The Dutch Trade and Industry Appeals Tribunal (College van
Beroep voor het Bedrijfsleven - CBB) has today published its reasoning for
granting part of the appeals that were filed against the OPTA decisions of 14
Nov 2005 and 31 May 2006 relating to the wholesale markets for voice call
termination on individual mobile networks (Market 16 of the European Commission's Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation). 

The CBB annulment ruling is extremely far reaching. The CBB’s overall conclusion, contained in point 11.6.5 of
the judgement, is translated in full hereafter: 

The
annulment of the OPTA decisions has as a consequence that the markets defined
by OPTA are, until further notice, unregulated. The CBB College
sees no grounds for taking temporary measures in accordance with art. 8:72,
fifth paragraph, Awb (general administrative law), irrespective of what the
contents of such temporary measures would be. The CBB College
notes that the mobile providers have reciprocally committed themselves not to
increase their wholesale mobile call termination charges until 1 Dec 2006. In addition, during
the session of 14 June 2006, it has been put forward on behalf of the mobile
providers that they will not subsequently increase these charges within the
current regulation period and/or that an increase is very improbable. From the
documentation filed during the proceedings, it has not appeared that the
removal of regulatory obligations (be it temporary or not) of access, non-discrimination
and transparency would have consequences that would extend so far as to require
consideration of the adoption of temporary measures. 

T-REGS Note: This also confirms the assessment we
provided on 30 Aug 2006, i.e. that the judgement affects the entire glide-path
for reductions of wholesale mobile call termination charges, including the
reduction which came into effect on 1 July 2006. 

An extensive summary of the key points of the CBB judgement is
provided hereafter.

Market definition

The CBB agrees that the market definition ‘voice call
termination on individual mobile networks’ (‘gespreksafgifte
op afzonderlijke mobiele netwerken’) put forward by OPTA is appropriate and
rejects objections from operators in this respect. Two particular points of
interest in the context of market definition are discussed below:

Status of the Telfort network (Telfort was acquired by KPN)

A key issue of contention in The
Netherlands is the treatment of the Telfort network (1800 MHz network)
following its acquisition by KPN Mobile (900 MHz network) for the purposes of
market definition and regulatory obligations. OPTA had decided to treat KPN
Mobile/Telfort as a single network market for the purposes of the regulation of
wholesale call termination, and to apply differential wholesale call
termination charges for the 900 MHz networks (KPN Mobile/Telfort and Vodafone)
compared to the 1800 MHz networks (Orange and T-Mobile). The CBB notes that it
has received evidence that the wholesale divisions of KPN Mobile and Telfort
have been merged, and notes also that OPTA is required to conduct a prospective
analysis of the market, and on this basis the CBB considers that OPTA’s
decision on treating KPN Mobile/Telfort as a single network is appropriate. 

T-REGS Note: Whilst this validates a
key point of OPTA’s market definition and selection of regulatory obligations
(‘remedies’), the overall effect of the CBB judgement overrides this. 

Treatment of MVNOs

Tele2 (which operates as an MVNO on
an 1800 MHz host network) questioned OPTA’s decision to consider that it has a
network and the resulting SMP designation. The CBB notes that Tele2 controls
access to its own end-users, which has as a consequence that, for the purposes
of terminating a call to those users, other operators have to purchase
wholesale call termination from Tele2 (directly or indirectly). On this basis,
the CBB confirms OPTA’s decision to designate Tele2 as an MVNO as a separate
relevant single network market.

 

SMP assessment: focus
on countervailing buyer power

The CBB criticises OPTA for
attaching excessive importance to market share (100%) as a criterion for
finding SMP on Market 16 and, more importantly, for insufficient attention to issues
surrounding countervailing buyer power, especially:

 a)     countervailing buyer
power between mobile operators.

 b)    countervailing buyer
power of KPN and KPN mobile, who, as the CBB states, have in the past refused
to pay the full amount of wholesale call termination charges levied by other
operators.

As regards countervailing buyer
power between mobile operators, the CBB concludes that OPTA has insufficiently contradicted
the argument that ‘there exists a certain interdependency among mobile
operators’. According to the CBB, it cannot be excluded that the mobile
operators are ‘in a certain equilibrium’, and it cannot be excluded that ‘some
and probably all mobile operators are not genuinely able to behave
independently of one-another’.

In addition, the CBB states that
OPTA has insufficiently investigated the factual position of each individual
mobile operator on the retail market for mobile telephony and on the wholesale
markets for call termination on each network.

As regards countervailing buyer
power of KPN (the fixed incumbent operator) in particular, the CBB questions
whether high wholesale mobile call termination charges are due exclusively to
market power for wholesale mobile call termination. The CBB puts forward a
potential alternative explanation, namely the possibility that the absence of
countervailing buyer power can be explained by regulation of fixed telephone
services, and in particular wholesale fixed call termination, which may impede
the creation of a balance of power between fixed and mobile operators in terms
of the determination of their wholesale call termination charges and retail
tariffs. The CBB calls into question whether OPTA has really taken a situation
absent regulation as a basis for its analysis of Market 16, and asks which
consequences are derived or are to be derived from the fact that fixed markets
(including fixed wholesale call termination) would or would not be regulated.

OPTA is enjoined to make a thorough
and complete analysis of the economic characteristics of the market, including
the points outlined above.

Furthermore, the CBB states that OPTA
has insufficiently explained and justified what ‘excessive’ means (in the
context of excessive wholesale mobile call termination charges), and why the
mobile operators’ charges would be excessive. In this context, the CBB confirms
that OPTA admitted in the session of 14 June 2006 that it had not examined the
underlying costs of mobile operators. The CBB also largely rejects the
benchmarking approach adopted by OPTA in the context of its finding that
charges were ‘excessive’.

 T-REGS Note: The grounds for
rejection are partial in the case of the comparison with the decisions made by
Ofcom in the UK.

 
Overall conclusion on SMP assessment: link with differentiation of
remedies

 On the basis of the points outlined
above, and other elements that are not discussed in this T-REGS summary, the
CBB conclusion is that it cannot be excluded that, if OPTA had been more
diligent in conducting its research and analysis, and given that OPTA has not
properly justified its decision, a different conclusion could be reached on the
question as to whether mobile operators have significant market power on the
markets for voice call termination on individual mobile networks.

If OPTA intends to re-designate
several or all mobile operators as having SMP, OPTA is enjoined to demonstrably
verify whether the mobile operators have a different degree of SMP, and if so,
whether this gives rise to grounds for differentiation in the imposition of
regulatory obligations. 

 

Further
elements

Sufficiency of competition law

 The CBB adds to its judgement that,
irrespective of the weaknesses it sees in OPTA’s analysis, there is also the
issue of sufficiency of competition law to address possible competition
problems. The CBB considers it insufficient to rely on the European
Commission’s Recommendation on Relevant Markets Susceptible to Ex-Ante
Regulation (especially given that it is 3 years old) in this regard, and
considers that this issue needs to be addressed by OPTA.

Impact assessment

OPTA is also criticised for not
having sufficiently weighed up the benefits and drawbacks of regulatory
intervention, and in particular the possible pros and cons of wholesale charge
regulation for fixed and mobile operators and for fixed and mobile end-users.
In this context, reference is made to the arguments presented by mobile
operators that they are not able to retain possibly important profits derived
from high wholesale call termination charges, because these profits are
‘competed away’ on the retail market for mobile calls. It is added that
increased competition for retail mobile services boosts mobile take-up and
usage, which is globally in the interests of fixed users as well.

The glide-path: issues of legal certainty

The CBB considers that it is not
possible to assess the appropriateness of wholesale charge regulation and in
particular the duration of the glide-path to cost-orientation, without having
sufficient insight in the objective costs incurred by mobile operators for
mobile call termination, and without it being clear which charge level or
charge levels OPTA considers as being cost-oriented.

OPTA is also criticised for having
created an unclear situation, by requiring the mobile operators to reduce their
wholesale call termination charges on 1 July 2006, whilst OPTA was not able to
definitively establish the level of charges to be applied as of 1 July 2006,
and OPTA did not consider changing the date of applicability of the first step
in the glide-path. The CBB concludes that this may be contrary to the principle
of legal certainty.

 

Overall
conclusion

The CBB’s overall conclusion is that
the OPTA decisions must be annulled in their entirety, and that it is to
necessary to adopt interim measures. OPTA is enjoined to re-conduct the
analysis of Market 16. In
the meantime, market 16 is unregulated in The Netherlands. However, as is
indicated in the introduction of this T-REGS news item, the mobile operators
have given certain indications to the CBB with regard to their intentions going
forward.

 

For a discussion of this important
development, please contact Yves Blondeel

The full text of the CBB judgement (in Dutch) can be accessed
by clicking here.