Maltacom 'is not holding back competition' (1)

Maltacom wishes to correct the many factually incorrect and misleading statements carried in the article entitled EU Telecom Report - Maltacom Holding Back Competition (February 21).

Nowhere does the European Commission state that Maltacom plc is holding back competition - as the title of the article implies. The Commission simply refers to Maltacom's very strong position in the market for local calls. Most incumbent operators in the EU similarly enjoy dominance in their respective countries. Incidentally, the Commission's Malta report also refers to the dominant positions and monopoly enjoyed by local telecom operators other than Maltacom.

¤ The Commission is misquoted in the article as saying that liberalisation has not brought about any advantage to the consumer, when, in fact, the statement in the EU Commission's report refers only to the choice of operators. This in any case does not necessarily mean that consumers are worse off, so much so that the Commission's report refers more than once to Maltacom's "relatively low retail prices".

¤ Maltacom's tariffs have always been regulated. In fact, any changes to the company's fixed line tariffs have to be approved by the Malta Communications Authority (MCA) after the company submits very detailed accounting and other information. Maltacom therefore does not dictate either its wholesale or retail tariffs.

¤ Maltacom's peak termination rate is about 33 per cent lower than that reported in the article and its interconnection tariffs are derived from an economic cost model developed by the MCA.

¤ The company already has functioning interconnection agreements with mobile network operators and is currently in negotiation with other network operators.

¤ The article confuses the discussion in the Commission's report on tariff rebalancing as referring to achieving a balance between wholesale and retail tariffs. Tariff rebalancing is in fact an exercise conducted on retail tariffs only. It refers to the aim of eliminating imbalances and basing all retail tariffs on costs. Operators such as Maltacom do not control the tariff rebalancing process. Late last year, after many months of preparatory discussions, Maltacom submitted a retail tariff proposal to the MCA. Evaluation is ongoing.

The allegation regarding number portability is also unfounded. Readers are informed that on January 6, 2006, Maltacom officially informed the MCA of the company's determination to be fully compliant and would be introducing the full service to its customers by the stipulated April 1, 2006 deadline.

Editorial note: The following are excerpts from the European Commission in relation to the points raised by Maltacom:

On fixed line telephony and consumers.
"In the fixed telephony sector (*Maltacom's), the formal liberalisation of the sector in 2001 has not, so far, brought benefits to end users in the form of an enhanced freedom of choice between network operators and service providers."

On tariff rebalancing.
"Retail tariff rebalancing in the fixed telephony market (*Maltacom's) needs to be finalised. Charges for line rental for residential customers seem to be relatively low and they include free minutes of talk.

"Tariffs for local/national calls appear to remain lower than the associated wholesale cost. Some changes (including per second billing - instead of current per five minute - and discontinuation of free minutes bundled with line rental) were to be introduced in 2006."

On access/interconnection.
"Concluding any interconnection agreement with the fixed incumbent (*Maltacom), proves so far to be rather difficult, especially since, as indicated in the 10th report, the wholesale tariffs of the incumbent published in its reference offer and believed to be cost oriented appear to be very high.

"Despite a significant decrease, by half, in the fixed incumbent's termination rates, the tariffs remain the highest in EU. The high interconnection tariffs combined with relatively low retail prices are posing a question of a possible margin squeeze (call termination rate is €0.028 per minute, in comparison to retail €0.125 charged every five minutes) and make the prospects for development of competition on the fixed market questionable. MCA has undertaken some work in this regard and, among other things, has built a bottom-up cost model of the incumbent's network. Interconnection rates resulting from this model differ significantly from the rates offered by the incumbent in his reference interconnection offer, however, they remain to be implemented. As long as the interconnection tariffs are not lowered and balanced in respect to retail prices, no prospects for service based competition (on the basis of carrier selection and pre selection) seem to be available in Malta."

On number portability.
"Despite objections, current mobile operators seem to be prepared to introduce the service by the end of first quarter of 2006. The fixed incumbent (*Maltacom), on the other hand, claims that it will not be technically ready for the introduction of number portability by that time."