Brussels, 26 October 2009
Telecoms: Commission asks Danish regulator to reconsider regulation of terminating calls to premium rate services
In a letter sent today, the European Commission calls on the Danish telecoms regulator, IT- og Telestyrelsen (NITA), to reconsider its regulatory approach for terminating calls to non-geographic numbers operated by service providers that offer premium rate services to end-users. Unlike national regulators in other EU Member States, NITA regulates the price of these services, setting them at the same level as for "ordinary" termination services. However, as recognised by the Commission's Recommendation on Termination Rates ( ), terminating calls to service providers is generally characterised by different competitive conditions than terminating calls to end-users and therefore not necessarily subject to regulation. Against this background, the Commission invited NITA to re-assess whether the obligations imposed in this regard on TDC, the Danish incumbent operator, in particular concerning price control, were indeed proportionate and justified.
" The effective regulation of call termination services has been a key priority for the Commission. However, it is equally important to ensure that regulatory intervention is limited to areas where competitive problems are likely to occur. Over-regulation implies unnecessary costs for regulated companies and might also hamper their ability to compete", said Viviane Reding, the EU Telecoms Commissioner. " At this stage I am not convinced that the situation in Denmark is different from the rest of Europe to such an extent that it justifies the regulation of terminating calls to premium rate services. This is why the Commission is now asking NITA to reconsider its approach and bring it in line with European best practice."
Competition Commissioner Neelie Kroes said: " I appreciate the efforts made by the Danish regulator to set cost-oriented prices for a range of telecoms services. However, the different competitive conditions related to each service should be taken into account when shaping such regulation. Companies providing premium rate services are aware of their termination costs and can switch to the operator offering the most competitive prices, which puts into question the need to regulate these services. "
NITA notified the Commission of its intention to set the regulated prices of a number of wholesale fixed line telecommunications services for 2010, on the basis of its updated and revised cost model, specifying that the termination fees set for calls to end-users would also apply to calls to premium rate service providers.
Termination rates, i.e. the fees telecommunications companies charge each other for terminating calls to their own subscribers, are regulated in all EU Member States. This is because the termination of calls to landline subscribers can only be provided by the operator of the network to which the called subscriber is connected. Since the called party is usually not sensitive to the price of call termination, which is paid by the calling party, terminating operators are able to charge high termination fees.
However, the termination of calls to providers of premium rate services (i.e., information and content services, such as phone voting) is characterised by different competitive conditions, as the called service provider is well aware of the terminating operator's fee. This specificity has also been recognised by the Commission Recommendation on Termination Rates in the EU (see ). Indeed, service providers may exert competitive pressure on terminating operators with whom they usually share the revenues from premium rate services, since in the case of high termination fees they can simply switch to another supplier.
NITA's draft measure only contained details on price control but did not address the differing competitive conditions for premium rate service providers. Such an analysis should usually form part of the market definition and/or the assessment whether certain services warrant ex ante regulation. The Commission further notes that NITA has carried out its last review of the relevant fixed call termination markets in 2005 and only expects to finalise its currently ongoing analysis in 2010.
The Commission therefore urges the Danish telecoms regulator to carry out its next review of the fixed interconnection markets without delay, taking the Commission's concerns into consideration. The Commission also asks NITA to consider, in the meantime, withdrawing the price control obligation imposed on TDC's termination services for calls to service providers so as to ensure a proportionate and justified regulation.