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European Commission - Press release

Digital Agenda: Commission seriously concerned about future high mobile rates in Estonia

Brussels, 16 April 2012 – The European Commission put a hold on a proposal by the Estonian Competition Authority (ECA) to impose some of the highest mobile termination rates (MTRs) in the European Union from mid-2012 until mid-2015.

MTRs are the rate mobile networks charge other networks for delivering voice calls. The Commission is concerned that ECA's proposed pricing methodology does not fully follow the method set out in EU telecoms rules and will lead to durably excessive MTRs and ongoing consumer harm. The 2009 Termination Rates Recommendation (see IP/09/710 and MEMO/09/222), requires cost-efficient rates to be in place by 1 January 2013. For example, ECA proposes MTRs at 3.89 euro cents per minute in the first half of 2013, well above the cost-efficient rate of around 1 euro cent per minute.

In addition, from mid-2013 ECA plans to stop notifying the Commission of its subsequent MTRs, meaning these rates would be enforced in Estonia regardless of whether they are in line with EU law or not. European Commission Vice President Neelie Kroes said: "We need a fair EU single telecoms market. We cannot allow a situation where certain operators are able to achieve an unfair advantage or overcharge consumers through excessive mobile termination rates. Consumers all over the Union should equally benefit from the lower rates agreed back in 2009."

Background

The Commission's decision to start an in-depth investigation starts a second phase under Article 7a of the Telecoms Directive (MEMO11/321). ECA now has three months to work with the Commission and the body of European telecoms regulators (BEREC) on a solution to this case.

In March 2012 the Commission received ECA's proposal regarding its plans to regulate mobile termination markets in Estonia. This included a price control remedy, according to which the mobile termination rates would be set by a benchmarking methodology. Moreover, ECA stated that it will not notify to the Commission interim decisions which will set the MTRs for the remainder of the market review period (after mid-2013).

The Commission has issued this serious doubts letter as the benchmarking methodology ECA applies seems to be flawed. This arises, first of all, because the termination rate for the first half of 2013 is set above the cost efficient level, and secondly, because the Commission has serious concerns that the termination rates will not attain the pure BU-LRIC target even after mid 2013. ECA failed to explain how the chosen approach would promote efficiency, enhance competition and maximise consumer benefit. Such a price control remedy would, in the Commission's view, run against Articles 8(4) and 13(2) of the Access Directive in conjunction with Article 8 and Article 16(4) of the Framework Directive.

Moreover, the above concern appears to be even more serious bearing in mind ECA's clear intention not to consult and notify interim decisions which will set the MTRs for the remainder of the market review period. Not only would this be a breach of Articles 6 and 7(3) of the Framework Directive, but such a practice would leave the Commission with no possibility to scrutinize the price levels which are to be applied as from 1 July 2013.

Under the new powers of Article 7a of the Framework Directive, over the next three months the Commission, in close cooperation with BEREC, will discuss with ECA how to amend its proposal in order to make it compliant with EU law. In the meantime, implementation of the proposal is suspended.

The new rules also enable the Commission to adopt further harmonisation measures in the form of recommendations or (binding) decisions if divergences in the regulatory approaches of national regulators, including remedies, persist across the EU in the longer term.

Useful Links

The Commission's letter sent to the Estonian regulator will be published at:

https://circabc.europa.eu/w/browse/0fc4cbf9-3412-45fe-84bb-e6d7ba2f010e

Digital Agenda website: http://ec.europa.eu/digital-agenda

Neelie Kroes' website: http://ec.europa.eu/commission_2010-2014/kroes/

Follow Neelie Kroes on Twitter: http://twitter.com/#!/neeliekroeseu:

Contacts:

Ryan Heath (+32 2 296 17 16); Twitter: @ECspokesRyan

Linda Cain (+32 2 299 90 19)


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