Brussels, 4 October 2006
Telecommunications: Commission requests more market data before assessing draft regulatory measures for the German wholesale leased lines markets
In a letter dated 29 September 2006, the Commission has informed the German telecom regulator Bundesnetzagentur (“BNetzA”) that at this stage it has serious doubts as regards the compatibility of the notified draft measures for the German wholesale leased lines markets with Community law. In the Commission’s view, BNetzA has so far provided insufficient evidence to support its definition of the wholesale leased lines markets in Germany and the conclusions on the competitive situation in certain market segments, says the Commission. The wholesale leased lines markets are crucial markets for business customers. During the next two months, it will call for and assess further market data from BNetzA and market players. On the basis of the additional data received, the Commission will decide whether BNetzA will need to withdraw or whether it can adopt the proposed regulatory measure.
"The segmentation of the leased lines markets by bandwidth can be problematic and is only acceptable if based on solid economic data" said Viviane Reding, EU Commissioner for Information Society and Media. "I want to make sure that the assessment of the German regulator, which may lead to regulation or deregulation of commercially important markets, are based on correct market definitions and will not create barriers to the single market."
On 29 August 2006, BNetzA notified the Commission of its draft measures regarding the German markets for wholesale terminating and trunk segments of leased lines, which are dedicated connections for transmission of voice and data. On the basis of its market analysis, BNetzA proposes to divide both these market segments according to bandwidth (i.e. up to and including, and above 2Mbit/s) and to designate Deutsche Telekom as having significant market power (“SMP”) only in the lower bandwidths of these two markets. According to BNetzA, the markets for higher bandwidth terminating and trunk segments of leased lines are competitive.
In its letter of 29 September, the Commission provides its preliminary assessment of the notified draft measure, informing the regulator of its serious doubts that the evidence supporting the proposed market definition and the conclusions on SMP on the leased lines market segments above 2Mbit/s was sufficient. To draw any conclusions on the competitive conditions, the Commission requires a more detailed technical analysis of the wholesale leased lines and their use in Germany. It needs further data on the substitution patterns between leased lines offers of different bandwidths and with alternative interfaces such as the Ethernet. The trunk and terminating segment markets should also be analysed separately, including market share developments, barriers to market entry, duplicability of infrastructure and the existence of potential competition.
The so-called "Phase II" two-month investigation launched last Friday by the Commission allows BNetzA to provide such additional market data, including the geographic coverage of the networks of alternative operators offering wholesale leased lines. This period will also be used by BNetzA and the Commission to further clarify the outstanding issues. On this basis, the Commission will be able to judge whether the draft measures submitted by BNetzA are compatible with Community law, thereby contributing to the consistency in telecoms regulation in the markets for wholesale leased lines.
The Commission's decision to launch “Phase II”-investigations in the present case is based on Article 7 of the EU Framework Directive for electronic communications (see MEMO/06/59), which requires the Commission to ensure that national regulatory measures do not create a barrier to the single market and are compatible with Community law.
Wholesale leased lines are dedicated unmanaged connections between two points for the transmission of voice and data. Operators use these connections in particular to provide retail leased line services. These retail leased lines are permanently connected communications links between two premises dedicated to the customer’s exclusive use and are first of all used by business customers.
The terminating segments of leased lines cover circuits between client site and the first network node, whereas trunk segments are the backbone linking the terminating segments.
All Member States (CY, ES, CZ, LT, EL, FR, SK, MT, SI, NL, IT, DK, SE, HU, PT, IE, AT, FI, UK) that so far have notified the wholesale terminating segments for leased lines markets, found the market (including leased lines above 2 Mbit/s) not to be competitive. The UK's OFCOM found the market for terminating segments above 155 Mbit/s to be competitive and RRT concluded that the market for terminating segments above 2 Mbit/s was only emerging in Lithuania.
The text of the letter is available at: http://ec.europa.eu/information_society/policy/ecomm/article_7/commission_decisions/index_en.htm