Europese Commissie bekrachtigt Italiaanse overgangsmaatregel voor meer concurrentie op telefoonmarkt (en)

New entrants to the Italian telecom market may charge higher wholesale call termination rates than the dominant player Telecom Italia, but only for transitional period of four years, says the European Commission today in a letter with comments sent to the Italian telecom authority Autorità per le garanzie nelle comunicazioni ("AGCOM"). The Commission however requires AGCOM to specify the details of a 4-year "glide path" for reducing alternative network operators' wholesale call termination rates. Moreover, to better safeguard consumer interests, AGCOM is asked to develop a cost model for calculating alternative network operators' termination rates that takes account of the need for them to become cost-efficient over time. The Commission's decision is based on Article 7 of the EU Framework Directive for electronic communications (2002/21/EC), which requires the Commission to ensure that national regulatory authorities apply competition law principles consistently in this sector.

" I am determined to open, with the support of national telecom regulators, national telecom markets further to effective competition ", said Viviane Reding i, EU Commissioner for Information Society and Media. " In order to promote infrastructure-based competition, it can be justified to allow new entrants to charge higher call termination rates. However, such a measure should be justified by higher cost and be clearly limited in time to encourage new entrants to become cost-efficient. This efficiency should be reflected in progressively lower termination rates and hence lower retail prices for end users ".

The regulatory measures proposed to the Commission on 28 April by the Italian telecom regulator AGCOM in the wholesale call origination, termination and transit markets aim at enhancing competition in the Italian fixed telephony markets. The proposed obligations imposed on Telecom Italia allow alternative operators to have access to the necessary wholesale inputs on regulated terms in order to be able to compete in retail call markets.

In the call termination market, AGCOM had proposed to impose regulatory measures both on the incumbent operator Telecom Italia and on alternative network operators, in view of the dominant positions all these operators hold on their respective networks. However AGCOM proposed to impose lighter obligations on alternative network operators than on the dominant operator Telecom Italia (so-called "asymmetrical regulation"). While Telecom Italia's termination rates are regulated with a view to achieving a cost-oriented level in 2009, alternative network operators are allowed to charge higher rates for the next four years before reaching the symmetry with Telecom Italia.

Today, the Commission has approved with comments the regulatory measures proposed by AGCOM in a letter under Article 7 of the EU Framework Directive on Electronic Communications. The Commission acknowledges that new entrants may not benefit of the same economies of scale as the established operators and, therefore it may be justified to allow them to charge higher termination rates than the incumbent. However, new entrants should become more efficient over time, especially if they gain market shares. Therefore, their higher termination rates may be maintained only for a limited period. In its comments, the Commission stresses that in order to increase transparency and legal certainty AGCOM should specify the details of the 4-year "glide path" for decreasing the termination rates of alternative network operators. High wholesale termination rates are normally reflected in high end user prices. Therefore, in order to better safeguard consumer interests, the Commission also invites AGCOM to develop a cost model as soon as possible for calculating the termination rates of alternative network operators which, while being based on costs, takes into account the necessity for new market entrants to become efficient over time. Under no circumstances, the incumbent or the alternative operators should be required to sell their services below cost of a reasonable efficient operator.

In today's letter, the Commission also requests the withdrawal of existing regulation on the market for Internet dial-up call termination and on the market for call termination on international networks, in view of effective competition on both these markets. "Where the application of EU telecom rules has led to effective competition, their purpose has been met and regulation needs to be phased out", stressed Commissioner Reding.

Background:

• 1) 

  What is the Article 7 consultation mechanism?

The regulatory framework for electronic communications in the European Union (which came into force on 25 July 2003) builds on the principles of EU competition law and aims to progressively withdraw sector specific regulation as markets become more competitive. Under the regulatory framework each national regulatory authority (NRA) has to analyse the state of competition in at least 18 specific markets which have been identified by the Commission in its Recommendation on relevant markets[1] as susceptible to ex ante regulation. Subsequent to their analysis of such markets, and if trade between Member States is affected, the NRAs must notify the outcome - i.e. whether or not one or more undertakings are dominant (have significant market power) in these markets - by way of a consultation mechanism described in Article 7 of Framework Directive[2] (the so-called Article 7 consultation mechanism). Only if a market is found not to be competitive, a regulator should intervene by imposing at least one remedy on such dominant undertakings.

The Commission as well as other NRAs may make comments on the notified draft measures within one month ("1st phase"). If the Commission informs the NRA concerned that it considers the notified draft measure to create a barrier to the single market, or if it has serious doubts as to its compatibility with Community law, then within a further period of two more months ("2nd phase") it may take a decision requiring the NRA to withdraw the draft measure ("veto decision"). Of comments made by the Commission, NRAs must take utmost account. The main goal of the Article 7 consultation mechanism is to enforce a consistent application of the EU telecom rules in a single market comprising 25 EU Member States and to avoid distortions of competition.

The Article 7 consultation mechanism is enforced jointly by the European Commission's Information Society and Media and Competition departments. For further details of the Article 7 procedure, see MEMO/05/255.

• 2) 

  What is meant by fixed call termination?

The fixed call termination market - which is at the heart of today's decision concerning the Italian telecom market - can be defined as the wholesale service offered by operator A to operator B in order to enable the subscribers of operator B to call subscribers of operator A. When a consumer who is subscribed to operator A calls a person who is subscribed to operator B, the call is handed over by operator A to operator B. Operator B then terminates the call at the premises of the called consumer. For this termination service, operator B charges operator A a wholesale price (called "termination rate"). Operator A usually passes on that rate the consumer. Termination rates thus usually have a direct incidence on prices paid by consumers.

In the case decided today, the Italian regulator AGCOM had come to the conclusion that each individual fixed telephone network (both the networks of the incumbent operator Telecom Italia and the network of alternative network operators) constitutes a relevant market for call termination where each network operator holds a monopoly position. This is why AGCOM could propose (asymmetrical) remedies to be imposed on both Telecom Italia and the alternative network operators. The Commission endorsed these measures today, while requiring AGCOM to ensure that within a period of four years, symmetry is reached in regulating the termination charges of the incumbent operator and alternative network operators.

Further information on the EU regulatory framework for electronic communications and the "Review 2006" can be found at:

http://ec.europa.eu/information_society/policy/ecomm/index_en.htm

[1] Commission Recommendation 2003/311/EC of 11 February 2003 on relevant product and services markets within the electronic communications sector susceptible for ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services, OJ L 114, 8.5.2003.

[2] Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services