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European Commission

Press release

Brussels, 13 June 2013

Telecoms - Commission queries Estonian regulator’s costing methodology for broadband infrastructure.

The European Commission has suspended a proposal from the Estonian telecoms regulator (ECA) for calculating regulated fees which the dominant operator, Elion Ettevoted AS, can charge other operators to use its broadband infrastructure. The Commission is concerned that ECA's approach may not be compatible with EU telecoms rules, could hamper investment in broadband and could also create artificial barriers in the market.

ECA proposes to set the fees using a method of calculation valuing the assets at their initial historical cost rather than their current cost. The Commission believes that this approach could lead to artificially devalued access prices for copper. Although these access prices may benefit competition in the short term, they are likely to hamper efficient investment and innovation in new and enhanced infrastructures and ultimately risk impeding operators from recovering their investment costs. If ECA's approach were maintained, operators from either inside or outside Estonia would have less incentive to invest in Estonia, with a negative effect on trans-European telecommunication markets.

European Commission Vice-President Neelie Kroes said: "ECA is proposing exactly what I want to avoid: inconsistent access prices across the EU which can have a dampening effect on investment in modern networks. I urge ECA to put forward a new proposal which will ultimately give national and multinational operators the right incentive to replace the old legacy copper network with modern technology."

The Commission has sent a "serious doubts" letter to ECA and the regulator now has three months to work with the Commission and the Body of European telecoms regulators (BEREC) to find a solution to this case. In the meantime, implementation of the proposal is suspended.

Background

On 13 May 2013 the Commission received a draft proposal from ECA concerning both the market for wholesale network infrastructure access at a fixed location and the market for wholesale broadband access in Estonia.

ECA proposed to use a "top-down historical fully distributed cost model" to calculate prices for access to both copper and fiber lines in both markets.

The Commission has acknowledged ECA's margin of discretion over the choice of costing methodology to regulate access rates. However, the Commission considers that the evidence provided by ECA is insufficient to justify its choice

The Commission’s decision to start an in-depth investigation begins a “second phase” procedure under article 7a of the EU Telecoms Directive (MEMO/11/321).

"Article 7" of the Telecoms Framework Directive requires national telecoms regulators to notify the Commission, BEREC (the Body of European Regulators for Electronic Communications) and telecoms regulators in other EU countries, of measures that they plan to introduce to address the lack of effective competition in the markets in question.

The new rules 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

Neelie Kroes' website

Follow Neelie Kroes on Twitter

Contacts :

Ryan Heath (+32 2 296 17 16), Twitter: @RyanHeathEU

Linda Cain (+32 2 299 90 19)


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