Judgment;Summary — ECLI:EU:C:2022:867
Date: 2022-11-10
Language of the case: English
Court formation: Fifth Chamber
Subject matter: Telecommunications
Procedure: Reference for a preliminary ruling
Origin: Ireland

C-494/21 -1
CURIA GREFFE 
Luxembourg
1 1. 08. 2021
THE HIGH COURT
COMMERCIAL 
2019 No. 167 MCA 
(2019 No. 76 COM)
Thursday the 1st day of July 2021 
BEFORE MR JUSTICE O’MOORE
IN THE MATTER OF AN APPEAL UNDER REGULATION 4 OF THE 
EUROPEAN COMMUNITIES (ELECTRONIC COMMUNICATIONS 
NETWORKS AND SERVICES) (FRAMEWORK) REGULATIONS 2011 
BETWEEN/
EIRCOM LIMITED
APPELLANT
AND
COMMISSION FOR COMMUNICATIONS REGULATION
RESPONDENT
AND BY ORDER OF THE COURT:
THREE IRELAND (HUTCHISON) LIMITED 
AND
THREE IRELAND SERVICES (HUTCHISON) LIMITED
AND
VODAFONE IRELAND LIMITED
NOTICE PARTIES
The above entitled proceedings having being listed before the Court 
on the 6th day of November 2020 for Preliminary Reference Hearing pursuant to the 
parties making an application to the Court for a reference to the Court of Justice of 
the European Union for a preliminary ruling pursuant to the provisions of Article 
267 of the Treaty on the Functioning of the European Union
On the application of Counsel IT IS ORDERED that the 
proceedings herein be reported by a shorthand writer
  1
THE HIGH COURT
And on hearing Counsel for the Appellant Counsel for the 
Respondent Counsel for the First and Second Named Notice Parties and Counsel 
for the Third Named Notice Party
And the Court being pleased to reserve Judgment 
And further clarification regarding the form of question being 
provided by the parties and in particular the Appellant by the 13th day of November 
2020
And a written ruling having been delivered electronically on the 19th 
day of February 2021
And a written Judgment having been delivered electronically on the 
5th day of May 2021
And the parties having provided agreed submissions to appear as 
Schedule to the within Order giving a background of the matters under 
consideration for the within referral to said Court of Justice
And the matter coming before the Court on this day
IT IS ORDERED that pursuant to Article 267 of the Treaty on the 
Functioning of the European Union that the question as set forth in the written 
Judgment of this Court delivered on the 5th day of May 2021 be and the same ios 
hereby referred to the Court of Justice of the European Union for a determination 
the said question being as follows:
In circumstances where:-
(i) the telecommunications market has been liberalised and there are multiple 
telecommunication services providers operating in the market;
(ii) one service provider (the “Universal Service Provider” or “USP”) has 
been selected by the National Regulatory Authority (“NRA”) to perform 
Universal Service Obligations (“USOs”);
THE HIGH COURT
(iii) it has been determined by the NRA that there is a positive net cost 
associated with the performance of the USOs (“USO Net Cost”); and
(iv) it has been determined by the NRA that the USO Net Cost is material 
compared to the administrative costs of the establishment of a sharing 
mechanism in respect of the USO Net Cost amongst participants in the market;
If the NRA is required, pursuant to its obligations under the Universal Services 
Directive 2002/22, to consider whether the USO Net Cost is excessive in view 
of the ability of the USP to bear it, account being taken of all the USP's 
characteristics, in particular, the quality of its equipment, its economic and 
financial situation and its market share (as referred at para. 42 of Base) is it 
permissible under the Directives for the NRA to conduct that assessment by 
having regard exclusively to the characteristics/situation of the USP, or is it 
required to assess the characteristics/situation of the USP relative to its 
competitors in the relevant market?
JEAN BRENNAN 
REGISTRAR 
Perfected 30th of July 2021
A&L Goodbody 
Solicitors for the Appellant
McCann FitzGerald 
Solicitors for the Respondent
Matheson
Solicitors for the First and Second Named Notice Parties 
McKeever Rowan
Solicitors for the Third Named Notice Party
SCHEDULE
THE HIGH COURT
2019/167MCA
BETWEEN
EIRCOM LIMITED
AND
PLAINTIFF
COMMISSION FOR COMMUNICATIONS 
REGULATION
DEFENDANT
AND
VODAFONE IRELAND LIMITED 
AND
THREE IRELAND (HUTCHINSON) LIMITED 
AND
THREE IRELAND SERVICES (HUTCHINSON) LIMITED
NOTICE PARTIES
ORDER FOR A REFERENCE TO THE COURT OF JUSTICE OF THE
EUROPEAN UNION
1. Abbreviations
“C-3 89/08 Base” Judgment of 6 October 2010, Base NVand Others v. Ministerraad,
Case C-389/08, ECLI:EU:C:2010:584
“Universal Service Directive 2002/22/EC of the European Parliament and of the
Directive” Council of 7 March 2002 on universal service and users’ rights
relating to electronic communications networks and services
“Framework Directive” 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
CURIA GREFFE 
Luxembourg
^ 1 1. 08. 2021
“USO” Universal Service Obligation
“USP” Universal Service Provider
“ROCE” Return on Capital Employed
“WACC” Weighted Average Cost of Capital
I. THE REFERRING COURT
2. This request for a preliminary ruling pursuant to Article 267 of the Treaty on the 
Functioning of the European Union is made by the High Court of Ireland (Mr 
Justice O’Moore). The contact details for communications from the Court of 
Justice are as follows.
Principal Registrar 
The High Court 
Four Courts 
Inns Quay 
Dublin 7 
Ireland
II. THE PARTIES TO THE MAIN PROCEEDINGS AND THEIR 
REPRESENTATION
3. The Plaintiff (“Eircom”) is represented by Jonathan Newman, SC; and Jennifer 
O’Connell BL of the Bar of Ireland, instructed by A&L Goodbody Solicitors LLP of 
International Financial Services Centre, North Wall Quay, Dublin 1, D01H104, 
Ireland.
4. The Defendant (“ComReg”) is represented by Cian Ferriter SC; and David Dodd BL of 
the Bar of Ireland, instructed by McCann Fitzgerald Solicitors of Riverside One, Sir John 
Rogerson's Quay, Dublin 2, Ireland.
5. The First Named Notice Party is represented by Niall Buckley BL of the Bar of Ireland, 
instructed by McKeever Rowan Solicitors of 8 Exchange Place, International Financial 
Services Centre, Dublin 1, Ireland D01 E925.
6. The Second and Third Named Notice Parties are represented by Donogh Hardiman BL of 
the Bar of Ireland, instructed by Matheson Solicitors of 70 Sir John Rogerson's Quay,
2
Dublin 2, Ireland D02 R296.
III. THE SUBJECT-MATTER OF THE MAIN PROCEEDINGS AND THE 
RELEVANT FACTS
7. Guidance is required from the Court of Justice of the European Union as to the correct 
application of C-389/08 Base which considers the interpretation of the Universal 
Service Directive and specifically the assessment of an unfair burden, in 
circumstances where there is only one USP in the Irish market but multiple 
telecommunication service providers.
8. The dispute in the main proceedings concerns a statutory appeal to the Irish High Court 
brought by Eircom pursuant to Regulation 4 of the European Communities (Electronic 
Communications Networks and Services) (Framework) Regulations, 2011 (“the 
Framework Regulations”).
9. Eircom is seeking relief in respect of five Decisions made by ComReg, which found that 
the net cost to Eircom of delivering the USO in respect of the provision of access at fixed 
locations for the years 2010-2011 to 2014-2015 inclusive was not an unfair burden on 
Eircom and that, consequently, Eircom’s applications for funding pursuant to Regulation 
11 of the European Communities (Electronic Communications Networks and Services) 
(Universal Service and Users' Rights) Regulations 2011 (the “Universal Service 
Regulations”) should be refused.
IV. OVERVIEW CHRONOLOGY
10. On 30 June 2010, following a public consultation, ComReg re-designated Eircom as the 
USP in respect of the provision of access at fixed locations for a period of two years and 
all other aspects of the USO, from 1 July 2010 to 30 June 2012. Subsequent decisions re­
designated Eircom for certain aspects of the universal service and the conditions and 
obligations have been altered in light of market conditions. Eircom remains the sole USP 
for the provision of access at a fixed location and a voice service and public payphones in 
Ireland to date.
11. On 31 May 2011, following a number of public consultations, ComReg published 
Decision 04/11, comprised of a series of numbered Decisions, which set out the principles
3
and methodologies for calculating the USO net costs and revenues, the principles and 
methodologies for calculating the other benefits of the USO and the approach that would 
be taken to the determination of whether an unfair burden was being placed on the USP as 
a result of the net cost. The terms of the relevant decisions setting out this approach are set 
out in Annex A.
12. Between September 2014 and March 2016, Eircom made applications for funding of the 
net cost of the USO for each of the five years from 2010-2011 to 2014-2015, pursuant to 
Regulation 11 of the Universal Service Regulations.
13. On 18 April 2019, following a public consultation in respect of each of the five 
applications, ComReg published its five Decisions (the “Decisions”) finding that the 
positive net cost incurred by Eircom in delivering the USO in each of the years 2010-2011 
to 2014-2015 was in each case not an unfair burden.
14. On 15 May 2019, Eircom brought a statutory appeal against the Decisions on the grounds 
that ComReg erred in its finding that there was no unfair burden on Eircom.
V. THE DECISIONS UNDER CHALLENGE
15. ComReg made a separate Decision in respect of each year for which Eircom sought 
funding. These decisions were published together and in each case it was decided that the 
net cost was not an unfair burden on Eircom.
16. ComReg calculated that the net cost to Eircom of the USO over the five years was just 
under €43 million in total. The positive net cost identified by ComReg for each year is set 
out in Annex B.
17. The Earnings Before Interest & Tax of Eircom in respect of its fixed line business over the 
five year period in question was €1.397 billion, the figure in respect of each relevant year 
being set out in Annex C.
18. In respect of each of the Decisions, ComReg relied on an “Unfair Burden Report” 
provided by Oxera, a firm of economic consultants, in respect of the relevant year. The 
Report of Oxera for the year 2014-2015 is attached at Annex D by way of sample, 
together with the corresponding Decision of ComReg at Annex E.
19. In each Decision it was determined that there was a verifiable and verified direct net cost; 
that the benefits of the USO did not outweigh the net cost (i.e. that there was a positive net
4
cost); and that the positive net cost was material compared to the administrative cost of a 
sharing mechanism (therefore satisfying the conditions set forth at (i), (ii) and (iii)(a) in 
Decision 38, as set out in Annex A).
20. In each of its Reports, Oxera concluded that the USP’s profitability and ability to earn a 
fair rate of return on its capital employed had not been significantly affected by the net 
cost of the USO in the relevant period (which assessment was required to be undertaken by 
Decision 40, as set out in Annex A).
21. The benchmark used by Oxera (and adopted by ComReg) to determine whether or not 
Eircom was earning a fair rate of return was to compare a return on capital employed 
(“ROCE1”) measure of Eircom’s financial returns to a regulated weighted average cost of 
capital (“WACC”), which cost had been previously determined by ComReg. In the 2014- 
2015 Report for example, it was determined that Eircom’s fixed line (retail and wholesale) 
business ROCE including the net cost was 11.4%, whilst Eircom’s regulated allowed 
WACC was 8.18% (and the ROCE in the fixed line business including the net cost 
exceeded the WACC in each year under assessment). A table of these figures for each year 
under assessment is at Annex F. Oxera also considered (although Eircom takes the view 
that no significance was given to these indicators by Oxera) additional indicators of 
Eircom’s financial position and economic situation, including Eircom’s own market share 
of the fixed line market by Revenue, changes in Eircom’s average revenue per user over 
time, and changes in the number of customers of Eircom over time as “broader context” 
for the profitability analysis that it had conducted. Oxera concluded in each year under 
assessment that Eircom’s profitability and ability to earn a fair rate of ROCE had not been 
significantly affected by the net cost of the USO and, therefore, that the burden of the net 
cost in the period of application was not excessive in view of Eircom’s ability to bear it.
22. Oxera stated that it had not therefore, on the basis of the analysis carried out, assessed 
whether the net cost materially impacted Eircom’s ability to compete on equal terms with 
competitors going forward under Decision 41 (as set out in Annex A).
23. ComReg concluded that, in respect of each year of application, the finding as to there 
being no significant effect on Eircom’s profitability and ability to earn a fair rate of 
ROCE demonstrated that the net cost had not caused a significant competitive 
disadvantage for Eircom. ComReg therefore found that there was no need carry out the 
competitive distortion assessment set out in Decision 41 of Decision 04/11.
1 The ROCE is an accounting-based financial returns metric which captures the relationship between operating profits and 
capital employed in a business.
5
24. Neither ComReg nor Oxera carried out any assessment of any of Eircom’s competitors in 
the marketplace. Both Oxera’s reports and the ComReg decisions are focused on the 
characteristics of Eircom.
VI. THE FIXED LINE TELECOMMUNICATIONS MARKET IN IRELAND
25. The national market shares of the market participants in the fixed line market in Ireland for 
the bulk of the relevant period, as they appear from ComReg’s 2015 Market Review, are 
set out at Annex G: as appears therefrom, the national market share of Eircom (the former 
incumbent monopolist) in respect of fixed telephony subscription numbers fell from 74.5% 
(Ql, 2010) to 47.2% (Q4, 2014); while, for example, Virgin increased its national share 
from 5% to 21.7% in the same period. The ComReg Market Review, 2014, stated that in 
Dublin the market share for Virgin was 42% against Eircom’s 44% in a 2013 household 
survey.
26. As Eircom has been the only undertaking designated with significant market power in a 
number of fixed line markets (wholesale and retail), such that its wholesale and retail 
prices are regulated, Eircom is the only market participant for which a WACC has been 
applied by ComReg. The amount of the regulated WACC is not in dispute, but the 
appropriateness of its use in the unfair burden assessment is.
27. The USP is, in particular, obliged to honour any reasonable request by a member of the 
public to be connected to the public communications network at a fixed location at a single 
national price decided by the USP (the Geographically Averaged Price “GAP”).
28. Most of the USO net cost (in excess of 85% in the 2014-2015 period) arises out of the 
provision of USO services to uneconomic customers in economic areas or economic 
customers in uneconomic areas.
29. Although the relevance of these matters to the appeal is disputed, there is no dispute that, 
in principle, it is a feature of a competitive telecommunications market that service 
providers which are not USPs also benefit from having consumers connected to the 
network who would otherwise remain unserved (“positive externalities”) or that it is also a 
recognised feature of such competitive markets that all service providers may in theory 
“cherry-pick” in more profitable geographic centres.
VII. THE RELEVANT LEGAL PROVISIONS
6
30. At the material times the EU regulatory framework for electronic communications 
consisted of the Framework Directive and four specific Directives, of which the Universal 
Service Directive is relevant to this appeal.
31. The Framework Directive provides that each Member State shall designate either one or 
more competent bodies to act as a National Regulatory Authority and that this body or 
bodies shall be charged with the regulatory obligations in the Framework Directive itself 
and each of the specific Directives. Article 3(3) provides that “Member States shall ensure 
that national regulatory authorities exercise their powers impartially and transparently.”
32. ComReg, as the regulator of the electronic communications sector in Ireland, is the 
National Regulatory Authority for the purpose of the Framework Directive and the specific 
Directives.
33. Articles 7 and 8 of the Framework Directive set out the principles to be applied by the 
National Regulatory Authority including non-discrimination, safeguarding competition, 
proportionality and transparency. 2
34. The following provisions of the Universal Service Directive are relevant to the issues in 
these proceedings that give rise to the parties’ request for an Article 267 reference:-
• Article 1, which sets out the aim and fundamental nature of universal service;
• Article 3, which places obligations on Member States to ensure the availability of 
universal service, whilst respecting certain specified principles;
• Article 12, which sets out the steps to be undertaken where an National Regulatory 
Authority considers that a USP may be under an unfair burden;
• Article 13, which provides that where an National Regulatory Authority has found 
that a USP is subject to an unfair burden that Member States may, upon request 
from the USP, either introduce a mechanism to compensate the USP for the 
determined net costs under transparent conditions from public funds and/or share 
the net cost of USOs between the different providers of electronic communications 
networks and services in the market;
• Part A of Annex IV, which governs the correct calculation of the USO net costs3.
2 Article 2(g), 3(1) and Recitals 1 and 36 of the Framework Directive are also relevant.
3 The following recitals are also relevant to the issues in these proceedings: Recitals 2, 3, 4, 18, 21 and 23.
7
35. At the national level, Regulation 11 of the Universal Service Regulations (S.I. 337/2011)4 
provides that the USP may apply to ComReg for a determination that the net costs of the 
USO represent an unfair burden.
36. Regulation 12 provides that where ComReg finds there to be an unfair burden on the USP 
it shall apportion the net cost of the USO among providers of electronic communications 
networks and services.
VIII. C-389/08 BASE
37. There is a disagreement between the parties as to the meaning of the conclusions of the 
Court of Justice in C-389/08 Base and their application to the assessment of an unfair 
burden where there is only one USP in the market and as to the correct test to be applied in 
determining an unfair burden more generally. Consequently, a reference needs to be made 
to the Court of Justice concerning, principally, the application to this appeal of C-389/08 
Base.
38. The factual background for the reference to the Court of Justice in that case was a 
legislative scheme whereby all operators in the market were potentially USPs if their 
customers were entitled to social tariffs. Belgian law provided that where an operator was 
granting a greater proportion of the total social tariffs granted in the market than 
corresponded to that operator’s market share, then the operator would be compensated.
39. The net costs, however, were not calculated by reference to the characteristics of each 
individual operator but were based on the costs of Belgacom, the former incumbent.
40. At §§42—43 the Court of Justice held as follows as to the meaning of 
“unfair burden”:5
“/« that regard, it is apparent from recital 21 in the preamble to Directive 
2002/22 that the Community legislature intended to link the mechanisms for the 
recovery of net costs which an undertaking may incur as a result of the provision 
of universal service to the existence of an unfair burden on that undertaking. In 
that context, in concluding that the net cost of universal service does not 
necessarily represent an unfair burden for all the undertakings concerned, it 
intended to exclude the possibility that any net costs of universal service provision 
automatically give rise to a right to compensation. In those circumstances, the
4 European Communities (Electronic Communications Networks and Services) (Universal Service and Users' 
Rights) Regulations 2011.
5 The same principles are set out in Case C-222/08 Commission v Belgium, related infringement proceedings 
brought by the Commission.
8
unfair burden which must be found to exist by the national regulatory authority 
before any compensation is paid is a burden which, for each undertaking 
concerned, is excessive in view of the undertaking’s ability to bear it, account 
being taken of all the undertaking’s own characteristics, in particular the quality 
of its equipment, its economic and financial situation and its market share.
In the absence of any specific provision in this regard in Directive 2002/22, it falls 
to the national regulatory authority to lay down general and objective criteria 
which make it possible to determine the thresholds beyond which - taking account 
of the characteristics mentioned in the preceding paragraph - a burden may be 
regarded as unfair. However, the fact remains that the authority cannot find that 
the burden of providing universal service is unfair, for the purpose of Article 13 of 
the directive, unless it carries out an individual assessment of the situation of each 
undertaking concerned in the light of those criteria.”
41. It is common case that both ComReg and the Irish High Court are bound by the principle 
of sincere cooperation to apply the findings of the Court of Justice. Where the parties 
differ is as to the correct interpretation of C-389/08 Base and its correct application to the 
factual situation in the present case.
IX. THE POSITIONS OF THE PARTIES ON THE LEGAL ISSUES
42. The parties agree that ComReg has a statutory obligation to determine whether the cost 
(net of benefits) of performing the USO represents an unfair burden for the USP. However, 
there is a disagreement between the parties as to the meaning of the conclusions of the 
Court of Justice in C-389/08 Base and their application to the assessment of an unfair 
burden where there is only one USP in the market and as to the correct test to be applied in 
determining an unfair burden more generally.
Eircom’s position
43. Eircom’s position, insofar as relevant to the issues giving rise to this request for an Article 
267 reference, is that:
(i) The determination of whether the USO is an unfair burden in a competitive 
market requires a competition analysis to assess whether the unilateral imposition 
of the net USO cost on the USP distorts competition by placing it at a competitive 
disadvantage vis-a-vis its competitors in the market;
(ii) The USP’s relative ability to bear the USO net cost should be assessed, account 
being taken not only of Eircom’s own characteristics, but those of its competitors. 
The independent expert economist engaged by Eircom expresses the view that
9
without that assessment there is a significant risk of ending up in a situation where 
all the communication services providers benefit from the positive externalities of 
the USO, but only the USP bears its costs, in spite of not being in a significantly 
better position to do so, which by definition should be considered unfair as there 
is no objective justification for such difference in treatment;
(iii) References in C-389/08 Base to the necessity to consider a USP’s own 
characteristics must be considered in the factual context of that case, where there 
were multiple USPs and the offending behaviour of the National Regulatory 
Authority was treating the potential unfair burden placed on each of those USPs in 
a generic fashion. The Court of Justice’s comments must be considered in this 
light rather than as a mandate to consider the characteristics of only one 
undertaking in a competitive market;
(iv) Further, the characteristics that fall to be considered under the test set out in C- 
389/08 Base, such as the quality of the equipment and market share, are 
fundamentally comparative terms and their relevance can only be the advantage or 
disadvantage that the USP has vis-a-vis its competitors;
(v) The findings in C-389/08 Base must also be understood in the context of the 
binding obligations on National Regulatory Authorities in the Framework 
Directive and the Universal Service Directive as well as in the light of the general 
principles of EU law. It is clear from the terms of the Framework Directive and 
the Universal Service Directive and the general principles of EU law that the 
minimisation of distortion to competition is a binding obligation placed on 
ComReg as National Regulatory Authority;
(vi) ComReg’s setting of a very high threshold to be met before it would consider that 
there was a “significant effect” on profitability and/or ability to earn a fair rate of 
return on capital before there is any assessment of whether or not a burden places 
the USP at a competitive disadvantage fails to meet ComReg’s obligations as 
National Regulatory Authority under the Framework and Universal Service 
Directives;
(vii) The methodology of assessing whether the USO net cost has placed the USP at a 
competitive disadvantage by assessing whether, in the relevant year the USP’s 
ROCE has exceeded its WACC, is flawed. ComReg’s approach only considers 
whether or not the USP has been able to absorb the cost without its ROCE falling 
to the level of its WACC. Further, the threshold looks at the ROCE of the entire 
retail and wholesale fixed line business of Eircom, and not that of its USO 
business (which is retail business only);
(viii) The imposition of a unilateral obligation to fund a universal service on one 
business in a competitive market simply on the basis that the National Regulatory 
Authority estimates that the business could afford it in the short to medium term 
could never constitute objective justification for doing so. The fact that the USP 
has a ROCE that is higher than its WACC does not, without further information,
10
show that the USP is able to absorb the cost without a detrimental impact on its 
competitive position in the market. It reveals nothing about the market power of 
the USP or the power of its competitors and is a weak indicator of market 
conditions and the competitive impact of the USO;
(ix) The ROCE of each of the market participants for the relevant period, as 
calculated by Eircom’s expert economist, appear at Annex H. The independent 
expert economist engaged by Eircom expresses the view that the figures show that 
Eircom’s average ROCE over the period 2010 - 2015 is the lowest amongst all 
the operators considered in the analysis;
(x) The use of the WACC determined by ComReg in respect of Eircom is not an 
appropriate benchmark: the independent expert economist evidence is that in 
many industries firms earn a rate of return above the WACC, and every operator 
in this market has profitability levels well above the WACC applied to Eircom. 
The USO, which is a regulatory obligation aimed at guaranteeing that users have 
access to a set of basic communication services at affordable prices, is not aimed 
at curtailing the returns by the USP in a competitive environment. Imposing the 
cost of the USO unilaterally on a USP, even if that places the USP at a 
competitive disadvantage, and regardless of the fact that its major competitors 
have not been the subject of any measures to reduce their profits to a like level, is 
contrary to the objectives of the Framework and Universal Services Directives of 
ensuring proportionality and avoid discrimination and distortion of competition;
(xi) The evidence given by Eircom’s expert economist and not contradicted by 
ComReg’s expert economist that in 2010-2011 the net cost would have had to 
have been €244 million to have met this test (representing 62% of Earnings 
Before Interests & Tax) and that in the years in respect of which funding has been 
sought the lowest sum that would have met this test in one of the years would 
have been a net cost of €51 million (representing 23% of Earnings Before 
Interests & Tax);
(xii) The test embraced by ComReg in its Decisions would mean that there would only 
be an unfair burden when Eircom’s ROCE for the entire fixed line business had 
sunk to a point where, if sustained, the expert economics evidence is that it would 
start to have problems raising new capital. This is inconsistent with the regulatory 
scheme, which aims to promote effective competition;
(xiii) Insofar as the findings in C-389/08 Base are relevant to markets with a sole USP, 
it therefore follows that the National Regulatory Authority must, first, undertake 
an individual assessment as to the real net costs for a USP without applying any 
generic assumptions as to the relationship between a positive net cost and an 
unfair burden, but must then, second, meet its binding obligation under the 
Universal Service Directive to determine whether or not it is an unfair burden in 
the full factual context of the market in which the USP is operating; and
11
(xiv) Eircom’s profitability and ability to earn a fair rate of return is significantly 
impacted by the USP Net Cost because it imposes an extra cost on Eircom that its 
rivals do not bear without Eircom possessing any countervailing advantage (such 
as quasi-monopoly market power in the retail market) to offset the disadvantage 
of the extra cost burden. Whether there is a “significant effect’ on profitability 
and/or ability to earn a fair rate of return cannot be determined by a profitability 
threshold, thereby excluding considerations of competitive distortion and 
objective justification.
ComReg’s position
44. ComReg’s position, insofar as relevant to the issues giving rise to this request for an
Article 267 reference, is that:
(i) The effect of the findings in C-389/08 Base is to focus on the USP’s ability to 
bear the net cost in light of the USP’s own characteristics. The test provides for a 
unilateral analysis of an entity’s own ability to bear the burden, not an analysis of 
all competitors in the market and their respective abilities to bear the net cost;
(ii) The Universal Service Directive not only permits National Regulatory Authorities 
to lay down general and objective criteria to make it possible to determine 
whether a burden may be regarded as unfair but, in light of C-389/08 Base, 
positively requires National Regulatory Authorities to do so. These are not fixed 
in the Directive or by the Court but are to be decided on by each National 
Regulatory Authority. It is therefore no surprise that each member state has 
adopted its own criteria and that these vary across member states;
(iii) The test posited by C-389/08 Base is directed to whether the net cost is excessive 
in light of the USP’s ability to bear it, in light of identified criteria which focus on 
the characteristics of the USP;
(iv) Given the test posited in C-389/08 Base, profitability is a critical variable in 
determining Eircom’s ability to bear the net cost;
(v) ComReg contends that Eircom’s profitability and ability to earn a fair rate of 
ROCE are measures of its financial position and that they are appropriately used 
to assess its ability to bear the burden of the net cost. ComReg contends that the 
regulatory allowed WACC is an appropriate competitive benchmark level of 
return for use in the assessment. The WACC is commonly used by regulators and 
authorities in competition cases as a benchmark measure of the return that 
investors (i.e. equity owners and lenders) can expect from investing in a business. 
WACC represents an investor's opportunity cost of assuming the risk of investing 
in a company or, in other words, the return that an investor would require as a 
benchmark for investing;
12
(vi) The Oxera reports and the ComReg decisions focused on Eircom’s characteristics 
and Eircom’s ability to bear the net cost and concluded that the net cost was not 
excessive in light of Eircom’s ability to bear it, in line with this test;
(vii) The ability of an entity to cross-subsidise from profits made is relevant to the 
ability to bear the net costs of the USO and cross-subsidisation as a principle 
subtends the reasoning in C-389/08 Base;
(viii) Eircom emphasises the unfairness to it of having to bear a burden of €45m over 
five years, ignoring in the same period that Eircom’s EBIT was €1.397 billion. 
That is of note given that the unfair burden assessment is directed at the USP’s 
ability to bear the net cost;
(ix) Critically, Eircom does not present evidence that its profitability and ability to 
earn a fair rate of ROCE was significantly affected by the net cost of the USO. 
Nor is it claimed by Eircom that the net cost of the USO is driving any lack of 
profitability (as there is no lack of profitability) or, more importantly, an inability 
to bear the cost. The absolute level of profits and the ROCE v WACC analysis 
demonstrate that the net cost was not having a significant effect on Eircom’s 
profitability. To take the year 2010-2011 as an example, while operating in a 
competitive environment, Eircom’s EBIT was €388 million while bearing the 
positive net cost for that year of €7.5 million;
(x) Nowhere does C-389/08 Base state, or support, the proposition that ComReg must 
carry out an assessment of the USP’s competitors, their profit, their market share, 
and the benefit which they obtain from the USO. Nowhere in C-389/08 Base is it 
suggested that such a type of market analysis has to be carried out, or that any 
kind of comparison between Eircom and its competitors must be conducted, 
before determining whether Eircom can bear the net cost burden;
(xi) ComReg contends that the competitors’ market shares and their progression trends 
(as advanced by Eircom) are not indicative, still less determinative, of Eircom’s 
ability to bear the net cost. In relation to the ROCE of other market participants 
set out by Eircom at Annex H, ComReg contends that this ROCE analysis 
presents volatile and contradictory data points on competitors’ profitability and, in 
any event, is irrelevant to the assessment;
(xii) If an unfair burden assessment required such a market analysis one could 
reasonably expect that the Framework or Universal Services Directive to have set 
this out in similar or like terms, or the Court of Justice could have stated this in C- 
389/08 Base; it did not do so;
(xiii) ComReg’s methodology does take into account the competitive situation in the 
market as, where it is established that a positive net cost significantly affects a 
USP’s profitability, ComReg will assess whether or not such a net cost materially 
impacts a USP’s ability to compete on equal terms with competitors going 
forward. In addition, in the context of the Decision 40 analysis, ComReg and
13
Oxera did consider aspects of the market as broader context for the profitability 
assessment (including Eircom’s pricing and its fixed-line market share), as can be 
seen in, for example, Table 5.1 and the conclusion of the Oxera reports appended 
to each of the Decisions, an example of which for 2014-2015 is at Annex D;
(xiv) Profitability is a strong indicator of the competitive environment and the outcome 
of a profitability assessment is not divorced from competitive considerations;
(xv) At issue in this appeal is the net cost of the USO - the impact of a monetary sum - 
not other qualitative requirements of the USO that might have competitive effects, 
such as GAP;
(xvi) In deciding C-389/08 Base there can be no doubt that the Court of Justice had in 
the forefront of its mind the requirements of non-discrimination, proportionality 
and minimisation of market distortions, and the departure from market conditions 
that the USP might entail, when it determined the appropriate test to determine the 
presence of an unfair burden; and
(xvii) The expert economist retained by ComReg is satisfied that the comparison of 
ROCE and WACC is appropriate as part of the assessment of a USP’s economic 
and financial position.
X. GROUNDS FOR A REFERENCE
45. There is a disagreement between the parties as to the meaning of the conclusions of the 
Court of Justice in C-389/08 Base and their application to the assessment of an unfair 
burden where there is only one USP in the market and as to the correct test to be applied in 
determining an unfair burden more generally.
46. The decision in C-389/08 Base does not address a situation where there are multiple 
telecommunication services providers in the relevant market but only one USP. Such a 
situation arises in Ireland. In deciding the issues in the main proceedings, the guidance of 
the Court of Justice is necessary. In addition, it is likely that the guidance of the Court of 
Justice will be of interest to courts in other Member States; Ireland is unlikely to be the 
only Member State which has a liberalised telecommunications market where this issue 
may arise.
XI. QUESTION REFERRED FOR A PRELIMIMARY RULING:-
In circumstances where:-
14
(i) the telecommunications market has been liberalised and there are multiple 
telecommunication services providers operating in the market;
(ii) one service provider (the “Universal Service Provider” or “USP”) has been 
selected by the National Regulator}-' Authority (“NRA”) to perform Universal Service 
Obligations (“USOs”);
(iii) it has been determined by the NRA that there is a positive net cost associated with the 
performance of the USOs (“USO Net Cost”); and
(iv) it has been determined by the NRA that the USO Net Cost is material compared to 
the administrative costs of the establishment of a sharing mechanism in respect of the 
USO Net Cost amongst participants in the market;
If the NRA is required, pursuant to its obligations under the Universal Services Directive 
2002/22, to consider whether the USO Net Cost is excessive in view of the ability of the 
USP to bear it, account being taken of all the USP's characteristics, in particular, the 
quality of its equipment, its economic and financial situation and its market share (as 
referred at para. 42 of Base) is it permissible under the Directives for the NRA to conduct 
that assessment by having regard exclusively to the characteristics/situation of the USP, 
or is it required to assess the characteristics/situation of the USP relative to its competitors 
in the relevant market?
15