WRITTEN QUESTION E-3248/98

by Ernesto Caccavale (UPE) to the Commission

(28 October 1998)

Subject: Telecom Italia's monopoly in the urban telephone services sector

Telecom Italia, the dominant player in Italy's telecommunications sector, has officially announced increases of 22 % in charges for local telephone calls and 11 % in fixed charges for domestic users, although these are somewhat attenuated by various discounts for individual customers. These increases have raised once again the question of Telecom's continued monopoly position in the market in urban telephone services, as shown by the marked disparity between Telecom and the new operators that have recently entered the Italian market, which offer their services for trunk and international calls only. This clearly operates to the disadvantage of users and consumers, particularly those from the least affluent sectors of society, who are least likely to benefit from the reduced rates promised for interurban and international calls, which in any event will take some time to come into effect following the liberalisation of the communications market.

Could the Commission state, therefore:

- whether it considers that, in a liberalised telecommunications services system, Telecom Italia, which simply by virtue of its position already benefits from fixed charges yielding more than Lit 5 000 billion a year, is de facto infringing European competition rules?

- whether, given that Telecom obviously has a dominant position in the market in fixed telephone networks, these increases in local call charges constitute an abuse of dominant market position within the meaning of Article 86 of the Treaty?

- finally, whether it is not possible to prevent this increase, the most recent of Telecom's many attempts to fleece its customers, who do not have the opportunity to opt for alternative services?

Answer given by Mr Van Miert on behalf of the Commission

(11 December 1998)

The Commission is keeping a particularly close watch on the pricing practices of telecommunications operators during the initial opening-up to competition. For example, Commission Directive 96/19/EC of 13 March 1996 amending Directive 90/388/EEC with regard to the implementation of full competition in telecommunications markets(1) calls on Member States to allow incumbent operators to rebalance their tariffs in order to remove any instances of certain services being subsidised by other services, i.e. provided at artificially low rates. Such pricing practices restrict competition since it is not in the interests of potential market entrants to target this segment of the market.

Price changes designed simply to implement the principle of cost orientation (which is, in any event, compulsory under Article 17(2) of Parliament and Council Directive 98/10/EC of 26 February 1998 on the application of open network provision (ONP) to voice telephony and on universal service for telecommunications in a competitive environment,(2) which concerns application of the arrangements for open network provision to voice telephony) could not, therefore, constitute an abuse. According to this Directive, the national regulatory authorities are responsible for ensuring that the principle of orienting charges to costs is put into practice. This principle has been incorporated into Italian law and the Italian communications authority is currently examining the orientation of charges to costs and the phased rebalancing of Telecom Italia's charges.

The examination by the Italian communications authority, which has consulted the Commission on this issue, will take into account the provisions of European competition law, including Article 86 of the EC Treaty.

The responsibility for rebalancing the charges rests fully with the Italian communications authority, and the Commission does not intend to take a position on any increases that might be authorised on condition that they facilitate the orientation of charges to costs.

(1) OJ L 74, 22.3.1996.

(2) OJ L 101, 1.4.1998.