Opinion of the Economic and Social Committee on the 'Communication from the Commission on the application of the competition rules to access agreements in the telecommunications sector` (97/C 287/03)

On 20 December 1996 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 7 May 1997. The rapporteur was Mr Meriano.

At its 346th plenary session (meeting of 28 May 1997), the Economic and Social Committee adopted the following opinion by 71 votes to one with two abstentions.

1. Introduction

1.1. The draft Commission communication is a most timely initiative, providing a broad interpretative instrument to clarify the application of Community competition law under the new European regulatory framework for telecommunications, since access agreements are the key to allowing market operators to take advantage of liberalization in this sector.

1.2. The Committee thus fully shares the Commission's concern to prevent anti-competitive practices when access agreements are made, and supports the adoption of a communication on the subject. The Commission issued guidelines on 6 September 1991 on the application of Community competition law in the telecommunications sector; however, these guidelines need updating to take account of the recent regulatory changes in the sector and furthermore do not provide any specific indications on access agreements. They therefore do not offer sufficient guarantees to businesses that provide telecommunications services using existing networks in competition with the current operators. The Commission intends to take action now to create more reliable trading conditions and, in particular, a more stable environment for investment and commercial initiatives in the telecommunications and multimedia sectors.

1.3. Furthermore, this new draft communication adopts a particularly broad concept of access, making reference both to access by providers of services using the public network as a carrier and to the interconnection of those offering services on their own (leased or owned) infrastructure, as well as to every other use of their essential facilities, including, for example, access to databases of lists of subscribers. This is a further strength of the document, which takes a broad and exhaustive view of its subject matter.

1.4. The draft Commission document

The draft communication is divided into three parts:

1.4.1. Part I sets out the regulatory framework for the telecommunications market, outlining the existing and forthcoming ONP directives, the directives issued under Article 90 of the EC Treaty, and the Treaty provisions on competition (Articles 85 and 86). Apart from areas of its own competence, the Commission also notes the jurisdictions of national regulatory authorities who are obliged to guarantee access to the various providers' public networks in accordance with the ONP rules mentioned above. The Commission furthermore confirms the competence of national competition authorities and courts in the application of national and Community competition law, preferring that disputes be settled on a decentralized basis unless a significant Community interest is involved.

1.4.2. Part II defines the relevant markets in the sector, with a view to assessing access agreements between companies. Considering product markets, the Commission accepts that it is not possible to provide an up-to-date definition of individual markets on the basis of the services offered in a sector that is changing as rapidly as telecommunications. It thus simply makes a general distinction between the market for telecommunications services on the one hand and the market for service providers' access to the public networks on the other. For the definition of geographical markets, the Commission considers that legal and economic conditions for network access must be similar throughout the area under discussion.

1.4.3. Part III considers the practical application of EC Treaty Articles 85 and 86 to access agreements between telecommunications operators (TOs). In particular the Commission defines the criteria it will use in assessing whether TOs (particularly those in dominant positions) are acting anti-competitively when drawing up and/or implementing these agreements.

2. General comments

2.1. The Committee is happy with the structure of the draft document. However, it feels obliged to comment on certain points, with the aim of making the regulatory framework more consistent and preventing possible distortions in the application of the document.

2.2. The Committee feels that the communication on the application of competition rules in the telecommunications sector should, as previously mentioned, hold the status of an interpretative instrument, and should simply illustrate the intentions and principles behind the Commission's competition activity. Attempts to second-guess the future behaviour of the various operators should not be used as a substitute for case-by-case analysis of actual practice. Indeed, such attempts are likely to be wide of the mark, given the particularly dynamic nature of the telecommunications market, characterized by constant technological development and a wide variety of resultant situations.

3. Specific comments

3.1. On the subject of Part I of the draft communication, the Committee fully supports the Commission's approach to the problem of the relationship between the sector-specific legislation (the ONP procedures () and directives under Article 90 EC), and Community competition law. In particular, the Committee seconds the invitation made by the Commission to all the competent national and Community authorities handling the application of these rules to avoid unnecessary duplication of procedures in connection with these cases.

3.2. However, the Committee fears that the suggestions made in the document could fail to take effect unless there is some prior harmonization of the numerous laws applicable. In the present case, the Committee feels that it might be advisable to harmonize the application of the concept of 'dominant position`, as shown in the draft communication, with the rules governing undertakings with significant market strength, contained in the ONP rules.

3.3. In the absence of such harmonization, basic legal principles such as transparency and legal certainty could be seriously prejudiced on the telecommunications market, in that the activities of many operators could be assessed differently depending on the criteria used at different times by the competent authorities in their dealings with the operator, bringing a risk of disputes with the European institutions.

3.4. As regards Part II of the communication, the Committee is concerned about the distinction between telecommunications service markets and the markets for service providers' access to the public networks. More specifically, the Committee wonders whether this distinction is realistic in a market which is so complex that in many cases the facilities required to supply a particular service themselves constitute a service.

3.5. It is indisputable that the increasing convergence of telecommunications, the audiovisual sector and information technology will make any a priori demarcation between the respective markets increasingly difficult.

3.6. The communication's definition of the geographic market certainly accords with current Commission practice on competition. Nevertheless, in the Committee's view, a proper assessment of the behaviour of TOs active on the European market should reflect the fact that some of them, at least during the initial phase of liberalization, will continue to enjoy special or exclusive rights in their own country (e.g. additional transitional periods for transposing liberalization directives), and will therefore be able to gain competitive advantages in other Member States through cross-subsidization from 'protected` activities.

3.7. Lastly, turning to Part III of the draft communication, the Committee feels that the criteria identified by the Commission for assessing the existence of a dominant position on the telecommunications market are excessively rigid.

3.8. It seems unfair to assume that an undertaking has a dominant market position solely on the basis of criteria such as its market share or number of clients, particularly without checking whether alternatives are available on the market. Although being in a dominant position is not deemed unlawful under Community law (and the draft communication does not seek to amend this principle), the Commission nevertheless adopts a much stricter line when assessing the commercial conduct of dominant companies than it does when assessing that of other businesses.

3.9. Although this approach is quite right in general terms, it may harm the development of the sector as a whole, by hindering moves by current operators to extend their activities to sectors which are being drawn closer together by the progressive convergence of technologies, through vertical and horizontal integration which is simply a response to the need to adjust company structures in line with technological progress.

3.10. The Committee would therefore call at least for a statement in the text clearly pointing out that the criteria set out in the communication are not enough, taken individually, to prove the existence of a dominant position. At the same time, it would be advisable to mention the need for the Commission to check, in each individual case, for the presence of alternative network operators able to function in competition with the traditional operators. The Commission should note, in particular, that in many Member States alternative operators are already capable of exerting considerable influence on the telecommunications market.

3.11. The Committee has some doubts about the concept of 'essential facilities` defined in the communication. In particular it should be noted that some of the examples given in the text are already out of date: this is the case, for example, with leased circuits, which are no longer essential in the sense implied by the communication, given the current degree of openness in the market, the growth in alternative networks, and the maturity of technological alternatives such as DECT. Under these circumstances it would be more appropriate for the communication simply to provide a general definition of essential facilities, leaving it to the competent authorities to assess individual instances on a case-by-case basis.

3.12. The Committee broadly endorses the communication's classification of types of abuse, and considers that greater attention should focus on applying the concept of 'abuse` to the telecommunication sector (especially access agreements) than on drawing up definitions of 'dominant position` which may prove abstract and misleading when dealing with specific cases.

3.13. The same applies to the part of the communication which examines abusive situations. For example, the Commission (rightly) includes among these the case in which a public operator charges competitors excessively high or excessively low prices for network access. However, there is no mention of the possible supply of transmission capacity at extremely low prices as practised by the owners of alternative infrastructures, who have been able to recover their costs by using profits generated by their principal activity, generally run as a monopoly.

3.14. The Committee's last comment concerns the section of the communication which considers access agreements in the light of Article 85 EC. The Committee endorses the general but effective way in which the Commission seeks to clarify how the various cases should be treated.

Brussels, 28 May 1997.

The President of the Economic and Social Committee

Tom JENKINS

() Specifically the draft European Parliament and Council Directive on the ONP and interconnection lays down rules for determining the economic conditions for access to telecommunications networks.