WRITTEN QUESTION P-4069/00

by Antonio Di Pietro (ELDR) to the Commission

(20 December 2000)

Subject: Increase in Telecom subscription rate

According to Italian press reports, the European Commissioner responsible for competition, Mario Monti, has asked the Italian telecommunications watchdog body (Autorità per le Garanzie nelle Comunicazioni italiane) to increase the Telecom annual subscription rate for fixed telephony by at least 6 %, excluding VAT and inflation.

This subscription generates a total income of around ITL 7 700 billion for Telecom Italia each year. It would appear, on the basis of comparable purchasing power, to be the highest in Europe. However, with the switch from a concessionary to a licensing system, the telephone subscription rate should, with a view to guarding against distortions of competition, gradually fall rather than rise until it only covers the actual cost of maintaining the fixed network.

The problem is that the investigations aimed at establishing the access deficit were conducted by a former Ministry of Communications director, who had moved on to the watchdog body and was then recruited by Telecom Italia.

In response to the Commissioner's request, two Italian consumer organisations - Adusbef and Codacons - have submitted to the competent authorities a complaint questioning Mr Monti's right to impose such an increase on an independent authority and asking whether his role should not be limited to making representations to national governments.

In the light of the above, it would seem necessary to establish whether any member of the Commissioner's office may be in a position of conflict of interest with respect to the request to the watchdog body to increase the subscription rate.

Answer given by Mr Monti on behalf of the Commission

(2 May 2001)

Acting on a proposal by the Member of the Commission who was responsible for competition at the time, the Commission decided in 1998 to initiate infringement proceedings against Italy, because that country had not authorised Telecom Italia to rebalance its telephone tariffs. Article 4c of Directive 90/388/EEC, as amended, provides that before the liberalisation of the market on 1 January 1998 the Member States must allow telephone tariffs to be aligned on real costs. The purpose of this is to stop prices being held below costs in some markets, which would deter investments by new entrants into these markets.

During September and October 2000, experts from the Italian telecommunications watchdog body (AGCOM) and the Commission agreed on the cost of the service providing access of Telecom Italia. This made it possible to calculate the necessary increase in the annual subscription rate in order to enable Telecom Italia to generate sufficient revenue to cover the cost of this service. The purpose of the Commission's action in relation to AGCOM was solely to remind it that if it did not permit such an increase, the Commission would have no alternative but to refer the matter to the Court of Justice to find that the Directive was being infringed. The Commission was obliged to refer the matter to the Court of Justice if, after more than two years of proceedings, AGCOM still did not allow Telecom Italia to align its annual subscription rate on the real cost. Since the Directive refers to alignment on the real costs of the services concerned, it is not legitimate to make an international comparison.

Telecom Italia was not involved in the process of calculating the cost of the access service, except to provide the required accounting data or details on the accounting methodology used. As regards the Italian former senior official mentioned by the Honourable Member, who is currently working within Telecom Italia, this is a purely internal Italian matter on which the Commission cannot comment.

The Commission has received a letter from consumers' associations, questioning the relevance and legitimacy of its action with regard to the rebalancing of tariffs. It has replied to this letter, which seemed to be based on misunderstandings, by explaining the grounds for its action. The Commission does not call into question the price cap principle introduced by AGCOM. Consequently, if Telecom Italia increases its annual subscription rate, it will have to reduce other prices to remain below the ceiling set for 2001 and 2002. For the average consumer, this operation will involve no extra cost. Lastly the Commission has not imposed an increase in the annual subscription rate, let alone fixed its amount, and has merely set out the legal constraints to which it was itself subject.

Lastly, no member of the office of the Commissioner responsible for Competition has a conflict of interests.