EC vetoes market 1 and 2 - UKE

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EC vetoes market 1 and 2

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2007-01-16

The European Commission has vetoed draft decisions of the President of UKE on TP’s SMP in market 1 and 2.

On 10 January 2007, the European Commission vetoed notified draft measures of the President of UKE designating Telekomunikacja Polska S.A. as a telecommunications undertaking with significant market power in the market for retail access to the public telephone network at a fixed location for residential customers in Poland (market 1) and for retail access to the public telephone network at a fixed location for non-residential customers in Poland (market 2) and imposing regulatory obligations provided for in the Polish Telecommunications Act.

The Commission’s veto closed a two-month procedure suspending the issuance of the decisions due to the Commission’s serious doubts letter of 13 November 2006 which opened phase II investigation.

In its veto decision the Commission says that the President of UKE has not presented sufficient evidence to support its finding that broadband access services are part of the relevant market and therefore the draft decisions are not compatible with Community law and in particular with the requirements referred to in Article 8 and 15 (3) of the Framework Directive read in conjunction with Articles 10 and 82 of the EC Treaty.

For this reason the Commission requires the President of UKE to withdraw the notified draft measures. In addition, as its is indicated in the veto decision, the President of UKE should fully reflect the Commission’s analysis as to why the present draft measure should not be adopted when identifying anew the markets for access to the public telephone network at a fixed location for residential and non-residential customers. In particular, in assessing the access products to be included in the relevant markets, the President of UKE should carefully analyse the substitutability of the products in terms of their functionality and prices.

The President of UKE maintains its position on market 1 and 2 and is of the opinion that the inclusion of xDSL access (for the purpose of broadband services) in the product market is justified in the light of data presented to the European Commission in response to its request for additional information and during further talks with the Commission.

It should be noted that access services, and not voice call services, are the main products in the market subject to analysis. The President of UKE has no doubts that DSL lines constitute an element of the telecommunications infrastructure, which in technical and functional terms may be used to provide telecommunications services both to residential and non-residential customers for different purposes: traditional voice telephony and broadband Internet access.

The President of UKE would like to note that the objective of proposed measures is not to exercise price controls for retail broadband products (i.e. retail products whose prices are linked to specific capacities). Despite the fact that TP S.A. is currently free to set the prices for these products, the President of UKE does not find its intervention in monthly subscriptions for Internet access (for the so called options) justified. The notified draft measures aimed at including in the scope of ex-ante regulation only that element of the service (network access / monthly charge for maintaining the line) that is common for such services as analogue access, digital access and broadband access. In the President’s of UKE view, a situation in which TP S.A. charges line maintenance for the PSTN/ISDN at PLN 21.48 and for the purposes of naked DSL at PLN 30 is unacceptable. A monthly line maintenance charge should be irrespective of the manner in which the line is used (telephone subscription, Internet access).

In addition, the President of UKE when proposing regulation with respect to xDSL has taken account of the absence of an effective wholesale offer ensuring access to xDSL for the competitors of TP S.A. Until now no local loop has been unbundled and only 6 bitstream access agreements have been concluded (under conditions not fully in line with the reference offer imposed by the President of UKE and questioned by alternative operators) whose practical implementation will need time. The President of UKE is concerned that alternative operators using broadband access will tend to reach business rather than residential customers as a first reaction to a wholesale offer, which will not change TP S.A.’s position in the retail (narrowband and broadband) access market for residential customers within the next 2 years. At the same time the activities undertaken by TP S.A. due to mandating naked Neostrada (naked xDSL) starting from 15 February 2007 cause serious concerns since they are limited to:

  • imposing the price for line maintenance which is not cost-based,
  • discrimination of subscribers with contracts for undetermined period of time compared to subscribers with contracts for a determined period of time (regarding prices, upgraded capacities),
  • unfavourable provisions in the service provision rules and regulation.

Therefore the President of UKE is convinced that it is necessary to take action aimed at monitoring and supervision under ex ante regulation of TP S.A.’s retail offers with respect to charges for narrowband and broadband access in their common part, i.e. line maintenance charge as well as non-price conditions for consumers.

The President of UKE is of the view that the markets defined in the Commission Recommendation and their clarification as provided for in the Explanatory Memorandum should be a reference point for regulators, however their narrow interpretation as applied by the EC cannot lead to a situation in which the President of UKE, faced with rapid technological developments in the retail access market, is deprived of the freedom to intervene in a way that in his/her view ensures the delivery of the tasks provided for in the Telecommunications Act. Apart from the above mentioned activities linked to the launch of naked Neostrada, this also includes the possibility to intervene in case of such practices of TP S.A. as bundling, discrimination of subscribers with contracts for undetermined period of time compared to subscribers with loyalty contracts and concluding long-term promotional contracts which lock consumers in without any choice options.

The President of UKE would like to note that prior to the Commission’s veto to proposed regulation of retail xDSL access, the Director General of the Information Society and Media Directorate General, Fabio Colosanti, questioned the President’s of UKE right to regulate the tariffs and rules and regulations for broadband services by the time a market analysis was carried out. The President of UKE, opposing this view, published on the UKE website its commentary, which remains valid regarding ex ante regulation of retail access markets at a fixed location for residential and non-residential customers, and continued to exercise its powers over TP S.A. under the existing law. TP’s practices which followed this exchange of correspondence (refusal to split Neostrada, then splitting Neostrada under prohibitive terms, discrimination of certain subscribers, refusal to submit Neostrada rules and regulation for approval by the President of UKE), in the President’s of UKE view, confirmed the necessity to regulate this market. The President of UKE, in order to dispel Mr Colosanti’s doubts and to meet the Commission’s expectations about the market analysis, notified the draft measures for market 1 and 2. However, this action was also not appreciated by the European Commission.

The President of UKE hopes that the information communicated in this position should enable the Commission as well as telecommunications undertakings and consumers to understand the approach of the Polish regulator to the issues in question.

 

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