On 18 December, the EU Commission opened an in-depth investigation into the Swedish national regulatory authority’s draft market analysis concerning the wholesale fixed and mobile call termination markets.
Following the implementation of the Delegated Regulation on Union-wide termination rates, which entered into force on 1 July 2021, the termination markets have been removed from the list of markets subject to ex-ante regulation. The Commission considers that the Delegated Regulation addresses the most significant competition issue in termination markets, namely the risk of excessive pricing.
However, the Swedish Post and Telecom Authority (PTS) has argued that, despite the EU-wide regulation of termination rates, other significant price and non-price distortive practices still exist in the Swedish market, and that ex ante regulation is necessary to ensure effective competition. PTS has carried out a three-criteria test and concluded that they are met, justifying the imposition of regulatory obligations.
PTS considered that the market does not tend towards effective competition because large operators may engage in practices such as offering different conditions to different originating operators, and refuse direct interconnection, which can lead to higher tariffs not capped by the Delegated regulation.
PTS also emphasised that the lack of technical alternatives for call termination, as calls can only be terminated by the operator controlling the recipient’s telephone number, limits the ability of smaller operators to negotiate fair interconnection agreements. This, combined with the significant barriers to entry and limited market dynamics, leads PTS to conclude that the market does not tend towards effective competition.
The Commission has serious doubts as to the compatibility of the PTS’s draft measure with EU law and consequently opens the Phase II investigation on the following grounds:
- Lack of sufficient evidence: The Commission believes that PTS has not provided sufficient evidence to prove that the three criteria test is met and justify continued regulation of wholesale call termination markets in Sweden. The Commission notes that the PTS’s analysis is based on hypothetical anticompetitive behaviour by operators, rather than specific evidence of market failure.
- Failure to consider alternative mechanisms: The Commission is also concerned that PTS has not adequately considered alternative mechanisms provided in the EU’s electronic communications framework, such as Article 61(2) of the European Electronic Communication Code, which provides ex ante obligations on access, interconnection, and interoperability of services. The Commission believes that these mechanisms could be used to address potential competition concerns in the market, making regulation unnecessary.
The Commission has two months to further investigate the draft measures and the evidence presented therein, in close cooperation with the Body of European regulators (BEREC). At the end of the Phase II investigation period, the Commission may either lift its reservations or issue a veto under Article 32 of the European Electronic Communications Code. During this period, PTS will not be able to adopt its draft measures.
The Commission’s serious doubts letter opening the in-depth investigation will be available online on CIRCABC.
The invitation to third parties to submit their observations is published in CIRCABC.
Source – EU Commission