Case note on ECJ ruling on the Universal Service Directive, Judgment in Case C-1/14 Base Company NV and Mobistar NV v Ministerraad

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Copyright © 2015 Inderscience Enterprises Ltd.
Case note on ECJ ruling on the Universal Service
Directive, Judgment in Case C-1/14 Base Company
NV and Mobistar NV v Ministerraad
Marta Maroni
University of Helsinki,
Yliopistonkatu 3, 550, 00130 Helsinki, Finland
Email: marta.maroni@helsinki.fi
Abstract: This paper is a commentary on the ECJ ruling on the Universal
Service Directive Judgment in Case C-1/14 Base Company NV and Mobistar
NV v Ministerraad. In its judgment, the ECJ states that the Universal Service
Directive does not lay down a social pricing obligation for mobile
communication services and mobile internet subscriptions. This case provides
an opportunity to look at the evolution of the notion of universal service and its
relationship with services of general economic interest. This commentary
underlines the paradoxical character of European Legislation concerning
universal service. On the one hand European Legislation designs standards for
providing availability of electronic communication networks to all and imposes
an obligation on member states to ensure these services. On the other hand, it
limits the scope and the means through which it is possible to reach such
standards. Consequently, EU legislation limits the member states’ discretion on
the means to achieve the availability of universal service. Finally, this paper
explains the reasons why mobile communication services should be included
within the notion of universal service.
Keywords: universal service; services of general economic interest; internet;
EU legislation, mobile communication services.
Reference to this paper should be made as follows: Maroni, M. (2015)
‘Case note on ECJ ruling on the Universal Service Directive, Judgment in Case
C-1/14 Base Company NV and Mobistar NV v Ministerraad’, Int. J. Human
Rights and Constitutional Studies, Vol. 3, No. 4, pp.384–393.
Biographical notes: Marta Maroni is a Doctoral candidate in Constitutional
Law at the University of Helsinki. She holds a Master’s degree in International
Relations at the University of Perugia, Italy. She has previously worked as
Legislative Assistant at the Italian Senate for four years, where she collaborated
with the Standing Committee on European Union Policies and the Special
Committee for the Protection and Promotion of Human Rights. During her
work as a Legislative Assistant, she drafted bills and carried out extensive
research in various areas such as the right to internet access, the establishment
of basic income in Italy and the rights and protection of migrants and
minorities. Her research interest lies in the relationship between internet
governance and fundamental rights.

Case note on ECJ ruling on the Universal Service Directive 385
1 Introduction
On 11 June 2015, the Court of Justice of the European Union (ECJ) ruled that the
Universal Service 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 (European Parliament and Council Directive 2002/22/EC
108/2002) does not lay down a social pricing obligation for mobile communications and
mobile internet subscriptions.1
The case is interesting for three reasons. Firstly, the case touches upon the complex
debate on services of general economic interest and its relationship with universal
service. This ruling, in fact, represents a new opportunity to reflect on these two
categories. Secondly, the case unravels the paradoxes surrounding universal services
obligations because if on the one hand, universal service confers on all citizens a right to
access and forms of consumer protection, on the other hand, what represents a universal
service can be decided only by EU legislation. There seems to be a limited view of what
represents a universal service, sometimes at the expense of the idea of universality itself.
For these reasons, leaving aside the nature of the judgement itself, the court’s judgment
focuses on member states meeting regulations concerning competition law and their
derogations, rather than the internet accessibility debate.
Lastly, the Belgian legislation contributes to the discussion whether universal service
provisions should be broadened as to include mobile communication services.
In this comment, it is argued that the scope of universal service provisions should be
extended to include mobile communication services in order to meet technological
changes and new types of needs driven by an ever changing society.
1.1 Questions to the court
The request for preliminary ruling under Article 267 TFEU was made by Grondwettelijk
Hof (The Constitutional Court of Belgium). Preliminary rulings are questions raised to
the ECJ by a court or tribunal of a European Union member state on the interpretation or
validity of a provision of EU law. The ECJ may declare a national provision incompatible
with EU law [Craig and de Burca, (2011), p.442].
In this case, the questions referred to the court concerned the interpretation of
Articles 9 and 32 of the directive. Whilst article 9 of the directive deals with the
affordability of tariffs, and states that member states may ensure support for low income
consumers or with special social needs, article 32 envisages the possibility for member
states to decide to provide further additional services in addition to services within the
scope of the directive.
First of all, the Grondwettelijk Hof asked whether the above mentioned articles can
be interpreted as meaning that the social tariff for universal service as well as the
compensation mechanism provided for in Article 13(1)(b) of the Universal Service
Directive are extendible to electronic communications by means of mobile
communication services and/or internet subscriptions in addition to connection at a fixed
location. Further, the court asked, referring to Article 9(3), whether member states are
allowed to add special tariff options to the universal service for services other than those
defined in Article 9(2) of the Universal Service Directive. Lastly, the court raised the
issue of compatibility of the Universal Service Directive with the principle of equality.

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2 The legal and historical background
2.1 The Universal Service Directive
Universal service policies encompass redistributive considerations (Mueller, 1999) and
confer legal rights that can be claimed by citizens (end-users) when they cannot retain
access over public utility services [Napolitano, (2000), p.431]. In other words, universal
service functions as a right, enabling end-users to claim to be equally treated in the
deployment of services (Napolitano, 2000). Yet, a universal service not only offers forms
of protection from social exclusion, but also provides end-users with consumer protection
(Napolitano, 2000).
It is possible to sketch some features of universal services provisions: whilst they
allow public authorities to intervene when the market does not provide services that are
deemed necessary for the public interest, they also impose obligations on member states
to guarantee those services. However, the general principle of the universal service is that
competition should first serve the purpose of ensuring services, and only in case of
market’s failure is there room for public intervention.
The Universal Service Directive aims at providing a minimum set of services, of
specified quality which is available to all users regardless of their geographical location
and, in the light of specific national conditions, at an affordable price (European
Parliament and the Council Directive 2002/22/EC, recital 4).
Earlier on, the telecommunication sector was part of the EU state-owned monopolies.
Then, during the liberalisation and privatisation period, there was the need to replace the
idea of ‘service-public’ (Eliassen and From, 2009; Napolitano, 2000) and to protect
essential public services.
It is well-known that the ‘service-public’/public service concept belongs to the French
tradition, but is also rooted in most of member states of continental Europe such as
Belgium.
The understanding of public service is not univocal, but reflects both historical
developments and political ideologies of the EU member states [Bauby, (2011), p.20].
The overwhelming literature on the topic shows that a crystal-clear definition of service-
public is missing. However, Eliassen and From’s words (2009, p.241) provide some
explanation:
Sometimes it refers to the fact that a service is offered to the general public,
sometimes it highlights that a service has been assigned a specific role in the
public interest, and sometimes it refers to the ownership or status of the entity
providing the service.
One of the main differences between the public-service and universal service provisions
can be found in the ownership:
Universal services signify that certain services are available to all but can be
provided by either the public bodies owned and regulated by the state or
non-state bodies or a hybrid of public and private provision. This neutrality in
ownership and provision is significant in the over-arching EU policy of
liberalisation and the creation of consumer sovereignty [Szyszczak and Davies,
(2011), p.159]
As noted by Sauter (2015), there are key elements in the concept of universal service:

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1 universal accessibility (independently of geographical location)
2 quality (there is a minimum set of services to be provided)
3 affordability (low incomes/those with social needs should have the same right
of access).
It can be easily claimed that universal service operates as a safeguard in a liberalised
market and its function is “to establish the right of everyone to access certain services”
[Sauter, (2008), p.37].
3 The facts
The request was brought by Base Company NV (‘Base Company’) and Mobistar NV
(‘Mobistar’) and the Ministerraad (Council of Ministers of Belgium) concerning an
action for the annulment of the Act of 13 June 2005 on electronic communication
(Case C-1/14, 2015,§2).
The act states that all operators whose turnover with regard to publicly available
electronic communication service exceeds 50 million Euros are obliged to provide the
social component of the universal service, which required special tariff conditions for
certain categories of beneficiary. In addition, where the delivery of the social component
represents an unfair burden for a provider, the act envisages a compensation procedure
for the net cost borne by the operator (Case C-1/14, 2015, §3).
Base company and Mobistar submitted that the contribution to the financing of the
net cost was contrary to EU Law and in particular to Articles 9 and 32 of the Universal
Service Directive (Case C-1/14, 2015, §2).
The referring court stated that the establishment of the financing mechanism relied on
Article 13 (1)(b) of the Universal Service Directive. The doubt of the court concerned the
interpretation of Article 9 of the directive, which refers to “voice, facsimile and data
communications at data rates that are sufficient to permit the functional internet access”.
The same article also designates the possibility to provide support to consumers for
services other than those set out in Articles 4 and 7 (Case C-1/14, 2015, §22).
Lastly, the referring court pointed out that Article 32 acknowledges the possibility for
member states to decide upon additional mandatory services, beyond the ones stated
within the universal service obligations.
Concluding, the referring court asked whether mobile communication services and
or/internet subscription fall within the scope of the universal service (Case C-1/14, 2015,
§23). The third question, however, was dismissed by the court due to the lack of
information or explanation provided by the referring court.
4 The judgement
The court acknowledged that article 4 of the Universal Service Directive imposes an
obligation to member states to ensure a connection at a fixed location to a public
communication service. The meaning of this obligation can also be found in recital 8 of
the directive. This states that a fundamental requirement of universal service is to provide
end-users on request with a connection to the public communication networks. However,

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the ECJ held that ‘at fixed location’ means the opposite of the term ‘mobile’. For this
reason, mobile communication services are excluded from the minimum set of universal
service (Case C-1/14, 2015, §36).
As regards the interpretation of Article 32 of the Universal Service Directive, the
court ruled that member states may decide to design additional services beyond the ones
mentioned as part of the universal service obligations. In particular, the court clarified
that member states remain free to impose special measures, which should be
implemented on a cost efficient basis (Case C-1/14, §37).
However, member states cannot impose financing mechanisms for those services. The
central point is that member states remain free to finance special measures in conformity
with EU law. However, they must do so at they own expense, in conformity with EU law,
not at the expense of market players (Case C-1/14, §38).
As the ECJ ruled:
When member states decide to make additional mandatory services publicly
available in their own territory, a financing mechanism for those services
involving specific undertakings cannot be imposed. Consequently, the
financing mechanism provided for in Article 13(1)(b) of the Universal Service
Directive cannot be extended to such services. (Italics are mine, Case C-1/14,
§41)
Moreover, as stated in §42
Member states are not permitted to impose on market players financial
contributions which relate to measures which are not part of the universal
service obligations. Therefore, while individual Member States remain free to
finance special measures in conformity with EU law, they may not do so by
means of contributions from market players. (Italics are mine)
The judgement follows the Advocate General’s opinion of 29 January 2015. This
Opinion focuses inter alia on the question whether mobile communication services and
internet subscription services fall within the meaning of ‘universal service’. The
Advocate General excluded that both cases could benefit from the financial mechanism
of Article 32 since this article applies only to services provided by fixed location)
(Advocate General’s Opinion §43–55).
In delivering his opinion the Advocate General differentiates between mobile
communication services and internet subscription services.
As far as concerns mobile communication, the Advocate General claimed that it is
self-evident that the Universal Service Directive does not include this category within the
scope of ‘universal service’ (§46).
In paragraph 47 of his Opinion, the Advocate General considered whether the mobile
connection could be included in the Universal Service Directive relying on Art. 9 §2
which states
“Member States may, in the light of national conditions, require that designated
undertakings provide tariff options or packages to consumers which depart
from those provided under normal commercial conditions, in particular to
ensure that those on low incomes or with special social needs are not prevented
from accessing or using the publicly available telephone service”.
However, the Advocate General added in paragraph 48 that in order, to have a full picture
paragraph 3 of Article 9 should be also born in mind as it establishes that

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“Member states may, besides any provision for designated undertakings to
provide special tariff options or to comply with price caps or geographical
averaging or other similar schemes, ensure that support is provided to
consumers identified as having low incomes or special social needs.”
Finally, the Advocate General concludes by pointing out that from the abovementioned
provisions it may be deduced that the directive imposes special tariff options only for
these services listed in the directive.
The case of internet subscription services, in Advocate General’s opinion, seems to
belong to a different scenario. Internet subscription services could fall within additional
mandatory services. This is because article 4 of the Universal Service Directive which in
its second paragraph states that to “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” (Art. 4, §1).
5 Comment to the case
5.1 Legal basis
The concept of universal service has entered in the EU language throughout secondary
law. Universal service is said to be part of the “services of general economic interests”
[Micklitz, (2009), p.7] hereinafter SGEI. SGEI constitute a limited derogation to
competition law (Jones et al., 2011).
SGEI are enshrined in EU primary law (Treaty on the Functioning of the European
Union, 2007, Art. 106). The legal basis for legislation concerning SGEI is Article 106(2)
along with Articles 14 TFEU and Article 36 located in the chapter of solidarity of the
charter which lays down the right to access to SGEI.
The Union recognises and respects access to services of general economic
interest as provided for in national laws and practices, in accordance with the
Treaty establishing the European Community, in order to promote the social
and territorial cohesion of the Union. (TFEU, Article 36)
Along with the concept of services of general economic interest, the Commission
referred to the concept of ‘services of general interest’ in protocol 26 incorporated into
the Treaty of Lisbon (2007). Nevertheless, the meaning of this separation remains unclear
to the majority of the literature [Jones et al., (2011), p.632]. As Tuori (2015, p.242) puts
it “non-economic service which do not meet the criteria of an economic service fall
outside the scope of competition (and free movement) law anyway, whether these
services pursue a general interest or not”.
It is argued that the concepts of SGEI and universal service are both blurred. As
noticed by Micklitz (2009) there is a bit of confusion regarding these categories. What
Micklitz (2009) stresses is that the Commission, within the notion of universal service, is
developing a new concept beyond the distinction between services of general economic
interest and services of general interest and thus gaining more power in the field. As
noticed by Sauter (2008, p.14) “In the Green Paper the Commission proposes the basic
principles of universal service are to be defined at Community level, and subsequently to
be implemented by the member states”.

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Hence, the SGEI have become more ‘europeanised’ through the universal service
obligations [Chalmers et al., (2010), p.1035; Szyszczak, (2014), p.977]. As a result
member states’ powers are more limited (Szyszczak, 2014).
5.2 The financing method mechanism
Critical to understanding the judgement is the role of the financing method mechanism of
universal service. The court pointed out that “Member states are free to consider mobile
communication services including internet subscription services provided by means of
mobile communication services as mandatory services, for the purposes of Universal
Service Directive”. In that case, a financing mechanism for those services involving
specific undertakings cannot be imposed” (ECJ press release no. 68, 2015). According to
EU legislation, member states are free to extend the scope of universal service. However,
the costs of such extension should not require contribution from undertakings.
It is often highlighted that universal service obligations represent a market distortion
and could constitute an unfair burden on the provider of the service, thus the number of
services falling with these categories is very limited (Storsul, 2008). Member states can
establish mechanisms to recover net costs efficiently by introducing a mechanism to
compensate an undertaking for the determined net costs under transparent conditions
through public funds; and/or by sharing the net cost of universal service obligations
between providers of electronic communications networks and services (European
Parliament and Council Directive 2002/22/EC, Art. 13).
5.3 Universal service Regular review: mobile communication
The universal service is a ‘dynamic concept’ kept under regular review (European
Parliament and Council Directive 2002/22/EC, Art. 15). In fact, Article 15 of the
directive requires the commission to review the scope the Universal Service Directive by
taking into account the social, economic and technological developments.
Notwithstanding, mobility and data rates receive special attention by the European
Institutions [Nihoul and Rodford, (2004), p.322]. In 2008, the Commission undertook its
second public consultation and the third periodic review of the scope in accordance with
Article 15 of Directive 2002/22/EC. From the consultation process, it emerged that
including mobility within the scope of universal service at EU level was not considered
necessary since “competitive provision of mobile communications has resulted in
consumers having widespread affordable access to these services so that there is no risk
of social exclusion” (COM (2011) 795 final).
However, it should be borne in mind that in many European countries there still is a
gap in the accessibility. For example, the data of the Italian Communications Authority
highlight how the internet connectivity has steadily grown because of the use of
smartphones, rather than due to the use personal computer (Autorità per le Garanzie nelle
Comunicazioni, 2015). The same report, further, shows how internet infrastructure
struggles to develop in areas where the population density is low. It will not come as a
surprise if the Italian case is not the only example in Europe.
Although it is evident that the Universal Service Directive imposes an obligation on
member states to ensure that electronic communications are made available to all users in
their territory through a fixed location, it should be acknowledged that if one segment of
the market (fixed location) is still not able to provide the accessibility deemed to be

Case note on ECJ ruling on the Universal Service Directive 391
necessary in the so called information society, this could be compensated with another
segment of the market (mobile communication).
Extending the scope of universal service also means to take into consideration the
geographical context as one solution might not meet the different social and geographical
needs (Alleman et al., 2010). In fact, mobile connectivity can nowadays provide services
regardless of the geographical location. Mobile connectivity may overcome the problem
of market forces being unable to reach low income groups and rural areas at the same
pace they reach rich society (Mueller, 1999). It should be stressed that universal service
provisions are ‘relevant at the margin’, they work as supplement to markets development
[Mueller, (1999), p.356]. If the aim of universal service is to avoid exclusion, no
distinction should be made as regards the concept of universal service (Alleman et al.,
2010).
Universal service review should consider that not only technology is changing but
also the trends of consumers in using the internet (Alleman et al., 2010). A relevant
example can be found in Finland, where the abandonment of fixed lines is taking place
[Goggin, (2011), p.42]. Further, it should be also noticed that “mobiles are also offering
different kinds of services now widely used by consumers every day, in conjunction with,
complementing or substituting for fixed line-communication” [Goggin, (2008), p.47].
The rigidity of EU law, in this case, seems unable to keep up with the technological
change and either with the different habits developed regarding the use of technologies.
It is worth mentioning the economic debate underpinning the universal service
rationale. It is often said that the biggest achievements have been reached because of
commercial imperatives. According to Mueller (1999), universal services should not be
imposed on new or emerging technologies. Mueller (1999, p.357) points out that “One
can equalize access only to well-established goods and services, after a mass market has
developed and service levels have been standardized”.
The ECJ reasoning does tackle the merits of the directive. The case shows how
member states are free to undertake initiatives consider to be necessary. However, this
should not be done at the expenses of the market.
6 Conclusions
The importance of universal service lies in the fact that market alone is not able to reach
social goals, and, governments may need to cope with cases of market failure. Broadly
speaking, the universal service enables a redistribution of resources and “reduce[s] access
disparities among different groups in the same society” (Mueller, 1999). Hence, the idea
is that all citizens should have a right to the same services regardless their geographical
area.
The EU understanding of internet as universal service is still relegated to ‘fixed
location’. This disregards two key points. First, it underestimates the importance of
mobility in nowadays society. Secondly, it does not consider that fixed location, whilst
important, is becoming obsolete and mobile communication services could actually
guarantee a universal accessibility of the internet, particularly in these regions lacking of
infrastructure.

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Notes
1 Prior to this case, and in connection with to the financing method of Universal Service, there
were other rulings. The Joined cases C-152/07 to C-154/07 Arcor AG & Co. KG,
Communication Services TELE2 GmbH and Firma 01051 Telekom GmbH v. Germany [2008]
ECR I-5959 and Case C-389/08 Base NV et al. v. Ministerraad [2010] ECR I-9073; Case C-
222/08 Commission v. Belgium [2010] ECR I-9017.