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Brussels, 14 September 2009

Telecoms: European Commission calls on Czech telecoms watchdog to strengthen regulatory control on mobile termination

In a letter sent today, the European Commission has, for a second time, asked the Czech telecoms regulator, Český telekomunikační úřad (ČTÚ) to further reduce mobile termination rates (MTRs) in the Czech Republic. MTRs are the wholesale charges which mobile operators charge other operators for connecting calls on their networks. Despite the Commission's recent call on ČTÚ, in a letter sent end of last year , to bring MTRs closer to efficient cost as soon as possible, the Czech regulator intends to maintain the MTR levels set in its previous decision. A new glide path aimed at approximating efficient costs in a swifter manner would, however, provide for a smoother transition to the approach set out in the Commission's Recommendation on Termination Rates ( IP/09/710 ), which asks all Member States to set MTRs at the level of the cost of an efficient operator by 31 December 2012. The Commission also regrets that less stringent obligations are imposed on the smallest operator, MobilKom. This may lead to market failures or disputes between operators if MobilKom decides to raise its own MTRs or to not terminate calls from other operators' networks.

The average mobile termination rate in the Czech Republic is the second highest in the EU. Whilst welcoming ČTÚ's efforts to take certain aspects of our Recommendation into account already in its current measure, I am very disappointed that the Czech regulator proposes to maintain the level of mobile termination rates imposed on the larger operators previously," said Viviane Reding, the EU Telecoms Commissioner. " Only further substantial reductions can ensure that consumers in the Czech Republic benefit from lower prices for mobile calls. I also urge ČTÚ to impose stricter obligations on the smallest operator to treat all mobile companies alike. I hope that the Czech telecoms regulator will duly consider our advice and regulate mobile termination markets accordingly."

Competition Commissioner Neelie Kroes said, "I regret that the Czech regulator did not apply a cost model that reflects the true costs for the provision of termination services by an efficient operator. Such an approach would have led to lower termination rates and a level playing field for all mobile phone operators to the benefit of competition and Czech consumers".

According to ČTÚ's notified measure Telefónica O2, T-Mobile and Vodafone have to respect a set of obligations to ensure fair competition on the Czech mobile markets. In particular, the termination rates of these operators should not exceed certain price caps. Thus, until 31 December 2009 the three largest operators can charge a maximum of 2.31 Czech crowns (≈ 9.1 eurocents) per minute while for the period from 1 January to 30 June 2010 the maximum termination rate is 1.96 Czech crowns (≈ 7.7 eurocents) per minute. The prices to be allowed thereafter would be set by ČTÚ at the end of 2009 on the basis of the lowest cost actually faced by the three larger operators, whereby certain costs that are not related to the mobile termination service would not be taken into account.

The Commission today reiterated the importance of using long-run incremental costing methodologies for calculating the efficient costs of termination, rather than the fully allocated costing approach proposed by ČTÚ. The Commission's letter urges ČTÚ to re-consider its proposed glide path with a view to moving more swiftly towards the efficient MTR level. This will also help avoiding the need for sudden, sharp reductions in MTRs in the future and facilitate a swifter transition to the efficient costing methodology set out in the Commission's Recommendation to be applied by the end of 2012.

ČTÚ also proposes to impose less stringent obligations (i.e., only transparency and non-discrimination) on the smallest new entrant operator, MobilKom, referring to its relatively weaker market position. ČTÚ intends to protect competition through settlement procedures in case of possible disputes about the provision of mobile termination services, and the applicable rates.

The Commission has expressed doubts regarding the appropriateness of imposing softer remedies on MobilKom than on the other three mobile operators. It also reminded ČTÚ that commercial agreements and dispute settlement procedures, as the ones proposed, cannot normally address the potential market failures in termination markets. Therefore, the Commission has asked ČTÚ to impose a price control obligation and an access obligation also on MobilKom so as to ensure an adequate and effective regulation of mobile termination services of all operators in the Czech Republic.


The Commission's comments to ČTÚ follow the " Article 7 procedure ", under the Framework Directive of the EU telecoms rules ( MEMO/08/620 ). This procedure leaves some scope for regulators to achieve effective competition in their national telecoms markets, while ensuring consistency across the EU, and therefore requires them to notify the Commission of draft measures. Where these concern market definitions and analyses of whether operators have significant market power, the Commission can require the regulator to withdraw the measure. Where they concern regulatory remedies – as in the present case – the Commission may make comments of which the regulator must take utmost account.

The Commission's letter sent today will be published at the end of this week at:


Average MTRs in 32 European countries as of January 2009

Czech Republic has the second highest mobile termination rate amongst EU countries

Figures and graphics available in PDF and WORD PROCESSED

Source: European Regulators Group, MTR Benchmark Snapshot ERG (09) 23_final_090604

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