BEREC Opinion on Phase II investigation pursuant to Article 7a of Directive 2002/21/EC as amended by Directive 2009/140/EC: Case PL/2019/2156 Market for wholesale call termination on individual public telephone networks provided at a fixed location (Market 1) in Poland - Remedies

On 28 March 2019, the Commission registered a notification by the Polish Regulatory Authority, Urząd Komunikacji Elektronicznej (UKE), concerning the market for wholesale call termination on individual public telephone networks provided at a fixed location in Poland (case PL/2019/2156). In its draft measure, UKE notifies the market definition, including call termination services in each operator’s fixed network, as well as termination services to emergency numbers, the identification of operators with significant market power (SMP) - namely Orange Polska S.A., the incumbent, (OPL, thereafter) and 203 alternative operators – and, respectively, the regulatory remedies. UKE proposes to impose the obligations of providing access to and the use of certain network elements and associated infrastructure, non-discrimination, transparency and price control, on all SMP operators. A cost accounting obligation is proposed to be imposed only on OPL.With regard to the imposition of the price control obligation, UKE proposes to issue a partial administrative decision according to which the future rates are to be calculated and imposed at a later stage in line with the recommended BU-LRIC methodology. In other words, UKE aims at maintaining the currently applied fixed termination rates (hereafter, referred to as FTRs) for now. They are either established based on the Fully Distributed Costs (FDC) methodology, for the price regulated operators, or on the interconnection agreements for the rest of the operators identified with SMP. However, UKE does not envisage a timeframe for the application of FTRs calculated according to the BU-LRIC methodology, nor does it propose that intermediary FTRs could be established through one of the exceptionally accepted methods mentioned in the Commission’s Recommendation 2009/396/EC on the Regulatory Treatment of Fixed and Mobile Termination Rates (Termination Rates Recommendation or TRR, thereafter), for example, benchmarking. On 26 April 2019, the Commission sent a serious doubts letter opening a phase II investigation pursuant to Article 7a of Directive 2002/21/EC as amended by Directive 2009/140/EC. The Commission’s doubts concern UKE’s proposed measures with respect to the price control remedies for the concerned market. To this effect, the Commission specifically outlines that, pending the partial decision setting FTRs based on the BU-LRIC methodology, the operators in Poland will continue applying, for an undetermined period of time, the current FTRs which include the recuperation of inefficiently incurred costs, as well as a proportion of joint and common costs, in instances when they are regulated. For the other operators, the current FTRs bear no relation to costs. The Commission considers that UKE’s proposed notification maintains considerable asymmetries to the detriment of competition and the internal market, as such.Based on the analysis set out in this Opinion, BEREC considers that the Commission’s serious doubts are justified. In light of the argumentation provided herewith, BEREC suggests that, for the intermediary period, UKE is to notify a draft measure setting the regulated FTRs in Poland on the basis of a benchmark of European FTRs determined according to the pure BU-LRIC methodology. This will ensure, on one hand, the setting of regulated FTRs at an efficient level and, on another hand, address the current asymmetric regime of regulated FTRs. Additionally, UKE should outline and present to the market, without undue delay, a schedule setting timelines for the adoption of the BU-LRIC-based FTRs in Poland.