The eCommunications Consultation Task Force (eCCTF) of the European Commission has published its comments on the market analysis performed by the Hungarian regulatory authority Nemzeti Hírközlési Hatóság (NHH) with regard to voice call termination on individual mobile networks in Hungary (Market 16).
NHH has followed the market definition approach set out in the European Commission’s Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation, and hence defined three separate markets, corresponding to the networks of T-Mobile, Pannon and Vodafone.
NHH also put forward all three operators as having Significant Market Power (SMP) on their respective relevant market. Under the outgoing regulatory framework, only T-Mobile and Pannon were declared as having SMP. NHH has now also proposed to declare Vodafone as having SMP, invoking low countervailing buyer power and the absence of potential competition. NHH also noted that in the period during which only the call termination charges of T-Mobile and Pannon were regulated, Vodafone had increased its call termination charges (whereas the regulated rates of Pannon and T-Mobile decreased). NHH also noted that Vodafone, being the smallest operator in both retail and wholesale terms, “was able to define its call termination fees independently of its competitors, the buyers and ultimately consumers”.
NHH put forward the following remedies:
• Obligation to provide access and interconnection
• Accounting separation, and
• Cost orientation and the “controllability” of charges
It is the last proposed remedy which has attracted particular attention from the eCCTF.
NHH proposed to require the operators to submit a cost model based on Long Run Incremental Costs (“LRIC”) for its approval, and NHH proposed to attach the following test:
“If the average cost-based charge per operator calculated in accordance with the LRIC model would cause a reduction in fees of more than 10% compared to the average charge at 31 December 2004, the cost-based charges are to be implemented over a longer period of time, progressively approaching cost-based charges. In this case, NHH will impose a 10% reduction in termination fees, and stipulate that the charge established may not exceed by more than 20% the lowest average termination charge determined for the same period by other mobile network operators.”
This proposed test was accompanied by the following wording: “ …the annual rate and number of years over which such reduction shall be achieved” will be decided by NHH.”
The eCCTF letter expresses its concerns about this proposed approach, as follows:
“…the draft measure notified by NHH does not specify to an appropriate extent the details of implementation underpinning the proposed cost-orientation obligation in the event that the average cost-based charge calculated in accordance with the LRIC model caused a reduction of more than 10% compared to the average charge as of 31 December 2004. Therefore, in order to be able to assess the compatibility of the implementing measures in such a case with the requirements of Article 8(4) of the Access Directive the Commission invites NHH to notify, once adopted, these implementing measures setting out the timeframe and stages applicable for the reduction of termination charges.”