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Brussels, 23 rd December 2009

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

In a letter sent today, the European Commission has called on the Danish telecoms regulator, IT- og Telestyrelsen (NITA), to align the mobile termination rates (MTRs) of the smallest mobile operator, Barablu, with those of the other mobile companies as soon as possible. At the same time, the Commission welcomed NITA's proposal to review its cost model for calculating MTRs in the near future. The Commission stressed the need to bring NITA's cost model in line with the Commission's Recommendation on Termination Rates ( IP/09/710 ). MTRs are the wholesale prices which mobile operators charge other fixed and mobile operators for connecting incoming calls to subscribers located on their networks and are ultimately included in the phone prices of calls to mobile networks.

Competition Commissioner Neelie Kroes said: "Low, symmetric tariffs for call termination services are fundamental to create the right incentives for market players to become efficient. The Commission called on NITA to treat all mobile operators alike. This would allow Danish consumers to benefit from lower prices for calls to mobile phones."

Viviane Reding, the EU Telecoms Commissioner said: "NITA’s commitment to lower MTRs of the smallest mobile operator is to be welcomed. Nevertheless, shorter-term actions are necessary to remove inconsistencies in regulation of termination rates. If smaller operators are allowed to charge higher termination rates that are not duly justified, this penalises both end-users and market players. I trust that NITA will consider our advice and reduce the termination rates of the smallest mobile operator, thus complying with our Recommendation on Termination Rates . "

In Denmark, there are currently five operators providing mobile phone services. Four of them (TDC, Telenor, TeliaSonera and Hi3G) are network operators have built their own networks, while Barablu is a virtual network operator providing mobile phone services to its customers using other operators' networks (host operators).

In its current market review, NITA proposes to qualify all mobile operators as having significant market power in terminating calls on their networks and, as a consequence, to impose a set of obligations, including price control, on them.

With regard to the four network operators, NITA intends to review its cost model for setting regulated MTRs. The Commission welcomed NITA's proposal and invited the regulator to take due account of the Commission's Recommendation on Termination Rates and to apply the single efficient termination rate resulting from the recommended cost model to all operators present in the market.

However, in its current proposal NITA, claiming the absence of a cost model developed for calculating the mobile termination rates of virtual network operators, determines Barablu's prices on the basis of a comparison to the rates applied by three other virtual network operators in neighbouring Nordic countries. This methodology results in the possibility for Barablu to charge higher rates (ca. 6 eurocents/minute) than the four network operators (ca. 5 eurocents/minute) and differs from the method applied by several other EU telecoms regulators, who set virtual network operators' rates at the level applied by the respective host operators.

In its letter, the Commission reminded the Danish regulator that MTRs should be set at the level of costs incurred by an efficient operator and should therefore be the same for all operators, unless objective reasons justify a differentiated approach. Whilst new entrant mobile operators may initially face higher per-unit costs, due account should be taken of the fact that virtual network operators may be able to achieve low unit costs irrespective of their actual market shares by using the networks of larger operators and benefiting from their economies of scale and scope. For these reasons, the Commission invited NITA to either identify objective cost differences that would justify the asymmetry allowed for Barablu or to bring down Barablu's termination rates to the level applicable by the other operators as soon as possible.


The Commission's comments on NITA's proposal follow the so-called " Article 7 procedure ", under the Framework Directive of the EU telecoms rules ( MEMO/09/539) , where national regulators (NRAs) 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 the Commission may make comments of which NRAs must take utmost account.

The Commission's letter to NITA will be published at:


Average MTRs in 32 European countries as of July 2009

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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