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Access and Termination Charges in Telecoms: Antitrust considerations

European Commission DG Competition Chief Economist Team. Access and Termination Charges in Telecoms: Antitrust considerations. Eliana Garces Tolon European Commission- DG Competition Toulouse 30 June 2006.

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Access and Termination Charges in Telecoms: Antitrust considerations

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  1. European Commission DG Competition Chief Economist Team Access and Termination Charges in Telecoms: Antitrust considerations Eliana Garces Tolon European Commission- DG Competition Toulouse 30 June 2006 The views expressed in this presentation are those of the presenter and do not attempt to portray the official position of the European Commission

  2. Economic Issues and Antitrust Concerns • Optimal access and termination prices depend on • Price Elasticity and calling patterns of callers • Relative size of network • Nature of competition (price/non price, extent of differentiation, access vs. usage) • Number of related services (bundling opportunities) • Prevalence of cross subsidisation and non linear pricing • Antitrust consequences • Might no be so obvious to define markets • Impact on consumer welfare difficult to assess • Collective dominance implications: effects of lack of transparency in pricing - agreements

  3. Approach by the European Commission • Market definition based on substitution possibilities and entry barriers at each level of the communication process  Narrow markets • Intervention based on competition concerns if SMP and • Abuse: Art. 82 cases (Roaming UK and DE, margin squeeze cases) • Presumption of harm: Regulatory framework • Harm is foreclosure or excessive price • Price related remedies: No price discrimination, Cost orientation • But asymmetric remedies in termination fees have been allowed •  Simple economics • basically ignores MSM issues – ignores potential bundling and/or price discrimination incentives.

  4. Current Revision of the Framework Regulation for Electronic Communications • Same criteria as before • Movement towards deregulation? • Take out some markets: retail except universal service obligation • Add some others: wholesale SMS • Are market definition and SMP the right criteria for ex-ante regulation? • What would be viable alternatives (performance measures,…)? • Should there be a harmonisation of remedies? (revision of directives 2009)

  5. International Roaming Sector Inquiry • Regulation proposal based on excessive pricing allegations BUT: • No theory of harm has been developed (excessive price w/o SMP) • No SMP has been demonstrated  Difficult to intervene on anti-trust grounds or even using current regulatory framework. • Concerns with the proposed regulation: • Regulating prices without understanding pricing mechanism • What are the incentives to price high on wholesale international roaming? • What determines (lack of) pass-on? How much pass-on is there? • Impact assessment incomplete

  6. General Considerations • EC should understand firms’ motivation and incentives for pricing before taking action • This would help better identify the source of potential inefficiencies and design the best appropriate remedy • Examine consequences of remedies on entry, consumer welfare and innovation. • Competition policy should only be used when there is harm to the competitive process

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