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Third, competition law remedies are made in an on-off way because competition authorities have no obligation or resource to monitor the implementation of their decision afterwards. Conversely, regulatory remedies can be evaluated at intervals by the regulator. From some kind of point, we can say that competition law would be more static and rigid, whereas, regulation would be more flexible and evolutive.
2.1.2 The superiority of regulation to competition law
First, liberalisation aims to mimick the effects of market force through implementing control on price and on service . Namely, the liberalisation process also means to break down the rules on the former market and create a new market with new rules by external force. Obviously, the liberalisation process falls out of the applicable scope of competition law. Only under the situation where another kind of the rule of market comes out can competition law find its place to regulate. Furthermore, regulation will persist until an effective competitive market truly comes out.
Second, Liberalisation has two different tasks, one is to control market power, and the other is to promote competition. Since in the transitional period the former rule of market has been destroyed and the new rule of market has not rolled out, the occurrence competition problem would be tenser that ever, this not only would result into a heavy workload for competition authorities, but also would bring the courts substantial difficulty in proving an incumbent supplier had abused its dominant position. In addition, the fast technological development in telecommunications sector aggregate this issue because legal proceedings proved to move slowly at times when quick decisions were required to keep pace with rapid technological advance.
Third, competition authorities have to deal with general competition problems across all economic sectors more than telecommunications sector, therefore, they normally are less equipped with enough information to handle competition issues in telecommunications sector than the regulator. It is a practical reason for competition authorities to seek help from regulatory authorities.
Consequently, increased competition law enforcement and regulatory oversight may both be necessary temporarily to ensure that competition has the opportunity to develop to the point where it can eventually replace regulation as the key source of discipline on the incumbent firm. Moreover, considering the objective of deregulation, it must be always kept in mind that “it is essential that ex ante regulatory obligations should only be imposed where there is not effective competition, i.e. in markets where there are one or more undertakings with significant market power, and where national and Community competition law remedies are not sufficient to address the problem.”
However, this is just a too over-simplified analysis and it still cannot answer fundamental question of when to prefer sector regulation to general competition law as the theoretical principle of only applying the former when the later is considered inadequate does not offer sufficient guidance. Really answer this question needs to further examine how competition law and regulation overlap and diverge when applying to competition issues in telecommunications sector.
2.2 The model of EC liberalisation
EC liberalisation in telecommunications sector was processed based on the economic theories aforementioned in the past years. Since the 1987 Green Paper blowing the horn to open up the telecommunications market until 2002 new directives promising full liberalisation, having eyed a successive series of regulatory model EC considered that the current regulatory framework for telecommunications has been successful in creating the conditions for effective competition in the telecommunications sector. The fundamental elements of the current regulatory framework in telecommunications sector include: (1) erecting NRAs independent of telecommunications operators, (2) abolishing all exclusive or special rights on the telecommunications market, (3) making the telecommunications market controlled by competition law and regulation , (4) establishing an Open Network Provision (ONP) framework to regulate the relationship between network providers and service providers, (5) creating a general authorisation system , (5) keeping separate account obligations , (6) setting up universal service obligations (USOs) , (7) promoting Community-wide interoperability by standardization , and (8) establishing dispute resolution system .
In order to ensure the integrated implementation of the new directives EC set up three objectives for the liberalisation in telecommunications sectors that are ensuring effective competition, developing single market and protecting consumers’ interests. According to the three objectives, we can find a two-layer regulatory framework. First, “economic regulation” aims at ensuring the functioning of an effectively competitive market, thereby maximizing economic efficiency, taking into account of the characteristics of the telecommunications sector. In particular, it pays attention to the important economy of scale and scope, the externality generated by network effects and the presence of infrastructure funded by public aid. Second, “social regulation” aims to ensure that the needs of citizens which are considered to be important by the legislature are satisfied even though they are not necessarily guaranteed by the market alone. Hence, it covers an enhanced consumer protection and the universal access to some basis telecommunications networks and services provided for in the USOs Directive.
Effective competition has already been regarded as the best means to achieve the other two objectives, say a single market and consumer interest, therefore, the major concern of liberalisation of telecommunications sector can be predigested to competition issues. Thus ensuring effective competition in telecommunications sector becomes the prominent objective for the regulator under the new directives. Furthermore, in considering the characteristics of natural monopoly in telecommunications sector the practical problems that has to be dealt with to ensure effective competition is to control significant market power (SMP) or dominant position, for example, prohibiting any practice of an SMP undertaking which is aimed either at driving competitors out of the market (or prevent them from entering the market) or at exploiting consumers, and at the same encourage efficient market by access obligations impose on the incumbent. Accordingly, simply speaking we can say the problems under economic regulation in telecommunications sector are how to control market power in network market to benefit market players in service market.
There are only two kinds of instruments for the EC regulators to deal with the competition problem on the liberalising telecommunications market, which are ex ante general competition law and ex post sector-specific regulation. After two-decade liberalisation experience, the new framework directive determines to give more playing fields for competition law and limit the application of regulation to a necessary extent. Under this deregulation process, an SMP designation is a necessary precondition and situations where ex ante regulation is needed, and the insufficiency of ex post competition law intervention would be the determinant factor for the intervention of regulation. In order to facilitate this analysis, the new framework directive introduces the methodology of application competition law on market definition and assessment of dominant position into analysis the two factors in the former sentence. This move brings a methodology convergence between competition law and regulation and results into some effects on each other. This project aims to investigate the effect of such convergence on the application of regulation itself and side effect on the application of competition law as well.
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