The European Commission has decided to further investigate the proposal by the Czech telecoms regulator (ČTÚ) to partially lift obligations on the main Czech telecoms operator Telefónica to give alternative operators access to its infrastructure, so they can also offer broadband. Without this access, the choice of operators offering high-speed Internet in the Czech Republic would be limited and consumers might have to pay higher prices for higher speed Internet connections. The Commission has serious doubts whether ČTÚ's proposal not to impose regulation on wholesale broadband access in municipalities where Telefónica allegedly faces more intense competition from alternative infrastructures is compatible with EU telecoms rules. The Commission also believes that ČTÚ's plans could affect trade in the EU as the conditions for access to Telefónica's copper and fibre network in the Czech Republic can determine the cost of Internet services offered by other operators in the other Member States. The Commission has therefore suspended ČTÚ's plans and started a so-called 'Phase 2' investigation.
Neelie Kroes, European Commission Vice President responsible for the Digital Agenda, said: "We need to ensure competition for companies offering broadband services. Czech consumers should not miss out on the opportunities provided by more competitive markets in broadband, including high-speed networks."
ČTÚ has proposed to deregulate access to broadband in those municipalities where Telefónica allegedly faces competition from alternative cable or fibre operators, as well as Wi-Fi operators, and where its retail market share does not exceed 40%. In the rest of the municipalities, ČTÚ proposes to impose a set of remedies without including cost orientation or price control, nor affecting all types of fibre networks. Under the Commission's Recommendation on Next Generation Access Networks (see MEMO/10/424), a telecom regulator should in principle mandate wholesale broadband access remedies and give cost orientation unless certain exceptions apply.
The Commission has therefore suspended ČTÚ's plans, because it needs further proof from ČTÚ that the competition faced by Telefónica from alternative Internet service providers in certain parts of the country is sufficient to warrant a lifting of all regulatory remedies. The Commission has doubts about the competitive constraints of Wi-Fi given the fragmented nature of its providers and the customers' unwillingness to switch to cheaper services offering a lower speed in case Telefónica would increase its prices. It also notes the specificity of the Czech context where the wholesale access seekers have a limited presence. ČTÚ has not sufficiently justified why the access remedy imposed on Telefónica in the remaining areas of the Czech Republic does not include price control or cost orientation and does not concern all Telefónica's fibre network.
The Commission's decision to start an in-depth investigation begins "second phase" procedures under Articles 7 and 7a of the EU Telecoms Directive (MEMO/11/321). ČTÚ cannot adopt its plans to deregulate wholesale broadband access in certain municipalities and to impose certain remedies for two months (under Article 7) and for 3 months (under Article 7a).
On 11 May 2012 the Commission received a draft decision from ČTÚ concerning the market for wholesale broadband access, which is a key access product for alternative operators to provide broadband Internet access to Czech customers. According to ČTÚ's assessment, the market includes access provided on copper, fibre, cable and Wi-Fi platforms. ČTÚ proposes to divide the country into two geographic markets, segment A where at least three competing infrastructures are present and segment B covering all the rest. ČTÚ finds Telefónica only has significant market power in segment B. It proposes to impose no regulation on Telefónica in segment A, and to impose remedies in segment B, but these remedies do not include cost orientation and do not concern all of Telefónica's fibre lines.
Article 7 of the Telecoms Framework Directive requires national telecoms regulators to notify the Commission, the Body of European Regulators for Electronic Communications (BEREC) and telecoms regulators in other EU countries, of the measures they plan to introduce to solve market problems. The EU telecoms rules enable the Commission to adopt further harmonisation measures in the form of recommendations or (binding) decisions if divergences in the regulatory approaches of national regulators, including remedies, persist across the EU in the longer term.
The Commission's letter sent to the Czech regulator will be published at:
Neelie Kroes' website
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Linda Cain (+32 2 299 90 19)