KKV1007, v1.3, 2012-09-10 STATEMENT 06/11/2013 593/2013 1 (7) The Ministry of Enterprise, Energy and Communications 103 33 Stockholm Statement regarding a European single market for electronic communications N2013/4192/ITP Summary The Swedish Competition Authority believes that there have been no strong arguments presented for carrying out such extensive changes as the Commission suggests. Limited-period right of use for the radio spectrum should not be extended, and if this occurs, it should entail additional fees. The Swedish Competition Authority is hesitant towards the proposed "virtual broadband access" and believes that such a product should not replace the physical access that is currently regulated. The Swedish Competition Authority can support the proposed price regulation for calls made from mobile phones to foreign numbers. Introducing "the need for a convergent regulation throughout the Union" and "the global competitiveness of the Union economy" as assessment criteria for when a market should be regulated may lead to uncertainty and should not be implemented. The Swedish Competition Authority is hesitant towards the introduction of the proposed exemption from enabling separate sales of international roaming, as the proposal may create uncertainty in the market. Overall comments The Swedish Competition Authority has been given the opportunity to comment on the European Commission's proposal for a new Regulation concerning electronic communications. Address 103 85 Stockholm Visiting address Torsgatan 11 Telephone +46 (0)8-700 16 00 Fax +46 (0)8-24 55 43 konkurrensverket@kkv.se
06/11/2013 593/2013 2 (7) An assessment of the proposal should be based on the rules that currently exist in the field. A central aim of the regulatory framework is to achieve a harmonised and competitive single market for electronic communication services. An important step in this is to successively reduce the scope of the competitionpromoting ex ante regulation (SMP regulation) as competition in the markets develops. Other steps involve ensuring that the use of radio spectrum is based on demand and generally divided neutrally in respect of technologies and services, and to ensure that the minimum level of consumer protection in this field remains high. To enable a suitable phasing out of SMP regulation, and for other rules aimed at increased harmonising of the single market to have an impact, the rules currently adopted must be given a chance to make an impact. The Swedish Competition Authority believes that the current rules in the field are generally well-suited to achieving an effective single market characterised by sustainable long-term competition and functional consumer protection. The Swedish Competition Authority also does not believe that there have been any strong arguments presented for carrying out such extensive changes as the Commission suggests. In cases where there is still a perceived need for a comprehensive review of the existing regulatory framework, the Swedish Competition Authority believes that this should be done in a concentrated effort and for the regulatory framework as a whole, as was the case in 2007 2009. This gives increased predictability for the market participants. Predictable regulation creates better investment conditions which lead to increased benefits for the consumers. An overall motivation behind the new Regulation proposed by the Commission is the creation of better conditions for cross-border investments. From a competition perspective, measures that remove and mitigate barriers to cross-border trade are welcome, as they can be expected to result in better usage of resources and effective investments. However, there is no compelling case made for the market participants needing extra support in order to overcome such obstacles to a greater extent than participants in any other market. On the contrary, the inherent dynamics of the markets in question contradict the existence of a particularly strong need for intervention. Regarding the creation of larger, Pan-European operators, the Swedish Competition Authority believes that there could very well be advantages from a competition and consumer perspective, for example if it improves the preconditions for cost synergies. However, it is currently unclear why such a development would need to be promoted in the field in question. The Swedish Competition Authority believes that the competition rules generally applicable, especially the rules applicable to merger control, is capable of handling the balancing of the potential negative and positive effects of market consolidation. The Swedish Competition Authority also notes that there is an obvious risk of conflicts of interest and subsequent uncertainty if the Regulation, as suggested, is
06/11/2013 593/2013 3 (7) to be designed to both promote efficient competition and to promote the creation of Pan-European operators. The Swedish Competition Authority presents below its comments regarding some of the provisions in the proposed Regulation, based on the Swedish Competition Authority's mission to promote well-functioning markets to the benefit of the consumers. Authorisation (Article 3 7) The Swedish Competition Authority is fundamentally supportive of simplifications that lead to reduced barriers to entry into markets, and which help companies offer services across national borders. The Swedish Competition Authority is unable to determine to what extent the suggested changes will, in practice, lead to reduced administration, but puts a question mark over the proposal to introduce special rules for "European electronic communications providers". Equal treatment of operators, regardless of whether they operate in one or more member states, should be a fundamental consideration when designing rules. The Swedish Competition Authority would like to see an analysis of the consequences that this distinction would have for national operators. Radio spectrum (Article 8 16) There are many advantages to harmonising radio spectrum, and the work to do this is already being carried out. The criteria for assigning spectrum specified in Article 9 10 appears to be generally well-suited for the purpose and, as far as the Swedish Competition Authority can tell, they generally coincide with the principles being applied in Sweden. According to Article 10.3 d) of the Regulation, the national authorities shall strive to achieve an optimal distribution between omedelbar betalning [immediate payment] and avbetalning [instalments] for fees in order to incentivise rapid network roll-out. The Swedish Competition Authority notes firstly that the Swedish version uses "avbetalning" while other language versions use the term "periodic payments". 1 If that which is being referred to is the type of recurring (annual) fees that are sometimes charged for radio permits, then the translation is unfortunate. The term "avbetalning" implies some form of payment plan for auction proceeds where the State acts as the lender. 2 The Swedish Competition Authority also believes that other factors are more important to the quick roll-out of a network than how fees are divided between one-time fees and periodic fees. 1 Compare for example the Danish periodiske betalinger, English periodic payments, German regelmäßigen Zahlungen and French paiements périodiques. 2 An example from the U.S.A. which highlights the risks of favourable state credits in connection with spectrum auctions is provided by Thomas W. Hazlett and Robert E. Munoz: A Welfare analysis of spectrum allocation policies, RAND Journal of Economics, Vol. 40, No 3, Autumn 2009, p. 436. The auction led to inefficient entry and some of the frequencies remained unused for long periods of time.
06/11/2013 593/2013 4 (7) It is suggested in Article 12.3 that the Commission may approve implementing acts in order to achieve harmonised dates for the allocation of usage rights. It can be noted that the Commission is hereby given significant influence over the allocation of an important input. Even if there may be some advantages to harmonising the points in time at which spectrum becomes available, for example in order to facilitate the operators' offering of services across national borders, the Swedish Competition Authority believes that there are risks inherent in a coordination of allocation dates that is too far-reaching. If the time schedules of several countries are to be synchronised, this may lead to spectrum becoming available later than they otherwise would in the member states that need to delay their allocation to "wait" for the other countries, which could delay the implementation of new networks and services and reduce the operators' ability to enter the market. Furthermore, large coordinated auctions that include many member states risk increasing the barriers to entry, which would benefit larger operators and hamper smaller ones. The proposal says that national authorities are to extend existing usage rights identified by the Commission in order to coordinate the dates for new allocations. If the extension is significant in comparison with the original duration, the authorities may charge additional fees. Radio spectrum is a limited resource which is very valuable and highly priced in auctions and on the second hand market. Extensions of permits hamper competition for the actual or potential competitors that wish to expand their operations, or enter the market. A system where permit periods cannot, in practice, be predicted also leads to uncertainty in the market, which reduces the willingness to invest. In cases where operators are demanding more frequency space than that which is available, the time-limited permits should therefore be withdrawn at the expiration of the permit period and subsequently re-allocated. In cases where extensions are motivated, this should generally entail further fees that reflect the market value of the extension. To introduce a limit in this respect, where the extension is "significant", would mean a transfer of large values from the public to individual companies. European virtual access products (Article 17 18) According to the proposal, national regulatory authorities that have previously imposed on operators with any obligation to provide wholesale access to a nextgeneration network shall assess whether it would be appropriate and proportionate to impose instead an obligation to deliver a "European virtual broadband access product". The Swedish Competition Authority believes that access regulation should be on a physical level, as it creates better conditions for effective competition. As the Swedish Competition Authority has understood the proposal, a "virtual broadband access product" is a more refined form of access (i.e. at a lower rung of the
06/11/2013 593/2013 5 (7) ladder of investment) than the access to physical network infrastructure that is currently regulated. The Swedish Competition Authority believes that, if development shifted from physical access to virtual access, this would have a negative impact on competition. The Swedish Competition Authority is therefore hesitant to support the suggestion and in any case a virtual access should not replace physical network infrastructure access. Price regulation for international calls (Article 21) In its Impact Assessment, the Commission notes that there are significant differences in tariffs for national and international calls, in particular from mobile phones. According to the Commission, the tariffs for international calls from mobile telephones significantly exceed the regulated international roaming tariffs, and the price differences cannot be explained by differences in costs. The availability of voice over IP telephony has not caused the traditional operators to lower their tariffs. On the contrary, the Commission notes that tariffs for international calls have in some cases gone up. The Commission suggests a maximum tariff for international calls and text messages from mobile phones, matching the roaming tariffs. The Swedish Competition Authority agrees with the Commission's assessment that the competition in this segment has not been effective enough to keep the tariffs down for the end customers. Price regulation is an intrusive measure and competition-promoting regulation is often preferable to direct regulation of prices. However, the suggested maximum tariffs, i.e., matching the level of international roaming tariffs, appear to be permissive enough to mostly act as high cost protection for consumers who do not make an active choice. Given that which is stated above, the Swedish Competition Authority is able to support the suggested price regulation. An increased usage of voice over IP telephony may pressure operators to lower tariffs on international calls, which is something that the Commission also predicts in their Impact Assessment. The suggested rules regarding net neutrality can also contribute to such developments. If this does not happen, there may be grounds for considering competition-promoting measures as a supplement to the price regulation, such as separate sales of international calls corresponding to that which is being introduced for international roaming. Changes to the Framework Directive (Article 35) The regulation of the telecoms market is a competition-promoting regulation that is intended to diminish over time as competition develops. To determine if regulating a market is justified, an analysis is made of the competitive situation and appropriate obligations are imposed on operators.
06/11/2013 593/2013 6 (7) The Commission's proposal includes an addition to the Framework Directive that means that, when assessing the need for a market to be regulated, factors such as "the need for a convergent regulation throughout the Union" and "the global competitiveness of the Union economy" are to be taken into account. The conditions for effective competition differ between the member states, which may justify the sector-specific regulation being phased out earlier in some countries than in others. If too much emphasis is put on the need for a convergent regulation, there is a risk that member states will be forced to either over or under-regulate in relation to the competition issues in their respective markets. The Swedish Competition Authority believes that effective competition and open markets, both within the Union and globally, leads to effective investments, innovations and the creation of competitive companies. However, a decision to directly take into consideration the Union economy's global competitiveness risks allowing for various interpretations of how regulation should be designed, which would create uncertainty about the future regulation. For example, the Swedish Competition Authority believes there to be a risk that the provision will allow operators to demand an easing of the regulation ("regulatory holiday") so that they are protected from competition and can grow to become major players in a global market. The Swedish Competition Authority believes that regulation should still be designed according to what is justified by the existing competition issues, and thereby the benefit to consumers. The suggested criteria should therefore not be implemented. International roaming (Article 37) With regard to the existing roaming Regulation, the end-users shall, as of 1 July 2014, be able to buy international roaming services separately. The consumers are thereby presented with alternatives, which can lead to prices being lowered. The Commission now suggests, before these provisions have been implemented, an exemption from the obligation to allow customers to purchase roaming separately. Exemptions should be offered if a number of conditions are met. The Commission notes in its Impact Assessment that the impact of this proposal is not easy to calculate. The Swedish Competition Authority agrees with this assessment. It is hard to predict if, and if so, how many of the operators will have the ability and incentives to introduce such offers that will entitle them to exemptions. However, the large operators should be better equipped than the smaller operators to provide such offers. To introduce exemptions now, before the provisions regarding separate selling have even been implemented, risks creating uncertainty on the market, especially
06/11/2013 593/2013 7 (7) for operators that plan to launch separate roaming services. For these reasons, the Swedish Competition Authority is hesitant to support the proposed exemption. This statement has been decided on by the Director-General. The presentation has been made by Competition Counsellor Staffan Martinsson. Dan Sjöblom Staffan Martinsson