WRITTEN QUESTION E-2533/96 by Amedeo Amadeo (NI) to the Commission (8 October 1996)

Subject: Competition in the telecommunications sector

Telecommunications is a strategic sector of considerable interest to the EU. The current liberalization process has prompted operators to introduce new services and lower their rates. The introduction of competition benefits both operators and users and is vital in order to facilitate the transition to the information society and thereby ensure our survival in an ever more competitive, ever more global market. Against this background, the protection of cultural diversity and equality of access to the new services are fundamental requirements.

How does the Commission intend to ensure that the legal barriers which have been removed are not replaced by agreements or practices which have the same effect, such as concentrations which conflict with the principle of free competition, agreements to divide up the market, unfair practices by companies already on the market against new competitors (such as the refusal of free access to essential services), or illegal state aids?

Answer given by Mr Van Miert on behalf of the Commission (29 November 1996)

The Commission is fully aware of the fact that the steps it has taken over the last years to open up the telecommunications sector to competition, culminating in full liberalization in 1998, would be futile if the legal monopolies of the past were to be replaced by anticompetitive agreements and behaviour such as market-partitioning along national borders and unfair pricing practices by dominant operators.

With regard to the three possible sources of anticompetitive situations mentioned by the Honourable Member (concentra-tions,restrictions of competition through anticompetitive agreements and abuses of dominant position and illegal state aids), the Commission applies the relevant rules in the same way to the telecommunications sector as to other sectors. This having been said, it is clear that the Commission must take into account the specific features of this sector, which even after the 1998 deadline for full liberalization will still be characterized by the existence of dominant positions of the incumbent telecommunications operators (TOs).

For example, in its recent decisions exempting the strategic alliances involving Deutsche Telekom (DT), France Télécom (FT) and the american telecommunications company Sprint, the Commission imposed very stringent conditions to ensure in particular that the Community parent companies do not discriminate in any way in favour of these new subsidiaries and to the detriment of competitors of the latter which still depend on DT and FT for the building blocks of their own telecommunications networks and services ((Commission decisions of 17 July 1996 relating to proceedings under Article 85 of the EC Treaty and Article 53 of the EEA Agreement (Cases no. IV/35.337-ATLAS and IV/35.617-Phoenix/GlobalOne), OJ L 239 of 19 September 1996, pp. 23-78. )). The same policy will be followed with respect to other strategic alliances involving incumbent TOs which the Commission is currently examining under Article 85 of the EC Treaty.

With respect to abusive behaviour by dominant companies such as under certain circumstances the refusal to give competitors access to essential facilities, thereby hampering the emergence of competition on precisely those markets where the Commission has used its powers to abolish monopolies, the scrutiny under Article 86 will be intensified and appropriate remedies applied in cases of flagrant abuse. In view of the possible magnitude of such problems, application of national and Community competition rules by national courts and competition authorities is indispensable.

Access to facilities necessary to provide telecommunications services, such as interconnection to the public switched telecommunications network, is one of the major issues in the development of this sector. Such access is central in allowing market participants the benefits of liberalization.

Under the merger Regulation (EEC) no 4064/89 ((OJ L 395, 30.12.1989. )), the Commission assesses mergers and concentrative joint ventures. A number of cases relating to telecommunications, telecommunications equipment and related sectors (eg cable television) have been considered in the context of the Regulation since its entry into force in 1990. Examples of cases include the Siemens/Italtel joint venture in telecoms equipment in Italy and the MSG media service operation relating to pay television services in Germany. Both these cases were the subject of detailed investigation and the latter operation was prohibited. In cases involving incumbent TOs, continuing dominant positions will be an essential element in examining whether a concentration leads to the strengthening of a dominant position, as required under the merger control rules.