Access and Termination Charges in Telecoms: Antitrust considerations

1
Access and Termination Charges in Telecoms
Antitrust considerations
European Commission DG Competition Chief
Economist Team

• Eliana Garces Tolon
• European Commission- DG Competition
• Toulouse 30 June 2006

The views expressed in this presentation are
those of the presenter and do not attempt to
portray the official position of the European
Commission
2
Economic Issues and Antitrust Concerns

• Optimal access and termination prices depend on
• Price Elasticity and calling patterns of callers
• Relative size of network
• Nature of competition (price/non price, extent
  of differentiation, access vs. usage)
• Number of related services (bundling
  opportunities)
• Prevalence of cross subsidisation and non linear
  pricing
• Antitrust consequences
• Might no be so obvious to define markets
• Impact on consumer welfare difficult to assess
• Collective dominance implications effects of
  lack of transparency in pricing - agreements

3
Approach by the European Commission

• Market definition based on substitution
  possibilities and entry barriers at each level
  of the communication process ? Narrow markets
• Intervention based on competition concerns if SMP
  and
• Abuse Art. 82 cases (Roaming UK and DE, margin
  squeeze cases)
• Presumption of harm Regulatory framework
• Harm is foreclosure or excessive price
• Price related remedies No price discrimination,
  Cost orientation
• But asymmetric remedies in termination fees have
  been allowed
• ? Simple economics
• basically ignores MSM issues ignores potential
  bundling and/or price discrimination incentives.

4
Current Revision of the Framework Regulation for
Electronic Communications

• Same criteria as before
• Movement towards deregulation?
• Take out some markets retail except universal
  service obligation
• Add some others wholesale SMS
• Are market definition and SMP the right criteria
  for ex-ante regulation?
• What would be viable alternatives (performance
  measures,)?
• Should there be a harmonisation of remedies?
• (revision of directives 2009)

5
International Roaming Sector Inquiry

• Regulation proposal based on excessive pricing
  allegations
• BUT
• No theory of harm has been developed (excessive
  price w/o SMP)
• No SMP has been demonstrated
• ? Difficult to intervene on anti-trust grounds
  or even using current regulatory framework.
• Concerns with the proposed regulation
• Regulating prices without understanding pricing
  mechanism
• What are the incentives to price high on
  wholesale international roaming?
• What determines (lack of) pass-on? How much
  pass-on is there?
• Impact assessment incomplete

6
General Considerations

• EC should understand firms motivation and
  incentives for pricing before taking action
• This would help better identify the source of
  potential inefficiencies and design the best
  appropriate remedy
• Examine consequences of remedies on entry,
  consumer welfare and innovation.
• Competition policy should only be used when there
  is harm to the competitive process