Table of Contents Glossary 1 Introduction 1.1 Termination services 1.2 Regulation of termination rates in the Union 1.3 Article 75 and Annex III of the Code 1.4 Procedure for the preparation of the Delegated Regulation 2 Scope of the Delegated Regulation 2.1 Scope 2.1.1 Definition of “voice termination service” 2.1.2 Interconnection ports 2.1.3 Numbering ranges other than fixed geographic and mobile numbers 2.1.4 Hybrid services 2.1.5 Conclusion on the definition 2.2 Treatment of calls originated from third country-numbers and terminated to Union-numbers 3 Cost models and general methodology 3.1 Preparation of the two cost models for the Delegated Regulation 3.2 The mobile cost model 3.2.1 Introduction to the model and available scenarios

3.2.2 The selected combination of scenarios 3.2.3 Results of the selected combination of scenarios 3.2.4 Cost of interconnection ports 3.3 The fixed cost model 3.3.1 Introduction to the model and available scenarios 3.3.2 The selected combination of scenarios 3.3.3 Results of the selected scenario 4 Setting and implementation modalities of the single maximum Union-wide mobile voice termination rate 4.1 Current mobile termination rates 4.2 The single maximum Union-wide mobile voice termination rate 4.3 Implementation modalitites for the single maximum Union-wide mobile voice termination rate 4.3.1 Glide path 4.3.1.1 Glide path for the single maximum Union-wide mobile voice termination rate 5 Setting and implementation modalities of the single maximum Union-wide fixed voice termination rate 5.1 Current fixed termination rates 5.2 The single maximum Union-wide fixed voice termination rate 5.3 Implementation modalities for the single maximum Union-wide fixed voice termination rate 5.3.1 Transitional period for the single maximum Union-wide fixed voice termination rate 6 Application of the maximum Union-wide mobile and fixed voice termination rates Annex I: Regulatory practice on termination rates

Annex II: Currencies other than the Euro

Glossary AS Application Server BEREC Body of European Regulators for Electronic Communications BU-LRIC Bottom Up Long Run Incremental Cost CPNP Calling Party Network Pays CPP Calling Party Pays CDMA Code Division Multiple Access CA Competent Authority ENMS Electronic Number Mapping System FTR Fixed termination rate FAC Fully Allocated Costs FDC Fully Distributed Costs IC Inter-Connection IP Internet Protocol I-CSCF Interrogating Call Session Control Function IMS IP Multimedia Subsystem LTE Long Term Evolution MNO Mobile Network operator MTR Mobile termination rate MVNO Mobile Virtual Network Operator NRA National Regulatory Authority OTT Over the Top PSTN Public Switched Telephone Network RPP Receiving Party Pays RRM Relevant Markets Recommendation S-CSCF Serving Call Session Control Function TRR Termination Rates Recommendation UMTS Universal Mobile Telecommunication System VoIP Voice over IP VoLTE Voice over LTE



1Introduction This Staff Working Document accompanies the Delegated Act (a Delegated Regulation) setting a single maximum Union-wide mobile voice termination rate and a single maximum Union-wide fixed voice termination rate under Article 75 of the European Electronic Communications Code (the “Code” or the “EECC”) . The following sections provide explanations regarding: -the termination services, the market and regulatory context prior to the inclusion in the Code of a provision requiring the Commission to adopt single maximum Union-wide voice termination rates, and the content and rationale of Article 75 procedure followed in the adoption of the Delegated Regulation (section 1); -the scope of the Delegated Regulation, including the definition and the treatment of calls originated from third country-numbers and terminated to Union-numbers (section 2); -details of the fixed and mobile cost models used in the setting of the single maximum Union-wide voice termination rates and the explanations on the general methodology (section 3); -the setting and implementation modalities of the single maximum Union-wide mobile voice termination rates (section 4); -the setting and implementation modalities of the single maximum Union-wide fixed voice termination rates (section 5). The Delegated Regulation only concerns price obligations. National Regulatory Authorities (NRAs) will not, after its entry into force, be able to impose price controls obligations as regards the fixed or mobile termination rates for termination services provided in their national territory. Non-price obligations imposed by NRAs when regulating markets in their territory, are outside the scope of this Regulation. The Review of the Recommendation Relevant Market addresses the termination markets and provides clarifications on the possible instruments that NRAs may use to impose non-price related obligation on the termination providers. The Delegated Regulation applies directly to the Union and will apply to the European Economic Area (EEA) after its incorporation in the EEA agreement. 1.1 Termination services Voice termination rates are the wholesale rates that electronic communications operators charge each other to terminate calls on their respective networks (“termination rates”) . The establishment of a voice call between two subscribers who are served by different operators requires the use of both operators’ networks. The operator who serves the calling subscriber is called the ‘originating operator’ while the operator who serves the called subscriber is called the ‘terminating operator’. The terminating operator will connect the call from the point of interconnection with the originating operator in its network up to the device of the called subscriber. This service is called voice call termination and it can be provided only by the operator serving the called subscriber, i.e. by the terminating operator. Each operator has full control over terminating voice calls to its own subscribers. Thus, each operator has a monopolistic position on the market for terminating calls on its own network and has the ability and incentives to set the wholesale price for terminating calls at a level that is significantly above-cost. Wholesale voice termination services (“termination services”) represent a non-replicable input for the provision of retail voice services, given that voice termination can only be supplied by the network provider to which the called party is connected. There are no demand or supply substitutes for voice termination on an individual network. Therefore, each network represents a separate relevant market in which each operator is a monopolist for the calls terminated in its network. In addition, under the calling party pays (“CPP”) principle , which is the one mostly used in the Union, the party initiating a call is charged but the receiving party is not. The wholesale termination rate is paid by the originating operator to the terminating operator. The originating operator incorporates this cost into its retail prices, thus it is ultimately born by the caller (i.e. not by the called party). In the context of interoperable networks, fixed and mobile interconnections follow a ‘two-way’ model, whereby an interconnection agreement needs to be negotiated by the interconnecting operators A and B, to deliver calls from operator A’s customers to operator B’s customers, and vice versa. Figure 1 shows a typical calling party pays (CPP) termination arrangement for the termination of calls (showing only one-way interconnection). Figure 1: termination according to calling party network pays

Source: Rundfunk und Telekom Regulierungs-GmbH (RTR) (Austrian Regulatory Authority for Broadcasting and Telecommunications) This system raises two main competition concerns. Firstly, due to their monopoly position in terminating calls in their networks, operators, in the absence of regulation would be able to extract excessive profits at the wholesale level . Secondly, operators have an incentive to charge high rates to increase their rivals’ costs. This is possible because the termination rate charged by an operator is a cost to another operator, There are also other, less market-specific competition concerns affecting the wholesale termination markets. Operators with many customers may have an incentive to refuse terminating calls from smaller operators. This would make the smaller operators’ network much less attractive to (potential) customers. More realistically, operators may not refuse but make it more difficult and costly to interconnect to and terminate calls in their networks. Such behaviour may qualify as constructive refusal to supply or discriminatory behaviour under competition law. High termination rates, even if traffic is symmetrical, would lead to anti-competitive outcomes at least in two ways. First, high wholesale termination rates would prevent otherwise possible unilateral decreases in retail prices, leading to high retail prices. This is because high termination rates would act as a price floor for operators and reduction in retail prices below termination rates would lead to monetary losses at least in the variable part of a two-part retail tariffs. Second, high termination rates, in conjunction with lower prices for on-net calls would incentivise mobile customers to keep a large proportion of their calls on-net, leading to higher barriers to entry and expansion by smaller operators which, due to their size, would be unable to match such high on-net share of calls. The application of different termination rates across the Union leads to distortions in the functioning of the internal market for reasons explained below. Differences which are not due to cost differences in termination rates across the Union can lead to cross-subsidisation of operators and ultimately consumers in countries with higher termination rates, to the detriment of operators and end-users in countries with lower termination rates. In general, and independently on whether rates are based on efficient costs, when an operator from a country with lower termination rates exchanges traffic with an operator from a country with higher termination rates, even if the incoming and outgoing traffic is equal, operators from high termination rates countries receive higher remuneration for the same service. Further, different wholesale termination rates may distort consumer behavior by reducing the volume of calls to countries with high rates. Moreover, as acknowledged by BEREC , termination rates higher than the efficient costs could have a negative effect on the development of pan-European offers, proposing uniform pricing schemes for international calls to networks across the Union, regardless of the Member State where the end user is based. The lack of uniform pricing, together with the high cost of calls directed outside the border of each Member State – for which historically high termination rates are at least partly responsible, constitute an obstacle to voice communication within the internal market. This represents a barrier affecting not only the electronic communications sector, but all sectors that rely on voice communications for their commercial activities. Further, unjustified differences in the level of rates among Union countries in two-sided and interdependent markets such as termination also distorts investment incentives. It creates regulation-induced asymmetrical revenue streams between Member States, which distort efficient investment decisions across Member States borders. The unequal regulation of termination rates, i.e. based on the different principles, constitutes a barrier to trade in the internal market. Full harmonisation of termination rates is intended to foster market integration by limiting net payments (and cross-subsidisation) between operators in different Member States that are due to different levels of national termination rates rather than to different call volumes, thereby reducing barriers to intra-Union trade. Finally, divergent approaches to termination rates among Member States undermine the predictability of regulation and legal certainty within the Union, with operators not being able to rely on consistent rules for voice traffic that cross Member State borders. Regulatory predictability reduces uncertainty for investors, which in turn reduces the return required by the investor – leading to a larger willingness to invest. 1.2Regulation of termination rates in the Union Wholesale mobile termination rates (“MTRs”) and wholesale fixed termination rates (“FTRs”) have been regulated in the Union for around 20 years. These markets were included by the Commission in the 2003 Recommendation providing a list of markets susceptible to ex ante regulation . The Commission recommended NRAs to continue regulating these markets in the subsequent Recommendations on relevant markets issued in 2007 and 2014 . In the draft regulatory measures notified to the Commission under Article 7 of the Framework Directive until 2008, the Commission noted that, in some cases, NRAs were applying different types of price controls on different operators within similarly defined markets, and in some instances NRAs were setting termination rates based on different methodological approaches. Those approaches included top-down accounting data, bottom-up model, hybrid models . The Commission found that the divergent regulatory approaches towards MTRs and FTRs were undermining the internal market and the competitiveness of the Union electronic communications sector. High and strongly divergent termination rates (ranging in 2008 from 2 to 15 cent for MTRs) distorted competition between fixed and mobile operators, hindered market entry of smaller operators and innovation, and ultimately led to higher retail tariffs for businesses and households . To remedy this situation, the Commission adopted in 2009 a Recommendation on the regulatory treatment of fixed and mobile termination rates in the EU (TRR) . The TRR was issued in accordance with Article 19 of the Framework Directive, to ensure the harmonised application of the price-control obligation set in Article 13 of the Access Directive . The TRR is a "soft" law instrument intended as guidance for NRAs on how to interpret and apply the legal provisions of the Directives of the regulatory framework for electronic communications. In particular, the TRR provides guidance on how to calculate the maximum wholesale prices on the termination markets, which are subject to periodic market reviews and notifications to the Commission in accordance with Articles 7 and 7a FD. The aim of the TRR was to achieve lower and more consistent termination rates, by increasing consistency in the way NRAs set termination rates across the Union. The 2009 Recommendation provides a common methodology for the calculation of cost oriented termination rates which only allows the recovery of costs as would be incurred by an efficient operator (the so called ‘pure Bottom-Up Long Run Incremental Costs’ model, ‘pure BU-LRIC’ ). Given the ability and the incentives of terminating operators to raise prices significantly above cost, cost orientation was considered the most appropriate tool to address these concerns. The pure BU-LRIC cost methodology takes into account the costs of a hypothetically efficient operator and implies the exclusion of costs which would not be avoidable, if the provision of termination services were discontinued. Moreover, “pure” BU-LRIC methodology assumes the exclusion of joint and common costs for the purpose of calculation of efficient termination rates. The rationale of the pure BU-LRIC approach lays in the special character of termination services market, and its two-sided nature, whereby not all related termination costs must necessarily be recovered from the wholesale charge levied on the originating operator. This methodology has been recommended since it eventually leads to termination rates at a level which would prevail if the market were competitive. NRAs were recommended to implement the methodology by 31 December 2012, and to take utmost account of it. In particular, NRAs were recommended to use this methodology when imposing price control obligations on operators designated with significant market power. With respect to the nature of the TRR, the European Court of Justice (CJEU) held that “[i]t is only where it appears to the NRA, in its assessment of a given situation, that the ‘pure-BU-LRIC’ model advocated by this recommendation is not appropriate to the circumstances that it may depart from it, giving reasons for its position’ . An Evaluation Report on the Commission’s 2009 Recommendation on Termination Rates (the “Evaluation Report”) was issued on 12 November 2018. The evaluation covered the implementation of the TRR across the Union since its adoption in 2009, examined developments in voice termination markets in the Union and their impact on wholesale and retail prices, assessed and quantified the impact on trade in the internal market . The evaluation also looked into the question of whether there is a need for either further specification of the recommended methodology and parameters used to derive efficient costs for fixed and mobile network operators, and if so, to identify how this should be done, including the possibility to issue a decision on the basis of Article 19 (1) of the Framework Directive.

The Evaluation Report concludes, based on the cases notified in accordance with the Article 7 consultation procedure, that there was still a lack of consistency in the way NRAs were implementing the recommended model, in particular concerning the following aspects: (I)a divergence in the way wholesale commercial costs are calculated for the purpose of setting FTRs; (II)the modelling, for the purpose of determining the minimum efficient scale, of an operator who is already efficient when it enters the market (instead of modelling an operator which would need several years to reach an efficient target scale); (III)the need to define the appropriate interconnection level to be modelled for the purpose of defining FTRs; (IV)the need to model 4G technology to set MTRs; (V)the need to properly define the termination increment; and (VI)the fact that some NRAs are applying the average rate resulting from the model's output for the several years modelled, while others apply a different rate for each year as calculated by the model . With regard to the relevance of the TRR, the Evaluation Report concluded that the principles of the TRR remained relevant. The main issue to be addressed was termination rates' divergence due to the non-implementation of the TRR in some Member States. In relation to the TRR’s effectiveness, the Evaluation Report found that the TRR had contributed to achieving lower and more consistent termination rates across the Union. Low termination rates had helped develop new all-net and flat-rate offers and the decline of offers differentiating between on-net and off-net calls, thereby allowing new entrants to expand and compete more effectively. Based on the fact that some NRAs had not yet implemented the TRR, the Evaluation Report concluded that the TRR has not fully achieved its objective, i.e. the consistent regulation of termination rates across the Union. While greater consistency of regulatory approaches to termination rates has indeed been achieved in the Union, the issues identified continue to represent a barrier to the internal market for electronic communications . Regarding the TRR’s efficiency, the Evaluation Report suggested that the benefits of the TRR – for most operators, end-users and society as a whole – broadly outweigh the costs resulting from its implementation. The main negative effect observed by NRAs is indeed related to the asymmetric implementation of the TRR across the Union, which significantly distorts the cross-border traffic and leads to financial imbalances across the Union, ultimately creating a barrier to the internal market. According to the Evaluation Report, the TRR has led to lower termination rates, thus boosting competition and increasing social welfare on the relevant termination markets. It has also favoured the harmonisation of national regulatory approaches to modelling termination costs and contributed to the development of the internal market for electronic communications. As the pre-2009 situation has shown, the same results would not have been achieved absent a coordinated action at Union level and thus shows the added value of action at Union level. Finally, the Evaluation Report concluded that the TRR contributed to meeting the objectives of the regulatory framework and was coherent with the objectives pursued by the Roam-Like-at-Home (“RLAH”) initiative. In this respect, it should be noted that as consistent MTRs across the Union were key for the elimination of roaming fees by 2017, the establishment of single Union-wide MTRs and FTRs will further support the continuation of the Roam-like-at-home regime. However, the evaluation of the TRR, and the notifications received since 2009, have shown that the potential benefits of the TRR have not yet been fully achieved: despite the overall convergence towards cost-oriented termination rates, divergences persist, in particular between those Member States which have implemented the recommended model and those which have not. The reason for this is that, on the one hand, a small number of NRAs have not followed the recommended approach. On the other hand, until recently, in some Member States, NRAs’ decisions were annulled by national courts requesting the NRA to use a different cost methodology . Due to deviations from the TRR in certain Member States, the relevant national operators continued to benefit from higher (above-cost) termination rates. Operators in non-implementing countries thus have an advantage as compared to operators in the implementing Member States. In these cases, NRAs put forward different reasons to explain the departure from of the TRR. In its Recommendations under Article 7 of the Framework Directive (see Annex I), fully supported by BEREC, the Commission, concluded that regulatory approaches other than pure BU-LRIC in the given termination markets were not appropriate to address the lack of effective competition within the meaning of Article 16(4) of the Framework Directive or justified in the light of the objectives laid down in Article 8 of the Framework Directive - particularly the objectives of promoting competition and user benefits pursuant to Article 8(2) of the Framework Directive. Moreover, some divergence in the levels of termination rates was also observed among the Member States which have been applying the TRR . To some extent, the difference may be explained by genuine and objective cost differences (e.g. network topology, population density) or by the time period for which the model calculation has been performed (subsequent updates of the same model calculations tend to yield lower costs). However, in some cases the differences result from different interpretation of the TRR and different approaches taken by NRAs within the pure BU-LRIC modelling, where the Recommendation is not sufficiently detailed. With regard to the latter, some examples include the determination of an efficient scale for a hypothetical operator and the treatment of wholesale commercial costs. 1.3Article 75 and Annex III of the Code The Code requires the Commission to adopt a Delegated Regulation setting a single maximum Union-wide voice call mobile termination rate and a single maximum Union-wide voice call fixed termination rate by 31 December 2020. Full harmonisation of FTRs and MTRs by means of a binding legal instrument introducing a single maximum termination rate for each mobile and fixed termination service which will be applicable to any provider of fixed and mobile termination services across the Union will enhance the development of the internal market and significantly reduce trade barriers among Member States. Moreover, given that individual NRAs will not be required anymore to build cost models to calculate efficient rates and regularly update them, the Delegated Regulation will significantly reduce the administrative burden for national regulators. Article 75 of the Code provides that in setting the single maximum Union-wide voice termination rates the Commission must comply with the principles, criteria and parameters provided in Annex III. In sum, the Delegated Regulation should: (i) ensure compliance with the principles, criteria and parameters of Annex III, (ii) take into account the weighted average of efficient costs in fixed and mobile networks established in accordance with the principles provided in Annex III, (iii) take into account the total number of end-users in each Member State and any exceptional national circumstances, (iv) take into account information provided by NRAs, BEREC and undertakings and (v) where needed, provide for a transitional period of no longer than 12 months on the basis of rates previously imposed.

The Code also provides in Articles 75(2) and 75(3) that the Commission must review the Delegated Regulation every five years and in each such occasion shall consider whether the imposition of single maximum Union-wide voice termination rates remains necessary by applying the criteria listed in Article 67(1). Should the Commission thus decide not to impose single maximum Union-wide voice termination rates, the NRAs may conduct market analyses of voice call termination markets in accordance with Article 67, to assess whether the imposition of regulatory obligations is necessary at national level. If an NRA imposes, as a result of such analysis, cost-oriented termination rates in a relevant market, it shall follow the principles, criteria and parameters set out in Annex III and its draft measure shall be subject to the procedures referred to in Articles 23, 32 and 33. Finally, Article 75 provides that NRAs must closely monitor, and ensure compliance with the application of the single maximum Union-wide voice termination rates as well as annually report to the Commission and to BEREC with regard to the application of this Article. 1.4Procedure for the preparation of the Delegated Regulation In order to prepare the Delegated Regulation the Commission services have relied on a broad range of inputs. First, the Commission services have considered the draft measures notified under Article 7 of the Framework Directive by NRAs, and the prevailing FTRs and MTRs to date, as reported by bi-annual BEREC reports and in regulatory decisions. Second, in order to estimate the costs of providing mobile and fixed voice call termination services, the Commission services took into account the two cost models commissioned to an external contractor, Axon Consulting. The cost models developed by Axon have been intensively consulted (with operators, NRAs, industry associations and BEREC) at a number of workshops. Stakeholders had the opportunity to give concrete feedback on both the fixed and the mobile cost model, in separate written consultation rounds. Also, a designated Steering Group – composed by experts on termination rates and costs models – was created, with the members appointed by BEREC who closely followed the development of each cost model. Third, the Commission services launched an open public consultation on the scope of the Delegated Regulation and various implementation aspects, which ran from 20 July to 8 November 2019. The results of this consultation informed the relevant parts of this Staff Working Document and have been published. The consultation included questions on the definition of termination services, the treatment of hybrid services, the scope of application, the possible use of a glide path and/or a transitional period and non-price related obligations. There were 68 respondents, including 32 companies or business organisations, 6 business associations, 19 Union citizens, 1 non- Union citizen, 9 public authorities (national regulatory authorities, Ministries and BEREC) and 1 non-governmental organisation. The replies came from 22 Union Member States. Fourth, an Informal Expert Group on Union Voice Call Termination Rates, composed by representatives of NRAs with specific knowledge of the regulation of termination markets was established on 6 November 2019. It met on 10 February 2020 and 11 September 2020. Revised drafts of the Delegated Regulation and Staff Working Document were shared with the Expert Group on 11 November 2020. Several members provided comments by 18 November and the final drafts were shared with the Expert Group on 7 December 2020. The feedback from the Expert Group has been taken into account for the elaboration of the Delegated Regulation. With the Expert Group and its members, the Commission services discussed the draft Delegated Regulation and accompanying draft Staff Working Document, and especially the inclusion of associated facilities in the definition of termination services; the treatment of calls to non-geographic numbers other than mobile, where they raised a concern of over-regulation; the criteria for the inclusion of calls originated from outside the Union in the scope of the Delegated Regulation as well as the overall implementation of the single maximum Union-wide fixed and mobile voice termination rates. These exchanges provided to the Commission services an in-depth understanding of these services across the Union as well as of any Member State specific concern. Finally, the Commission services also took into account BEREC’s opinion on the draft Delegated Regulation, issued on 15 October 2020 and the feedback received during the publication on the Commission’s ’Have Your Say!’ website, from 26 August to 22 September 2020. Feedback received by the Commission during this period included 49 submissions (29 from operators, 12 from industry associations, 2 from NRAs (UKE, NMHH), 1 from the German Federal Ministry for Economic Affairs and Energy and 5 from citizens (anonymous). A number of replies came from the same economic group (e.g. O2 CZ and O2 SK). All replies are public. In its opinion, BEREC provides an overall support for the draft Delegated Regulation, including the proposed single maximum Union-wide fixed and mobile voice termination rates and how the efficiently estimated rates are reached through a glide path and transitional period respectively. BEREC supports the general principle for defining mobile and fixed termination services along the numbers assigned to the provider of the called party. Further, BEREC also concurs with the approach for hybrid services and the possibility for NRAs to resolve disputes through dispute resolution procedures. On associated facilities, BEREC points out that these are not included in the cost models developed by Axon Consulting. If any associated facility is included in the termination service definition, it needs to be ensured that its costs are covered by any safety margin so that it is ensured that all the underlying costs are remunerated. BEREC also underlines, that it is necessary for NRAs to remain able to impose remedies regarding associated facilities. For non-geographic numbers other than mobile numbers, BEREC considers that the Delegated Regulation should not include a generic obligation to impose single maximum Union-wide fixed and mobile voice termination rates regarding termination to these numbers. According to BEREC, the Delegated Regulation should only include an obligation for services with “non-geographic numbers other than mobile numbers” when there exists a risk of excessive prices (i.e. termination monopoly situation) for wholesale termination services, and this happens under the CPP pricing interconnection regime. It should also be clarified that any regulation of origination is outside the scope of the Delegated Regulation. For calls originated from third country-numbers, BEREC asks for clarification so that the Delegated Regulation defines the concept of "calls incoming and terminating in the Union" to calls originated from or terminated to numbers assigned nationally to numbering plans of operators active in the Union, irrespective of the country of origin or termination of the calls. BEREC supports the approach proposed in the draft, however pointing to potential implication issues. As a final remark, BEREC highlights that non-price remedies are still necessary as it is essential for the NRAs to be able to easily and effectively tackle non-pricing issues. Regarding the feedback received under “Have your say!”, large operators generally ask for higher rates and longer glide paths. Access seekers and MVNOs strongly support the proposed rates. Fixed operators, especially in Member States with high fixed termination rates, requested higher fixed termination rates and two Member States (where such rates remain very high) expressed concern as regards the impact of the lower rates on small fixed operators. The Hungarian NRA is very supportive of the draft Delegated Regulation, while the Polish NRA would favour higher termination rates and longer glide paths and a special transition period in particular for the fixed. The German Federal Ministry for Economic Affairs and Energy ask that the cost model be reviewed in light of the COVID-19 situation, a longer glide path and a 12 month transitional period (the longest possible). 2Scope of the Delegated Regulation 2.1Scope This section describes the products and services that are to be considered as “termination services” and therefore in the scope of the Delegated Regulation. The Delegated Regulation sets out the single maximum Union-wide mobile voice termination rate that applies to mobile termination services as well as the single maximum Union-wide fixed voice termination rate that applies to fixed termination services. It is therefore necessary to define the products and services that are to be considered as mobile and fixed termination services, respectively.

2.1.1Definition of “voice termination service” Current regulatory practice Termination markets (both mobile and fixed) are included in the 2014 Relevant Markets Recommendation (‘RRM’). The exact product scope of these markets was not defined in the RRM, however, the Explanatory Note accompanying the RRM provided some guidance on the definition of the relevant market in the case of fixed and mobile voice call termination. It specified inter alia that “[i]n line with a technology-neutral approach, the wholesale fixed termination market comprises termination on PSTN and IP networks, and the wholesale mobile termination market comprises all mobile network topologies, 2G, 3G - UMTS, 4G - LTE and, if appropriate, any other networks operated in the Member States, such as CDMA networks. It includes call termination irrespective of where the call originates (national, international, fixed and mobile)”. So far, in regulatory practice, the closest to a definition of wholesale voice termination services could be found in the 2009 TRR which states (Recital 7) that “Wholesale voice call termination is the service required in order to terminate calls to called locations (in fixed networks) or subscribers (in mobile networks)”. Regulatory practice shows that most NRAs define termination services markets by reference to the number called (rather than to the network used), including Austria, Belgium, Bulgaria, Croatia, Czechia, France, Greece, Ireland, Lithuania Malta, Portugal, Romania, Slovakia and Sweden . Some NRAs (e.g. Luxembourg) currently define termination services by reference to both network and numbering aspects. Other NRAs (e.g. Germany) are currently considering moving from a network-based to a number-based market definition. Poland, which is currently using a network-based product market definition, supported a number-based approach for the purposes of the Delegated Regulation . Feedback received One of the questions asked in the public consultation was whether the definition included in the 2009 TRR, based on the network called, would still be valid, i.e. Would you agree with the following definition of (wholesale) voice call termination service: “Wholesale voice call termination is the service required in order to terminate calls to called locations (in fixed networks) or subscribers (in mobile networks)”? Among the public authorities who replied to the public consultation, the views as regards such definition were mixed. While two NRAs and two Ministries agreed, four NRAs and BEREC did not agree and argued that the determinant characteristic of the termination service is the control of the number, hence the definition should reflect this. BEREC’s suggested definition was: “Wholesale fixed (mobile) voice call termination is the service required in order to terminate calls to end users’ fixed (mobile) telephony numbers“. According to one NRA, the relevant criterion to be a termination service provider is the ability to control call termination and being able to set termination rates independently (partly due to the CPP principle explained above), and this should be reflected in the definition. BEREC and NRAs, such as that of Romania, argued that the definition should be on the underlying numbering range involved. BEREC suggests “[finding] a definition of wholesale voice call termination which is not technology based (fixed networks or mobile networks) but based on numbers (calls to numbers in EU MS national numbering plans which are either for fixed calls or for mobile calls). BEREC is of the opinion that the control of the number range is the key element to controlling the routing of the wholesale call termination service leg of the inbound call to the called party. Wholesale call termination cannot occur without, directly or indirectly, the involvement of the number range holder.” BEREC also asked the Commission to identify the different services considered to be part of the “termination service” and clarify to what extent the costs for transport from the interconnection point to the end-user, fixed costs for ancillary access services (e.g. fees for collocation, IC-port, IC-line, set-up) are included under the definition. Most operators and business associations did not agree with the definition proposed in the public consultation and made some suggestions, such as that (i) regulated termination services should be based on the number; (ii) OTTs (thus not owning a network or interconnection points) should not benefit from regulated termination rates; Mobile Virtual Network Operators (MVNOs) not controlling access and supporting call termination costs do not qualify as voice termination service providers ; (iii) VoIP traffic should be included in the definition if numbering resources are used; or (iv) more flexibility for fixed wireless technologies is required, given that the link of “called networks” to “fixed networks” and “subscribers” to “mobile networks” is overly restrictive. In reply to the public consultation, most citizens agreed with the proposed definition. Commission services’ views The Commission services agree with BEREC’s opinion that the number is the element that shapes demand substitutability and therefore the termination monopoly: voice calls have to be terminated in the network of the operator controlling the access to the subscriber’s (or location’s) number, either directly or through indirect means, such as call forwarding. Likewise, no supply-side substitutability is possible because the called numbers are controlled by one terminating operator only. As some stakeholders point out, the number is relevant also at the wholesale level, given that call routing is performed on that basis. Therefore, the Commission services consider that the key element to determine the scope of the termination services is the number on which these calls are terminated. In line with BEREC’s opinion , the Commission services define this number as a number in national numbering plans corresponding to E.164 country codes for geographic areas belonging to the territory of the Union (Union numbers). This holds both at the retail level (i.e. users calling a certain number) and at the wholesale level (i.e. operators route a call to the terminating network). Defining termination services based on the number called therefore reflects the fact that technical control of the number and the legal right to use it, and thus the ability to set the termination rate, is the main factor for the existence of the termination monopoly. In line with most NRAs’ decisions, the Commission services consider that there are no sufficiently close substitutes to broaden the market (and hence the termination service definition) beyond the focal (retail) service of calls to (fixed geographic or mobile) numbers, except for voice calls to certain numbering ranges that, as regulatory practice shows, are to be classified as fixed termination services (see Section 2.1.2 below for more details). In the Commission services’ view, this definition should also follow a technology-neutral approach. The proposed scope including all technologies used to provide (fixed geographic or mobile) termination services is technology neutral, both for termination services to fixed (including geographic and other non-geographic) and mobile numbers. It should include all possible technologies used to terminate calls to numbers, such as VoIP, 2G/3G/4G/5G, VoLTE, etc. This implies that the product market definition includes voice calls terminated to internet-based interpersonal communications services to the extent they use (fixed or mobile) publicly assigned numbering resources, namely, a number or numbers in national or international numbering plans. Conversely, the Commission services consider voice calls to number independent interpersonal communications services not to be sufficiently close substitutes from the end-user’s perspective, although this situation may evolve in the future. Current national regulatory practice reflects this approach, as number independent interpersonal communications services are not included in the relevant termination markets and therefore remain unregulated. In addition, for a given provider to qualify as a provider of termination services, the control of the numbering range and the ability to set termination rates independently needs to be established. As BEREC points out: ‘[…] control of the number range and the ability to set the FTR and MTR is intrinsic to the cause of the termination monopoly.’ The Commission services agree that the relevant criterion to determine which providers are termination service providers is whether they are able to set termination rates independently for calls to publicly-assigned numbers, irrespective of the underlying network technology. Two additional criteria that should be used include: (i) if the provider has entered into a specific interconnection agreement for terminating calls on its network, and (ii) if the provider is in control of E.164 numbers corresponding to E.164 country codes for geographic areas of the territory of the Union (directly or indirectly). The Commission services consider that voice calls terminated by MVNOs with control over charging for termination services are to be included in the definition, whereas voice call termination by MVNOs without control over charging for termination rates (since this is done by the Mobile Network Operator which terminates the voice calls for them) should not be included. Following this approach (i.e. define the scope of the termination service based on the number called) could potentially lead to the following outcomes: (i) over-recovery of costs, linked to operators being entitled to apply the single maximum Union-wide mobile voice termination rate while bearing lower costs (such as those incurred for the provision of fixed termination services), or (ii) under-recovery of costs, if voice calls terminated on mobile networks are only entitled to charge the single maximum Union-wide fixed voice termination rate. The Commission services do not consider these two potential outcomes to justify a different approach for the following reasons. First, in view of the conditions associated with the use of numbering resources, such as the required mobility for the use of mobile numbering ranges (e.g. in Sweden), the cases leading to over-recovery of costs could only be marginal (using fixed termination for calls to a mobile number). Second, the use of fixed (geographic), fixed nomadic and emergency numbering ranges (non-geographic numbers) is usually associated to a fixed location, although voice call transfer mechanisms could be in place. Therefore, voice calls to fixed numbers would normally be terminated using a fixed network. The cases identified that use a mobile network to terminate fixed voice calls represent a very small part of termination markets overall.

Third, as set out in Section 2.1.3 below, in specific cases concerning hybrid services, the latter will be treated as either fixed or mobile termination services based on the number called and, for voice calls to numbering ranges for fixed nomadic and emergency services, they will be considered fixed termination services. Given that – as a consequence of being considered fixed termination services – the single maximum Union-wide fixed voice termination would apply (which is lower than the single maximum Union-wide mobile voice termination rate), no arbitrage issues would arise. Fourth, the Commission services consider that classifying the termination service as a function of the number called is aligned with the underlying competitive analysis (demand substitutability) and retail price transparency, given that voice call plans typically charge based on the number called and therefore is less likely to lead to over or under-recovery of costs. Finally, the Commission services consider that the Delegated Regulation should only apply to calls originated from and terminated to a Union number, that is to say a number included in national numbering plans under E.164 country codes for geographic areas belonging to the territory of the Union. 2.1.1Interconnection ports Interconnection ports are needed to hand over calls to other operators, connecting two networks. At the interconnection port, the call leaves network A and arrives at network B. Accordingly, interconnection ports are required for both origination and termination. The usage of interconnection is incremental to the costs of providing termination services as increased capacity for interconnection is needed with increasing traffic, which is a decisive element for the determination of the wholesale voice termination rates under Annex III. The costs related to call origination are not incremental and should not be attributed to the costs of the termination rate. The above are the technical elements setting interconnection ports apart from e.g. collocation and indeed most (if not all) other associated facilities, as these depend on the individual agreements and situation per operator in each Member State. As for example regarding colocation, this is used to provide also other services than termination services and is in the majority of cases also needed for origination services. For colocation, the cost for this service will typically not increase with the number of minutes/subscribers and according to the cost principles applied for defining the efficient maximum termination rates, colocation is not incremental to termination. Current NRA regulation of interconnection ports focuses on legacy infrastructure for which the costs are indeed significant. If regulated rates for interconnection ports appear high, that is because those interconnection ports are based on legacy infrastructure, which results in higher costs. However, costs for providing interconnection ports based on modern IP-technology are much lower (as acknowledged also by BEREC) and likely to decrease. Given that Article 75 and Annex III of the Code refer to efficient costs and modern technologies, IP technology based interconnection is the technology this assessment relies on for reference. More harmonisation would be needed in regard to the interconnection ports as the regulated rates differ substantially. There is evidence of anticompetitive pricing in regard to interconnection ports which has led some NRAs to regulate access and prices of interconnection ports. Interconnection ports are essential – for any operator and in any Member State – for the provision of voice termination services in order to allow operators to interconnect to the networks of other operators. For instance, operators in Italy are currently allowed to charge five-fold for interconnection ports compared to the Netherlands, despite the underlying technology supporting the interconnection being the same in the two Member States (both regulate the legacy interconnection ports, but with a substantially different maximum charge allowed). Therefore, at present a number of regulators rely on price-regulation for interconnection ports while some rely on “bill-and-keep”. In its opinion , BEREC concludes that for any associated facility to be included in the definition of the termination service, it needs to be ensured that the margin between the termination rates and the underlying costs is sufficient to ensure full recovery for any additional element included. This is ensured in the case of interconnection ports as explained in point 3.2.4. Therefore, the definition of termination services should include interconnection ports, since if excluded they would represent a hidden cost and prevent the effective application of Union-wide termination rates. 2.1.2Numbering ranges other than fixed geographic and mobile numbers Some numbering ranges, other than fixed geographic and mobile, follow the mechanism described in the flow chart below for call termination. Figure 2: termination services for certain numbering ranges *) Service fee II = end-consumer fee minus billing costs minus encashment risks. **) The direction of the payment flow in this case corresponds to a value-added service number. This direction generally depends on the level of the end-consumer fee. For 0800-numbers, e.g. there is no payment, the service provider has to pay for the origination of the call. Source: Rundfunk und Telekom Regulierungs-GmbH (RTR) (Austrian Regulatory Authority for Broadcasting and Telecommunications) However, other numbering ranges, such as those for fixed nomadic voice services, follow similar competitive dynamics to those of fixed geographic termination services. In its opinion , BEREC classifies non-geographic numbering ranges other than mobile in the following categories:

(i) fixed nomadic services; (ii) free-phone services, where the charge for the call is paid by the called party and not the caller; (iii) premium-rate services used for calls where certain services are provided, and for which the prices are higher than normal calls. Unlike a normal call, part of the total call charge is usually paid to the premium rate service provider, generally a distinct entity from the ECS provider, thus enabling businesses to be funded via the calls; (iv) shared-cost services, which allow the caller to be charged for only part of the cost of the call, with the called party being charged for the remainder; (v) emergency services (e.g. 112); (vi) social value services, such as the EEA harmonised number range 116 XXX; (vii) other special phone services, charged more than a regular fixed call, like directory services, (e.g. 11 8 XY in some MS used for directory services), and (viii) machine to machine (M2M) services, in Member States where non-geographic numbers other than mobile are used for M2M voice communications. According to BEREC, “value-added services” (VAS) comprise all these ranges, except for (i), (v) and (viii). Current regulatory practice Most NRAs exclude numbering ranges for VAS from regulated termination rates, based on different competitive constrains and other factors. The 2014 RRM Explanatory Note also argued in favour of excluding them: “[w]hile calls to mobile numbers and to non-geographic numbers providing public services can be considered as part of the relevant mobile or fixed termination market on the grounds of similar competitive conditions to those when a call is terminated on a geographic number, the mechanics of termination of calls to non-geographic numbers for the provision of value added services would rather argue in favour of excluding this type of termination from the relevant market. Most NRAs exclude it, on the basis of differences in terms of functionalities, network coverage requirements, costs for the provision of the service and competitive conditions which are not prone to change in a forward looking perspective.” Most NRAs however include calls to fixed nomadic and emergency numbers in the regulated termination rates under fixed termination services, as they follow similar competition dynamics to those of calls to geographic numbers. Commission services’ views The Union-wide termination rates should apply to mobile and fixed termination services respectively. Only those services which represent the common denominator in Member States, which are regulated at present as fixed or mobile termination services (based on current NRA practice) should be included in the scope of the Delegated Regulation as they can be classified as either fixed or mobile. The Commission services consider that the termination of calls to numbering ranges for VAS should be excluded from the scope of the Delegated Regulation. Taking into account in particular BEREC opinion the following reasons are relevant: First, the competition dynamics for terminating voice calls in numbering ranges for VAS differ from “traditional” CPP-based termination. For example, free-cost numbers typically follow the receiving party pays (“RPP”) and not the CPP principle. The call recipient (the provider of the free-cost services) would therefore take the termination rate billed by its host operator into account when choosing its host operator, as opposed to a call recipient under “traditional” CPP. As regards revenue-sharing arrangements (e.g. for premium rate numbers), which still follow the CPP principle, the service provider enters into an agreement with the host operator and would have an incentive to switch if termination rates are increased substantially. At the same time, the termination rates negotiation would be only one element of the overall revenue sharing negotiation. In most of these cases the service provider is not indifferent to the termination charges paid by the calling party (unlike in the case of “traditional” termination services) as these charges may affect their competitive advantage as regards the service they provide (e.g. premium-rate services). Second, this would allow to avoid/minimise potential risks of over-regulation, and therefore to focus regulation where it is effectively needed, in line with the principle that remedies should be justified, objective and proportionate. As stated by recital 196 of the Code, the Commission should establish, by means of a delegated act, single maximum voice termination rates in order to reduce the regulatory burden in addressing the competition problems relating to wholesale voice call termination. Therefore, the Commission services consider that extending its intervention to segments of the markets that do not currently present competition problems in most of the Member States would not be justified. Finally, if NRAs find that competition problems still remain for calls termination to numbering ranges for VAS (which only happens today in very few Member States), they may still decide to impose price obligations on service providers for these services, as they fall outside the scope of Article 75 EECC, as they would not be fixed or mobile voice termination services to which the Delegated Regulation applies. In relation to calls to numbers for fixed nomadic services and to access emergency services, the Commission services consider that termination for calls to these numbering ranges should fall within the scope of the Delegated Regulation and be treated as fixed termination services. This is in line with BEREC opinion and is based on the following reasons. First, termination services for calls to numbers for fixed nomadic services and access to emergency services are currently regulated by a majority of NRAs as fixed termination rates because, as BEREC suggests in its opinion , they are likely to follow similar competition dynamics of “genuine” termination services. Therefore, their classification as fixed termination services is in line with current NRA practice.

Second, the majority of these services, if not all, are provided over a fixed infrastructure, rather than a mobile one, which would be consistent with their treatment as fixed termination services, since the relevant costs would match those of a fixed network. Some of these numbering ranges, notably fixed nomadic services, are also typically billed as fixed calls in retail calling plans for end-users. Therefore, there would be no or little risk of under-remuneration of termination into these numbering ranges as they are largely provided over a fixed infrastructure. This reasoning based on the cost is relevant since these numbering ranges are not geographic or mobile numbers, and hence cannot automatically be assigned to one category. Finally, including them in the scope of the Delegated Regulation would reduce regulatory burden and increase legal certainty for market players, as NRAs would not need to take a specific decision for including them under regulated termination rates. It would be however necessary that NRAs, either at the request of operators, as a result of dispute resolution procedure or at their own initiative, specify which numbering ranges correspond to fixed nomadic services and emergency services in each Member State. In relation to calls to M2M-specific numbering ranges , the Commission services consider that they should be excluded from the scope of the Delegated Regulation, as the services provided over M2M-specific numbering ranges, are not used for interpersonal communications – a condition that should be met to fall within the scope of this Regulation- but for communications between machines. Conclusion Termination services for calls to numbers for VAS, such as those used for premium-rate services, toll-free services and shared-cost services should be left out of the scope of the Delegated Regulation. Termination services for calls to numbers for fixed nomadic and emergency services should fall within the scope of the Delegated Regulation and be treated like fixed termination services. NRAs would, as part of their implementation tasks of the Delegated Regulation, specify which numbering ranges correspond to fixed nomadic and emergency service in each Member State, in principle at the request of operators or as a result of dispute resolution procedures. Termination services for calls to numbers to M2M-specific numbering ranges should be left out of the scope of the Delegated given that, in the vast majority of cases, they are not used for the provision of interpersonal communications services. 2.1.3Hybrid services Some voice call services that cannot be classified as purely mobile or purely fixed have appeared on the market. An example is the service provided by Telco Village in Germany. Telco Village provides voice call termination to call collection services (or ‘Anrufsammeldienste’) on a mobile number allocated to TelcoVillage GmbH. For this purpose, however, Telco Village does not use mobile network elements but only fixed network elements, which it uses to forward calls to the mobile numbers it controls. Other operators in different countries provide ‘home zone’ services which allow a mobile subscriber to receive calls using a fixed number and the caller be charged the rate for fixed calls, provided the user is within a certain distance from a given location (typically the caller’s home). Other examples of hybrid services are: Unified Communication-IP Centrex in Italy (call services on fixed number over mobile devices, which are provided using call forwarding solutions or over-the-top applications, through VoIP protocols over data network); fixed call service (also in Italy) provided through a wireless network especially designed for providing fixed voice and data services, provided on a modem installed in the premises of the end-users and using VoIP technology (Linkem, Eolo, Tiscali, Go Internet, Mandarin are the companies providing such type services); Fix GSM (Croatia) is a service where GSM mobile technology is used for the provision of call services in fixed location (used only as a substitute for fixed line connection in areas with no fixed line coverage or in areas); Home Zone services in Portugal or Germany (fixed call service, provided at a fixed location, provided with assigned fixed numbering from the national numbering plan, enabled by mobile network technology). Current regulatory practice In most cases, such hybrid services are currently treated as fixed termination services, given that they use fixed geographic numbers (see replies to the Public Consultation below). Feedback received The public consultation asked three questions regarding hybrid services: (i) “Are you aware of these operators in your country?”, (ii) “If yes, how are they regulated as regards termination rates?” and (iii) “How should these hybrid services in your view be classified under the delegated act?” The large majority of business associations, operators and public authorities were aware of hybrid services being provided in their countries. These services were only known to around half of the Union citizens who replied to the public consultation. Regarding existing regulation of hybrid services, the responses were mixed. About one third of operators replied that they are regulated as fixed termination services, another third replied that they are regulated in a different way, while the rest did not provide a response. The majority of public authorities replied that these services are regulated in a different way (neither as fixed nor as mobile services). In most of the latter replies, these authorities explain that they regulate them based on the number called. In relation to the question as to how hybrid services should be regulated, the views were again mixed. Only a small minority of stakeholders took the view that these services should be regulated as mobile services. The majority of business associations and public authorities submitted that these services should be regulated in a different way (not as fixed, mobile, as a function of the underlying network or the underlying pricing structure). Among operators, around 20% were of the view that they should be regulated as fixed services (which is consistent with a number-based approach as those services typically use fixed numbers), another 20% considered that they should be regulated as a function of the underlying network and 28% supported regulation in a different way (mentioning options such as regulation based on the number called or based on the recovery of costs, i.e. network-based). Almost half of the Union citizens who replied to the consultation also supported this approach. BEREC submitted that NRAs take these services into account in their market analysis and they are typically regulated based on the numbering ranges these services use. BEREC is of the opinion that, under the Delegated Regulation, hybrid services should be classified as purely mobile or fixed services depending on the numbering range to which the call is terminated. BEREC added that it “[…] finds that the call termination service for calls to fixed numbers delivered via mobile technology is in the same relevant market as voice call termination for calls to fixed numbers delivered over landline voice technology. This reflects also the perspective of the end-users (fixed number are associated with fixed services and mobile numbers with mobile services) and is consistent with the retail charging regime, where retail call charging hinges on the kind of the called user number (fixed or mobile), i.e. in the CPNP regime the calling party knows whether the call is delivered to a fixed or mobile destination on the basis of the called number”. Some operators and associations highlighted that the overarching principle should be the recovery of costs. ECTA called for a case-by-case assessment in view of their competitive impact, also based on the service functionality. Commission services’ views The Commission services consider that the relevant criterion to decide whether hybrid services should be treated as fixed or mobile termination services is the number called as this reflects the substitutability of the service from the end-user’s perspective. This is in line with the proposed definition of wholesale termination services. This approach provides transparency and legal certainty for operators given that operators would expect that a FTR is applied to a retail fixed voice service and a MTR to a retail mobile service. As a result from this approach, termination of calls to fixed numbers provided through mobile technology will be treated like fixed termination services. This is in line with current NRA practice and is compatible with the logic of market analysis where demand-substitutability needs to be assessed and is supported by BEREC. The 2014 RRM also follows this approach.

In the event that a given service provider provides calls to both fixed and mobile numbers, the treatment of such service as a fixed or mobile will be undertaken on a call-by-call basis (whereby some calls are terminated on a fixed number while others are terminated on a mobile number). However, given the potential variety of such services and the likely rapid technology evolution, NRAs will be able to eventually decide which regulatory treatment (fixed or mobile termination) should be applied through dispute resolution procedures, in cases they do not clearly fall under the scenarios described in this Section and therefore may give rise to a dispute. Some stakeholders have submitted that the termination rate charged should in all circumstances reflect the underlying cost (hence suggesting to apply the termination as a function of the network). The Commission services, in line with the approach taken in Section 2.1.1, do not consider it necessary to follow this approach for the following reasons. First, conditions attached to numbering in Member States typically ensure that fixed numbers are used for services that are fixed and mobile numbers are used for services that are mobile. In particular, mobile numbers are usually only used for mobile services (thus avoiding over-recovery of costs). Second, applying the fixed or mobile termination rate depending on the functionality of the service (i.e. in line with the number used, whether fixed or mobile) is in line with the incremental, long-run efficient cost-based approach, in that the single maximum Union-wide fixed voice termination rate is applicable to functional equivalents of calls to fixed numbers and the single maximum Union-wide mobile voice termination rate to calls to mobile numbers. In line with cost model principles, fixed (or mobile) technology would in general be the most efficient way to provide such services, and the single maximum Union-wide voice termination rate applied would reflect that cost. In other words, it would be the operator’s choice to use a less efficient technology (mobile) to provide fixed services. If, in some cases, an operator decides to use mobile technology for the provision of fixed services, it cannot be argued that the application of the single maximum Union-wide fixed voice termination rate would amount to financial losses for that operator, given that the mobile infrastructure is likely to be already in place and such provision would therefore enable considerable cost savings for those operators (those of deploying a fixed network). Third, hybrid services are relatively marginal and would therefore not have a large impact on the financial situation of operators. Fourth, a number-based approach is more transparent, in that calling operators and end-users will know that a single maximum Union-wide fixed voice termination rate will be applicable for calls considered as “fixed” in retail calling plans. Conversely, a network-based approach would lack such transparency. Conclusion Termination for hybrid services should be treated as either fixed or mobile termination services depending on the number called, in line with the proposed definition of termination services. Moreover, dispute resolution procedures may be used in case of complaints regarding the appropriate classification of certain termination services. BEREC concurs with this conclusion. 2.1.4Conclusion on the definition For the purposes of the Delegated Regulation, termination services are defined as follows: “Mobile voice termination service means the wholesale service required to terminate calls to mobile numbers that are publicly assigned numbering resources, namely numbers from national numbering plans, provided by operators with the ability to control termination and set the termination rates for calls to such numbers, where there is interconnection with at least one network, irrespective of the technology used, including interconnection ports”; “Fixed voice termination service means the wholesale service required to terminate calls to geographic numbers and non-geographic numbers used for fixed nomadic services and emergency services, that are publicly assigned numbering resources, namely numbers from national numbering plans, provided by operators with the ability to control termination and set the termination rates for calls to such numbers, where there is interconnection with at least one network, irrespective of the technology used, including interconnection ports”. As it results from the above definitions, the main criterion that the Delegated Regulation uses for the definition of termination services is the number, i.e. whether the call is delivered to a mobile number or to a fixed number (including numbers for fixed nomadic and emergency services). The Commission services consider that the number is the element that shapes demand and supply substitutability both at the retail and the wholesale levels. This definition includes all technologies used to terminate calls to that mobile or fixed geographic number by the termination provider (e.g. on a 2G, 3G, 4G or 5G network and/or via WiFi, any type of fixed network) and regardless of how the call may be originated. Any termination service, fixed or mobile, entails the terminating operator’s network interconnecting with at least one other network other than the terminating operator’s network. Voice termination providers should therefore have the necessary technical capabilities to be able to route the call to the call recipient, including the control of the number (and be responsible for these capabilities). The termination service, as defined by the Delegated Regulation, should also include any capacity requirements for interconnection ports, setup fee to provide interconnection. This applies regardless of the actual underlying technology implemented by the operator(s) to provide the interconnection. As such, any provider of termination services may not levy any other cost than the relevant single maximum Union-wide voice termination rate for the full service of terminating a call to a number on its network. 2.1Treatment of calls originated from third country-numbers and terminated to Union-numbers The foreseen regulated termination rates apply to voice calls originated from and terminated to Union-numbers . However, a relevant question to consider is whether they should also apply to calls originated from third-country-numbers and terminated to Union-numbers, and if yes, under which circumstances. Current regulatory practice

Currently, in a large majority of Member States, NRAs do not regulate voice termination for calls terminated to Union-numbers that originated from third country-numbers and thus operators are able to set termination charges freely for such calls. Some NRAs set certain limits to the freedom of operators to set termination charges in such cases, for instance by mandating that operators can only charge termination rates equivalent to those charged by their third country counterparts (and not higher). As BEREC notes in its response to the public consultation, ‘[i]n 2016 incoming calls originating from numbers pertaining to the national numbering plan of countries from outside the EEA were treated differently by NRAs, such that either these were not regulated at all or operators could set symmetric or asymmetric termination rates’. Taking into account the latest decisions issued by NRAs, the situation is the following as of June 2020: -For FTR: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Slovenia, Slovakia and Sweden do not regulate fixed voice termination originated from third country-numbers; France, Germany, Ireland, Netherlands, Portugal, Romania and Spain allow operators to freely negotiate termination rates, with certain conditions, typically that the rates charged should not be higher than those charged by their third country counterparts . -For MTR: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Slovenia and Slovakia and Sweden, do not apply any price regulation to mobile calls originated from third country-numbers; France, Germany, Ireland, Netherlands, Portugal, Romania and Spain allow operators to set termination rates, with certain conditions, typically that the rates are not higher than those charged by their third country counterparts . Feedback received The public consultation asked the following question: “If you are an operator that is active outside the EEA, are you of the view that operators outside the EEA should apply termination rates equivalent to the single maximum Union-wide voice termination rates outside the EEA, if they were to benefit from the single maximum Union-wide voice termination rates when terminating calls from non-EEA countries into the EEA?”. Although this question was mainly addressed to non-EEA operators, EEA stakeholders also replied. The public consultation provided broad support for the exclusion of calls originated outside the EEA from the scope of the Delegated Regulation, sustaining the view that EEA operators would be in a weaker bargaining position vis-à-vis non-EEA providers for the negotiation of termination rates. The large majority of respondents who provided a view on this issue considered that the single maximum Union-wide voice termination rates should not apply to calls originating outside the EEA for the following main reasons: (i) it would limit the ability of EEA operators to respond to excessively high termination rates from operators outside the EEA, thus putting EEA operators at a competitive or financial disadvantage, and (ii) there would be a risk of a potential distortion of competition between EEA and non-operators EEA that increases costs for domestic operators and, by extension, for domestic end-users. The large majority of respondents who provided a view considered that operators outside the EEA should charge termination rates equivalent to the single maximum Union-wide voice termination rates for calls originated from the EEA, if they were to benefit from the single maximum Union-wide voice termination rates when terminating calls from non-EEA countries into the EEA. Most public authorities, BEREC, operators and associations agree that the single maximum Union-wide voice termination rates should apply either (i) only to calls originated within the EEA or (ii) to both calls originated within the EEA and calls originated outside the EEA subject to certain reciprocity requirements . BEREC highlights that these two approaches are in line with the current practice of NRAs. Two non-EEA companies (the only non-EEA companies which responded to the public consultation) raised concerns that such complete non-application of the Union regulated rates to calls originated in third countries would not comply with international trade law. The Romanian NRA (ANCOM) also raised this concern and suggested that, should termination rates set by third countries not be cost-oriented, the Union should take action at WTO level or bilaterally. Further, ANCOM took the view that single maximum Union-wide voice termination rates shall apply at least for the calls originated from states which agreed with the Reference Paper. Public authorities and operators agreed that applying the single maximum Union-wide voice termination rates to calls originating outside the EEA would put European operators in a weak bargaining position vis-à-vis their non-EEA counterparts. Several operators and associations (Orange, Vodafone, TIM, Hutchison, Eir, MVNO Europe and ECTA) advocated the application of the single maximum Union-wide voice termination rate to calls from outside the EEA only in the case that non-EEA operators charge the same termination rate as the single maximum Union-wide voice termination rate. Some of them were in favour of such mechanism, whereas other opposed. Citizens provided replies supporting both views. In the ’Have Your Say!’ feedback, most respondents argued that the Delegated Regulation should generally not apply to calls originated outside the Union. In its opinion, BEREC appreciates the approach presented in the draft Delegated Regulation and the efforts made to find a WTO-compliant regulation of termination rates. Further, BEREC finds it critical that any criteria to be used in this regard do not unreasonably restrict the ability of European operators to respond to high termination rates in countries outside the Union. Commission services’ views With the aim of ensuring the application of termination rates in an open, transparent and non-discriminatory way, and taking account the proportionality principle, the regulated termination rates should apply to calls originated from third countries’ numbers and terminated to a Union-number in two cases: First, they should apply to calls originated from third countries’ numbers and terminated to a Union-number where the termination rates (applied or proposed to be applied) for calls originated from a Union-number and terminated in those third countries’ numbers are at a level equal or lower than the level of the maximum voice termination rate set by the Delegated Regulation for each year in each Member State. The relevant maximum mobile termination rates that will trigger this mechanism in 2021, 2022 and 2023 will be those set out by paragraphs 2 to 5 of Article 4 of the Regulation. The relevant maximum fixed termination rates that will trigger this mechanism in 2021 will be those set out by Article 5(2) of the Delegated Regulation. Providers of termination services in the Union should apply the maximum regulated termination rates automatically to providers of termination services in third-countries, on the basis of rates included or proposed to be included in the agreements with such providers. Taking into account BEREC’s opinion , given that Union providers of voice termination services may not always be in the position to know the level of the termination rate applied by third country operators , it will be normally for the latter to provide verifiable information proving the level of the termination rate offered. Unless Union providers of termination services have the necessary information referred to before, they are not under the obligation to apply the single maximum Union-wide termination rates set out in the Delegated Regulation. This information requirement should not, however, be abused for the purpose of excluding the third country operator from the application of those rates. Second, the regulated termination rates would apply to calls originated from third country-numbers and terminated to Union-numbers, in cases where it results, on the basis of information received by the Commission from such third-countries, that the regulation of termination rates for calls originated from Union-numbers and terminated to such third countries’ numbers is equivalent to the principles set out in Article 75 and Annex III of the Code. The third-countries which make such a request and which meet such requirements as assessed by the Commission, should be included in a list in an Annex to the Delegated Regulation. The list should be reviewed in order to remove third-countries that no longer apply such regulation or add third countries that apply and qualify based on the Commission’s assessment. Therefore, this second criterion for including calls originated from third country-numbers in the scope of the Delegated Regulation would only be used if termination rates in the third country are above the Union-wide termination rates, as the lower or equal rates will be addressed under the first criterion. Limiting the application of the maximum Union-wide termination rates to such cases is necessary to ensure the conditions for the good functioning of the internal market and the achievement of the objectives of the Delegated Regulation.

An indispensable objective of the Delegated Regulation is to harmonise the maximum rates for fixed and for mobile termination services across the Union. This aims to reduce the regulatory burden on NRAs and operators and prevent competition problems in wholesale voice call termination markets. It also removes the fundamental competitive distortions arising from significant divergences in the treatment of fixed and mobile termination rates. As explained in Section 1, the primary objective of the Delegated Regulation is therefore to foster market integration by harmonising termination rates across the Union, going beyond setting a common methodology for regulated termination rates which has failed so far to ensure full consistency of rates, as some NRAs applied different approaches within the recommended cost methodology . These single maximum Union-wide rates will eliminate net payments between operators in different Member States that are due to different levels of termination rates rather than to different call volumes. Termination rates can have important strategic and competitive implications and thus having different levels of termination rates within the Union is likely to favour certain operators and harm others. Examples of such distortions are, as highlighted by the Evaluation Report on 2009 TRR, financial transfers between fixed and mobile operators, or between small and large operators. Member States with higher termination rates would likely have higher retail prices, causing lower usage rates and decreasing consumer welfare. The positive effects of harmonised termination rates are set out in the Commission’s evaluation report of the 2009 TRR. The evaluation report found that the Recommendation contributed to achieving lower and more consistent termination rates across the Union and increased the level playing field in the termination markets (by addressing the issue of cross-subsidisation between fixed and mobile operators on one hand, and small and larger operators on the other hand). The report also found that lower wholesale termination rates are likely to have triggered a decrease of retail prices, an increase in traffic volumes and the launch of new retail offers. These positive effects will be further increased (to the maximum possible) through the Delegated Regulation by setting a single rate across the Union due to its even stronger harmonisation impact, which cannot be ensured under the Recommendation. However, the application of the single rates to calls originated from third country-numbers where operators charge termination rates higher than the maximum termination rates set out in the Delegated Regulation or third countries whose rates do not follow the cost principles set out in the Code, would risk undermining the objectives pursued, including its internal market objectives. First, including calls originated from third country-numbers - where operators charge high termination rates - and terminated to Union numbers, would deprive Union operators of the possibility to negotiate termination rates with non-Union operators on an equal footing, which they can currently do. In fact, if they were bound to apply the single maximum Union-wide voice termination rates to calls originated from Union-numbers even where there is no guarantee that the termination rates charged by those third country operators are set or regulated in an appropriate manner, Union operators would be bound to accept any rate charged by third country operators, while being bound to charge to them very low prices (the single maximum Union-wide voice termination rates). The result would be that Union operators would likely face much higher termination rates for calls terminated outside the Union than they do today. This situation could lead to significant net payments to non-Union operators, which are likely to be reflected in increased retail tariffs for consumers in the Union. This could potentially hamper the functioning of the internal market. The risk is not merely hypothetical but has materialised in the past. The German and Austrian cases show that some third country operators are ready to take advantage of the strict cost orientation enforced in the Union by charging extremely high termination rates (while paying a low regulated rate when the non-Union originated call is terminated in an Union operator network). In one case, a Russian operator charged a German operator 115-fold the regulated rate. This could have had an impact on retail prices paid by German consumers, risking the increase of domestic prices. Additionally, facing high termination rates for calls to third countries’ numbers could prevent Union operators from including such calls in their pan-European calling plans, thereby limiting the availability of those pan-European offers for consumers in the Union and therefore, the achievement of the internal market. Second, applying the single maximum Union-wide voice termination rates to operators whose pricing for termination services is unrestricted, or not meaningfully restricted, would distort competition among Union operators, as different operators would face different degrees of exposure to such high termination rates, and bring into question the economic sustainability of the harmonised single maximum Union-wide voice termination rates system from the point of view of the Union operators. Those with a high share of terminated non- Union calls that are not subject to meaningful pricing constraints would have a competitive disadvantage over operators with a low share of non- Union calls, a dimension which is out of control of the operators themselves. Some would be harmed by such high termination rates charged by third country operators, while some would not. That would make it more difficult to achieve the objectives of the market integration sought by the Delegated Regulation, which are reinforcing the single market by removing distortions between operators due to termination rates charged well above cost (see Section 1). Likewise, the application of high termination rates to certain Union providers would also raise a barrier to trade within the Union as it would result in different conditions and constraints faced by different Union operators as a result of different exposures to international calls (made and received by the operators’ customers) which would translate into different competitive conditions faced by such operators, as a result of regulation, i.e. the application of the single maximum Union-wide voice termination rates to calls originated from third country-numbers. Finally, the application of regulated rates to calls originated from third country-numbers in cases where third country operators charge high termination rates would distort investment incentives, which also risk running counter to foster the single market. This is because investment ability and incentive in the Union (both investment in operators and by operators) would be distorted by the asymmetrical impact of the exposure to high termination rates for calls terminated outside the Union. All these factors would risk undermining the objective of furthering market integration that the Delegated Regulation, and more generally the Union regulatory framework for electronic communications networks, strive to achieve. Therefore, the obligation to apply the maximum regulated termination rates should not apply to calls originating from third country-numbers as that would run counter to the above objective of market integration. However, under certain circumstances, such as where termination rates are lower than or at the level of the maximum termination rates set out in the Delegated Regulation or where these third countries apply equivalent cost-orientation principles to regulate termination of calls to such third countries, the application of the maximum termination rates set out in the Delegated Regulation may not lead to the distortions described above. Accordingly, there is a need for a specific mechanism in order to accommodate such cases and thus keep the exclusion as narrow and circumscribed as possible. This ensures its application in an open, transparent and non-discriminatory way, taking account of the proportionality principle. This would therefore require a mechanism to apply regulated rates in such cases based on the following two distinct criteria: ·Criterion A (equal or lower termination rates): if a provider of termination services in a third-country applies, for calls originated from a Union-number and terminated to a number on its network, termination rates equal or below the maximum (mobile and/or fixed) termination rates set in the Delegated Regulation for each year for each Member State , then the relevant maximum termination rates set in the Delegated Regulation for each year should apply. As this would entail a simple acknowledgment of the level of termination rates applied by each provider included or proposed to be included in agreements with providers of terminations services from the Union, such mechanism would apply as soon as the rates set in the Delegated Regulation become applicable. However, Union providers of termination services will only be obliged to apply such rates if they have all the necessary information regarding rates applied by third country operators. This information requirement should not, however, be abused for the purpose of excluding the third country operator from the application of those rates. ·Criterion B (equivalent regulatory principles applied): if a third country regulates (mobile and/or fixed) termination rates, for calls originated from Union-numbers and terminated to numbers of that country, based on principles equivalent to those set out in Article 75 and Annex III of the Code, the Commission, acting on the request from the third country’s competent authorities and on the basis of information submitted by that third-country and following an appropriate assessment, may include that third-country to the list in an Annex of the Delegated Regulation to which the regulated termination rates would apply. As the call origin contributes to define whether the Union-wide termination rates apply or not, it is essential for Union operators to be able to identify the country of origin of the caller. The Calling Line identification (CLI) is the common method used in order to identify the origin (through the country code) of an inbound call via the signalling information associated to that call. In particular, the country of origin of the caller is identifiable via the country code linked to the CLI. In order to send correct invoices and to avoid disputes between operators, Union operators should receive a valid CLI assigned to every incoming call. Therefore, in order to avoid fraudulent calls or routing abuses, Union operators would not be bound to apply Union-wide termination rates to termination of calls if the CLI is missing, invalid or fraudulent.

In some cases, agreements for termination of calls originated from third country-numbers involve the presence of an intermediate operator, i.e. a transit provider, between the originating and the terminating network operator. Given that the termination rates applied by the third country operator, for calls originated from Union-numbers and terminated to third country-numbers, may not always be known or easily verifiable for Union operators, the application of criterion A above (equal or lower termination rates) would normally require the intermediate operator to provide information to the Union operator from which it follows that such conditions are actually met (and such lower or equal rates would be applied for calls originated from Union-numbers by the Union operator and terminated to third country-numbers by the third country operator). In that case, where transit providers (or other intermediaries) resell termination services in third countries to Union operators, the termination rate applied or offered by those transit providers (for calls from the Union to that third country) would be the relevant one for determining if they are equal or lower than the maximum voice termination rates set by this Regulation. 3Cost models and general methodology Taking account of the particular characteristics of voice termination markets, the Code requires that the costs of termination services are calculated on the basis of forward-looking long-run incremental costs (LRIC). LRIC models include only those costs which are caused by the provision of a defined increment. An incremental cost approach which allocates only efficiently incurred costs that would not be sustained if the service included in the increment was no longer produced (i.e. avoidable costs) promotes efficient production and consumption and minimises potential competitive distortions. Avoidable costs are the difference between the identified total long-run costs of an operator providing its full range of services and the identified total long-run costs of that operator providing its full range of services except for the wholesale voice termination service supplied to third parties (i.e. stand-alone cost of an operator not offering termination to third parties). To ensure an appropriate attribution of the costs, a distinction needs to be made between those costs that are traffic-related, i.e. all those fixed and variable costs which rise with increased levels of traffic, and those costs that are non- traffic-related, i.e. all those costs which do not rise with increased levels of traffic. To identify the avoidable costs relevant for wholesale voice termination, non-traffic-related costs should be disregarded. Moreover, it is appropriate to attribute traffic-related costs firstly to other services (e.g. call origination, SMS, MMS, broadband, leased lines) with wholesale voice termination being the final service to be taken into account. The cost allocated to the wholesale voice termination service should thus be equal to the additional cost incurred to provide the service. As a consequence, cost accounting based on a BU-LRIC approach for wholesale voice termination services in fixed and mobile markets should allow only the recovery of costs which would be avoided if a wholesale voice termination service was no longer provided to third parties. The further termination rates move away from incremental costs, the greater the competitive distortions between fixed and mobile markets and/or between operators with asymmetric market shares and traffic flows. Therefore, and in line with Annex III of The Code, it is justified to apply a pure LRIC approach whereby the relevant increment is the wholesale voice termination service and which includes only avoidable costs. A LRIC approach would also allow the recovery of all fixed and variable costs (as the fixed costs are assumed to become variable over the long run) which are incremental to the provision of the wholesale call termination service and would thereby facilitate efficient cost recovery. Further to the LRIC principle, Annex III of the Code also states: “the evaluation of efficient costs shall be based on current cost values; the cost methodology to calculate efficient costs shall be based on a bottom-up modelling approach using long-run incremental traffic-related costs of providing the wholesale voice termination service to third parties” As such, the cost model methodology for the single maximum Union-wide voice termination rate shall be based on a Bottom Up Long Run Average Incremental (BU-LRIC) approach. Such a cost model should be based on the efficient technology which a hypothetically new operator would rely on when establishing a network today. Article 75 of The Code and specifically Annex III spells out in detail the requirements for such a cost model, building on the principles established in the 2009 TRR. Annex III requires that costs of wholesale voice termination rates are to be based on the principles of recovery of costs incurred by an efficient operator, calculated using the pure BU-LRIC approach. Only costs related to traffic which would be avoided in the absence of the provision of a wholesale voice termination service shall be allocated to the cost of terminating a call. In essence, any cost not directly related to termination (such as radio spectrum fees, commercial costs not directly related to the provision of wholesale voice termination and capacity-related costs for services other than termination) should be excluded from the costs of termination services. For the mobile network, the efficient operator modelled should be set to a market share not below 20%. For both the mobile and fixed network, the technology modelled shall be forward looking, based on an IP core network. 3.1Preparation of the two cost models for the Delegated Regulation In order to assess the costs of providing wholesale termination services in the Union for the purposes of the Delegated Regulation, the Commission commissioned two independent cost studies: one for mobile and one for fixed networks. The aim was to construct two separate cost models, estimating the wholesale costs of providing mobile and fixed termination services respectively. The two projects were launched independently of each other and were both awarded to Axon Consulting Partners Group (Axon). The mobile cost model was developed from mid-March 2018 to mid-July 2019 and the fixed cost model from September 2018 to November 2019. At the start of each study, a first workshop with all relevant stakeholders was organised to collect feedback on the methodology proposed by Axon. The aim for both studies was to build models with a similar skeleton facilitating as much as possible the estimation of the relevant mobile/fixed wholesale costs in each of the 31 EU/EEA countries . The models were based on country-specific input where relevant and, where not, on averages/common values across the EU/EEA. The mobile cost model was finalised and published on 24 July 2019. The fixed cost model was published on 26 November 2019. To ensure transparency throug