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IP/07/45

Brussels, 15 January 2007

Telecommunications: Polish regulator must carry out a new market analysis of retail access markets, says Commission

The Commission issued a decision requiring the Polish telecom regulator, Urząd Regulacji Elektronicznej (UKE), to withdraw its draft measures for regulating retail access services. Two months ago, the Commission expressed serious doubts that UKE's plans for regulating these markets were compatible with Community law and requested UKE to back its market definition with convincing evidence. UKE has failed to justify why it intends to regulate broadband access services in addition to regulating retail narrowband access, says the Commission.

"So far retail broadband access services have not been regulated in any other Member State. Regulation can only be imposed on the basis of correct market analysis," said Viviane Reding, EU Commissioner for Information Society and Media. "The Commission wants to ensure that the Polish regulator's assessment complies with competition law principles and will not create barriers to the single market, restrict competition or hamper investment and innovation."

During the last two months of the so-called "Phase II" procedure applying EU telecom rules, the Commission assessed further clarifications provided by UKE and third parties. Based on competition law, the Commission concludes that in terms of both price and function, broadband access services cannot be considered to belong to the same market as narrowband access. The Commission is concerned that UKE's plans to regulate Telekomunikacja Polska S.A.'s (TP) retail broadband access services on the basis of an incorrect market definition on which the subsequent market analysis is based, may hinder TP in its ability to compete for the provision of such services and may discourage TP, as well as other operators, from investing in the development of broadband infrastructure.

The Commission takes note of UKE's concerns about possible anticompetitive behaviour in the Polish retail broadband market. It believes, however, that under normal circumstances regulation at the wholesale level is sufficient. UKE is therefore invited to first implement efficient wholesale regulation before deciding whether there is still a need for retail regulation. In any event, competition law continues to apply.

UKE will have to withdraw its regulatory measure and to fully reflect the Commission's present analysis when re-identifying the Polish markets for retail access services.

Background

On 13 and 24 October 2006 UKE notified the Commission about its draft measures on the Polish markets for fixed public telephone network access for residential and non-residential customers. UKE's analysis, which included access to broadband services in the relevant markets, described Telekomunikacja Polska S.A. (TP) as having significant market power, which meant that market regulation was needed. The Commission questioned this approach in its letter of 13 November to UKE.

Access to the fixed public telephone network for residential and non-residential customers means a connection or access (at a fixed location or address) to the public telephone network for the purpose of making and/or receiving telephone calls and related services, such as faxes and dial-up internet. Although broadband connections can also deliver telephone services, customers will generally refrain from switching to a broadband connection for telephony services only. Consumers switch from narrowband to the more expensive broadband connections primarily to access higher speed internet services – which constitute a different market.

At the wholesale level this concerns broadband or “bitstream” access enabling alternative operators to provide broadband services to end-users by combining their own backbone network with parts of the incumbent operator’s network. Bitstream access is generally considered to be an essential step towards enabling new entrants to invest in the full-scale roll-out of their network on the basis of local loop unbundling (first through “shared” and then through “fully” unbundled network access).

The Commission's Phase II decision requiring UKE to withdraw its proposed regulatory measures 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.


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