Tele2 Appeals Authority Decision on Markets 1, 2, 3 and 5 - International Law Office

Background
Decision
Appeal
Appeal Procedure

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.

On April 21 2006 the authority issued its decision on Markets 1 to 6, the retail markets for fixed telephony (for further details please see "Authority Presents Draft Decision on Markets 1 to 6 to ESA"). Markets 1, 2, 3 and 5 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; and
  
  
• Market 5 - publicly available local and/or national telephone services provided at a fixed location for non-residential customers.

Decision

In its final decision, the authority concluded that Telenor had significant market power in Markets 1 to 6 and imposed regulatory obligations on Telenor in the six markets.

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

• prohibition against bundling access to Voice over Broadband with other electronic communication services;
  
  
• prohibition against offering discounts on public switched telephone network and integrated services digital network subscriptions to limited categories of customer, 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).

Market 3
The obligations imposed on Telenor in Market 3 were as follows:

• prohibition against bundling Voice over Broadband with other electronic communication services;
  
  
• prohibition against offering discounts on public switched telephone network and integrated services digital network traffic to limited categories of customer, 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
The obligations imposed on Telenor in Market 5 were as follows:

• prohibition against bundling Voice over Broadband with other electronic communication;
  
  
• prohibition against offering discounts on public switched telephone network and integrated services digital network traffic to limited categories of customer, 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.

Appeal

On May 12 2006 Tele2 appealed the decision, including the price regulation of wholesale line rental in Markets 1 and 2, as well as the lack of regulation against margin squeeze in the national traffic markets. Tele2 alleged that the authority should introduce price regulation in Markets 3 and 5 in order to prevent end-user prices from being reduced without similar reductions being made at the wholesale level.

Tele2 claimed that the authority's inadequate regulation of fixed telephony markets resulted from the belief that Voice over Broadband services would guarantee competition in voice telephony and that traditional fixed telephony need no longer be strictly regulated. Tele2 wishes to compete with Telenor in both traditional and internet telephony, but the authority's decision did not focus on the relationship between Telenor's end-user prices and its wholesale prices. In the long run, this may imply that it will no longer be possible to compete with Telenor in the traditional telephony market and that all competition will occur through various Voice over Broadband offerings. This will give Telenor the opportunity to 'milk' the customers that do not make the jump to internet telephony.

In Tele2's opinion, the authority's decision over-emphasizes internet telephony's contribution to competition and fails to ensure that margins between end-user and wholesale prices of subscriptions (Markets 1 and 2), as well as margins between end-user prices for traffic (Markets 3 and 5) and interconnect prices, will continue to exist, which is a prerequisite for guaranteeing competition in traditional telephony services.

Appeal Procedure

An affected operator can appeal the authority's decisions to the Ministry of Transport and Communications, which has published guidelines on deadlines for appealing decisions. In order to appeal, the affected party must first file an appeal with the authority within three weeks of receiving the decision. Within one week of receiving the appeal, the authority must notify the parties and operators affected by the outcome of the appeal and give them three weeks to comment. The authority must also notify the ministry within one week of receipt of the appeal and investigate whether there are grounds for appeal. If there are no grounds for appeal, the authority must send the appeal with its recommendation to the ministry without delay and no later than two months after it receives the appeal. If grounds exist for repealing or amending the decision, the same two-month deadline applies. The ministry's guidelines specify that the deadline can be extended in certain circumstances.

The authority must also send the appeal with its recommendation to the parties and operators affected by the decision, which have two weeks to provide the ministry with their comments. The ministry shall decide on the appeal as soon as possible. The ministry's guidelines specify that the ministry shall decide on the appeal within two months of receiving the appeal from the authority; however, that deadline may be extended in certain circumstances.

It is expected that the ministry will rule on Tele2's appeal around September or October 2006.

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).