The European Commission has given an upbeat assessment of the electronic communications market, but it warned seven Union Member States that their failure to enact a new legal regime, called the telecoms package, is hampering the development of high-speed broadband services.

The Commission opened legal proceedings against eight countries last month: Belgium, Germany, Greece, Spain, France, Luxembourg, the Netherlands and Portugal. Since then only Spain has transposed the telecom package into its national laws.

The laws place much of the responsibility for regulating markets, ranging from local telephone exchanges to e-mail servers, with national regulatory authorities. However, the Commission can intervene if it believes fair competition doesn't exist in a market.

"All competent authorities now need to do their work and further strengthen competition in the broadband market to build on the current momentum," said Mario Monti and Erkki Liikanen, commissioners for competition and the information society respectively.

"Before they can do their job," they added, "the EU legislation needs to be transposed into national law."

The new regulatory framework is designed to get national telecom regulators working in line with each other, helped by a coordinating role played by the Commission, the EU's executive body.

It started with a regulation on local loop unbundling passed in December 2000. Since then laws including a directive on auctioning licenses, on access and interconnection of networks, data protection in the digital environment and a framework telecommunications directive have been passed. They should have taken force across the 15-member Union in July.

In spite of the poor rate of transposition of the telecom package, the Commission said the market is improving. Electronic communications markets are expected to grow faster in 2003 than the overall rate of growth of the EU economies, the report said.

The number of mobile subscribers will grow at a rate higher than in 2002, despite the mobile penetration rate being close to 90 percent in some Member States. 3G (third generation) UMTS (universal mobile telecommunications service) mobile communication services are now available in at least four Member States and are being launched in others.

The number of fixed broadband access lines almost doubled in the year to July 2003. New entrants' market share is starting to pick up, even if competition in the broadband sector is still weak.

"It is very encouraging that the electronic communications market appears to be overcoming the difficult economic circumstances experienced over recent years. The growth in broadband and mobile subscriptions reflects high consumer interest," Liikanen said.

Local loop unbundling, designed to prize open local phone exchanges to allow competitors to offer high speed Internet access on the same conditions that the former telecom monopolies do, has failed, the Commission concluded.

In its report the Commission said development of local loop competition "is still rather unbalanced across the EU and has not yet taken off."

"The Commission will, if necessary, take further enforcement action to protect competition in these key sectors," it added.

Earlier this year the Commission fined Deutsche Telecom AG and France Telecom SA's Internet service provider Wanadoo for failing to allow fair access to the high speed Internet connection market.

The number of competing operators in each national market has remained more or less stable in recent years, the Commission concluded, but it noted that a number of operators have retrenched back to their home markets.

Competitive pressure has moved from the international and long-distance markets to the local call segment, where the incumbents' fixed market share has continued to decrease, while consumers have continued to benefit from price reductions for fixed voice telephony, the Commission said.

"While the downward trend in prices has been maintained, the pace in 2003 is significantly slower than in previous years and less than half of that reported in 2002," the Commission said.