Telecommunications and TV Networks

6 Colum. J. Eur. L. 142 (2000)

Monica A. Lamb.

The European Commission in June 1999 took another step in its campaign to introduce competition into the European telecommunications market by enacting Commission Directive 1999/64/EC amending Directive 90/388/EEC in order to ensure that telecommunications networks and cable TV networks owned by a single operator are separate legal entities (“Legal Separation Directive”). The Commission adopted this Directive pursuant to Article 86(3) of the Treaty Establishing the European Community (“EC Treaty”), which protects the Community’s interest in competition and trade development with respect to “undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly.”

This Directive will have an immediate impact on the cable telecommunications industry in Europe; all Member States must submit evidence of compliance by April 2000. The Commission adopted the Directive over the opposition of incumbent companies that are dominant in both the national telecommunications markets and voice telephony markets; the new Directive requires that incumbent companies legally separate their telecommunications companies from their cable companies. From a technological perspective, cable networks have the unique and growing potential to provide competition against ordinary telephone networks in the voice communication and data transmission markets, which makes the joint ownership of telephone and cable networks in a geographic area particularly anti-competitive. The Commission described the required legal separation as a minimal measure to counteract the conflict of interest created by cross-ownership of both telephone and cable networks. In doing so, the Commission seemed to concede that it had made serious compromises of its goal to reduce anti-competitive behavior in the cable market. Requiring that telephone and cable entities be legally separate would, alone, probably not do much more to protect competition than the accounting separation standard (which required the separation of accounts for each network and service) that it replaces. However, this legislation has prompted some affected operators to take the more extreme and effective measure of fully divesting their cable networks. It appears these companies wish to escape the risk of future regulatory uncertainty.