Brussels, 11 th March 2010
Telecoms: Commission raises serious doubts about Lithuania's proposed definition of access network markets
The European Commission has informed the Lithuanian national telecoms authority, Ryšių reguliavimo tarnyba (RRT), that it has serious doubts about its definition of the markets for access services used by alternative operators to connect final consumers to telecoms services like telephone and internet. RRT has defined two separate markets for access to copper and fibre networks close to the final customer, called the "last mile" or "local loop". RRT makes a distinction between unbundled copper loops and unbundled optical fibre-to-the-home (FTTH) loops. The distinction has not been justified in accordance with the principles of competition law. At the same time, RRT does not include unbundled fibre-to-the-building (FTTB) loops in its defined markets. While FTTH lines are deployed directly to a customer's home, FTTB lines only reach a building which can comprise several households. In the Commission's view, this means that alternative telecoms operators (other than the incumbent TEO) could find it difficult to access TEO's networks to reach final consumers regardless of the technology used. This approach could restrict competition; discourage investment in Next Generation Access broadband networks by both incumbent and alternative operators and in the end lead to higher prices and lower quality services for customers. During the next two months the Commission will call for and assess further clarifications and market data from both RRT and market players. In the meantime, RRT cannot adopt its proposed measure.
Digital Agenda Commissioner Neelie Kroes said "We have to guard against inaccurate telecom market definitions, as they can give contradictory signals to operators and investors, distort the Single Market and discourage potential investors in Next Generation Access broadband networks. NGA networks are crucial to Europe's sustainable economic recovery and to giving customers access to innovative services".
On 11 January 2010, the Lithuanian telecoms regulator RRT notified the Commission of its plans to regulate the market for unbundled access to local lines, i.e. the "last mile" of a telecoms network before reaching the customer. Technically, the line connecting a specific consumer can be separated from the other lines (the "bundle") traditionally owned by the incumbent and can be used by alternative operators to provide broadband and fixed telephone services to that consumer.
The Lithuanian national telecoms regulator based its definition of access markets on the differences between unbundled access provided through copper local loops and optical fibre-to-the-home (FTTH) local lines. In addition, RRT has proposed to exclude unbundled access through fibre-to-the-building (FTTB) lines from both markets.
The Commission is concerned that the market definition proposed by RRT is not in line with the principles of competition law. In the letter it has sent to RRT, the Commission underlines that the data provided by RRT does not justify its definition of separate copper and fibre markets. The Commission considers that copper and fibre networks, because of their similar technical characteristics, should both be included in the same relevant market. Moreover, the prices consumers pay for internet access appear to be equivalent, irrespective of whether services are provided through fibre or copper loops.
The Commission is not convinced that FTTB-based access should be excluded from the market definition. It is technically possible to unbundle copper lines to connect each consumer's home to the basement of the building. RRT has not provided any convincing data to exclude such access. The RRT's approach could lead to incorrect regulation of the incumbent's access network, leading to limited competition by alternative operators and restricted investment in Next Generation Access networks by both incumbent and alternative operators.
The Commission's letter expressing serious doubts on RRT's draft measure follow the so-called " Article 7 procedure ", under the EU telecoms rules Framework Directive ( MEMO/09/539 ). 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, as in the present case, the Commission can require the regulator to withdraw the measure. Where they concern regulatory remedies, the Commission may make comments of which the regulator must take utmost account.
The Commission's letter sent yesterday to the Lithuanian regulator will be made available very shortly, in accordance with EU and national rules on business confidentiality, at: