Luxembourg

Changes over the last three months (Oct. Dec. 98)

On-going developments

1. Context

Until the vote of the new Law on Telecommunications, early spring 1997, the general legal framework on telecommunications guaranteed the monopolistic provision of basic voice communications and telecommunication infrastructure to the national operator, the P&T, a 100% state-owned public company.

Because of its small and thus very open telecommunication market, Luxembourg had first negotiated in June 1993, along with other European countries such as Spain, Portugal, Greece or Ireland, to postpone the liberalisation of its telecommunications to the 1^st of January 2000. Later, the luxembourger government announced his intention to stick to the recommended deadline of January 1998, in line with the initial European Commission’s recommendations on telecom deregulation, after the Commission had rejected, in November 1996 Luxembourg’s application for a full two-year derogation. Nevertheless, marginal derogation have been maintained by the EC on 7th of May 1997, such as those concerning alternative infrastructures for liberalised or voice telephony, international services and associated infrastructures.

Luxembourg : Derogation granted for 1998

Still, public authorities progressed slowly and carefully on the path of deregulation and open competition because of local specificity.

2. Evolution of the legal framework

2.1 Before 1997

P&T had become a 100% state-owned autonomous company in August 1992. In February 1996, a new project of law on Telecommunications was addressed to the Chamber of Deputies. It aimed at reforming the overall context in line with the deregulation recommendations and calendar of the E.U by:

• creating a competitive environment for the telecommunications sector;
• organising equal access to telecommunication services and infrastructures
• defining the universal service delivery conditions
• determining open network access conditions
• proposing an efficient management of "scarce resources"
• regulating privacy
• and creating a regulatory body – the "Institut Luxembourgeois des Télécommunications".

Several significant changes occurred during the year 1997, among which the adoption of a new law on telecommunications and the creation of a new regulatory body.

2.2 The 1997 period

A new Law on Telecommunications
The new Law which was voted on 21^st March 1997 radically reorganises the landscape of the telecommunications market The new law :

• separates explicitly regulatory and exploitation activities ;
• aims at organising a fair competition framework ;
• imposes five licensing procedures ;
• organises the licensing procedures and lists the minimal conditions to be defined in their terms of reference ;
• imposes a declaration procedure for all other telecommunication services ;
• determines the procedures of definition, production, co-financing and control of the Universal Service ;
• defines interconnectivity and open network access conditions ;
• rules terminals agreement, scarce resources management and directories ;
• creates and frames the new regulatory body : the "Institut Luxembourgeois des Télécommunications" ;
• creates a CATV registration and licensing procedure.

Luxembourg was in charge of the European presidency during the second semester of 1997. This may have kept the rhythm of some evolutions to a slower pace. Still, the government has issued (22^nd of December 1997) two new terms of references concerning major telecommunication issues:

• development and exploitation of fixed telecommunications infrastructures
• development and exploitation of fixed telecommunications and voice telephony infrastructures

The setting up of a new regulatory body
The Director of the "Institut Luxembourgeois des Télécommunications", created by Law, has been nominated at the end of April 1997. She addressed some urgent issues as the practical organisation of the first bid for competition in the mobile sector, the opening to competition of infrastructures and voice telephony, and the registration and licensing of the CATV sector.

Since before 1998, most of the international operators had already started early competitive offers for voice telephony and other services among banks and insurance companies.

The assessment of the EC, end of 1997
The European Commission has put forward in October, as in May 1997, the insufficient progress of the Luxembourger legislative adaptation to the EC Directives. Globally, end 1997, the Luxembourger regulatory framework was characterised by the Commission as follows:

2.3 The 1998 period

Secondary legislation is published
The ILT, in co-operation with the Ministry of Telecommunications, has published most of the secondary legislation and decisions to allow a full functioning of the telecom market.

EC Assessment
The European Commission has initiated an infringement procedure against Luxembourg as regarding insufficient transposition of the liberalisation directives and partial transposition of certain directives. It mainly concerned the definition of the Universal Service, the vocal telephony licensing procedure, the financing of the ILT and the adaptation of the Law in line with the EU Satellite Directive. But in most cases, the situation was assessed as resulting mainly of delays in adopting the secondary legislation. Thus one may expect the future assessment to be rather positive.

3. Other regulatory issues

3.1 Information Society

In March 1998, the Commission of Communications and Informatics, together with the Commission of Media, Research and Culture of the Chambers of Parliament have organised a public hearing to assess the follow-up of their earlier statements on the IS (1995 and 1996 Info 2000 Reports and their debates).

Various inter-ministerial workgroups have been created among the national administrations since 1995 to explore issues related to the upraise of the Information Society. The report of the workgroup in charge of the legal impacts on the Information Society is expected to be presented to the Government by the end of 1998.

3.2 Author's Rights

Three new laws concerning authors’ rights have been adopted and published late 1997. They aim at adapting the 29 March 1972 and 23 September 1975 Laws in line with EU Directives:

Further, a thorough revision of these recently adapted laws on authors’ rights has been overviewed by the Council of State and should be voted by July 1998. It should definitely integrate and modernise most of the existing texts in line with international agreements.

3.3 Electronic Commerce

The Ministry of Economy has created a specific workgroup aiming at developing a legal framework concerning the digital signature.

3.4 Media Legislative Framework

The media sector is ruled by a series of legal texts concerning :

• freedom of expression and press ;
• the Electronic Media
• the written press: an important series of Laws and Règlement including the organisation of the sector, the status of the journalists and the organisation of the public funding of the sector. This last matter is to be revised in a new project of Law. The Service des Médias is working on a new law on written media, which could include aspects concerning electronic press publishing.
• movie diffusion
• the audio-visual production .Here again, a project of law is to be voted this year: it concerns fiscal aspects

3.5 Penal Code

The Ministry of Justice has initiated a workgroup aimed at modernising the penal code. This could favour the inclusion of references to criminal acts considered as specifically developed in the framework of on-line or other networking services and infrastructures.

4. The telecommunication market

4.1 Effects on the former DNO

Most observers expect little effects of the liberalisation process on the former DNO on the short term. Still, the presence of most major international operators has to be taken into account as part of a game theory-like strategy : most of these international players have already started early competitive offers among banks and insurance companies long before 1998.

Some observers are doubtful about P&T chances to adapt its commercial strategies in due time to resist to its competitors; others consider the foreign operators will exclusively serve their existing foreign clients and keep away form extending on the local market. Nevertheless, end 1997, 61 files were introduced for licensing and 210 service declarations were registered by the ILT.

4.2 Mobile telephony : competition in 1998

Until 1998, the only mobile operator was LuxGSM, owned by P&T. The terms of reference of a bid for a second operator have been published on 30^th April 1997 and opened the field to an interconnected GSM and DCS 1800 network.

Three consortium were candidates for the creation and exploitation of a second mobile network in Luxembourg:

• LETZGO, a consortium close to MOBISTAR, the second operator in Belgium (France Telecom Mobile International, TELINDUS, TELINFO, Banque Générale du Luxembourg, Crégélux, Arbed)
• LUXCALL (Compagnie Luxembourgeoise de Télécommunications - a CEGEDEL / AUDILUX joint venture - , Mannesmann Eurokom GmbH, and Compagnie Générale de Services et d’Applications de Télécommunications - subsidiary of the French CGE)
• MILLICOM Luxembourg, a subsidiary of MILLICOM International Cellular (MIC).

MILLICOM SA, has been chosen in October 1997, as second mobile operator. MILLICOM SA, is developed on the basis of the June 97 restructuring of MILLICOM INTERNATIONAL CELLULAR (MIC). MILLICOM SA will invest 3 BFLUX (75 MECU) in the development of the new GSM-DCS 1800 network, called TANGO. It aimed at being operational by mid 1998 and cover 95% of the territory and 98% of the population. MILLICOM started to operate during the second semester 1998, while co-operating with a national company of supermarkets ("Cactus") for the commercialisation of the service.

4.3 CATV sector in trouble since 1997

After over 5 years of trial, the cable operators have been condemned to pay the author’s rights to the SACEM. This may further weaken the dispersed and weak capital of most cable operators: observers estimated this could provoke the closing down of a series of smaller operators organised within non-profit associations and thus accelerate a merging process in favour of a public or private operator.

The Law of 8^th September 1997 answered to the issue of copyright as raised by the Court condemnation of the Luxembourger CATV operators in favour of the SACEM. Negotiations about due payment for the past and about future agreements have started end 1997.

Simultaneously, the new Law on Telecommunications, implementing a registration and licensing procedure for CATV operators, aimed at clarifying the context.

A project of Règlement Grand-Ducal concerning TV program diffusion would confirm CLT’s quasi exclusivity in CATV broadcasting in Luxembourg.

II - Changes and adjustments over the last three months (October-December 1998)

1. Evolution of the legal framework

The following chart gives the details of the legal or regulatory texts of the period:

2. Telecom Market

• MILLICOM has started its services of mobile telephony with a fair success (Est. 30 000 clients) but meets difficulties with the expected geographical coverage of the country.
• GLOBAL ONE, present in Luxembourg since 1997 has announced it was planning for a 10 Mecu turn-over in 1998 in Luxembourg. Succeeding to France Telecom’s FTNS and an even earlier joint venture between the national P&T, FT and Interpac Belgium, GLOBAL ONE offers NGEN infrastructures and one-stop shopping global telecom solutions to the corporate market in Luxembourg.
• JUSTICE TELECOM Luxembourg, a USA call-back company created in 1993, has also announced it would start operating in Luxembourg.

3. CATV sector

The AURORA project has not been launched in September 1998, as announced since April: diverse regulatory, technical and financial difficulties seem to constraint this initiative.

III - On-going developments

The results of the CATV survey should be published shortly and their regulating effects known.

On the mobile sector, prices should fall and the market should still grow rapidly. On the CATV sector, the ILT is still expected to produce its survey report and new licensing procedures and conditions. On the other hand, the copyright issue and its financial consequences, along with foreign projects concerning digital TV, could still generate a complete restructuring of the sector.