shifts like the Information Age.’ (Carr 2015: 640)

5.2

Internet Technology

At the same time when the European Commission started engaging in the telecommunications sector, the US further developed its military network ARPANET interconnecting universities among the US. In the beginning, ARPANET resulted from the US Department of Defense (DoD) program to establish ‘a commandand-control network that could survive a nuclear war’ (Tanenbaum/Wetherall 2011: 55) and to safeguard US primacy in the cold war. While prior communications, also in the DoD, relied on telecommunications networks, the idea behind ARPANET soon developed to ‘building a packet-switched subnet, connecting each host to its own router’ (Tanenbaum/Wetherall 2011: 56). The result was a redundant network independent from physical circuit switching, on which telephony relied. Also, satellite and mobile packet ready networks became part of the ARPANET—back in the late 1960s. Key to this development was the invention of a protocol constituting packet switched intercommunication:1 ‘TCP/IP was specifically designed to handle communication over internetworks, something becoming increasingly important as more and more networks were hooked up to the ARPANET’ (Tanenbaum/Wetherall 2011: 58). When ARPANET eventually merged with the academic NSFNET, it established a major part of the Internet backbone and laid the foundations for today’s mass usage. Circuit switched telephone networks relied on a connection-oriented network2 that ‘establishes a route through the telephone system that is maintained until the call is terminated. All words or packets follow the same route. If a line or switch on the path goes down, the call is aborted’ (Tanenbaum/Wetherall 2011: 67). While this approach provides quality of service for voice line applications, it is less resource efficient and less fault tolerant if one part of the network is interrupted. The alternative packet switched approach—just as had been intended by the US DoD—provides for independent and redundant routing in case of disruptions, which apparently for a long time was a tradeoff to quality of service (Figure 5.1). I.a. Krämer, Wiewiorra and Weinhardt (2012: 794 f.) concisely described packet switching: 1 Transmission

Control Protocol/Internet Protocol, TCP/IP.

2 ISDN and in the beginning also GSM (2G) have been connection-oriented circuit-switching

networks.

158

5 The Advent of Internet Communications in EU Communications Policy

‘The architectural design of the Internet was guided by two fundamental design principles: Messages are fragmented into data packets that are routed through the network autonomously (end-to-end principle) and as fast as possible (best-effort (BE) principle). This entails that intermediate nodes, the so-called routers, do not differentiate packets based on their content or source. Rather, routers maintain routing tables in which they store the next node that lies on the supposedly shortest path to the packet’s destination address. However, as each router acts autonomously when deciding the path along which it sends a packet, no router has end-to-end control over which path the packet is send from sender to receiver. Moreover, it is possible, even likely, that packets from the same message flow may take different routes through the network. Packets are stored in a router’s queue if they arrive at a faster rate than the rate at which the router can send out packets. If the router’s queue is full, the package is deleted (dropped) and must be resent by the source node. Full router queues are the main reason for congestion on the Internet. However, no matter how important a data packet may be, routers would always process their queue according to the first-in-first-out principle.’

Kurose and Ross (2013: 612) further elaborate the best-effort principle, while also illustrating the downside of this principle with regards to applications that require specific quality of service:

Figure 5.1 Circuit-switched and packet-switched networks (author’s figure)

‘The Internet’s network-layer protocol, IP, provides best-effort service. That is to say the service makes its best effort to move each datagram from source to destination as quickly as possible but makes no promises whatsoever about getting the packet to

5.2 Internet Technology

159

the destination within some delay bound or about a limit on the percentage of packets lost. The lack of such guarantees poses significant challenges to the design of realtime conversational applications, which are acutely sensitive to packet delay, jitter, and loss.’

To understand the different architectures behind these technologies is relevant as it illustrates the different relations between services aka content and underlying infrastructure. The rules of the game in the internet universe significantly differ from those in the traditionally vertical integrated world of telecommunications. The evolution of the Internet on the basis of the Internet Protocol (IP) makes it a network operating on top of and technologically independent from the physical infrastructure and even the internet access service provided locally on the basis of customers contracting telecommunications networks and services providers: ‘The glue that holds the whole Internet together is the network layer protocol, IP (Internet Protocol). Unlike most older network layer protocols, IP was designed from the beginning with internetworking in mind. A good way to think of the network layer is this: its job is to provide a best-effort (i.e., not guaranteed) way to transport packets from source to destination, without regard to whether these machines are on the same network or whether there are other networks in between them.’ (Tanenbaum/Wetherall 2011: 438)

Telecommunications networks were designed to transmit telephony signals and in addition to that provided a physically separate data transmission circuit for i.a. fax or narrow band data transmission: ‘telephones were invented for carrying the human voice and the entire system has been carefully optimized for this purpose. Data have always been stepchildren’ (Tanenbaum/Wetherall 2011: 147). The advances of IP changed this legacy and enabled so called overlay services and applications that unbundled the content layer from the physical network and the services layer. Wu states that IP ‘was designed to follow the end-to-end principle, and is famously indifferent both to the physical communications medium “below” it, and the applications running “above” it’ (Wu 2005: 146). In order to understand the dynamics of Internet economics and politics it is important to understand the principles of this architecture. Andrej Savin (2014) has fruitfully shortened the complex theory of internet architecture3 to the outmost necessary for the present context (Figure 5.2):4 3 For a more detailed overview of the architecture and the different layer models, i.a. OSI, see

Tanenbaum/Wetherall 2011 or Kurose/Ross 2013. leaves out the application layer, which represents the various applications that are being used by the consumer to access content. For the simplified model being applied in the present context, this layer can be neglected.

4 Savin

160

5 The Advent of Internet Communications in EU Communications Policy

‘The Internet has since its inception been split between three technological layers. The first of these is the telecommunications or the carrier layer, which conveys the signal. This is the physical level through which the communication travels – the wires, the hardware and the infrastructure that enables the internet. The second, logical layer, is the software and protocols that enables the hardware to operate. The third is the content layer, which carries the substance.’

Figure 5.2 Three layers of internet communications (author’s figure)

When scholars in the US started highlighting the advances of packet-switched data transmission in the 1960s, mass usage was no intention. Foremost, these networks were designed to transmit data from one point to another using a packet-switched technology in contrast to circuit-switched voice line telephony. Tanenbaum and Wetherall (2011: 66–7) recall that ‘[s]ince the beginning of networking, a war has been going on between the people who support packet networks (i.e., connectionless subnets) and the people who support circuit networks (i.e., connection-oriented subnets). The main proponents of packets come from the Internet community. […] The circuit camp comes from the world of telephone companies’. From its beginning, the Internet community itself faced a bias between technology and ideology: ‘Packet switching was never adopted on the basis of purely technical criteria, but always because it fit into a broader socio-technical understanding of how data networks could and should be used’ (Abbate 1999: 8). IP as the pivotal technological rule has then ossified in the network infrastructure hampering other technologies to grow: IP ‘was internalised not because state bureaucracies made official decisions to that effect, but because the technology became entrenched among the relevant users’ (Townes 2012: 47). It became the constitutional rule of internet technology as an infrastructure. In consequence, ‘IP is now a legacy’ (Crowcroft 2011: 54) (Table 5.1). But a ‘new technology does not strike roots and grow on a virgin ground. Instead, it encounters a terrain marked by old technologies. The new technology’s growth then is shaped not only by its own potentialities but also the opportunities

5.2 Internet Technology

161

Table 5.1 Different standardization models in the US and Europe EXCURSUS: Different standardization models The implementation of GSM in Europe illustrates significant differences between European and US standardization endeavors. Since the organizational environment was set out to rapidly market a particular standard, GSM could seize first-mover advantages: whereas ‘the standardization philosophy in the USA resulted in competition between different systems within the same generation of technology (multi-standard approach), […] in Europe the practice has been to have competition between operators and manufacturers on the basis of a single pan-European standard (mono-standard approach)’ (Michalis 2007: 117). The accompanying ISDN Recommendation (86/659/EEC)—announced to become a Directive in 1987—accounted for services of universal provision that justified common pan-European standards (COM(87) 290: 105) but accounted for the same standardization process as GSM. The development of ISDN in Europe leads back to 1984 when it was proposed by the SOGT subgroup GAP—dominated by national PTT’s aiming to safeguard their monopoly (Michalis 2007: 114). As ISDN accounts for an integrated network infrastructure, it was ‘the PTT’s defensive response, an effort to assert control in the emerging era of advanced digital communications at a time when traditional telephony markets were saturated’ (Michalis 2007: 115). Whereas ISDN eventually provided new markets for PTT’s and their associated equipment manufacturers, the Commission agreed on the proposition forecasting its amplified organizational and political influence in a potentially pan-European telecommunications market. In sum, the implementation of ISDN across Europe was a ‘supply-led process driven by state-owned PTT’s and European manufacturer’ (Michalis 2007: 115), which fell short of expectations due to a lack of rollout-investment.a Moreover, the implementation of ISDN as an integrated communications infrastructure fell short of the technological reality of data transmission developed in the US Internet Protocol environment. Thus, both GSM and ISDN relied on the technological heritage of telecommunications monopoly, circuit switching, whereas the US had already implemented the IP standard packet switching. a As

refers to Michalis (2007: 115) ‘incumbent telecommunications operators realized that it was more profitable to continue to lease lines to private corporate users and competitors rather than invest in the rollout of ISDN.’

and restraints created by the systems based on old technologies’ (Sawhney 2003: 25). Although strongly related to the invention of the Internet it was telecommunications that irrevocably has linked information to technology. Only the vast deployment of telecommunications infrastructure in Europe in the 20th century has enabled the evolution of the knowledge society and the information society. Certainly, telecommunications technology has been developed over years in order to optimize information transmission. Thereby, telecommunications infrastructure has paved the way as well as it has framed the shape of information infrastructure. At the same time, the invention of the internet has started to change and amend

162

5 The Advent of Internet Communications in EU Communications Policy

information infrastructure on the basis of its advanced techniques in transmitting information. While establishing a new protocol enabling overlay information transmission, internet infrastructure still relies on the prerequisites established by telecommunications infrastructure. These prerequisites furthermore have been shaped significantly by policy-makers and regulators, which thereby constituted respective institutions. The question occurs: How do these institutions cope with the transformation induced by technological innovation? With regards to the present case study, IP—comprising the best-effort and end-to-end (e2e) principles—serves as the pivotal institutional rule enabling the transmission of signals irrespective their purpose, shape, origin or physical layer and shaping the institution of internet communications. Whereas services and infrastructure had been unbundled on a regulatory basis beforehand, the invention and evolution of IP has unbundled the physical network layer from the content layer in a way that exceeds any regulatory approach ever has: ‘Widespread adoption of TCP/IP has given the Internet a nearly universal interoperability that allows all end users to access Internet applications and content on a nondiscriminatory basis’ (Yoo 2005: 3). IP as an open standard enabled services (content) to emerge and access the network infrastructure without prejudice to the physical appearance of the infrastructure. While the EU framework on electronic communication accounted for technological neutrality and interoperability as refers to networks and services, technological neutrality and interoperability inhere the open interface of IP, which enables over-the-top services (OTTs) to emerge. However, ‘[s]uch OTT services are not subject to the same regulatory regime at this stage, as the current scope of the EU regulatory framework is centered on the definition of ECS, which requires inter alia “conveyance of signals”’ (European Commission 2015). Underlining the telecommunications incumbents’ inertia, Castells states that ‘the historical production of a given technology shapes its content and use in ways that last beyond its original inception’ (Castells 2001: 9). Whereas internet access providers5 today have started to re-calibrate their technological basis transforming their circuit-switched systems to packet-switching all-IP networks, overlay service providers already substitute conventional communications services.6 But the conflict goes beyond. Not only do IP-based services substitute traditional communications services but they also account for a massive shift in infrastructure usage. Whereas content distribution occurs globally, access to the content eventually is realized through local access networks. Despite the fact that IP runs irrespective the underlying physical layer, the vast amount of data 5 Comparable 6 cf.

and partly identical to communications services providers. overlay VoIP and video-conferencing services.

5.3 The Information Society Narrative

163

being carried over the Internet demands ever increasing capacity of the physical infrastructure. New content layer services seizing the existing physical infrastructure on the basis of a logical infrastructure following TCP/IP, thus independently from the actual network operator, re-calibrated the telecommunications market. These new services created a two-sided market within which IP-based services and consumers are brought together by an intermediary that provides the (physical) platform for services and content exchange. While internet access providers to a certain extent became mere intermediaries, their position made them potentially powerful bottlenecks in this two-sided market.7

5.3

The Information Society Narrative

5.3.1

The Bangemann Report

Technological evolution in the ICT sector has affected policy-making in the EU ever since the first liberalization efforts in the 1980s. Global competition and advances in ICT became significant drivers for policy-making. Just before the completion of telecommunications liberalization in the European Community, the term Information Society8 opened a new chapter in EU communications policy. In addition to technological advances, the promise of the Internet’s global potential for society and economy urged policy-makers to act on information society issues: ‘The European Union Internet policy regime emerged within the broad context of proposals and initiatives on the Information Society’ (Halpin/Simpson 2002: 287). The initial policy draft regarding the evolution of internet policy on Community level had been coordinated by the Bangemann Report in 1994. The report was conducted against the backdrop of the EC telecommunications market being irreversibly liberalized by 1998. Already on 31 December 1992, the Single European Market was to be established following the Single European Act (Table 5.2). When in 1994 the EU High-Level Group on the Information Society—in preparation to the Council meeting in Corfu, 24–25 June 1994—eventually presented

7 For

a general introduction see Rochet/Tirole (2006) and Armstrong (2006).

8 The implications of the term information society have promoted many concepts of digitaliza-

tion: the Network Society (van Dijk 2012; Castells 2004), the Broadband Society (Fortunati 2010), the Internet Society (Bakardjieva 2005), the Transparent Society (Han 2012), the Digital Society and the Gigabit Society.

164

5 The Advent of Internet Communications in EU Communications Policy

Table 5.2 Bangemann Report (High-Level Group on the Information Society 1994: 23)

its report on Europe and the global information society9 , it recommended promoting further action in the field of information and communications technologies on EU level. In response to advances in ICT and evolving digitalization the report recommended a sophisticated set of ‘specific measures to be taken into consideration by the Community and the Member States in the sphere of information’ (High-Level Group on the Information Society 1994: 4). The report thus paved the way towards making the Internet a European Community policy issue. At an early stage, the Bangemann Report addressed the need to adapt to technological developments and global competition—common references from the liberalization of the telecommunications sector. Already in 1994, the question was ‘whether this will be a strategic creation for the whole Union, or a more fragmented and much less effective amalgam of individual initiatives by Member States’ (High-Level Group on the Information Society 1994: 6). However, concrete policy recommendations on information technology infrastructure and the respective liberalization of telecommunications markets—including networks, services and applications10 —outshined other policy recommendations related to information society applications:11 ‘The telecommunications liberalization project became linked politically to the pursuit of the Information Society through the Bangemann Report which urged Member States to put in place legislative measures to liberalize telecommunications infrastructures across the EU in complement to the agreement which they had reached in 1993 on comprehensive telecommunications services liberalization (European Council of Ministers 1993)’12 (Simpson 2013: 907).

9 The

Bangemann Report. the roll-out of broadband and ISDN. 11 Whereas chapter 4 outlines issues regarding 10 information society application—from teleworking to city information highways—it limits the scope to soft law targets (Bangemann 1994: 25–34). 12 Council Resolution of 22nd July 1993 on the Review of the Situation in the Telecommunications Sector and the Need for Further Development in that Market, Office of Official Publications of the EC, 93/C213/01. 10 namely

5.3 The Information Society Narrative

165

On 15 February 1994, the Commission13 officially organized the first meeting of the High Level Group on the Information Society. The group held posterior discussions in the US ‘with groups who have been responsible for developing information networks and highways’ (IP/94/133) and adopted the issue of information infrastructure outlined in the Commission’s White Paper on Growth, Competitiveness and Employment (COM(93) 700). It further established two working groups on technological, market, and employment issues as well as on regulatory, ownership, standardization, and political issues of industrial change on information both headed by private sector experts.14 High-level expert groups inhered the actor network surrounding the Commission’s activities on information society issues as had already been the case when initiating telecommunications liberalization—with some organizational stakeholders already participating in the expert groups employed during the telecommunications liberalization process.15 Not only did the Commission invite private stakeholders to accompany the decision-making process, but it also accounted for organizational continuity of these stakeholders (Halpin/Simpson 2002: 292): ‘A significant dimension of the social aspect of EU information society policy is the use of high-level and advisory groups, experts and other mechanisms which tend to place social players in its policy-making framework.’ ‘In developing its policy, the EU has liaised closely with a network of social and economic actors, notably Internet Content Rating for Europe (INCORE)—an organization containing representatives from the Internet Watch Foundation (IWF), the Electronic Commerce Organization (ECO) and Childnet International (INHOPE). It has also formed expert groups, such as the Bertelsmann Group, and consulted with Internet service and content providers.’

In order to promote the full potential of the information society, the Bangemann report claimed the completion of full liberalization in the telecommunications sector, e.g. full competition of infrastructures and services and the removal of political barriers and constraints, such as universal service obligations; ‘[t]he overtly neo-liberal perspective of the report […] was that the creation of the information society should be left to market forces’ (Halpin/Simpson 2002: 287). The leverage for full liberalization should be based on the reduction of regulation to a

13 represented

by Commissioner Bangemann.

14 namely Carlo de Benedetti, chairman of Olivetti, and Etienne Davignon, chairman of Societé

Generale de Bélgique. 15 e.g. telecommunications service providers that today act as internet service providers.

166

5 The Advent of Internet Communications in EU Communications Policy

necessary minimum codified in ‘a single regulatory framework valid for all operators’ (High-Level Group on the Information Society 1994: 13).16 An EC level authority should oversee compliance with competition. Interoperability and interconnection should then safeguard the emergence of a pan-European information infrastructure. In the aftermath, the Bangemann report served as a toolbox for further EU policy-making in the field of communications—as had been commissioned by the Council—and thus became part of the institutional setting. The fact that the high-level group consisted of private sector experts points at the role private actors play for rule-making in this institution. As has been illustrated for the process of telecommunications liberalization and the development of the electronic communications framework, private sector actors continuously participated in the processes leading to institutional rule-making. Further hardening of their influence could be a consequence of actors’ involvement in institutional rule-making in the first place. The recommendation to i.a. establish a European Broadband Steering Committee accompanying the future process of decision-making is one mean to consolidate constant influence of a specific group of actors: ‘The Group recommends that the Council supports the implementation of the European broadband infrastructure and secure its interconnectivity with the whole of European telecom, cable television and satellite networks. A European Broadband Steering Committee involving all relevant actors should be set up in order to develop a common vision and to monitor and facilitate the realisation of the overall concept through, in particular, demonstrations and, choice and definition of standards.’ (High-Level Group on the Information Society 1994: 22)

The Group also foresaw organizational steps in order to cope with the advances of the information society, namely a dedicated Council dealing with the information society requiring dedicated ministers from the Member States and a responsible Commissioner for the topic. On the policy dimension, the claim for less regulation—removal of political burdens on Community and national level—was another, quite clear output of private actors’ involvement. Moreover, the report occupied a rule that had been internalized in the institution of EU communications policy from the very beginning: competition policy:

16 ’The Group believes the creation of the information society in Europe should be entrusted to the private sector and to market forces’ (High-Level Group on the Information Society 1994: 35).

5.3 The Information Society Narrative

167

‘Competition Policy is a key element in Europe’s strategy. The Group recommends that the application of competition rules should reflect the reality of the newly emerging global markets and the speed of change in the environment. The aim should not be to freeze any set of regulations, but rather to establish procedures and policies through which the exploding dynamism of the sector can be translated into greater opportunities for wealth and job creation.’ (High-Level Group on the Information Society 1994: 20)

With reference to the Bangemann report, various actions had been taken to address developments on the telecommunications market that resulted from internet technology. The Commission Communication on Europe’s Way to the Information Society. An Action Plan (COM(94) 347) as well as Commission Communication on Europe at the Forefront of the Global Information Society: Rolling Action Plan (COM(96) 607) summarized the actions foreseen, eventually leading to the 1997 Green Paper on the Convergence of the Telecommunications, Media and Information Technology Sectors, and the implications for regulation, which triggered the 2002 adjustment of the legislative framework for telecommunications. Also in 1994, former DG XIII changed its name to Directorate General Information Society: Telecommunications, Markets, Technologies—Innovation and Exploitation of Research (DG InfSo). The Directorate was responsible for new electronic services addressed in the Bangemann report, such as health, government, transport, work and e-commerce (EC Webgate). In the aftermath, ever more issues referring to ICT had been transferred to DG InfSo. In 2004, the newly inaugurated Commission integrated consumer and data protection into the portfolio. In 2005, the topics audiovisual media and media have been transferred from DG Education and Culture to DG InfSo.17 In sum, the Bangemann Report and the respective process that contributed to the report illustrate once again the embedding of Community policies in a legislative and a globally economic institutional environment. From an institutional perspective, the development of DG Connect illustrates an ever more extensive organizational unit responsible for i.a. communications infrastructure. Whereas global, technological and economic, developments triggered behavior of European policy-makers—as had already been the case when liberalizing the telecommunications sector –, policy-making was also shaped by the legislative legacy in place. Path dependence paired with a strong sector interest to maintain (or regain) power positions in a new institutional context. Whereas competition had been established as the underlying norm for regulation, the Bangemann report created a link to telecommunications regulation when suggesting a single regulatory framework for 17 Information

Society and Media.

168

5 The Advent of Internet Communications in EU Communications Policy

all operators reducing regulatory burdens. Information society policies were thus interpreted within the constraints of existing institutional rules that aimed at adjusting to new environmental realities. However, the continuity of rules and actors rather accounted for the maintenance of existing structures than for realizing the ruptures the emerging technology was about to reify.

5.3.2

The Information Society Action Plan

The Commission Communication Europe’s Way to the Information Society. An Action Plan (COM(94) 347) directly linked to the 1993 White Paper on Growth, Competitiveness, Employment and the Bangemann Report and issued a Commission work program to cope with the identified challenges and global competition: ‘the race is on at global level, notably US and Japan’ (COM(94) 347: 1b). The program emphasized four areas: the regulatory and legal framework; networks, basic services, applications, and content; social, societal and cultural aspects; promotion of the information society. While the program once more highlighted the urgency to liberalize the telecommunications sector18 , it remained vague on concrete measures. The European Parliament was invited to comment on the action plan and did so endorsing the Commission’s proposals.19 The subsequent Commission Communication on Europe at the Forefront of the Global Information Society: Rolling Action Plan (COM(96) 607) aimed ‘to harness and give more impetus to the implementation of the various measures taken at Member State level’ (COM(96) 607: 4). It again attached to the relevance of completing the telecommunications liberalization and the exogenous pressure from global competition. ‘The key challenges are to ensure that Europe remains at the forefront of the new global and networked society and that European citizens equally enjoy its benefits. The EU must therefore focus on an effective implementation of all aspects of the information society’ (COM(96) 607: 2) reflecting in the antecedent action plan. The rolling action plan already foresaw instruments that had then been implemented throughout the phase of telecommunications liberalization and convergence, namely the 1997 Green Paper on the convergence of the telecommunications, media and information technology sectors, and the implications for regulation. The plan also listed actions, which included most of the telecommunications liberalization measures (COM(96) 607: 17–21). It appears that the information society narrative rather served to underline the importance of 18 including 19 cf.

the establishment of an authority at European level. procedure to COM (1994) 347

5.4 Europe 2020, a Digital Agenda for Europe and the Digital …

169

the contemporary liberalization efforts than effectively promoting Internet-related policies. In 1998, the Commission proposed a Directive on certain legal aspects of information society services, in particular electronic commerce, in the internal market. The directive addressed legal obstacles in the single market for information society services and therefore intended to harmonize the regulatory scope, particularly for e-commerce: ‘the development of information society services within the area without internal frontiers is vital to eliminating the barriers which divide the European peoples’ (2000/31/EC: (1)). The subsequent activities on the information society mainly focused on demand-side initiatives and infrastructure deployment (Mansell 2013: 210; Stewart et al. 2006).

5.4

Europe 2020, a Digital Agenda for Europe and the Digital Single Market

In March 2010, the Commission adopted the Europe 2020 strategy, which replaced the abortive Lisbon strategy. Europe 2020 emphasized economic, environmental and social priorities in order to overcome the preceding financial crisis (McCormick 2011: 68). From a governance perspective, Europe 2020 represented a soft law approach, in which ‘EU targets are translated into national targets and trajectories to reflect the current situation of each Member State’ (COM(2010) 2020: 11) in combination with EU level actions. The strategy identified digitalization as one particular leverage for progress in all three areas, while employing the narrative of Europe lagging behind: ‘The global demand for information and communication technologies is a market worth e2 000 billion, but only one quarter of this comes from European firms. Europe is also falling behind on high-speed internet, which affects its ability to innovate, including in rural areas, as well as on the on-line dissemination of knowledge and on-line distribution of goods and services.’ (COM(2010) 2020: 12)

In consequence, the Digital Agenda for Europe as one of seven flagship initiatives should ‘deliver sustainable economic and social benefits from a Digital Single Market based on fast and ultra-fast internet’ (COM(2010) 2020: 14). The Council accompanied the strategy throughout the subsequent years and issued conclusions on different aspects of the strategy. On 26 May 2010, Coreper endorsed the Digital Agenda for Europe (COM(2010) 245), which had been adopted by the Commission on 19 May 2010. The Council emphasized the relevance of digitalization for all sectors and highlighted that ‘the Digital Agenda for Europe should

170

5 The Advent of Internet Communications in EU Communications Policy

boost the competitiveness of the European ICT sector at the worldwide level, thereby creating growth and jobs in the EU’ (Coreper 2010). The creation of a digital single market became the new scope for policy-making on EU level and attached to the SEM objectives. As Spindler put it, the Commission followed a perforce path dependence: ‘The Internet as a global platform without any territorial frontiers seems to be the perfect means to realize an internal market, which has been the predominant goal of the European Union since its foundation’ (Spindler 2014: 3). Irrespective the regulatory advances towards liberalization during the 1990s and early 2000s, EU policy-making has shifted towards accelerating the European digital single market fostering the boost of European digital economies within a common market: ‘The Digital Agenda is located within the wider European policy space and it influences the priorities of the research, technology development and innovation Framework Programmes that complement high-level strategic initiatives’ (Mansell 2013: 203). It defined the objectives to be achieved on EU level and by member states. Whereas innovation in digital products and services should be accelerated in order to successfully cope with global competition, citizens should be empowered to catch up with the digital transformation of society. As refers to internet infrastructure, the agenda forecasted three actions:  Providing a ‘stable legal framework’ stimulating investments in the deployment of internet infrastructure,20  developing ‘an efficient spectrum policy’,  making available EU structural funds for the sake of i.a. deploying internet infrastructure. As refers to internet access the Digital Agenda for Europe forecasted:  the NGA Recommendation (2010/572/EU)  the Recommendation on non-discrimination (C(2013)5761)  the Directive on reducing costs for high-speed network deployment (2014/61/EC)  a Recommendation on regulated access to Next Generation Access (2010/572/EU)  a Radio Spectrum Policy Programme;  a Communication on Broadband.

Deployment of fast and ultra-fast internet access was a core issue of the Digital Agenda for Europe (COM(2010) 245) as broadband deployment became the 20 eventually implemented as Directive 2014/61/EU on measures to reduce the cost of deploying high-speed electronic communications networks

5.4 Europe 2020, a Digital Agenda for Europe and the Digital …

171

policy objective that should eventually promote ubiquitous access to information society services: ‘Overall, there was continuity in the basic themes and a tension between economic and social priorities. Social and demand-side issues made appearances, but the principal goals remained consistent with supplyoriented strategies, commercial market priorities and competitiveness’ (Mansell 2013: 208). The respective broadband targets, which should be monitored as part of the soft-law Digital Agenda Scoreboard, could in effect be characterized as a non-comprehensive, voluntary internet universal service—if the network was eventually deployed. By 2020, the Digital Agenda foresaw that ‘all Europeans have access to much higher internet speeds of above 30 Mbps and 50% or more of European households subscribe to internet connections above 100 Mbps’ (COM(2010) 245: 19). Aside specific broadband targets and the ambition to reduce broadband roll-out costs, the agenda intends to ‘monitor closely the implementation of the new legislative provisions on the open and neutral character of the internet, which safeguard users’ rights to access and distribute information online and ensure transparency about traffic management’ (ibid.: 20). It thus attaches to the Citizens’ Rights Directive (2009/136/EC), which provides that ‘national regulatory authorities […] promote the interests of the citizens of the European Union by promoting the ability of end-users to access and distribute information or run applications and services’. Furthermore, the ‘Commission will launch a public consultation before summer 2010 as part of its more general commitment to report by the end of the year, in the light of market and technological developments, on whether additional guidance is required, in order to secure the basic objectives of freedom of expression, transparency, the need for investment in efficient and open networks, fair competition and openness to innovative business models’ (COM(2010) 245: 20 f.). Although crucial aspects of the ongoing net neutrality debate remained unconsidered and thus missed in Key Action 8 on internet access, Savin argues that ‘[t]he closest the EU ever came to a coherent vision is the Digital Agenda 2020’ (Savin 2014): ‘The Digital Agenda 2020 integrates the content and carrier sides. It shows awareness of the majority of problems facing policymakers wishing to tackle internet regulation. Its reference to trust, security, speed, innovation, literacy and inclusion demonstrates an alertness going beyond the commercial.’ (Savin 2014)

Still, the correlation between fast and ubiquitous networks and innovation in electronic communications applications did not lead to a coherent framework on content, services and infrastructure. The underlying ratio embraced broadband internet access as an impetus for economic growth and social welfare:

172

5 The Advent of Internet Communications in EU Communications Policy

‘the promotion of ICTs, the Internet, and broadband connectivity is assumed by many policy-makers to be directly and causally related to economic growth through productivity gains and to other social outcomes, including improved quality of life, improved education, and more responsive government services’ (Mansell/Steinmueller 2013: 554). Political action followed this ratio when shaping the regulatory environment covering broadband infrastructure. Economic and societal objectives again shaped the development of infrastructure. However, objectives converted: incentivizing the deployment of high-speed internet access followed the regulatory goal to foster access competition. As soft-law prevailed, infrastructure deployment ousted infrastructure regulation on the policy agenda. The adaptation of the Internet as an economic and societal motor of growth and welfare—highlighted in the Bangemann report at the earliest, through the Lisbon strategy, and eventually the Digital Agenda—has made broadband policy a crucial political endeavor:21 ‘Broadband refers to telecommunication networks operating at speeds exceeding those of the “narrowband” networks constructed for purposes of voice telephony but later used for data communication’ (Mansell/Steinmueller 2013: 512). Both technological innovation and political objectives of ever-increasing bandwidths—super-fast broadband, information superhighways, ultra-fast internet access—amplified and requested new tools utilizing communications infrastructure. Accompanied by communications markets and services liberalization, broadband policies led to both the exploitation of existing copper line infrastructure, the substitution by cable and mobile infrastructure and the deployment of fiber optics infrastructure (Mansell/Steinmueller 2013: 512). Notwithstanding these advances, European policy-makers had also scrutinized developments on the US market for broadband internet access, which triggered an academic debate about market consolidation, competition and the conflict between revenues and user rights (Crawford/Scott 2015; Yoo 2014; Layton 2014; Bennett et.al. 2013). In Europe, calls for broadband expansion caused significant lobbying of network operators conducting infrastructure deployment. More than a decade after full liberalization and convergence of the European communications sector, the perspective on the market has shifted eventually formulating new objectives: ‘So far, we have ensured that consumers benefit from the liberalisation of telecoms markets. From now on our actions must be more geared more toward allowing companies to make fair profits.’ (Oettinger 2014)

21 c.f.

OECD 2013.

5.4 Europe 2020, a Digital Agenda for Europe and the Digital …

173

Member states on the other hand were required to develop national high speed internet strategies and to ‘establish a legal framework […] to reduce costs of network rollout’ (COM(2010) 2020: 14). Whereas beforehand the Commission had established a liberalized, competitive single communications market, it was then to assist the deployment of broadband infrastructure with public initiatives. Soft-law instruments eventually replaced hard-law. In consequence, all EU member states established digital agendas, DG InfSo set up a Digital Agenda Scoreboard and both member states and EU funding fostered broadband roll-out.22 National implementation of broadband policies also affected EU competition law and Commission decision particularly in the area of state aid in the course of publicly funding broadband infrastructure deployment. Thus, after the completed liberalization of the telecommunications sector and the subsequent convergence of markets, the EU’s foremost objectives targeted broadband deployment and other ‘soft’ priorities set out in the Europe 2020 strategy following the OMC. Whereas Ungerer (2013: 17) even argues that it is only after liberalization that the Internet could develop in Europe, this development was both the basis for today’s infrastructural diversity and the starting point to its demotion. As concerns the legacy from telecommunications liberalization—competition—Melody concludes that ‘competition, although still in the general rhetoric of EU policy, is no longer seen as a key element for successful implementation of these programs. Apparently making competition now legally possible in telecom markets was enough. Significant further steps focused on the implementation of effective competition were not forthcoming’ (Melody 2011: 227).

Technological advances and the narrative of lagging behind in global competition has led to actors’ conversion before the institutional setting of the former era has completed its objectives. Moreover, ‘the new regulatory framework and the liberalization agenda have become secondary to the new Digital Agenda. Broadband investment by incumbents and other dominant operators, increasing SMP, has taken priority over market liberalization’ (Melody 2011: 232). Ruptures in the institutional arrangement resulted from modifications actively enforced by a new political agenda.

22 The ‘stable legal framework’ stimulating investments in the deployment of internet infrastructure was eventually introduced by Directive 2014/61/EU on measures to reduce the cost of deploying high-speed electronic communications networks.

174

5.5

5 The Advent of Internet Communications in EU Communications Policy

The Net Neutrality Debate

When a new debate on the negative effects of network management practices arose in the US in the early 2000s, it encouraged considerable debate among academics, economics, policy-makers and activists. Net neutrality addresses the link between users and content over internet infrastructure and opposes potential disruptions thereof by network operators’ potential gatekeeper role.23 Thus, it founds on the end-to-end principle of a best-effort Internet. While traditional communications was shaped by infrastructure and the services conveyed, the net neutrality debate eventually associated infrastructure with content. The advent of internet mass usage and the changed utilization of communications networks for content rather than communication (Tanenbaum/Wetherall 2011: 734) also transformed the relationship between the different market participants. Content providers entered the market as new stakeholders utilizing the internet’s content layer to provide overlay services and applications. Starting with web-browsing and e-mailing, capacity requirements increased when content downloading (video or music) became popular. Applications facilitating streaming of content or even real time applications, such as voice-over-IP, video conferencing or video gaming, demanded low latency in addition to high bandwidth. Today, most traffic volume is produced by unidirectional video-streaming from content providers to users. Whereas the use of communications changed, ‘the growth of the latter […] applications has changed the scale and flow of data traffic on the internet, and this brought the treatment of traffic to the fore’ (Greenstein 2016: 130). The increasing transmission of IP-based services, applications and content on top of the communications incumbents’ physical infrastructure on the one hand promised societal and economic advances due to the free and open character of the Internet. On the other hand, overlay services tended to substitute and increasingly replace incumbents’ services (and revenues), whereas incumbents became ever more capable of managing and also prioritizing the traffic conveyed over their networks: ‘The first controversy arose out of the desire of network operators to introduce traffic management on the internet, thus increasing control over data flow and opening the possibilities for differentiated pricing’ (Savin 2014). Not only did this altered environment evoke economic and political friction, but it also consolidated a new socio-economic cleavage. Marsden even claims that ‘[n]etwork neutrality is the latest phase of an eternal argument over control of communications media’ (2014a: 39). 23 In the beginning, network management where in fact practices of blocking and throttling on online services and content.

5.5 The Net Neutrality Debate

5.5.1

175

The Innovation Conundrum

The starting point of the academic net neutrality debate, particularly among law scholars, can be assigned to the US (Wu 2003; Yoo 2004, 2005, 2006; Frischmann/van Schewick 2007; Crowcroft 2007; van Schewick 2012, 2014; Crawford/Scott 2015).24 The basic assumption of net neutrality thinking concluded that the Internet created a platform-based innovation process, which might be either facilitated or hindered through net neutrality. Wu explained that the conflict arose between arguments that claimed application innovation on the basis of a neutral network and arguments that advocated innovation processes on the basis of network management. He concluded that the ‘argument for network neutrality must be understood as a concrete expression of a system of belief about innovation, one that has gained significant popularity over last two decades’ (Wu 2003: 145). In correspondence to this, Crowcroft described the narrative dimension of the net neutrality discourse (2007: 567): ‘there are a lot of emotional terms used in the context of the “net neutrality” debate. For example, “censorship” or “black-holing” rather than route filtering, fire- walling and port blocking; “free-riding” rather than overlay service provision to describe the business of making money on the Net; or “monopolization” instead of the natural inclination of an organization with a lot of investment trying to make revenue from it.’

At the same time, Marsden and Crowcroft argued that ’there has been virtually no innovation within the network for 30 years’ (Crowcroft 2011: 54); ‘network neutrality has in fact stifled evolution in the network layer’ (Marsden 2014a: 39). Marsden even claims that most innovations stems from users themselves: ‘If innovation is typically both user-distributed and user-driven, the implications are that innovation is encouraged by interoperability and open access: in general, ensuring that content can be freely shared between those users. This view is in some conflict with content and network owners’ desire to be recompensed for provision of local loop upgrades’ (Marsden 2010: 134).

In this context, Wu elaborated that ‘[o]perators showed an unfortunate tendency to want to ban new or emerging applications or network attachments, like WiFi devices or Virtual Private Networks, perhaps out of suspicion or an (often futile) interest in price- discrimination’ (Wu 2003: 143). For net neutrality proponents, 24 This resulted particularly from more concentrated access markets in the communications sector and the associated threat of discrimination. Also, content providers emerged early in the US.

176

5 The Advent of Internet Communications in EU Communications Policy

this innovation process could only unfold without network operators’ potentially discriminating distortion (Wu 2003: 146; Lessig 2001: 1789). Accordingly, van Schewick explains that ‘[n]etwork neutrality proposals are based on the concern that in the absence of such regulation, network operators may discriminate against independent applications and that this behavior may reduce innovation by providers of these products to the detriment of society’ (van Schewick 2007: 332). Frischmann and van Schewick (2007: 388) argue alike when emphasizing the egalitarian character and the societal value of the Internet: ‘network neutrality proponents fear that allowing network providers to exclude applications, content or other uses at will or to discriminate against them may significantly reduce the Internet’s value for society. According to them, the value of the Internet as a general purpose technology does not stem from the existence of the Internet as such, but from the benefits resulting from the use of the Internet in all areas of the economy and society, and from the benefits derived from the various private, public, and nonmarket goods produced by users that depend upon the Internet as an essential input.’

The relevant question when addressing potential regulation was, ‘whether circumstances exist in which deviations from network neutrality would create benefits that would be foreclosed if network neutrality were imposed’ (Yoo 2005: 6). Therefore, Yoo suggested an ex-post regulation in case of competition infringements rather than an ex-ante provision of net neutrality as this would foreclose potential benefits. Yoo’s argument emphasizes that ‘competition policy would be better promoted if attention were focused on the level of production that is the most concentrated and the most protected by entry barriers’ (Yoo 2005: 8). In terms of net neutrality, he suggests to rather leave it to network operators or services providers to abstain from the principle of net neutrality and thereby experience either a competitive advantage or a competitive disadvantage vis-à-vis competing network operators and services providers who follow the net neutrality principle. Thereby, network diversity in which consumers opted for the one (neutral) operator or the other would account for the desired regulatory outcome (Yoo 2005: 16). Also van Schewick advocates a user-centric approach, which reverses the idea of inter-network diversity: ‘The only actors who need to be convinced that the application needs Quality of Service are the innovator, who needs to communicate this to the user, and the user, who wants to use the application. This greatly increases the chance that an application can get the type of service it needs’ (van Schewick 2015: 126). Greenstein et al. employ the argument of welfare, which is common when discussing net neutrality: ‘welfare is maximized when all content providers can

5.5 The Net Neutrality Debate

177

contact all end users. […] It immediately follows that any situation which restricts participation either on the user side or on the content provider side will be inefficient, because of the decline in the size of network externalities’ (Greenstein 2016: 135). Moreover, Scheijter and Yemini emphasized the normative dimension of net neutrality in order to elaborate the regulatory obligations towards an Internet for everyone: ‘Indeed, large content providers, for whom the Internet is a source of income, would be damaged should access providers be allowed to discriminate. […] The promise of the Internet does not lie in its support of large businesses, but in the opportunities it provides for those who could not have had a say in technologies of content scarcity.’ (Scheijter/Yemini 2007: 171)

They illustrate the cleavage between socio-technological conditions and economic interests and eventually conclude ‘that “network neutrality” is not about regulation of the Internet, but the opposite. Network neutrality is about ensuring that physical scarcity in access to the Internet […] does not limit the abundance of content over the Internet’ (Schejter and Yemini 2007: 172). Whereas traditional communications were limited in the means of content due to circuit switching and scarcity as refers to access infrastructure, the virtualization of data transmission through packet-switched IP technology abandoned the scarcity of access and content provision.25 Not only did Schejter and Yemini apply the normative character of the Internet on content, but they also expanded it to the internet access networks: ‘Egalitarian access to the Internet to participate in the economic opportunities it offers, will be maintained under a system that ensures neutrality. Additionally, the obligation to preserve freedom of speech to all is maintained. While access is a necessary condition, it is far from a sufficient one. Ensuring physical access to broadband Internet and enabling individual use, are critical in making network neutrality a worthy endeavor.’ (Schejter and Yemini 2007: 173)

On the other hand, Schejter and Yemini highlight the correlation between the liberalization of communications networks and services and net neutrality in addressing the change from telecommunications monopoly to liberalized markets: ‘The question […] is whether the underlying assumption that interests gained in the physical infrastructure under conditions of scarcity should continue to translate into 25 Whereas in the US (to which the article refers) vertical unbundling was abandoned, in the EU ONP and the 2002 Access Directive have accounted for diversity in network and services.

178

5 The Advent of Internet Communications in EU Communications Policy

a right to regulate content under the guise of scarcity, or whether the introduction of abundance in the content layer allows rethinking the underlying theory of utilitarianism that has guided telecommunications regulators since the beginning.’ (Scheijter/Yemini 2007: 141)

This link helps to understand both the conflict and relation between the physical layer and overlay services. Moreover, it relates to telecommunications policy that—also in the EU—recently neglected communications regulation in favor of broadband policy in order to facilitate the application of information society services. As has become clear in the previous section, policy-makers thus missed to associate network regulation, network deployment and network utilization.

5.5.2

The Pivot of Non-Discrimination in a Two-Sided Market

Hahn and Wallstein define net neutrality considering the respective relation between the three concerned parties: ‘broadband service providers charge consumers only once for Internet access, don’t favor one content provider over another, and don’t charge content providers for sending information over broadband lines to end users’ (Hahn/Wallstein 2006, quoted in Marsden 2017: 9). The authors thus address the two-sided character of the market, which is explained in more detail i.a. by Greenstein et al. (2016), Krämer et al. (2013) and Crocioni (2011). Users in general pay the internet access provider26 for the internet access service and the content provider for the payed content. Where there is free content, users might pay the content provider by their (personal) data. The internet service provider does not charge the content provider. While also ‘content providers pay for their traffic to be carried by backbone ISPs, on a best effort basis’ (Madsen 2010: 134), they do not pay the local loop carrier. Yet, the closer the control over data transmission to the local loop, the stronger the position of the respective ISP to act as a gatekeeper for service transmission aka content delivery. The emergence of IP-based services has created a complex market of functional similar but legally different services providing a services infrastructure. Crowcroft emphasized that ‘there is already a value chain between clients, web sites and search engines, and between broadband Internet clients and VoIP service providers and the ISP. The profit made by the overlays is not independent of the profit made by an ISP’ (Crowcroft 2011: 51). However, this structure intensifies the incumbents’ market power on both sides of the market: ‘those that benefit from net 26 also:

internet services provider (ISP)

5.5 The Net Neutrality Debate

179

neutrality are all outside the rooms in which most of the negotiation takes place, traditionally between incumbents and their competitors, all ISPs and in the main committed to trying to charge for access’ (Marsden 2010: 135). Operators’ main interest in blocking or throttling specific services and applications was to discriminate against competing or substituting services and applications in a vertically integrated environment: ‘there exist several examples of ISPs that have blocked voice over IP (VoIP) traffic which is in competition to their regular telephone service’ (Krämer et al. 2013: 798). This practice resembles the discrimination against alternative services providers in the telecommunications world, which had eventually been abandoned through open network provisions. The incentives were well illustrated by van Schewick: ‘Independent VoIP providers threaten the source of this revenue: The more of the network provider’s telephone customers place their long- distance calls using VoIP, the less access charges the network provider will receive. If independent VoIP providers are excluded from the network and the network provider does not offer VoIP itself, customers are forced to make their long-distance calls using the conventional telephone service. Thus, exclusion in the VoIP market serves to preserve the network provider’s current profits.’ (van Schewick 2007: 346)

Given this complex structure, there are different scopes of net neutrality understanding. A broader definition includes mandatory backbone interconnection, tariff regulation, and mandatory adoption of standardized protocols27 (cf. van Schewick 2007; Yoo 2005). In this scope, ‘net neutrality can be thought of as a requirement that the ISP provide the same service to all content providers and users, while charging a fee only to users’ (Greenstein 2016: 135). Instead, van Schewick (2007: 334) argued that ‘the measures included in the broad definition constitute heavy forms of regulation; by contrast, the non-discrimination rules in network neutrality proposals have been explicitly designed to provide a light form of behavioral regulation that narrowly targets the behavior identified as problematic and is far less intrusive than other forms of regulation such as structural separation or open access regulation’. The current understanding shall focus on the latter as it reflects the scope of EU communications policy in the relevant legislative process. Nevertheless, the broader definition might be an interesting field of further inquiry. 27 Discrimination can occur along the entire length of the infrastructure—from backbone to local loop. Whereas IPTV provision can afford differentiated quality of service in the local loop, private peering agreements among ISPs in the backbone can result in different qualities of availability of certain content. For further detail on these issues see Möller (2012: 24–8).

180

5 The Advent of Internet Communications in EU Communications Policy

The different definitions of net neutrality ‘reflect profoundly diverging normative considerations, premised on different economic arguments and visions about the Internet and the role that regulation should play therein’ (Maniadaki 2015: 19). The claims for net neutrality are as various as are the practices undermining it: blocking, favored treatment in vertically integrated services,28 walled gardens,29 traffic management, specialized services, quality of service,30 zero rating,31 etc. The possible net neutrality requirements intend to prohibit discrimination between content distributed through access networks and interconnection networks respectively: ‘the basic principle behind a network anti-discrimination regime is to give users the right to use non-harmful network attachments or applications, and give innovators the corresponding freedom to supply them. Such a regime avoids some of the costs of structural regulation by allowing for efficient vertical integration so long as the rights granted to the users of the network are not compromised.’ (Wu 2003: 142–3)

The non-discrimination principle is the foundation of common net neutrality definitions. Net neutrality lite aka negative net neutrality claims the absence of discrimination against services and applications that compete with the operators’ vertically integrated services or application to the detriment of end-users. Also, net neutrality lite should safeguard the Four Freedoms for Internet users: to access content, run applications and use services of their choice by the devices of their choice (Marsden 2017: 11). The positive or heavy net neutrality definition instead requires a ban on paid prioritization of any traffic on the Internet and rather addresses the relation between internet access providers and content providers as is explained by the broad scope above. It claims equal treatment of all data on the 28 A services provider or network operator favors its own service, application or content that is (commercially) bundled to the service or network provision and thereby discriminates competing services, applications or content. 29 Similar to vertically integrated services a walled garden is a bundling of Internet access services with specific content services contracted between internet access providers and content providers. 30 Just as specialized services, quality of service (QoS) guarantees a dedicated quality for services, applications or content when transmitting them over the respective networks— potentially to the detriment of other services, applications or content. 31 Specific services, applications or content are not blocked or slowed down even though the contractually agreed data volume cap has been reached by the respective customer. Also, data consumption of these specific services, applications or content does not amount to the available data volume cap. This practice only applies to customers that have agreed on a data volume cap with his or her services provider. This practice is most common in mobile radio communications.

5.5 The Net Neutrality Debate

181

network, irrespective their origin, destination, content (Marsden 2017: 11; Möller 2012: 19). Although both definitions cover equal treatment of traffic on the basis of a non-discrimination principle, net neutrality lite allows unequal treatment as long as it is non-discriminatory, namely non-discriminatory discrimination. Current legal discussions mainly cover net neutrality lite as policy-makers seek to balance the different perspectives from the innovation conundrum. The potential discrimination against certain content has triggered public concern: ‘Public debate has expressed a concern that, in the absence of net neutrality, an internet service provider might benefit from strategically degrading the quality of the nonpriority lane in order to drive traffic to a paid-for prioritized lane’ (Greenstein 2016: 142). Moreover, vertically integrated services providers or network operators could discriminate against competing overlay services32 . The practice of traffic management potentially combined with price discrimination represents the major source to this concern. The conflict runs between the ownership of physical infrastructure and the intensified utilization of these networks by content providers and users allegedly circumventing the network operator’s value chain. Krämer et al. argue that ‘[t]he debate on net neutrality rests on two fundamental assumptions. First, the belief that Internet traffic will increase at a rate which cannot be handled by the current technology and traffic management techniques and which will therefore result in a severe and persistent congestion problem (exaflood). Second, the ISPs’ claim they cannot bear the costs for the necessary network infrastructure investments without tapping additional revenue streams’ (Krämer et al. 2013: 807).

After attempts of content blocking and throttling the most prominent practice for network operators and internet service providers is traffic management. Traffic management provides specialized services or quality of service (QoS) to certain content, which is ultimately prioritized over other content. Thereby, traffic management undermines the best-effort principle of the Internet. This practice is not necessarily to the consumers’ disadvantage as ‘some types of traffic lose their value with delay […] while other types do not […]. Delaying the latter would cause little social cost, as the material is not very time-sensitive, and the principal cost of delay is inconvenience’ (Greenstein 2016: 141). Wu explains the difficulty of the neutrality term claiming that ‘[i]n a universe of applications, that includes both latency-sensitive and insensitive applications, it is difficult to regard the IP suite as truly neutral as among all applications. […] IP doesn’t care: it runs 32 For a more detailed economic insight into incentives to discriminate and prioritize see Choi/Kim (2010) and Bourreau/Kourandi/Valletti (2015).

182

5 The Advent of Internet Communications in EU Communications Policy

over everything. But as a consequence, it implicitly disfavors applications that do care’ (Wu 2003: 149). Thus, Wu proposed a net neutrality regime based on class discrimination in order to safeguard true net neutrality subject to an application’s needs: ‘many of the usage or application bans surveyed are clearly justified. For example, operators usually ban users from using applications or conduct that are meant to hurt the network or other users, like network. […] At the opposite extreme, the harm from totally unjustified discrimination is equally clear’ (Wu 2003: 152). Thus, a ban on quality of service may result in pervert effects. Krämer, Wiewiorra and Weinhardt (2012) and Bourreau, Kourandi and Valletti (2015) argued that there are society services that benefitted from quality of service. As a matter of fact, the basic architecture of the internet takes into account different characteristics of different content and can prioritizes content classes. To illustrate the effects of class-based vs. class-agnostic approaches, Tanenbaum and Wetherall employ an example from telecommunications: ‘To make the difference between flow-based quality of service and class-based quality of service clearer, consider an example: Internet telephony. With a flow- based scheme, each telephone call gets its own resources and guarantees. With a class-based scheme, all the telephone calls together get the resources reserved for the class telephony. These resources cannot be taken away by packets from the Web browsing class or other classes, but no telephone call gets any private resources reserved for it alone.’ (Tanenbaum/Wetherall 2011: 422)

At the same time, there are arguments against class-specific quality of service, which refer to the non-discrimination principle: ‘discrimination among classes of applications hurts some classes of applications, even if the classes are not alike. For example, some Internet applications such as Internet telephony applications, Internet messaging applications or Internet video offerings compete with network-provider services that are sold separately from Internet access and do not run over the Internet-access portion of the network provider’s access network. In these cases, discriminating against all applications in that class allows the network provider to favor its own offering without discriminating among applications within the class.’ (van Schewick 2015: 125)

The issue of traffic management adds to the innovation conundrum as it can neither foresee future developments nor the best outcome for harvesting the benefits from Internet-enabled content, applications and services. Greenstein argued that ‘long-term trade-offs depend on the competitive setting, both horizontal competition (between internet service providers) and vertical competition (between ISPs integrated into content and other content providers)’ (Greenstein 2016: 141).

5.6 The Eu and the Net Neutrality Debate—Prologues to EU Internet …

183

Whereas van Schewick recalls that ‘[n]etwork neutrality rules seek to protect competition in complementary products such as Internet applications, content and portals from anti-competitive behavior by network operators or ISPs’ (van Schewick 2007: 337), the application of the non-discrimination principle under the umbrella of competition law seems one reasonable solution. Greenstein et al. even reflect the regulatory effort that follows the implementation of extensive quality of service provisions: ‘if regulation of traffic quality is too complex or costly for the regulatory authority to monitor, a net neutrality regime might be a useful policy to avoid quality degradation’ (Greenstein 2016: 143). Also, a non-discrimination approach would account for a level playing field of equivalent offers: ’Network neutrality regulation does not forbid network providers to vertically integrate into complementary markets; it only bans them from using discrimination to increase their sales at the expense of rivals’ (van Schewick 2007: 388).

5.6

The EU and the Net Neutrality Debate—Prologues to EU Internet Policy

5.6.1

The 2006 Review and Net Neutrality

The 2006 review of the regulatory framework for electronic communications was also the first EU legislative action on net neutrality. Whereas the global discourse on net neutrality had already pursued, neither the EU nor its member states had taken legislative action in this field. The reason therefore was twofold: on the one hand, EU legislation on internet infrastructure to date had merely focused on telecommunications services, networks and terminal equipment (Marsden 2010: 138). Although the 2002 Access Directive codified the end-to-end principle for voice line services and narrow band communications, it did not cover online content and services other than telecommunications services: ‘whilst Internet access and transmission services fall within its remit, content services provided over the Internet, such as electronic commerce, will be treated separately’ (Halpin/Simpson 2002: 288). On the other hand, in Europe net neutrality had been perceived as a US related issue for a long time as in the US local loop unbundling had been abandoned in order to foster competition on the broadband market. In Europe, where vertical and horizontal unbundling have become fundamental rules of competition in the communications sector, the discrimination of IP-based services through ISPs has not been discerned as a threat (Marsden 2008: 7). A 2006 Commission Communication (COM(2006) 334) reporting on the functioning of the electronic communications framework emphasized the challenges

184

5 The Advent of Internet Communications in EU Communications Policy

for future communications policies, namely end-user rights and consumer protection in terms of enhanced transparency and enhanced competences for NRAs. At the same time and with regards to the future of communications, the communication addressed the challenge to promote both innovation in terms of networks and services and openness in terms of accessing and distributing internet-based services (COM(2006) 334; Maniadaki 2015: 83). Thereby, the Commission attaches to the basic argument whether net neutrality promotes or hinders innovation (cf. Wu 2003)—and inherently advocates the latter. Although the communication discusses the 2004 net freedoms framed by the US FCC, the Commission emphasized that competition principles instead of legislative codification of these net freedoms would benefit both consumers and services providers (Maniadaki 2015: 83–4; SEC(2006) 816). Again, the principle of EU competition rules served as the pivotal rule. As regards net neutrality, the proposal set out detailed provisions covering transparency obligations in order to enable informed end user choice and give power to NRAs in order to set minimum quality of service requirements. The actual effect of the amendments on net neutrality is doubtable as the provisions of the amendments do not cover broadband Internet access.33 Article 1(8)(g) of the Better Regulation Directive amends Article 8(4)(g) of the Framework Directive (2002/21/EC) as follows (Table 5.3): Table 5.3 Directive (2002/21/EC), Article 8 Directive (2002/21/EC) Article 8 4. The national regulatory authorities shall promote the interests of the citizens of the European Union by inter alia: (g) ‘promoting the ability of end users to access and distribute information or run applications and services of their choice’

The objective of harmonization of quality standards particularly with regards to content in the single market for communications is best described by the 2007 impact assessment (SEC(2007) 1472: 90): ‘The issue of network neutrality contains many complex overlapping topics involving many competing interests. Nevertheless, the underlying dilemma is that whereas the Internet is very efficient for quickly routing large amounts of data, it was not designed to provide the guaranteed quality of service or security that many applications now 33 For

a different perspective see Leal (2014).

5.6 The Eu and the Net Neutrality Debate—Prologues to EU Internet …

185

increasingly require. Network providers have powerful tools that allow them to control, prioritise or block specific data transmissions. For example, traffic prioritisation can be used to improve quality of service on the network as well as potentially be employed in an anti-competitive manner to block or disadvantage competing services’.

In addition to that, the impact assessment referred to the public consultation, which illustrated the above mentioned uncertainty (SEC(2007) 1472: 99): ‘In the public consultation, most Member States, ISPs, consumer organisations and some software companies were in favour of the proposed change to set quality standards. On the other hand, most operators were against the proposal arguing, among others, that any quality of service should be regarded as a result of market competition, or that the proposal would lead to an increase of price for end-users if it concerns all services at all times. The ERG noted that there is some uncertainty about whether the current provisions of the Access Directive are sufficient to deal with the blocking of information society services (which would be outside the scope of the framework). Consumers were concerned whether the process of setting standards at EU level would involve a sufficient level of consumer representation.’

Whereas the impact assessment emphasized the potential risk of anti-competitive behavior, the public consultation outlined positions between consumer protection through European harmonization and market-based self-regulation. The ERG expressed concerns whether the current rules were sufficient to prevent the blocking of information society services. The review targeted both positions as it ‘aims at promoting effective competition’ (COM(2011) 222: 4), which worked best when consumers could freely choose between offers on the basis of transparent information. The review thus foresaw the empowerment of consumers and competition in the information society. The Commission’s communication emphasized again that for the information society to unfold its potential it was crucial to maintain competition principles in order to avoid market-based malpractices: ‘the adequacy of the competitive environment as a guarantor of the openness of the internet can be affected by the possible existence of market failures, of oligopolistic practices, of bottlenecks to the provision of high quality services to consumers and of information asymmetry’ (COM(2011) 222: 4).

In sum, the EP had negotiated in favor of both Directives accounting for net neutrality ‘lite’ rules, i.e. that services are neither blocked nor throttled nor prioritized. However, they allow discriminating network management practices under specific circumstances (Marsden 2017: 14). The Directives combined consumers’ freedom

186

5 The Advent of Internet Communications in EU Communications Policy

‘to run applications and services of their choice’34 by introducing transparency obligations (2009/136/EC) and the definition of a minimum quality standard on a voluntary basis (2009/140/EC). Although the Commission’s proposal aimed at improving harmonization as refers to the provision of content at a minimum quality, the final directives delegated the tasks mentioned above to the member states and national NRAS: ‘In order to prevent the degradation of service and the hindering or slowing down of traffic over networks, Member States shall ensure that national regulatory authorities are able to set minimum quality of service requirements on an undertaking or undertakings providing public communications networks’ (2009/136/EC: Art 22). ‘European law upholds transparency on a mandatory basis, and minimum Quality of Service on a voluntary basis, under provisions in the 2009 electronic communications framework’ (Marsden 2014b: 79). ‘The 2002 Universal Services Directive was eventually amended to include obligation to inform end users of any limitations imposed on access or distribution possibilities in Articles 20 and 21 but also minimum quality of service guarantee in Article 22. At the same time, the EU Digital Agenda committed to maintaining an open and neutral character of the internet. These provisions fall short of providing full net neutrality protection while maintaining a semblance of basic protection.’ (Savin 2014)

Whereas the Citizens’ Rights Directive had been adopted after second reading, the Better Regulation Directive had to pass the Conciliation Committee.35 The legislative process towards the final directive had significantly shifted between safeguarding consumer rights and safeguarding market competition as refers to content transmission and eventually is a result of member states’ concerns about transferring further competences to the EU-level (Marsden 2010). Whereas the legislative process eventually developed the Commission’s initial minimum approach, ‘the underlying principle remained that a competitive market would ensure that end-users can access the content of their choice’ (Maniadaki 2015: 2). The Commission closed the review with a declaration on net neutrality codified at the bottom of the Better Regulation Directive (2009/140/EC): ‘The Commission attaches high importance to preserving the open and neutral character of the Internet, taking full account of the will of the co-legislators now to enshrine net neutrality as a policy objective and regulatory principle to be promoted by national regulatory authorities, alongside the strengthening of related transparency requirements and the creation of safeguard powers for national regulatory authorities to prevent 34 2009/136/EC, 35 cf.

Rec. 28. procedure 2007/0248/COD.

5.6 The Eu and the Net Neutrality Debate—Prologues to EU Internet …

187

the degradation of services and the hindering or slowing down of traffic over public networks.’

Irrespective the Commission’s commitment to net neutrality, the interpretation of the review process (i.a. COM(2011) 222: 3) explicitly expressed the necessity for traffic management under specific circumstances—other than for congestion and safety reasons, which will become relevant in the EU Open Internet provisions. The key objective of the evaluation process then was to clarify existing practices of traffic management, blocking, throttling, quality of service and transparency. In consequence, rules on net neutrality remained vague as the amendments did not specifically cover the relationship between content, service and network provision. Moreover, the revised regulatory framework for electronic communications continued to exclude information society services from its scope: ‘In light of a recent important, and at times controversial, debate on regulating ICT convergence at EU level, there were nonetheless key limitations to the scope of the proposed new framework: when (as is likely) fully implemented, it will only apply to communications infrastructures and associated services and will not cover communications services content of any kind. Thus, whilst Internet access and transmission services fall within its remit, content services provided over the Internet, such as electronic commerce, will be treated separately.’ (Halpin and Simpson 2002: 288)

5.6.2

Net Neutrality Evaluation: A Phase of Transition

The phase following the 2009 framework review was both focused on broadband deployment in order to promote information society services and in terms of net neutrality coined by extensive evaluation rather than by concrete legislation. Whereas the Commission, the Parliament and BEREC issued public consultations with BEREC also publishing reports on the net neutrality situation in member states, the main focus with regards to communications infrastructure was on broadband deployment as has been shown above. At the end of the 2009 review process, the Commission announced to further evaluate ‘whether additional guidance is required, and will invoke its existing competition law powers to deal with any anti-competitive practices that may emerge’ (2009/140/EC) with regards to net neutrality. The Commission thus claimed to maintain its pivot rule competition, which had already empowered the Commission to act on telecommunications in the first place. In 2010, the Commission together with the Parliament and BEREC started a consultation process accompanied by an assessment on net neutrality in the EU member states (Marsden 2017: 14). The public consultation attracted 300

188

5 The Advent of Internet Communications in EU Communications Policy

responses from various stakeholders leading to a Commission’s communication ‘The open internet and net neutrality in Europe’ (COM(2011) 222). Therein, the Commission stated that ‘[t]he essence of net neutrality and the issues underpinning the debate concern first and foremost how best to preserve the openness of this platform and to ensure that it can continue to provide high-quality services to all and to allow innovation to flourish’.

The Commission clearly outlined that there is both a need for traffic management to ensure the quality of IP-based services and a tendency for operators to maintain discriminatory practices (COM(2011) 222). Therefore, the Commission claims transparency to be a crucial element for safeguarding net neutrality principles. At the same time, the Commission links competition to the net neutrality debate emphasizing the role of the EU communications policy fundaments: ‘The EU regulatory framework aims at promoting effective competition, which is considered the best way to deliver high-quality goods and services at affordable prices to consumers. […] The significance of the types of problems arising in the net-neutrality debate is therefore correlated to the degree of competition existing in the market.’

Further: ‘Enforced in parallel to the ex ante regulatory framework, competition law has contributed to efficient market entry by tackling abuses of dominant position by regulated operators.’

But also: ‘the adequacy of the competitive environment as a guarantor of the openness of the internet can be affected by the possible existence of market failures, of oligopolistic practices, of bottlenecks to the provision of high quality services to consumers and of information asymmetry.’

This being emphasized, the Commission created an understanding of the net neutrality debate within the institutional context, which both justifies policy action by the Commission and considers the interests of versatile actors at stake—namely proponents and opponents of net neutrality regulation. The public consultation was accompanied by a BEREC assessment on net neutrality together with NRAs following the Commissions declaration on net neutrality concluding the Better Regulation Directive to ’monitor closely the implementation of these provisions

5.6 The Eu and the Net Neutrality Debate—Prologues to EU Internet …

189

in the Member States, introducing a particular focus on how the “net freedoms” of European citizens are being safeguarded in its annual Progress Report to the European Parliament and the Council’ (2009/140/EC). In the course of the assessment, the French NRA ARCEP and the UK NRA OFCOM undertook their own, national consultations. The results of the BEREC assessment reflected the answers from the Commission’s public consultation, which indicated that throttling and blocking were the most common practices opposing net neutrality principles:  Limits on the speed (‘throttling’) of peer-to-peer (P2P) file-sharing or video streaming by certain providers in France, Greece, Hungary, Lithuania, Poland and the United Kingdom;  Blocking or charging extra for the provision of voice over internet protocol (VoIP) services in mobile networks by certain mobile operators in Austria, Germany, Italy, the Netherlands, Portugal and Romania. Also in 2010, the newly established BEREC started to publish annual reports on the application of Quality of Service within the member states, following Article 22(3) of the Citizens’ Rights Directive.36 In its first report, BEREC identified that only few situations occurred that had been relevant in the scope of net neutrality. Furthermore, the report states that all incidents could be resolved by NRA intervention. At the same time, BEREC concluded that ‘it is difficult to make a definitive evaluation of the effect of these regulatory changes as the provisions only come into effect when transposed by Member States’ (BoR (11) 19: 16). BEREC also issued a public consultation on BEREC’s draft Guidelines on Transparency in the scope of Net Neutrality: Best practices and recommended approaches (BoR (11) 67). The guidelines were meant to illustrate transparency mechanisms enabling consumers to access and distribute information or run applications and services of their choice in line with the Better Regulation Directive. The public consultation took place between 3 October and 2 November 2011. In addition to that, BEREC published a Framework for Quality of Service in the scope of Net Neutrality, which addresses the amendments to the Framework 36 ‘National regulatory authorities shall provide the Commission, in good time before setting any such requirements, with a summary of the grounds for action, the envisaged requirements and the proposed course of action. This information shall also be made available to the Body of European Regulators for Electronic Communications (BEREC). The Commission may, having examined such information, make comments or recommendations thereupon, in particular to ensure that the envisaged requirements do not adversely affect the functioning of the internal market. National regulatory authorities shall take the utmost account of the Commission’s comments or recommendations when deciding on the requirements.’

190

5 The Advent of Internet Communications in EU Communications Policy

Directive (Better Regulation Directive) clarifying provisions to define, measure and safeguard minimum quality requirements (BoR (11) 53). In sum, BEREC concludes that ‘there is general consensus that a certain amount traffic management may be necessary to ensure the smooth flow of Internet traffic. In its response to the previous years’ public consultation, BEREC has also indicated that certain traffic management measures were necessary for ensuring a good functioning of the services’ (BoR (11) 67: 20). During the entire period since the 2007 telecommunications review BEREC had taken a leading role in issuing papers concerning net neutrality as the following table shows (Table 5.4)37 : Table 5.4 List of BEREC documents on net neutrality BoR (10) 42

BEREC’s Response to the Commission’s consultation on the open Internet and net neutrality in Europe

BoR (11) 44

Draft BEREC Guidelines on Net Neutrality and Transparency: Best practices and recommended approaches

BoR (11) 67

BEREC Guidelines on transparency in the scope of net neutrality

BoR (12) 30

BEREC findings on traffic management practices in Europe

BoR (12) 31

BEREC draft Report for public consultation “Differentiation practices and related competition issues in the scope of Net Neutrality”

BoR (12) 32

BEREC draft Guidelines for Quality of Service

BoR (12) 33

BEREC Draft Report “Assessment of IP-interconnection in the context of net neutrality”

BoR (12) 34

Explanatory paper in relation to the BEREC public consultations on net neutrality

BoR (12) 120 BEREC comments on the ETNO proposal for ITU/WCIT BoR (13) 117 Ecosystem Dynamics and Demand Side Forces in Net Neutrality BoR (14) 117 Monitoring quality of Internet access services in the context of net neutrality BEREC report BoR (15) 90

BEREC publishes its report on how consumers value net neutrality

In November 2011, the EP issued a resolution on the open internet and net neutrality in Europe stressing the need for consistent net neutrality rules and 37 For a comprehensive overview of the BEREC reports in this phase cf. Marsden (2017: 15) or the respective BEREC website: https://berec.europa.eu/eng/about_berec/working_g roups/net_neutrality_expert_working_group_/282-net-%20neutrality-expert-working-group (available 10/01/2018).

5.6 The Eu and the Net Neutrality Debate—Prologues to EU Internet …

191

an effective implementation of the regulatory framework on electronic communications. The resolution particularly links the protection of net neutrality to effective competition. While effective net neutrality would account for competition, economic growth, social development and innovation, a lack of net neutrality would impede competition, block innovation and restrict freedom of expression (European Parliament 2011). The EP also emphasized that the functioning of the electronic communications framework and the ‘internal digital market’ are pivotal to harvesting the potentials of the digital economy. Although not having started the electronic communications review process, policy making on network neutrality accelerated. In 2012, BEREC and Norway concluded a study emphasizing the spread of discriminatory practices (Marsden 2017: 103). In December 2012, the EP issued two resolutions calling for net neutrality rules to be codified in EU law (Table 5.5): Table 5.5 European Parliament Resolution on net neutrality A digital freedom strategy in EU foreign policy Completing the digital single market Procedure: 2012/2094(INI) Procedure: 2012/2030(INI) The European Parliament

The European Parliament

whereas net neutrality is an essential principle for the open internet, ensuring competition and transparency;

Calls on the Commission to propose legislation to ensure net neutrality;

Strongly supports the principle of net neutrality, namely that internet service providers do not block, discriminate against, impair or degrade, including through price, the ability of any person to use a service to access, use, send, post, receive or offer any content, application or service of their choice, irrespective of source or target;

Points out that more competition and transparency with regard to traffic management and quality of service, as well as ease of switching, are among the minimum necessary conditions to ensure net neutrality; reiterates its support for an open internet where content and individual commercial services cannot be blocked; recalls the recent findings of the Body of European Regulators for Electronic Communi-cations (BEREC), and considers that additional measures are needed to ensure net neutrality;

Calls on the Commission and Council to promote and preserve high standards of digital freedom in the EU, in particular by codifying the principle of net neutrality by means of appropriate regulation, so as to strengthen the Union’s credibility in terms of promoting and defending digital freedoms around the world;

Re-emphasises the potential challenges arising from departures from network neutrality, such as anti-competitive behaviour, blockage of innovation, restriction of freedom of expression, lack of consumer awareness and infringement of privacy, as well as the fact that lack of net neutrality hurts businesses, consumers and society as a whole; (continued)

192

5 The Advent of Internet Communications in EU Communications Policy

Table 5.5 (continued) A digital freedom strategy in EU foreign policy Completing the digital single market Procedure: 2012/2094(INI) Procedure: 2012/2030(INI) Regards the further expansion of the broadband network and, in particular, the connection of rural, isolated and outermost areas to electronic communication networks, as a central priority; calls on the Commission, therefore, to check continuously and, if necessary, ensure by means of regulatory inter-vention that network neutrality is maintained and that internet providers are not hampered or hindered in accessing network infrastructure;

In September 2013, the Commission published a Communication on the Telecommunications Single Market (TSM) outlining the advances made since the market liberalization, emphasizing the challenges ahead and iterating the overall objective to complete the telecommunications single market. Within this single market, internet access has ‘become the central and most valuable service provided by network operators and internet service providers’ (COM(2013) 634: 6). On the basis of its 2009 commitment, the Commission deemed it valuable to protect the open internet for four reasons: 1) fragmented rules among member states, while at the same time there was evidence of services being blocked and throttled; 2) clear conditions were needed to address the emergence of specialized services, which would serve economic and societal value; 3) the emergence of traffic management practices required NRAs to address this issue, which has not been implemented in the contemporary regulatory framework; 4) national legislation was ongoing, potentially distorting EU harmonization. The communication served as the preliminary to the 2013 proposal for a regulation, which should eventually conclude EU net neutrality rules. In 2013, before the Commission took action, net neutrality rules had been implemented in three EU member states, the Netherlands to be the first, Slovenia and Finland (Marsden 2014b: 76; Marsden 2017: 6). In 2011, a conflict about throttling and blocking of substituting services (especially Skype and WhatsApp) intensified in the Netherlands. National internet services provider KPN intended to charge consumers for using IP-based substitutes to KPN’s SMS services. In effect, massive public opposition resulted in Europe’s first net neutrality legislation (Marcus 2016: 270). The Dutch legislator seized the ongoing implementation of the 2006 electronic communications review to implement net neutrality rules on national level. On 1 January 2013, Article 7.4a of the Dutch Telecommunications Act entered into force. The Article prohibited blocking or throttling of services

5.7 Interim Conclusion: Digitalization Policy and the Conversion …

193

and applications as well as price differentiation on the basis of services or applications. The prohibition did not apply in cases of traffic management measures, for network security reasons, spam management or in accordance with other legal instruments. In procedural terms, the NRA was empowered to sanction any discrimination by network operators. Together with Slovenia, which likewise adopted strong net neutrality rules, two member states exceeded the rules imposed by the 2006 EU review (Maniadaki 2015: 91; Marsden 2017: 15).38

5.7

Interim Conclusion: Digitalization Policy and the Conversion in EU Communications Policy

After liberalization and technological convergence, the incumbent structures of EU communications policy again faced transformative pressure from the institutional context. Alien rules and actors invaded the existing institution. While liberalization and convergence of telecommunications in Europe was politically induced,39 digitalization and virtualization, which empowered information society and/or overlay services, was technologically induced. The adoption of the information society narrative by pivotal actors such as the Commission and the Council supported by private sector actors, which emphasized further advances as well as market revenues through seizing ICT, created momentum to foster digitalization policies in the merits of communications policy. The Bangemann report initially linked advances of the information society to advances in telecommunications liberalization, thus linked a new scope to old objectives. In the context of exogenous (global) pressure and endogenous transformation, the Lisbon strategy and eventually the Europe 2020 strategy identified new objectives and respective measures to be achieved under a new policy framework outlined in the Digital Agenda for Europe. Digitalization policy, which in effect emerged from communications policy, defined the advent of institutional conversion. It linked market liberalization to infrastructure deployment and technological advances in the field of ICT and henceforth established a soft law regime to foster the information society. While liberalization appeared to be accomplished, the availability of broadband internet infrastructure in order to facilitate information society services was identified as a key objective to tackle global competition. From an institutionalist perspective, the interpretation prevailed among relevant actors that the objectives, which initially led to the displacement of communications policy and advanced EU communications policy, had been achieved. At the same time, the institutional 38 A comparative analysis on net neutrality legislations has been provided by Marsden (2015). 39 on

the basis of technological developments.

194

5 The Advent of Internet Communications in EU Communications Policy

context and the framing capacity of relevant actors centralized new objectives on the basis of a new idea that followed from previous rule-making. Not only did the Bangemann report promote the contemporary narrative of global competition and the advances of liberalization, but it also nourished the idea of societal welfare and economic growth through competitive information and communications technologies. It thus attached to the cognitive and normative legacy from former phases in EU communications policy. While progress in communications regulation apparently ceased, the rules imposed maintained. Yet, actors converted to a new setting, committing to new procedures and rules leaving the continuation of the old setting to the newly established BEREC, NRAs and apparently subliminal evaluation processes. Bauer argues that a ‘key problem of many countries and of the EU overall is that the policy approach was more successful in squeezing efficiencies out of the existing system than to stimulate the transition to the next generation of infrastructures and services’ (Bauer 2014: 10). At the same time, virtualization had physically detached the services provided over the Internet from the physical infrastructure enabling their transmission. Technological evolution in terms of virtualization enabled through IP and the end-to-end paradigm had unlocked new possibilities for users and communications services providers. From a policy-making perspective this development was welcomed as it would promote information society services. However, ‘[o]ver the top communications services cannot exist in a vacuum—they are dependent on underlying connectivity. Without someone carrying their traffic, there is no over the top service’ (Brown 2014: 371). The dependence on physical infrastructure reflects in the new objectives to which EU communications policy had converted through Europe 2020 and the Digital Agenda for Europe. Yet, the chosen soft law approach accounted for infrastructure availability rather than legal coherence to rules imposed on the electronic communications regime. While ‘there is a far greater barrier to entry for the provision of connectivity than there is for the provision of an over the top communications service’ (Brown 2014: 371), the availability of the latter was both subject to infrastructure availability accounted for by the broadband targets and—more crucial—the conveyance of overlay services and content via network operators and services providers. The potential bottleneck imposed by the network operators’ and services providers’ sovereignty had not been addressed by the existing institutional setting. The rules in place were neither suited for traffic management practices nor for massive overlay services and the actors that conducted them. While IP was developed technologically neutral, telecommunications never was: ‘The ICT convergence made possible by the new technologies—primarily the growth in digitalization of all electronic communication signals and the gradual spread of

5.7 Interim Conclusion: Digitalization Policy and the Conversion …

195

Internet Protocol (IP) through the telecom network—was changing the technological foundations for services and markets. In the pre-convergence era, the provision of facilities and services were part of the same package and specialized by service. Voice, data, radio, television, etc. were each provided over their own networks reflecting their unique technical requirements. The provision of network facilities and services for each type of specialized communication were part of the same package. Network and services provision was provided in vertical silos. […] But ICT convergence was making it possible to provide any electronic service on any network. It was breaking down the technical barriers among the different service silos and opening new opportunities for providing services individually or in packages’ (Melody 2011: 223 f.).

What sounds like a positive development toward vertical and horizontal unbundling in communications constituted a conflict in the existing communications environment. From an institutional perspective it even threatens the constitution of the incumbent institution as it undermines the structure of incumbent actors’ existing rights: ‘the end-to-end principle acts as a limitation on the property rights of network owners’ (Frischmann/van Schewick 2007: 387). Telecommunications network and services providers—in the EU institutional context and beyond— were set out to two sources of pressure: First, fading control over the services provided over their networks; and second, the slow decrease of habitualized behavior in terms of creating revenues from providing services over networks: ‘This pressure comes from many sources, including the Internet’s evolution to broadband (infrastructure, applications, and content), the rapid increase in users, demand for latency-sensitive applications such as video-on-demand and IP telephony, demand for security measures and spam regulation measures implemented at the “core” of the Internet, and, more generally and importantly, demand for increased returns on infrastructure investments.’ (Frischmann/van Schewick 2007: 387)

Content providers became new market actors starting to provide overlay services over communications infrastructure outside the scope of the institution that is otherwise highly shaped by regulation. The prospects of the information society narrative outlined in the Bangemann report became reality—only, the regulatory framework had not taken any precautions in these regards. Although there have been Commission commitments to net neutrality and EP resolutions that called for action, the Digital Agenda and the contemporary soft law policy-making were not equipped with the necessary capacities to address the regulatory challenges ahead. Internet-enabled, IP-based advances in communications services eventually started to challenge the existing business models in communications services and networks as well as the regulatory framework covering it: ‘The net neutrality argument is a debate between radically different stakeholders, and one thing the reader must recall when reading any contributions, is that the goals

196

5 The Advent of Internet Communications in EU Communications Policy

of different stakeholders are very different’ (Crowcroft 2011: 54). The question Sheijter and Yemini rise, whether abundance of content in the internet age conditions a rethinking of the nature of regulating communications, directs to the political dimension of the debate. Internet communications accounts for a new, technologically induced transformation of the telecommunications sector, which in the EU to date was set out to a mainly politically motivated transformation process. Whereas the architecture of the Internet follows the best-effort principle, technological innovation on the network layer has led to a situation in which prioritization of data became possible and profitable (Blumenthal/Clark 2001). Incumbent actors—namely network operators and services providers—from the institution of EU communications policy internalized new practices according to their (economic) interest. Accordingly, network operators engaged in discriminatory practices towards content and services. The innovation conundrum that inheres the net neutrality discourse became subject to the same uncertainties as do most new rules (Thelen 2009: 491). From an institutional perspective, the intensified occupation with net neutrality rules disrupted well established and newly internalized power structures as they threatened to impose limitations on the incumbents’ practices of traffic management without imposing rules on new entrants that would fit the rules of the game. In effect, net neutrality approaches caused massive opposition from the incumbent actors that have gathered practices in and environment with no corresponding rules in place and eventually faced rule-makers considering—again—potential restraints. With regards to the actors involved in the phase of conversion it is important to identify those actors that supported the establishment of new goals. Commissioned by the Council the High Level Group on the Information Society fulfilled two tasks: It promoted the liberalization objectives and outlined potentials of ICT. The neo-liberal perspective of the final report is not surprising as the group consisted of industry representatives that expected economic growth and market potentials in a liberalized market. The group did not represent the incumbent stakeholders of the telecommunications market. The Council supported these conclusions but also favored an approach that facilitated member states’ actions. Nevertheless, the information society narrative—also as part of the institutional context, e.g. in the US—contributed to the identification of new objectives. The Europe 2020 strategy eventually consolidated the favored instruments against the backdrop of the financial crisis and established the Digital Agenda as a soft law policy instrument. While the targets were monitored on EU level, implementation followed subsidiarity. The regulatory perspective together with the pivotal actors converted to a score boarding perspective; requirements for adapted regulation with regards to information society services had been largely neglected. It was the EP that eventually emphasized the role of net neutrality for the constituency of communications

5.7 Interim Conclusion: Digitalization Policy and the Conversion …

197

in the internet age. The changed context again accounted for the relevance of the topic, which had gained visibility through the EP already. Moreover, it is remarkable that after decades of debate, the 2009 review process eventually established a supranational EU level coordinative body for NRAs inhering far-reaching competences and resources to obtain extensive research, guidelines and recommendations on a policy that was not even implemented to date: ‘[p]rograms adopted as a simple political compromise by a legislature become endowed with separate meaning and force by having an agency established to deal with them’ (March/Olsen 1984: 739; Skocpol/Finegold 1982). In terms of net neutrality rules, BEREC was empowered to both interact with member states on the level of NRAs to hold public consultations and to issue advisory documents. The 2009 review process culminating into the Better Regulation Directive was the first institutionalized rule to net neutrality within the existing institution of EU communications policy. Thus, institutional layering adopted environmental changes without changing the institution as such. BEREC prepared the implementation of a new policy for which it had gained comprehensive competence and guideline power to persist in. BEREC thus framed parts of an institutional change in which and—more importantly— after which it plays a crucial role itself. It is noteworthy that the first legislative action covering network neutrality applies in the course of a telecommunications review. The issue is thus approached within the remits of an already existing set of rules. With regards to private sector incumbents the arrangement changed significantly, while maintaining the underlying ratio. During previous changes, incumbent providers of networks and services always faced new entrants that were legally enabled to invade the incumbents’ market, thus their institutional power structure. These new actors accounted for intra-sectoral and eventually inter-sectoral competition. Internet communi-cation has created actors that provide overlay services and content irrespective the underlying service or infrastructure. IP thus equalized all actors from the world of traditional communications—addressed by the regulatory framework for electronic communications—as it created an additional layer of new entrants imposing competition on an entire group of actors from the established institution. Whereas incumbent actors seized traffic management measures to counter competition from these intruding actors, the technological rules that inhere IP—best-effort and end-to-end—have been activated through net neutrality considerations to the perceived detriment on these incumbents. Net neutrality thus acts as a potential restriction to the practices that have been employed by some institutional incumbents to counter practices that would facilitate exogenous transformation. In fact, net neutrality considerations threatened to deter habitualized rules and thus envisage endogenous change against the backdrop of potential exogenous transformation.

Figure 5.3 The institutionalization process of EU communications policy—Phase 3 (author’s figure; coordinate plane refers to Hix/Høyland (2011:10))

198 5 The Advent of Internet Communications in EU Communications Policy

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat It, Can You?

‘Few years after the revision of the EU Regulatory Framework, the debate on NN in Europe looks nothing like when it started and NN now figures amongst the areas in which harmonized EU rules are being considered.’ (Maniadaki 2015: 3)

6.1

Introduction: Enhancing Telecom Single Market

In September 2013, against the backdrop of the global and European financial crisis, the Commission issued a comprehensive proposal for a regulation embedded in a legislative package following the spring 2013 Council meeting in March,1 the Connected Continent legislative package. Although the review of the regulatory framework for electronic communications networks and services had not yet been concluded, the Transport, Telecommunications and Energy (TTE) Council agreed to deepen integration and harmonization in the market for electronic communications. Once again, the EU emphasized the economic potential of the ICT sector—an idea that has been employed ever since communications became an EU policy issue. Harvesting the economic and societal benefits of digitalization should promote the recreation of economic growth, fight unemployment, balance public budgets and thereby accompany the identified challenges: 1 Council

2013a.

Electronic supplementary material The online version of this chapter (https://doi.org/10.1007/978-3-658-33014-9_6) contains supplementary material, which is available to authorized users. © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_6

199

200

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

‘The untapped potential of an EU single market in electronic communications is estimated at up to 0.9% GDP, or e110 billion per year. The benefits from a single market for business communication services alone amount to almost e90 billion per year. A sound telecommunications market underpins a wider digital economy, whose dynamism of is reflected in its sustained employment growth. To give some idea of the scale and robustness of that wider economy, there are more than 4 million ICT specialists working in the EU, a number which keeps on growing despite the recession. In the wider economy, increasing ICT investment, improving e-skills in the labour force and reforming the conditions for the Internet economy could boost GDP by an additional 5% up to 2020, and create 3.8 million jobs.’ (COM(2013) 627: 4f.)

The proposal intended to assess remaining obstacles in the Digital Agenda for Europe in order to implement concrete measures to complete ‘a fully functioning Digital Single Market (DSM) by 2015’ (EUCO 23/13: 8). As such, it was both a continuation of the previous digitalization policies and a re-activation of communications regulation. After having consulted the Commission, the May 2013 TTE Council identified the respective objectives (Council 2013b: 2): ‘One essential factor in harnessing the digital economy is to complete the Digital Single Market, including to the benefit of its most active segment, that of mobile communications […]. In this respect improved spectrum management is important.’

Further: ‘Europe’s ability to compete in the digital economy is hampered not least by its fragmented telecoms market: Europe will need to utilise better its innovation capabilities and the size of its internal market efficiently to regain its competitive edge on a global level.’

The motivation underlying these objectives referred to a number of documents issuing the potential benefits from a harmonized single market—not exclusively limited to the communications sector. As has been shown in the previous chapters, the objective of a harmonized single market for communications has already framed the liberalization of the EU telecommunications markets in the early 1980 s and has pursued ever since. Also, the Bangemann report emphasized the importance of a single market in the information age in order to seize the potential benefits from new technologies across the EU. On the verge of adjusting to the Information Society, pivotal actors in EU communications policy once again applied the connex between economic prospect and EU market harmonization in order to balance Europeanization efforts and the tendency to maintain national competence. The overall objective of the Council and the Commission’s proposal

6.1 Introduction: Enhancing Telecom Single Market

201

was again ‘to enable the completion of a European Single Market for electronic communications’ applying Article 114 TFEU (SWD(2013) 331): ‘The general objective of the proposal is to move towards a single market for electronic communications in which citizens and businesses can access electronic communications services wherever they are provided in the Union, without cross-border restrictions or unjustified additional costs [and] companies providing electronic communications networks and services can operate and provide them wherever they are established or their customers are situated in the EU.’ (COM(2013) 627: 2)

The underlying rationale that constituted the objective of establishing a single market (for electronic communications) was motivated by consumer protection and (global) market competition. Both issues had already framed communications regulation thus far, whereas telecommunications market liberalization had defined market competition as a means to safeguarding consumer choice. As will be shown later, this argument prevails in the narrative surrounding policy making on communications in the EU.2 The second key element of EU communications policy, which has also been applied in the proposal, is the idea of economic growth through competition: ‘A single market for electronic communications would promote competition, investment and innovation in networks and services by fostering market integration and the cross-border investment in networks and the provision of services. The specific measures proposed should lead to greater levels of competition on infrastructure quality as well as price, stronger innovation and differentiation, including in business models, and to easier planning of the commercial and technical elements of investment decisions regarding entry or expansion on wireless or fixed markets. It will thus underpin other measures taken to promote the ambitious broadband targets set out in the Digital Agenda for Europe as well as the establishment of a genuine Digital Single Market where content, application and other digital services can freely circulate. Enhanced levels of infrastructure competition and integration across the Union should also lead to a reduction in bottlenecks and thus in the need for ex ante regulation of electronic communications markets, making this over time a sector like any other economic sector subject to horizontal regulation and competition rules.’ (COM(2013) 627: 2)

The iteration of a decade old prospect illustrates different ambitions outlined in the proposal. First, it intends to foster competition in a pan-European electronic communications market on infrastructure. Infrastructure competition should achieve 2 ‘The

growing availability of digital infrastructures and services would in turn increase consumer choice and quality of service, and contribute to territorial and social cohesion, as well as facilitate mobility across the EU’ (COM(2013) 627: 2).

202

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

the EU’s broadband targets and promote an ecosystem of content, applications and services within the Digital Single Market. Second, it should cease the need for ex ante regulation and therefore free the market of incumbents’ market power. Whereas the proposal links networks (physical layer) and services (logical layer) to the content layer, it merely addresses the former to achieve advances in the latter. Although, communications networks and services competition should serve as a guarantor for the breakthrough of Information Society services (COM(2013) 627: Art. 17–20), the proposal’s objectives did not reflect the advanced role and prospect of IP-based overlay services. It thus rather continues communications regulation in the remits of digitalization policy. The global dimension of the proposal reflects global competition in the ICT sector: ‘The ultimate goal [of the proposal] is to underpin European competitiveness in a world which increasingly depends on the digital economy to function and to grow’ (COM(2013) 627: 2–3). As had already been the case when issuing the 1987 Green Paper, competitiveness vis-à-vis global competitors from the US and Asia remains the crucial narration to foster policy-making in the European ICT sector. In order to harmonize competition law and consumer protection the proposal based on four pillars that address the issues of authorization harmonization, spectrum policy harmonization, virtual broadband access and enhanced consumer protection, including net neutrality rules and the gradual abolition of roaming charges. Although the proposal was never adopted, it is important to scrutinize the initial legislative process as this provides insights to the legislative procedure that eventually led to a different regulation in force as of November 2015 and the implementation of EU net neutrality rules as part of EU communications policy.3 The following analysis will thus put the main focus on the issue of net neutrality, whilst not neglecting other issues concerned.

6.2

Public Consultations and Impact Assessment

The legislative process on the proposal for the Connected Continent Regulation (COM(2013) 627) succeeded a two-years period of contribution activities by various stakeholders: ‘the Commission received substantive input on the subject matter of a Single Telecoms Market from a wide range of stakeholder organisations, including those representing established and alternative operators, business and consumer organisations as well as users of telecommunications services, 3 The following will present a brief overview of the public consultation process and the impact

assessment and will then illustrate the process that led to the rejection of the proposal and the final results as regards the present research interest on net neutrality.

6.2 Public Consultations and Impact Assessment

203

national regulators and governments’ (SWD(2013) 331: 13). Since 2009, BEREC also scrutinized issues relevant for realizing the Single Telecoms Market, namely net neutrality and a single authorization procedure for electronic communications provision. The issue of spectrum had been assessed by the Radio Spectrum Policy Group (RSPG), a high-level advisory group established during the 2002 telecoms review by Commission Decision 2002/622/EC.4 These comprehensive activities contrast the consultation process preparing the actual Connected Continent legislative procedure. Although the Commission intended to cover the depth and width of the sector, ‘due to time constraints a full (12 weeks) public consultation could not be organized’ (SWD(2013) 331: 15). Instead, the Commission conducted several consultative events, i.a. in June 2013 in Brussels and Dublin attracting over 900 stakeholders, and received detailed feedback on the emerging draft proposal as of July 2013. Also, the Commission organized a CEO round table hosting business leaders from the telecoms, manufacturer and media sector, who emphasized the need for a binding European regulatory framework that would safeguard legal certainty and promote enhanced action to establish highspeed internet infrastructure. Industry representatives further claimed a lack of high-speed internet provision and therefore demanded faster broadband roll-out to efficiently seize information society services as soon as possible (SWD(2013) 331: 14). Network operators and services providers supported harmonization efforts emphasizing the need for consistent regulation in the sector, while at the same time favored de-regulation. Mobile network operators, supported by associations GSMA and ETNO, the European Telecommunications Network Operators’ Association as well as private investors, expressed fierce concern on the potential end of roaming charges, which would threaten mobile network operators’ business revenues (SWD(2013) 331: 107). With regards to net neutrality rules, incumbent network operators and services providers, while committing to the principle of net neutrality, claimed flexibility of the foreseen provisions to i.a. enable differentiated service qualities (QoS). On the other hand, BEUC, the European Consumer Organisation, claimed both the end of roaming charges and the ban on discriminatory practices of blocking and throttling online-services applying on both mobile and fixed line. BEUC as well as national consumer organizations welcomed measures on net neutrality, the end of roaming charges and further transparency requirements. They also claimed a ‘need for better enforcement of consumer protection rules’ (SWD(2013) 331: 107). A meeting with the European Consumer Consultative Group (ECCG) in June 2013 concluded that with regards to net neutrality, it was crucial to safeguard the principle of net neutrality in order to ensure 4 RSPG

unites representatives of the NRAs or national ministries covering spectrum policy.

204

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

‘a vibrant and innovative Internet ecosystem’ (SWD(2013) 331: 113). Consumer organization thus attached to the innovation conundrum and advocated the enabling role of net neutrality for innovation. Digital Europe, the European digital economy association, and ECTA, the European Competitive Telecommunications Association, also supported the foreseen net neutrality provisions. Digital Europe, which also represents content providers and consumer electronics manufacturers, highlighted the role of global competition in digitalization. The contemporary regulatory framework would not account for economic growth and innovation in globally digitalized and competing markets—attaching to the narrative of global competition. With regards to the overall scope of the net neutrality provisions ‘other stakeholders have expressed concerns on how certain measures […], like net neutrality, may not ensure a level-playing field between OTTs and traditional electronic communications services and network providers’ (SWD(2013) 331: 107). In line with the Council’s objective and the Commission’s proposal to complete a harmonized Telecoms Single Market, the respective impact assessment (SWD(2013) 331) analyzed the reasons for the fragmentation of the European telecommunications market. First, the numerous delegations to NRAs appointed in the various legal acts—most of them directives—contributed to regulatory inconsistency, which had already been identified during the 2006 review. This particularly affected the authorization of electronic communications services under the 2002 Authorisation Directive (2002/20/EC). The second finding claimed insufficiently coordinated spectrum policy. Whereas Commission Decision 676/2002/EC aimed at harmonizing spectrum policy mandated to CEPT, ‘uncoordinated spectrum assignments in the Union are holding back the Union’s potential to benefit from the benefits of wireless broadband and the mobile revolution’ (SWD(2013) 331: 24). Likewise, the impact assessment discussed the lack of a wholesale Virtual Network Access market (SWD(2013) 331: 27–8) and the effects of maintaining roaming charges, which illustrated ‘probably the most visible example of an unfinished Single Market’ (SWD(2013) 331: 29). Moreover, the impact assessment identified limitations to the Open Internet as a barrier to the Telecoms Single Market, which were likely to prevent end-users from accessing and distributing content of their choice—addressing parts of the four Net-Freedoms. Structural concerns outlined in the impact assessment were twofold: first, regulatory diversity on net neutrality rules among member states would be likely to further fragment the Digital Single Market (DSM). The Netherlands and Slovenia had already implemented national net neutrality rules, France had issued NRA guidance, the UK and Denmark engaged in self-regulatory measures and Germany was considering legislation. With reference to BERECs traffic management investigation (BoR (12) 30) the impact assessment stated that

6.2 Public Consultations and Impact Assessment

205

‘access restrictions due to traffic management measures are relatively frequent and affect a significant number of mobile and fixed end-users in most Member States. The blocking and throttling of P2P and VoIP is the most common example: over 21% of Internet access subscribers are affected by fixed P2P and mobile VoIP restrictions and over 36% by mobile P2P restrictions’ (SWD(2013) 331: 29).

Although the impact assessment attested anti-competitive behavior in the throttling and blocking of competing services, it took into account the role specialized services played for information society services: ‘If European operators would have legal guarantees that they could offer such highquality products, whilst ensuring “best efforts” Internet for all other traffic, this could spur new business models and also give them greater leverage in negotiating agreements with so-called “Over The Top” (OTT) providers’ (SWD(2013) 331: 30)

It thereby claimed to balance consumer protection and the presumed innovation capacity of specialized services, neglecting the other side of the innovation conundrum aka innovation in the best-effort network. This reservation will manifest in the subsequent process and reflects a telecommunications mind-set that protects consumer and enables network and services providers to compete. Yet, the impact assessment did not overlook the active role of new content providers and the direct relation between consumers and content providers. It discussed effect net neutrality rules might have on innovation and growth in the digital environment and thus considered internet communications as a triad connection between network and services providers, content providers and consumers. On the one hand, arbitrary blocking and throttling of content would hamper the willingness to invest in and develop IP-based applications and services. On the other hand, innovative applications and services might require specific quality levels to develop their full potential. The net neutrality debate whether net neutrality was positive or negative for innovation appeared to remain unsolved in the course the EU Connected Continent Legislation. The overall, and vague, impact assessment’s trade-off concluded to implement ‘clear and predictable rules at EU level’ (SWD(2013) 331: 29) that would guarantee both legal certainty and economic freedom in order to foster innovation and growth. Lastly, the impact assessment emphasized the role data protection and transparency played in a competitive, pan-European Telecoms Single Market. In sum, it highlighted four conclusions affecting the choice of an proportionate option (SWD(2013) 331: 45): • Measures at EU level are needed to tackle the underlying cause of the problem by enabling operators to benefit from harmonised procedures and access inputs in order to provide services on a pan-European basis

206

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

• The principle of subsidiarity is respected as EU intervention will be limited to cases that enable operators who so wish to carry out their activities on a pan-EU dimension • EU measures foreseen will not limit the national margin of policy assessment more than is necessary to achieve Single Market goals • As regards authorization of ECS providers, virtually all supervision and enforcement powers can remain with host country authorities, who may be better placed for fact-finding, etc., with only the power of suspension or withdrawal of authorization retained for all countries of operation by the authorities of the home Member State The impact assessment eventually emphasized four objectives (SWD(2013) 331: 49–50), which with regards to net neutrality regard network and services providers as pivotal intermediaries and rather neglects the potential net neutrality contribution to innovation: • Enabling unrestricted EU-wide provision of service by removing obstacles in the authorisation regime and as regards rules applicable to service provision. • Ensuring greater consistency in spectrum assignment and deployment conditions in order to allow wireless broadband operators to access spectrum across the EU on the basis of predictable rules and coordinated conditions. • Ensure consistent European [virtual] wholesale inputs to enable electronic communication service providers to offer their services across the Single Market. • Enable consumers to freely enjoy electronic communication services seamlessly across the Union, and establish a common high level of protection to the benefit of both consumers and cross-border telecoms undertakings, providing the necessary legal certainty to develop new services and business models [highlighted by author]. Three possible options inhere these objectives in order to fulfill the overall objective to complete the Digital Single Market. The first option would maintain the existing regulatory framework while using recommendations in the remits of Art. 292 TFEU and Art. 19 of the Framework Directive (2002/21/EC) to adapt to further coordinative needs in order to complete the Single Market.5 It would foresee the review of the Universal Service Directive in 2014 and the Roaming Regulation

5 The

impact assessment is not entirely clear on the use of Single Market, Telecom Single Market and Digital Single Market.

6.2 Public Consultations and Impact Assessment

207

in 2016 as well as the exhaustion of Art. 7 of the Access Directive as regards virtual access products. It also outlined the coordinative role of BEREC supporting exchange of best practice among NRAs and the guiding role of the RSPG with regards to spectrum harmonization. The second—eventually preferred—option described ‘a set of integrated legislative with targeted measures’ (SWD(2013) 331: 2) including a single European authorization on the basis of harmonized consumer protection rules, convergent regulatory remedies, spectrum coordination, leased line coordination, bitstream coordination, release of roaming charges, and guaranteed access to the Open Internet. This option would require a new legislative package covering the above-mentioned issues. The third option would implement option two supported by a single EU regulator implying implementation and enforcement authority over pan-European issues, such as spectrum and complying with consumer protection rules. The impact assessment concluded (SWD(2013) 331: 86–90) that whereas Option 1 would increase regulatory consistency, it would lack legal predictability due to the choice of recommendations as the main policy instrument: ‘Using a soft law tool such as a Recommendation does not seem appropriate as a Recommendation, by its non-binding nature, would maintain the existing fragmentation of the rules’ (SWD(2013) 331: 88). This option also would have been the most time consuming with regards to the EU review process as well as the national implementation processes. Option 2 would account for greater harmonization and timely implementation (by 2015) of the foreseen measures as it presumed a Regulation as policy instrument. Option 3 ‘entails the most radical change compared to the baseline scenario’ (SWD(2013) 331: 89) as it foresaw to establish a new EU level regulator. Whereas the impact assessment concluded that Option 3 would accomplish the same as Option 2, it emphasized concerns on proportionality, subsidiarity and the necessary implementation time, which would be longer than in Option 2 and thus would delay the economic and societal benefits stemming from the new regulatory framework. Considering national reservations against a further transfer of competences to the EU level, Option 2 seemed as the most opportune option: ‘The first option would not have achieved more than a cosmetic change and would, as such, have been largely unnecessary. The third option would have gone a long way towards creating a true European Single Market in telecommunications. A number of actors including most member states, however, were skeptical or openly antagonistic towards the cornerstone of the third option - the introduction of a single EU telecommunications regulator. In such a climate, the second option seemed the logical way forward’ (Savin 2014).

208

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

As Savin concludes, the second option was not the best but the most likely option considering the legislative process to go—once more a rather opportunistic approach. In practice, the ratio of assessing three options is quite predictable: whereas one option would understate the objectives, another option would exaggerate the means. The remaining option then justifies the already foreseen actions. Impact assessments thus can be classified as rules approving the decisions that eventually perpetuate the respective institution and the roles of the actors concerned. It is however interesting to recall the previous phase in EU communications policy, which disavowed from hard-law in favor of a soft law score-board approach under OMC. Although the TTE Council meeting of 6 June 2013 supported the issues set out in the draft proposal, including harmonization efforts, ‘[a] large number of delegation’ within the Council opposed further integration in terms of a European regulator, a single European authorization and centralized spectrum assignment (SWD(2013) 331).

6.3

The 2013 Connected Continent Proposal

In September 2013, the European Commission adopted the Proposal for a Regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent (COM(2013) 627) and outlining necessary actions to complete a single market for electronic communications in order to ‘underpin European competitiveness in a world which increasingly depends on the digital economy to function and to grow’ (COM(2013) 627: 3). The proposal combined several measures aiming at harmonizing national differences stemming from the implementation of the 2002 regulatory framework on electronic communications. Whereas the proposed regulation should adjust the 2002 authorization and access regimes as refers to electronic communications services6 across EU member states and enhance consumer protection, e.g. end mobile roaming surcharges and safeguard the open internet, a corresponding Recommendation (C(2013) 5761)7 aimed at enhancing broadband investment. The proposal took into account both shortcomings in the present legal framework and enhanced the prior focus on broadband deployment with reference to the results of the public consultation processes. Moreover, it aimed at advancing both aspects of the existing communications infrastructure policy: communications regulation and broadband deployment. 6 as

amended in 2009. Recommendation of 11.9.2013 on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment.

7 Commission

6.3 The 2013 Connected Continent Proposal

209

As has been outlined in the impact assessment, the proposal foresaw the policy instrument of a regulation as this would target the implementation of ‘directlyapplicable rights and obligations’ in order to establish ‘a truly common approach [that] is necessary to avoid from the outset the current tendency towards divergent national solutions’ (COM(2013) 627: 10). The proposal covered the above mentioned four pillars including a single EU authorization (Art. 3–7), spectrum harmonization (Art. 8–16), virtual broadband access (Art. 17–20) and enhanced end-user rights (Art 21–29) as well as organizational changes regarding the power of NRAs and BEREC (Art 31–40). All issues targeted harmonization of more or less institutionalized rules (Table 6.1). Serving the analysis’ interest, the following will focus on enhanced end-users rights and the role of regulatory authorities, particularly focusing on open internet provisions. Table 6.1 COM(2013) 627, Article 23 COM(2013)627 Article 23—Freedom to provide and avail of open internet access, and reasonable traffic management 1. End-users shall be free to access and distribute information and content, run applications and use services of their choice via their internet access service. End-users shall be free to enter into agreements on data volumes and speeds with providers of internet access services and, in accordance with any such agreements relative to data volumes, to avail of any offers by providers of internet content, applications and services. 2. End-users shall also be free to agree with either providers of electronic communications to the public or with providers of content, applications and services on the provision of specialised services with an enhanced quality of service. In order to enable the provision of specialised services to end-users, providers of content, applications and services and providers of electronic communications to the public shall be free to enter into agreements with each other to transmit the related data volumes or traffic as specialised services with a defined quality of service or dedicated capacity. The provision of specialised services shall not impair in a recurring or continuous manner the general quality of internet access services. […] 5. Within the limits of any contractually agreed data volumes or speeds for internet access services, providers of internet access services shall not restrict the freedoms provided for in paragraph 1 by blocking, slowing down, degrading or discriminating against specific content, applications or services, or specific classes thereof, except in cases where it is necessary to apply reasonable traffic management measures.

With reference to prior BEREC investigations on traffic management practices by telecoms operators, which concluded that blocking and throttling of traffic

210

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

affected numerous end-users, the proposal advocated clear rules maintaining the open internet and avoiding national fragmentation.8 Thus, the proposal rehearsed the Commission’s commitment from the Better Regulation Directive in 2009 (2009/140/EC).9 It furthermore committed to three of the four net neutrality freedoms, i.e. ‘freedom of end-users to access and distribute information and lawful content, run applications and use services of their choice’ (COM(2013) 627: Art. 23(1)). Irrespective the general commitment to the Open Internet, the proposal also foresaw exceptions from net neutrality principles in case of reasonable traffic management measures. Recital 47 clarifies that ‘[r]easonable traffic management encompasses prevention or impediment of serious crimes, including voluntary actions of providers to prevent access to and distribution of child pornography. Minimising the effects of network congestion should be considered reasonable provided that network congestion occurs only temporarily or in exceptional circumstances.’

Furthermore, Article 23(2) should allow free contracting between ISPs, content providers and end-users on specialized services as ‘[t[here is also end-user demand for services and applications requiring an enhanced level of assured service quality’ (COM(2013) 627: (49)), which in effect would constitute a negative net neutrality definition, or net neutrality lite. Recital 50 eventually thwarted any heavy, or positive, net neutrality definition, as it explicitly encouraged specialized services: ‘In addition, there is demand on the part of content, applications and services providers, for the provision of transmission services based on flexible quality parameters, including lower levels of priority for traffic which is not time-sensitive. The possibility for content, applications and service providers to negotiate such flexible quality of service levels with providers of electronic communications to the public is necessary for the provision of specialised services and is expected to play an important role in the development of new services’.

8 COM(2013)

627, Rec. 45. Commission attaches high importance to preserving the open and neutral character of the Internet, taking full account of the will of the co-legislators now to enshrine net neutrality as a policy objective and regulatory principle to be promoted by national regulatory authorities, alongside the strengthening of related transparency requirements and the creation of safeguard powers for national regulatory authorities to prevent the degradation of services and the hindering or slowing down of traffic over public networks.’

9 ‘The

6.3 The 2013 Connected Continent Proposal

211

Also, the proposal in Article 24(2) emphasized the possibility for NRAs to implement national minimum quality of service requirements on providers of electronic communications. Furthermore, BEREC should be provided with enhanced monitoring and evaluation powers on the commitment to open internet provisions and—through amending the 2002 legislative package—roaming tariffs (Table 6.2). Table 6.2 COM(2013) 627, Article 24 COM(2013) 627 Article 24—Safeguards for quality of service 1. National regulatory authorities shall closely monitor and ensure the effective ability of end- users to benefit from the freedoms provided for in Article 23 (1) and (2), compliance with Article 23 (5), and the continued availability of non-discriminatory internet access services at levels of quality that reflect advances in technology and that are not impaired by specialised services. They shall, in cooperation with other competent national authorities, also monitor the effects of specialised services on cultural diversity and innovation. National regulatory authorities shall report on an annual basis to the Commission and BEREC on their monitoring and findings. 2. In order to prevent the general impairment of quality of service for internet access services or to safeguard the ability of end-users to access and distribute content or information or to run applications and services of their choice, national regulatory authorities shall have the power to impose minimum quality of service requirements on providers of electronic communications to the public. National regulatory authorities shall, in good time before imposing any such requirements, provide the Commission with a summary of the grounds for action, the envisaged requirements and the proposed course of action. This information shall also be made available to BEREC. The Commission may, having examined such information, make comments or recommendations thereupon, in particular to ensure that the envisaged requirements do not adversely affect the functioning of the internal market. The envisaged requirements shall not be adopted during a period of two months from the receipt of complete information by the Commission unless otherwise agreed between the Commission and the national regulatory authority, or the Commission has informed the national regulatory authority of a shortened examination period, or the Commission has made comments or recommendations. National regulatory authorities shall take the utmost account of the Commission’s comments or recommendations and shall communicate the adopted requirements to the Commission and BEREC. 3. The Commission may adopt implementing acts defining uniform conditions for the implementation of the obligations of national competent authorities under this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 33 (2).

212

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

BEREC’s governance structure should be altered in the way that ‘[i]n order to provide stability and strategic leadership to BEREC activities, BEREC Board of Regulators should be represented by a full-time Chairperson appointed by the Board of Regulators, on the basis of merit, skills, knowledge of electronic communication market participants and markets, and of experience relevant to supervision and regulation, following an open selection procedure organised and managed by the Board of Regulators assisted by the Commission’ (COM(2013) 627: (77), Art. 38). Whereas previous chapters have illustrated the EU authorization regime (2002/20/EC) as a legacy from national monopolies, the 2013 proposal aimed at facilitating authorization by Europeanizing the mutual recognition of national authorization. Authorization in one member state should result in a general pan-European authorization, meaning that a provider of electronic communications networks and services would not be required to authorize its undertaking in every single member state. Instead, authorization follows a notification procedure starting in the providers home member state, eligible for any other member state under the supervision of the respective NRAs—mutual recognition for communications authorization. Virtual broadband access or bitstream access is the IP-based successor of vertical unbundling of the communications infrastructure codified in the 2002 Access Directive (2002/19/EC) and its subsequent legislative acts. According to the proposal, the harmonization of national rules on virtual broadband access ‘would facilitate market entry and the provision of cross-border services both to endusers and businesses’ (COM(2013) 627: 11).10 Together with the provision of virtual broadband access products the proposal introduces the provision of assured service quality (ASQ) connectivity products that ‘enables customers to set up an IP communication link between a point of interconnection and one or several fixed network termination points, and enables defined levels of end to end network performance for the provision of specific services to end users on the basis of the delivery of a specified guaranteed quality of service, based on specified parameters’ (COM(2013) 627: (12)). Just like specialized services, ASQ products provide for a specific level of quality, virtually bypassing connectivity aside the best effort network. ASQ and specialized services put networks and services 10 The provision of virtual broadband access products signifies the transmission of the 2002 Access regime to the IP era as it aims at covering a new environment of vertical unbundling of communications services and networks on IP basis. However, it remains sticking to the definition of traditional communications services and does not consider substituting IP-based services. The impact assessment on the Connected Continent regulation briefly describes the diverging interest on the virtual broadband access market (SWD(2013) 331 final: 54–5).

6.4 The Legislative Procedure

213

operators and purchasers of virtual broadband access products in the position to ‘diverting traffic away from the public Internet to a less regulated premium priced alternative’ (Marsden 2014a: 56) and thus preferentially promote vertically integrated products. With regards to spectrum allocation, the proposal intended maximum harmonization, whilst safeguarding the competence of national competent authorities. Furthermore, roaming charges should be abandoned. On 11 September, the proposal was transmitted to the European Parliament and the Council.

6.4

The Legislative Procedure

6.4.1

Divided Support and Substantial Opposition

In September and October 2013, BEREC took position on the Commission’s proposal stressing that the proposed regulation—due to the hasty and incomplete consultative process—might ‘risk creating unnecessary complexity and greater legal uncertainty, and could have a negative impact on both investment and competition, ultimately to the detriment of European consumers and the wider European economy’ (BoR (13) 142: 1). BEREC referred to the proposal in the context of the ongoing review of the regulatory framework for electronic communications. Comprehensive scrutiny, also of the larger environment of the sector, was pivotal for the policies addressed. BEREC also addressed the bound perspective on traditional network and services providers and ‘notes that the overall output of the IT sector in Europe does not depend solely on the telecoms industry. Rather, it requires the development of sound relationships between telecoms operators and actors in neighbouring sectors (e.g. OTT providers, providers of operating platforms, equipment manufacturers)’ (BoR (13) 142: 3). BEREC further questioned the shift towards centralized regulation, which would threaten best practice on the basis of subsidiarity, and emphasized critical issues associated with the single EU authorization. To authorize undertakings only in the home member state when these undertakings market in more than one member state would undermine the competence of ‘host’ NRAs to adapt regulations to national market specification. The proposed Commission’s veto power on Article 7/7a (BoR (13) 142: 4) would undermine NRAs and BERECs independence. Also, BEREC rejected the Commission’s proposal to install a permanent BEREC chair. Thereby, BEREC emphasized its rather national character—representing national regulatory authorities—as it both rejected a supranational regulator and mutual recognition of authorization.

214

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

With regards to the provision of specialized service BEREC argued that ‘[t]he implicit encouragement of ASQ […] contradicts provisions elsewhere in the regulation aimed at controlling the proliferation of specialised services to ensure they do not impair the availability of best efforts internet access services’ (BoR (13) 142: 7). BEREC concluded that there was so far no market failure related to ASQ and that its provision should base on market-driven processes. Although the provisions on net neutrality were in line with the principles developed by BEREC, the proposal to a certain extent imposed uncertainties and difficulties on the provisions, enforceability as definitions of specialized services and the expected minimum quality of internet access services were not clarified: ‘BEREC believes that there should be more focus on end-users’ control and applicationagnosticism as criteria to identify practices to be prohibited’ (BoR (13) 142: 7). At this point, BEREC again emphasized that NRAs were the most appropriate actors to ensure the reflection and adoption of national specifications. Moreover, BEREC questioned the proposals on virtual broadband access products and spectrum. Rather than establishing a new regulatory framework both issues should follow a best practice approach, for which BEREC could provide expertise. In sum BEREC welcomed further harmonization in the sector and would support the measures adopted by the legislative bodies. On 14 November 2013, the European Data Protection Supervisor issued his comment on the proposal specifically responding on the outlined circumstances under which traffic management was applicable. He outlined that ‘[t]raffic management measures constitute a restriction to net neutrality, which the proposal sets out as the key principle applicable to Internet use in the EU, and interfere with end-users’ rights to confidentiality of communications, privacy and personal data protection’ (2014/C 38/06). Whenever ISPs measured online traffic, they might infringe end-users’ privacy rights and should therefore be restricted to a minimum interference with data transmitted online. In particular that contains analyzing IP headers instead of Deep Packet Inspection and refraining from wide-scale, preventive and systematic monitoring of communications content in general. He also suggested that not only NRAs supervised the application of traffic management measures but that also national data protection authorities supervised compliance with data protection law when applying these measures. On 5 December, the Council discussed the proposal for the first time (Table 6.3):

6.4 The Legislative Procedure

215

Table 6.3 3278th Council meeting Transport, Telecommunications and Energy (Council 2013c: 11) In their discussion, ministers welcomed the proposal’s objectives of incentivising investment, enhancing consumer rights and addressing net neutrality. However, many of them underlined the need for stability and predictability for investors and considered that the same objectives could be furthered by making better use of current instruments. Several ministers mentioned the need for a detailed analysis of the impact of the Commission’s proposal. Many delegations would prefer to give priority to the finalisation of other, more mature legislative proposals, such as electronic identification and reduction of the cost of broadband rollout. Many ministers expressed their concerns about the ramifications of the proposals, such as expected market consolidation which would be detrimental to small operators and small markets and limit consumer choice. Some delegations mentioned the costs and red tape that the creation of a single EU authorisation could cause.

The Council discussion showed general approval of the proposal, whilst some participants favored to prioritize different issues. One concern illustrated the wellknown conflict between consumer protection through safeguarding net neutrality against providing stability and predictability in the legal environment in order to safeguard private investments. Just as has been concluded by the impact assessment, also the Council did not attach to the innovation conundrum but employs a contradiction between innovation and consumer protection. The discussion thus shifted from net neutrality as a rule facilitating innovation to net neutrality as a rule safeguarding consumer rights. Opponents of the new proposal favored the maintenance and improvement of existing instruments. Other participants would rather focus on measures to reduce costs for the deployment of high-speed infrastructure, which again showed the twofold character of EU communications policy: measures concerning the Internet as an infrastructure and measures targeting the deployment of physical infrastructure serving internet-enabled services. Furthermore, some participants discussed their concerns regarding the fate of small market participants—network operators and services providers—within a consolidated single market and the costs and administrative burdens that would accompany the establishment of a single EU regulator as has been outlined as third option in the impact assessment. These concerns already showed latent opposition to further market integration and regulatory harmonization as would be achieved by further consolidation of an EU single market for electronic communications and a single EU regulatory authority for this market. The European Economic and Social Committee (EESC) in contrast, supported the Commission’s proposal as it was, while also favoring the possibility of

216

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

assured service quality (specialized services) and a single EU regulator dealing with specialized services. The EESC also highlighted that the Commission should ‘reconsider including broadband services in the scope of Universal Service Provision’ (2014/C 177/12: 2). Furthermore, the EESC discussed concerns of premature regulation as regards wholesale virtual broadband access products, end-users’ possibility to make available radio networks to other users, and the general ambitious timeframe of the regulation. The EESC justified its position employing the narrative of global competition on the high-speed internet market—particularly towards the US, Japan and South Korea—and the economic potential of high-speed internet for GDP growth. The Committee of Regions (CoR) also welcomed the Commission’s proposal, while it emphasized the need to respect heterogeneity in the Member States as regards the deployment of internet infrastructure and the role of local and regional authorities. Moreover, CoR emphasized ‘that it is essential to extend glass fibre networks to cover the last mile without delay’ (2014/C 126/13). As regards the net neutrality provisions of the proposal CoR opposed any exceptions from net neutrality and best effort principles as were outlined in Article 23 of the Commission’s proposal, as any deviation from these principles might result in anticompetitive behavior and thus harm the economic and societal potential of the Internet. The CoR therefore suggests the complete revision of any exceptions outlined in Article 23 and thus as the only actor concerned applied a heavy net neutrality definition.

6.4.2

The European Parliament’s Opinion

On 3 April 2014, the European Parliament issued its 1st reading opinion on the Commission’s proposal. In preparation to this opinion, six EP committees issued amendments to the Commission’s proposal, which put different foci on the issues of net neutrality, specialized services and ASQ. In the political system of the EU the committee debates represent the process prior to the first plenary debate. It is mostly their conclusions—particularly those of the responsible committee— that forecast the course and result of the plenary debate as they already organize backing among the committee and parliamentary groups (Shackleton 2012: 134; Hix/Høyland 2011: 58). In order to illustrate the diversity of opinions within the EP and the distinct perspectives on the issues at stake the different opinions will be highlighted in the following. The amendments will be scrutinized where relevant for the analysis.

6.4 The Legislative Procedure

217

Table 6.4 Procedure 2013/0309/COD, leading to Regulation (EU) 2015/2120 Procedure 2013/0309/COD, leading to Regulation (EU)2015/2120 11/09/2013

Adoption by the Commission and Transmission to the Council and the Parliament

14/11/2013

Opinion of the European Data Protection Supervisor Peter Hustinx

05/12/2013

Discussion within the Council

21/01/2014

EESC opinion, rapporteur: Anna Nietyksza

30/01/2014

CoR opinion, rapporteur: Frank Zimmermann

03/04/2014

EP opinion and 1st reading, rapporteur: Pilar Del Castillo Vera

09/07/2014

Commission position on EP amendments on 1st reading

27/11/2014

Discussions within the Council

23/03/2015

Trilogue negotiation

21/04/2015

Trilogue negotiation

02/06/2015

Trilogue negotiation

29/06/2015

Trilogue negotiation

28/09/2015

Discussions within the Council

01/10/2015

Adoption of Council’s position at 1st reading

02/10/2015

Adoption by Commission of its communication on Council’s position at 1st reading

08/10/2015

Receipt by the Parliament of the Council’s position at 1st reading

27/10/2015

EP opinion on 2nd reading

29/10/2015

Discussions within the Council

06/11/2015

Signature by the President of the EP and by the President of the Council

19/01/2016

Discussions within the Council

30/04/2016

Entry into force, except specific exceptions

The responsible Committee on Industry, Research and Energy (ITRE) issued the explanatory statement on the Commission’s proposal on 20 March 2014. Although the committee followed the Council’s objective to rapidly complete the digital single market, it claimed that the Commission’s proposal was not as comprehensive as it should have been. Correspondingly, ITRE issued concerns whether the proposal coped with the challenge ahead and suggested to postpone the amendments on spectrum policy, the single authorization of electronic communications and wholesale virtual broadband access, including ASQ, until the

218

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

complete review of the regulatory framework on electronic communications. This would also enable ‘a full public consultation as well as on ex-post assessments of the impact of the framework since 2009 and a thorough ex-ante assessment of expected impacts of the options emanating from the review’ (EP 2014: 165–6). Whereas roaming charges should be finally abolished, the committee opted for balancing general net neutrality rules and user demand for specific service qualities. ITRE thus opened yet another contradiction as refers to net neutrality: As had been outlined in the previous chapter, some arguments claim that there is consumer demand for specialized services. ITRE attached to this interpretation when issuing its opinion. It also suggested to outweigh potential misuse by ensured transparency and non-discrimination rules, which should be safeguarded through the regulation. Finally, ITRE rejected changes in BEREC’s governance structure as ‘in order to safeguard its independence from Member States and the Commission alike, it is critical to ensure that BEREC is led by one of its members’ (EP 2014: 166). The associated Committee on the Internal Market and Consumer Protection (IMCO) focused on consumer protection issues with regards to the Open Internet. IMCO supported ITRE on the incorporation of net neutrality rules in the new regulation. However, it criticized the sources of market fragmentation—already outlined in the impact assessment: ‘Imposing a selection of new centralised regulatory requirements in countries where the Regulator is already underperforming on consumer enforcement is hardly a recipe for long term success!’ (EP 2014: 169). Provisions amending Universal Service Directive EC/2002/22 should be implemented as specific amendments and not as part of the regulation in question. Finally, IMCO rejects Article 19 on ASQ whilst only slightly amending Article 23 on the Open Internet including the provision of specialized services. The Committee on Culture and Education (CULT) issued the most critical opinion on the Commission’s proposal. Particularly as regards spectrum policy, the committee opposed the proposal’s provisions and claims that regulating spectrum facing an upcoming framework review was premature. Moreover, member states should ‘retain the right to organize their spectrum’ (EP 2014: 262). The committee furthermore opposes the Commission’s net neutrality definition, which should account for non-discrimination and equal treatment of all traffic: ‘Net neutrality “lite”, as proposed by the Commission, effectively undermines this basic principle, would be the end of net neutrality and would establish a two-tier Internet’ (EP 2014: 263). Consequently, the opinion foresaw the deletion of any specialized service or ASQ and justifies traffic management only ‘where it is dictated by technical constraints and is in line with the general principles of necessity, reasonability, efficiency assurance, non- discrimination and transparency as well as the

6.4 The Legislative Procedure

219

other conditions of this regulation’ (EP 2014: 279, Am. 22). Specialized services in these regards should be separated from the Internet, made available only to a limited user group via controlled access and must not ‘substitute or provide content, applications or services functionally identical to those of the open internet’ (EP 2014: 289, Am. 44) Also, this practice must not discriminate against different specialized services. In sum, the committee suggested that ‘the Commission were to withdraw its proposal and provide an opportunity for proper discussion in the context of a normal consultation process, and then on this basis submit a new, balanced proposal to create a telecoms single market’ (EP 2014: 263). It further introduces a net neutrality lite definition ‘“net neutrality” means the principle that all internet traffic is treated equally, without discrimination, restriction or interference, independent of its sender, receiver, type, content, device, service or application’ (EP 2014: 279, Am. 23)

The committee furthermore intended to introduce minimum quality requirements for open internet access services ‘which shall be constantly upgraded in line with technological developments’ (EP 2014: 280, Am. 24), and committed to the best effort principle: ‘an open internet access service enables end-users to run any internet-based application in accordance with the best effort principle; the only permissible derogation from this principle is proportionate, justified data traffic management, in cases where the conditions for its use are clearly defined’ (EP 2014: 280, Am. 24)

The Committee on Legal Affairs (JURI) chiefly criticized the procedural and organizational environment of the Commission’s proposed time scheme as well as the possibility to conduct impact assessments and consultations, and refers to BEREC’s critical opinion on the proposal: ‘The European Parliament should have been able to request a thorough impact assessment of the proposed Regulation from its own services and dispose of sufficient time to proceed to a broad public consultation. The Rapporteur notes also the critical stance of BEREC towards the EU Commission’s proposal.’ (EP 2014: 304)

The committee rejected the implementation of a single authorization in favor of amendments to the Authorisation Directive (EC/2002/20), suggested to delete harmonization efforts of Articles 25–30 on transparency and information as they

220

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

would hamper consumer interests. It also opposed potential national fragmentation with regards to reasonable traffic management measures.11 The Committee also deleted provisions on ASQ and introduced a minimum service quality, which would safeguard the best-effort principle as had been proposed by CULT. The Committee on Civil Liberties, Justice and Home Affairs (LIBE) welcomed the harmonization efforts inhering the Commission’s proposal with regards to the single authorization, end-users’ rights and transparency and information obligations (Articles 25–30). However, the committee rejected Article 19 on ASQ. In detail, the Committee focused rather on privacy and data protection issues. The responsible ITRE committee eventually voted 30 to 12 in favor of its opinion with 14 abstentions. Despite the width of—in part contrary—opinions among and within the committees, on 3 April 2014, the EP adopted its 1st reading opinion. In sum, the ITRE opinion prevailed considering marginal changes in wording proposed by JURI and LIBE. The amendments to separate specialized services from the public Internet and to limit the access to specialized services by CULT, JURI and in parts REGI as well as enhanced transparency obligations proposed by CULT and JURI were eventually rejected. With regards to broadband deployment the EP followed the REGI amendment (Am. 8) to make available the European Regional Development Fund ‘to improving broadband access and high-speed networks and supporting the use of new technologies and networks in the digital economy and all European regions should be put in a position to make investments in this area’ (EP 2014: Am. 8).12 The single EU authorization complementing the 2002 Authorisation Directive (2002/20/EC), which should facilitate cross border acceptance of electronic communications undertakings within the Union, was rejected by the EP. Whereas the Commission intended to establish a single authorization in one member state granting access to all member states of that undertaking, the EP emphasized that in some member states authorization notifications were not mandatory and actually posed an administrative burden as such. The EP eventually rejected these provisions in favor of no authorization at all as is set out in amendment 103 referring to Article 3(1) of the Commission’s Proposal: ‘A European Any electronic communications provider has the right to provide electronic communications networks and services in the whole Union and to exercise the rights linked to the provision of such networks and services in each Member State

11 This issue targets exception defined under Art. 23(5) of the Proposal for a Regulation COM(2013) 627. 12 Amendment 8, Recital 4 c (new).

6.4 The Legislative Procedure

221

where it operates pursuant to a single EU authorisation which is subject only to the notification requirements provided in Article 4.’

Moreover, NRAs ‘shall treat providers equally in comparable situations, irrespective of their State of establishment’. Any further assignment of Articles 3 to 7 covering a single EU authorization were rejected by the EP’s first reading position. The EP intended to prolong spectrum the lease of spectrum to 25 years, and abandon any administrative charges excelling the administrative costs. In addition to the RSPG competence, BEREC should become eligible to issue ‘regulatory best practice, report or advice’ (EP 2014: Am. 116) to the Commission. Rules for wholesale virtual broadband access products should initially be assessed by an evaluation of the state of play. Rejecting the Commission’s proposals, the EP requested that BEREC, after evaluating the status quo, laid down guidelines on wholesale high-quality access products by the end of 2015 and thereafter reviews them ‘regularly in light of market and technological developments’ (EP 2014: Am. 141). It furthermore demanded NRAs to apply SMP monitoring of the provision of wholesale high-quality electronic communications services in line with Framework Directive EC/2022/21. The Open Internet provisions of the proposal caused a controversial first reading in the EP with the Commission13 attending. As the protocol illustrates, the issue of specialized services created a conflict between two well-known narratives: 1) Specialized services created a two-speed internet privileging those actors being financially able to pay for specialized services at the costs of those utilizing the ‘common’ internet. 2) Specialized services promoted innovation in internet-based services and applications as well as investment in infrastructure development.14 In its consolidated first reading opinion the EP eventually emphasized the principles of non-discrimination, equal treatment of content and services irrespective of content, sender and receiver, i.e. advocated the principles of best-effort and end-to-end. Moreover, the EP suggested limits to specialized services, which should safeguard the quality of the best-effort network and potentially provide for class-based discrimination: ‘Where such agreements are concluded with the provider of internet access, that provider should ensure that the enhanced quality service does not cause material detriment to the general quality of internet access. Furthermore, traffic management measures

13 namely

Commissioner for the Digital Agenda Neelie Kroes.

14 Neelie Kroes in EP debate on 02-04.2014: ‘there must be no blocking of specialised services

as long as they are not blocking the open Internet’.

222

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

should not be applied in such a way as to discriminate between competing services.’ (EP 2014: Am. 46)

With respect to Article 23 (EP 2014: Am. 148) the EP amended end-user choice by the freedom to ‘use terminals of their choice’ and thus overcame the gap relative to the four freedoms of net neutrality. Moreover, the EP limited the scope of the provisions of specialized services and imposed restraints on traffic management measures. The EP granted providers of internet access, of electronic communications to the public and providers of content, applications and services the right to offer specialized services, which ‘shall only be offered if the network capacity is sufficient to provide them in addition to internet access services and they are not to the detriment of the availability or quality of internet access services’ (EP 2014: Am. 148). Traffic management should be only reasonable in case of a legislative provision, a court order, security and integrity issues as regards the network, the services or the end-users’ terminals, and to prevent or to mitigate network congestions. The EP also intended to strengthen end-user rights with regards to transparency obligation on traffic management measures and the end-users’ rights to complain against any breaches of the provisions and to report to the respective NRA. In sum, the different positions of the committees15 illustrate that ITRE’s position, as the responsible committee, has prevailed in most cases. Particularly the application of a net neutrality definition is puzzling. Although CULT, JURI and LIBE succeeded to integrate a net neutrality definition in the EP’s 1st reading opinion, the term net neutrality is not being repeated in the legal text. Net neutrality remains a definition in Article 2 with the respective recital (45) (Table 6.5). Table 6.5 EP Amendments to COM(2013) 627, Art. 2 and Rec. 45 EP Amendments to COM(2013)627, Art. 2 and Rec. 45 Article 2—Definitions—(12a)/EP 1st reading opinion ‘net neutrality’ means the principle according to which all internet traffic is treated equally, without discrimination, restriction or interference, independently of its sender, recipient, type, content, device, service or application; Recital 45/EP 1st reading opinion (continued)

15 For

a detailed overview over the different committee amendments cf. Annex 1.

6.4 The Legislative Procedure

223

Table 6.5 (continued) EP Amendments to COM(2013)627, Art. 2 and Rec. 45 The internet has developed over the past decades as an open platform for innovation with low access barriers for end-users, content and application providers and internet service providers. The principle of ‘net neutrality’ in the open internet means that traffic should be treated equally, without discrimination, restriction or interference, independent of the sender, receiver, type, content, device, service or application. As stated by the European Parliament resolution of 17 November 2011 on the open internet and net neutrality in Europe, the internet’s open character has been a key driver of competitiveness, economic growth, social development and innovation — which has led to spectacular levels of development in online applications, content and services — and thus of growth in the offer of, and demand for, content and services, and has made it a vitally important accelerator in the free circulation of knowledge, ideas and information, including in countries where access to independent media is limited. The existing regulatory framework aims at promoting the ability of users to access and distribute information or run applications and services of their choice. Recently, however, the report of the BEREC on traffic management practices published in May 2012 and a study, commissioned by the Executive Agency for Consumers and Health and published in December 2012, on the functioning of the market of internet access and provision from a consumer perspective, showed that a significant number of users are affected by traffic management practices which block or slow down specific applications. These tendencies require clear rules at the Union level to maintain the open internet and to avoid fragmentation of the single market resulting from individual Member States’ measures.

6.4.3

EP Elections and the Council Conclusion

On 22 to 25 May 2014, just after the adoption of the EP 1st reading opinion, citizens of the European Union elected a new European Parliament, which in the aftermath resulted in a new Commission. In November 2014, the newly inaugurated European Commission16 committed to the European Digital Single Market and the importance of digitization for society. After already having fostered policies on the information society under the previous Commission, through DG Information Society respectively DG Connect, the new Commission designated the Digital Single Market one of three priorities of the European Union:17 ‘By creating a connected digital single market, we can generate up to EUR 250 billion of additional growth in Europe in the course of the mandate of the next Commission, thereby creating hundreds of thousands of new jobs, notably for younger job-seekers, 16 Namely,

newly elected president Jean-Claude Juncker.

17 The other key priorities are ‘Jobs, Growth and Investment’ and ‘Energy Union and Climate’.

Besides that, there are seven further priorities.

224

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

and a vibrant knowledge-based society. To achieve this, I intend to take, within the first six months of my mandate, ambitious legislative steps towards a connected digital single market, notably by swiftly concluding negotiations on common European data protection rules; by adding more ambition to the ongoing reform of our telecoms rules; by modernising copyright rules in the light of the digital revolution and changed consumer behaviour; and by modernising and simplifying consumer rules for online and digital purchases. This should go hand-in-hand with efforts to boost digital skills and learning across society and to facilitate the creation of innovative start-ups. Enhancing the use of digital technologies and online services should become a horizontal policy, covering all sectors of the economy and of the public sector.’

Also, from an intra-organizational perspective the Commission emphasized the strengthened focus on the Digital Single Market.18 The Commission had been organized into four project teams under the lead of one vice-president each. Within these project teams several Commissioners contributed their specific competences to support the targets of the leading Commissioner and the related key priority.19 On 19 September 2014, the Italian Council Presidency presented its opinion on the Commission’s proposal (Council 2014a) deleting the provisions on the single authorization, virtual broadband access and changes in BEREC’s governance structure and rejecting EP amendments on roaming, spectrum, net neutrality and end user rights (ibid.: 3). The Presidency’s opinion emphasized the Council’s agreement to focus on the key issues to abolish roaming charges and safeguarding the Open Internet: ‘Basic provisions in that respect were introduced into the framework for electronic communications in 2009. The review of that framework, combined with the forthcoming review of the Audiovisual Media Services Directive, might offer a suitable opportunity for a comprehensive approach to the issue. However, a number of delegations consider a principles-based EU approach useful at this juncture to minimise divergent regulation in the Member States, and the issue is also of relevance to internet governance’ (ibid.: 4).

The concerns about fragmented rules on net neutrality among the EU already guided the initial mandate to draft a proposal prior to the conclusion of the electronic communications framework review. The Presidency aimed at deleting the definitions of net neutrality and specialized services in favor of a ‘reference to 18 Andrus Ansip, Vice-President for the Digital Single Market, and Günther Oettinger, Commissioner for Digital Economy and Society, represented this priority in a new administrative arrangement. 19 These organizational ruptures in the institutional arrangement thus result from modifications actively enforced by political entrepreneurs such as Jean-Claude Juncker.

6.4 The Legislative Procedure

225

the objective of net neutrality, e.g. in a recital, which would resolve the concerns that the definition might be at variance with the specific provisions’ (ibid.: 10). The Presidency also endorsed ‘traffic management […], provided that it is transparent, non-discriminatory, proportionate, not anti-competitive’ and ‘cannot be maintained longer than necessary’ (ibid.: 10) (Table 6.6). Table 6.6 Council Presidency of 14 November 2014 on net neutrality (Council 2014b) Discussions on open internet/net neutrality appear to be converging around the following core elements: (i) a simplified principles-based approach, in order not to inhibit innovation and to avoid technological developments making the regulation obsolete; (ii) not regulating “specialised services” (while not prohibiting them); (iii) allowing necessary flexibility regarding traffic management measures (while not including measures relating to content lawfulness) and (iv) allowing scope for national NRAs, coordinated by BEREC, to provide guidance.

On 27 November 2014, the Council concluded that the Commission’s proposal has raised questions related to the single EU authorization, spectrum policy and consumer rights harmonization and that the preparatory bodies had suggested to limit the scope on roaming and net neutrality (Council 2014c: 8). Both issues also represented positions within which citizens (rights) take a pivotal role (Table 6.7). Table 6.7 3350th Council meeting Transport, Telecommunications and Energy (Council 2014c: 8)

The abolition of roaming charges caused concerns within the Council about the compensation of fading charges through raising national mobile communication charges. The Council furthermore highlighted that safeguarding an open and nondiscriminatory access to the Internet was crucial but that any regulation should not interfere with innovation and investment, consulting the narrative of specialized services as driver for innovation. Some member states had also favored a potential ban on price discrimination in terms of net neutrality. Moreover, the Council concluded that additional work on technical issues had to be complemented in order

226

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

to establish a common position. This would take until the end of 2014, whereas the discussion with the EP should wait until then (Council 2014c: 9). The Council thus determined the time frame of the procedure’s continuation. In light of the envisaged TSM review the Council took a reluctant position towards the Commission’s proposal also due to the manifold harmonization and Europeanization issues of the proposal. It thus degraded the Commission’s policy entrepreneurship and took over the policy-making procedure.

Table 6.8 Comparison of opinions of EP, BEREC and Council to COM(2013) 627 Commission Proposal

EP 1st reading opinion

BEREC opinion

Council opinion

Single Authorisation

rejected/proposal to repeal general authorization

rejected

eventually rejected

Spectrum Harmonization

amended

rejected in favor of best practice approach

eventually rejected

Virtual Broadband Access

postponed to general framework review

rejected in favor of best practice approach

eventually rejected

End-user rights (net neutrality and roaming)

amended

amended

amended

In May 2015, BEREC again published a position on the EP’s 1st reading opinion (BoR (14) 50). Whereas BEREC welcomed the amendments, it also issued concerns regarding the degraded role of NRAs as referred to the proposed nonotification approach in the authorization regime. BEREC criticized that the net neutrality provisions set out by the Commission and the EP were too complex and imprecise, the rules set out would lag sustainability and practical enforceability, and would not cope with subsidiarity: ‘BEREC would instead prefer an approach based on principles rather than detailed rules and which provides NRAs with the necessary powers to ensure that those principles […] are respected’ (BoR (14) 50: 4). Further, ‘national regulators would be pursuing the same objective and enforcing the same principles, but the specific triggers and thresholds for regulatory intervention in a given market could be adapted to address national circumstances’ (ibid.). BEREC further welcomed the EP’s acknowledgement of physical or

6.4 The Legislative Procedure

227

virtual separation of specialized services from internet access services, although it did not cover separation as a consistent principle (Marsden 2017: 99). As had been described above, concerns within the Council on the specific issues of the proposal have caused a limitation to issues related to end-user rights, namely roaming charges and net neutrality. With regards to the former, the Council refrained from abandoning roaming charges and instead postponed its repeal to the review. The Council in its position did neither define net neutrality nor specialized services.

6.4.4

Trilogue Negotiations

Between the first Council meeting in November 2014 and the second Council meeting in September 2015 the proposal was subject to trilogue negotiations between the Commission, the Council and the EP. Council representatives (COREPER I)20 , EP rapporteurs and Commission representatives held trilogue meetings on 23 March 2015, 21 April 2015, 2 June 2015 and 29 June 2015, followed by the confirmation of the political agreement on 8 July 2015. Throughout the trilogue process, compromise had been achieved on substantially limiting the scope of the regulation. Resulting from sontinued concerns among member states, the negotiating parties focused on the abolition of roaming charges and establishing rules on the open internet aka net neutrality—prior Article 23: ‘The Commission supported the Council position which limits the scope of the proposal to net neutrality and roaming, and this was confirmed in the negotiations with the European Parliament. The Commission recalled that the Digital Single Market strategy announced by the Commission on 6 May 2015 makes clear that spectrum will be part of the telecom review to be presented in 2016.’ (Council 2015b)

In May 2015, during the trilogue negotiation, the Commission adopted A Digital Single Market Strategy for Europe (COM(2015) 192), which consisted of 16 actions, i.a. covering the review of the regulatory framework for electronic communications. Claiming manifold advances related to the usage of ICTs and the emergence of the interconnected society—such as welfare and growth for Europe—the objective for the legislative period was to fulfill the Europe 2020 strategy by making ‘Europe a world leader in information and communication technology, with all the tools to succeed in the global digital economy and society’ (COM(2015) 192). The Commission’s Communication from 1 October 2015 to 20 COREPER I had debriefed the Commission in its meeting on 23/3/15 (ST 7416 2015 INIT).

228

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

the EP on the Council’s position in the trilogue negotiation illustrated the procedure that led to discontinue-ing the 2013 Commission proposal taking into account the adopted strategy (COM(2015) 489: 3): ‘The Council took a firm position to limit the scope of the proposal to net neutrality and roaming, and this was confirmed in the negotiations with the European Parliament. It should be noted that the Digital Single Market strategy announced by the Commission on 6 May 2015 makes clear that spectrum will be part of the telecom review to be presented in 2016. It is therefore acceptable to limit the scope of the draft regulation to roaming and net neutrality. This choice takes into account the clear indications from the European Council conclusions of 26 June 2015, that emphasise the importance of all dimensions of the Commission’s strategy and of pursuing an ambitious reform of the telecommuni-cations framework, including coordinating spectrum more effectively.’

Further: ‘As all amendments to the Commission proposal were discussed during the informal tripartite discussions, the Commission can accept the amendments that the Council adopted in its first reading position.’

The final Regulation (EU) 2015/2120 thus only includes the 2013 proposal’s provisions on net neutrality and the abolition of roaming surcharges, which represents the EP’s and Council’s position from the first trilogue meeting. It is likely that the Commission did not object this step, in order to facilitate compromise. The prospect of the 2015 DSM strategy probably helped compromise on this limitation as it announced a comprehensive review of the legal framework for electronic communications anyway. The negotiations might have built on the critical amendments by BEREC, specific EP amendments and the overall Council reservations: ‘The Commission will present proposals in 2016 for an ambitious overhaul of the telecoms regulatory framework focusing on (i) a consistent single market approach to spectrum policy and management (ii) delivering the conditions for a true single market by tackling regulatory fragmentation to allow economies of scale for efficient network operators and service providers and effective protection of consumers, (iii) ensuring a level playing field for market players and consistent application of the rules, (iv) incentivising investment in high speed broadband networks (including a review of the Universal Service Directive) and (v) a more effective regulatory institutional framework.’ (COM(2015) 192 final: 10)

A setback to the respective rule-making was to diminish the initial objective of the 2013 proposal, e.g. ‘[t]his Regulation establishes the regulatory principles

6.4 The Legislative Procedure

229

and detailed rules necessary to complete a European single market for electronic communications’ (COM(2013) 627: Art. 1). Whereas the 2015 DSM strategy announced that net neutrality provisions and the elimination of roaming surcharges directed a ‘first essential step’ (COM(2015) 192: 9) towards a Digital Single Market, it likewise postponed the completion of the digital single market based on the evaluation that the existing challenges ‘will not be fully resolved in the context of the ongoing discussions on the Telecoms Single Market package’ (ibid.). In consequence, any additional issue of the proposal had been postponed to the electronic communications framework review, which should cover ‘an ambitious reform of the telecommunications framework’ (COM(2015) 489)—regardless the fact that the Commission’s proposal for a regulation already foresaw an ambitious reform of the telecommunications framework, as had been claimed by the Council in Spring 2013. The trilogue compromise thus separated a pivotal step in rule-making on internet communications from the overall regulation of communications.21 Certain insights on the actors’ positions, particularly those of the EP and the Council, can be derived from the trilogue documents, which have been inquired by EDRi (European Digital Rights association) and made publicly available on asktheeu.org (EDRi 2015). The documents show that the Council already prior to the first trilogue meeting on 23 March 2015 has reduced the scope of the regulation to net neutrality and roaming issues. While the EP still attached to its 1st reading position, the Council had already deleted most of the paragraphs related to all issues but net neutrality and roaming. For the present context, Recital 45 and Article 23 of the proposal are of importance. The maturity of review that the Council’s amendments show indicates that it intended to pursue the limited scope from the very beginning. Also, the Council position had already limited Article 1 to: ‘This Regulation establishes the regulatory principles and detailed rules necessary to complete a European single market for electronic communications where: common rules on open internet access safeguarding related end-user’s rights and ensuring nondiscriminatory treatment of traffic in provision of internet access services.’22

The agreement can be characterized as negotiating two versions of net neutrality lite. While both agreed to limit traffic management measures in internet access services to the outmost necessary, the Council appeared as an advocate for 21 For a brief microlevel analysis of selective individual actors’ positions during the process see Marsden (2017: 97–102). 22 cf. 1st trilogue 4 column.pdf in EDRi (2015).

230

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

commercial traffic management agreements in services other than internet access services. The Council suggested the following provision, which was eventually rejected: ‘Providers of electronic communications to the public, including providers of internet access services, shall be free to enter into agreements with end-users, including providers of content, applications and services to deliver a service other than internet access services, which requires a specific level of quality’.23

At the same time, the Council successfully included provisions on commercial traffic management practices that had not been foreseen in the draft proposal (Table 6.9): Table 6.9 3rd TrilogueAmendment to the Council Mandate, Regulation (EU) 2015/2120, Art. 3(5) TrilogueAmendment to the Council Mandate Regulation (EU)2015/2120, Art. 3(5) 5. Providers of electronic communications to the public, including providers of internet access services, and providers of content, applications and services shall be free to offer services other than internet access services which are optimised for specific content, applications or services, or a combination thereof, in order to meet their requirements for a specific level of quality. Providers of electronic communications to the public, including providers of internet access services, may offer such services only if the network capacity is sufficient to provide them. Such services shall not be offered as a replacement for internet access services, and shall not be to the detriment of the availability or general quality of internet access services.

While both EP and Council complemented the Commission’s proposal by the fourth net freedom—the user’s free choice of terminal equipment—and defined limited exceptions for traffic management in internet access services, the Council nonetheless included exceptions from net neutrality rules on the basis of commercial considerations. The trade-off for the EP appears to be concessions with regards to the abolition of roaming surcharges. Although the Council agreed on a common position on 1 October 2015, Slovenia and the Netherlands opposed the net neutrality provisions of the trilogue compromise and thus voted against it. Whilst Slovenia and the Netherlands—in contrast to other member states—welcomed the harmonization of rules, they feared that the provisions would dilute 23 cf.

Annex 1.

6.5 The Final Legislation

231

national regulations on net neutrality in both states. Both Member States draw on a common concern—the narrative of heavy net neutrality proponents—that ‘the new arrangements will result in a two-layer Internet: a slow “best effort” service model and a high-speed Internet with guaranteed quality for an additional charge’ [Slovenia] and that ‘effective net neutrality rules also require discriminatory pricing practices to be clearly prohibited’ [Netherlands] (Council 2015a). By the end of 2013, after the first discussion within the Council, an NGO advocating for strong net neutrality rules launched the website savetheinternet.eu and thereby started to organize civil society engagement in favor of strong net freedom provisions under the legislative proposal. The NGO was supported by consumer protection organizations, civil rights movements and data protection associations, reporters without borders, start-up associations and manifold net freedom NGOs. During EP’s first reading and the phase of trilogue negotiations the initiative launched four successive online campaigns that called consumers to engage with members of the European Parliament (MEPs). Citizens should contact their MEPs to demand for strong net neutrality rules. From February until October 2015, during the trilogue negotiations, savetheinternet.eu informed about the development of the negotiations—as far as possible due to secluded access to information. It furthermore called citizens to additionally contact member states representations to the EU in order to claim strong net neutrality rules. After the Council had adopted its common position in October 2015, savetheinternet.eu again focused on the EP in order to undermine the trilogue agreement and convince MEPs to vote against the agreement—without success. The initiative eventually claimed that ‘we did not reach an absolute majority for the amendments which would have brought clarity to the text. The EU Regulation was passed, leaving it up to the telecom regulators to fix the uncertainties of the text’ (savetheinternet.eu). From April until September 2016, the initiative accompanied BEREC’s assessment and drafting of the Guidelines on Net Neutrality, calling citizens to contact their respective NRA. Savetheinternet.eu eventually participated in the public consultation on the BEREC guidelines.24

6.5

The Final Legislation

On 25 November 2015, Regulation (EU) 2015/2120 laying down measures concerning open internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and 24 For

a detailed analysis of the trilogue negotiations see McNamee/Fernández Pérez (2016).

232

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

services and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union was adopted. On the one hand, the Regulation ‘sets up a new retail pricing mechanism for Union-wide regulated roaming services in order to abolish retail roaming surcharges without distorting domestic and visited markets’; on the other hand it ‘establishes common rules to safeguard equal and non-discriminatory treatment of traffic in the provision of internet access services and related end-users’ rights’ ((EU) 2015/2120: Art. 1).25 The net neutrality scope of the regulation focuses on end-user rights, particularly on consumer choice, and aims at safeguarding the principles of a (negative) net neutrality definition. Despite the fact that the term net neutrality is avoided within the entire regulation, the provisions on the Open Internet yet implement net neutrality rules. The regulation foresees non-discriminatory connectivity to ‘any accessible end-points of the internet’ (ibid.: (4)), namely to all content, applications and services and their non-discriminatory provision with any terminal equipment of the respective user’s choice. It thus codifies the Four Freedoms of Internet, which enable users to access content, run applications and use services of their choice by the devices of their choice (Marsden 2017: 11), without prejudice to existing law. With regards to terminal equipment these freedoms had already been codified in respective legal acts, e.g. latest by Commission Directive 2008/63/EC.26 The Regulation also links to both already existing definitions from the 2002 regulatory framework on electronic communications (2002/21/EC) and introduces a definition for ‘providers of electronic communications to the public’27 and ‘internet access service’ ((EU) 2015/2120: Art. 2). The regulatory framework for electronic communication thus is amended by a new definition of services aside the definitions of publicly available telephone service (98/10/EC; 2002/22/EC), electronic communications service (2002/21/EC) and information society services (2000/31/EC). The ‘conveyance of signals on electronic communications networks’—defined in Framework Directive 2002/21/EC and amended by the Better Regulation Directive 2009/140/EC—and the provision of services thereon is further defined for the provision of internet access services (Table 6.10).

25 With

regards to the present study the latter is of relevance (Article 1(1)).

26 Directive 2008/63/EC of 20 June 2008 on competition in the markets in telecommunications

terminal equipment. 27 The definition of Art. 2(1) is redundant to prior definition, which already covered electronic communications networks.

6.5 The Final Legislation

233

Table 6.10 Regulation (EU) 2015/2120, Art. 2—Definitions Regulation (EU)2015/2120 Art. 2—Definitions 1. ‘“provider of electronic communications to the public” means an undertaking providing public communications networks or publicly available electronic communications services’ 2. ‘“internet access service” means a publicly available electronic communications service that provides access to the internet, and thereby connectivity to virtually all end points of the internet, irrespective of the network technology and terminal equipment used’

The regulation thereby extents the provision of electronic communications to access to the internet and the related services, while not addressing content providers. Regulation (EU) 2015/2120 rather defines two types of communications services: internet access services and services other than internet access services (specialized services). The former is provided by providers of electronic communications to the public and is subject to the non-discrimination net neutrality provisions set out in Article 3 (Table 6.11). The latter can be provided by providers of electronic communications to the public, including providers of internet access services and providers of content, applications and services and must necessarily be optimized for a specific level of quality (Art. 3 (5)). These services are offered or facilitated by providers of electronic communications to the public and providers of internet access services and must neither be provided at the costs of the overall network capacity and any internet access services nor substitute internet access services. The regulation outlines that these respective services and applications justify specific quality levels irrespective the overall compliance with the regulation’s provisions as ‘there is demand’ (ibid.: (16)) and as they served public interest. This also implies that the regulation thereby undermines a positive net neutrality definition. Whereas these provisions oppose the position of particularly some stakeholders in the legislative process, e.g. EP committee CULT and CoR, it represents claims for a balanced net neutrality approach issued by the responsible EP committee ITRE, member states in the Council and the Commission.

234

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

Table 6.11 Regulation (EU) 2015/2120, Art. 3—Safeguarding of open internet access Regulation (EU)2015/2120 Art. 3—Safeguarding of open internet access 1. End-users shall have the right to access and distribute information and content, use and provide applications and services, and use terminal equipment of their choice, irrespective of the end-user’s or provider’s location or the location, origin or destination of the information, content, application or service, via their internet access service. This paragraph is without prejudice to Union law, or national law that complies with Union law, related to the lawfulness of the content, applications or services. 2. Agreements between providers of internet access services and end-users on commercial and technical conditions and the characteristics of internet access services such as price, data volumes or speed, and any commercial practices conducted by providers of internet access services, shall not limit the exercise of the rights of end-users laid down in paragraph 1. 3. Providers of internet access services shall treat all traffic equally, when providing internet access services, without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used. The first subparagraph shall not prevent providers of internet access services from implementing reasonable traffic management measures. In order to be deemed to be reasonable, such measures shall be transparent, non-discriminatory and proportionate, and shall not be based on commercial considerations but on objectively different technical quality of service requirements of specific categories of traffic. Such measures shall not monitor the specific content and shall not be maintained for longer than necessary. Providers of internet access services shall not engage in traffic management measures going beyond those set out in the second subparagraph, and in particular shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific content, applications or services, or specific categories thereof, except as necessary, and only for as long as necessary, in order to: (a) comply with Union legislative acts, or national legislation that complies with Union law, to which the provider of internet access services is subject, or with measures that comply with Union law giving effect to such Union legislative acts or national legislation, including with orders by courts or public authorities vested with relevant powers; (b) preserve the integrity and security of the network, of services provided via that network, and of the terminal equipment of end-users; (c) prevent impending network congestion and mitigate the effects of exceptional or temporary network congestion, provided that equivalent categories of traffic are treated equally. 4. Any traffic management measure may entail processing of personal data only if such processing is necessary and proportionate to achieve the objectives set out in paragraph 3. Such processing shall be carried out in accordance with Directive 95/46/EC of the European Parliament and of the Council. Traffic management measures shall also comply with Directive 2002/58/EC of the European Parliament and of the Council. 5. Providers of electronic communications to the public, including providers of internet access services, and providers of content, applications and services shall be free to offer services other than internet access services which are optimised for specific content, applications or services, or a combination thereof, where the optimisation is necessary in order to meet requirements of the content, applications or services for a specific level of quality. Providers of electronic communications to the public, including providers of internet access services, may offer or facilitate such services only if the network capacity is sufficient to provide them in addition to any internet access services provided. Such services shall not be usable or offered as a replacement for internet access services, and shall not be to the detriment of the availability or general quality of internet access services for end-users.

6.5 The Final Legislation

235

Article 3 defines the conditions under which safeguarding open internet access will be conducted in the EU. First, it defines the four net freedoms and integrates a provision on location-independence, which can be explained by the Europeanization efforts of the institutional context to promote a Digital Single Market. Article 3(2) codifies that end-users and providers of internet access services can agree on commercial and technical conditions, such as price, data volumes and speed under the premise that these conditions do not limit end-users’ rights. Article 3(3) amends the provision from the first paragraph by a positive net neutrality definition. However, the prohibitive Article 3(3) is accompanied with some exceptions such as the permissive Article 3(5): reasonable traffic management measures and the provision of services other than internet access services define two exceptions from the provisions set out in Article 3(1) and 3(2) under specific limitations. The first exception is granted under the provision of maintaining the non-discrimination principle. While the exceptions are limited to three justified reasons, it links the issue of internet access to broadband policies: the compression of content, which should not infringe the provisions of Regulation (EU) 2015/2120, ‘enables a more efficient use of scarce resources and serves the endusers’ interests by reducing data volumes, increasing speed and enhancing the experience of using the content, applications or services concerned’ (ibid.: (11)). In turn, Article 3(5) is of a permissive nature that allows the offering of services other that internet access services requiring a specific level of quality. Recital 16 and 17 of the Regulation explain this need as follows: (16) There is demand on the part of providers of content, applications and services to be able to provide electronic communication services other than internet access services, for which specific levels of quality, that are not assured by internet access services, are necessary. Such specific levels of quality are, for instance, required by some services responding to a public interest or by some new machine-to-machine communications services. Providers of electronic communications to the public, including providers of internet access services, and providers of content, applications and services should therefore be free to offer services which are not internet access services and which are optimised for specific content, applications or services, or a combination thereof, where the optimisation is necessary in order to meet the requirements of the content, applications or services for a specific level of quality. […] (17) In order to avoid the provision of such other services having a negative impact on the availability or general quality of internet access services for end-users, sufficient capacity needs to be ensured. Providers of electronic

236

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

communications to the public, including providers of internet access services, should, therefore, offer such other services, or conclude corresponding agreements with providers of content, applications or services facilitating such other services, only if the network capacity is sufficient for their provision in addition to any internet access services provided. The provisions of this Regulation on the safeguarding of open internet access should not be circumvented by means of other services usable or offered as a replacement for internet access services. The provision of services other than internet access services (specialized services) should be suitable ‘only if the network capacity is sufficient for their provision in addition to any internet access services provided’; other services should not replace internet access services (ibid.: (16)). In consequence, the differentiation classifies two kinds of data transmission being realized on the internet of which the open internet can be subject to specific, limited traffic management measures and the QoS internet will be subject to traffic management measures (Figure 6.1).

Figure 6.1 The (EU) 2120/2015 net neutrality regime

These provisions eventually thwart any ‘heavy’ or positive net neutrality definition. As has been described above, ‘heavy’ net neutrality has never been seriously negotiated during the legislative process. The provisions eventually enable services or applications to be provided with a guaranteed level of quality as long as they do not substitute internet access services and as long as they do not deter the quality of internet access services. Content providers, application providers, services providers and Internet access providers are thus empowered to offer specialized services and establish a potentially vertical integrated internet in addition to internet access services, which must respect equal and non-discriminated

6.5 The Final Legislation

237

access to any (other) content. The regulation lags a definition of services other than internet access services, which is also due to a lack of understanding which applications could be included. Paragraph 3(5) might cause legal uncertainty—or arbitrariness. The US case on specialized services shows that a precise definition was ineffective given ‘the fact that the technological environment in which these issues arise is subject to rapid, and in material respects unforeseeable, change’ (O’Donoghue/Pascoe 2016: 1). Whereas the lack of a definition of specialized services is due to the just mentioned issue, O’Donoghue and Pascoe ask ‘by what standard, or measure, one should judge the lower bound of internet access services against which the different quality demanded by services that are optimised for specific content, apps, or services is compared’ (ibid.: 4). At first glance, Article 3(5) sub-paragraph 1 also infringes the consumer rights character of the regulation as it directs the definition to providers of content, applications and services ‘where the optimisation is necessary in order to meet requirements of the content, applications or services for a specific level of quality’ ((EU) 2015/2120: Art. 3(5)). However, Recital 16 dedicates this exception to the benefit of end-users ‘to enable a corresponding quality assurance to be given to end-users, rather than simply granting general priority over comparable content, applications or services available via the internet access service’ ((EU) 2015/2120: Rec. 16). Whilst the provisions on specialized services target relations between providers of electronic communications to the public and providers of content, applications and services, ‘a quality characteristic that is entirely disconnected from something that has utility for end-users seems inconsistent with the concept of necessity’ (O’Donoghue/Pascoe 2016: 5). However, economic considerations that are prohibited for traffic management measures under Article 3(3) can apply under Article 3(5), which leads to the question whether technological necessity leads to economic considerations or the other way around. With reference to van Schewick, the following argument shall be reconsidered: ‘selling Quality of Service allows network providers to profit from bandwidth scarcity, which reduces their incentives to increase the capacity of their networks’ (van Schewick 2014: 24). These issues will be subject to further monitoring and supervision by NRAs under Article 5(1) and eventually court decisions. In effect, these considerations could contradict the pivotal objective of contemporary EU communications policy, to promote broadband deployment. The consumer choice character of the regulation links the broadband issue (network capacity) to the universal service issue (net neutral consumer choice) when enabling Member States to take further reaching measures in the means of the 2002 Universal Service Directive (2002/22/EC). It again mandates ISPs to inform end-users about the usually available speed they are contracting over

238

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

with an ISP and empowers BEREC to establish, review and update methodological guidelines and NRAs to enforce compliance with the requirements of the present Regulation (ibid.: (18)). In line with the BEREC guidelines, the present regulation and the Universal Services Directive, NRAs ‘should also have powers to impose requirements concerning technical characteristics, minimum quality of service requirements and other appropriate measures on all or individual providers of electronic communications […] to ensure sufficient network capacity for the provision of high quality non-discriminatory internet access services’ (ibid.: (19)). However, it does not quantify the sufficient internet access quality. In the end, this debate appears as a compromise between consumer rights and return of invest or even between the two arguments claiming that net neutrality was hampering or promoting innovation respectively—only, it considers innovation on the network and services layer. Nevertheless, this compromise comes at the cost of legal uncertainty, which certainly hampers both investment and innovation. Recital 8 of the regulation explains the scope of net neutrality provided by Article 3 of the Regulation emphasizing the principle of non-discrimination: ‘When providing internet access services, providers of those services should treat all traffic equally, without discrimination, restriction or interference, independently of its sender or receiver, content, application or service, or terminal equipment. According to general principles of Union law and settled case-law, comparable situations should not be treated differently and different situations should not be treated in the same way unless such treatment is objectively justified.’

It thus refers to the principles of non-discrimination that inhere competition law, but at the same time leaves the details to third party interpretation. It has not become clear yet, which practices allow necessary traffic management measures. Article 5 thus sets out provisions for supervision and enforcement and thereby empowers NRAs and BEREC to supervise, monitor and enforce the provisions of the Regulation. Marsden describes it as ‘the teeth of the Regulation’ (Marsden 2017: 115). Whereas these provisions bring NRAs in a strong position to impose further requirements on providers of internet access services, legal delegations to NRAs might undermine EU level harmonization. In order to ensure the consistent application of the regulation, BEREC both takes account of annual national reports from the respective NRAs and as of 30 August 2016 had to issue Guidelines for the Implementation of the Obligations of NRAs under Article 5 (Table 6.12).

6.5 The Final Legislation

239

Table 6.12 Regulation (EU) 2015/2120, Art. 5—Supervision and enforcement Regulation (EU)2015/2120 Art. 5—Supervision and enforcement 1. National regulatory authorities shall closely monitor and ensure compliance with Articles 3 and 4, and shall promote the continued availability of non-discriminatory internet access services at levels of quality that reflect advances in technology. For those purposes, national regulatory authorities may impose requirements concerning technical characteristics, minimum quality of service requirements and other appropriate and necessary measures on one or more providers of electronic communications to the public, including providers of internet access services. National regulatory authorities shall publish reports on an annual basis regarding their monitoring and findings, and provide those reports to the Commission and to BEREC. 2. At the request of the national regulatory authority, providers of electronic communications to the public, including providers of internet access services, shall make available to that national regulatory authority information relevant to the obligations set out in Articles 3 and 4, in particular information concerning the management of their network capacity and traffic, as well as justifications for any traffic management measures applied. Those providers shall provide the requested information in accordance with the time-limits and the level of detail required by the national regulatory authority. 3. By 30 August 2016, in order to contribute to the consistent application of this Regulation, BEREC shall, after consulting stakeholders and in close cooperation with the Commission, issue guidelines for the implementation of the obligations of national regulatory authorities under this Article. 4. This Article is without prejudice to the tasks assigned by Member States to the national regulatory authorities or to other competent authorities in compliance with Union law.

Article 9 points out that the net neutrality provisions of the Regulation will have to be reviewed firstly three years after entering into force: ‘By 30 April 2019, and every four years thereafter, the Commission shall review Articles 3, 4, 5 and 6 and shall submit a report to the European Parliament and to the Council thereon, accompanied, if necessary, by appropriate proposals with a view to amending this Regulation.’

In sum, the regulation provides for the four net freedoms and a net neutrality ‘lite’/negative net neutrality definition (Marsden 2017: 116). O’Donoghue and Pascoe argued already before the regulation entered into force that ‘it is fair to say that the Regulation is not exactly a model of clarity and consistency. Unsurprisingly therefore the Regulation raises more questions than answers, which are likely to be litigated in the future’ (O’Donoghue/Pascoe 2016: 1). The two-tier

240

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

Internet eventually established by EU net neutrality rules intends to safeguard consumer protection through the best-effort internet access services (Art. 3(1)) and facilitate QoS innovation through services other than internet access services (Art. 3(5)). The latter particularly applies on bundled offers by network operators and services providers and implies that the ‘requirement of an application can be specified by the provider of the specialised service, although requirements may also be inherent to the application itself’ (BoR (16)127: para 106). This leaves the definition of these specialized services to the respective provider. Thus, the consumer is the blind spot of EU net neutrality rules. Just as van Schewick argues, ‘[t]he only actors who need to be convinced that the application needs Quality of Service are the innovator […] and the user, who wants to use the application’ (van Schewick 2015: 126). While some zero-rating offers already offer content classes to be added to zero-rating in mobile communications, the user cannot define a specialized service with a specific quality of service he or she wants to access via the general internet access service. In an open letter,28 Internet pioneer Sir Tim Berners-Lee together with Internet law professor Lawrence Lessig and Barbara van Schewick called European citizens, policy makers and regulators to advocate net neutrality guidelines that would establish strong net neutrality rules, namely: 1. Ban fast lanes: Regulators need to close a loophole that could allow carriers to offer special “fast lanes” to normal websites and applications for a fee. 2. Ban zero-rating: Regulators need to ban harmful forms of zero-rating. 3. Ban discrimination: Regulators need to prevent carriers from discriminating among classes of traffic to manage their networks. 4. Protect internet access: Regulators need to prohibit new “specialized” services from taking over bandwidth that people bought to access the Internet.

6.6

The BEREC Guidelines and the Commission Review

6.6.1

BEREC Guidelines

As is set out in Article 5(3) of the Regulation, BEREC was requested to issue ‘guidelines for the implementation of the obligations of national regulatory authorities under this Article’ by 30 August 2016, leaving the final interpretation of the regulation and its recitals to BEREC. The guidelines should address the 28 https://webfoundation.org/2016/07/four-days-to-save-the-open-internet-in-europe-anopen-letter/

6.6 The BEREC Guidelines and the Commission Review

241

obligations of NRAs resulting from the regulation and provide guidance on fulfilling these obligations. As requested, BEREC published its guidelines in August 2016 (BoR (16)127) taking into account the provisions of Articles 3 and 4 of the regulation as well as the objective to contribute to a consistent application of the regulation. In sum, BEREC did not assert the necessity of ex ante regulation. It rather identified three tasks to be conducted by NRAs: supervision, enforcement and reporting (ibid.: 167): Supervision, which encompasses monitoring by the NRA as set out in Article 5(1), and facilitated by the powers to gather information from ISPs in Article 5(2), on: • Monitoring of restrictions of end-user rights as regards terminal equipment (Article 3 (1))29 • Monitoring of contractual conditions and commercial practices (Article 3 (2))30 • Monitoring equal treatment of any traffic (Article 3 (3) 1)31 • Monitoring reasonability of traffic management (Article 3 (3) 2)32 • Monitoring and assessment of IAS performance and impact of specialised services on the general quality of IAS (Article 3(5) and Article 4) • Monitoring of transparency requirements on ISPs (Article 4); Enforcement, which can include a variety of interventions and measurements as set out in Article 5(1); Reporting by NRAs on the findings from their monitoring, as set out in Article 5(1). In line with Article 3, 5 and the recitals of Regulation (EU) 2015/2120, BEREC interpreted its provisions with a perspective on regulatory harmonization and enduser rights. With regards to the principle of non-discrimination, outlined in the objectives of the regulation, BEREC provided a class-based net neutrality understanding: any agreement on technical and commercial conditions is suitable as long as volume and speed limitations are conducted in an application-agnostic manner (BoR (16)127: para 34). BEREC also declared that bundling of services 29 BoR

(16)127: para 15–17. (16)127: para 30–48. 31 BoR (16)127: para 49–56. 32 BoR (16)127: para 57–75. 30 BoR

242

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

not affecting speed or volume or any other kind of traffic management, e.g. the provision of an internet access services while granting a free subscription to another service or application at the same time, was suitable under the guidelines if class-based (ibid.: para 36). Under the provisions of Article 3(1) any blocking or throttling of content, services and application or the agreement on the former was unlawful as it would limit end-user rights. BEREC clarified that this also applied on an application-agnostic ban on any application or services category, e.g. banning VoIP services in general (ibid: para 38). Relevant effects on end-users were given when ‘the range and diversity of content and applications which consumers may use […] is reduced in practice’ (ibid.: para 46) or when end-users are incentivized to use specific applications or services instead of others. With regards to the latter, BEREC claims potential influence on users’ choice within the remits of the legal provisions. Accordingly, particularly zero-rating was able to threaten users’ choice without limiting end-users rights. ‘The ISP could either apply or offer zero-rating to an entire category of applications (e.g. all video or all music streaming applications) or only to certain applications thereof (e.g. its own services, one specific social media application, the most popular video or music applications). In the latter case, an end-user is not prevented from using other music applications. However, the zero price applied to the data traffic of the zero-rated music application (and the fact that the data traffic of the zero-rated music application does not count towards any data cap in place on the IAS) creates an economic incentive to use that music application instead of competing ones. The effects of such a practice applied to a specific application are more likely to “undermine the essence of the endusers’ rights” or lead to circumstances where “end-users’ choice is materially reduced in practice” (Recital 7) than when it is applied to an entire category of applications.’ (Ibid: para 42)

This scenario illustrates how net neutrality is potentially being undermined as a result from the lite net neutrality definition. Although no bandwidth discrimination occurs at a certain point in time, when the data volume is unwearied, foresight to the effects occurring after the data volume will be exhausted, namely legal throttling of all traffic, incentivizes users to rather use zero-rated content, services or applications in the first place. The guidelines furthermore state that ‘the lower the data cap, the stronger such influence is likely to be’ (ibid.: para 48). Whereas there is no discrimination in the remits of the regulation and thus no infringement of user-rights, there is an incentive for user-based discrimination due to cognitive bias. While this only refers to situations in which data caps apply (e.g. mobile communications), a positive/heavy definition of net neutrality could avoid this, yet patronizing end-users. The guidelines also emphasize the effects on providers of content and applications, which could likewise be exposed to anti-competitive

6.6 The BEREC Guidelines and the Commission Review

243

behavior by internet access services providers if the availability or accessibility of their offers was limited, they were ‘discouraged from entering the market or forced to leave the market’ (ibid.: para 46) or if ISP’s influence distorted the market in a way that disadvantaged the internet ecosystem. In effect, the implications on content providers add to the limitations of end-user rights. On 6 December 2018, BEREC concluded that the net neutrality guidelines from 2016 should be reviewed and thereby clarified. The review should be conducted throughout 2019 including a written consultation. ‘In general, BEREC concludes that the application of both the Open Internet Regulation and the BEREC Net Neutrality Guidelines is working well. It is clear that both the Regulation and the Guidelines could be considered as striking a balance between the views of many stakeholders. From their inputs, BEREC observes that some stakeholders (for example ISPs) would like the BEREC NN Guidelines to be less stringent while others (for example consumer organisations) argue that the BEREC NN Guidelines should be more stringent.’ (BoR (18) 244: 2)

The conclusion emphasized three necessary actions that should eventually further harmonize their applications by NRAs, provide further guidance for assessing zero-rating cases and cope with the use cases of the emerging 5G technology, which creates a new context for applying net neutrality provisions. The BEREC Guidelines are interesting for another reason. When interpreting Regulation (EU) 2015/2120, BEREC concludes that ‘a limitation of the exercise of end-user rights is more likely to arise where an ISP or a CAP has a “strong” market position (all else being equal) compared to a situation where the ISP or CAP has a “weak” market position’ and that ‘[t]he market positions should be analysed in line with competition law principles’ (BoR (16)127: para 46). Also, the interpretation that any practice limiting end-users’ rights through discrimination of content, applications or services was unlawful under the provisions of the regulation becomes a core rule to the EU net neutrality approach. This key principle eventually attaches to competition law, which is not reflected by the regulation but eventually added through the BEREC Guidelines. Although ‘EU net neutrality rules bear little resemblance to competition rules and the scope to incorporate competition law principles within them is very limited’ (Maniadaki 2019: 479), BEREC advocates the application of competition law for assessing infringements against the open internet with regards to both internet access providers and content and application providers. BEREC thus became an advocate for applying the pivotal rule of EU communications policy to the new rules stemming from the exogenous and endogenous pressure.

244

6.6.2

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

The Commission Review COM(2019) 203 and the EECC

In April 2019, the Commission published the report on the implementation of the open internet access provisions of Regulation (EU) 2015/2120, which serves as the separate review process on the open internet provisions of the regulation defined in Article 9, due 30 April 2019 (COM(2019) 203). The report based on BEREC’s 2018 conclusions, a dedicated study on the implementation of the net neutrality provisions of the Telecoms Single Market Regulation (European Union 2019) and various stakeholder engagements. The report defines the success of the regulation along the four net freedoms imposed by the regulation, namely the abolition of blocking and throttling, which had been identified throughout the initial consultation process prior to the 2013 proposal, and the free choice of terminal equipment. With regards to the increased commercial practice of zero-rating, the Commission concluded that ‘these offers are less likely to have a distorting effect on the content market if they include entire categories of applications’ (COM(2019) 203: 4), thus attaching to the concept of class-based discrimination. While the Commission follows BEREC’s legal conclusion with regards to zerorating and welcomes coherent interpretation among NRAs, it ignores BEREC’s considerations about the cognitive bias that is exerted on end users by zero-rating offers. In sum, the report emphasized the maturity of end-users’ decisions in commercial agreements with internet access providers. With regards to services other than internet access services aka specialized services, the report refers to the legal uncertainty in the regulation. While specialized services may be provided ‘only if the network capacity is sufficient to provide them in addition to any internet access services provided’ ((EU) 2015/2120: Art. 5), the regulation did not define the sufficiency of network capacity. On this behalf, the Commission forecasted that it ‘might become necessary to further clarify when […] “network capacity is sufficient” and when specialised services are to the detriment of the availability or general quality of internet access services’ (COM(2019) 203: 8). The Commission further announced that it will update the guidelines together with BEREC. Given the short duration of the regulation’s implementation, the Commission concluded that the provisions satisfy the objectives as well as the market development. In the meantime, also epicenter.works has conducted an evaluation of the first two years of net neutrality enforcement in the EU. The report was published in January 2019 and concludes that ‘the European net neutrality regulation lacks a harmonised approach’ (Lohninger et al. 2019: 6).

6.6 The BEREC Guidelines and the Commission Review

245

On 11 December 2018, Directive (EU) 2018/1972) establishing the European Electronic Communications Code (EECC)33 was adopted. Once implemented by end of 2020, the EECC will replace the legislative framework for electronic communications networks and services, namely Directives 2002/19/EC, 2002/20/EC, 2002/21/EC and 2002/22/EC, and Directive 2002/58/EC and in fact amend the Better Regulation Directive 2009/140/EC and the Citizens’ Rights Directive 2009/136/EC. The EECC results from the review of the antecedent regulatory framework on electronic communications and intends to adapt to market and technology developments in the sector. Whereas already draft Directive COM(2013) 627 on a Connected Continent was intended to adapt the framework to a new market and technology reality, the relevant chapters were eventually postponed because member states awaited a scheduled review of the electronic communications frameworks, which was not yet due in 2013. In consequence, Regulation (EU) 2015/2120 on roaming and concerning the Open Internet—adopted on 25 November 2015—was neither subject to the evaluation nor is it integrated in the EECC. The EECC’s objective is to ‘simplify the current structure with a view to reinforcing its consistency and accessibility’ and provide ‘a level playing field for all market players and consistent application of the rules’ (EU) 2018/1972). As a direct descendant of the electronic communications framework, the EECC directly attaches to the EU telecommunications liberalization legislative context. EECC mirrors EU efforts initiated by liberalization and eventually targeting the completion of the Digital Single Market. In consequence, EECC ‘also offers the possibility to adapt the structure to the new market reality, where the provision of communications services is no longer necessarily bundled to the provision of a network’ ((EU) 2018/1972: (4)). The evaluation thus emphasizes that ‘the competition objective should take into account the new internet based services or Over-The-Top (OTT) players which are currently outside the scope of intervention of the regulatory framework’ (SWD(2016) 313: 32). Although the EECC is outside the scope of the present dissertation, it is remarkable that it does not consider EU net neutrality rules and thus neglects the possibility to integrate the scope of net neutrality rules when addressing the challenges imposed by overlay services (OTTs).

33 Directive (EU) 2018/1972 of the European Parliament and of the Council establishing the European Electronic Communications Code; in the following simply EECC.

246

6.7

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

Interim Conclusion: Risking Institutional Drift Through Non-decision

EU net neutrality rules were formulated in the context of EU communications policy. As part of the Connected Continent draft regulation (COM(2013) 627)) net neutrality rules had been proposed aside other provisions that should eventually promote harmonization and thus deepen the institutionalization of EU communications policy. The initial draft should therefore start a new phase of institutional layering. The financial crisis exerted external pressure from the institutional context and, together with the sedimented idea of ICT’s growth potential and the habitualized narrative of increasing global competition in the ICT sector, demanded measures to further harvest ICT potentials. The premature draft of the Connected Continent regulation should address these exogenous challenges. With regards to net neutrality, both the US34 and some EU member states had addressed the issue in respective legislative procedures. Especially the development in some member states urged EU-level action as the Commission intended to prevent fragmented net neutrality rules among the member states on the basis of national legislations. The DSM objective of the regulation thereby attached to the sedimented single market objective in EU communications policy. It should account for harmonizing existing rules and enhancing consumer protection—another pivotal rule in the institution of EU communications policy. Throughout the public consultation, the need for harmonization, legal certainty and high-speed internet had been emphasized by various stakeholders. To deploy high speed internet stems from the objectives of the Digital Agenda for Europe and once more illustrate the twofold character of EU communications policy— communications regulation and broadband deployment policies. The narrative of the economic and societal potentials of infrastructure availability had been internalized by relevant actors and thus had been iterated in the initial draft regulation. To continue to iterate this issue results from a perceived lack of deployment, thus poorly fulfilled expectations from the soft-law rules that have been implemented in the era of the Digital Agenda. Potentially, responsible actors—member states 34 For a long time, in Europe net neutrality had been perceived as a US related issue. To withdraw local loop unbundling in the US in favor of competition on the broadband market clearly provoked the debate on power over free access to online content as vertical integration arose suspicion of creating bottlenecks for online content (Marsden 2008: 7). In Europe, where vertical and horizontal unbundling have become fundamental rules of competition in the communications sector, the discrimination of IP-based services through ISPs has not been discerned as a threat, so far (Maniadaki 2015: 2). In 2010, US regulator FCC eventually implemented net neutrality rules.

6.7 Interim Conclusion: Risking Institutional …

247

or telecommunications operators—alienated from these rules or were not equipped to enforce them. Moreover, the rules implemented by the Digital Agenda might have been less ambitious as the relevant actors expected. While the Council welcomed harmonization, it likewise opposed further Europeanization of national competences. Although the institutional context justified further harmonization, the actual necessity to further harmonize the electronic communications framework resulted from poor harmonization due to a lack of coordination (SWD(2013) 331). Findings from the impact assessment illustrate that although there are coordinative bodies (BEREC, CEPT, RSPG), there is a lack of coordination and as a result also a lack of harmonization. This might in part be due to the primary choice of directives instead of regulations—thus the choice of a rule enabling more individual interpretation in favor of a rule prohibiting extensive individual interpretation. As a legacy from the telecommunications regime and electronic communications regime, directives had been applied in order to adapt to national specification and not least to ensure Council agreement on the foreseen measures. This implied that member states could adapt the respective provisions both to national needs and particular interests. Although initially the Commission intended to drive policy-making through accelerating the review of the TSM framework, it was eventually the Council who determined the next steps of the procedure. Both the EP and the Council deemed the Commission’s proposal (partially) premature, which reflected the short-term consultation process. While EP and Council thus agreed to limit the initial scope of policy-making, the Commission altered from an institutional entrepreneur to a mere coordinator in the legislative procedure. Whereas the Council already in its first meeting objected scope and timeframe of the proposal, the EP consolidated its comprehensive 1st reading position on the Commission’s proposal, which started an ordinary legislative procedure. In addition to that, the EP had been an important driver for net neutrality rules already throughout the 2009 communications review. As had been illustrated by the EP resolutions in 2011 and the comprehensive work on the 2013 net neutrality proposals, the EP was to be an institutional entrepreneur. Whereas the EP has become a tough negotiator in the legislative process of the EU (Wallace 2010: 84)35 , the heterogeneity of the EP often made it difficult to aggregate interests (Shackleton 2012: 131). The committee system—relevant in the legislative process as has been shown above—is an established mode of publicly discussing legislative proposals and consolidating interests. While the influence of civil society activists remains unclear, there is no doubt that activists and digital elites were responsible for the issue to be publicly 35 For

a brief historical overview over the EP’s development see Shackleton 2012.

248

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

discussed and become publicly visible. In addition to the official EP position, ‘the detailed work in the committees provides an opportunity for those interests that fail to win the argument in the Council or the Commission’ (Shackleton 2012: 134), which particularly concerns CULT’s and LIBE’s position in the present case. Without mobilizing civil society actors, the leverage of EP party groups and committees would not have had a societal base—even though it was not entirely successful in the end. The secluded trilogue negotiations stand in stark contrast to this. Actors that were disadvantaged by the opaqueness of this procedure tend to increase transparency. In the present case, NGOs engaged in formal rules—a formal inquiry—to eventually publish documents from the informal trilogue procedure. They created transparency in an otherwise nontransparent black box. The findings from the trilogue negotiations show that while both EP and Council tried to balance the net neutrality conundrum, the Council’s position slightly prevailed. Co-decision, implemented under the Maastricht Treaty, recalibrated the power structure within the legislative process of the EU (McCormick 2011: 91). The Treaty of Amsterdam enhanced both the influence of the EP in the legislative process and the policy areas on which co-decision applied (Shackleton/Raunio 2003; Hix 2002). It furthermore created a legislative ‘fast-track’ through enabling legislative conclusion in first reading (Héritier/Reh 2012: 1134; Häge/Kaeding 2007: 344; Brandsma 2015: 302; De Ruiter and Neuhold, 2012: 536). Ever since the introduction of possible early stage decisions the percentage of first-reading agreements has increased shortening the duration of the co-decision procedures in average36 (Rasmussen/Reh 2013: 1006; Brandsma 2015: 310; Häge/Kaeding 2007: 345; Reh 2014: 826). Particularly under the ordinary legislative procedure (OLP) introduced by the Lisbon Treaty, the strategic value of early stage trilogue negotiations increased as it circumvents the formal procedure of OLP in second and third reading, which imposes time limits, stricter voting rules on the EP and qualified majority voting for amendments in the Council ‘with uncertain outcomes’ (Brandsma 2015: 303). Limiting uncertainty and gaining momentum might be reasons for both actors to act on this basis and seize the processes enabled through the underlying institutional rules granting them authority over the choice of procedure. Roederer-Rynning and Greenwood adapt to the concept of culture in institutionalist theory when positioning trilogue therein: ‘Thus, when we speak of trilogues as an institution, we mean that trilogues have moved away from being simple technical devices for managing the inter-dependence 36 Whereas Héritier and Reh (2012: 1137) emphasize that the absence of legislative conflict is one reason for early stage agreement, informal negotiations are the likely alternative to pre-legislative consent.

6.7 Interim Conclusion: Risking Institutional …

249

of the co-legislators to become cultural constructs crystallizing different conceptions of institutional design. We see in trilogues the unstable product of the encounter of, and permanent negotiations between, different “conceptions of institutional design” involving different evaluations of the proper place of informal and formal politics’ (2015: 1153).

In terms of the present research interest in institutional rules, which can be of a formal or informal nature, Häge and Kaeding emphasized that ‘it is questionable whether a focus on constitutional rules and procedures alone can form a solid basis for explaining and understanding current decision making under the co-decision procedure’ (Häge/Kaeding 2007: 346). Informal negotiations, particularly when being as (informally) institutionalized as the trilogue procedure (Häge/Kaeding 2007: 344), play a major role in understanding not only decision making but also the persistence or change of institutions. Brandsma even argued that ‘informal trilogues have nowadays become a standard operating procedure’ (Brandsma 2015: 301). The concrete procedure of trilogue negotiations is organized in a rather black box, so that the procedure is not only informal and inaccessible, but it is also undocumented (Reh 2014: 826). The trilogue process limits transparency and shifts negotiating power to the participating actors. As Héritier and Reh state ‘[a]ll first and second reading trilogues offer an informal, restricted and secluded setting for negotiation between the co-legislators’ (2012: 1138). The authors claim that informal trilogue negotiations limit and thus empower the circle of actors in charge through exclusive participation, secluded information and informal rules of the game. Whereas trilogue also tends to lead to minimum barriers for Parliament and Council voting,37 legislations nonetheless have to be adopted formally (ibid.; Reh 2014: 826). The informal institutional rule to conduct trilogue negotiations underwent a specific process of concern and adjustment. In 2004, Members of the EP called for reforms, which successively institutionalized. First, non-binding Guidelines for First and Second Reading Agreements had been implemented, followed by a Code of Conduct in 2008 and amending Rules of Procedure in 2009. All of these efforts had been pushed forward by the EP itself, however stipulating only non-binding rules. Lately, the EP has even amended its procedural rules to further institutionalize first-reading agreements (EP 2015: 48–9; Brandsma 2015: 305). In 2011, the Constitutional Affairs Committee issued proposals on formalizing the rules into legal status. Thereafter, opening trilogue negotiations required a formal mandate given by the EP plenary. The amendments also codified a wider circle 37 Whereas first reading voting requires a simple majority in the EP, later voting require much higher quotas.

250

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

of participants from the EP, namely shadow rapporteurs or political group coordinators, and reporting obligations to the parliament’s groups (Roederer-Rynning/ Greenwood 2015: 1149–50). Although side-procedures to trilogue negotiations, both in the EP and the Council, have become more formalized since 2004, the massive application of trilogue has yet integrated secluded decision-making into OLP. The list of beneficiaries is diffuse. Scholars disagree whether the Council (Roederer-Rynning/Greenwood 2015) or the EP (Häge/Kaeding 2007) benefits most from trilogue in early-stage agreements. Also do scholars argue that increased formalization of selection and sanction procedures limit the scope of individual benefit for the participating actors, such as rapporteurs (Reh 2014). Whereas it is obvious that for ‚parliamentary actors, changing opportunities have three specific sources: the restriction of decision-making, the seclusion of negotiation and the majority required to endorse a compromise at first reading‘ (Héritier/Reh 2012: 1138), it is not likewise obvious to which ends this analysis leads. Since EP and Council still need to agree on a compromise made in the trilogue negotiations, trilogue requires inter-institutional and intra-institutional negotiations. This configuration of the negotiation process ‘creates novel opportunities for some actors and novel constraints for others, leading to a respective gain or loss of power’ (Héritier/Reh 2012: 1135) just as has been described for institutional rules. Farrell and Héritier (2003; 2004) thus argue that informal decision-making procedures benefit ‘relais-actors’ being in charge of the negotiations, such as EP rapporteurs, and the Council’s working group presidency (Häge/Kaeding 2007: 346; Brandsma 2015: 304; Rasmussen/Reh 2013: 1007; Stie 2013: 62). Both EP’s rapporteurs and Council Presidency are pivotal actors in the informal trilogue with limited actors in charge, ‘temporally restricted but afford unique opportunities’ (Rasmussen/Reh 2013: 1008).38 Héritier and Reh concluded that ‘being at the centre of inter-organisational negotiations in all policy areas seems to have brought a certain loss of open parliamentary debate, a marginalisation of rank-and-file MEPs, in particular those from small political groups, and, thus, a challenge to institutional legitimacy’ (2012: 1154). With reference to the institutional procedure in place, Rasmussen and Reh argue that ‘an actor’s strategic intra-institutional position is shaped by (1) institutional opportunities and constraints, (2) bargaining resources, and (3) the rules of inter-institutional negotiation’ (2013: 1008). Rasmussen and Reh also argue that rapporteurs were selected by 38 For further literature on EP rapporteurs in trilogue negotiations see Costello and Thomson (2010: 220; 2011: 338–9), Yoshinaka et al. (2010: 461–4), Benedetto (2005: 70) and on Council Presidency cf. Tallberg (2006: 19–39).

6.7 Interim Conclusion: Risking Institutional …

251

the EP on the basis of their ability to represent EP’s potential compromise. The present case of trilogue negotiations after EP’s first reading amendments both makes the EP’s position more transparent and makes it even less likely for a rapporteur to follow partisan or individual interests. It even limits the scope for the Council Presidency to play two-level games (Rasmussen/Reh 2013: 1019–20; Costello/Thomson 2011: 351–2). Moreover, the EP benefits from informal early stage negotiations relative to the Council, because of the latter’s aversion to conciliation due to less resources as regards time and personnel. The EP thus owns more negotiation power relative to the Council. Furthermore, the Commission’s role could be neglected due to its pivot interest in policy change relative to stasis (Häge/Kaeding 2007: 346). Translating these findings into an institutional perspective would characterize the Commission as a change entrepreneur and the EP and the Council as the subsequent designers of the change’s shape. With reference to Knight (1992), Héritier and Reh argue that in an institutional world ‘actors are competence maximisers and that their preferences over the rules governing fast-track legislation derive from the motivation to correct or sustain asymmetrical legislative influence’ (Héritier/Reh 2012: 1139), i.e. actors privileged by the status quo aim at maintaining the rules in force, whereas underprivileged actors try to either get in a position of power under the status quo or turn the rules of the game to their benefit. That applies both on the single actors within the particular organization and the organization as such. The increased utilization of early stage agreements and trilogue negotiations, which constitutes a research field on its own, has changed the process of decision-making in the EU legislative process and thus imposes significant changes of the rules of the game in the institution of EU communications policy. For the present case, trilogue negotiators have agreed on the division of the (COM) 2013/627 policy package. Whereas scholars highlight the pivotal actors’ advantages within the procedure when trilogue takes place on first-reading,39 in the present case trilogue negotiations started after the EP had already adopted its formal opinion at first reading. The reason for trilogue negotiations to start albeit the parliament had already adopted its formal position can be explained by potential discontinuity of the process. The question occurs, how sincere the Commission’s proposal was. Two procedural facts hint at procedural deficits: First, EU elections held in May 39 Rasmussen/Reh 2013: 1009): ‘There are, indeed, three key differences between negotiating an EA and concluding at second or third reading: first, the reliance on negotiation in secluded trilogues; second, “informal and simultaneous” rather than “formal and sequential” decisionmaking (Farrell/Héritier 2004: 1198); third, a simple majority requirement for amendments at first reading and for accepting the Council’s position at second reading (Hagemann/Høyland 2010).’

252

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

2014—just after the EP’s 1st reading opinion. Second, early Council objections that eventually manifested in the process. In comparison to the phase of telecommunications liberalization, first-movers on net neutrality rules rather objected the Commission’s approach and the trilogue agreement. The Netherlands and Slovenia, which had national net neutrality rules already in place, were concerned for their stronger national rules potentially being eased through the regulation. From an institutionalist perspective, first-mover actors might increase the pressure for superior rule-makers to act in terms of institutional change, they might not necessarily benefit from the changes eventually agreed on. Although the Connected Continent regulation had eventually been rejected, the legislative procedure linked the Open Internet provisions to the legacy of EU communications policy. Regulation (EU) 2015/2120 introduced general provisions to safeguard the Four Freedoms of the Internet. At the same time, the pivotal actors agreed to foster negative net neutrality (net neutrality lite) rules, that would facilitate traffic management. Thus, they established a bias that ultimately led to legal uncertainty. The innovation conundrum was further introduced to the rulemaking by the opposition between consumer organizations and network operators together with services providers, which accounted for further uncertainty of outcome. In effect, provisions on traffic management split into enabling, permissive rules (Article 3(5)) and restraining, prohibitive rules (Article 3(3)). O’Donoghue and Pascoe, Marsden and others conclude that ‘the concept of “reasonable traffic management measures” is nebulous and is therefore likely to lead to litigation’ (O’Donoghue/Pascoe 2016: 12). Traffic management represents a practice from the institutional setting of internet communications that was new to the institution of EU communications policy and furthermore conflicts with key principles of competition. The Council combined the competition objective of consumer protection with the innovation conundrum when arguing for a balanced net neutrality approach that would both reflect consumer protection and safeguard (incumbent) network operators’ and services providers’ capacity to innovate and invest. Likewise did EP committees. The EP eventually adopts net neutrality narratives when framing a two-tier Internet, which resulted from allowing specialized services. The narrative of net neutrality enabling or hampering innovation, which has been employed in the EU net neutrality debate, was new to the institution of EU communications policy. In effect, rules from a foreign institutional setting intrude the existing institution during the process of rule-making. In the present case, these new rules attach to the established narrative of the information society, which could benefit from the new practice of maintaining specialized services. Thus, the relevance of the internet as a tech-nological development—or, put differently, a

6.7 Interim Conclusion: Risking Institutional …

253

set of rules and procedures—in the context of economic growth and global competition opened the institution of EU communications policy for intermediates from another institutional setting. While the EU attaches to this exogenous concept, internalizes it and addresses the respective challenges, it regulates a problem without easing the inclined challenges. While the net neutrality provisions of the regulation intended to safeguard consumer protection in terms of end-users’ rights, the addressee of the regulation is the internet services provider, which is capable of infringing with these rights. Throughout the process, the discussion shifted from net neutrality as a rule facilitating innovation to net neutrality as a rule safeguarding consumer rights. The regulation thus refrains from addressing the complex relations between network operators, internet access providers, content providers and end-users. Nevertheless, the regulation changes the relation between the various groups of actors affected by the new rules. While end-users remain the subject to consumer protection, for which competition law should account under the telecommunications framework, the former differentiation between incumbent providers of communications services and new entrants was dissolved. Instead, the regulation establishes symmetric provisions for provider of electronic communications to the public, namely internet access services and network operators. The legal division for imposing non-discrimination rules separated internet access providers from content providers imposing competition law provisions on the former while in effect safeguarding the latter from discrimination. Moreover, the provisions apply irrespective of the market power of any of the actors in the any of these groups (Maniadaki 2019: 487), which is partly balanced by the BEREC guidelines addressing SMP situations. During the discussions about net neutrality from 2009 on and the subsequent legislative processes, BEREC gained massive influence on the interpretation of net neutrality related issues. Regulation (EU) 2015/2120 delegates the interpretation of net neutrality provisions to BEREC through assessments and guidelines. Not only did BEREC execute its right to advice on issues relevant for the electronic communications sector, such as net neutrality, but it also fulfills a pivotal role in interpreting the provisions of the legislation. BEREC eventually incorporated an ever-stronger position in the institution of EU communications policy. Thus, the question arises who might benefit and who might lose from this development. The Commission is likely to gain power through further Europeanization of competences through co-drafting guidelines and supervising implementation. NRAs might gain further competence through their monitoring role towards BEREC. Member states might maintain national competence due to the strengthened role of NRAs. At the same time, BEREC’s competence implies the intergovernmental

254

6

EU Net Neutrality Rules: You Can’t Have the Cake and Eat …

interpretation of supranational rules by independent national actors that ultimately enforce compliance of private sector actors within the member states. Given these findings, the question occurs whether net neutrality rules that do not even refer to competition law and instead impose vague provisions are better suited to tackle discrimination in the online world than established competition law would. Correspondingly, the BEREC guidelines emphasized the fundamental role of EU competition law to the interpretation of the regulation and to safeguard consumer rights also in internet communications. While Savin concludes that a ‘rapidly changing internet combined with a slowreacting compromise-prone political entity results in confusing policies’ (Savin 2014), the pivot of competition law together with the competences already transferred to the EU level might provide the basis for further Europeanization in EU communications policy. However, when the relevant actors cannot agree on the changes, which they want to implement with regards to the rules of the game, or attach to different interpretations, the respective institution will suffer from increasing pressure both from the changing environment and from different interpretations and internal alienation. The consequence from this inclination for stasis could eventually lead to institutional drift, which would threaten the stability of this institution: ‘In the case […] where the mode of change was drift, change was above all the result of nondecision’ (Streeck/Thelen 2005: 25). The lack of long-term objectives with regards to specific net neutrality provisions and the uncertainty with regards to political outcome imposed by the innovation conundrum ultimately resulted in institutional nondecision indicating potential drift. Particularly legal uncertainty for private and civil society actors adds to ambiguity, which could ultimately threaten actors’ overall allegiance.

Figure 6.2 The institutionalization process of EU communications policy—Phase 4 (author’s figure; coordinate plane refers to Hix/Høyland (2011:10))

6.7 Interim Conclusion: Risking Institutional … 255

7

Conclusion: Upcoming Challenges for EU Communications Policy

The present dissertation intended to approach the question how the institution of EU communications policy responds to the changing institutional context that ultimately represents a new communications reality. It did so on the basis of institutionalist theory, which had been reduced to this definition: An institution is a status quo in a specific temporal and sectoral institutional context, that is constituted in normative and cognitive sources of allegiance. The institution is built upon commonly accepted rules among a group of participants that commit to the institution’s rules on the basis of a (sedimented) common understanding of behavior which is not necessarily their own or their preferred behavior. Due to its temporal and sectoral embeddedness and its reliance on allegiance, institutions are potential subjects to constant and gradual change.

Over the past four decades, EU communications policy has become a sophisticated institution constituted by significant vertical depth and horizontal linkage. The process of rule-making on communications has illustrated the capacity to actively integrate a former national policy area into EU policy-making through institutional engineering and institutional entrepreneurship seizing contextual changes. The disruptions caused by liberalization had been the sincerest in the sector. The friction that currently occurs in the context of internet communications and the related net neutrality debate could become likewise sincere. While institutional change towards liberalization resulted from regulatory change, the clash between traditional communications and internet communications results from technological change in the very institutional context. While incumbents’ rights had already been massively reviewed during 1980s and 1990s, technological change cause short-term disruptions. The actual implementation of net neutrality rules in the © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9_7

257

258

7

Conclusion: Upcoming Challenges for EU Communications Policy

EU rather intended to balance economic uncertainty—albeit creating legal uncertainty. Long-term objectives had not been implemented, which hindered actors to dissolve the innovation conundrum that inheres the foreign institutional setting. Uncertainty has rather been imported to the institution of EU communications policy. Institutional entrepreneurs that promoted liberalization of telecommunications, namely the European Commission, had been supported by the sectoral context. Institutional change had followed the long-term objectives to facilitate competition to the end-user’s advantage, economic growth and social welfare. The situation in internet communications is less clear. The innovation conundrum that inheres the net neutrality debate makes it difficult for institutional entrepreneurs to commit to stringent rule-making. Various institutionalist scholars emphasized the risk and even likelihood of unintended consequences (Pierson 1998: 30; Rothstein 1998; March and Olsen 2008; Thelen 2009). The advantage of telecommunications reform was the relatively stable context that facilitated a process of almost three decades1 for institutional change and respective rule-making. Just as March and Olsen emphasized: ‘successful comprehensive [institutional] reform may depend on expanding the time horizons of reform efforts and buffering them from short-term fluctuations in attention’ (March/Olsen 1989: 99). As of today, the established institution of EU communications policy accounts for a highly integrated EU policy field with established rules and structures, relatively committed actors, and clearly defined procedures and power attributions. Deciding to not maintain this institution by either actively abandoning it due to a new institutional context or by not actively maintaining its capability to persist despite institutional change would eventually lead to the exhaustion of these established structures and its contribution to EU integration. The establishment of embedded structures in a new institution that embraces internet communications has not yet prospered. Thus, there are various interests to maintain the incumbent institution, not least to maintain integrative power over an established as well as emerging institutional context—communications policy. The analysis suggests that there is continuity in institutional rule-making within the institution of EU communications policy. Although the focus on EU digitalization and broadband policy accounts for a conversion, which implies changed objectives within the institution, the pivotal rules of EU communications policy had been relatively persistent. However, the occupation with the new institutional context of internet communications was limited to infrastructure availability and facilitation of services and application. Rule-making rather neglected the connection 1 From

the 1983 Green Paper to the review of the converged market and the establishment of BEREC in 2009.

7.1 Context Matters: A Window of Opportunity for Institutional …

259

between hard-law communications regulation and soft-law information society policies. Net neutrality rule-making eventually constituted a bridge between these two pillars, yet to the detriment of institutional (and legal) certainty due to nondecision. The following will present generalization of the findings. It will therefore structure the findings along the theoretical prerequisites that context matters, rules matter, actors matter and institutions matter. This chapter will end with overall concluding remarks on the institutional role of technology and an outlook on the institutional context of emerging technologies.

7.1

Context Matters: A Window of Opportunity for Institutional Change

The analysis concludes that for the present institution the institutional context was decisive for change. Only through changes in the institutional context could actors seize the windows of opportunity and engage in institutional engineering. Yet, while the context to EU communications policy changed from liberalization to the information society narrative to digitalization to internet-enabled innovation, the narratives associated with the various contexts remained constant. Throughout the entire record of EU communications policy, the relevant actors employed the narrative of competition from the US and Asia—Japan, South Korean and China—in a changing economic and technological environment. Likewise did actors attach this narrative to the idea of societal and economic potential of ICT when adapting to the respective new context. The institutionalization of EU telecommunications policy was promoted through an advantageous institutional context inside and outside the EU: ‘Global competition in the telecommunication sector was interpreted as pressure toward structural adaption, which during the 1990s attained such an intensity that virtually all countries have become forced to transform their sectors toward privatization and liberalization. Europeanization in this context did not create these pressures, but it certainly provided a kind of catalytic transmission of this constraint in order to produce favorable conditions for European industry to survive in the context of increasing global competition.’ (Schneider 2001:78)

This institutional entrepreneurship created both institutional change through displacement, layering and conversion and institutional stability through adapting to the new realities from the institutional context. While there was certainly economic and technological change in the context of EU communications policy, it

260

7

Conclusion: Upcoming Challenges for EU Communications Policy

was the acceptance of narratives and ideas that facilitated contextual adaptation. The interpretation of external economic pressure to the advantage of an emerging (digital) single market under competition rules supported the institutionalization of single market policies. The interplay between non-discrimination policies and the establishment of a (digital) single market promoted the application of EU competition law and the installation of actors enforcing it: ‘In this way, the EU has established one of the most sophisticated regulatory frameworks in the world. It highlights the Commission’s success in Europeanising regulation of a sector that, for many years, was driven by the perceived need to catch up to the United States and Japan’ (Goodman 2006: 255).

At the same time, the institutional context exerted massive pressure on incumbent actors, which intensified institutional ruptures. While in the beginning neither was the Internet meant for telecommunications nor was telecommunications meant for data transmission, technological evolution became a leverage to the transformation process. The latest phase of EU communications policy has illustrated the mismatch between EU communications policy and communications reality in the context of internet communications, which eventually provoked the need for change. In comparison to the liberalization efforts that resulted from a regulatory change in the institutional context, the latest changes were the results of technological changes in the institutional context. As Michalis put for the early 1980s: ‘Europe was weak in information technology but strong in telecommunications’ (Michalis 2007: 111). This is valid until today. To cope with the inherent frictions resulting from the institutional context of internet communications it is crucial to advance EU communications policy and to safeguard the advances in European integration.

7.2

Rules Matter: The Pivot of Sedimented Rules

The institutionalization of EC communications policy followed a combination of activating systemic norms—EC competition law—and utilizing procedures derived from the political system—e.g. issuing Commission Directives under Article 90(3) and complying with ECJ rulings. Subsequent rule-making depended on this combination. In effect, the pivotal rule of competition law prevailed throughout the entire transformation of the institution and framed other rules that hardened the institutional setting throughout the phases of layering and even conversion, e.g. non-discrimination as implemented in ONP, technological neutrality and the

7.2 Rules Matter: The Pivot of Sedimented Rules

261

Digital Agenda policies. The rules attached to competition law have also affected the transformation of power structures within the institution as is particularly true for the Commission, BEREC and NRAs. Not only did competition law develop a basic paradigm in EU economic policy but it ultimately became the glue that holds together the institution of EU communications policy: ‘This progressive habitualization is likely to be reinforced when a professional community gets structured around those new legal rules—in charge of reading, implementing, and enforcing them’ (Quack/Djelic 2005:256). Other rules that have been implemented attached to competition law when outlining the principle of non-discrimination as is seen in the relevant liberalization legislations but also underlying BEREC’s net neutrality interpretation. The application of EU competition law on telecommunications policy in accordance with the EU liberalization objectives illustrate a twofold institutional transformation: first, it signifies the expansion of the scope of EU competition law and thus promotes the emergence and displacement of incumbent institutions. Second, it demands allegiance among the member states and therein demands allegiance to EU law, which is realized again through the emergence and displacement of incumbent institutions. But competition law did not only shape EU communications policy. The overall single market objectives made ‘EU competition rules guarantee a free market and economic efficiency, providing an “economic constitution” for Europe’ (Wilks 2010: 135). Beforehand, the scope of EU competition law was subject to negotiations between competing interests and institutional allegiances (i.a. Quack 2005: 363). The ‘old’ politics of integration developed to the ‘new’ politics of regulation (Young 2010: 108). During the process of liberalization, policy-makers aimed at overcoming the cleavage characterizing then telecommunications markets: imbalance between incumbents and market entrants in all of the three relevant areas, infrastructure, services and terminal equipment. Rule-making in that phase intended to create a level-playing-field among potential competitors and thereby to overcome segregation between market participants resulting from market entrance barriers. Whereas the Treaties have been changed repeatedly, the articles on competition in the Treaties have prevailed these changes. Although these articles have accounted for member states’ setbacks as refers to telecommunications policy, allegiance with the generality of these rules has accounted for their durability: ‘Historically, there is no question that neither the governments negotiating the Treaties of Rome nor the parliaments ratifying them had any intention to use European competition law to challenge the existence of service public functions in the member states of the Community. In fact, Art (86) II TEC contains language which suggests exactly the opposite.’ (Scharpf 1999: 63)

262

7

Conclusion: Upcoming Challenges for EU Communications Policy

Open access to physical networks for new market entrants, universal service obligations, which guarantee end users’ access to telecommunications services, and technological neutrality, introduced by the EU regulatory framework for electronic communications in 2002, provided further institutional rules and hardened the institution of EU communications policy. In sum, the institutionalization of EC telecommunications policy has endured manifold changes and persisting opposition; continuous layering strengthened its resilience to massive change. These changes have transformed the institutional arrangement but maintained and even extended the core institution of competition. Competition became the sedimented, reciprocal typifications of habitualized action within the institution of EU communications policy or as Zucker claimed: ‘norms which are central to institutions become internalized’ (Zucker 1991: 84). While the Bangemann report supported further liberalization and therefore the application of competition law, it also outlined the objective to provide digital infrastructure access to all EU citizens, which ever since echoed in EU communications policy. This objective had been promoted for telecommunications under state monopoly before liberalization and under the universal service regime in liberalized markets. Surprisingly, this hard-law approach of universal service obligations never made it to the digital age, i.e. mandating universal services for broadband networks. The Commission rather decided to incentivize member states to promote broadband roll-out through a digital agenda scoreboard, in fact soft-law naming and blaming. Institutional rules have blurred after the 2009 review of the regulatory framework for electronic communications. Whereas the old rules remained fierce, digital agenda policies have led to new non-binding targets. The phase of soft-law during the implement-tation of the Digital Agenda for Europe both shifted the focus to broadband development and relied on coregulation, investment incentives and public funding for broadband deployment. At the same time, new market entrants started to substitute traditional electronic communications services via IP and introduced for the significant transformation towards IP-based content in communications. Despite these developments, the regulatory framework on electronic communications—and with that the institutional setting—neglected the emergence and eventual vast application of information society services. Although the 2015 net neutrality rules did not per se attach to EU competition law, BEREC’s interpretation adopted the logics on non-discrimination and revived EU competition law for interpreting the EU net neutrality provisions. Given the technological developments in the institutional context, which eventually intruded the institution of EU communications policy, there is value in comparing the different inherent technological preconditions of the EU communications policy and the Internet. As Star argues

7.2 Rules Matter: The Pivot of Sedimented Rules

263

‘[i]n information infrastructure, every conceivable form of variation in practice, culture, and norm is inscribed at the deepest levels of design. Some are malleable, changeable, and programmable–if you have the knowledge, time, and other resources to do so. Others […] present barriers to users that may only be changed by a full-scale social movement’ (Star 1999: 389).

Also, Busch argues that while ‘standards appear to be neutral, benign, merely technical, obscure, and removed from daily life’ (Busch 2011: 28) they represent the translation of (diverse) positions due to roles into power structures; standards eventually become gateways of power (Sandvig 2013: 98). In internet communications IP provides for interoperability on the basis of technological evolution, while in traditional communications regulation provided for interoperability. Furthermore, IP is per se technologically neutral, which was codified by the 2002 Framework Directive for traditional communi-cations. More significant, the endto-end and best-effort principles account for any end-user’s access to the requested content, application or service. In traditional communications, this principle had been safeguarded by universal services provisions—limited to telecommunications technology. Lastly, net neutrality accounts for content being carried on the physical network via internet access services, just as open network provisions accounted for alternative services providers’ access to incumbents’ networks and services via bitstream access. In effect, there is already a technological equivalent to regulatory requirements from the institution of EU communications policy in internet communications. It has yet to be codified to become legally binding. But as DiMaggio and Powell stated: ‘institutional models are unlikely to be imported whole cloth into systems that are very different from the ones in which they originate’ (DiMaggio/Powell 1991: 29). The entire setting on EU net neutrality rules—including the legislation and the posterior guidelines—illustrates that while there is no legislative continuity of the competition principle, there is continuity of interpretation in favor of the competition principles. Liberalization perpetuated the idea to open networks for services competition as the new entrants on the services market did not own networks (at least until convergence). The endeavor to remove regulation when the regulatory need ceases is a crucial challenge once regulation is enforced (Knieps 2013: 3). So far, it did not cease. EU policy-making already used non-discrimination legislations in the telecommunications era, namely the 1988 Terminal Equipment Directive (88/301/EEC), the 1990 Open Network Provision (90/387/EEC) and Services Directive (90/388/EEC) and the 2002 Framework Directive (2002/21/EC), Access Directive (2002/19/EC) and Authorization Directive (2002/20/EC). It was therefore rational to also approach net neutrality under

264

7

Conclusion: Upcoming Challenges for EU Communications Policy

a non-discrimination umbrella. In the light of EECC and the 2015 net neutrality provisions, Maniadaki concluded that ‘competition law remains one of the tools which are available to regulators in order to address practices that might result in the unequal treatment of content of certain type or origin. In some cases, competition rules will even be the only tool available’ (Maniadaki 2015: 3). On the other hand, the net neutrality debate unearthed a new conflict arising in the Internet age between content providers and network operators as well as internet access services providers. Diffuse interests on this issue have settled binding but neither comprehensive nor clear rules. The focus on consumer rights rather than on the relationship between network operators, internet access providers and content providers stems from EU competition law but does not entirely address the broadened scope of actors—thus the increased vertical depth. To abandon state monopolies within the remits of competition law should eventually serve public interest and consumer protection. Whether the uncertain net neutrality rules will serve both is yet to be evaluated and might be best assessed retrospectively. Rule-making in the context of net neutrality and the innovation conundrum imposes uncertainty on the actors involved as they do not provide interpretive coherence: ‘The suspicion arises from the belief that the most promising path of development is difficult to predict in advance, and the argument that any single prospect holder will suffer from cognitive biases […] that make it unlikely to come to the right decisions, despite best intentions’ (Wu 2003: 146). This makes it unlikely for actors to find normative and cognitive sources of allegiance. If ambiguity is not resolved, this leads to institutional ruptures (March/Olsen 1989: 48). With reference to Quack (2005: 347) this rule however provides for a regulative function as it constrains and enables action and provides for a symbolic function as it accounts for societal (and economic) values. The major finding of this analysis addresses the long-term procedures that eventually guided policy-making to the detriment of an effective EU communications policy. Thus, it is not the processes of institutional layering or displacement that are crucial but the fractures in policy linearity. In the present case there are two. The first one was introduced by the Bangemann report and eventually executed by the Europe 2020 strategy and the Digital Agenda. Whereas beforehand there was a linear choreography of hard-law and soft-law legislation leading to comprehensive regulatory objectives, the displacement of the policy objectives towards soft-law score boarding diffused the antecedent efforts. It addressed network deployment without implementing specific rules for the prospected services that should eventually utilize these networks. This development created significant asymmetries in the institution of EU communications policy. The second fracture refocused communications policy as it intended to adapt the existing regulatory

7.2 Rules Matter: The Pivot of Sedimented Rules

265

framework to the technological developments. While network deployment remained subject to policy action, communications infrastructure and services became subject to regulatory calibration. However, the second, adverse friction could not settle the initial discontinuation of steady regulatory adaptation. To date, EU legislation differentiates between traditional communications networks and services on the one hand and content being distributed and accessed on or overlay this communications infrastructure. EU net neutrality rules have not reflected the importance of reform itself. They rather reflected the changes from the institutional context. In order to cope with the technological advances and challenges ahead, EU rule-making should consider an approach that eventually combines the logics underlying these legally separated but functionally associated contexts. For rule-making in EU communications policy this means first and foremost to define long-term objectives, to which the related rules adhere. Also, a pivotal rule that glues the institutional structures and motivates commitment through providing certainty is of crucial relevance. Only if objectives and a pivotal rule provide for normative and cognitive allegiance, an institution can adapt to exogenous and endogenous challenges. EU competition law has proven as an effective pivotal rule that eventually also provides for interpreting EU net neutrality rules. The long-term objectives appear to attach to two institutional context: First, innovation continues the narrative of global competition and the idea of societal and economic potential of ICT. If institutional rules can facilitate innovation in communications, they will satisfy the pressure resulting from the context and fulfil the idea. Second, consumer protection inheres EU competition law ever since. Consumer protection was to be safeguarded through enhancing consumer choice throughout telecommunications liberalization and communications convergence on the basis of non-discrimination. The question, rule-makers should ask is how to combine these objectives in a way that satisfies these long-term objectives and thereby promotes cognitive and normative allegiance. Therefore, rule-making in EU communications policy should further enhance its vertical depth and actively integrate content providers and not least consumers as those actors that request and ultimately define the demand for any specialized or best-effort communications service.

266

7.3

7

Conclusion: Upcoming Challenges for EU Communications Policy

Actors Matter: The Role of Institutional Entrepreneurs

The analysis further concludes that actors prevail throughout the entire process of EU communications policy to date and that there is a relative continuum of actors that benefit from Europeanization of rules and that endorse further Europeanization. Although the Commission as the initial institutional entrepreneur faced setbacks particularly in the latest stage of institutional change, both the Commission and BEREC gained power throughout the entire process. Irrespective their concrete influence on rule-making, incumbent telecommunications operators lost institutional power, while the linkage of other private sector actors increased throughout institutional change. Also, the analysis suggests that institutional entrepreneurs—such as the European Commission—take a pivotal role in institutionalization processes. While rule-making on EU communications policy as such included various important actors, initial advances towards further Europeanization had been pursued by the Commission. The Commission also elevated actors that eventually supported further integration. As an institutional entrepreneur, the Commission increased the horizontal linkage of the institution through attaching it to the pivotal rule of EU competition law and promoted vertical depth through continuous integration and establishment of further actors. The establishment and integration of actors such as ITTF, SOGT, CEPT, ETSI strengthened the validity of the institutional displacement. Programs such as ESPRIT and RACE equipped further supporting actors with resources: ‘[W]indows of opportunity arise if problem pressure has built up and a sufficient number of stakeholders share a vision of an alternative set of policies so that change is feasible and not blocked by veto players’ (Bauer 2014: 11; Baumgartner/Jones 1993; Tsebelis 2002). When actors started to realize the value and the stake of telecommunications for global competition and the ongoing institutionalization, they put massive effort in controlling telecommunications regulation and safeguard their role in this process. Throughout the entire institutionalization process the Commission managed to gather allegiance with the rules inhering the emerging institution—i.a. through the interplay with the ECJ. It thus broadened the institution’s scope through integrating ever more actors, albeit discriminating the former power structures. Through allocating interest for its objective, seizing the window of opportunity provided by the institutional context, applying competition law and verifying its competence on the application of competition rules by the ECJ, the Commission reinforced its position in the incumbent institution and managed to contribute to the process of change. It furthermore executed its power through directives that left some interpretation to the member states and thereby enabled compromise where necessary.

7.3 Actors Matter: The Role of Institutional Entrepreneurs

267

Thus, the support of the ECJ, which agreed on the Commission’s interpretation of EC competition law, was pivotal and eventually enforced compliance through member states’ allegiance with the Treaties. The Commission managed to organize approval from other relevant actors, also by granting concessions to member states and particularly NRAs, which had been established by the Commission’s proposals in the first place. With reference to Rothstein (1998), it is not far-fetched to conclude that the Commission instrumentalized its power over competition law to achieve a “doubling of power”, making the ECJ its companion. The Commission understood well to leverage the changed institutional context, sedimented rules from the past and emerging ambitions from less powerful actors—potential new market entrants—to advance its own position not only in the institution of telecommunications policy but in the entire political system of the Community: ‘for external shocks to bring about fundamental transformation, it helps if endogenous change has prepared the ground’ (Streeck/Thelen 2005: 22). Also, the relevant actors understood how to maintain the once established institution of EU communications policy and, instead of converting or drifting, through a combined approach of layering and displacement to keep and ultimately enhance horizontal linkage and vertical depth. The Commission’s initiative thus further accelerated European integration when it followed a path of ‘harmonized but decentralized’ regulation (Mayer-Schönberg/Strasser 1999:578). Another initial key actor in institutionalizing telecommunications policies was the European Court of Justice (ECJ). The ECJ, already before the White Paper on the common market had been adopted, played a crucial role as regards the interpretation of the Treaty, thus as refers to interpreting the rules constituting the institution of the EC—i.a. when deciding the Cassis de Dijon case. Ever since, the ECJ comprised interpretative authority in all institutional domains it inheres. During the procedure applying Treaty competition rules on communications policy, the ECJ was the only actor holding adequate ‘constitutional-legal’ (Rhodes 1997: 37) resources to assemble allegiance among actors opposing the institutionalization process—namely the member states and PTTs. However, the tendency to maintain the status quo—and the therein established power positions and belief systems—remained strong. Significant changes occurred either through changes in the environment—which caused successive compromise—or through the enforcement of allegiance to the rules of the Treaty—particularly competition law. The appeal on the EC Treaty recognized by the ECJ thereby accounts for an institutional motion of confidence—either the associated actors comply, or they are being expelled from the institution:

268

7

Conclusion: Upcoming Challenges for EU Communications Policy

‘As important, the Court operates to saturate supranational political arenas with rules, and with rule-oriented modes of deliberating, a process that proceeds gradually but inevitably in areas of sustained judicial activity. To the extent that private and public actors adapt to this process and to these rules, the Court has reinforced the move to supranational governance, making it all but impossible to reverse.’ (Stone Sweet/Caporaso 1998: 130)

Although the Council adopted the overall single market objectives, it was equally the major opponent—and potential veto-player—both in this initial phase and in the subsequent phases. The ECJ interoperation of the single market objectives and the associated rules in favor of Europeanization, thus in favor of the Commission’s capacity to act under competition law, definitely weakened the Council’s veto position. However, the challenge to maintain national competence in telecommunications persisted. Wallace points out that the Council’s ‘first priority is to pursue whatever seems to be the preferred objective of national policy’ (Wallace 2010: 79). Institutional change in EU communications policy ever since was a contested endeavor between proponents of a supranational competence and wardens of the status quo. As has been illustrated in the analysis, Europeanization potentially threatens the existence of incumbent rights, roles and power structures. The beneficiaries of the respective status quo, namely most member states and PTTs, opposed institutional change in the first place. On the other hand, potential new entrants seized liberalization and entered the market challenging incumbents—often being supported by the new regulatory regime: ‘Communications policies are being made in increasingly crowded environments, with new foreign actors coming centre stage. This erosion of independence has freed both governments and groups from old restraints. Governments can use external restraints and “necessities” to force change on domestic groups, whilst groups can in turn shortcircuit their governments by lobbying international institutions or forging their own cross-national strategies. In these respects the influence of external decision-making centres and constraints has become critical to the development of communications policies.’ (Dyson/Humphreys 1990: 2)

The diversity of private sector actors diversified throughout further layering and conversion as ever more sector segments had been internalized to the institution both during the phase of liberalization and during the phase of digitalization policies. While the Commission’s role changed from an institutional engineer to an entrepreneur overseeing market developments in a soft-law score boarding environment of the Digital Agenda targets, it remained thus pivotal to the maintenance of the institutional stability. Yet, with regards to net neutrality, BEREC, the EP and not least individual member states acted as institutional entrepreneurs

7.4 Institutions Matter: Institutional Change as a Basis …

269

that evaluated the overall net neutrality situation, issued resolution and legislated. While BEREC’s activities were rather mandated through the Digital Agenda and thus prepared potential Commission action, the EP and particularly active member states contrasted EU level inertia. Also, during the trilogue negotiations on the Connected Continent regulation, the Commission did not succeed to maintain its role as institutional entrepreneur. Rather did the Council take over the process and transformed the eventual outcome. The Commission might regain its role as institutional entrepreneur when reviewing net neutrality provisions after having evaluated further market developments together with BEREC. The role of institutional entrepreneurs, be they institutional engineers or just beneficiaries of a changing institutional context, is pivotal to institutional change that maintains the existing institution. While the initial institutional displacement established the institution of EU communications policy certainly through institutional engineering, the subsequent layering rather account for safeguarding the institution’s stability. Instead of altering the rules and structures arbitrarily, the Commission as the institutional entrepreneur managed to balance the respective interests, not least to the advantage of further Europeanization. While the Commission applied commonly agree narratives and ideas throughout previous rule-making, it could not employ a joint vision with regards to net neutrality rules. Opposition between civil society actors and industry actors in internet communications promoted net neutrality’s innovation conundrum and thus provided for uncertainty already in the phase of rule-making, which nourish outcome uncertainty towards pivotal rule-makers. One difference that can be derived from the liberalization process is the lack of further integrating actors that prepare or support the Commission’s objective on net neutrality. While during liberalization various actors had been established or activated (SOGT, ITTF, etc.), net neutrality rules had been prepared by BEREC alone, which eventually criticized the Commission’s initial draft. Moreover, the Commission’s approach to balance the innovation conundrum imported the related uncertainty, which ultimately threatened its role as institutional entrepreneur.

7.4

Institutions Matter: Institutional Change as a Basis to European Integration

After its emergence through institutional displacement, the institution of EU communications policy maintained stability despite various contextual changes. The institutions’ response to exogenous and endogenous alterations was constant and gradual change through layering and conversion in order to adapt to the changed context. The institutionalization of EU communications policy based on the

270

7

Conclusion: Upcoming Challenges for EU Communications Policy

combination of activating systemic norms and procedures, iterating narratives of contextual trans-formation and employing actors to support the interpretation of the former. While the context changed, rules accumulated, pivotal actors remained relatively constant. Thereby, the institutionalization of EU communications policy also accounted for European integration. To reflect one of the initial theses, institutional change in EU communications policy has in effect advanced European integration. Haas points out, that political integration is the process ‘whereby political actors in several, distinct national settings are persuaded to shift their loyalties, expectations and political activities toward a new centre, whose institutions process or demand jurisdiction over the pre-existing national states. The result of a process of political integration is a new political community, superimposed over the pre-existing ones’ (Haas 1958: 16). The institution of EU communications policy is constituted by: a committed set of actors, of which institutional entrepreneurs embedded in a supporting network advanced institutionalization; the continuity of a pivotal rule, to which the respective actors commit; a basic exogenous narrative, which attaches to the institutional context; and an idea that unfolds validity in the remits of normative and cognitive allegiance. Institutions shall reduce complexity and increase certainty about future developments by providing prospect of other’s behavior. Despite opposition against the liberalization and convergence efforts imposed by the Commission and infringement procedures against member states, institutional change provided a sufficient quality of certainty for actors to commit to the institution. This composition explains the stability of this institution despite massive changes in the institutional context. The scheme below has continuously illustrated a path towards more Europeanization with reference to Hix/Høyland (2011: 10). Yet, it also outlines an uncertain path in the last phase—either towards more layering or eventual drift. The rules are illustrated as structural clusters that represent the respective policy regimes and regulatory frameworks; some legislations are highlighted. Pivotal rules that are implemented at a certain point of the institutionalization persist and are highlighted as such. They eventually refer to the one pivotal rule of EU competition law (right column). The pivotal actors cluster around the specific policy regimes, which helps to identify pivotal actors that shape the entire process, while some actors inhere pivotal rules in a temporary context.2 The overall institutional context also divides into four phases, which likewise employ the narrative

2 Other

than the previous schemes, this scheme also includes the pivotal rule of ‘end-toend/best effort’ that inheres in Internet communications since its advent and is thus a pivotal rule to Internet technology as such – contributing to the pivotal open internet rules.

7.4 Institutions Matter: Institutional Change as a Basis …

271

of global competition in the respective context (background slices). The institutional context reflects a temporal dimension that shaped the institutionalization process. The overall institutionalization process accounts for an increased degree of policy integration throughout the temporal dimension of EU communications policy. While the extent of supranational decision-making increased significantly through displacement and layering against the backdrop of liberalization, the score boarding and soft-law approach initiated after the completion of telecommunications liberalization slightly ceased supranational decision-making. Conversion to digitalization policies shifted EU communications policy to other objectives and thereby integrated further policies. Against the backdrop of global competition on internet-enabled innovation, which inheres internet communications, the path of EU communications policy to rely on open internet provisions rather created uncertainty. It became evident that EU communications policy did not reflect communications reality in the internet age. The Connected Continent regulation could have accounted for further layering and thus advancing Europeanization. Instead, the EECC might continue further layering and absorb the potential institutional drift. While the institution of EU communications policy managed transformative pressure in the past, it lately neglected incorporating the transformation imposed by the institutional context as such. The analysis has concluded that the results from institutional change do not necessarily satisfy the objectives that initiated change in the first place. Irrespective the altered scope of the legislation, the net neutrality case illustrated that Regulation (EU) 2915/2120 rather created legal uncertainty instead of resolving the net neutrality conundrum. Neither did the Commission as an institutional entrepreneur nor did the trilogue favor one of the two innovation paradigms. Successful continuation of the institution through i.a. further layering lacks a pivotal rule to which change can adapt. From an EU policy perspective, the implementation of net neutrality rules lacks this distinct objective. Thus, network neutrality does not necessarily represent a policy adjustment that could maintain EU communications policy in the new context. The key problem was that EU communications policy imported a foreign rule that instantiates uncertainty. Nondecision ultimately impeded further institutional layering and will thus not ease exogenous pressure. Eventually, this might result in the institution’s drift and potential exhaustion if the rules and actors involved will not counter the ongoing institutional drift. A learning from this should be to not adopt the uncertainties that inhere foreign rules when adapting to contextual change by adopting rules from a different institution. In sum, it is not yet clear whether the institution of EU communications policy persists in the new institutional context.

7

Figure 7.1 The institutionalization process of EU communications policy—all phases (author’s figure; coordinate plane refers to Hix/Høyland (2011:10))

272 Conclusion: Upcoming Challenges for EU Communications Policy

7.5 Outlook: Technology Matters

273

The adoption of the EECC is one step to advance institutional layering to cope with the changed institutional context.

7.5

Outlook: Technology Matters

The analysis has illustrated that there are indeed two institutional settings that collide. The uncertainty that manifests in the 2016 net neutrality rules is just a symptom of this collusion. To analyze the institutionalization of EU net neutrality rules may thus provide only first insights into the impact that internet communications as both an institutional context and a competing institution will have on the institution of EU communications policy: ‘In the end, the NN debate may only be the onset of a larger debate on neutrality in the Internet ecosystem. Renda (2010), for example, points out that the Internet ecosystem is affected by competition up and down the Internet value chain, which exerts pressure on the network layer by taking over revenue sources historically exploited by ISPs. In other words, while the NN debate is currently focused on ISP as the gatekeepers of the customer access network, other gatekeepers of the information society may soon enter center stage on other forms of neutrality.’ (Krämer et al. 2013: 809)

With this remark, Krämer et al. reflect potentially discriminatory practices of content providers—more precisely platform providers—themselves. Already today, platforms can discriminate against third party content. Given the winner-takesit-all/lock-in characteristics of internet platforms, these providers will eventually gain significant market power in internet communications. After technological neutrality and network neutrality, the question of neutrality will rise anew. Competition law principles will thus remain relevant. Also, the changing role of network operators and internet service providers in a vertically unbundled market with vertically integrated solutions facilitated by specialized services will remain subject to further technological development and scrutiny. An inherent question of this dissertation addressed the nature of technology in institutionalist thinking. Whilst technology potentially had been ahead of rule-making, the latter determined what was appropriate and possible within the existing rules and what was not. This was particularly true for the telecommunications liberalization regime and subsequent rules addressing technological convergence. Technology was constrained by institutional rules, namely regulation, while at the same time it promoted institutional change: ‘technological developments have been a consistent exogenous pressure for change in European telecommunications and, to some extent, have driven policy development’

274

7

Conclusion: Upcoming Challenges for EU Communications Policy

(Goodman 2006: 215–6). Both the idea of technology’s potential to societal advances and economic growth and the narrative of global competition in technology emphasize the relevance of technology for change. At the same time, the insights into telecommunications illustrate the inertia of a technology. The collusion of two different logics underlying circuit-switched and packet-switched systems explain the path dependence that ossifies in technology: ‘internet regulation is to a large extent a result of legacy regulation inherited from separate activities dating to well before the emergence of the internet’ (Savin 2014). From an institutionalist perspective, technology can be understood as a structural element—an infrastructure—within an institution. In the case of EU communications policy this technology is crucial as it constituted the institutional existence, accounts for change and inertia. The roles and rules that inhere the institution direct towards communications technology, whether they promote exogenous and endogenous institutional change or defend the power structures that inhere the legacy technology. Technology represents the constitutive element to institutional conduct—yet, not necessarily the subject of rule-making. New actors that were enabled by technological change or new (technological) rules that conflict or conflate with established systems cause a—more or less—urgent need for action. Particularly ‘[i]nfrastructures are arrangements of practices [that] could be described as an achievement of negotiation, as its interconnectedness means that modifying one part requires adjustments in another—and these adjustments are both social and technical’ (Sandvig 2013: 97–8). There is definitely reason for incumbent actors to defend habitualized roles and rules, for new entrants to introduce foreign rules and roles to gain relevance and for the system to modify existing rules in order to ‘accommodate the new technology within the existing order’ (Sawhney 2003: 27). Either way, in order to maintain institutional stability rule-making will have to adapt to new technological prerequisites: ‘Only when we truly think the new technology can we use it to its fullest’ (Bowker et al. 2010: 112). To neglect the rules and prerequisites that inhere new technologies in order to maintain the status quo will ultimately cause institutional exhaustion.

References

Abbate, J (1999) Inventing the Internet (Cambridge: MIT Press). Akerlof, G A (1980) ‘The Economics of Social Customs, of Which Unemployment May Be One Consequence’, Quarterly Journal of Economics, 94(4): 749–775. Altes, W and F Korthals (2000) ‘Regulation Instruments from a Legal Perspective’, in K Terplan and P Morreale (eds), The Telecommunications Handbook (IEEE Press), 49–55. Analysys Consultants (1989) European Telecommunications 1: Standards and ONP—Keys to the Open Market (Cambridge: Analysys Publications). Andersen, S (2012) The Enforcement of EU Law (Oxford: Oxford Univ. Press). Ansell, C (2008) ‘Network Institutionalism’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (Oxford: Oxford Univ. Press), 75–89. Armstrong, M (2006) ‘Competition in two-sided markets’, The RAND Journal of Economics, 37(3): 668–691. Ashford, D E (1977) ‘Political Science and Policy Studies: Towards A Structural Solution’, Policy Studies Journal, 5(1): 570–583. Atkinson, M M (1990) ‘Rediscovering Institutions: The Organizational Basis of Politics by J G March and J P Olsen’, Canadian Journal of Political Science/Revue canadienne de science politique, 23(4): 843–844. Austin, M T (1994) ‘Europe’s ONP bargain: What’s in it for the user?’, Telecommunications Policy, 18(2): 97–113. Axelrod, R (1980) ‘More Effective Choice in Prisoner’s Dilemma’, Journal of Conflict Resolution, 24(3): 379–403. Axelrod, R. (1984) The Evolution of Cooperation (New York: Basic Books). Bach, T (2008) DSL versus Kabel. Informationsexternalitäten als Determinanten von Pfadabhängigkeit und Wechselkosten bei der Adoption von Breitband-Technologien (Wiesbaden: Gabler). Bakardjieva, M. (2005) Internet Society. The Internet in Everyday Life (London: Sage). Barnes, M, J Newman, and H Sullivan (2007) Power, Participation and Political Renewal: Case Studies in Public Participation (Bristol: Policy Press). Baskoy, T (2008) The Political Economy of European Union Competition Policy. A Case Study of the Telecommunications Industry (New York: Routledge).

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 S. P. Rinas, From Telecommunications Liberalization to Net Neutrality Rules, Studien der NRW School of Governance, https://doi.org/10.1007/978-3-658-33014-9

275

276

References

Bauer, J M (2014) ‘The Evolution of the European Regulatory Framework for Electronic Communications’, IBEI Working Papers, 2013/41. Benedetto, G (2005) ‘Rapporteurs as legislative entrepreneurs: the dynamics of the codecision procedure in Europe’s parliament’, Journal of European Public Policy, 12(1): 67–88. Benz, A (2004) ‘Einführung: Governance—Modebegriff oder nützliches sozialwissenschaftliches Konzept?’, in ibid. (ed.) Governance—Regieren n komplexen Regelsystemen. Eine Einführung (Wiesbaden: VS), 11–28. Benz, A (2007) ‘Accountable Multilevel Governance by the Open Method of Coordination?’, European Law Journal, 13(4): 505–22. Benz, A (2013) ‘Balancing Rigidity and Flexibility: Constitutional Dynamics in Federal Systems’, West European Politics, 36(4): 726–749. Berger, S (1981) (ed.) Organizing Interests in Europe: Pluralism, Corporatism, and the Transformation of Politics (Cambridge: Cambridge University Press). Berger, P L and T Luckman (1966) The Social Construction of Reality. A Treatise in the Sociology of Knowledge (London: Penguin Books). Besen, S M (1990) ‘The European Telecommunications Standards Institute: A Preliminary Analysis’, Telecommunications Policy, 14(6): 521–530. Bevir, M (2009) Key Concepts in Governance (London: Sage). Binder, L (1986) ‘The natural history of development theory’, Comparative Studies in Society and History, 28(1): 3–33. Blatter, J. et al. (2006) Qualitative Politikanalyse. Eine Einführung in Methoden und Forschungsansätze (Fernuniversität zu Hagen: Studienbrief). Blondel, J (2008) ‘About Institutions, Mainly, but not Exclusively, Political’, in S A Binder, R A W Rhodes, and Bert A Rockman (eds) The Oxford Handbook of Political Institutions (Oxford: Oxford Univ. Press), 716–30. Bourreau, M, F Kourandi, and T Valletti (2015) ‘Net Neutrality with Competing Internet Platforms’, Journal of Industrial Economics, 63(1): 30–73. Bowker, G, K Baker, F Millerand, and D Ribes (2010) ‘Towards Information Infrastructure Studies: Ways of Knowing in a Networked Environment’, in J Hunsinger, I Klastrup, and M Allen (eds) International Handbook of Internet Research (New York: Springer), 97–118. Brandsma, G J (2015) ‘Co-decision after Lisbon: The politics of informal trilogues in European Union lawmaking’, European Union Politics, 16(2): 300–319. Braun, J-D and R Capito (2009) ‘The Emergence of EC Telecommunications Law as a New Self-Standing Field within Community-Law’, in C König, A Bartosch, J-D Braun, and M Romes (eds.) EC Competition and Communications Law, 5th edn. (The Hague: Kluwer Law International), 41–52. Brown, N (2014) ‘An assessment of the proportionality of regulation of “over the top” communications services under Europe’s common regulatory framework for electronic communications networks and services’, Computer Law & Security Review, 30(4): 357–374. Brown, N and C T Marsden (2013a) Regulating Code (Cambridge: MIT Press). Bulmer, S, D Dolowitz, P Humphreys, and S Padgett (2007) Policy Transfer in European Union Governance. Regulating the utilities (London: Routledge). Burns, T et al. (1985) Man, Decision, Society (London/New York: Gordon and Breach). Busch, L (2011) Standards. Recipes for Reality (Cambridge: MIT Press).

References

277

Calvert, R (1995) ‘Rational Actors, Equilibrium, and Social Institutions’, in J. Knight and I. Sened (eds) Explaining Social Institutions (Ann Arbor: Univ. of Michigan Press), 57–95. Campbell, J L (1998) ‘Institutional analysis and the role of ideas in political economy’, Theory and Society, 27(3): 377–409. Campbell, J L and O K Pedersen (2001) ‘The Rise of Neoliberalism and Institutional Analysis’, in ibid. (eds) The Rise of Neoliberalism and Institutional Analysis (Princeton: Princeton Univ. Press). Castells, M (2001) The Internet Galaxy. Reflections on the Internet, Business, and Society (Oxford: Oxford Univ. Press). Cardoso, G (2006) The media in the network society (Lisbon: Center for Research and Studies in Sociology). Carr, M (2015) ‘Power Plays in Global Internet Governance’, Millennium: Journal of International Studies, 43(2): 640–659. Carrigan, C and C Coglianese (2011) ‘The Politics of Regulation: From New Institutionalism to New Governance’, Annual Review of Political Science, 14: 107–29. Castells, M (2001) The Internet Galaxy. Reflections on the Internet, Business, and Society (New York: Oxford University Press). Castells, M (ed.) (2004) The network society: A cross-cultural perspective (Northampton: Edward Elgar). Castells, M (2008) ‘The New Public Sphere: Global Civil Society, Communication Networks, and Global Governance’, Annals of the American Academy of Political and Social Science, 616(1): 78–93. Chappell, L (2006) ‘Comparing Political Institutions: Revealing the Gendered “Logic of Appropriateness”’, Politicy and Gender, 2(2): 223–34. Chester, J (2007) Digital destiny. New media and the future of democracy (New York: New Press). Choi, J P and B-C Kim (2010) ‘Net Neutrality and Investment Incentives’, Rand Journal of Economics, 41(3): 446–71. Chung, H-C (2010) ‘Developments in Cable Broadband Networks’, OECD Digital Economy Papers, 170. Clemens, E S and J M Cook (1999) ‘Politics and Institutionalism: Explaining Durability and Change’, Annual Review of Sociology, 25: 441–66. Cohen, M D , J G March, and J P Olsen (1972) ‘A Garbage Can Model of Organizational Choice’, Administrative Science Quarterly, 17(1): 1–25. Cohen, M D (1974) Two-Dimensional Man: An Essay on the Anthropology of Power and Symbolism in Complex Societies (London: Routledge). Cooper, J and D W Brady (1981a) ‘Institutional Context and Leadership Style: The House from Cannon to Rayburn’, American Political Science Review, 75(2): 411–25. Cooper, J and D W Brady (1981b) ‘Toward a Diachronic Analysis of Congress’, American Political Science Review, 75(4): 988–1006. Costello, R and R. Thomson (2010) ‘The policy impact of leadership in committees: rapporteurs’ influence on the European Parliament’s opinions’, European Union Politics, 11(2): 219–240. Costello, R. and Thomson, R. (2011) ‘The nexus of bicameralism: rapporteurs’ impact on decision outcomes in the European Union’, European Union Politics, 12(3): 337–57.

278

References

Cowles, M G (1995) ‘Setting the Agenda for a New Europe: The ERT and EC 1992’, Journal of Common Market Studies, 33(4): 501–526. Crawford, S (2012) ‘Captive Audience: The Telecom Industry & Monopoly Power in the New Gilded Age’, lecture held at the Berkman Center for Internet & Society, 12 December 2012: https://cyber.law.harvard.edu/events/2012/12/crawford Crawford, S and E Ostrom (1995) ‘A Grammar of Institutions’, The American Political Science Review, 89(3): 582–600. Crawford, S and B Scott (2015) ‘Be Careful What You Wish For. Why Europe Should Avoid the Mistakes of US Internet Access Policy’, Stiftung Neue Verantwortung Policy Brief , June 2015. Crowcroft, J (2007) ‘Net Neutrality: The Technical Side of the Debate—A White Paper’, International Journal of Communication, 1: 567–79. Crowcroft, J (2011) ‘The affordance of asymmetry or a rendezvous with the random?’, Communications & Convergence Review, 3(1): 40–56. Crozier, M (1964) The Bureaucratic Phenomenon (Chicago: Univ. of Chicago Press). Czernich, N, O Falck, T Kretschmer, and L Woessmann (2011) ‘Broadband Infrastructure and Economic Growth’, The Economic Journal, 121(3): 505–32. Deeg, R (2005) ‘Change from Within: German and Italian Finance in the 1990s’, in W Streeck and K Thelen (eds) Beyond Continuity. Institutional Change in Advanced Political Economies (New York: Oxford University Press), 169–202. De Ruiter R and C Neuhold (2012) ‘Why is fast track the way to go? Justifications for early agreement in the co-decision procedure and their effects’, European Law Journal, 18(4): 536–54. De Streel, A (2008) ‘Current and future European regulation of electronic communications: A critical assessment’, Telecommunications Policy, 32(11): 722–34. Díaz-Pinés, A (2009) ‘Indicators of Broadband Coverage’, OECD Digital Economy Papers, 165. DiMaggio, P and W W Powell (1983) ‘The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields’, American Sociological Review, 48(2): 147–60. DiMaggio, P J and W W Powell (1991) ‘Introduction’, in W W Powell and P J DiMaggio (eds) The New Institutionalism in Organizational Analysis (Chicago, University of Chicago Press), 1–40. DiMaggio, P, E Hargittai, W R Neuman, and J P Robinson (2001) ‘Social Implications of the Internet’, Annual Review of Sociology, 27: 307–36. Djelic, M-L and S Quack (2003a) ‘Introduction: Governing globalization—bringing institutions back in’, in ibid. (eds) Globalization and Institutions. Redefining the Rule of the Economic Game (Cheltenham: Edward Elgar), 1–14. Djelic, M-L and S Quack (2003b) ‘Conclusion: Globalization as a Double Process of Institutional Change and Institutional Building’, in ibid. (eds) Globalization and Institutions. Redefining the Rule of the Economic Game (Cheltenham: Edward Elgar), 302–33. Downs, G W and D M Rocke (1995) Optimal Imperfection? Domestic Uncertainty and Institutions in International Relations (Princeton: Princeton University Press).

References

279

Drake, W J (1994) ‘The transformation of international telecommunications standardization: European and global dimensions’, in C Steinfeld, J M Bauer and L Caby (eds) Telecommunications in Transition: Policies Services and Technologies in the European Community (Thousand Oaks: Sage Publications), 71–96. Drewry, G (1996) ‘Political institutions: Legal perspectives’, in R E Goodin and H-D Klingemann (eds) A New Handbook of Political Science (Oxford: Oxford University Press), 191–204. Dyson, K and P Humphreys (1990) ‘Introduction: politics, markets and communication policies’, in ibid. (eds) The Political Economy of Communications. International and European Dimensions (London, New York: Routledge). Edwards, P N, S J Jackson, G C Bowker, and C P Knobel (2007) ‘Understanding Infrastructure: Dynamics, Tensions, and Design’, Final report of the workshop, “History and Theory of Infrastructure: Lessons for New Scientific Cyberinfrastructures”, https://deepblue.lib.umich.edu/bitstream/2027.42/49353/3/UnderstandingInfrastr ucture2007.pdf (available 20/03/2017). Egan, M (2001) Constructing a European Market: Standards, Regulation, and Governance (Oxford: Oxford Univ. Press). Easton, D (1968) ‘Political Science’, in D L Sills (ed.) International Encyclopedia of the Social Sciences, 12th Ed. (London: Macmillan). Edelman, M (1964) The Symbolic Uses of Politics (Urbana: Univ. of Illinois Press). EDRi (2015) ‘Informationsfreiheit request to DG Connect: Trialogues on the Telecommunications Single Market Regulation’, Asktheeu.org, https://www.asktheeu.org/de/request/tri alogues_on_the_telecommunicat_2 (available 20/03/2017). Egeberg, M (1987) ‘Designing Public Organizations’, in J Kooiman and K A Eliassen (eds) Managing Public Organizations: Lessons from Contemporary European Experience (London: Sage). Eisner, M A (1993) Regulatory Politics in Transition (Baltimore: Johns Hopkins). Elster, J (1991) ‘The Possibility of Rational Politics’, in D Held (ed.) Political Theory Today (Oxford: Polity Press), 115–42. Ermert, M (2014) ‘US Communications Commission decision to fuel further fight in the EU’, Internet Policy Review, https://policyreview.info/articles/news/us-communicationscommission-decision-fuel-further-fight-eu/295 (available 20/03/2017). Esser, J and R Noppe (2001) ‘Von nationalen Technologienormen zur transnationalen Technologienormenkonkurrenz. Das Beispiel Telekommunikation’, in G Simonis, R Martinsen and T Saretzki (eds) Politik und Technik. Analyse zum Verhältnis von technologische, politischem und staatlichem Wandel am Anfang des 21. Jahrhunderts, PVS Sonderheft 31 (Wiesbaden: Westdeutscher Verlag), 55–70. Etheredge, L S (1976) The Case of the Unreturned Cafeteria Trays (Washington D.C.: American Political Science Association). Ethington, P and E McDonagh (1995) ‘The Eclectic Center of the New Institutionalism: Axes of Analysis in Comparative Perspective’, Social Science History, 19(4): 469–77. European Commission (1994) Analysis Report on Intelligent Network Functions, Network Management, Local Loop, Broadband Communications in accordance with Council Directive 90/387/EEC, https://aei.pitt.edu/37553/1/A3414.pdf (available 20/03/2017). European Commission (2015) Background to the Public Consultation on the Evaluation of the Regulatory Framework for Electronic Communications and on its Review, https://ec.

280

References

europa.eu/digital-single-market/en/news/public-consultation-evaluation-and-review-reg ulatory-framework-electronic-communications (available 20/03/2017). European Union (2019) Study on the implementation of the open internet provisions of the Telecoms Single Market Regulation (Luxembourg: Publications Office of the European Union). Evans, P B, D Rueschemeyer, and T Skocpol (1985) (eds) Bringing the State Back In (Cambridge: Cambridge Univ. Press). Farrell, H and A Héritier (2003) ‘Formal and Informal Institutions Under Codecision: Continuous Constitution-Building in Europe’, Governance, 16(4): 577–600. Farrell, H and A Héritier (2004) ‘Interorganizational Negotiation and Intraorganizational Power in Shared Decision Making. Early Agreements Under Codecision and Their Impact on the European Parliament and Council’, Comparative Political Studies, 37(10): 1184– 212. Feldman, M S and J G March (1981) ‘Information in Organizations as Signal and Symbol’, Administrative Science Quarterly, 26(2): 171–186. Finlayson, A and J Martin (2006) ‘Poststructuralism’, in C Hay, M Lister, and M Marsh (eds) The State: Theories and Issues (Basingstoke: Palgrave Macmillan). Finnemore, M (1996) ‘Norms, culture, and world politics: Insights from sociology’s institutionalism’, International Organisation, 50(2): 325–47. Fortunati, L et al. (eds) (2010) Interacting with Broadband Society (Frankfurt am Main: Peter Lang). Frischmann, B M and B van Schewick (2007) ‘Network Neutrality and the Economics of an Information Superhighway: A Reply to Professor Yoo’, Jurimetrics, 47, 383–428. GAP (1988) Report by the “Analysis and Forecasting Group” (GAP) On Open Network Provision (ONP) in the Community, Brussels. Garrett, G and G Tsebelis (1996) ‘An Institutional critique of intergovernmentalism’, International Organization, 50(2): 269–299. George, A L and A Bennet (2005) Case Studies and Theory Development in the Social Sciences (Cambridge: MIT Press). Geradin, D (2006) ‘Twenty years of liberalization of network industries in the European Union: Where do we go now?’, George Mason University School of Law; Tilburg University— Tilburg Law and Economics Center (TILEC), https://papers.ssrn.com/sol3/papers.cfm? abstract_id=946796 (available 20/03/2017). Gerber, E R and J E Jackson (1993) ‘Endogenous Preferences and the Study of Institutions’, The American Political Science Review, 87(3), 639–56. Giddens, A (1984) The Constitution of Society: Outline of the Theory of Structuration (Cambridge: Polity). Gluntz, P (1998) ‘Opportunities in the worldwide telecommunications market’, in T M Schuringa (ed.) EuroComm 88: Proceedings of the international congress of business, public and home communications (Amsterdam). Goldsmith, J and T Wu (2008) Who Controls the Internet? Illusions of a Borderless World (Oxford: Oxford University Press). Goodin, R E (1998) ‘More Than Anyone Bargained For: Beyond the Welfare Contract’, Ethics & International Affairs, 12(1): 141–58. Goodman, J (2006) Telecommunications Policy-Making in the European Union (Cheltenham: Edward Elgar).

References

281

Gurumurthy, K and A Gurumurthy (2008) ‘Internet Governance and Development Agenda’, Economic and Political Weekly, 43(14): 19–23. Grafstein, R (1992) Institutional Realism. Social and Political Constraints on Rational Actors (New Haven: Yale University Press). Graham, S and S Marvin (2001) Splintering Urbanism: Networked Infrastructures, Technological Mobilities, and the Urban Condition (New York: Routledge). Grande, E (2012) ‘Governance-Forschung in der Governance-Falle?—Eine kritische Bestandsaufnahme’, PVS, 53(4): 565–92. Green Cowles, M (1995) ‘Setting the Agenda for a New Europe: The ERT and EC 1992’, Journal of Common Market Studies, 33(4): 501–526. Gray, D E (2009) Doing Research in the Real World, 2nd Ed. (London: Sage Publications). Greenstein, S, M Peitz, and T Valletti (2016) ‘Net Neutrality: A Fast Lane to Understanding the Trade-offs’, Journal of Economic Perspectives, 30(2): 127–50. Häge, F M and M Kaeding (2007) ‘Reconsidering the European Parliament’s Legislative Influence: Formal vs. Informal Procedures’, Journal of European Integration, 29(3): 341– 61. Hahn, R W and S. Wallsten (2006) ‘The Economics of Net Neutrality’, AEI-Brookings Joint Center Working Paper, No. RP06–13. Hall, P A (1986) Governing the Economy: the Politics of State Intervention in Britain and France (Oxford: Oxford Univ. Press). Hall, P A (1989) (ed.) The Political Power of Economic Ideas: Keynesianism across Nations (Princeton: Princeton Univ. Press). Hall, P A (1992) ‘The Movement from Keynesianism to Monetarism: Institutional Analysis and British Economic Policy in the 1970s’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 90–113. Hall, P A and R C R Taylor (1996) ‘Political Science and the Three New Institutionalisms’, Political Studies, 44(5): 936–57. Halpin, E F and S Simpson (2002) ‘Between self-regulation and intervention in the networked economy: the European Union and Internet policy’, Journal of Information Science, 28(4), 285–96. Han, B-C (2012) Transparenzgesellschaft (Berlin: Mathes & Seitz). Hanf, K and F W Scharpf (1978) (eds) Interorganizational Policy Making: Limits to Coordination and Central Control (London: Sage). Hattam, V C (1992) ‘Institutions and Political Change: Working-Class Formation in England and the United States, 1820–1896’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 155–87. Hattam, V C (1993) Labor Visions and State Power: the Origins of Business Unionism in the United States (Princeton: Princeton Univ. Press). Haucap, J (2009) ‘The Regulatory Framework for European Telecommunications Markets Between Subsidiarity and Centralization’, in B Preissl, J Haucap, and P Curwen (eds) Telecommunications Markets. Drivers and Impediments (Heidelberg: Physica), 463–79. Hawkins, R W (1992) ‘The doctrine of regionalism: A new dimension for international standardization in telecommunications’, Telecommunications Policy, 16(4), 339–53. Hay, C (2002) Political Analysis: A Critical Introduction (Basingstoke: Palgrave Macmillan).

282

References

Hay, C (2006) ‘Constructivist Institutionalism’, in R A W Rhodes, S A Binder, and B A Rockman (eds) The Oxford Handbook of Political Institutions (Oxford: Oxford University Press), 56–74. Hay, Colin (2008) ‘Constructivist Institutionalism’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (Oxford: Oxford University Press), 56–74. Heclo, H (2008) ‘Thinking Institutionally’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (New York: Oxford Univ. Press), 731–41. Henten, A, H Olesen, D Saugstrup, and S-E Tan (2004) ‘Mobile Communications: Europe, Japan and South Korea in a Comparative Perspective’, Info: The Journal of Policy, Regulation and Strategy for Telecommunications, Information and Media, 6(3), 197–207. Héritier, A and C Reh (2012) ‘Codecision and its discontents: Intra-organisational politics and institutional reform in the European Parliament’, West European Politics, 35(5), 1134–57. High-Level Group on the Information Society (1994) Europe and the global information society. Bangemann report recommendations to the European Council (Brussels). Hix, S (2002) ‘Constitutional agenda-setting through discretion in rule interpretation: Why the European Parliament won at Amsterdam’, British Journal of Political Science, 32(2): 259–80. Hix, S and B Høyland (2011) The Political System of the European Union, 3rd Ed. (Hampshire: Palgrave Macmillan). Hughes, T P (1983) Networks of Power: Electrification in Western Society, 1880–1930 (Baltimore: Johns Hopkins Univ. Press). Humpreys, P (1990) ‘The political economy of telecommunications in France: A case study of “telematics”’, in K Dyson and P Humphreys (eds) The political economy of telecommunications: International and European dimensions (London: Routledge). Humphreys, P and S Simpson (2005) Globalisation, Convergence and European Telecommunciations Regulation (Cheltenham: Edward Elgar Publishing). Humphreys, P (2002) ‘Europeanisation, Globalisation and Policy Transfer in the European Union: The Case of Telecommunications’, Convergence: The International Journal of Research into New Media Technologies, 8(2), 52–79. Hüsing, T (2003) ‘Zunehmendes Nord-Süd Gefälle der digitalen Spaltung in der EU. Zur Messung von Ungleichheit in der Diffusion von Informations- und Kommunikationstechnologien’, Informationsdienst Soziale Indikatoren, 30: 1–5. Immergut, E M (1992) ‘The Rules of the Game: The Logic of Health Policy-Making in France, Switzerland, and Sweden’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 57–89. ITU (2011) Measuring the Information Society 2011 (Geneva). Jackson, S J, P N Edwards, G C Bowker, and C P Knobel (2007) ‘Understanding Infrastructure: History, Heuristics, and Cyberinfrastructure Policy’, First Monday, 12(6), https://www.fir stmonday.org/ojs/index.php/fm/article/view/1904/1786 (available 20/03/2017). Jagd, S (2007) ‘Economics of Convention and New Economic Sociology: Mutual Inspiration and Dialogue’, Current Sociology, 55(1): 75–91.

References

283

Jayasuriya, K (2001) ‘Globalization and the changing architecture of the state: the regulatory state and the politics of negative coordination’, Journal of European Public Policy, 8(1): 101–23. Jepperson, R L (1991) ‘Institutions, Institutional Effects, and Institutionalism’, in W W Powell and P J DiMaggio (eds) The New Institutionalism in Organizational Analysis (Chicago, University of Chicago Press), 143–63. Jessop, B (1977) ‘Recent Theories of the Capitalist State’, Cambridge Journal of Economics, 1(4): 353–73. Jessop, B (2007) State Power: A Strategic-relational Approach (Cambridge: Polity). Kahnemann, D, P Slovic, and A Tversky (1982) (eds) Judgement Under Uncertainty: Heuristics and Biases (Cambridge: Cambridge Univ. Press). Kenny, M (2007) ‘Gender, Institutions and Power: A Critical Review’, Politics, 27(2): 445–66. Keohane, R O and L L Martin (1995) ‘The Promise of Institutionalist Theory’, International Security, 20(1): 39–51. King, D D (1992) ‘The Establishment of Work—Welfare Programs in the United States and Britain: Politics, Ideas, and Institutions’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 217–50. King, D D (1995) Actively Seeking Work: The Politics of Unemployment and Welfare Strategies in the United States (Chicago: Univ. of Chicago Press). King, G, R O Keohane and S Verba (1994) Designing Social Inquiry: Scientific Inference in Qualitative Research (Princeton: Princeton University Press.) Kjellberg, F (1975) Political Institutionalization (London: Wiley). Knieps, G (2011) ‘Regulatory Unbundling in Telecommunications’, Competition and Regulation in Network Industries, 12(4), 344–56. Knieps, G (2013) ‘Europäische Telekommunikationsregulierung: Quo vadis?’, Discussion Paper, Institut für Verkehrswissenschaft und Regionalpolitik, 143, https://www. vwl.uni-freiburg.de/fakultaet/vw/publikationen/ diskussionspapiere/Disk143.pdf (available 20/03/2017). Knight, J (1992) Institutions and Social Conflicts (Cambridge: Cambridge University Press). Koelble, T A (1995) ‘The New Institutionalism in Political Science and Sociology’ (Review Article), Comparative Politics, 27(2): 231–43. Kooiman, J (2003) Governing as Governance (London: Sage). Krasner, S D (1984) ‘Approaches to the State: Alternative Conceptions and Historical Dynamics’, Comparative Politics, 16(2): 223–46. Krasner, S D (1988) ‘Sovereignty: An Institutional Perspective’, Comparative Political Studies, 21(1): 66–94. Kreiner, K (1976) ‘Ideology and Management in a Carbage Can Situation’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 156–73. Kroes, N (2010) Net neutrality in Europe Address at the ARCEP Conference (L’Autorité de Régulation des Communications Electroniques et des Postes), Paris, 13th April 2010, SPEECH/10/153. Krook, M L and F Mackay (2011) ‘Introduction: Gender Politics and Institutions’, in ibid. (eds) Gender, Politics and Institutions: Towards a Feminist Institutionalism (Basingstoke: Palgrave Macmillan).

284

References

Kurose, J F and K W Ross (2013) Computer Networks. A Top-Down Approach, 6th Edition (Pearson). Kurz, M (1978) ‘Altruism as an Outcome to Social Interaction’, American Economic Review, 68(2): 216–22. Kwon, B-W (2009) ‘Broadband over Power Lines (BPL): Developments and Policy Issues’, OECD Digital Economy Papers, 157. Larouche, P (1998) ‘EC competition law and the convergence of the telecommunications and broadcasting sectors’, Telecommunications Policy, 22(3): 219–42. Larouche, P. (2000) Competition Law and Regulation in European Telecommunications (Oxford: Hart). Larouche, P (2009) ‘Law and Technology. The Network Neutrality Debate Hits Europe’, Communications of the ACM, 52(5): 22–4. Latour, B (2007) Reassembling the Social. An Introduction to Actor-Network Theory (Oxford: Oxford Univ. Press). Leal, M C (2014) ‘The EU approach to net neutrality: Network operators and over-the-top players, friends or foes?’, Computer Law & Security Review, 30(5): 506–20. Lecours, A (2005) New Institutionalism: Theory and Analysis (Toronto: University of Toronto Press). Lemstra, W and N van Gorp (2013) ‘Telecommunications reform and the internal market in Europe’, info, 15(2): 73–90. Lessig, L (2001) The Future of Ideas (New York: Random House). Levi, M (1990) ‘A Logic of Institutional Change’, in K Schweers Cook and M Levi (eds) The Limits of Rationality (Chicago: University of Chicago Press), 402–18. Levinthal, D and J G March (1981) ‘A Model of Adaptive Organizational Search’, Journal of Economic Behavior and Organization, 2(4): 307–33. Levitt, B (1988) Institutional Constraints on Decision-Making in the Textbook Industry (Stanford University). Lieberman, R C (2002) ‘Ideas, Institutions, and Political Order: Explaining Political Change’, The American Political Science Review, 96(4): 697–712. Lohninger, T et al. (2019) The Net Neutrality Situation in the EU. Evaluation of the First Two Years of Enforcement (Vienna: Epicenter.works). Lowi, T J (1964) ‘American Business, Public Policy, Case Studies, and Political Theory’, World Politics, 16(4): 677–715. Lowndes, V (1996) ‘Varieties of New Institutionalism: A Critical Appraisal’, Public Administration, 74(2): 181–97. Lowndes, V (2010) ‘The Institutional Approach’, in D March and G Stroker (eds) Theory and Methods in Political Science, 3rd Ed., 60–79. Lull, J (2007) Culture-on-demand: Communication in a crisis world (Malden: Blackwell). Lehmbruch, G (1992) ‘The Institutional Framework of German Regulation’, in K Dyson (ed.) The Politics of German Regulation (Aldershoth), 29–52. Macridis, R C (1963) ‘A survey of the field of comparative government’, in H Eckstein and D E Apter (eds) Comparative Politics. A Reader (New York: The Free Press of Glencoe), 43–52. Majone, G (1996) Regulating Europe (London: Routledge). Malecki, E J (2002) ‘The Economic Geography of the Internet’s Infrastructure’, Economic Geography, 78(4): 399–424.

References

285

Maniadaki, K (2015) EU Competition Law, Regulation and the Internet: The Case of Net Neutrality (Aalphen an den Rijn: Wolters Kluwer Law). Maniadaki, K (2019) ‘Net Neutrality Regulation in the EU: Competition and Beyond’, Journal of European Competition Law & Practice, 10(7): 479–88. Mann, M (1986) ‘The Autonomous Power of the State: Its Origins, Mechanisms and Results’, in J A Hall (ed.) States in History (Oxford: Basil Blackwell), 109–36. Mansell, R (2011) ‘New visions, old practices: policy and regulation in the internet era’, Continuum: Journal of Media & Cultural Studies, 25(1): 19–32. Mansell, R (2013) ‘Here Comes the Revolution—The European Digital Agenda’, in K Donders, C Pauwels and J Loisen (eds) The Palgrave Handbook of European Media Policy (London: Palgrave Macmillan), 202–17. Mansell, R and W E Steinmueller (2013) ‘Digital Infrastructures, Economies, and Public Policies: Contending Rationales and Outcomes Assessment Strategies’, in W H Dutton (ed.) The Oxford Handbook of Internet Studies (Oxford: Oxford Univ. Press), 509–30. March, J G (1981) ‘Decisions in Organizations and Theories of Choice’, in A van de Ven and W Joyce (eds) Perspectives on Organizational Design and Performance (New York: Wiley). March, J G and J. P Olsen (1976) (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget). March, J G and J P Olsen (1983) ‘The New Institutionalism: Organizational Factors in Political Life’, The American Political Science Review, 78(3): 734–49. March, J G and J P Olsen (1984) ‘Organizing Political Life: What Administrative Reorganization Tells Us About Government’, American Political Science Review, 77(2): 281–97. March, J G and J P Olsen (1989) Rediscovering Institutions. The Organizational Basis of Politics (New York: The Free Press). March, J G and J P Olsen (2008) ‘Elaborating the “New Institutionalism”’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (New York: Oxford Univ. Press). March, J G and P Romelaer (1976) ‘Position and Presence in the Drift of Decisions’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 251–76. March, J G and H A Simon (1993) Organisations, 2nd Ed. (Cambridge: Blackwell). Marsden, C T (2010) Net Neutrality. Towards a co-Regulatory Solution (Bloomsbury Open Access). Marsden, C T (2014a) ‘Net Neutrality Law’, in A Savin and J Trzaskowski (eds) Research Handbook on EU Internet Law (Cheltenham: Edward Elgar), 37–59. Marsden, C T (2014b) ‘Net Neutrality: Past Policy, Present Proposals, Future Regulation?’, in L Belli and P De Filippi (eds) The Value of Network Neutrality for the Internet of Tomorrow, https://hal.archives-ouvertes.fr/hal-01026096 (available 20/03/2017). Marsden, C T (2015) ‘Comparative Case Studies in Implementing Net Neutrality: A Critical Analysis’, TPRC 43: The 43rd Research Conference on Communication, Information and Internet Policy Paper (Arlington). Marsden, C T (2017) Network Neutrality. From Policy to Law to Regulation (Manchester: Machester University Press).

286

References

Marsh, D and R A W Rhodes (eds) (1992) Policy Networks in British Government (Oxford: Clarendon Press). Mayer-Schönberg, V and M Strasser (1999) ‘A Closer Look at Telecom Deregulation: The European Advantage’, Harvard Journal of Law & Technology, 12(3): 561–87. McCormick, J (2011) Understanding the European Union. A Concise Introduction, 5th Ed. (Hampshire: Palgrave Macmillan). Melody, W H (2011) ‘Viewpoint: The Closing of the Liberalization Era in European Telecommunication’, Competition and Regulation in Network Industries, 13(3), 218–35. Metcalfe, B (2010) The .ly Domain Space to be Considered Unsafe, https://benmetcalfe.com/ blog/2010/10/the-ly-domain-space-to-be-considered-unsafe (available 20/03/2017). Meyer, J W and B Rowan (1977) ‘Institutionalized Organizations: Formal Structure as Myth and Ceremony’, American Journal of Sociology, 83(2): 340–63. Meyer, J W and B Rowan (2004) ‘Institutionalized Organizations: Formal Structure as Myth and Ceremony’, in F Dobbin (ed.) The New Economic Sociology (Princeton: Princeton Univ. Press), 86–110. Meyer J W, J Boli, and G M Thomas (1987) ‘Ontological rationalization in the Western cultural account’, in ibid. (eds) Institutional Structure: Constituting State, Society, and the Individual (Newbury Park: Sage), 12–37. McNamee, J and M F Pérez (2016) ‘Net Neutrality: An Analysis of the European Union’s Trialogue Compromise’, in L Belli and P De Filippi (eds) Net Neutrality Compendium. Human Rights, Free Competition and the Future of the Internet (Heidelberg: Springer), 183–91. Michalis, M (2007) Governing European Communications: From Unification to Coordination (Lanham: Rowman & Littlefield Publishing). Moe, T M (1987) ‘Interests, institutions, and positive theory: the politics of the NLRB’, Studies in American Political Development, 2: 236–99. Naftel, M and L J Spiwak (2000) The Telecoms Trade War: The United States, the European Union and the World (Oxford: Hart). Natalicchi, G (2001) Wiring Europe: Reshaping the European Telecommunications Regime (Lanham: Rowman & Littlefield Publishers). Neal, L (2007) The Economics of Europe and the European Union (Cambridge: Cambridge University Press). Nee, V (1998) ‘Sources of the New Institutionalism’, in M C Brinton and V Nee (eds) The New Institutionalism in Sociology (New York: Russel Sage Foundation), 1–16. Nisbet, R and L Ross (1980) Human Inference: Strategies and Shortcomings of Social Justice (Englewood Cliffs: Prentice-Hall). Noam, E M (2010) ‘Regulation 3.0 for Telecom 3.0’, Telecommunications Policy, 34(1): 4–10. North, D C (1990) Institutions, institutional change and economic performance (New York: Cambridge University Press). North, D C (1998) ‘Five Propositions about Institutional Change’, in J Knight and I Sened (eds) Explaining Social Institutions (Ann Arbor: University of Michigan Press), 15–26. Nye, D E (2010) When the Lights Went Out: A History of Blackouts in America (Cambridge: MIT Press). O’Donoghue, R and T Pascoe (2016) Net Neutrality in the EU: Unresolved Issues Under the New Regulation, https://doi.org/10.2139/ssrn.2741173 (available 20/03/2017).

References

287

OECD (2007) ‘Catching up in Broadband—What Will it Take?’, OECD Digital Economy Papers, 133. OECD (2011) ‘National Broadband Plans’, OECD Digital Economy Papers, 181. Oettinger (2014) quoted in I Scales ‘Back to the Future’, TelecomTV, 27 October 2014: https:// www.telecomtv.com/ articles/policy-and-regulation/back-to-the-future-oettinger-soundslike-neelie-phase-one-11868 (available 20/03/2017) Offe, C ( 1985) Disorganized Capitalism: Contemporary Transformations of Work and Politics (Cambridge: The MIT Press). Offe, C (1996) ‘Designing Institutions in East European Transitions’, in R Goodin (ed.) The Theory of Institutional Design (Cambridge: Cambridge Univ. Press), 199–226. Offe, C (2009) ‘Governance an Empty Signifier?’, Constellations, 16(4): 550–62. Olsen, J P (1976a) ‘The Process of Interpreting Organizational History’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 338–50. Olsen, J P (1976b) ‘University Governance: Non-Participation as Exclusion or Choice’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 277–313. Olsen, J P (1981) ‘Integrated Organizational Participation in Government’, in P C Nystrom and W H Starbuck (eds) Handbook of Organizational Design, 2nd Ed. (New York: Oxford University Press). Olsen, J P (1983) Organized Democracy (Bergen: Universitetsforlaget). Ostrom, E (1991) ‘Rediscovering Institutions: The Organizational Basis of Politics by James G. March and Johan P. Olsen’, Public Choice, 72(1): 95–6. Ostrom, E (2007) ‘Institutional Rational Choice. An Assessment of the Institutional Analysis and Development Framework’, in P A Sabatier (ed.) Theories of the Policy Process (Boulder: Westview Press), 21–64. Otsuka, Y (2009) ‘Mobile Broadband: Pricing and Services’, OECD Digital Economy Papers, 161. Owen-Smith, J and W W Powell (2008) ‘Networks and Institutions’, in R Greenwood, C Oliver, R Suddaby, and K Sahlin (eds) The SAGE Handbook of Organizational Institutionalism (London: SAGE), 594–621. Padgett, J F (1981) ‘Hierarchy and Ecological Control in Federal Budgetary Decision Making’, American Journal of Sociology, 87(1): 75–129. Pascuzzi, G and A Rossato (2005) ‘European Telecommunication Law and Community Networks’, in I Chlamtac, A Gumaste, and C A Szabó (eds) Broadband Services. Business Models and Technologies for Community Networks (Wets Sussex: Wiley), 69–84. Parsons, T (1954) Essays in Sociological Theory (New York: The Free Press). Peters, B G (2005) Institutional Theory in Political Science. The ‘New Institutionalism’ (London: Continuum). Peters, B G (2011) ‘Institutional Theory’, in M Bevir (ed.) The Sage Handbook of Governance (Los Angeles: SAGE), 78–90. Peters, B G, J Pierre, and D S King (2005) ‘The Politics of Path Dependency: Political Conflict in Historical Institutionalism’, The Journal of Politics, 67(4), 1275–300. Pfeffer, J (1981) ‘Management as Symbolic Action: The Creation and Maintenance of Organizational Paradigms’, in L Cummings and B M Staw (eds) Research in Organizational Behavior, 3rd Ed. (Greenwich: JAI Press).

288

References

Pierson, P (1998) ‘The Path to European Integration: A Historical-Institutionalist Analysis’, in W Sandholtz and A Sweet Stone (eds) European Integration and Supranational Governance (Oxford: Oxford Univ. Press), 27–58. Pierson, P (2004) Politics in Time: History, Institutions, and Social Analysis (Princeton: Princeton University Press). Pierson, P and T Skocpol (2002) ‘Historical Institutionalism in Contemporary Political Science’, in I Katznelson and H V Milner (eds) Political Science: The State of the Discipline (New York: W. W. Norton & Company), 693–721. Pondy, L R (1978) ‘Leadership as a Language Game’, in M W McCall and M M Lombado (eds) Leadership (Durham: Duke Univ. Press). Powell, W W (1978) ‘Publishers’ Decision-Making: What Criteria Do They Use in Deciding Which Books to Publish?’, Social Research, 45(2): 227–52. Powell, W W (1991) ‘Expanding the Scope of Institutional Analysis’, in W W Powell and P J DiMaggio (eds) The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press), 183–203. Quack, S (2005) ‘Zum Werden und Vergehen von Institutionen: Vorschläge für eine dynamische Governanceanalyse’, in G F Schuppert (ed.) Governanceforschung. Vergewisserung über Stand und Entwicklungslinien (Baden-Baden: Nomos), 346–70. Rasmussen, A and C Reh (2013) ‘The consequences of concluding codecision early: trilogues and intra-institutional bargaining success’, Journal of European Public Policy, 20(7): 1006–24. Reh, C (2014) ‘Is informal politics undemocratic? Trilogues, early agreements and the selection model of representation’, Journal of European Public Policy, 21(6): 822–41. Renda, A (2010) ‘Neutrality and diversity in the internet ecosystem’, CEPS Policy Brief , No. 309 (Brussels: Centre for European Policy Studies). Rhodes, R A W (2006) ‘Old institutionalism’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (New York: Oxford Univ. Press), 90–108. Robins, R S (1976) Political Institutionalization and the Integration of Elites (Beverly Hills: Sage). Rochet, J-C and J Tirole (2006) ‘Two-Sided Markets: A Progress Report’, The RAND Journal of Economics, 37(3), 645–67. Roederer-Rynning, C and J Greenwood (2015) ‘The culture of trilogues’, Journal of European Public Policy, 22(8): 1148–65. Rommetveit, K (1976) ‘Decision Making Under Changing Norms’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 140–55. Rothstein, B (1992) ‘Labor-market Institutions and Working-class Strength’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 33–56. Rothstein, B (1998) ‘Political Institutions: An Overview’, in R E Goodin and H-D Klingemann (eds) A New Handbook of Political Science (Oxford: Oxford Univ. Press), 133–66. Sabatier, P (1987) ‘Knowledge, Policy-Oriented Learning, and Policy Change: An Advocacy Coalition Framework’, Knowledge: Creation, Diffusion, Utilization, 8(4), 649–92. Sanders, E (2008) ‘Historical Institutionalism’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (New York: Oxford Univ. Press), 39–55.

References

289

Sandfeld Jakobsen, S (2014) ‘EU Internet law in the era of convergence: the interplay with EU telecoms and media law’, in A Savin and J Trzaskowski (eds) Research Handbook on EU Internet Law (Cheltenham: Edward Elgar), 60–80. Sandholtz, W (1998) ‘The emergence of a supranational telecommunications regime’, in W Sandholtz and A S Sweet (eds) European Integration and Supranational Governance (Oxford: Oxford University Press), 134–63. Sandvig, C (2013) ‘The Internet as Infrastructure’, in W H Dutton (ed.) The Oxford Handbook of Internet Studies (Oxford: Oxford Univ. Press), 86–106. Savin, A (2014) ‘How Europe formulates internet policy’, Internet Policy Review, 3(1). Sawhney, H (2003) ‘Wi-Fi Networks and the Rerun of the Cycle’, Info: The Journal of Policy, Regulation, and Strategy for Telecommunications, 5(6), 25–33. Scharpf, F W (1977) ‘Does Organization Matter? Task Structure and Interaction in the Ministerial Bureaucracy’, in E H. Burack and A R Negandhi (eds) Organization Design: Theoretical Perspectives and Empirical Findings (Kent: Kent State University Press). Scharpf, F W (1997) Games Real Actors Play. Actor-Centered Institutionalism in Policy Research (Oxford: Westview Press). Scharpf, F (1999) Governing in Europe: Effective and Democratic? (Oxford: Oxford Univ. Press). Schejter, A M and M Yemini (2007) ‘„Justice, and Only Justice, You Shall Pursue“: Network Neutrality, the First Amendment and John Rawls’s Theory of Justice’, Michigan Telecommunications and Technology Law Review, 14(1), 137–74. Schmidt, S K (1998) ‘Commission Activism: Subsuming Telecommunications and Electricity under European Competition Law’, Journal of European Public Policy, 5(1), 169–84 Schmidt, V A (2008) ‘Discursive Institutionalism: The Explanatory Power of Ideas and Discourse’, Annual Review of Political Science, 11: 303–26. Schmitter, P and G Lehmbruch (1979) (eds) Trends Toward Corporatist Intermediation (Beverly Hills: Sage). Schneider, V (2001) ‘Institutional Reform in Telecommunications: The European Union in Transnational Policy Diffusion’, in M G Cowles, J Caporaso, and T Risse (eds) Transforming Europe. Europeanization and Domestic Change (Ithaca: Cornell Univ. Press), 60–78. Schneider, V and F Janning (2006) Politikfeldanalyse. Akteure, Diskurse und Netzwerke in der öffentlichen Politik (Wiesbaden: VS). Schneider, V and R Werle (1990) ‘International regime or corporate actor?: The European Community in telecommunications policy’, in K Dyson and P Humphreys (eds) The political economy of telecommunications: International and European dimensions (London: Routledge), 77–106. Schulte-Braucks, R (1986) ‘Das „British-Telecom“-Urteil: Eckstein für ein europäisches Fernmelderecht?’, Wirtschaft und Wettbewerb, 3: 202–15. Schuppert, G F (2005) ‘Governance im Spiegel der Wissenschaftsdisziplinen’, in ibid. (ed.) Governanceforschung. Vergewisserung über Stand und Entwicklungslinien (BadenBaden: Nomos), 371–469. Scott, W R (1995) Institutions and Organisations (London: Sage). Scott, W R (2008) Institutions and Organizations: Ideas and Interests, 3rd Ed. (Thousand Oaks: Sage).

290

References

Sewell, W F (1992) ‘A Theory of Structure: Duality, Agency, and Transformation’, The American Journal of Sociology, 98(1): 1–29. Shackleton, M (2012) ‘The European Parliament’, in J Peterson and M Shackleton (eds) The Institutions of the European Union, 3rd Ed. (Oxford: Oxford Univ. Press), 124–47. Shackleton, M and Raunio, T (2003) ‘Codecision since Amsterdam: a laboratory for institutional innovation and change’, Journal of European Public Policy, 10(2): 171–87. Shearman, C (1986) ‘European collaboration in computing and telecommunications: A policy approach’, in K Dyson and P Humphreys (eds) The politics of the communications revolution in Western Europe (London: Frank Cass). Shepsle, K A (1986) ‘Institutional Equilibrium and Equilibrium Institutions’, in H F Weisberg (ed.) Political Science: The Science of Politics (New York: Agathon), 51–82. Shepsle, K A (1989) ‘Studying institutions: some lessons from the rational choice approach’, Journal of Theoretical Politics, 1(2): 131–47. Shepsle, K A (2008a) ‘Old Questions and New Answers about Institutions: The Riker Objection Revisited’, in D A Wittmann and B R Weingast (eds) The Oxford Handbook of Political Economy (New York: Oxford University Press), 1031–49. Shepsle, K A (2008b) ‘Rational Choice Institutionalism’, in S A Binder, R A W Rhodes, and B A Rockman (eds) The Oxford Handbook of Political Institutions (New York: Oxford Univ. Press), 23–37. Shepsle (2010) Analyzing Politics: Rationality, Behavior, and Instititutions, 2nd Ed. (New York: W. W. Norton & Company). Shepsle, K A and B Weingast (1982) ‘Institutionalizing Majority Rule: A Social Choice Theory With Policy Implications’, American Economic Review, 72(2): 367–71. Skocpol, T (1992) Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States (Cambridge: Cambridge Univ. Press). Skocpol T and K Finegold (1982) ‘State Capacity and Economic Intervention in the Early New Deal’, Political Science Quarterly, 97(2): 255–78. Skowronek, S (1982) Building A New American State (Cambridge: Cambridge University Press). Simon, H A (1965) Administrative Behavior, 2nd Ed. (New York: Macmillan). Simpson, S (2010) ‘Governing Information Infrastructures and Services: States, Markets and the Public Interest in Telecommunications’, Aslib Proceedings, 62(1): 46–56. Simpson, S (2013) ‘The Interactive Nature of “Soft” and “Hard” Governance in the EU Information Society’, Information, Communication & Society, 16(6): 899–917. Smith, R M (1988) ‘Political Jurisprudence, the “New Institutionalism”, and the Future of Public Law’, American Political Science Review, 82(1): 89–108. Spindler, G (2014) ‘EU Internet Policy’, in A Savin and J Trzaskowski (eds) Research Handbook on EU Internet Law (Cheltenham: Edward Elgar), 3–36. Star, S L (1999) ‘The Ethnography of Infrastructure’, American Behavioral Scientist, 43(3): 377–91. Stewart, C. M., G. Gil-Egui, Y. Tian and M. I. Pileggi (2006) ‚Framing the Digital Divide: a Comparison of US and EU Policy Approaches‘, New Media & Society, 8(6): 731–751. Stie, A E (2013) Democratic Decision-making in the EU. Technocracy in disguise? (London and New York: Routledge). Stinchcombe, A L (1968) Constructing Social Theories (New York: Harcourt, Brace & World). Stinchcombe, A L (1986) ‘Milieu and Structure Update’, Theory and Society, 15(6): 901–13.

References

291

Stone Sweet, A and J A Caporaso (1998) ‘From Free Trade to Supranational Polity: The European Court and Integration’, in W Sandholtz and A Stone Sweet (eds) European Integration and Supranational Governance (Oxford: Oxford Univ. Press), 92–133. Straßheim, H (2009) ‘Governance als reflexive Koordination’, in S Botzem, J Hofmann, S Quack, G F Schuppert, and H Straßheim (eds) Governance als Prozess—Koordinationsformen im Wandel (Baden-Baden: Nomos), 461–77. Stava, P (1976) ‘Constraints on Politics of Public Choice’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 206–24. Streeck, W and K Thelen (2005) ‘Introduction: Institutional Change in Advanced Political Economies’, in ibid. (eds) Beyond Continuity. Institutional Change in Advanced Political Economies (New York: Oxford University Press). Stryker, R (1994) ‘Rules, resources, and legitimacy processes: some implications for social conflict, order, and change’, American Journal of Sociology, 99(4): 847–910. Tallberg, J (2006) Leadership and Negotiation in the European Union (Cambridge: Cambridge University Press). Tanenbaum, A S and D J Wetherall (2011) Computer Networks, 5th Ed. (Boston: Pearson). Thatcher, M (2004) ‘Winners and Losers in Europeanisation: Reforming the National Regulation of Telecommunications’, West European Politics, 27(2), 284–309. Thelen, K and S Steinmo (1992) ‘Historical Institutionalism in Comparative Politics’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 1–32. Thelen, K, S Steinmo, and F Longstreth (1992) (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press). Thelen, K (2004) How Institutions Evolve. The Political Economy of Skills in Germany, Britain, the United States, and Japan (Cambridge: Cambridge University Press). Thelen, K (2009) ‘Institutional Change in Advanced Political Economies’, British Journal of Industrial Relations, 47(3), 471–98. Therborn, G (1980) What Does the Ruling Class Do When It Rules? (London: Verso). Thomas, G M et al. (1987) (eds) Institutional Structure: Constituting State, Society, and the Individual (Beverly Hills: Sage). Townes, M (2012) ‘The Spread of TCP/IP: How the Internet Became the Internet’, Millennium: Journal of International Studies, 41(1), 43–64. Tsebelis, G (2002) Veto Players. How Political Institutions Work (New York: Russell Sage Foundation). Tsebelis, G and G Garrett (2001) ‘The Institutional Foundations of Intergovernmentalism and Supranationalism in the European Union’, International Organization, 55(2): 357–390. Tyack, D B (1976) ‘Pilgrim’s Process: Toward A Social History of the School Superintendency, 1890–1960’, History of Education Quarterly, 16(3): 259–300. Ungerer, H (2013) ‘Back to the roots: the 1987 telecom green paper 25 years after—has European telecom liberalization fulfilled its promise for Europe in the internet age?’, info, 15(2): 14–24. van Dijk, J (2012) The Network Society, 3rd Ed. (London: Sage). van Schewick, B (2007) ‘Towards an Economic Framework for Network Neutrality Regulation’, Journal on Telecommunications and High Technology Law, 5(2): 329–391.

292

References

van Schewick, B (2014) ‘Network Neutrality and Quality of Service: What a NonDiscrimination Rule Should Look Like’, Public Law and Legal Theory Working Paper Series Research Paper, No. 2459568. Verba, S (1971) ‘Sequences and development’, in L Binder and J La Palombara (eds) Crises and Sequences in Political Development (Princeton: Princeton University Press), 283–316. Vogel, S K (1996) Freer Markets, More Rules. Regulatory Reform in Advanced Industrial Countries (Ithaca: Cornell University Press). Ward, H (1998) ‘A Game Theoretic Analysis of the Politics of Taking It in Turns’, British Journal of Political Science, 28(2): 355–87. Weaver, R K and B A Rockman (1993) (eds) Do Institutions Matter? Government Capabilities in the United States and Abroad (Washington, DC: Brookings). Webster, F (2006) Theories of the Information Society, 3rd Ed. (London: Routledge). Weiner, S (1976) ‘Participation, Deadlines, and Choice’, in J G March and J P Olsen (eds) Ambiguity and Choice in Organizations (Bergen: Universitetsforlaget), 225–50. Weingast, B R (2002) ‘Rational-Choice Institutionalism’, in I Katznelson and H V Milner (eds) Political Science: The State of the Discipline (New York: W. W. Norton & Company), 660–92. Weir, M (1992) ‘Ideas and the Politics of Bounded Innovation’, in S Steinmo, K Thelen, and F Longstreth (eds) Structuring politics. Historical institutionalism in comparative analysis (New York: Cambridge University Press), 188–216. Wilks, S (2010) ‘Competition Policy: Towards an Economic Constitution?’, in H Wallace et al. (eds) Policy-Making in the European Union, 6th Ed. (Oxford: Oxford University Press), 133–156. Williamson, O E (1975) Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press). Winner, L (1980) ‘Do Artifacts Have Politics’, Daedalus, 109(1): 121–36. Woods, L and P Watson (2012) EU Law, 11th Ed. (Oxford: Oxford Univ. Press). Wright, H T (1977) ‘Recent Research on the Origin of the State’, Annual Review of Anthropology, 6: 379–397. Wu, T (2003) ‘Network Neutrality, Broadband Discrimination’, Journal on Telecommunications & High Technology Law, 2(1): 141–79. Yin, R K (1989) Case Study Research. Design and Methods (London: Sage Publications). Yin, R K (1993) Applications of Case Study Research (London: Sage Publications). Yin, R K (2009) Case Study Research. Design and Methods, 4th Ed. (London: Sage). Yin, R K (2014) Case Study Research. Design and Methods, 5th Ed. (London: Sage). Yoo, C S (2005) ‘Beyond Network Neutrality’, Harvard Journal of Law & Technology, 19(1): 1–77. Young, O (1986) ‘International Regimes: toward a new theory of institutions’, World Politics, 39(1): 104–22. Zherebin, V M (2010) ‘Information Society as the Law-governed Result of the Evolution of Information’, in L Fortunati, J Vincent, J Gebhardt, A Petrovcic, and O Vershinskaya (eds) (2010) Interacting with Broadband Society (Frankfurt am Main: Peter Lang), 161–74. Zucker, L G (1991) ‘The Role of Institutionalization in Cultural Persistence’, in W W Powell and P J DiMaggio (eds) The New Institutionalism in Organizational Analysis (Chicago, University of Chicago Press), 83–107.

References

293

List of BEREC Documents BoR (10) 42: BEREC’s Response to the European Commission’s consultation on the open Internet and net neutrality in Europe. BoR (11) 19: BEREC Annual Report 2010, 27 May 2011. BoR (11) 44: Draft BEREC Guidelines on Net Neutrality and Transparency: Best practices and recommended approaches. BoR (11) 53: A framework for Quality of Service in the scope of Net Neutrality. BoR (11) 67: BEREC Guidelines on transparency in the scope of net neutrality: best practices and recommended approaches. BoR (12) 30: A view of traffic management and other practices resulting in restrictions to the open Internet in Europe, 29 May 2012. BoR (12) 31: BEREC draft Report for public consultation “Differentiation practices and related competition issues in the scope of Net Neutrality”. BoR (12) 32: BEREC (2012b) BEREC draft Guidelines for Quality of Service. BoR (12) 33: BEREC Draft Report “Assessment of IP-interconnection in the context of net neutrality”. BoR (12) 34: Explanatory paper in relation to the BEREC public consultations on net neutrality. BoR (12) 120: BEREC comments on the ETNO proposal for ITU/WCIT. BoR (13) 117: Ecosystem Dynamics and Demand Side Forces in Net Neutrality: Progress Report and Decision on Next Steps. BoR (13) 142: BEREC views on the proposal for a Regulation “laying down measures to complete the European single market for electronic communications and to achieve a Connected Continent”, 17 October 2013. BoR (14) 50: BEREC (2014) BEREC views on the European Parliament first reading legislative resolution on the European Commission’s proposal for a Connected Continent Regulation, 16 May 2014. BoR (14) 117: Monitoring quality of Internet access services in the context of net neutrality BEREC report. BoR (15) 90: BEREC publishes its report on how consumers value net neutrality. BoR (16)127: BEREC Guidelines on the Implementation by National Regulators of European Net Neutrality Rules, 30 August 2016. BoR (18) 244: BEREC Opinion for the evaluation of the application of Regulation (EU) 2015/2120 and the BEREC Net Neutrality Guidelines, 6 December 2018.

List of Commission Communications COM(83) 329: Communication from the Commission to the Council: Telecommunications. COM(83) 573: Communication from the Commission to the Council on Telecommunications—Lines of Action. COM(84) 277: Communication from the Commission to the Council: Progress Report on the Thinking and Work done in the field and initial Proposals for an Action Programme.

294

References

COM(85) 310: Completing the Internal Market—White Paper from the Commission to the European Council. COM(87) 290: Towards a Dynamic European Economy—Green Paper on the Development of the Common Market for Telecommunications Services and Equipment. COM(88) 48: Communication from The Commission: Towards a Competitive Communitywide Telecommunications Market in 1992—Implementing the Green Paper on the Development of the Common Market for Telecommunications Services and Equipment; State of Discussions and Proposals by the Commission. SEC(92)1048: Review of the situation in the telecommunications services sector. Communication by the Commission, 21 October 1992. COM(93)159: Communication to the Council and European Parliament on the Consultation on the Review of the Situation in the Telecommunications Services Sector. COM(93) 700: Growth, Competitiveness, Employment—The Challenges and Ways Forward into the 21st Century—White Paper. COM(94) 347: Europe’s Way to the Information Society. An Action Plan—Communication from the Commission to the Council and the European Parliament and to the Economic and Social Commitee and the Committee of Regions. COM(94) 440: Communication from the Commission—Green Paper on the liberalisation of telecommunications infrastructure and cable television networks: Part One—Principe and timetable. COM(96) 607: Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on “Europe at the Forefront of the Global Information Society: Rolling Action Plan”. COM(97) 623: Green Paper on the convergence of the telecommunications, media and information technology sector, and the implications for regulation. Towards an Information Society Approach. COM(1999) 539: Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions— Towards a new framework for Electronic Communications infrastructure and associated services—The 1999 Communications Review. COM(2000) 393 Proposal for a Directive of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services. SEC/2001/1407: Communication from the Commission to the European Parliament pursuant to the second subparagraph of Article 251 (2) of the EC Treaty concerning the common position of the Council on the adoption of a Directive of the European Parliament and of the Council on universal services and users’ rights relating to electronic communications networks and services. COM(2002) 695: Eighth Report from the Commission on the Implementation of the Telecommuni-cations Regulatory Package—European telecoms regulation and markets 2002. COM(2005) 24: Communication to the Spring European Council—Working together for growth and jobs—A new start for the Lisbon Strategy—Communication from President Barroso in agreement with Vice-President Verheugen. COM(2005) 97: Communication from the Commission to the Council and the European Parliament—Better Regulation for Growth and Jobs in the European Union.

References

295

COM(2006) 68: Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions—European electronic communications regulation and markets 2005 (11th Report). COM(2006) 334: Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the review of the EU Regulatory Framework for electronic communications networks and services. COM(2007) 698: Proposal for a Directive of the European Parliament and of the Council amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on consumer protection cooperation. COM(2007) 699: Proposal for a Regulation of the European Parliament and of the Council establishing the European Electronic Communications Market Authority. COM(2010) 245: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A Digital Agenda for Europe. COM(2010) 253: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Progress Report on the Single European Electronic Communications Market (2009 15th Report). COM(2010) 2020: EUROPE 2020 A strategy for smart, sustainable and inclusive growth. COM(2011) 222: Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions—The open internet and net neutrality in Europe. COM(2011) 427: Green Paper on the online distribution of audiovisual works in the European Union: opportunities and challenges towards a digital single market. COM(2013) 627: Proposal for a Regulation of the European Parliament and of the Council laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012. COM(2013) 634: Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the Telecommunications Single Market. COM(2019) 203: Report from the Commission to the European Parliament and the Council on the implementation of the open internet access provisions of Regulation (EU) 2015/2120.

List of Directives 83/189/EEC: Council Directive of 28 March 1983 laying down a procedure for the provision of information in the field of technical standards and regulations. 86/361/EEC: Council Directive of 24 July 1986 on the initial stage of the mutual recognition of type approval for telecommunications terminal equipment.

296

References

86/529/EEC: Council Directive on the adoption of common technical specifications of the MAC/packet family of standards for direct satellite television broadcasting. 87/372/EEC: Council Directive of 25 June 1987 on the frequency bands to be reserved for the coordinated introduction of public pan-European cellular digital land-based mobile communications in the Community. 88/301/EEC: Commission Directive of 16 May 1988 on competition in the markets in telecommunications terminal equipment. 90/387/EEC: Council Directive of 28 June 1990 on the establishment of the internal market for telecommunications services through the implementation of open network provision. 90/388/EEC: Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services. 91/263/EEC: Council Directive of 29 April 1991 on the approximation of the laws of the Member States concerning telecommunications terminal equipment, including the mutual recognition of their conformity. 92/44/EEC: Council Directive of 5 June 1992 on the application of open network provision to leased lines. 95/51/EC: Commission Directive of 18 October 1995 amending Directive 90/388/EEC with regard to the abolition of the restrictions on the use of cable television networks for the provision of already liberalized telecommunications services. 95/62/EC: Directive of the European Parliament and of the Council of 13 December 1995 on the application of open network provision (ONP) to voice telephony. 96/19/EC: Commission Directive of 13 March 1996 amending Directive 90/388/EEC with regard to the implementation of full competition in telecommunications markets. 97/51/EC: Directive of the European Parliament and of the Council of 6 October 1997 amending Council Directives 90/387/EEC and 92/44/EEC for the purpose of adaptation to a competitive environment in telecommunications. 98/10/EC: Directive of the European Parliament and of the Council of 26 February 1998 on the application of open network provision (ONP) to voice telephony and on universal service for telecommunications in a competitive environment. 1999/5/EC: Directive of the European Parliament and of the Council of 9 March 1999 on radio equipment and telecommunications terminal equipment and the mutual recognition of their conformity. 2000/31/EC: Directive of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market. 2002/19/EC: Directive of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (Access Directive). 2002/20/EC: Directive of the European Parliament and of the Council of 7 March 2002 on the authorisation of electronic communications networks and services (Authorisation Directive). 2002/21/EC: Directive of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive).

References

297

2002/22/EC: Directive of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive). 2008/63/EEC: Commission Directive 2008/63/EC of 20 June 2008 on competition in the markets in telecommunications terminal equipment. 2009/136/EC: Directive of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (Citizens’ Rights Directive). 2009/140/EC: Directive of the European Parliament and of the Council of 25 November 2009 amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and services (Better Regulation Directive). 2014/61/EC: Directive of the European Parliament and of the Council of 15 May 2014 on measures to reduce the cost of deploying high-speed electronic communications networks Text with EEA relevance.

List of Regulations (EEC) 3300/86: Council Regulation instituting a Community programme for the development of certain less-favoured regions of the Community by improving access to advanced telecommunications services (STAR programme). (EEC) 4064/89: Council Regulation of 21 December 1989 on the control of concentrations between undertakings. (EC) 2887/2000: of the European Parliament and of the Council of 18 December 2000 on unbundled access to the local loop. (EC) 1211/2009: of the European Parliament and of the Council of 25 November 2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office. (EU) 2015/2120: of the European Parliament and of the Council of 25 November 2015 laying down measures concerning open internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union.

298

References

List of Decisions 82/861/EEC: Commission Decision of 10 December 1982 relating to a proceeding under Article 86 of the EEC Treaty (IV/29.877—British Telecommunications). 85/372/EEC: Council Decision on a definition phase for an R&D programme in advanced communications technologies for Europe (RACE). 87/95/EEC: Council Decision on standardisation in the field of information technology and telecommunications. 2002/622/EC): Commission Decision of 26 July 2002 establishing a Radio Spectrum Policy Group. 2002/627/EC: Commission Decision of 29 July 2002 establishing the European Regulators Group for Electronic Communications Networks and Services. 676/2002/EC: Decision of the European Parliament and of the Council of 7 March 2002 on a regulatory framework for radio spectrum policy in the European Community. 2004/641/EC: Commission Decision of 14 September 2004 amending Decision 2002/627/EC establishing the European Regulators Group for Electronic Communications Networks and Services.

List of Recommendations COM(80) 422: Council Recommendation concerning the implementation of harmonization in the field of telecommunications. 84/549/EEC: Council Recommendation of 12 November 1984 concerning the implementation of harmonization in the field of telecommunications. 84/550/EEC: Council Recommendation of 12 November 1984 concerning the first phase of opening up access to public telecommunications contracts. 86/659/EEC: Council Recommendation of 22 December 1986 on the coordinated introduction of the integrated services digital network (ISDN) in the European Community. 87/371/EEC: Council Recommendation of 25 June 1987 on the coordinated introduction of public pan-European cellular digital land-based mobile communications in the Community. 92/383/EEC: Council Recommendation of 5 June 1992 on the provision of harmonized integrated services digital network (ISDN) access arrangements and a minimum set of ISDN offerings in accordance with open network provision (ONP) principles. 2000/417/EC Commission Recommendation of 25 May 2000 on unbundled access to the local loop: enabling the competitive provision of a full range of electronic communications services including broadband multimedia and high-speed Internet. 2010/572/EU: Commission Recommendation of 20 September 2010 on regulated access to Next Generation Access Networks (NGA). C(2013)5761: Commission Recommendation of 11.9.2013 on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment.

References

299

List of Council meeting documents Council (1993) Council Resolution of 22nd July 1993 on the Review of the Situation in the Telecommunications Sector and the Need for Further Development in that Market, Office of Official Publications of the EC, Luxembourg: 93/C213/01, 6 August. Council (2000) 2318th Council meeting INDUSTRY/ENERGY, Brussels, 5 December 2000, Conseil/00/466. Coreper (2010) Digital Agenda for Europe—Adoption of Council conclusions, Brussels, 26 May 2010, 10130/10. Council (2013a) Conclusion of the European Council 14/15 March 2013, EUCO 23/13. Council (2013b) Digital Agenda for Europe—The role of the Telecommunications and ICT Sectors—Policy debate, 9756/13. Council (2013c) 3278th Council meeting Transport, Telecommunications and Energy, Brussels, 5 December 2013, 17341/13. Council (2014a) Proposal for a Regulation of the European Parliament and of the Council laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, 13383/14. Council (2014b) Presidency: Proposal for a Regulation of the European Parliament and of the Council laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent on 14 November 2014, 15541/14. Council (2014c) Outcome of the Council Meeting, 3350th Council meeting Transport, Telecommunications and Energy, Brussels, 27 November 2014, 16175/14. Council (2015a) General Secretariat of the Council: Draft Regulation of the European Parliament and of the Council laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012 (first reading)—Adoption, Brussels, 29 September 2015, 12279/15. Council (2015b) Commission communication on Council’s position, 2013/0309(COD)– 02/10/2015, https://www.europarl.europa.eu/oeil/popups/summary.do?id=1405045&t= d&l=en (available 20/03/2017).

List of Council Resolutions 74/C 86/1: Council Resolution of 15 July 1974 on a Community policy on data processing. 85/C 136/01: Council Resolution of 7 May 1985 on a new approach to technical harmonization and standards. 86/C 160/01: Council Resolution on the use of videoconference and videophone techniques for intergovernmental applications. 1988/C 257/1: Council Resolution on the development of the common market for telecommunications services and equipment up to 1992, 30 June 1988. 1993/C 213/1: Council Resolution of 22 July 1993 on the review of the situation in the telecommunications sector and the need for further development in that market.

300

References

List of European Parliament reports and resolutions (EP 2011) European Parliament Resolution of 17 November 2011 on the open internet and net neutrality in Europe, 2011/2866(RSP). EP (2012a) European Parliament—Resolution Digital freedom strategy in EU foreign policy, 2012/2094(INI). EP (2012b) European Parliament Resolution—Completing the digital single market, 2012/2030(INI). EP (2014) Report on the proposal for a regulation of the European Parliament and of the Council laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC, 2002/22/EC, and Regulations (EC) No 1211/2009 and (EU) No 531/2012 (COM(2013)0627 – C7–0267/2013 – 2013/0309(COD)) of 20/03/2014, A7–0190/2014. EP (2015) Rules of Procedure, 8th Parliamentary Term, January 2015 (Brussels: European Parliament).

List of ECJ rulings C-26/62: Judgment of the Court of 5 February 1963: NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration. Reference for a preliminary ruling: Tariefcommissie–Netherlands. C-6/64: Judgment of the Court of 15 July 1964: Flaminio Costa v E.N.E.L. Reference for a preliminary ruling: Giudice conciliatore di Milano–Italy. C-41/83: Judgment of the Court of 20 March 1985. Italian Republic v Commission of the European Communities. Abuse of a dominant position (Article 86)–Public undertakings (Article 90)–International agreements (Article 234)–Article 222–Article 190 of the Treaty. C-202/88: Judgment of the Court of 19 March 1991: French Republic v Commission of the European Communities. Competition in the markets in telecommunications terminals equipment. C-271/90: together with C-281/90, C-289/90. Judgment of the Court of 17 November 1992: Kingdom of Spain, Kingdom of Belgium and Italian Republic v Commission of the European Communities. Competition in the markets for telecommunications services.

List of impact assessments SEC(2007) 1472: COMMISSION STAFF WORKING DOCUMENT—IMPACT ASSESSMENT Accompanying document to the Commission proposal for a Directive of the European Parliament and the Council amending European Parliament and Council Directives 2002/19/EC, 2002/20/EC and 202/21/EC, Commission proposal for a Directive of the European Parliament and the Council amending European Parliament and Council Directives 2002/22/EC and 2002/58/EC, Commission proposal for a Regulation of the European Parliament and the Council establishing the European Electronic Communications Markets Authority.

References

301

SWD(2013) 331: Commission Staff Working Document Impact Assessment accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down measures to complete the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012.

List of press releases IP/98/733: Commission Working Document sums up Green Paper consultation on the convergence of the telecommunications, media and information technology sectors, Brussels, 29 July 1998. IP/99/164: Results of the Public Consultation on the Green Paper on the Convergence of the Telecommunications, Media and Information Technology Sectors, Brussels, 10 March 1999. Conseil/00/466: 2318th Council meeting INDUSTRY/ENERGY Brussels, 5 December 2000. IP/03/1356: EU rules on electronic communications—Commission launches infringement proceedings against ten Member States, Brussels, 14 April 2005. IP/03/1750: Electronic Communications: Commission takes further step in enforcement action against seven Member States, Brussels, 17 December 2003. IP/04/510: Six Member States face Court action for failing to put in place new rules on electronic communications, Brussels, 21 April 2004. C/07/274: 2835th Council meeting Transport, Telecommunications and Energy, Brussels, 29–30 November/3 December 2007.

List of other documents 2000/184(COD): Opinion of the Commission pursuant to Article 251 (2), third subparagraph, point (c) of the EC Treaty, on the European Parliament’s amendments to the Council’s common position regarding the proposal for a Directive of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services amending the proposal of the Commission pursuant to Article 250 (2) of the EC Treaty. 2014/C 38/06: Executive Summary of the Opinion of the European Data Protection Supervisor on the Proposal for a Regulation of the European Parliament and of the Council laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012. 2014/C 126/13: Opinion of the Committee of the Regions—European single market for electronic communications. 2014/C 177/12: Opinion of the European Economic and Social Committee on ‘New measures on the EU single market for telecoms’ covering the following two documents: Proposal for a Regulation of the European Parliament and of the Council laying down measures

302

References

concerning the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012. EC Webgate: https://webgate.ec.europa.eu/fpfis/mwikis/ThinkTank/index.php/DG_Connect (available 20/03/2017).