Authority Presents Draft Decision on Markets 1 to 6 to ESA - International Law Office

Background
Analysis
Draft Decision

Background

The Electronic Communications Act came into force on July 25 2003. Under the act, the Post and Telecommunications Authority is required to analyze 18 product markets in order to identify any providers with significant market power and determine which obligations to impose on them.

The retail markets for fixed telephony are as follows:

• Market 1 - access to the public telephone network at a fixed location for residential customers;
  
  
• Market 2 - access to the public telephone network at a fixed location for non-residential customers;
  
  
• Market 3 - publicly available local and/or national telephone services provided at a fixed location for residential customers;
  
  
• Market 4 - publicly available international telephone services provided at a fixed location for residential customers;
  
  
• Market 5 - publicly available local and/or national telephone services provided at a fixed location for non-residential customers; and
  
  
• Market 6 - publicly available international telephone services provided at a fixed location for non-residential customers.

Markets 1 to 2 are the markets for access; markets 3 to 6 are the markets for calls.

On September 15 2005 the authority notified its decision about which operators had significant market power in Markets 1 to 6 and its proposal for the imposition of obligations. The authority identified Telenor ASA as an operator with significant market power in all six markets and notified the obligations that it would impose on it.

The authority requested interested parties to present comments by November 3 2005. The authority received comments from the Norwegian Competition Authority, TDC Song AS, Telenor and Tele2. It presented a draft decision designating operators with significant market power and imposing specific obligations to the European Free Trade Association Surveillance Authority (ESA) on March 2 2006. The authority awaits the ESA's comments. After reviewing and taking note of the ESA's comments, the authority will publish its final decision on Markets 1 to 6.

The final decision may be appealed in accordance with administrative law and the Electronic Communications Act.

Analysis

The authority identified various competition issues in the retail markets for fixed telephony, including vertical and horizontal leveraging and single market dominance.

The authority determined that eight years after the liberalization of the market for fixed telephony, Telenor still possesses between 58% and 89% of market shares (measured by revenue) in the six markets. Its market shares are somewhat lower when measured by number of subscriptions and traffic minutes. Although Telenor's market shares have decreased during the past few years, the authority believes that an assessment of the market shares alone provides a clear indication that Telenor has significant market power in all six markets.

The authority also carried out an assessment of each of the six markets. It found that entry barriers for fixed telephony have fallen slightly during the past couple of years because of Telenor's offering of wholesale line rental and the growth of Voice over Broadband operators. However, as a leading operator in various related markets (eg, broadband, cable television, satellite television and mobile telephony), Telenor is able to offer attractive bundles of products, which represent a substantial competitive advantage. In addition, Telenor's vertical integration - including the fact that most of its competitors purchase wholesale services from Telenor - strengthens its position in the retail markets for fixed telephony. The authority also concluded that limited countervailing buying power exists in the retail markets for fast telephony. Although the authority found that technological developments in Voice over Broadband may weaken Telenor's market power, how this will affect Telenor's market share is still unclear.

Draft Decision

Having concluded that Telenor has significant market power in Markets 1 to 6, the authority was required to determine which regulatory obligations to impose on Telenor.

After considering the appropriateness and proportionality of the available remedies, the authority proposed obligations to impose on Telenor in the six markets.

Markets 1 and 2
The obligations imposed on Telenor at the wholesale level are as follows:

• obligation to meet all reasonable requests for access in the form of wholesale line rental on the basis of a retail-minus model;
  
  
• obligation to offer carrier pre-selection and carrier selection using a prefix at cost-oriented prices;
  
  
• obligation to submit cost accounts for public switched telephone network and integrated services digital network (basic rate interface) subscriptions;
  
  
• obligation of non-discrimination; and
  
  
• obligation to prepare and publish reference offers for wholesale line rental, carrier pre-selection and carrier selection using a prefix.

The obligations imposed on Telenor at the retail level are as follows:

• prohibition against bundling access to Voice over Broadband with other electronic communication services in a manner that does not allow end users to purchase the services individually. Bundling Voice over Broadband with Telenor's broadband access services is exempt. Divergence in prices and terms between services offered individually and package deals shall be transparent and objectively justified, and reflect underlying cost differences;
  
  
• prohibition against offering discounts on public switched telephone network and integrated services digital network subscriptions to limited categories of customers, unless the price differences are transparent and objectively justified, and reflect underlying cost differences; and
  
  
• obligation to publish all temporary discounts and appurtenant terms for public switched telephone network and integrated services digital network subscriptions (Market 1 only).

Markets 3 and 4
The obligations imposed on Telenor in Markets 3 and 4 are as follows:

• prohibition against bundling Voice over Broadband with other electronic communication services in a manner that does not allow end users to purchase the services individually. Bundling Voice over Broadband with Telenor's broadband access services is exempt. Divergence in prices and terms between services offered individually and package deals shall be transparent and objectively justified, and reflect underlying cost differences with regard to public switched telephone network and integrated services digital network, as well as Voice over Broadband;
  
  
• prohibition against offering discounts on public switched telephone network and integrated services digital network traffic to limited categories of customers, unless the price differences are transparent and objectively justified, and reflect underlying cost differences; and
  
  
• obligation to publish all temporary discounts and appurtenant terms for public switched telephone network and integrated services digital network calls.

Markets 5 and 6
The obligations imposed on Telenor in Markets 5 and 6 are as follows:

• prohibition against bundling Voice over Broadband with other electronic communication services in a manner that does not allow end users to purchase the services individually. Divergence in prices and terms between services offered individually and package deals shall be transparent and objectively justified, and reflect underlying cost differences with regard to public switched telephone network and integrated services digital network, as well as Voice over Broadband;
  
  
• prohibition against offering discounts on public switched telephone network and integrated services digital network traffic to limited categories of customers, unless the price differences are objectively justified and reflect underlying cost differences; and
  
  
• obligation to publish all temporary discounts and appurtenant terms for public switched telephone network and integrated services digital network calls.

For further information please contact Torleif P Dahl or Jason Hoida at Wikborg, Rein & Co by telephone (+47 22 82 75 00) or by fax (+47 22 82 75 01) or by email (tpd@wrco.no or jho@wrco.no).