Europe threatens price crackdown on network operators that abuse market dominance

Dominant telcos face a crackdown unless they provide fair pricing and access to information to organisations that want to lease their infrastructure, the European Commission’s Digital Agenda boss warned

Dominant telecoms providers face a crackdown unless they provide fair pricing and access to information to organisations that want to lease their infrastructure, the European Commission’s Digital Agenda boss warned yesterday.

In a tough warning EC vice-president Neelie Kroes said, "Vertically integrated network operators should not discriminate against competitors in favour of their own downstream business. We will crack down if some choose to mess up the playing field for others.

"We are kidding ourselves if we think that non-discrimination remedies have fully eradicated discriminatory behaviour of dominant operators. If given the opportunity, dominant firms have the short-term incentive to discriminate against their competitors. I urge national regulators not to hesitate to take action against any company found doing this."

Speaking to national regulatory agencies, Kroes set out how they could ensure that dominant telcos played fair. Her suggestions included establishing fair prices for third parties that required network access and effective non-discrimination by vertically integrated network operators.

Such operators include firms like BT, which own and operate the network, and also compete in the provision of services that run on the network.

Kroes called for access prices to reflect the underlying costs. She said they should be consistent and based on good modelling principles. "This is, however, not what I observe across member states," she said.

She called on regulators to be consistent in how they set regulated prices. "Consistency means that access prices for products that are part of the same value chain should be calculated according to the same cost standard," she said.

She suggested regulators base their cost standard on a completely new network build. "This is in principle a good idea since we do not want to compensate the dominant operator for costs which are caused by inefficiencies (and poor network reliability) of the past," she said.

This would ensure the right incentives to encourage a shift to fibre-based next generation technologies, and that smaller networks could "still climb the ladder of investment", she said.

She said regulators needed to balance transmission prices based on fibre and copper circuits. Some had argued that regulators should cut copper prices to raise fibre margins. But Kroes said this could erode retail broadband prices, making returns from fibre investments unattractive.

Kroes said "downstream competitors" often needed access to an appropriate wholesale offer before the dominant operator’s retail offer was launched, and they needed access to the same quality of service. "Otherwise there is no fair competition," she said, adding that for "superfast broadband" this meant access at least six months in advance.

"Similar considerations (should) apply to all access markets," she said. "The wholesale supplier needs to provide equal quality of service for the access seeker and the incumbent’s downstream arm and at the same time. It would not be acceptable to have 27 or even 10 or 20 separate approaches."

Kroes called for an end to the "Chinese walls" between a dominant supplier’s wholesale and retail arms. "Where the dominant operator shares between its wholesale and retail arms commercially sensitive information about the network, but withholds it from access seekers, this could grant the retail arm of the dominant operator an anti-competitive advantage," she said.

Kroes called on regulators to measure the effects of their rules. With the right performance indicators, they could detect differences in the number of faults, repair times, and frequency, among other measures, and act quickly on any misbehaviour they discovered.

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