EUROPEAN COMMISSION. Comments pursuant to Article 7(3) of Directive 2002/21/EC
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1 EUROPEAN COMMISSION Brussels, C(2012) 8828 Comisión del Mercado de las Telecomunicaciones (CMT) Carrer de la Marina E Barcelona Spain For the attention of: Mr. Bernardo Lorenzo Presidente Fax: Dear Mr Lorenzo, Subject: Commission Decision concerning Case ES/2012/1380: Access to the public telephone network at a fixed location for residential and nonresidential customers in Spain Comments pursuant to Article 7(3) of Directive 2002/21/EC I. PROCEDURE On 26 October 2012, the Commission registered a notification from the Spanish national regulatory authority, Comisión del Mercado de las Telecomunicaciones (CMT) 1, concerning access to the public telephone network at a fixed location for residential and non-residential customers 2 in Spain. The national consultation 3 ran from 5 July 2012 to 5 August On 8 November 2012, a request for information 4 was sent to CMT and a response was received on 13 November Additional information was received from CMT on Under Article 7 of 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 (Framework Directive), OJ L 108, , p. 33, as amended by Directive 2009/140/EC, OJ L 337, , p. 37, and Regulation (EC) No 544/2009, OJ L 167, , p. 12. Corresponding to market 1 in Commission Recommendation 2007/879/EC of 17 December 2007 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services (Recommendation on Relevant Markets), OJ L 344, , p. 65. In accordance with Article 6 of the Framework Directive. In accordance with Article 5(2) of the Framework Directive. Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel
2 and 16 November Pursuant to Article 7(3) of the Framework Directive, national regulatory authorities (NRAs), the Body of European Regulators for Electronic Communications (BEREC) and the Commission may make comments on notified draft measures to the NRA concerned. II. DESCRIPTION OF THE DRAFT MEASURE II.1. Background The market for access to the public telephone network at a fixed location for residential and non-residential customers in Spain was previously notified to and assessed by the Commission under cases ES/2006/ , ES/2007/ and ES/2008/ While in the first round review, CMT defined separate markets for residential and nonresidential users, in the second review (case ES/2008/0815) CMT distinguished between standardized and customized offers 7 in the same relevant market and differentiated remedies 8. CMT excluded from the market definition access over broadband and mobile connections and proposed the withdrawal of the price control remedy related to connection fees 9. In its "comments" letter the Commission (i) asked CMT to further justify both the substitutability between standardised and customized offers and the imposition of differentiated remedies, and (ii) invited CMT not to withdraw the price control obligation 10. II.2. Market definition CMT makes a distinction between two major types of consumers according to the use they make of electronic communication services: (i) those who acquire these services via standard contracts from large sales channels, the so called "mass market", and (ii) customers with a more developed structure and a number of geographically dispersed offices who often require a specific business plan, the so called "business market". CMT intends to base the definition of the relevant market on two criteria: (i) adoption of a business plan and (ii) nature of the customers (natural persons, identified via an individual taxpayer reference (NIF) number or legal persons using corporate taxpayer CIF identification (i.e. legal persons and entities without legal personality). Consequently, CMT includes in the market definition only the "mass market", i.e. those SG-Greffe(2007) D/ This notification concerns inter alia CMT's ex-ante retail methodology. C(208) CMT included both offer types in the same relevant market whereby defining customized offers as a bundle of services aimed at customers who are invoiced for using the relevant services for an amount exceeding 12,000 per year. These customers represent approx. 2% of TESAU's customers. The differentiation was limited to the transparency obligation. Regarding standardized offers, prices and applicable conditions had to be communicated to CMT with at least 21 days prior notice before they come into effect. Concerning customised offers, prices and conditions had to be notified to CMT at CMT's request. CMT claimed that TESAU has all the incentives to keep the connection fees at a lower level in order to attract as many customers as possible. In its final draft measure CMT imposed the following remedies: (i) carrier selection, (ii) nondiscrimination, (iii) prohibition of anticompetitive behaviour, (iv) transparency, (v) and accounting separation and cost accounting. In addition CMT imposed a price control obligation on recurrent subscription fees but withdrawn previously imposed price control obligation regarding connection fees. 2
3 customers who are natural persons identified by a NIF and who do not have a specific business plan (residential customers and small businesses who have not opted for a specific business plan) 11. Given the specificities of the above defined business market, CMT proposes to analyse it separately and exclude it from the current market definition. The analysis of the part of the business segment which is excluded from the present draft measure is part of the 2013 Action Plan currently under public consultation. According to the additional information provided by CMT, the forthcoming analysis would use the three criteria test in order to define a new market (i.e. consider it not included in the Recommendation on relevant markets). The relevant product market as notified includes the provision of access provided via copper, fibre-optic, cable, mobile/wireless networks 12 and wholesale line rental. CMT specifies that irrespective of whether the above networks/technologies are narrowband or broadband (excluding broadband internet access) they should be considered as substitutes 13. CMT intends to exclude from the relevant market (i) services provided to the business market, (ii) access via ISDN lines 14, (iii) publicly available telephone service (PATS), (iv) mobile access, (v) broadband internet access. Bundles are also excluded from the relevant market. The relevant geographic market is the territory of Spain. II.3. Finding of significant market power CMT proposes to designate TESAU as having SMP in the market 15. The main criteria considered by the NRA when reaching its conclusion on SMP include: (i) market share, (ii) barriers to entry and potential competition, and (iii) economies of scale and scope. II.4. Regulatory remedies CMT intends to impose the following obligations on the SMP undertaking: (i) prohibition of anti-competitive practices (including non-discrimination) such as anticompetitive price-reductions (e.g. margin squeeze, predatory pricing), unfair In addition to the residential customers, the market definition covers business customers, representing around one fifth of the total businesses in Spain and almost one third of the selfemployed. Mobile services are included in the market definition to the extent that they are provided at a fixed location using geographic numbers, i.e. home-zone products. With respect to the substitution with narrowband access, CMT specifies that (i) prices of BB access services are similar to those of narrowband access services, (ii) both types of access have similar technical characteristics and provide equivalent quality of service (e.g. ensuring uninterrupted access to emergency number 112). CMT explains that ISDN basic access has not been included in the market due to currently low penetration among the customers under analysis (i.e. 0.6% or basic ISDN lines), a significant barrier to change (linked to the additional investment for ISDN equipment) and high price differences (while price for rental is /month, ISDN basic access is priced at /month). Those services are not being offered to residential customers but only to a very limited number of self-employed. ISDN primary access is offered only to larger businesses (which are outside the market) at tariffs varying from 159 /month to 403 /month. In 2 nd semester 2012 TESAU had a market share of 56.1% which was almost four times that of ONO, the biggest alternative operator in Spain (14.3%) and almost six times that of Jazztel (9.5%). The market share of the remaining biggest alternative operators varied between 0.6% and 7.9%. 3
4 bundling, discriminatory prices, and inappropriate contractual clauses, (ii) transparency, (iii) cost accounting and (iv) accounting separation. Furthermore CMT proposes to repeal the current price control obligation 16. Until the adoption of a new decision on the business market (excluded from the present market definition), none of the above obligations were foreseen to apply to businesses identified with a CIF or to natural persons identified with a NIF but having a business plan. CMT further specifies that the obligations which are currently in place (resulting from CMT's previous market decision) were meant to be withdrawn with regard to the above defined legal and natural persons. In the additional information provided by CMT, the NRA stated that at the time of the 2008 decision, the imposed remedies were focused on the part of the market as defined in the currently proposed measure (rather than on the segment which is proposed to be excluded from the market), which led them to the conclusion that there would not be a practical difference between a situation where the remedies in place would be maintained or withdrawn. CMT explicitly states, however, that it proposes to amend the current draft measure in order to maintain (until a new decision will be issued) the previously imposed obligations on those businesses which are no longer included in the market. III. COMMENTS The Commission has examined the notification and the additional information provided by the CMT and has the following comments: 17 Need for parallel analysis of all parts of the market In the current notification CMT analyses only part (i.e. the mass market) of the market for access to the public telephone network at a fixed location such as defined by CMT in its previous market review. In particular, CMT proposes to analyse the remaining business market in a separate review and notify the results under the Article 7 consultation procedure. Furthermore, CMT's analysis, focused on the newly proposed market definition does not permit to assess competitive conditions in that part of the (business) market, which is now excluded from the notified market review. Consequently, the overall competitive situation in the market for access to the public telephone network at a fixed location such as defined in the Recommendation on relevant markets remains unclear. Only the simultaneous analyses of both segments would have ensured a more effective assessment of the draft measures proposed with respect to each of the market segments. The Commission considers that carrying out the market analyses of the two markets (which have been previously defined as a single market) at a different point in time may lead to lack of clarity and legal certainty for market players. Therefore, the Commission invites CMT to notify the market analysis of the Under obligations stemming from the reviewed Universal Service Directive (Directive 2009/136/EC) TESAU has committed to maintain a maximum price for the monthly rental for approximately 5 years. CMT concludes that the improvement of the competitive situation on the relevant market together with the existence of the above price commitments render the maintenance of the price control obligation and the associated retail geographic uniformity and non-discrimination obligations disproportionate. In accordance with Article 7(3) of the Framework Directive. 4
5 business segment as soon as possible, thus bringing more consistency in CMT's approach to the market for access to the public telephone network at a fixed location for residential and non-residential customers in Spain. Need to maintain previously imposed remedies on the part of the market excluded from the notified market definition CMT's draft measure implies the withdrawal of remedies imposed on the market for access to the public telephone network at a fixed location such as defined in case ES/2008/0815. Given that the current notification reviews the previously defined market only partially (i.e. analysis is limited to residential customers and to some small business customers), the withdrawal of remedies would not be based on a proper market analysis for those elements which are not subject to review. In this respect, the Commission would like to recall that according to Art. 16(2) of the Framework Directive NRAs when imposing, amending or withdrawing remedies shall do so on the basis of a market analysis in order to determine whether the market is effectively competitive. Against this background, the Commission takes note of CMT's commitment to amend the current draft measure in a way that it maintains the obligations previously imposed on those parts of the market which were included in CMT's 2008 market definition but which are no longer part of the market as defined in the present draft measure. The Commission therefore calls upon CMT to comply with their commitment and to maintain the above defined remedies until the issuance of a new market decision and following the Art. 7 consultation procedure. Pursuant to Article 7(7) of the Framework Directive, CMT shall take the utmost account of the comments of other NRAs, BEREC and the Commission and may adopt the resulting draft measure; where it does so, shall communicate it to the Commission. The Commission s position on this particular notification is without prejudice to any position it may take vis-à-vis other notified draft measures. Pursuant to Point 15 of Recommendation 2008/850/EC 18 the Commission will publish this document on its website. The Commission does not consider the information contained herein to be confidential. You are invited to inform the Commission 19 within three working days following receipt whether you consider that, in accordance with EU and national rules on business confidentiality, this document contains confidential information which you wish to have deleted prior to such publication. 20 You should give reasons for any such request Commission Recommendation 2008/850/EC of 15 October 2008 on notifications, time limits and consultations provided for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, OJ L 301, , p. 23. Your request should be sent either by CNECT-ARTICLE7@ec.europa.eu or by fax: The Commission may inform the public of the result of its assessment before the end of this three-day period. 5
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