COMMISSION OF THE EUROPEAN COMMUNITIES

Transcription

1 COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, C(2005)1442 final COMMISSION DECISION of 17 May 2005 pursuant to Article 7(4) of Directive 2002/21/EC ( Withdrawal of notified draft measures ) Case DE/2005/0144: Call termination on individual public telephone networks provided at a fixed location

2 COMMISSION DECISION of 17 May 2005 pursuant to Article 7(4) of Directive 2002/21/EC ( Withdrawal of notified draft measures ) Case DE/2005/0144: Call termination on individual public telephone networks provided at a fixed location THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to 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 (the Framework Directive ) and in particular Article 7(4) thereof 1, Having regard to the Commission Recommendation 2003/561/EC of 23 July 2003 on notifications, time limits and consultations provided for in Article 7 of the Framework Directive (the Procedural Recommendation ) 2, Having regard to the opening of Phase II investigations pursuant to Article 7(4) of the Framework Directive on 11 March 2005, Having regard to the additional information provided by the German Telecommunications Regulatory Authority ( Regulierungsbehörde für Telekommunikation und Post - RegTP ), Having regard to the notice posted on the Commission s website on 15 March 2005 inviting third parties to submit observations on the Commission s serious doubts letter (the notice ), After consulting the Communications Committee, Whereas: I. PROCEDURE (1) On 15 February 2005 the Commission registered a notification by RegTP, concerning the markets for call termination on individual public telephone networks provided at a fixed location in Germany, under case number DE/2005/0144. (2) On 22 February 2005 the Commission requested RegTP to provide additional information and clarifications regarding RegTP s preliminary market definition, 1 2 OJ L 108, , p.33. OJ L 190, , p.13.

3 significant market power ( SMP ) assessment und the regulation currently in place. A response by RegTP was received on 25 February (3) On 11 March 2005 the Commission, pursuant to Article 7(4) of the Framework Directive, informed RegTP that it had serious doubts as to the compatibility of the draft measures with Community law (the serious doubts letter ). (4) On 15 March 2005 the Commission posted a notice on its website inviting third parties to submit observations on the Commission s serious doubts letter within five working days. (5) On 17 March 2005 the Commission held a meeting with RegTP to obtain additional information and clarifications regarding regulation currently in place and the SMP assessment of alternative network operators ( ANOs ). A further request for information was sent to RegTP on 6 April 2005, to which a response was received on 11 April (6) On 29 April 2005 the Communications Committee was consulted on the draft decision in accordance with the procedure referred to in Article 22(2) of the Framework Directive. II. DESCRIPTION OF THE DRAFT MEASURES (7) RegTP defines and analyses the markets for call termination on individual public telephone networks provided at a fixed location including local call conveyance 3. RegTP identifies a total number of 54 separate operators to be active on such markets, and defines 54 separate markets for call termination on individual public telephone networks. Of these, Deutsche Telekom AG ( DTAG ) is the incumbent network operator and 53 operators are alternative network operators. (8) RegTP considers the geographic scope of the 54 markets to follow the area covered by the single operator s fixed telephone network. RegTP s market definition is in line with the Commission Recommendation on Relevant Markets 4 (market no. 9). (9) RegTP mainly considers market shares and countervailing buyer power to decide whether or not an undertaking has SMP on the markets concerned. Further criteria considered such as the overall size of the undertakings, technological advantages or superiority, product/services diversification, economies of scale/scope, vertical integration and a highly developed distribution and sales network are in RegTP s view not decisive for the SMP assessment on the markets concerned. (10) In the markets for call termination on individual public telephone networks provided at a fixed location, RegTP finds that each operator has a 100% market 3 4 Local call conveyance is the conveyance of calls from the interconnection point nearest to the end user to the end user. Commission Recommendation 2003/311/EC of 11 February 2003 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with the Framework Directive.

4 share on its respective network. RegTP designates DTAG with SMP on the market for call termination on its network. However, RegTP concludes that the 53 ANOs do not have SMP for call termination on their respective networks, despite their 100% market share. In RegTP s view, DTAG has countervailing buyer power which does not allow each of the alternative network operators to behave to an appreciable extent independently of its competitors (at the retail level) and customers (at the wholesale level, in the relevant market) when offering call termination services. (11) RegTP recognizes in its notification that its position deviates from the position taken by other national regulatory authorities (NRAs) that have analysed market 9 so far. 5 Generally, NRAs indeed consider that the incumbent s buyer power vis-àvis the ANOs is limited by the incumbent s obligation to interconnect with the ANOs and by the fact that its own termination tariffs are regulated. The Commission has not opposed these arguments 6. (12) RegTP argues its finding of non-smp for ANOs on the basis of two Greenfield approaches, the so-called strict Greenfield approach and the so-called modified Greenfield approach. (13) RegTP considers under the strict Greenfield approach a scenario under which DTAG is not obliged to interconnect with each of the ANOs. In such a scenario, DTAG could, be it in general or in price negotiations, credibly threaten each ANO not to interconnect or to disconnect and thereby exercise countervailing buyer power. (14) Under the modified Greenfield approach, RegTP proceeds on the basis of a scenario in which DTAG is generally obliged to interconnect with ANOs. According to RegTP, such obligation is however imposed on account of the imbalance of power in interconnection negotiations between DTAG and each ANO. It would therefore be methodologically wrong, in RegTP s view, to take this obligation of DTAG into account in the assessment of market power of each ANO. 7 Moreover, the obligation of DTAG to interconnect with and purchase termination services from each ANO would in RegTP s view solely prohibit a refusal to interconnect at reasonable conditions but not oblige DTAG to accept unreasonable conditions for interconnections. Hence, while DTAG would be under an interconnection obligation, it could still refuse unacceptably high call termination rates demanded by an ANO in (price) negotiations, limit the single ANO s freedom to behave to an appreciable extent independently of its competitors or customers and thereby exercise countervailing buyer power P. 105 of the non-confidential version of the notification referring to the positions taken by Oftel (UK), ICP-ANACOM (Portugal), ComReg (Ireland) and RTR (Austria). Also Ficora (Finland), PTS (Sweden), NHH (Hungary) and NITA (Denmark) in their notifications came to the conclusion that ANOs have SMP. See e.g. the Commission s comments letter of 22 September 2003 in case UK/2003/0003 (SG(2003)D/231920) and the Commission s no comments letter of 25 June 2004 in case PT/2004/0061 (SG(2004)D/202508). See also the Explanatory Memorandum to the Recommendation on relevant markets, p. 20. P. 106 and 107 of the non-confidential version of the notification, further clarified by RegTP in section IV.1 of its response to the request for information submitted on 11 April P. 107 and 108 of the non-confidential version of the notification.

5 (15) RegTP only indirectly considers the relationship between individual ANOs or between ANOs and mobile network operators ( MNOs ) as far as call termination services are concerned. In RegTP s view the extent of market power of an ANO on the market for call termination services is mainly determined by its position vis-àvis DTAG and not vis-à-vis other ANOs or MNOs. According to RegTP, ANOs and MNOs only play a marginal role on the demand side of these markets as most of the traffic originating on their networks is terminated indirectly on ANOs networks, using the transit and termination services offered by DTAG. RegTP also points out that it has so far never received a request to order interconnection against an ANO. III. OBSERVATIONS SUBMITTED BY THIRD PARTIES (16) Following the publication of the notice of the Commission on its website, eleven interested third parties submitted observations to the Commission. All observations were carefully considered.

6 IV. ASSESSMT (17) In order to ensure that decisions at national level do not have an adverse effect on the single market or other Treaty objectives, measures taken by NRAs should be compatible with Community law, and in particular with the objectives and principles of the new regulatory framework. Although NRAs are accorded discretionary powers correlative to the complex character of the economic, factual and legal situations, these factors must be assessed in line with the requirements of the Framework Directive, in particular, its Articles 14 to 16. Therefore an undertaking should be designated to have SMP, if either individually or jointly with others, it enjoys a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers. The 100% market share of network operators in the market for call termination on their individual public telephone network provided at a fixed location raises a strong presumption of SMP, save in exceptional circumstances which need to be clearly and unambiguously demonstrated by the NRA. RegTP therefore has not provided sufficient evidence to support a finding of absence of SMP of each ANO on the market for call termination on its individual public telephone networks. (18) RegTP s draft measures concerning the markets for call termination on individual public telephone networks provided at a fixed location in Germany fall within Article 7(4)(b) of the Framework Directive and would affect trade between Member States. A draft measure designating or not an undertaking with SMP and as a consequence imposing or not imposing regulatory obligations for the provision of call termination services on individual public telephone networks provided at a fixed location in Germany may have a direct or indirect, actual or potential influence on the ability of undertakings established in other Member States to provide electronic communications services dependent on such call termination 9. (19) It cannot reliably be concluded on the basis of the notified market analysis that the draft measures relating to ANOs are compatible with Community law and in particular with the objectives referred to in Article 8 of the Framework Directive. Pursuant to Article 8.2 (a) and (b) of the Framework Directive, NRAs shall promote competition in the provision of electronic communications services by ensuring that users derive maximum benefit in terms of choice, price and quality and by ensuring that there is no distortion or restriction of competition in the electronic communications sector. According to Article 8.3 (b), NRAs are to contribute to the development of the internal market by encouraging the establishment and development of trans-european networks and the interoperability of pan-european services, and end-to-end connectivity. The information available does not support the conclusion that RegTP has undertaken 9 See Recital 38 of the Framework Directive. In particular, the conditions for call termination services on individual public telephone networks provided at a fixed location in Germany determine the costs and the ability of other operators and service providers to compete, including those established in other Member States, who require such termination services to provide their own services. Consequently, they may affect the pattern of trade between Member States.

7 the assessment in accordance with Articles 14 and 16 of the Framework Directive, in particular with regard to Article 8(2)(a) and (b), and Article 8.3(b) of the Framework Directive read in conjunction with Articles 10 and 82 of the EC Treaty. (20) The Commission considers that RegTP has not provided convincing evidence that, despite a 100% market share, each of the 53 ANOs in Germany would not have SMP on the markets for call termination on their individual networks. This view is based on the following considerations. A. No justification for the considered strict Greenfield approach (21) Under the so-called strict Greenfield approach, RegTP considers a scenario under which DTAG is not obliged to interconnect with each of the ANOs 10. In such a scenario, DTAG could, according to RegTP, credibly threaten each ANO not to interconnect or to disconnect and thereby exercise countervailing buyer power. (22) The Commission is, however, of the view that there is no legal or economic basis for such a strict Greenfield approach. On the basis of competition rules, applicable under Article 14 and 16 of the Framework Directive, in particular Article 82 of the EC Treaty, an analysis of dominance (i.e. SMP) requires taking into account the concrete economic circumstances including legislative and administrative acts. In economic terms, it is not appropriate to exclude regulatory obligations that exist independently of a SMP finding on the market under consideration but that can have an impact on the SMP finding on the markets under consideration. From a methodological viewpoint obligations flowing from existing regulation, other than the specific regulation imposed on the basis of SMP status in the analysed market, must be taken into consideration when assessing the ability of an undertaking to behave independently of its competitors and customers on that market. In the Commission s view, this could only be otherwise where it is uncertain whether the regulation concerned will continue to exist throughout the period of the forwardlooking assessment 11. (23) The purpose of a Greenfield approach is indeed to avoid circularity in the market analysis by avoiding that, when as a result of existing regulation a market is found to be effectively competitive, which could result in withdrawing that regulation, the market may return to a situation where there is no longer effective competition In its serious doubts letter of 11 March 2005, the Commission indicated at p. 4 that under the strict Greenfield approach, RegTP considers a scenario absent all sector-specific regulation in all electronic communications markets, irrespective of whether such regulation is based on an SMP finding or not. RegTP clarified in its reply to the request for information submitted on 11 April 2005 in footnote 1, that the strict Greenfield approach is based on a scenario in which (only) the markets for termination services of ANOs are unregulated. See in this respect the cases FI/2003/0024 and FI/2003/0027 in which the Commission considered that the Finnish NRA, Ficora, had failed to analyse the potential impact of its market analyses on the existing regulatory obligations. In that case, Ficora had based its finding of absence of SMP on the international calls markets on existing regulation (i.e. carrier select and pre-select obligations). In its veto decision of 20 February 2004, the Commission stated that if Ficora wanted to rely primarily on regulatory obligations to conclude that the incumbent operator had no SMP, Ficora should make clear on which basis the existing regulatory obligations in the same or closely related markets will continue to exist for the relevant period of forward-looking assessment. (paragraph 35 of the veto decision)

8 In other words, any Greenfield approach must ensure that absence of SMP is only found and regulation only rolled back where markets have become sustainably competitive, and not where the absence of SMP is precisely the result of the regulation in place. This implies that regulation which will continue to exist throughout the period of the forward-looking assessment independently of a SMP finding on the market concerned, must be taken into account 12. (24) RegTP has informed the Commission that it intends to impose an interconnection obligation 13 on DTAG as a consequence of DTAG having SMP on the market for termination on its own network 14. Such a regulatory obligation, together with any other regulatory obligation imposed on a market other than the one for which the SMP assessment is conducted 15, must be taken into account. (25) Accordingly, there is no justification for the proposed strict Greenfield approach. (26) RegTP has not demonstrated that DTAG can credibly threaten to cut off its existing interconnection with each of the ANOs. Under the European regulatory framework, each public network operator has a right and, when requested, an obligation to negotiate interconnection agreements in order to ensure provision and interoperability of services. 16 NRAs may also order operators controlling access to end-users to interconnect where necessary to ensure end-to-end connectivity. 17 Further NRAs are to contribute to the development of the internal market by encouraging inter alia end-to-end connectivity. 18 If an operator, such as DTAG, were unwilling to interconnect at the request of an ANO or were to cut off an existing interconnection 19, the ANO could turn to RegTP to seek an interconnection order. 20 These requirements are not dependent on a finding of SMP. (27) Regardless of the existing regulatory framework set out above 21, DTAG has little economic incentive either to cut off current interconnection with, or to stop buying termination services from, any particular ANO. According to DTAG, offering its customers the possibility to call all retail customers irrespective of whether they are subscribed to DTAG or an ANO is an important selling point for DTAG. 22 If In carrying out the market analysis under the terms of Article 16 of the Framework Directive, NRAs will conduct a forward looking, structural evaluation of the relevant market, based on the existing market conditions (Point 20 of the Commission Guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services). On the basis of sec. 3 no. 34 new TKG and RegTP s previous decision practice, the obligation to interconnect seems to include the obligation to purchase termination services from ANOs. As set out in RegTP s reply to the request for information submitted on 11 April Provided that it may have an impact on the markets under investigation and that it will continue to exist throughout the period of the forward-looking assessment. Article 4(1) of the Access Directive. Article 5(1) of the Access Directive. Article 8.3(b) of the Framework Directive. Which according to standard interconnection contract of DT seems to be in any event subject to a 6 months notice period. Article 5(1) of the Access Directive read together with Article 8.3(b) of the Framework Directive RegTP has maintained that the interconnection obligations on DTAG are only applicable insofar as the ANO s prices are reasonable. See T-Com s submission to the Commission of 7 April 2005.

9 DTAG decided not to purchase termination from a certain ANO, this would conversely result in customer dissatisfaction, reputation damage and pressure from consumer organisations as DTAG s retail customers would no longer be ensured end-to-end connectivity. (28) In addition, if DTAG were to cease to purchase termination form ANOs, this may have the effect of stimulating substitution via carrier selection. There are several long distance carrier (pre-) select operators on the German retail calls markets which are eager to capture market share 23. In the presence of such carrier (pre-) select operators, a refusal by DTAG to offer its customers certain retail calls services namely calls to the subscribers of ANOs which DTAG no longer wants to purchase termination services from could lead DTAG s retail customers to switch to these carrier (pre-) select operators for making such calls. DTAG s retail customers could thus use such carrier (pre-) selection operators to by-pass calls - whose ubiquitous coverage is no longer guaranteed by DTAG - provided of course that those operators are directly or indirectly interconnected with the ANO in question. In such a case, DTAG would lose market share in a core area of its business. (29) Finally, RegTP has confirmed that DTAG has in practice never ceased to purchase termination services from an ANO, even where ANOs had against the will of DTAG on the basis of regulatory intervention raised their termination rates and some of them had cancelled their existing interconnection agreement with DTAG. According to RegTP, DTAG continued to purchase these services voluntarily, without any explicit buying obligation having been imposed on it 24. (30) Under the present regulatory framework and prevailing economic circumstances in Germany, the Commission considers it therefore not correct to assess the market power of each of the ANOs as if DTAG would not, through regulation or otherwise, be obliged to interconnect with each of them. RegTP has not provided evidence of DTAG having effectively used buyer power in the face of these regulatory and economic constraints. On the contrary, it seems that DTAG continues to buy termination services voluntarily, even at rates that it does not agree with and that it (at least in part) continues to challenge in court. B. No convincing evidence of absence of SMP under the so-called modified Greenfield approach (31) Under the modified Greenfield approach, RegTP proceeds on the basis of a scenario that there is an obligation to interconnect on DTAG or that such an obligation will be imposed on the basis of DTAG s SMP status on the market for termination of calls on its own network. RegTP, however, questions whether this obligation can be taken into account for assessing the market power of each of the According to the draft measures notified to the Commission on 15 February 2005 and registered by the Commission under case number DE/2005/0143, RegTP intends to designate DTAG as a SMP operator on the market for wholesale call origination on the public telephone network provided at fixed location. It can therefore be assumed that DTAG will also in the time-frame of the forward-looking assessment of this notification continue to be obliged to enable its subscribers to access the services of carrier (pre-) selection operators. Section IV.2 of RegTP s response to the request for information submitted on 11 April 2005.

10 ANOs, as the obligation would be imposed precisely to redress the equilibrium in interconnection negotiations between DTAG and each ANO. RegTP considers that taking the interconnection obligation into account could under such circumstances be circular. (32) The Commission does not share RegTP s view. The source of an ANO s market power for termination on its own network is not the regulatory requirement on DTAG to interconnect, but the ANO s 100% market share and the control over its network and over a service for which no substitute exists 25. Whether that market power is constrained to such an extent that the ANO cannot behave independently of its competitors (at the retail level) and of consumers should then be assessed on the basis of the concrete economic circumstances, in particular DTAG s buyer power. This approach does not lead to circularity, because ANOs SMP does not result from interconnection obligation, but rather from their 100% market shares. Therefore, when assessing DTAG s buyer power its interconnection obligation must be taken into account. (33) The Commission acknowledges that the market definition call termination on individual networks does not automatically mean that every network operator has significant market power; this depends on the degree of any countervailing buyer power and other factors potentially limiting that market power. While small networks will normally face greater buyer power than large networks, the regulatory requirements referred to in paragraph 26 above will normally redress this imbalance of market power. However, this would not endorse any attempt by a small ANO to set excessive termination rates. It may still be easier for a large network than for a small network to initiate a price raise, but this risk is essentially removed if the large network operator s termination rates are regulated (as is the case for DTAG) 26. (34) Contrary to other NRAs that have notified market 9 so far 27, RegTP asserts that DTAG s buyer power limits the ability of each ANO to behave independently of its customers and competitors (at the retail level). RegTP does, however, not present concrete evidence that DTAG has effectively exercised such buyer power. In fact what appears to have constrained the individual ANOs call termination rates in the past is not the countervailing buyer power on the part of DTAG, but the regulatory regime under which RegTP has introduced a de facto ex ante price regulation for ANOs termination rates. (35) Presently, under the German law, it seems that the interconnection charges (i.e. also call termination rates) of a non-smp operator may be price regulated in case of failure of private interconnection negotiations and without the need for any prior In other words, a particular ANO s market power derives from the fact that: (i) there is no substitute for a particular ANO s (termination) network, and (ii) as (an operator such as) DTAG is committed to delivering calls of its customers to all networks, it has no choice but to buy termination from that (ANO s) network. See further paragraph 27 above. See further Explanatory Memorandum, p. 20. Other NRAs have under similar circumstances argued that countervailing buyer power of an incumbent operator is sufficiently weakened by the obligation to purchase call termination services of ANOs (interconnection obligation) so that subsequently the ANOs were found to have SMP on their respective networks.

11 SMP finding 28. Against this regulatory background and following applications by at least 37 ANOs, RegTP has since mid September 2004 ruled that each requesting ANO is allowed to charge 25% more for the call termination on its respective network than DTAG 29. This implies that call termination rates of (a large proportion of) ANOs are constrained by a regulatory ceiling 30 rather than DTAG exercising countervailing buyer power. Such a regulatory price ceiling preventing ANOs from unilaterally raising their call termination charges appears to support the notion of ANOs attempting to set call termination charges independently of their customers and competitors (at the retail level) and might indicate that the designation of SMP status not only with regard to DTAG but also for these alternative operators would be warranted. (36) It is generally considered that countervailing buyer power of a large operator is essentially lost if its call termination rates are additionally regulated in the separate market for call termination on that operator s individual public telephone network 31. DTAG s call termination rates are currently regulated and it is the Commission s understanding that they will continue to be regulated as a consequence of RegTP`s finding that DTAG has SMP on the market for call termination on its network. In view of DTAG s own termination rates being regulated and given that it cannot realistically threaten to stop purchasing termination services (as set out above), DTAG would therefore be deprived of any bargaining tool in the form of a corresponding increase in its own tariffs when negotiating termination rates on that ANO s network. (37) RegTP does not contest that DTAG s own termination rates will (continue to) be price regulated, nor does it contest that, even in a Greenfield approach, this element is to be taken into account when assessing DTAG s buyer power. In RegTP s view, price regulation of DTAG s own termination rates does however not significantly limit its buyer power. RegTP argues to the contrary that it reduces the risk of collusion whereby both DTAG and each ANO would have a joint interest in raising termination rates. It may indeed be correct that DTAG s own price regulation could lower the risk of potential collusion, and DTAG could thus from this perspective have a greater incentive to exercise buyer power. However, as regards the ability rather than the incentive of DTAG to exert buyer power, the regulation of DTAG s own termination rates undisputedly removes a potential instrument of buyer power. (38) For the above reasons, the Commission considers that also under the modified Greenfield approach, RegTP has not provided convincing evidence to support the absence of SMP of each ANO. C. No analysis of ANOs market power vis-à-vis each other and vis-à-vis MNOs RegTP bases its respective decisions on 25 (5) TKG in conjunction with 30 (4) TKG and 38 (2) (4) TKG. From this follows that in line with 28 TKG charges in excess of DTAG+25% are considered abusive by RegTP. Further cases of this kind are pending. It indeed appears that the termination rates sought by several ANOs were significantly higher than the rates that were ultimately set by RegTP. This is the view taken also by the Austrian regulator Telekom Control Kommission ( TKK ) in its notification AT/2004/0106, Entwurf der Vollziehungshandlung gemäß 128 Abs. 1 TKG 2003, p. 18

12 (39) RegTP has limited its SMP analysis for ANOs mainly to an analysis of negotiation powers between DTAG and each of the ANOs. However, it appears that a number of direct interconnection agreements between ANOs exist and, as the Commission pointed out in its serious doubts letter, an analysis of these agreements could have provided further information on the market power of ANOs. (40) In the course of the second phase, RegTP and a number of operators argued that the pricing behaviour of ANOs vis-à-vis each other (and MNOs) is indirectly constrained by DTAG s buyer power. As ANOs (and MNOs) could always terminate traffic indirectly on each other s network, via the transit plus termination services offered by DTAG, the termination rates applied to them could de facto not rise above DTAG s (regulated) transit plus termination rates. (41) This argument is not convincing for the following reasons. In the first place, it implies de facto that ANOs seem to be in a position to raise their termination rates vis-à-vis each other (and MNOs) above the competitive level and assume for themselves as profit the price which DTAG charges for its (pure) transit service. Secondly, such behaviour may lead to a perpetuated dominance of DTAG on the transit market, as the competitive conditions on the transit market are directly influenced by the pricing conditions on the wholesale termination markets. Wholesale termination services are indeed on the one hand a necessary upstream input for the provision of transit services, and on the other hand a potential substitute for such transit services (as direct interconnection can be a potential substitute for indirect interconnection). If the termination rates of an ANO would be higher, equal or close to DTAG s transit plus termination rate, the incentive for an ANO (or MNO) to invest in and switch to direct interconnection may be reduced. Moreover, the level playing field between DTAG and each ANO for offering transit plus termination services would be distorted, as DTAG would be able to purchase the necessary wholesale input at more favourable conditions than the ANOs. RegTP seems to have been aware of this risk since, when it allowed the requesting ANOs to increase their termination up to 25% above DTAG s rates, it imposed on them a non-discrimination obligation (again absent a prior SMP finding). The Commission is aware of at least one operator who has not sought regulatory intervention to increase its termination rates and still maintains reciprocal tariffs with DTAG, while having raised its tariffs by 25% vis-à-vis those ANOs which have increased their rates following regulatory intervention. (42) Such autonomy in pricing behaviour and ability to price discriminate also points towards SMP status of ANOs. (43) The fact that RegTP has so far not received any request for a regulatory interconnection order against an ANO seems also not decisive. This may at least partly have been caused by a common interest of ANOs to rather put pressure on DTAG s and MNO s termination rates. V. CONCLUSION AND PROPOSALS FOR AMDING THE DRAFT MEASURES

13 (44) Following detailed examination of RegTP s notified draft measures, of its submission and of its replies to the Commission s requests for information and clarification, and for the reasons stated above, the Commission concludes that the evidence provided by RegTP does not support its finding of an absence of SMP for each ANO, and the draft measures are thus not compatible with Community law. The Commission therefore requires RegTP to withdraw the notified draft measures to the extent that they relate to the markets for call termination on the individual networks of the 53 alternative network operators in Germany. Since the Commission does not question RegTP s finding of SMP of Deutsche Telekom AG (DTAG) on the market for call termination on its individual public telephone network provided at a fixed location in Germany, the notified draft measure with regard to DTAG can be adopted. (45) The above conclusion is based on the fact that each ANO s market share of 100% on its own networks raises a strong presumption of its holding a position of SMP and the evidence in the present case does not rebut this presumption. This is because there is no concrete demonstration of how DTAG s alleged countervailing buyer power has in fact constrained and will continue to constrain the ANOs behaviour on their markets. No due account was taken of the regulatory situation that will continue to exist throughout the period of RegTP s forward-looking assessment which seems to limit DTAG s countervailing buyer power (in particular the regulatory provisions on interconnection and the price regulation of DTAG s own termination), or of DTAG s economic incentives. Finally, RegTP has failed to take properly into account the constraints on each ANO s behaviour vis-à-vis each other. (46) RegTP should fully reflect the Commission s conclusions, set out above, when carrying out a new analysis of the markets for call termination services on individual public telephone networks of ANOs provided at a fixed location. Regulatory obligations on DTAG to interconnect with other operators with a view to ensuring end-to-end connectivity, the regulation of DTAG s own call termination charges as well as DTAG s economic incentives should be fully taken into consideration when assessing DTAG s countervailing buyer power and each ANO`s ability to act independently of its customers and competitors (at retail level) on the market for call termination on its respective network. RegTP should also assess ANOs ability to raise call termination charges vis-à-vis other ANOs or MNOs when assessing their SMP status. HAS ADOPTED THIS DECISION: Article 1 This Decision concerns the draft measures relating to the markets for call termination on the 54 individual public telephone networks provided at a fixed location in Germany notified to the Commission on 15 February 2005 and registered under case number DE/2005/0144 (the draft measures ).

14 Article 2 (1) The Regulierungsbehörde für Telekommunikation und Post shall withdraw the draft measures. (2) Paragraph 1 shall not apply to the draft measure relating to termination on the individual network of Deutsche Telekom AG. This Decision 32 is addressed to: Article 3 Regulierungsbehörde für Telekommunikation und Post Tulpenfeld 4 D Bonn Germany Done at Brussels, 17 May 2005 For the Commission Neelie Kroes Member of the Commission 32 Pursuant to Point 14 of the Procedural Recommendation the Commission will publish this document on its website. The Commission does not consider the information contained herein to be confidential. RegTP is invited to inform the Commission within three working days following receipt whether it considers, in accordance with Community and national rules on business confidentiality, that this document contains confidential information which it wishes to have deleted prior to such publication. RegTP should give reasons for any such request. The request should be sent either by INFSO-COMP- ARTICLE7@cec.eu.int or by fax: