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Telecoms: European Commission urges Latvian regulator to set lower fixed and mobile termination rates

Commission Européenne - IP/10/129   05/02/2010

Autres langues disponibles: FR DE LV

IP/10/129

Brussels, 5 February 2010

Telecoms: European Commission urges Latvian regulator to set lower fixed and mobile termination rates

The European Commission has asked the Latvian telecoms regulator, Sabiedrisko pakalpojumu regulesanas komisija (SPRK), to change the way it calculates fixed and mobile termination rates so that these fees can be lowered, making calls cheaper for consumers. Termination Rates are the wholesale prices which telecoms operators charge each other for connecting incoming calls to subscribers using their networks and are ultimately included in phone call prices. In May 2009, the Commission recommended an EU wide approach for calculating Termination Rates ( IP/09/710 ) but allowed telecoms regulators to calculate termination rates in other ways for a transitional period. These temporary calculation methods should be based on objective criteria and ensure that termination rates reflect the costs that an efficient operator incurs to provide such services. The Commission has also said that access and price control obligations should be imposed on all operators with significant market power to avoid potential competition problems.

"I understand that some smaller telecoms regulators may find it challenging to implement the Commission’s recommended way of calculating termination rates. I am glad that SPRK's intends to build, despite these difficulties, such a model by 2013," said Viviane Reding, the EU Telecoms Commissioner. "In the meantime SPRK should ensure that Latvian termination rates are moving towards efficient costs, by carefully selecting the methodology and criteria when regulating tariffs. Latvian customers should not pay more than necessary until this happens".

Competition EU Commissioner Neelie Kroes said, "Effective network access and cost-based termination rates for all Latvian fixed and mobile network operators is necessary to ensure a level playing field for all phone operators and lower prices, to the benefit of competition and Latvian consumers."

The Latvian national regulator, SPRK informed the Commission that it reviewed the mobile call termination markets and concluded that all four mobile network operators in Latvia (Tele2, Latvijas Mobilais Telefons, BITE Latvija and Telekom Baltija) had significant market power. SPRK also established a price control mechanism for the three largest mobile operators (Tele2, Latvijas Mobilais Telefons, BITE Latvija) and the fixed incumbent (Lattelecom), by controlling their termination rates from April 2010 to January 2012.

Until SRPK is able to implement the Commission’s recommendation for calculating termination rates, it will continue using other methods for setting termination rates, such as prices in other EU countries and their estimated evolution. However, the Commission thinks that SPRK has not sufficiently explained why it has selected these methods, in particular those based on estimations for setting regulated termination rates. Some of the termination rates applicable in other EU countries are high compared to the rest of the EU and are also higher than certain operators' own reported costs.

In its letters, the Commission has reminded SPRK that termination rates should be set at the level of costs of an efficient operator. When regulators temporarily use benchmarks for establishing termination rates, such methods should reflect cost-based termination rates.

The Commission also asked SPRK to consider imposing an obligation on all operators to provide access to their networks for other operators. It suggests SPRK should regulate termination rates of all market players, including smaller ones. The Commission considers that all fixed and mobile operators have a monopoly position in their respective networks, and therefore, in the absence of appropriate regulation, they might refuse access and/or raise their termination rates or maintain them at a higher level.

Background:

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

The Commission's letters to SPRK will be published at:

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

Annex

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

Average FTRs of European incumbent operators as of October 2008
(at single tandem level)

Figures and graphics available in PDF and WORD PROCESSED



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