The Most Recent EU Competition Law Developments in the Telecommunication Market

65ENLR 1|2013 EU Competition Law Developments in the Telecommunication Market

I. Introduction

It may seem rational to expect the significance of EU competition law enforcement to lessen in telecommu-nication due to the extensive EU regulatory frame-work in place. However, important developments happened in the field of telecommunication-specific competition law recently. On the one hand, the Com-mission introduced substantial competition law prin-ciples regarding the market definitions that national regulatory authorities should use during the notifica-tions of their draft measures. Additionally, it seems that recent jurisprudence of the European Courts in telecommunication cases has defined margin squeeze as a clear-cut type of abuse of dominance. Under the merger control rules, the Commission has used the upward pricing pressure for the first time in a tel-ecommunication merger (Hutchison/Orange) to es-

The Most Recent EU Competition Law Develop-ments in the Telecommunication Market

András Tóth*

Despite the fact that the telecommunication sector is heavily regulated in the EU, several important telecommunication-specific competition law issues have emerged over the past two years. In its recent enforcement practice, the Commission gave important competition law guidance to the national regulatory authorities as to how to define the relevant markets in the telecommunication sector. In specific competition cases, the Commission and the European Courts issued various important statements on the relationship between ex-ante regulation and ex-post review. Apparently, the consideration of the incentives to invest is the main focus of the recent competition law enforcement in telecommunications. The spread of network-sharing agreements in the sector is increasing due to the higher requirements for investment into communication infrastructure (e. g. 4G and FTTx). The Commission resists being more lenient with the concentration of national telecommunication markets by not allowing the consolidation efforts to overcome anticompetitive effects in merger control, as it was expressed in the Hutchison/Orange Austria merger and it is reflected by the ‘Connected Continent’ legislative package as well.

timate (as the merger’s potential adverse unilateral effect) to what extent the merged firm would have the incentive to raise prices post-merger to the detri-ment of consumers.

This article presents these most recent telecommu-nication-specific EU competition law developments on the basis of the Commission’s decisions and Courts’ judgments rendered between 2011 and 2013.

II. Relevant market definition in the telecommunication sector

The definition of the relevant market in the telecom-munication sector has not exclusively been driven by competition law enforcement. In 2002, the common regulatory framework of electronic communication (CRF) was adopted. According to Article 15(3) and Article 16(1) of the Framework Directive,1 national regulatory authorities shall define relevant markets within their territory, in accordance with the princi-ples of competition law and in collaboration with the national competition authority. According to Article 7 of the Framework Directive, the national regulatory authorities should notify certain draft decisions (in-cluding the relevant market definitions) identifying the company having significant market power (SMP)

* Vice-president of the Hungarian Competition Authority and the Chairman of the Competition Council, Associate Professor and Head of the ICT Law Department at University of Károli in Budapest, Member of the European Networks Law and Regulation (ENLR) Editorial Board.

1 Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) OJ 2002 L 108.

66 ENLR 1|2013EU Competition Law Developments in the Telecommunication Market

on the relevant market to the Commission and other national regulatory authorities to give them the op-portunity to comment. Since 2003, more than 2,0002 market analyses (including relevant market defini-tions) have been notified to the Commission. The rel-evant market definition in telecommunication, based on the principles of competition law, has therefore be-come a key issue under ex-ante regulation and hence is prominent in the Commission’s enforcement prac-tice. Accordingly, to give a full picture of the current legal situation, this paper presents the most recent developments regarding relevant market definition both on the basis of competition cases and Commis-sion decisions from the past two years that expressed serious doubts on the regulatory authorities’ notified draft market analysis.

1. Relevant market definition under the ex-ante regulation

a. General competition law principles

i. Application of current market data The Commission stressed in several recent decisions that the relevant market definition and the designa-tion of SMP should be based on current market data.

In 2012, the Polish National Regulatory Authori-ty (UKE) notified a draft decision on the wholesale broadband access (WBA) market concerning 11 com-munes of Poland.3 Prior to this, UKE had notified, a year earlier, a review of the Polish WBA market (the second since 2006). At that time, the UKE defined that a sub-national market consisting of almost the entire territory of Poland, except for 20 communes, which UKE considered as competitive. The Commis-sion voiced strong reserves on the exclusion of those communes. Instead of conducting a separate market analysis for these 20 communes, however, UKE noti-fied in 2012 a third market review, considering on the basis of new data that the entire territory of Poland constituted a single geographical market. After the Commission initiated an in-depth investigation, the UKE withdrew this third notification. Two months later, in November 2012, the UKE – instead of con-ducting a new market analysis – notified the draft decision at stake on the Polish WBA market concern-ing 11 of the 20 communes of Poland which had been excluded from the geographical scope of the market in the UKE’s second review. The UKE regarded its forth notified draft market review as the continua-tion of the second market review and thus notified

its decision as it was drafted in early 2011, using old market data collected in 2009-2010 for the purpose of the second market review.

The Commission underlined that very important changes had taken place after 2010 in the relevant market (e.g the merger of two large cable operators), which had significant impact on UKE’s market anal-ysis.4 The Commission also noted that new market data was available for the UKE since the authority itself had notified a draft measure5 based on current market information, in which it reached considera-bly different conclusions. Despite being in possession of more recent data, the UKE based its decisions on outdated market information. Thus Commission thus decided that “the market definition and the assess-ment of SMP which is not based on reliable market data and which does not reflect current market condi-tions, which are known to the UKE, is contrary to the principles of competition law.”6

The Commission confirmed this approach in cases involving notified draft measures of the Czech Na-tional Regulatory Authority7 (CTÚ) and the Spanish National Regulatory Authority8 (CMT) and required both authorities to carry out new market analyses. The CTÚ was relying on its last market analysis data stemming from 2009 in its notified draft measures in 2012, while the CMT intended to impose remedies in a notified draft decision from 2013 on the relevant markets based on a market analysis carried out in

2 See: overview of notifications <https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.jsp> accessed 11.08.2013.

3 Commission Decision of 10.12.2012 concerning case PL/2012/1394: Wholesale broadband access market in 11 communes in Poland, Opening Phase II investigation.

4 Ibid. 7.

5 Commission Decision of 26.04.2012 concerning case PL/2012/1311: Wholesale broadband access in Poland, Opening Phase II investigation, SG-Greffe (2012) D/7530.

6 PL/2012/1394 (n. 3) p. 6.

7 Commission Decision of 10.12.2012 concerning case CZ/2012/1392: Price related remedies on the market for call termination on individual public telephone networks provided at a fixed location in the Czech Republic, Opening Phase II investigation, Commission Decision concerning case CZ/2012/1393: Price related remedies on the markets for voice call termination on individual mobile networks in the Czech Republic.

8 Commission Decision of 27.6.2013 concerning case ES/2013/1465: Wholesale (physical) access at a fixed location (review of prices) in Spain, case ES/2013/1466: Wholesale broadband access (review of prices in Spain, Opening Phase II investigation.

2008. Therefore, the Commission urged the authori-ties to conclude new market reviews.

ii. Geographic market segmentation In the same Polish case referred to above, the UKE’s 2012 draft decision on the WBA market concerned 11 of the 20 communes where it considered the market conditions as significantly different from the remain-ing territory of Poland.9 Although the UKE defined the relevant market as the WBA, the geographic di-mension of this market was determined almost ex-clusively on the basis of the competitive situation of the retail broadband segment. UKE considered that Telekomunikacja Polska S. A. (TP) did not have bigger SMP in the WBA market despite the fact that it is the only supplier, since the retail broadband access based on WBA constituted only 4 % on the territory of the 11 communes.

The Commission acknowledged that the area of 11 communes presented considerable differences in the retail level, compared to the remaining part of Poland (e. g. higher access speeds). However, the Commission noted that other consumer preferences (e. g. bundled serves) remained broadly similar in both areas. With regard to pricing, the Commission considered that UKE had not provided sufficient evidences that there were differentiated regional pricing schemes. Upon these findings, the Commission stated that UKE’s

market definition did not follow the principles of competition law.

b. The cable television (CaTV) infrastructure in the product market definition

The Commission’s ‘Recommendation on the Rele-vant Markets’ defines WBA market as ‘market 5’.10 According to the Commission, where cable networks exist, their geographical coverage is often limited and wholesale access to such networks does not constitute a direct substitute for DSL-based whole-sale access products, both from the demand and the supply sides, so that inclusion in the same product market is not justified.11 The Commission reached the same conclusion in its decision related to abuse of dominant position by TP when it stated that: “Ex-isting cable technology is not substitutable for xDSL access technology. Demand-side substitution is con-strained by the considerable costs that would need to be born in case of switching from an xDSL to a cable-modem technology, and by the low coverage and the fragmentation of cable networks in Poland.”12 The Commission also stressed in the Polish WBA case the importance of switching cost as a demand side substitution constraint when stated that UKE failed to demonstrate “whether and to what extent the operators on the demand side of the WBA market would be able to migrate their customers to the CaTV platform.”13

The presence of CaTV in a given Member State may, however, exercise an indirect constraint on the provider of DSL-based WBA because of the substi-tutability between both products at the retail level.14 According to the Commission, this competitive con-straint has to be taken into account when assessing if the incumbent DSL operator has SMP on the relevant market.15

In a recent case, the Estonian regulatory authority considered however that the relevant WBA market includes CaTV too, although that platform does not allow for the provision of wholesale non-physical or virtual network access including bit-stream access (BSA).16 The inclusion of CaTV infrastructure in the Estonian WBA market definition was justified on the basis of the existence of indirect constraints i. e. the substitutability at retail level where both infrastruc-tures exist in parallel. Upholding its approach in pre-vious decisions, the Commission however underlined that the indirect constraint should be assessed with regard to the following aspects:

9 PL/2012/1394 (n. 3.)

10 Commission Recommendation No 2007/879/EC on relevant product and service markets within the electronic communica-tions sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, OJ 2007 L 344/65, para. 7.

11 Commission’s Explanatory Note (Accompanying document to the Commission Recommendation on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services), SEC (2007) 1483 final, p. 34.

12 Commission Decision of 22 June 2011 in case COMP/39.525 Telekomunikacja Polska, para. 620.

13 PL/2012/1394 (n. 3.) p. 9.

14 Commission’s Explanatory Note (2007) (n. 11.) p. 34.

15 Ibid. p. 35.

16 Commission Decision of 13.6.2013 concerning case EE/2013/1453: Wholesale (physical) network infrastructure access (including shared or fully unbundles access) at a fixed location in Estonia; and case EE/2013/1454: Wholesale broadband access in Estonia, Opening Phase II investigation

(i) “ISPs would be forced to pass a hypothetical wholesale price increase on to their consumers at the retail level based on the wholesale/retail price ratio;

(ii) there would be sufficient demand substitution at the retail level based on indirect constraints such as to render the wholesale price increase unprof-itable; and

(iii) the customers of the ISPs would not switch to a significant extent to the retail arm of the integrat-ed hypothetical monopolist, in particular if the latter does not raise its own retail prices.”17

Thus the CaTV infrastructure is unable to exert a direct competitive constraint for the WBA market in most EU countries but national regulatory author-ities may consider the indirect constraints stemming from the retail infrastructure competition between the CaTV and DSL-based Internet access on the basis of the aforementioned aspects.

c. Separate sub-market for FttO-ODF access

The former Dutch telecommunication regulatory authority (OPTA, now Authority for Consumers and Markets) notified its market analysis on unbun-dled access to fibre-to-the-office (FttO) networks as a submarket of the wholesale market for (physical) network infrastructure access at fixed locations.18 FttO-ODF access is a fibre-based connection, located in mainly business areas. OPTA defined separate sub-market for FttO-ODF access mainly on the basis of the assumption that it concerns a growing market in which the strategic choices of the market players will have considerable impact on market developments.19 OPTA’s reasoning for narrowing its market definition based on the differentiation of consumers’ categories (i. e. businesses using FttO networks and residential customers using FttHome networks) and on higher investment costs of FttO resulting in higher FttO tariff.20

The Commission noted however that, in line with the competition principles, the extent of product market may be narrowed in the presence of distinct groups of consumers when such a group could be subject to price discrimination.21 The Commission considered that since FttH areas were rolled-out pri-marily on the basis of area glazing, i. e. without prior contractual commitment to connect by the end-us-ers, the investment risk could be considered higher than in case of an FttO investment, as the latter was

carried out on the basis of connection requests.22 In addition, the intrinsic investment cost in an FttH area was likely to be higher, due to the larger cov-erage area and the likely higher end-user density.23 Moreover, OPTA recognized that there was an over-lap not only in the types of retail services provided over FttH and FttO, but also in the type of customers, since there are business customers in the FttH are-as.24 Therefore, such business customers may benefit from regulated FttH-ODF access prices, according to the Commission.

The Commission also raised serious doubts re-garding OPTA’s conclusion on the fact that there was no operator enjoying SMP on the market, even if the FttH-ODF access market was to be considered as a sub-market of the copper-based unbundled ac-cess market. OPTA found that the presence of vari-ous alternative operators providing FttO-ODF access on an allegedly growing and uncertain market un-dermined KPN’s competitive advantage.25 OPTA’s argument that the FttO-ODF access market should be considered as growing and that therefore market shares were not the only indicators could not be fully sustained according to the Commission as the market did not have the characteristics of an emerging mar-ket.26 According to the Commission Recommenda-tion on Relevant Markets,27 newly emerging markets are considered to comprise products or services for which, due to their novelty, it is very difficult to pre-dict demand conditions or market entry and supply conditions. Incremental upgrades to existing network infrastructure (such as FttO) rarely lead to a new or emerging market.28 OPTA argued that a significant number of operators other than KPN had deployed

17 Ibid. p. 5.

18 Commission Decision of 21.03.2012 concerning case NL/2012/1298: market analysis on unbundled access to fibre-to-the-office (FttO) networks, a submarket to market 4 in the Netherlands, Opening of Phase II investigation, SG-Greffe (2012) D/4970.

19 Ibid. p. 7.

20 Ibid. p. 8.

21 Ibid.

22 Ibid.

23 Ibid.

24 Ibid. p. 9.

25 Ibid.

26 Ibid. p. 10.

27 Commission Recommendation on relevant product and service markets (n. 10), para. 7.

28 See Ibid.

a fibre network. However, none of these networks reached the same level of coverage as KPN according to the Commission.29

This case shows that the fibre network deploy-ment is a conflicting area within ex-ante regulation due to its high investment cost. The operators want to recoup their investments often by hindering their competitors’ access to the newly deployed networks. The CRF makes clear that the ‘regulatory holiday’ exists only for the newly emerging markets which require novelty product development where it is dif-ficult to consider the demand-supply substitution. However, according to the Commission the fibre net-work deployment is often a result of the upgrading of existing network infrastructures which rarely lead to exemption from regulation.

2. Relevant market definition in merger and antitrust cases

a. Mobile Internet

The question raised in Hutchison 3G Austria/Orange Austria merger30was whether fixed broadband ser-vices were a substitute for mobile data services in general or for mobile broadband specifically.31 The Commission ruled against it, on the grounds of mo-bility: “Mobile data services delivered on a smart phone in a bundle with voice services could not be fully substituted by fixed broadband in terms of their type of use (that is to say, in a mobile handset device). Most importantly, there is limited substitutability be-tween mobile data over dongles, tablets, etc. and fixed broadband because of the restriction in mobility. Only mobile data services offer customers the possibility to access the internet universally whilst on the move. Customers for whom mobility is important (including in locations where Wi-Fi is unavailable or less satis-factory) would not consider fixed line services as an alternative.”32

b. Substitutability between local loop unbundling (LLU) and BSA

In its decision33 related to TP’s abuse of dominant position, the Commission considered the substituta-bility between LLU and BSA. The unbundled loops typically give greater flexibility and control over the retail broadband service offered to the end-users. By contrast, WBA in the form of BSA has typically much less flexibility over the retail service, and may be supplied at a higher point in the network.34 In ad-dition, switching between BSA and LLU is extremely complex, costly and time consuming. Therefore LLU and BSA wholesale access products are not substi-tutable.35

III. Application of Article 101 TFEU in the telecommunication sector

Interesting developments also occurred recently in the competition law enforcement practice of the Commission and related case law of the EU Courts in the telecommunication sector. In the field of restric-tive agreements under Article 101 TFEU, the most relevant decision was taken against Telefónica and Portugal Telecom. More cases of such kind might be taken up by the Commission regarding network shar-ing agreements.

On 23 January 2013, the Commission adopted a decision36 related to a non-compete clause included in the stock purchase agreement concluded between Telefónica and Portugal Telecom (PT) on 28 July 2010 which gave Telefónica sole control over the Brazil-ian mobile operator Vivo, previously jointly owned by the parties. The Commission imposed fines on Telefónica: € 66.8 million and on PT: € 12.2 million. This was the first Article 101 TFEU case in the tele-communication at EU level where the Commission considered a non-compete clause as not ancillary to a transaction.

The clause concerned read as follows: “To the ex-tent permitted by law, each party shall refrain from engaging or investing, directly or indirectly through any affiliate, in any project in the telecommunication business (including fixed and mobile services, Inter-net access and television services, but excluding any investment or activity currently held or performed as of the date hereof) that can be deemed to be in com-petition with the other within the Iberian market for a period starting on the date of closing [27 September 2010] until December 31, 2011.”

29 NL/2012/1298 (n. 18) p. 10.

30 Commission Decision of 12.12.2012 in case M.6497 Hutchison 3 G Austria and Orange Austria.

31 Ibid. para. 55.

32 Ibid. para. 56.

33 COMP/39.525 Telekomunikacja Polska (n. 12).

34 Ibid. para. 614.

35 Ibid. para. 609.

36 Commission Decision of 23.1.2013 in case AT.39839 Telefónica / Portugal Telecom.

According to the Commission, the clause clearly provided for a non-compete obligation on the parties: it “prevented PT from entering into any telecommu-nication markets in Spain and prevented Telefónica from expanding its limited presence in the Portuguese electronic communications markets for the duration of the clause.”37 Therefore, the clause amounted to a market-sharing agreement.

Telefónica and PT argued that the non-compete clause merely provided for an obligation to self-as-sess the legality and scope of a separate non-compete agreement, which would be ancillary to the Vivo transaction. Contrary to the parties’ allegations, however, the Commission found that the non-com-pete clause constituted an infringement by object of Article 101(1) of the TFEU because of its very word-ing (which clearly provides for a non-compete obliga-tion),38 the economic and legal context of which the clause forms part (e. g., the liberalised electronic com-munications markets where the parties were potential competitors),39 and the actual conduct and behaviour of the parties (including the fact that they removed the clause by an agreement which, while setting out reasons for the removal of the clause, did not mention any self- assessment exercise or obligation).40

The Commission found that the non-compete clause could not be considered as a restraint ancillary to the Vivo transaction, as a non-compete obligation covering the entire Iberian Peninsula could not be considered as being directly related to or necessary for the implementation of the stock purchase agree-ment for Vivo in Brazil.41

The Commission also found that the non-compete clause did not fulfil the conditions for an exemption under Article 101(3) of the TFEU, since the clause concerned could not be considered as indispensable to the attainment of the objectives of the agreement due to the fact that the clause referred to the Iberi-an market, while the Vivo transaction occurred in Brazil.42

IV. Application of Article 102 TFEU

1. Margin squeeze cases

Since the Deutsche Telekom43 ruling of the Court of Justice, margin squeeze is recognised as an independ-ent abuse of a dominant position, distinct from other illegal anti-competitive practices within the meaning of Article 102 TFEU. Over the past two years, the

European Courts handed down three judgments44 in two margin squeeze cases (TeliaSonera and Tele-fonica) in the telecommunications sector. The Courts confirmed many aspects of the Deutsche Telekom judgment.

a. TeliaSonera

The ECJ confirmed in a preliminary ruling that “the list of abusive practices contained in Article 102 TFEU is not exhaustive, so that the list of abusive practices contained in that provision does not exhaust the meth-ods of abusing a dominant position prohibited by EU law.”45 Therefore, a margin squeeze, in view of the exclusionary effect, is “in itself capable of constituting an abuse within the meaning of Article 102 TFEU.”46 The ECJ held that there would be a margin squeeze if, inter alia, the spread between the wholesale pric-es for ADSL input services and the retail prices for broadband connection services to end-users were either negative or insufficient to cover the specific costs of the ADSL input services which TeliaSonera had to incur in order to supply its own retail services to end-users, so that that spread did not allow a com-petitor as efficient as that undertaking to compete for the supply of those services to end-user.47 Such a pricing practice is linked to the very existence of the margin squeeze and not to its precise spread. In this case, it was therefore not necessary to establish that the wholesale prices for ADSL input services or the retail prices were in themselves abusive on account of their excessive or predatory nature.48

37 Ibid. para. 353.

38 Ibid. para. 248.

39 Ibid. para. 267.

40 Ibid. para.298 and 317.

41 Ibid. para.375.

42 Ibid. para. 444.

43 C-280/08 Deutsche Telekom v Commission ECR [2010] I-09555.

44 C-52/09 Konkurrensverket v TeliaSonera Sverige AB. Reference for a preliminary ruling: Stockholmstingsrätt – Sweden[2011] ECR I-00527 and T-336/07 Telefónica, SA and Telefónica de España, SA v European Commission n. y. r., T-398/07 Kingdom of Spain v European Commission n.y.r.

45 C-52/09 Konkurrensverket v TeliaSoneraSverige (n. 44) para. 26.; C-280/08 Deutsche Telekom v Commission (n. 43) para. 173.

46 Ibid. para. 31, C-280/08 Deutsche Telekom v Commission (n. 43) para. 183.

47 Ibid. para. 32.

48 Ibid. para. 34., C-280/08 Deutsche Telekom v Commission (n. 43) para. 167. and 183.

The ECJ also confirmed that the undertaking concerned did not have to enjoy dominant position on the retail market49 and that the degree of market strength was, as a general rule, relevant rather for the effects of the conduct aspect, than in relation to the question of whether the abuse as such existed.50

i. Regulatory obligation and indispensability of the wholesale product

Contrary to the case Deutsche Telekom v Commission, TeliaSonera was not under any regulatory obligation to supply ADSL input services to operators. Accord-ing to the ECJ, the absence of any regulatory obliga-tion to supply the ADSL input services on the whole-sale market has no effect on the question as to wheth-er the pricing practice is abusive since TeliaSonera had complete autonomy in its choice of conduct on the market and Article 102 TFEU was applicable.51 Unlike the EJC, Advocate General Mazák held that a margin squeeze is abusive only where the dominant undertaking has a regulatory obligation to supply in-put or where that input is indispensable.52 The ECJ stated that the regulatory obligation to supply input services was irrelevant. As to whether or not the in-put services must be indispensable, the ECJ held it as a question of fact under the anticompetitive effects of the margin squeeze.53 According to Bavasso and

Long, Advocate General Mazák’s opinion was based on the refusal to supply while ECJ held that margin squeeze constitutes a distinct form of abuse.54

ii. Recoupment of the lossGiven the fact that margin squeeze may be the result not only of low price in the retail market, but also of high price in the wholesale market, an undertaking which engages in a pricing practice which results in a margin squeeze on its competitors does not neces-sarily suffer losses.55 Consequently, the recoupment of any losses suffered from the application of margin squeeze has no relevance on establishing whether that pricing practice is abusive.56

iii. Emerging marketThe ECJ underlined that the possibility that under-takings may exploit their dominant position in the wholesale market in such a way as to impair the de-velopment of competition in a rapidly growing neigh-bouring retail market means that no derogation from the application of Article 102 TFEU can be tolerated even if the market concerned are growing rapidly and involve new technology, requiring high levels of investment.57

b. Telefónica

The General Court (GC) dismissed Telefónica’s and Spain’s separate appeals against the Commission’s de-cision58 on Telefónica’s margin squeeze of 29 March 2012.59 The GC stated – with reference to the ECJ’s judgment in TeliaSonera – that the Commission was not required: − to show that Telefónica held a dominant position

on the retail market,60

− to demonstrate that Telefónica charged excessive prices for its wholesale products or predatory pric-es for its retail products,61

− to supplement its analysis of the abusive nature of Telefónica’s conduct on the basis of the ‘equal-ly efficient competitor’ criterion by a study of the margins of the main alternative operators on the Spanish market.62

The GC referred to the ECJ’s judgment in Deutsche Telekom when stating that it could be necessary to increase the prices of retail products in order to avoid a margin squeeze.63 The Commission consti-tuted the Telefónica’s conduct as a ‘clear-cut abuse’ for which there were precedents. Telefónica howev-

49 Ibid. para. 89.

50 Ibid. para. 81.

51 Ibid. para. 52.

52 Opinion of AG Mazák, C-52/09 (n. 44) para.11.

53 C-52/09 Konkurrensverket v TeliaSonera Sverige (n. 44) para. 69 and 72, 77.

54 Antonio Bavasso, Dominic Long ‘The Application of Competition Law in the Communications and Media Sector: A Survey of 2011 Cases’ (2012) 3 No. 4. Journal of European Competition Law & Practice, p. 389.

56 Ibid. para. 103.

58 Commission Decision of 04.07.2007 in case COMP/38.784 Wanadoo España v Telefónica.

59 T-336/07 Telefónica v Commission, (n. 44).

60 Ibid. para. 146.

61 Ibid. para. 187.

62 Ibid. para. 188. In order to assess the lawfulness of the pricing policy applied by a dominant undertaking, reference should be made, in principle, to pricing criteria based on the costs incurred by the dominant undertaking itself and on its strategy. C-52/09 Konkurrensverket v TeliaSonera Sverige (n. 44) para. 41.

63 Ibid. para. 337; C-280/08 Deutsche Telekom v Commission (n. 43) para. 141.

er alleged that the Deutsche Telekom decision was the subject-matter of an action before the Courts of the European Union. The GC rejected that argument since measures of the EU institutions are presumed to be lawful and accordingly produce legal effects until such time as they are withdrawn, annulled in an action for annulment or declared invalid follow-ing a reference for a preliminary ruling or a plea of illegality.64

i. Margin squeeze as a distinct form of abuseTelefónica argued that it was clear from the contested decision that the Commission analysed the alleged margin squeeze as an abuse whose exclusionary effects were analogous to the effects of the de fac-to refusal to enter into a contract. The GC however dismissed this argument and alleged that the Com-mission did not require Telefónica to give access to the wholesale products to its competitors.65 The GC revoked the ECJ’s judgment in TeliaSonera accord-ing to which the margin squeeze constitutes an inde-pendent form of abuse distinct from that of refusal to supply66 therefore the indispensable nature of the wholesale product is irrelevant.67

ii. Relationship between ex-ante regulation and ex-post review

Telefónica argued that the Commission, in assessing Telefónica’s conduct in the contested decision, en-croached on the powers of the national regulatory authority. The GC however referred to the judgment in Deutsche Telekom in which the ECJ stated that the competition rules laid down in the EC Treaty supple-mented, by ex-post review, the regulatory framework adopted by the EU legislature for ex-ante regulation of the telecommunications markets.68 Spain also ar-gued that the Commission’s adoption of the contested decision had consequences in respect of future activ-ity of CMT and affected its regulatory policy. The GC rejected this argument since ex-ante regulation by a national regulatory authority and ex-post review by the Commission have distinct purposes and objec-tives.69 Telefonica’s allegation of a breach of the prin-ciple of the protection of legitimate expectations was also found unfounded due to the distinct purposes of the ex-ante regulation and ex-post review.70

The GC emphasized that Telefónica could not be unaware that compliance with the Spanish reg-ulations on telecommunications did not protect it against an action by the Commission on the basis of Article 102 TFEU, a fortiori because a number of

legal instruments in the 2002 regulatory framework reflected the possibility of parallel proceedings before the national regulatory authorities and the competi-tion authorities.71 It follows that the decisions adopt-ed by the national regulatory authorities on the basis of the 2002 regulatory framework do not deprive the Commission of its powers to take action at a later stage in order to apply Article 102 TFEU.72

Spain alleged that in the contested decision, the Commission carried out an ‘in depth’ analysis of CMT’s regulatory activity, but the GC found this fact irrelevant since the Commission considered the rel-evant circumstances supporting the abuse of domi-nance only.73

2. Access refusal

The Commission in its decision of 22 June 2011 found that Telekomunikacja Polska (TP) was abusing its dominant position by refusing to supply its whole-sale broadband products between 3 August 2005 and 22 October 2009 (4 years and 2 month) and imposed € 127.5 million fines.74

a. Dominance and the refusal to supply

The Commission concluded on the basis of the rele-vant case law75 that it was not necessary to demon-strate that TP was dominant in the retail market for proving the existence of an abusive refusal to supply at the wholesale level.76 TP was the owner of the only

65 Ibid. para.179.

66 Ibid. para. 180.

67 Ibid. para. 182.

68 C-280/08 Deutsche Telekom v Commission (n. 43).

69 T-398/07 Kingdom of Spain v European Commission (n. 44) para. 56.

71 T-336/07 Telefónica v Commission, (n. 44) para.299.

72 Ibid. para. 300.

73 T-398/07 Kingdom of Spain v European Commission (n. 44) para 51.

74 COMP/39.525 Telekomunikacja Polska (n. 12) para. 578. Following the signature of the agreement with UKE on 22 October 2009, TP ceased the majority of anticompetitive practices described in the present decision.

75 C-333/94 P Tetra Pak v Commission [1996] ECR I-5951, para. 25.

76 COMP/39.525 Telekomunikacja Polska (n. 12) para.642.

nation-wide access network and is the only supplier of LLU and BSA in Poland, therefore having a market share of 100 %.77 Furthermore, there were significant barriers to entry arising from the fact that duplicat-ing TP’s network was not economically viable.78 Oth-er barriers included investment and sunk cost.79

The Commission seized various internal doc-uments indicating that TP developed a strategy to limit competition on the markets at all stages of the process accessing its wholesale products. The Com-mission identified several abusive practices: − proposing unreasonable conditions (TP’s contrac-

tual clauses did not meet the minimum standards set in the reference offer),

− delaying the negotiation process (e. g. delaying start of the access negotiations or delaying con-tract signature),

− limiting access to its network and to subscriber lines by inter alia rejecting alternative operators’ orders on unreasonable grounds,

− refusing to provide reliable and accurate general information indispensable for alternative opera-tors.

b. Objective justifications

TP denied the existence of the abuse and argued that they had to undergo technical efforts in a very short time to adjust to the new regulatory environment. The Commission did not accept those arguments since the case file contained solid evidence of TP’s

exclusionary practices and they had a lot of time to prepare for upcoming access obligations since TP has been aware of these obligations at least since 2003, when Polish telecommunication law identified TP as a SMP operator while the LLU and BSA remedies were imposed in 2005 and 2006 respectively.

c. Incentives of investments

Although the undertakings are free to choose their business partners,80 the application of Article 102 TFEU may lead to the imposition of an obligation to supply on the dominant undertaking.81 Therefore, the Commission considered (like in its previous de-cision in Telefónica)82 whether the imposition of such an obligation on TP would undermine TP’s incentives to invest and innovate.83 The ex-ante regulation in the telecommunication also requires the national regulatory authorities to balance the rights of an in-frastructure owner to exploit its infrastructure for its own benefit, and the rights of other service providers to access facilities that are essential for the provision of competing services.84

According to the Commission’s Guideline on the enforcement priorities in Article 102, “in certain spe-cific cases, it may be clear that imposing an obligation to supply is manifestly not capable of having negative effects on the input owner’s and/or other operators’ incentives to invest and innovate upstream, whether ex ante or ex post. The Commission considers that this is particularly likely to be the case where regulation compatible with Community law already imposes an obligation to supply on the dominant undertaking and it is clear […] that the necessary balancing of incen-tives has already been made by the public authori-ty when imposing such an obligation to supply. This could also be the case where the upstream market position of the dominant undertaking has been de-veloped under the protection of special or exclusive rights or has been financed by state resources. In such specific cases there is no reason for the Commission to deviate from its general enforcement standard of showing likely anti-competitive foreclosure.”85 Accord-ingly, the Commission is convinced on the basis of the relevant case law86 that the competition law is applicable where sector-specific regulation exists.

On the basis of the aforementioned Guidelines, the Commission concluded that TP’s duty to sup-ply the relevant upstream products resulted from a balancing made by the public authorities between TP’s and its competitors’ incentives to invest, based

77 Ibid. para. 643.

78 Damian Kaminski, Anna Rogozinska, Beata Sasinowska, ‘Telekomunikacja Polska Decision: competition law enforcement in regulated markets’ (2011) 3 Competition Policy Newsletter, p. 3.

79 Ibid.

80 Commission Decision of 24 March 2004 in case COMP/ 37.792 Microsoft, para. 547.

81 See: T-201/04 Microsoft v Commission [2007] ECR II-3601, paras. 319, 330, 331, 332 and 336.

82 COMP/38.784 Telefónica (n. 58) para. 303-305.

83 COMP/39.525 Telekomunikacja Polska (n. 12) para.700

84 Recital 19 of the Directive 2002/19/EC of the European Parliament and the Council on access to, and interconnection of, electronic communications networks and associated facilities, OJ 2002 L 108 (Access Directive).

85 Communication from the Commission – Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, para. 82. OJ 2009 C 45/7.

86 See C-280/08 Deutsche Telekom v Commission ECR [2010] I-09555 para. 92.

on the relevant EU and national telecommunication regulation.87 The reason for this was that the need to promote downstream competition in the long term by imposing access to TP’s upstream inputs exceeded the need to preserve TP’s ex-ante incentives to devel-op and exploit its upstream infrastructure for its own benefit.88 Moreover, the Commission stressed (like in its Deutsche Telekom89 and Telefonica decision)90 that TP had “rolled out its copper access infrastructure over significant periods of time, protected by preferen-tial government policy and exclusive rights, and was able to fund investment costs through monopoly rents from the provision of voice telephony infrastructure and services as well as from State subsidies.”91 Con-sequently, an obligation to supply as it was requested by the Commission under the enforcement of Article 102 TFEU is manifestly not capable of having nega-tive effects on TP’s incentives to invest and innovate at the upstream level since TP rolled out its infra-structure when enjoyed national monopoly position.

The Commission emphasized the importance of the WBA by presenting the ‘investment ladder’ the-ory as already described in its Telefonica decision.92 Alternative operators usually enter into the market relying on the incumbent operator’s network rath-er than by deploying a new alternative telecommu-nication infrastructure due to the significant risks. “Therefore, [alternative operators] usually follow a step-by-step approach and continuously expand their customer base and infrastructure investments. When constructing a new alternative telecommunications infrastructure, it is of crucial importance to obtain a minimum “critical network size” in order to […] be able to make further investments.”93 The progressive investments increasingly enable the alternative op-erator to differentiate its services from that of the incumbent.94 The Commission stated that TP pre-vented its downstream competitors from reaching rapidly a critical customer size that would have al-lowed them to climb the investment ladder earlier, from the possibility to differentiate them from TP by progressively building their own network, and from competing on own costs.95

d. Relationship between the ex-ante regulation and ex-post review

TP claimed that the Commission had no competence to investigate TP’s behaviour in the WBA markets. TP argued that UKE has issued many decisions and imposed fines on TP in order to ensure an adequate

and non-discriminatory treatment of alternative op-erators and preserve effective competition on the Pol-ish WBA markets.96 The Commission however point-ed out that despite the sanctions imposed by UKE, TP had not changed its anticompetitive behaviour, which negatively affected the development of WBA services in Poland.97 In addition, “the Commission cannot be bound by a decision taken by a national body pursuant to Art. 102 TFEU”.98

TP underlined that its obligations to provide access to its network and relevant wholesale services were subject to Polish regulation.99 The ECJ had however expressly stated in its judgment in Deutsche Telekom that “the competition rules laid down by the EC Trea-ty supplement in that regard, by an ex post review, the legislative framework adopted by the Union leg-islature for ex ante regulation of telecommunication markets.”100

The Commission revoked the Courts’ judgment in Deutsche Telekom according to which it has to be shown that the undertaking subject to the regulation has the commercial discretion to avoid or end the abusive practices on its own initiative.101 Commis-sion found that that the signature of the agreement between UKE and TP in October 2009 (under which the TP undertook voluntarily to cease most of the infringements) and the steps TP undertook following the agreement clearly showed that TP, if it had been willing to do so, could have eliminated the abusive practices.

87 COMP/39.525 Telekomunikacja Polska (n. 12) para. 807.

88 Ibid.

89 Commission Decision of 21 May in case COMP/C-1/37.451, 37.578, 37.579 Deutsche Telekom AG, para. 13.

90 Case COMP/38.784 Telefónica (n. 58) para. 304.

91 COMP/39.525 Telekomunikacja Polska (n. 12) para. 1 and 809.

92 COMP/38.784 Telefónica (n. 58) para. 177.

93 COMP/39.525 Telekomunikacja Polska (n. 12) para 604.

94 Ibid. para. 605.

95 Ibid. para. 818.

96 Ibid. para. 121.

97 Ibid. para. 131.

98 T-271/03, Deutsche Telekom AG v Commission of the European Communities ECR [2008] II-00477 para. 120.

100 C-280/08 Deutsche Telekom v Commission (n. 43) para. 92.

101 Ibid. para. 80-96.

e. The ‘ne bis in idem’ principle

According to TP, some of the competition concerns raised by the Commission had already been sanctioned at the national level by UKE. Therefore, a separate fine by the Commission for the same facts would violate the ‘ne bis in idem’ principle.102 The Commission how-ever found that one of the conditions to the ‘ne bis in idem’ principle was not met on the basis of the rele-vant case law,103 namely the unity of the legal interest protected.104 Commission revoked in the case at hand that argument from the ECJ’s judgment in Deutsche Telekom according to which the national regulatory au-thorities “operate under national law which may, as re-gards telecommunications policy, have objectives which differ from those of Community competition law”.105 Nevertheless, the Commission decided to deduct from the final amount of the fine the € 8.4 million of fines imposed by UKE on TP for its conduct in violation of regulatory obligations as it partially overlapped with the facts of the Commission’s decision.106

V. Merger control: Hutchison 3G Austria/Orange Austria

The Commission examined several concentrations in the telecommunication sector over the past few years. In a recent case, the Hutchison 3G Austria/Orange Austria merger, the Commission elaborated remark-able arguments on the issue of overlapping networks.

1. The transaction

Hutchison 3G Austria (H3G) acquired Orange Aus-tria (Orange) excluding the latter one’s subsidiary “Yesss!” since H3G would immediately sold-on “Yesss!”, in a back-to-back operation, to Telekom Austria (TA).107 The acquisition of “Yesss!” by Tel-ekom Austria was subject to national competition authority’s approval. Accordingly, two further trans-actions were conditional on the proposed acquisition of Orange by H3G but separated from it since sec-ondly TA acquired from H3G certain sites, spectrum frequencies and intellectual property rights current-ly owned by Orange as well, which was subject to national telecommunication regulator’s approval.108 Therefore the overall transaction was involved into two separated merger control regimes (EU and na-tional) and two separate national authorities’ ap-provals.109Bavasso and Long underlined that the one-shop-stop merger control approval coordinated with the referral system has failed and that there was no consolidation of the two parallel competition reviews, since the Commission did not accept the referral request of the Austrian competition author-ity on the acquisition of Orange by H3G, and since the Austrian competition authority was unwilling to refer the “Yesss!” acquisition.110

2. The competition concerns

H3G and Orange were respectively, the fourth and third mobile network operators ranked by market share on the Austrian market. The merger reduced the number of competitors from four to three. De-spite the parties’ lower market shares, the Commis-sion considered that the transaction would lead to sig-nificant impediments to effective competition, owing in particular to the market structure (i. e. high barri-ers of entry, the absence of significant buyer power and the existence on the part of competitors of an incentive to follow price increases by the merged en-tity)111 and the high diversion ratios between the par-ties.112 Additionally, the Commission considered that H3G was an important, if not the most important, competitive force on the market and that its incentive to remain a driving force would be reduced after the transaction.113 The aggressive commercial policy of H3G was evidenced by its lower margins as well as its success in attracting data-intensive users in both the smart phone and data-only segments.114

103 Joined Cases C- 204/00 P, C- 205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P Aalborg Portland A/S v. Commission ECR [2004] I-00123 para. 338.

104 COMP/39.525 Telekomunikacja Polska (n. 12) para. 137 and 139.

105 C-280/08 Deutsche Telekom v Commission (n. 43) para. 80-96.

107 M.6497 H3G/Orange (n. 30) para. 8.

108 Ibid. para. 11.

109 Antonio Bavasso, Dominic Long ‘The Application of Competition Law int he Communications and Media Sectors’ (2013) 4 No. 3. Journal of European Competition Law & Practice, p. 272.

110 Ibid.

111 Ibid. para. 84.

112 Ibid. para. 176.The proportion of customers switches to the other operator. In order for a merger to create significant non-coordi-nated effects, the products offered by the merging parties must be viewed as closest substitutes to each other by a significant group of customers.

113 Ibid. para. 283.

The notifying party argued that, with a combined market share below 25 %, there was a presumption that the proposed transaction did not raise compe-tition concerns.115 The Commission disagreed and emphasized the Merger Regulation116did not contain any legally binding rule that concentrations leading to a combined market share below 25 % should be cleared a priori. The Commission considered that the merger could be qualified as a case leading to signif-icant non-coordinated effects, notwithstanding the absence of the creation or strengthening of a domi-nant position.117

3. Application of the upward pricing pressure

This was the first time118 the Commission ever used the upward pricing pressure (UPP) to estimate (as the merger’s potential adverse unilateral effect) to what extent the merged firm would have the incentive to raise prices post-merger to the detriment of consum-ers, in particular in the post-paid private voice and data segments of the market.119 The estimated gross upward pricing pressure index (GUPPI) was com-puted on the average revenue per user (ARPU) and the diversion ratios for the last twelvemonth period which resulted in 10-20 % increase in price for both operators’ customers, a rate which can be considered highly significant.120 According to the Commission, the UPP arises because post-merger, the new entity would not lose all switchers after a unilateral price increase of one of its brands, but rather would retain a significant number and therefore internalise part of the losses.121 The Commission stressed that “the UPP methodology does not take into consideration the feedback effects of unilateral price increases by the merged entity on the two remaining rivals. Since an increase in prices by the merged entity would provide an incentive to [competitors] to follow suit. […] The UPP therefore underestimates the effect of the merger on the prices which the merged entity would adopt, and also does not quantify the extent to which the prices of competitors would be expected to rise in response.”122

4. Efficiency claims

The notifying party argued that by combining H3G’s and Orange’s networks, the merger would increase the capacity of the merged network would allow for

considerably faster and higher quality services in H3G’s network.123 However, the Commission consid-ered that a domestic roaming agreement with other MNOs, a joint venture to develop LTE, or large scale network sharing were less anti-competitive means of achieving hypothetical efficiencies without reducing the number of retail players.124“Moreover, the fact that higher network quality would be experienced directly by subscribers does not mean that they would have a net benefit from the merger. In particular, if not con-strained by enough competitive pressure, the merged entity could in principle increase prices […]”125

5. Remedies imposedThe competition concerns resulted from the fact that one viable competitor would be eliminated from the Austrian mobile telecommunication mar-ket which presented high barriers to entry for mo-bile network operators (MNOs) and mobile virtual network operators (MVNOs).126 The commitments submitted address those concerns by lowering the barriers to entry for both groups of potential competitors.

The commitments give the opportunity for a new MNO to emerge, since H3G must make spectrum available to a new entrant and will ensure the sale or collocation of sites and national roaming for a period of up to 6 years on its network.127 Firstly, H3G makes available 2 x 10 MHz of spectrum in the 2 600 MHz frequency band to a new entrant.128 Secondly, that spectrum is linked to the acquisition of additional spectrum in the 800 MHz which will be auctioned in Austria by the telecom regulator (TKK).129 Both

115 Ibid. para. 90.

116 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the Merger Regulation) OJ 2004 L 24.

117 M.6497 H3G/Orange (n. 30) para. 94.

118 Bavasso and Long, 2013 (n. 110) p. 272.

119 M.6497 H3G/Orange (n. 30) para. 310.

spectrums will only be sold to the same new entrant MNO.130

In order to lower the market entry barriers for MVNOs, H3G firstly committed not to complete the acquisition of Orange Austria before entering into an MVNO agreement with one MVNO, subject to prior approval by the Commission.131 Secondly, H3G shall give wholesale access up to 30 % of its network for up to 16 MVNOs for the next 10 years on attractive terms.132

The Commission was keen on preserving the “four market players” set-up on the Austrian MNO market and fostering the MVNOs’ competition since there were very few MVNOs active on the Austrian mar-ket. Vice-president Almunia underlined that the con-solidation efforts on the mobile market should not be promoted through allowing anti-competitive mergers at national level: “some operators claim that consoli-dation efforts should be allowed to achieve economies of scale and help Europe’s mobile operators invest in the development and roll-out of new technologies. [...] When consolidation takes place within the boundaries of an already concentrated national market, we should be careful about the potential harm to consumers in that country [...]”133 Accordingly, the lessons learnt from this case inspired the ‘Connected Continent’ legislative package announced by the Commission on 12 September 2013 which also stressed that there is no reason to change competition rules to allow for the consolidation of the EU telecommunication market.134

VI. Network sharing agreements

In the H3G/Orange merger, the Commission reject-ed the parties’ efficiency claims by network-shar-ing counterfactual analysis by stating that network sharing was less anti-competitive means of achiev-ing hypothetical efficiencies without reducing the number of retail players.135 Vice-president Almunia also stressed that: “[…] we do not have evidence that operators will invest more if they reach a bigger size, as long as markets will remain fragmented along na-tional borders. […] I can also think of other ways than mergers to promote efficiency gains among operators, such as network-sharing agreements.”136 However, the pro-competitive effects of the network sharing agree-ments are not so obvious.

The significance of the network sharing agree-ments in the telecommunication markets have been increased recently due to greater demand for high-speed access both on the mobile and fixed telecom-munication networks, which triggered the deploy-ment of 4G mobile and fibre (FTTx) fixed networks. These network developments require significant investments, however, especially in the rural areas where the risks of returns are very high. Therefore, the telecommunication operators may tend to cooper-ate on several levels and in various forms to mitigate their investments risks when developing new infra-structures. The forms of their cooperation could be the establishment of joint ventures (assessed under the merger regulation while the establishing of non-full function joint venture is subject to Article 101 of TFEU) or concluding agreement (assessed under the Article 101 of TFEU). The types of the networks sharing could be:137

− passive sharing: mobile sites, masts, cabinet, ducts or dark fibre (the common regulatory frame-work138 allow the national regulatory authorities to encourage or impose facility sharing included physical co-location and duct, building, mast, an-tenna or antenna system sharing)

− active sharing: radio access network (RAN), fibre network, network elements

− spectrum sharing or roaming − full network sharing though merger or joint ven-

The main benefits of the network sharing are accel-erated deployment, additional coverage in rural areas and fewer sites in urban areas. However, network sharing could reduce the competition if the parties

133 Speech of Vice-president Almunia on Introductory remarks on Hutchison 3G Austria/ Orange Austria merger decision, 12.12.2012, SPEECH/12/946.

134 European Commission – MEMO/13/779 11/09/2013, <http://europa.eu/rapid/press-release_MEMO-13-779_en.htm>

135 M.6497 H3G/Orange (n. 30) para. 418.

136 SPEECH/12/946., (n. 134)

137 See: BEREC-RSPG report on infrastructure and spectrum sharing in mobile/wireless networks, June 2011, BoR (11) 26, RSPG11-374, para. 5-8. <http://www.irg.eu/streaming/BoR%20(11)%2026%20BEREC-RSPG%20report%20on%20spectrum%20sharing_final_110629.pdf?contentId=547195&field=ATTACHED_FILE> accessed 19.08.2013.

138 See: Article 12 of the Framework Directive (n. 1) and Article 12(1)(f) of the Access Directive (n. 84).

lose their independence in determining their mar-ket products due to the common characteristics and input costs of the underlying infrastructure and/or facilitate the exchange of information between the parties. The main question in terms of the anti-com-petitive effects of network sharing is what level of autonomy for the parties could be retained to differ-entiate their offers regarding the price and the qual-ity of services.

There are two main conflicting issues here: pro-moting investments in the development of these new networks, especially in the rural areas, while safeguarding competition and boosting consumer choice.139As the Commission declared: “The aim of the new regulatory framework is ultimately to achieve a situation where there is full infrastructure compe-tition between numbers of different infrastructures. This can occur within or between platforms.”140 The potential competitors’ cooperation in developing common infrastructure may decrease the level of competition based on overlapping infrastructure as well as consumer choice while it could contribute to the spread of the new networks coverage. The main question is to balance between those conflicting is-sues when the interests to deploy new infrastructures outweigh the anti-competitive effects of network sharing. Network sharing for rural areas is generally considered as pro-competitive as long as it provides enhanced consumer access where it would not have been viable otherwise. Passive network sharing gen-erally also does not lead to anti-competitive effects if the parties are able to differentiate their products and to limit their exchange to information necessary to maintain the passive network sharing.141Active net-work sharing in the urban areas could potentially lead to negative impact on competition. When as-sessing its effects, three aspects must be taken into account: the parties’ market position, the level of their autonomy to differentiate their products, and counterbalancing efficiency gains (e. g. additional covered areas, more capacity).

The Commission took the view that national roam-ing between network operators who are licensed to roll out and operate their own digital mobile net-works by definition restricts competition between those operators on its key parameters.142 However, the GC found that the Commission wrongly conclud-ed that the roaming agreement was restrictive by its very nature, since the Commission only took gener-al considerations which were not based on any spe-cific evidence. Therefore, its decision suffered from

insufficient evidence.143 According to the French Competition Authority,144 the roaming agreements may severely limit the parties’ ability to differenti-ate their products and undermine the principle of network infrastructure competition but could lower the barriers to entry for a new operator. Therefore, roaming agreements must be temporary.

VII. Conclusion

Four aspects of the most recent developments of competition law in telecommunications could be highlighted:

Firstly, there is a manifest tendency towards ex-an-te regulation as primary territory of the definition of relevant markets in telecommunications. This is due to the fact that national regulatory authorities have to analyse the telecommunication market (i. e. defining markets and identifying operators having SMP) in accordance with the principles of competition law. The Commission elaborated several important tele-communications-specific competition law arguments by virtue of Article 7 notifications, e. g. regarding the relevance of the current market data when defining relevant market or the significance of the indirect constraint exerted by the retail CaTV access on the WBA market.

139 See: Directive 2009/140/EC of the European Parliament and the Council amending Directives 2002/21/EC on a common regu - latory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and services, OJ 2009 L 337/37, recital 8-9, and 53.

140 First Explanatory Memorandum attached to the Commission Recommendation on relevant product and markets within the electronic communications sector susceptible to ex-ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic networks and services, p. 25. <http://www.ivir.nl/legislation/telecom/eu/explanmemoen.pdf> accessed 08.19.2013.

141 See:Commission decision of 16 July 2003 in Case COMP/38.369: T-Mobile Deutschland/O2 Germany: Network Sharing Rahmenvertrag, OJ2004L 075, paras. 102-103.

143 T-328/03, O2 (Germany) GmbH & Co. OHG v Commission of the European Communities, ECR [2006] II-01231, para. 86. and 116.

144 Autorité de la concurrence’s opinion on the conditions for network sharing by mobile networks, press release 11.03.2013. <http://www.autoritedelaconcurrence.fr/user/standard.php? id_rub=483&id_article=2062> accessed 18.08.2013.

Secondly, unsurprisingly, the relationship of the ex-ante regulation and the ex-post review usually come up as a core issue in the abuse of dominance cases since the concept of ex-ante SMP and the ex-post dominance interfere in this kind of cases. Al-though the European Courts ruled that the Commis-sion is not bound by the national regulatory authori-ties’ decision and that a national regulatory authority and ex-post review by the Commission have distinct purposes and objectives, the Commission however decided in Telekomunikacja Polska with reference to the ‘ne bis in idem’ principle to deduct from the final amount of the fine the sum of fines imposed by UKE on TP for conduct which partially overlaps with the facts of the Commission’s decision.

Thirdly, the Commission (like in its previous de-cision in Telefónica) considered the impact of its de-cision on the TP’s incentives to invest, since the TP’s ex-ante incentives to develop and exploit its upstream infrastructure for its own benefit must be balanced with downstream competition in the long term by imposing access to TP’s upstream network.

The consideration of the incentives to invest is an absolute focus of the recent competition law enforce-ment is telecommunications. The Commission reject-ed the parties’ efficiency claims in the H3G/Orange merger by network-sharing counterfactual analysis, stating that network sharing was a less anti-compet-itive means of achieving hypothetical efficiencies without reducing the number of retail players. On the other hand, the pro-competitive effects of the network sharing agreements are not so obvious. The significance of network sharing agreements in the telecommunication markets has increased recently due to the greater demand for high-speed access both on the mobile and fixed telecommunication networks which require huge investments. There are two main conflicting issues here: promoting investments in the developments of these new networks especially in the rural areas while safeguarding competition and boosting consumer choice. The competition authori-ties are likely to receive more insight into competition law aspects of the network sharing agreements in telecommunications in the future.

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