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IP/09/1810

Brussels, 24 November 2009

Telecoms: Commission urges Lithuanian telecoms regulator to take stronger action on fixed termination rates

In a letter sent today, the European Commission calls on the Lithuanian regulatory authority for telecommunications, the Ryšių reguliavimo tarnyba (RRT), to impose appropriate price control and access obligations on all communication providers regarding their fixed termination services. Fixed termination rates (FTRs) are the wholesale prices which fixed operators charge for terminating calls on their respective networks. FTRs in Lithuania are amongst the highest in the EU. A higher reduction of FTRs would speed up the transition to the approach set out in the Commission's Recommendation on Termination Rates ( IP/09/710 ), according to which FTRs should be set in all Member States at the level of the cost of an efficient operator by 31 December 2012. In addition, the Commission urged RRT to ensure that termination services are provided on fair and equal conditions to all operators and therefore requested RRT to also consider imposing non-discrimination and transparency obligations on alternative providers.

Competition Commissioner Neelie Kroes said "Effective access regulation and price control for all Lithuanian communication providers should ensure lower termination rates and a level playing field for all phone operators to the benefit of competition and consumers in Lithuania."

"Fixed termination rates in Lithuania are amongst the highest in Europe. To facilitate a smooth transition towards fixed termination rates set at efficient cost levels to the benefit of Lithuanian consumers more substantial reductions are necessary." said Viviane Reding, the EU Telecoms Commissioner. " At the same time, I acknowledge the efforts of the Lithuanian Regulator to reinforce symmetry of fixed termination rates among operators, such as recommended in the Commission's Recommendation on Termination Rates."

RRT proposes to maintain the existing regulatory obligations, such as open access non-discrimination, transparency and accounting separation, for the incumbent operator, TEO lT, AB. As regards the incumbent's prices, RRT proposes to reduce at the beginning of each of the coming three years FTRs at peak and off peak hours and call set up fees both at the local and national level. For the calculation of the termination rates, RRT uses a hybrid long run average incremental cost model different from the model proposed by the Commission's Recommendation on Termination Rates, which would lead to even higher rates than those foreseen in RRT`s previous proposal.

As regards alternative fixed network operators (ANOs), RRT proposes to apply a more lenient regime: It does not fix termination charges but simply obliges ANOs to apply FTRs not higher than those of the incumbent operator, TEO. The access obligation for ANOs is also less detailed than the access obligation imposed on TEO, which cannot deny access to ANOs charging the same or lower termination fees than charged by TEO.

The Commission urges RRT to impose steeper reductions leading to rates closer to the EU average, thereby coming closer to the level of an efficient operator. This would avoid unduly steep glide paths at the end of the transition period provided for in the Commission's Recommendation on Termination Rates 2009/396/ EC (see IP/09/710 ), i.e. by 31 December 2012.

The Commission also emphasises that an access obligation is unilateral and unconditional by nature, and should in principle not be made subject to conditions offered on markets other than the relevant market, in this case another termination market. It invites RRT to review the scope and adjust the wording of the access obligation imposed on TEO taking account of these considerations.

Furthermore, the Commission has invited RRT to extend the scope of the access obligation on alternative operators in order to ensure that the termination services are provided on fair and equal conditions. Alternatively RRT may consider imposing a non-discrimination and transparency obligation also on alternative operators.

Background:

The Commission's comments on RRT's proposal follow the so-called " Article 7 procedure ", under the Framework Directive of the EU telecoms rules ( MEMO/08/620 ). Under this procedure, regulators are required to notify the Commission of draft regulations. 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 to the Lithuanian regulator will be published shortly at:

http://circa.europa.eu/Public/irc/infso/ecctf/library?l=/commissionsdecisions&vm=detailed&sb=Title


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