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European Commission

Press release

Brussels, 25 July 2013

Telecoms - Commission suspends Austrian regulator’s proposal on broadband wholesale pricing

The European Commission has suspended a proposal from the Austrian telecoms regulator (TKK) for calculating regulated fees which the dominant operator, Telekom Austria, can charge other operators to use its broadband infrastructure. The Commission is concerned that TKK's approach may not be compatible with EU telecoms rules as it threatens to impede efficient investment in broadband, and could also create artificial barriers in the internal market.

European Commission Vice-President Neelie Kroes said: "The inconsistent access prices across the EU have a dampening effect on investment in modern networks. TKK's proposal must give national and multinational operators the right incentive to replace the old legacy copper network with modern technology, and provide stability and predictability."

The TKK has developed a cost model of €15.34 per month for alternative operators to access copper of Telekom Austria. The Commission is concerned that the model is not taking into account all EU rules and therefore results in copper access prices above EU average. However, TKK decided not to impose on the SMP operator this price cap, but rather proposes a considerably lower price of €5.87 per month, as the price resulting from the use of a margin squeeze test. The access prices set at such a low level may benefit competition in a short term, but they are likely to hamper efficient investment and innovation in new and enhanced infrastructures and ultimately risk impeding operators from recovering their investment costs. Another downside of the approach is that it does not contribute to a stable and predictable environment for both Telekom Austria and alternative operators, since prices resulting from such margin squeeze can be reviewed every year. Finally, operators from either inside or outside Austria would have less incentive to invest in Austria, with a negative effect on trans-European telecommunication markets.

The Austrian regulator now has three months to work with the European 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 25 June 2013 the Commission received a draft proposal from TKK concerning both the market for wholesale network infrastructure access at a fixed location and the market for wholesale broadband access in Austria.

TKK proposes to set prices in both markets by using a margin squeeze test, although a cost-oriented price calculated on the basis of a forward looking model exists as a safety option in the wholesale network infrastructure access market, but the actual price level has not been imposed.

The Commission has acknowledged TKK's margin of discretion over the choice of costing methodology to regulate access rates. However, the Commission considers that the evidence provided by TKK 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 Austrian regulator will be published at:

https://circabc.europa.eu/

Digital Agenda website

Neelie Kroes' website

Follow Neelie Kroes on Twitter

Contacts

Email: comm-kroes@ec.europa.eu Tel: +32.229.57361 Twitter: @RyanHeathEU


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