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IP/09/1832

Brussels, 27 November 2009

Telecoms: European Commission urges Polish telecoms regulator to take stronger action on mobile termination rates

In a letter sent today, the European Commission has asked the Polish telecoms regulator, Urząd Komunikacji Elektronicznej (UKE), not to unnecessarily prolong asymmetric termination rates in favour of P4, the latest entrant in the Polish mobile telephone market. Currently P4 charges other operators around 1.5 times more for connecting calls on its network than its competitors. The Commission calls upon UKE to bring its pricing methodology in line with the Commission's Recommendation on Termination Rates of May 2009 ( IP/09/710 ) and to swiftly reduce P4's mobile termination rates (MTR) to the level of the cost of an efficient operator. Termination rates are an important cost element when consumers call a phone which is connected to another network. They are included in everyone's phone bill and eventually paid by the calling customer.

"Termination rates in Poland still vary highly between mobile phone operators. UKE must do more to reduce this asymmetry and to apply the same price regulation to all four mobile operators. Allowing P4 to charge termination rates that do not reflect true costs does not give the company the right incentive to become an efficient operator and does not allow Polish consumers to benefit from lower prices for mobile calls," said Viviane Reding, the EU Telecoms Commissioner.

Competition Commissioner Neelie Kroes said, "Lower termination rates will decrease retail prices for mobile voice calls to the immediate benefit of consumers. New entrants may be exceptionally allowed to charge higher rates to reach a minimum efficient scale. However, to limit distortions of competition, such exemptions may only be granted for a limited period of time and should not exceed four years from the date of market entry, as provided by our Termination Rates Recommendation."

The Commission has today informed UKE that allowing P4 to charge a higher mobile termination rate than its competitors until 2014 is not justified. The Commission's Recommendation on Termination Rates says that all mobile termination rates should be set at the level of efficient costs for all operators by 31 December 2012. The fact that P4 is a new entrant operator and has a smaller market share can only justify asymmetric termination rates for a transitory period (generally 4 years), allowing it to reach the minimum efficient scale. P4 entered the market in 2007.

On 27 October 2009, UKE notified the Commission of pricing dispute settlements between P4 and each of the three largest mobile operators (Polkomtel, PTC and PTK) as well as the fixed incumbent operator (TP) and of a change in the regulated mobile termination rate of P4. UKE proposes to set P4's termination rates at the level of 9.2036 €cent from 16 December 2009. This is 141% higher than rates charged for the same service by the other three mobile operators. P4's termination rate is foreseen to gradually decrease every half year and to reach the same level as other mobile operators on 1 January 2014. UKE has justified this asymmetry due to the recent entry of P4 in the market and its rather weak market position compared to its larger competitors.

The Commission's letter urges UKE's to re-consider in its final measure the proposed price control methodology and margin for P4. UKE is invited to move P4's termination rates more swiftly to the efficient MTR level, by means of steeper reductions in P4's termination rates, in line with the Commission's Recommendation on Termination Rates.

Background:

The Commission's comments to UKE 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 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 today to the Polish regulator will be published at the end of this week at:

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


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