Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

PL/2012/1394

7

5

The Commission’s doubts concern the reliance on historical data of 2009 and 2010 and the conclusions based on these data, including the definition of the relevant market and the assessment of SMP, which contradicted UKE’s more recent market analysis. The Commission also believed that there was a lack of sufficient evidence of UKE’s regional market differentiation and a lack of thorough assessment of the demand-side of the WBA market.
The Commission had doubts regarding UKE’s arguments concerning the impact of potential competition and considered that the draft measure would create a barrier to the internal market.

On the basis of the analysis set out in this Opinion, BEREC shares the Commission’s serious doubts.

EC imposed a Veto on 8 february 2013. UKE has withdrawn its notification 4 March.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

CZ/2012/1392

7a

3

The Commission observes that the proposed rates between 0.16 €-cents and 0.31 €-cents, calculated on the basis of a pure- BU-LRIC cost model, are approximately two times higher than in other EU-member states.
The Commission concludes that the rates are not set on the basis of the costs of an efficient operator. ČTÚ failed to impose price caps that would consider next-generation-network based technologies in its entirety, necessary to model costs of an efficient operator as required by a BU-LRIC methodology. The Commission also stresses that, according to ČTÚ’s explanation, it decided to amend the cost model, during a national public consultation by introducing several changes to the definition of the input data, so that the model can better reflect the reality, which is the fact that the SMP operator has not introduced NGN-technology to full extent.

BEREC was of the opinion that EC’s serious doubts were not justified.
BEREC is of the opinion that the resulting price levels, as notified by ČTÚ, cannot be in itself a reason to have serious doubts.
According to BEREC, the model used by ČTÚ is fully NGN-based.
Nevertheless BEREC recommends that these three elements of the methodology need to be examined more closely by ČTÚ and the Commission before the final decision.

CTU has withdrawn its decision 4 March.

Case

Art 7/7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

IT/2013/1415

7a

3

The notified measure does not appear to comply with the above principles and objectives set out in the regulatory framework. AGCOM proposes to delay the introduction of termination rates based on a pure BU-LRIC methodology until January 2015 without providing sufficient economic justification. Instead, until 2015, AGCOM proposes to apply a weighted average FTR which would result from a termination rate set for 2012 (in TDM network, including also common costs) and a pure BU-LRIC based termination rate in the IP network. Thus, in 2013 and 2014 pure BU-LRIC based rates will not be enforced in Italy.

The Commission further notes that for the period termination rates are set above the efficient level (i.e. until 1 January 2015), terminating operators in Italy will be able, on the basis of the calling party pays principle, to benefit from this rate at the expense of operators, and ultimately consumers, in those Member State from which the call originates and which do apply fully cost-oriented FTRs in line with Article 8(2) of the Framework Directive and Articles 8(4) and 13(2) of the Access Directive. Hence, the considerable difference in absolute terms derived from a glide-path with an end date beyond the 1 January 2013 results in the application of significantly above-cost termination rates for 2013 and 2014 in Italy and would, thus, be incurred at the expense of the operators, and eventually consumers, in the Member States from where the fixed/mobile calls originate.

On the basis of the analysis set out in section 4 above, BEREC considers that the Commission’s serious doubts are justified in that i) AGCOM’s proposed FTRs are not based on a pure BU-LRIC model, as recommended by the EC, until 2015 and ii) AGCOM has not provided a valid justification for deviating from the EC recommendation and in particular , has not provided evidence with supports its view that applying pure BU-LRIC tariffs from 2013 would have a disproportionate effect on Italian operators.
In addition, BEREC shares the Commission’s concerns that AGCOM proposal could create barriers to the internal market if other NRAs set FTR based on the methodology recommended by the Commission and AGCOM deviates from that methodology without valid justification. On the basis of AGCOM’s proposed glide path and impact estimates, BEREC considers that any such barriers are unlikely to be “considerable” and could be limited to the year 2013 only.
BEREC suggests, to the extent AGCOM finds it appropriate to set a glide path for reasons mentioned above, that AGCOM maintains its proposed glide path but sets the transition FTRs (for 2013 and 2014) on the basis of a pure LRIC for both TDM and IP (for the avoidance of doubt, this means setting the 2013 and 2014 FTRs using AGCOM’s proposed methodology in which the 2012 TDM FTR are replaced by the 2012 pure LRIC TDM FTR).

AGCOM has withdrawn its decision 18 April.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

DE/2013/1424

7a

7

Compliance with Articles 8(4) and 13(2) of the Access Directive in conjunction with Article 8 of the Framework Directive and Article 16(4) of the Framework Directive
The draft measures notified by BNetzA do not appear to comply with the  principles and objectives set out in the regulatory framework.
In particular, the Commission observes that BNetzA proposes to employ a LRIC+ methodology, which  includes in the calculation of the relevant mobile call termination rate both 'non-traffic-related' common costs as well as traffic-related costs, which could be attributable to services other than wholesale voice mobile call termination.
The Commission considers that BNetzA did not provide sufficient and compelling economic reasons to justify why it choose not to follow the Recommendation. In particular, BNetzA's assertion that, due to its inability to determine with certainty existing price elasticities of wholesale buyers, calling end-users and called end-users, it cannot curtail the ability of SMP operators to recover common costs via call termination rates, neglects that a pure BU-LRIC approach is better suited to facilitate a more efficient distribution of financial transfers between competing operators and thereby to a level playing field between all fixed and mobile operators.
The Commission does not share BNetzA's assertion that its proposed method is better suited to serve the policy objectives of promoting competition and the interest of citizens of the EU as it would not lead to a situation of over-recovery of costs,. Furthermore, the
Commission does not agree with BNetzA's assertion that the "recovery gap" between the proposed LRIC+ approach and a pure BU-LRIC methodology would be closed by the regulated operators through an increase in prices for their endusers.
Creation of barriers to the internal market
The draft measure would create barriers to the internal market. For the period until 30 November 2014 the application of a LRIC+ methodology leads to a considerable difference in absolute terms between German MTRs and those in other Member States, which are calculated in accordance with the Termination Rates Recommendation. This difference would be incurred at the expense of the operators, and eventually consumers, in the Member States from where the calls originate.

On the basis of the analysis set out in section 4 above, BEREC considers that the Commission’s serious doubts are justified in that (i) BNetzA’s proposed MTRs are not based on a pure LRIC costing methodology, as recommended by the Commission based on the economic analysis that show that pure LRIC results in a better competitive outcome, and (ii) BNetzA has not provided a valid justification for deviating from the EC recommendation and in particular, has not provided evidence to support its view that applying pure LRIC based tariffs would have a disproportionate effect on German operators and that LRIC+ methodology would be better suited to meet the policy objectives of promoting efficiency and sustainable competition and maximize consumer benefits than the pure LRIC. BNetzA therefore did not prove that national circumstances justify the deviation from the recommended MTR costing methodology.
In addition, BEREC shares the Commission’s concerns that BNetzA proposal could create barriers to the internal market if other NRAs set MTR based on the methodology recommended by the Commission (via a bottom-up model and by benchmarking) and BNetzA deviates from that methodology without valid justification. Moreover, BEREC considers that, since the 2014 tariffs are also based under a LRIC+ approach, such barriers would not only be limited to the year 2013.

EC issued a recommendation on 27.06.2013: BNetzA should amend or withdraw the remedies containing the price control obligation relating to the rates charged by SMP operators for mobile termination (in market 7) in Germany

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

DE/2013/1430

7a

3

The Commission takes note of the fact that BNetzA intends to implement price caps for fixed termination rates based on a LRAIC+ methodology for the period of 1 December 2012 until 30 December 2014. By proposing a LRAIC+ instead of a pure BU-LRIC costing methodology BNetzA chooses not to follow a core part of the Termination Rates Recommendation, in particular Recommends 2 and 6 thereof.The Commission observes that BNetzA's notification does not provide sufficient justification of why its proposed approach for the wholesale market for call termination on DT's individual public telephone networks provided at a fixed location meets the policy objectives and regulatory principles enshrined in Article 8 of the Framework Directive, and can be considered to be in line with Article 8(4) of the Access Directive. Hence, the Commission has serious doubts that BNetzA's proposal on fixed termination rates can be considered appropriate in the given termination markets within the meaning of Article 16(4) of the Framework Directive and justified in light of the objectives laid down in Article 8 of the Framework Directive, particularly the objectives of promoting competition and user benefits pursuant to Article 8(2) of the Framework Directive and believes, at this stage, that the draft measure would create barriers to the
internal market.

BEREC considers that the Commission’s serious doubts are justified. In particular, BNetzA has neither proved that the potential impacts of applying pure BU-LRIC based tariffs on German operators and/or consumers would justify a departure from pure BU-LRIC, nor has it proved that it’s proposal would be better suited to meet the policy objectives of promoting efficiency and sustainable competition and maximize consumer benefits than the pure LRIC.
In addition, BEREC shares the Commission’s concerns that BNetzA’s proposal could create barriers to the internal market if other NRAs set FTRs based on the methodology recommended by the Commission (via a bottom-up model or by benchmarking) while BNetzA deviates from that methodology without valid justification.
In the light of the Commission’s serious doubts and the argumentation above, BEREC recommends BNetzA to set the fixed termination tariffs for Deutsche Telekom AG at the level of pure BU-LRIC costs, without any glide path

EC issued a recommendation on 08.09.2013: BNetzA should amend or withdraw the remedies containing the price control obligation relating to the rates charged by SMP operators for fixed termination (in market 3) in Germany

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

AT/2013/1442

7

6

Contrary to the previous market review, RTR proposes to define a single wholesale product and geographic market for terminating segments of leased lines. However, on the basis of the limited information provided by RTR so far, the Commission came to the preliminary conclusion that competitive conditions are heterogeneous in the low and high capacity market segments (i.e. up to and including 2 Mbit/s and above 2 Mbit/s of bandwidth), and could justify a further delineation of markets according to bandwidth.
Furthermore the Commission is of the view that so far RTR has not provided sufficient evidence on A1 TA's SMP in the market for wholesale terminating segments of leased lines.
The Commission is not convinced at this stage that the lack of duplicability of A1 TA's infrastructure would exist. The information available to the Commission does not support the conclusion that RTR has undertaken the assessment in accordance with Articles 14 to 16 of the Framework Directive, in particular with regard to Article 8(2) (b) of the Framework Directive.

On the basis of the economic analysis set out in this Opinion, BEREC considers that the Commission’s serious doubts are justified.
BEREC suggests that RTR should reconsider and redraft its decision, providing a reliable evidential basis for reaching its conclusions on Market Definition and SMP assessment, and to amend its decision if the further consideration of the evidence suggests that a change is appropriate.

EC imposed a Veto on 3 July.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

EE/2013/1453 - 1454

7a

4 and 5

Commission has serious doubts that the proposed choice of costing methodology (HC FDC) complies with these regulatory principles. The Commission considers that the specific characteristic of this methodology, notably the use of historic costs for the valuation of all assets, can potentially lead to very low access prices. While historic cost models can ensure that the asset owner will be recovering its original investments, the eventual full depreciation of those assets, which have reached the end of their economic lifetime, will invariably lead to an important downward price trend over time.
The low initial and potentially reduced copper access price over time resulting from the Estonian HC FDC model is unlikely to incentivise investments into NGA networks by the owner of the legacy infrastructure.
Furthermore, the Commission notices that ECA proposes to impose the same HC FDC model to set the access price to Elion's FTTB and FTTH lines. The Commission would like to point out that an ex ante price control obligation for fibre infrastructure would not be necessary if there were sufficient competition safeguards in place.
However, the Commission notes that ECA does not envisage the implementation of Equivalence of Inputs in Estonia for this market review period and proposes to set a regulated access price for the SMP operator's fibre lines.
Taking into account the likely negative impact of the HC FDC model as proposed by ECA on investments of alternative operators and their ability to compete, as well as on the investments made the incumbent operators, the Commission
concludes that ECA has not sufficiently motivated that the proposed costing methodology fulfils the requirements of the Framework Directive and therefore raises serious doubts as to the compatibility of the proposed draft measure with EU law.

BEREC is of the opinion that ECA´s reasoning for using a TD HC FDC methodology is not sufficient to allow the Commission and BEREC to judge whether or not the chosen pricing methodology is the one best suited to address the particular situation in the Estonian marketplace.
In order for BEREC to be able to assess whether the costing methodology preferred by ECA is the one best suited to handle competition problems in Estonia, ECA must provide more adequate justification / evidence as to why it has come to this conclusion.
BEREC therefore recommends that the ECA adds to its SMP-decision a more thorough justification / evidence as to why, a TD HC FDC based costing methodology is to be preferred over a CCA based costing methodology, in the context of market 4 and market 5 services given the specific market situation in Estonia.

EC issued a Recommendation on 14.10.2013.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

DE/2013/1460

7a

3

The serious doubts are identical with those in case 1430 (see above). Onlky in this case they concern the rates of the alternative operators, which are stipulated using BNetzA is using a national benchmark approach, which sets the FTR benchmarked against the rates of DT.

BEREC considers that the serious doubts are justified in that (i) the proposed approach to set fixed termination rates benchmarked against the rates of DT, that are not based on a pure BU-LRIC costing methodology, as recommended by the Commission based on the economic analysis that shows that pure BU-LRIC results in a better competitive outcome, and (ii) BNetzA has not provided valid justifications for deviating from the Termination Rate Recommendation. In particular, BNetzA has neither proved that the potential impacts of applying pure BU-LRIC based tariffs on German operators and/or consumers would justify a departure from pure BU-LRIC, nor has it proved that its proposal would be better suited to meet the policy objectives of promoting efficiency and sustainable competition and maximize consumer benefits than the pure LRIC. BNetzA therefore did not prove that national circumstances justify the deviation from the recommended FTR costing methodology.
In addition, BEREC shares the Commission’s concerns that BNetzA’s proposal could create barriers to the internal market if other NRAs set FTRs based on the methodology recommended by the Commission while BNetzA deviates from that methodology without valid justification.
BEREC recommends BNetzA to set the fixed termination tariffs for Telekom Deutschland GmbH and therefore symmetrical rates through national benchmarking to all other alternative network operator at the level of pure BU-LRIC costs.

EC issued a Recommendation on on 21 October 2013.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

ES/2013/1466

7a

5

The draft measure deviates from strict cost-orientation.  Commission understands the price setting methodology in market 5 to include an additional element of arbitrariness.
The price setting methodology proposed by CMT in the notified measures raises serious doubts as to the compatibility with EU law.
The Commission has serious doubts that by setting price levels for the NEBA service, but also for bitstream legacy products (GigADSL and ADSL-IP) up to 50% above cost-efficient levels, CMT is safeguarding and promoting competition on the Spanish broadband markets.
The Commission has serious doubts that the proposed prices incentivize efficient investments and innovation, both by the SMP operator and the alternative operators.
The Commission has serious doubts that in departing from setting prices on the basis of the developed model CMT ensured predictability for all market players.
Commission points out that the draft measures do not contain a clear indication of the methodology CMT followed in order to set the proposed price, apart from explaining that the price needs to be adjusted upwards; however the specific percentage of this adjustment has been chosen on the basis of criteria not so clearly elaborated.

BEREC considers that the serious doubts regarding the draft decision of CMT, on the lack of sufficient evidence supporting the choice of the price regulation applied in the wholesale broadband access market (market 5) are mostly justified.
BEREC agrees with the Commission that CMT has not provided a transparent and sufficient justification that the price levels it set in the notified decision will reach the objectives of the regulatory framework and the objectives of CMT’s own market analysis decision. However, BEREC does not agree with the Commission that stakeholders could not predict that CMT would deviate from the results of the BU-LRIC+ cost model.
In the light of the Commission’s serious doubts and the argumentation above, BEREC would recommend CMT to add to its tariff decision a justification on the price regulation applied for market 5 services to safeguard the transparency of the decision making process with regard to setting the price levels. This could, e.g., entail an analysis of the appropriateness of all criteria and their weights being used to determine the resulting price levels, an impact assessment of the proposed prices on (the balance between) competition, investments and consumer benefits, and/or a reconciliation with cost calculations based on the SMP operator´s accounts (or expectations).

EC issued a Recommendation on 28.10.2013.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

AT/2013/1475-1476

7a

4 and 5

The Commission takes note of TKK's explanation that the regulatory approach taken was driven by the particular circumstances in the Austrian market, where the average end customer prices of A1TA are below the average costs. However, while the Commission recognises that the NRAs have a margin of discretion to propose a costing methodology to regulate access rates, the Commission would like to underline that any methodology has to be duly justified in order to show that it fully complies with the policy objectives and regulatory principles of the Regulatory Framework.
Commission has serious doubts that the proposed choice of price regulation based on FL-LRAIC in combination with a margin squeeze test in market 4, and by only applying the margin squeeze test in market 5, complies with these regulatory principles.

BEREC is of the opinion that TKK has presented sufficient evidence during the notification process to justify its choice of price regulation method on market 4 and 5. Furthermore, BEREC does not agree with the Commission’s conclusion of having identified an inconsistency of the price regulation between market 4 and 5. BEREC also is of the opinion that the Commission’s concerns with regard to the TKK’s LRAIC model are of little significance to the case.

EC issued a Recommendation on 26.11.2013.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

IT/2013/1489-90

7a

4 and 5

The Commission notes that AGCOM ran de facto two national consultations for likely different regulatory interventions in the same market in parallel.
The Commission has serious doubts that such regulatory approach can ensure regulatory predictability and stable planning conditions for market players.
Commission has serious doubts that the WACC value, being a subject of frequent changes by AGCOM promotes efficient investment (by both dominant and alternative operators) and innovation, whilst ensuring that competition in the market is preserved.
The Commission has serious doubts that, by adding a mark-up of 3% when setting the WBA prices and by setting the SLU price at 2/3 of the LLU price, AGCOM is effectively setting cost oriented wholesale access prices and therefore safeguarding and promoting competition in the Italian broadband markets.
Commission has serious doubts that the draft measures would contain a clear indication of the methodology which AGCOM followed for setting parameters such as (i) the WACC when setting the LLU prices, (ii) the mark-up over the BU-LRAIC based WBA cost when setting the WBA prices and (iii) the ratio between LLU and SLU prices when setting the SLU price in the absence of a cost model. Prices seem to have been set rather arbitrarily and, in any event, without the necessary methodological rigour. Such approach does not
appear to comply with the principle of transparency.

BEREC considers that the Commission’s serious doubts regarding the draft decision of the Italian Regulatory Authority, on the lack of sufficient evidence to update the price control obligations on markets 4 and 5 outside of the current market review are not justified.
BEREC is of the opinion that AGCOM has presented sufficient evidence during the notification process to justify its choice of time and methodology for an update of prices on markets 4 and 5. AGCOM should however add some of the information provided in response to the Commission’s RFI to relevant parts of the final price decisions.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

FI/2013/1498

7

3

Commission has serious doubts that FICORA has provided convincing evidence that, despite a 100% market share, operators would not have SMP on the market for call termination on their individual public telephone networks provided at a fixed location in Finland.

BEREC is of the opinion that the EC’s serious doubts are justified in that FICORA has not provided, as required by point 78 of the SMP Guidelines, a thorough and overall analysis of the economic characteristics of the relevant market in order to conclude that, despite a 100% market share, operators in Finland would not have SMP on the market for call termination on individual public telephone networks provided at a fixed location.

Case

Art 7/ 7a

Market(s)

EC serious doubts

BEREC assessment

Follow-ups and outcome

DE/2013/1500

7a

1

The Commission considers that, with regard to the segment of the market for which BNetzA now proposes to withdraw currently existing regulatory remedies, BNetzA has neither defined a relevant market nor has it determined that such market is effectively competitive. The Commission has serious doubts as to the compatibility of the notified draft measure with EU law, in particular Articles 15 and 16 of the Framework Directive.
The Commission believes that a withdrawal of existing regulatory obligations, in the absence of an assessment of the market conditions and in the absence of a determination that the market is effectively competitive is contrary to the provisions of the Framework Directive, and in particular its Article 16(2).

BEREC does not share the Commission’s view according to which the notified measure is not compatible with EU law, in particular with Article 16(2) of the FD, due to the
absence of market analysis concerning the segment in relation to which BNetzA proposes to withdraw the previously established remedies.