€39 million was recently imposed by the European Commission on ST and its parent company, Deutsche Telekom AG, for anti-competitive conduct in the Slovak telecoms market for broadband services.
The Commission’s message is loud and clear. It will not tolerate abusive behaviour by a dominant operator which seeks to eliminate competitors from the market in question.
ST is the owner of the only nationwide telephone metallic access network and is the only supplier of wholesale access to its unbundled local loops (ULL) in Slovakia. This local loop is the metallic cable pair that connects a customer’s premises with a telephone exchange in the network of the service provider. ST had rolled out its metallic telephone network, which also includes the local loops, when it enjoyed a monopoly. The Slovak telecoms regulator decided that ST, as a dominant company, must grant alternative operators remunerated access to its network to allow for effective competition on the downstream markets. This was necessary since competitors could not have sufficient resources to set out a similar network.
In implementing its obligations, ST published a set of detailed terms and conditions under which it would offer access to its ULL. However, these conditions were such as to, in practice, render access to competitors unacceptable. In particular, ST unjustifiably withheld from its competitors network information necessary for the unbundling of the local loops, reduced the scope of its regulatory obligation to unbundle by limiting access to only a quarter of the lines included in a cable – without any technical justification for doing so – and set other unfair terms and conditions in relation to each of the steps needed to obtain access. In this way, it delayed or prevented the entry of alternative operators into the retail broadband services market in Slovakia. Indeed, during most of the period under investigation, no alternative operator was able to get access to ST unbundled local loops.
To add insult to injury, ST imposed a margin squeeze on its competitors. This means that it set its wholesale prices for access to its local loops and its retail prices for the services it offers at levels which would force competitors to incur losses if they wanted to sell broadband services to retail customers at retail prices matching those offered by ST. Under such conditions, alternative operators could not viably enter the Slovak market.
The Commission found ST guilty of abusing of is dominant position on two counts. In practice, it was refusing to supply access to its network due to the terms and conditions imposed and it also imposed a margin squeeze on its competitors by applying unfair tariffs which did not allow an equally efficient competitor relying on wholesale access to ST’s network to compete with ST at a retail level without incurring a loss.
This is not the first time that operators in the European telecoms market have been found guilty of anti-competitive conduct and hefty fines imposed on them.
The Commission, as the competition watchdog of the EU, is always ready to bear down on companies which engage in anti-competitive conduct to the detriment of a European level playing field. As this decision clearly shows, it is ready to do so even in those markets such as the telecoms one, which are often regulated at national level by the national competent authorities.
mariosa@vellacardona.com
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.