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Brussels, 26 October 2009

Telecoms: Commission calls on Slovenian telecoms regulator to review its broadband market analysis

In a letter sent today to APEK, the Slovenian telecoms regulator, the Commission reminds APEK that regulatory remedies should be imposed on appropriately defined markets. Earlier this year APEK identified a market for access to unbundled local loops, the so-called last mile, and imposed a full set of remedies including price control on the dominant operator, Telekom Slovenije. Today's complementary measure significantly deviates from APEK's previous approach of August 2009. APEK now distinguishes between residential and business customers and differentiates price regulation for unbundled optical fibre lines accordingly. The Commission says that APEK's proposal does not have convincing evidence to maintain this distinction and calls upon the Slovenian regulator to prove the distinguishing features of wholesale fibre access to different customers. APEK may need to modify its relevant market definition informing the Commission and other national telecoms regulators.

"Compared to what I was told a few weeks ago by the Slovenian regulator, prices for access to the dominant operator's fibre lines should now be set at a much higher level. This does not seem to be in line with the markets which we have been notified of recently. Regulatory remedies can only be appropriate and justified if they are imposed on markets defined and assessed in line with competition law principles." said Viviane Reding, the EU Telecoms Commissioner. "Without this, market players do not have the legal certainty they need to make their business and investment plans."

Competition Commissioner Neelie Kroes commented: "The markets concerned are crucial for competition in electronic communication. I regret that APEK has not undertaken an independent study for key cost drivers but relied solely on information provided by the incumbent. I doubt that such an approach ensures a high level of competition and takes care of the interests of alternative operators and consumers and to have an affordable internet access."

Today, the Commission called on the Slovenian regulator to modify its previously defined market analysis for access to unbundled local loops in light of identified different competitive conditions for consumers and business customers. Buying local loop unbundling services allows competing operators to provide broadband and fixed telephone services to their own customers. The Commission stresses that the wholesale fibre access prices outlined in the current draft measure represent a substantial change from APEK's previous approach, since considerably different pricing remedies are now proposed for residential and business customers. The regulatory framework does not preclude the imposition of different remedies in the same relevant market based on product differentiation and market segmentation. However, in its previously notified market definition and SMP assessment of August 2009 APEK has not differentiated between residential and business market segments.

National telecoms regulators are obliged to apply sound competition law based methodology when they regulate markets. To enforce specific business-tailored remedies, either a business market segment must be identified or a convincing case must be made for the differentiation of remedies within the same market. This is not the case in this notification. Therefore, the Commission is calling on APEK to better substantiate the distinguishing features of wholesale fibre access to business customers both at the stage of the market definition and at the stage of imposing regulatory obligations. Since in the current notification APEK identified different competitive conditions between wholesale fibre access for business and residential customers, the market definition of access to unbundled local loops might need to be modified accordingly and notified to the Commission and the national regulatory authorities in the other EU Member States.

In today's letter, the Commission also comments on the parameters of APEK's cost model for optical fibre. It invites the Slovenian regulator to develop a cost model that draws on APEK's own experience in regulating markets and on outcomes of independent studies, rather than on data submitted by the incumbent. Such an approach may be more prone to identifying fair access prices and setting the right incentives for investment in new generation networks.


The Commission's comments to APEK follow the " Article 7 procedure ", under the Framework Directive of the EU telecoms rules ( MEMO/08/620 ). This procedure allows 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:

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