DRAFT COMMUNICATION FROM THE COMMISSION ON THE APPLICATION OF THE COMPETITION RULES TO ACCESS AGREEMENTS IN THE TELECOMMUNICATIONS SECTOR - Framework, Relevant Markets and Principles
Date: 1996-12-10
Institutions: European Commission
Subjects: communications policy, competition law, liberalisation of the market, single market, telecommunications

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels, 10.12.1996 
COM(96) 649  final 

DRAFT 

COMMUNICATION  FROM THE COMMISSION 

ON  THE  APPLICATION  OF  THE  COMPETITION  RULES 

TO  ACCESS  AGREEMENTS 

IN  THE  TELECOMMUNICATIONS  SECTOR 

Framework, Relevant Markets and Principles 

Notice by the Commission concerning a draft  Notice on the application of the 
competition  rules to access agreements in the telecommunications sector 

The Commission approved a draft  Notice on the application of the competition rules to 
access agreements in the telecommunications  sector. 

The  Commission  intends  to  adopt  the  Notice  after  having  heard  any  comments  from 
interested parties. 

The Commission invites interested parties to submit their possible observations they may 
have on the draft  Notice published hereunder. 

Observations must reach the Commission not  later  than two months following  the date 
of this publication. Observations may be sent to the Commission by fax  (No (32 2) 296 
98  19) or by mail to the following  address: 

European  Commission 
Directorate-General  for  Competition (DG IV) 
Directorate C 
Office  3/48 
150 Avenue de Cortenberg/Kortenberglaan 150 
B-1049 Brussels 

email:  access.notice@dg4.cec.be 

TABLE  OF  CONTENTS 

INTRODUCTION 

PART  I :  FRAMEWORK 

1. 
2 
3. 

4. 
5. 

Competition  Rules  and  Sector  Specific  Regulation 
Commission  Action  in  Relation to Access Agreements 
Complaints 
3.1  Use of  national  and  ONP  procedures 
3.2 
3.3 
Own-Initiative  Investigation  and  Sector  Inquiries 
Fines 

Safeguarding  complainant's  rights 
Interim  measures 

Relevant  Markets 
Relevant  product  market 
1.1.  Services  market 
1.2 
Relevant  geographic  market 

Access  to  facilities 

Draft 

1 

4 
4 
8 
8 

11 
11 

13 
13 

15 

Principles 
Dominance  (Article  86) 
1.1.  Services  market 
1.2 
1.3 
Abuses  of  Dominance 
23 
2.1  Refusal  to  grant  access  to  essential  facilities  and  application  of 

Access to  facilities 
Joint  dominance 

17 
18 

unfavourable  terms 

Abuses  of joint  dominance 

2.2  Other  forms  of  abuse 
2.3 
Access  agreements  (Article  85) 
Effect  on trade  between  Member  States 

31 
34 

35 

Part  II: 

1. 

2. 

Part  III: 

1. 

2. 

3. 
4. 

Conclusions 

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ky. 

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INTRODUCTION 

1. 

2. 

The  timetable  for  full  liberalization  in  the  telecommunications  sector  has  now  been 
established,  and  Member  States  are  to  remove  the  last  barriers 
to  the  provision  of 
telecommunications  services in a competitive environment to consumers by  1 January 
19981.  As  a  result  of  this  liberalization  a  second  set of  related  products  or  services 
will  emerge  as  well  as  the  need  for  access  to  facilities  necessary  to  provide  these 
services.  In  this  sector,  interconnection  to  the  public  switched  telecommunications 
network  is a typical  example  of  such access.  The  Commission  has stated  that  it  will 
define  the treatment  of  access agreements  under the  competition  rules".  This Notice, 
therefore,  addresses the issue of how competition rules and  procedures apply  to access 
agreements  in  the  context  of  harmonised  EU  and  national  regulation 
in  the 
telecommunications  sector. 

The regulatory  framework  for  the liberalization  of telecommunications  consists of the 
liberalization  directives issued  under  Article  90 EC and  the  Open Network  Provision 
(ONP)  framework.  The  ONP  framework  provides  harmonised  rules  for  access  and 
interconnection to the telecommunications  networks and the voice telephony  services. 
The  legal  framework  provided  by  the  liberalization  and  harmonization  legislation  is 
the  background  to  any  action  taken  by  the  Commission  in  its  application  of  the 
legislation  and  the  harmonization 
competition  rules.  Both  the  liberalization 
legislation  are  aimed  at ensuring  the  attainment  of  the  objectives  of  the  Community 

According to Directive 96/19/EC and 96/2/EC, certain Member States may request a derogation 
from  full liberalisation for certain limited periods.  See:  Commission  Decision of 27  November 
1996  concerning  the  additional  implementation  periods  requested  by 
Ireland  for  the 
implementation of Commission Directives 90/388/EEC and 96/2/EC as regards full competition 
in the telecommunications  markets.  This Notice is without prejudice to such derogations, and 
the  Commission will take account  of the existence  of any  such  derogation when  applying the 
competition  rules to access  agreements,  as described  in this  Notice. 

Communication  by  the  Commission  to  the  European  Parliament  and  the  Council, 
Consultation  on  the  Green  Paper  on  the  liberalisation  of 
telecommunications 
infrastructure  and cable television networks,  COM (95)  158 final, 3 May  1995. 

in 

in 

in 

competition 

the  markets 

the  markets 

Commission  Directive  88/301/EEC,  on 
telecommunications  terminal equipment,  OJ  L131/73 (1988); 
Commission  Directive  90/388/EEC,  on  competition 
telecommunications  services,  OJ  L 192/10  (1990); 
Commission  Directive  94/46/EC,  amending  Directive  88/301/EEC  and  Directive 
90/388/EEC  in particular with regard to satellite communications, OJ L 268/15 (1994); 
Commission  Directive  95/51/EC,  amending  Directive  90/388/EEC  with  regard  to  the 
abolition of the restrictions on the  use of cable television networks for the provision of 
already  liberalised telecommunications  services,  OJ  L 256/49  (1995); 
Commission Directive 96/2/EC, amending Directive 90/388/EEC with regard to  mobile 
and  personal communications,  OJ  L 20/59  (1996); 
Commission  Directive  96/19/EC,  amending  Directive  90/388/EEC  with  regard  to  the 
implementation  of  full  competition  in  the  telecommunications  markets,  OJ  L  74/13 
(1996). 

for 

Interconnection  agreements  are the  most significant form of access agreement  in the 
(continued...) 

Wdr-cons.wpd 

1  r 

Draft 

as laid  out  in Article  3 EC, and  specifically,  the establishment of  "a  system  ensuring 
that  competition  in  the  internal  market  is  not  distorted"  and  "an  internal  market 
characterised  by  the  abolition,  as  between  Member  States,  of  obstacles  to  the  free 
movement  of  goods, persons,  services  and  capital". 

The  Commission  has  published  Guidelines  on  the  application  of  EEC  competition 
rules  in  the  telecommunications  sector,  OJ  C  233/2  (1991).  The  present  Notice  is 
intended to build on those Guidelines, which do not deal explicitly with access issues. 

In the  telecommunications  sector,  liberalization  and  harmonization  legislation  permit 
and  simplify  the  task  of  Community  firms  in  embarking  on  new  activities  in  new 
markets  and  consequently  allow  users to  benefit  from  increased  competition.  These 
advantages must not be jeopardised  by restrictive or abusive practices of undertakings: 
the Community's  competition  rules are therefore  essential to ensure the completion  of 
this development.  New entrants must in the initial  stages be ensured the right to have 
access  to  the  networks  of  incumbent  telecommunications  operators  (TOs).  Several 
authorities, at the regional,  national  and  Community  levels, have  a role  in  regulating 
this sector.  If the competition process is to work well  in the Internal  Market,  effective 
coordination  between  these  institutions  must  be  ensured. 

Part  I  of  the  Notice  sets  out  the  legal  framework  and  details  how  the  Commission 
intends  to  achieve  its  intention  of  avoiding  unnecessary  duplication  of  procedures 
while  safeguarding  the  rights  of  undertakings  and  users  under  the  competition  rules. 
In this context,  the Commission's efforts  to encourage  decentralised  application  of the 
competition  rules by national courts and national authorities aim at achieving  remedies 
at a national  level,  unless a significant  Community  interest  is involved  in a  particular 
case.  In  the  telecommunications  sector,  specific  procedures  in  the  ONP  framework 
likewise aim at resolving access problems  in the first  place at a decentralised,  national 
level, with a further  possibility for conciliation  at Community  level. Part II defines  the 
Commission's  approach  to  market  definition  in  this  sector.  Part  III  details  the 
principles that the Commission will follow  in the application  of the competition rules: 

(...continued) 

telecommunications  sector.  A basic framework for  interconnection agreements  is set 
up by the  rules on Open  Network  Provision (ONP), and the application of  competition 
rules must  be seen  against this background: 
Council  Directive  90/387/EEC,  on  the  establishment  of  the  internal  market  for 
telecommunications  services  through  the  implementation  of  open  network  provision, 
OJ  L  192/1  (1990) 
Council  Directive 92/44/EEC,  on  the  application of  open  network  provision to  leased 
lines, OJL  165/27(1992); 
European  Parliament  and  Council  Directive  95/62/EC,  on  the  application  of  open 
network  provision to voice telephony,  OJ  L 321/6  (1995); 
Common  Position for a European  Parliament and Council Directive on  interconnection 
in  telecommunications  with  regard  to  ensuring  universal  service  and  interoperability 
through application of the principles of open network provision (ONP), OJ C220/13, 29 
July  1996. 
Proposal for a European Parliament and Council Directive amending Council Directives 
90/387/EEC and 92/44/EEC for the purpose of adaptation to a competitive environment 
in telecommunications,  Com(95)  543 final,  14.11.1995. 

Wdr-cons.wpd 

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6. 

7. 

it aims to help telecommunications market participants shape their access agreements 
by explaining the competition  law requirements. 

The Notice  is based  on  the  Commission's experience  in  several  cases,5 and  certain 
studies into this area carried  out on behalf of the Commission . 

This  Notice  does  not  in  any  way  restrict  the  rights  conferred  on  individuals  or 
undertakings by Community law, and is without prejudice to any interpretation of the 
Community competition rules that may be given by the Court of First Instance or the 
European Court of Justice. 

In  the  telecommunications  area,  notably  Commission  decision of  18  October 1991, 
Eirpaqe, OJ  L 306/22  (1991), and Commission decisions of  17 July  1996, Atlas and 
Phoenix,  OJ  L  239/23  and  57  (1996).  There  are  also a  number  of  pending cases 
involving access issues. 

Competition aspects of interconnection agreements in the telecommunications sector, 
June  1995;  Competition  aspects  of  access  by  service  providers to the  resources of 
telecommunications  operators,  December  1995.  See  also  Competition Aspects of 
Access  Pricing, December  1995. 

Wdr-cons.wpd 

3 

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PART  I :  FRAMEWORK 

1. 

Competition  Rules  and  Sector  Specific  Regulation 

Access  problems  in  the  broadest  sense  of  the  word  (e.g.  provision  of  leased  lines, 
interconnection  to networks, access to data  concerning  subscribers to voice  telephone 
services) can  be dealt with  at different  levels and on the basis of a range of  legislative 
provisions, of both national  and  Community  origin.  A service provider  faced  with an 
access  problem  such  as a TO's  unjustified  refusal  to  supply  (or  on  reasonable  terms) 
a  leased  line  needed  by  the  applicant  to  provide  services  to  its  customers  could 
therefore  contemplate  a  number  of  routes  to  seek  a  remedy.  Generally  speaking, 
aggrieved  parties  will  experience  a number  of  benefits,  at  least  in  an  initial  stage, in 
seeking  redress  at  a  national  level.  At  a  national  level,  the  applicant  has  two  main 
choices,  namely  (1)  specific  national  regulatory  procedures  now  established  in 
accordance with Community  law and harmonised  under Open Network  Provision (see 
footnote  4) and  (2)  an action  under  national  and/or  Community  law before  a  national 
court  or  national  competition  authority  . 

Complaints  made to the Commission  under the competition  rules  in the place of or in 
addition  to  national  courts,  national  competition  authorities  and/or  to  national 
regulatory  authorities  under  ONP  procedures  will  be  dealt  with  according  to  the 
priority  which  they  deserve  in  view  of  the  urgency,  novelty  and  transnational  nature 
of  the  problem  involved  and  taking  into  account  the  need  to  avoid  duplicate 
proceeding  (see  below,  points  13 et  seq.). 

In the case of the ONP leased line directive, ONP foresees the first stage which allows 
the  aggrieved  user  to  appeal  to  the  National  Regulatory  Authority.  This  can  offer  a 
number of advantages.  In the telecommunications areas where experience has shown 
that  companies  are  often  hesitant  to  be  seen  as  complainants  against  the  TO  on 
which they  heavily depend not only with respect to the specific point of conflict but also 
a  much broader  and far-reaching  sense, the  procedures  foreseen  under ONP are an 
attractive  option.  ONP  procedures  furthermore  can cover  a broader  range of  access 
problems  than  could  be  approached  on  the  basis of  the  competition  rules.  Finally, 
these  procedures  can  offer  users  the  advantage  of  proximity  and  familiarity  with 
national administrative procedures;  language is also a factor to be taken into account. 

Under  ONP procedures,  if matters  cannot  be resolved at the national  level, a second 
stage is organised at the European level (conciliation procedure).  Pursuant to the ONP 
leased line directive, an agreement between the parties involved must then be reached 
within two  months, with  a possible extension  of one  month  if the  parties agree. 

It should be noted that  in the  Proposed ONP interconnection directive, as opposed to 
the  leased  line  directive,  a  conciliation  procedure  is foreseen  for  transfrontier  cases 
only,  that  is  interconnection  disputes  in  which  more  than  one  National  Regulatory 
Authority 
If  the  National  Regulatory  Authorities  dealing  with  an 
interconnection problem do not reach a solution to the problem, then one of them may 
notify  the Commission thereof  and  invoke the conciliation procedure  (Article  17 of the 
Proposed  directive). 

is  involved. 

Wclr-cons.wpcl 

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9. 

10. 

11. 

12. 

The Commission recognises that National  Regulatory Authorities  have different  tasks, 
and  operate  in  a  different  legal  framework  to  the  Commission.  First,  the  NRAs 
operate  under  national  law,  albeit  often  implementing  European  law.  Secondly,  that 
law,  based  as  it  is  on  considerations  of  telecommunications  policy  has  objectives 
different  to, but consistent with, the objectives of Community competition policy.  The 
Commission  cooperates  as far  as possible with  the National  Regulatory  Authorities, 
and invites the National  Regulatory Authorities to cooperate as far as possible between 
themselves.  Under  Community  law,  national  authorities,  including  regulatory 
authorities  and  competition  authorities,  have  a  duty  not  to  approve  a  practice  or 
agreement  contrary  to  Community  competition  law. 

Community  competition  rules are not sufficient  to remedy the various problems in the 
telecommunications  sector.  NRAs  therefore  have  a  significantly  wider  ambit  and  a 
It  should  also  be 
significant  and  far-reaching  role  in  the  regulation  of  the  sector. 
noted  that  as  a matter  of  Community  law,  the  NRAs  must  be  independent. 

It  is  also  important  to  note  that  the  ONP  framework  imposes  certain  obligations  on 
national  telecommunications  operators  that  go  beyond  those  that  would  normally  be 
imposed  by  Article  86  EC.  NRAs  may  require  strict  standards  relating  to 
transparency,  obligations  to  supply  and  pricing  practices.  These  obligations  can  be 
enforced  by the National  Regulatory  Authorities, which  also have jurisdiction  to take 
steps to  ensure  effective  competition °. 

This Notice  is written,  for  convenience,  in most respects as  if the  law was  conceived 
with  only  one  telecommunications  operator  controlling  the  only  nation-wide  public 
switched  telecommunications  network  in  each  Member  States.  This  will  not 
necessarily  be the case: new telecommunications  networks offering  increasingly  wide 
coverage  will  develop  progressively.  These alternative  telecommunications  networks 
may ultimately  be large and extensive enough to be partly or even wholly  substitutable 
for  the  existing  national  networks, and  this  should  be  kept  in  mind. 

13. 

Given  the  Commission's  responsibility  for  the  Community's  competition  policy,  the 
Commission  must  serve  the  Community's  general  interest.  The  administrative 
resources at the Commission's disposal to perform  its task are necessarily  limited  and 
cannot  be  used  to  deal  with  all  the  cases  brought  to  its  attention.  The  Commission 

National  Regulatory  Authority 
telecommunications 
regulatory  created  by  a  Member  State  in  the  context  of  the  services  directive  as 
amended,  and the ONP  framework. 

is  a  sector  specific  national 

Article 7 of the services directive (Commission Directive 90/388/EEC, referred to above 
in  footnote  3),  and  the  Commission's  Communication  95/C  275/02  to  the  European 
Parliament and the Council on the status and implementation of Directive 90/388/EEC 
on competition in the markets for telecommunications services, OJ C 275, 20.10.1995, 
at  p.  9  et  seq.  See  also  Case  C-91/94,  Thierry  Tranchant  and  Telephones  Stores 
SARL,  Judgment  of the Court  of Justice,  9 November  1995,  not yet  reported. 

Proposed  ONP  interconnection  Directive cited  in footnote 4, Article 9(3). 

Wdr-cons.wpd 

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14. 

15. 

is therefore  obliged,  in  general,  to  take  all  organisational  measures  necessary  for  the 
performance  of  its task  and,  in particular,  to  establish  priorities". 

The  Commission  has therefore  indicated  that  it  intends,  in using  its  decision-making 
powers,  to  concentrate  on  notifications,  complaints  and  own-initiative  proceedings 
having  particular  political,  economic  or  legal  significance  for  the  Community  . 
Where these features  are absent in a particular case, notifications  will not normally  be 
dealt  with  by  means  of  a  formal  decision,  but  rather  a  comfort  letter  (subject  to  the 
consent of the parties), and complaints should, as a rule, be handled by national  courts 
or other  relevant  authorities.  In this context,  it should  be noted  that the  competition 
rules are directly  effective' ' so that  EC competition  law is enforceable  in the  national 
courts.  Even  where  other  Community  legislation  has  been  respected,  this  does  not 
remove  the  need  to  comply  with  the  Community  competition  rules. 

Other  national  authorities, in particular  National  Regulatory  Authorities acting  within 
the ONP framework,  have jurisdiction  over certain access agreements (which must be 
notified  to them).  However,  notification  of  an  agreement  to  an NRA  does  not  make 
notification  of an agreement to the Commission unnecessary.  The National  Regulation 
Authorities must ensure that actions taken by them are consistent with EC competition 
law15,  this  duty  requires  them  to  refrain  from  action  that  would  undermine  the 
effective  protection  of  Community  law  rights  under  the  competition  rules  . 
Therefore,  they  may  not approve  arrangements  which  are contrary  to the  competition 
rules  7.  If  the  national  authorities  act  so  as to  undermine  those  rights,  the  Member 

11 

12 

13 

14 

15 

16 

17 

Case T-24/90, Automec v Commission, 1992 ECR II-2223, at paragraph 77; and Case 
T-114/92,  BEMIM v Commission,  1995  ECR  II 147. 

Notice on cooperation between national courts and the Commission in applying Articles 
85 and  86 of the  EEC Treaty,  OJ C 39/6  (1993),  at  paragraph  14. 
Draft  Notice  on  cooperation  between  national  competition  authorities  and  the 
Commission, OJ C 262/5,  10 September  1996. 

Case  127/73,  BRT v  SABAM,  1974  ECR 51. 

Case 66/86, Ahmed  Saeed,  1989 ECR 838. 

They  must  not,  for  example,  encourage  or  reinforce  or  approve  the  results  of  anti 
competitive  behaviour:  Ahmed  Saeed,  above  at  footnote  14;  Case  153/93,  Federal 
Republic of Germany v Delta Schiffahrts,  1994 ECR-I 2517; Case 267/86, Van Eycke, 
1988  ECR 4769. 

Case  13/77, GB-lnno-BM/ATAB, 1977 ECR 2115, at paragraph 33: "while it is true that 
Article  86  is  directed  at  undertakings,  nonetheless  it  is  also  true  that  the  Treaty 
imposes a duty on Member States not to adopt or maintain in force any measure which 
could deprive the provision  of its effectiveness." 

For further duties of national authorities see Case 103/88, Fratelli Costanzo SpA,  1989 
ECR  1839. 
See Ahmed  Saeed, above at footnote  14:  "Articles 5 and  90 of the EEC  Treaty must 
be  interpreted  as  (  i  )  prohibiting  the  national  authorities  from  encouraging  the 
conclusion of agreements on tariffs contrary to Article 85(1 ) or Article  86 of the Treaty, 
(continued...) 

Wdr-cons.wpd 

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16. 

17. 

State  may  itself  be  liable  in  damages  to  those  harmed  by  this  action18.  In  addition, 
National  Regulatory  Authorities  have jurisdiction  under  the  ONP  directives  to  take 
steps to  ensure  effective  competition. ' 

Access  agreements  in  principle  regulate  the  provision  of  certain  services  between 
independent  undertakings  and  do  not  result  in  the  creation  of  an  autonomous  entity 
which  would  be  distinct  from  the  parties  to  the  agreements.  Access  agreements  are 
thus  generally  outside  the  scope  of  the  Merger  Regulation" . 

Under  Regulation  17" ,  the Commission could  be seised of an issue relating to access 
agreements  by  way  of  a  notification  of  an  access  agreement  by  one  or  more  of  the 
parties  involved",  by  way  of  a  complaint  against  a  restrictive  access  agreement  or 
against the behaviour  of a dominant company  in granting or refusing  access""5, by way 
of  a  Commission  own-initiative  procedure  into  such a  grant  or  refusal,  or  by  way  of 
a  sector  inquiry"  .  In  addition,  a complainant  may  request  that  the  Commission  take 
interim  measures  in  circumstances  where  there  is  an  urgent  risk  of  serious  and 
irreparable  harm  to the complainant  or to the public  interest".  It should  however,  be 
noted  in  cases  of  great  urgency  that  procedures  before  national  courts  can  usually 
result  more  quickly  in  an  order  to  end  the  infringements  than  procedures  before  the 
Commission.26 

17(...continued) 

as the case may be; ( ii)  precluding the approval by those authorities of tariffs  resulting 
from such agreements" 

Joined  Cases  C-6  and  9/90,  Francovich,  1990-1 ECR  5357;  Joined  Cases  C-46/93, 
Brasserie  de  Pêcheur  SA  v Germany  and  Case  C-48/93,  R v  Secretary  of  State  for 
Transport  ex  parte  Factortame  Ltd  and  others,  judgment  of  5  March  1996,  not  yet 
reported. 

For example,  recital  18 of the leased line directive referred to in footnote 4 and Article 
9(3)  of the draft  ONP  interconnection directive. 

Council Regulation No 4064/89 of 21 December  1989 on the control of concentrations 
between  undertakings,  OJ  L 395/1 (1989). 

Council  Regulation  No  17 of 6  February  1962, first  Regulation  implementing  Articles 
85 and  86 of the Treaty,  OJ  13/204  (1962),  as amended. 

Articles 2 and 4(1)  of  Regulation 17. 

Article 3 of  Regulation 17. 

Articles  3 and  12 of  Regulation 17. 

Case  792/79R,  Camera  Care v Commission,  1980  ECR  119. 
See also Case T-44/90,  La Cinq v Commission,  1992  ECR  11-1. 

See  point  16  of  the  Notice  on  cooperation  between  national  courts  and  the 
Commission cited above  in footnote  12. 

18 

19 

20 

21 

22 

23 

24 

25 

26 

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: 8. 

There are a number of areas w here agreements will be subject  to both the  competition 
rules and national  or European sector specific regulation, most notably  Internal  Market 
regulation.  In the telecommunications  sector, the ONP  Directives aims at establishing 
a  regulatory  regime  for  access  agreements.  Given  the  detailed  nature  of  ONP  rules 
and  the  fact  that  the}' may  go  beyond  the  requirements  of  Article  86,  undertakings 
operating  in the telecommunications  sector  should  be aware  that  compliance  with the 
Community  competition  rules  does  not  absolve  them  of  their  duty  to  abide  by 
obligations  imposed  in  the  ONP  context,  and  vice  versa. 

27 
Commission  Action  in  Relation  to  Access  Agreements 

19. 

20. 

Access  agreements  taken  as  a  whole  are  of  great  significance,  and  it  is  therefore 
appropriate  for  the  Commission  to  spell  out  as  clearly  as  possible  the  Community 
legal  framework  within  which  these  agreements  should  be  concluded.  Access 
agreements  having 
issues  under  Article  85. 
Agreements  which  involve  dominant,  or  monopolist, undertakings  involve  Article  86 
issues:  concerns  arising  from  the  dominance  of  one  or  more  of  the  parties  will 
generally  be of greater  significance  in the context  of a particular  agreement  than those 
under  Article  85. 

restrictive  clauses  will 

involve 

In applying  the competition  rules, the Commission will  build  on the ONP  framework, 
and  the  National  Regulatory  Authorities  acts  within  that  framework.  Where 
agreements  fall  within  Article  85(1). they  must  be notified  to the Commis^Scft. if they 
are to benefit  from  an exemption  under Article 85(3).  Where agreements are  notified, 
the  Commission  intends  to  deal  with  one  or  more  notifications  by  way  of  formal 
decisions,  following  appropriate  publicity  in  the  Official  Journal,  and  in  accordance 
with  the  principles  set  out  below.  Once  the  legal  principles  have  been  clearly 
established, the Commission  then proposes to deal  by way of comfort  letter with other 
notifications  raising  the  same  issues. 

3. 

Complaints 

21. 

Natural  or  legal  persons  with  a  legitimate  interest  may,  under  certain  circumstances, 
submit  a complaint  to  the  Commission,  requesting  that  the  Commission  by  decision 
require  that  an  infringement  of  Article  85 or  Article  86  EC be  brought  to  an  end.  A 
complainant  may  additionally  request  that  the  Commission  take  interim  measures 
where  there  is  an  urgent  risk  of  serious  and  irreparable  harm"1'.  A  prospective 
complainant has other equally  or even more effective  options, such as an action  before 
a national  court.  In this context,  it should  be noted that  procedures before  the national 

27 

28 

29 

Article 2 or 4(1)  of  Regulation 17. 

Article 3(2)  of  Regulation  17. 

Camera  Care  and  La Cinq,  referred to above  at footnote  25. 

Wdr-cons.wpd 

8 

Draft 

courts  can  offer  considerable  advantages  for  individuals  and  companies,  such  as  in 
particular "": 

national  courts can deal  with and award a claim for  damages resulting from  an 
infringement  of  the  competition  rules; 
national  courts  can  usually  adopt  interim  measures  and  order  the  termination 
of  an  infringement  more  quickly  than  the  Commission  is able  to  do; 
before  national  courts, it is possible to combine a claim under  Community  law 
will  a  claim  under  national  law; 
legal  costs can  be  awarded  to  the  successful  applicant  before  a national  court 

Furthermore,  the  specific  national  regulatory  principles  as  harmonized  under  ONP 
principles can offer  recourse both at the national and if necessary at Community  level. 

3.1 

Use of  national  and  ONP procedures 

22. 

As referred  to above'  the Commission  will  take  into account  the Community  interest 
of  each  case  brought  to  its  attention. 
In  evaluating  the  Community  interest,  the 
Commission  examines: 

"...the significance of the alleged infringement as regards the functioning  of the 
common  market, 
the  existence  of  the 
infringement  and  the  scope  of  the  investigation  required  in  order  to  fulfil, 
under the best possible  conditions,  its task of ensuring that Articles  85 and 86 
are  complied  with... "''" 

the  probability  of  establishing 

Another  essential  element  in  this evaluation  is the extent  to which  a national judge  is 
in  a  position  to  provide  an  effective  remedy  for  an  infringement  of  Article  85 or  86. 
This  may  prove  difficult,  for  example,  in  cases  involving  extra-territorial  elements. 

23. 

Article 85(1) and Article 86 EC produce direct effects  in relations between  individuals 
which  must  be  safeguarded  by  national  courts  .  As  regards  actions  before  the 
National  Regulatory  Authority, the ONP Directive  provides that  such an authority  has 
power  to  intervene  and  order  changes  in  relation  to  both  the existence  and  content  of 
access agreements.  National  Regulatory  Authorities must take into account, "the need 
to stimulate  a competitive marker  and  may  impose conditions on one or more parties, 
inter  alia,  "to  ensure  effective  competition"" . 

30 

31 

32 

33 

34 

Notice  on  cooperation  between  national  courts  and  the  Commission  cited  above  in 
footnote  12, point 16. 

At  paragraph  14. 

See Automec,  footnote  11 above,  paragraph 86. 

BRT v SABAM, footnote  13 above. 

Articles  9(1)  and  9(3)  of the  Proposed  ONP  interconnection  Directive. 

Wdr-cons.wpd 

9 

Draft 

The  Commission  may  itself  be  seized  of  a dispute  either  pursuant  to  the  competition 
rules,  or  pursuant  to  an  ONP  Conciliation  Procedure.  Multiple  simultaneous 
proceedings  might  lead  to  unnecessary  duplication  of  investigative  efforts  by  the 
Commission  and  the  national  authorities.  Where  complaints  are  lodged  with  the 
Commission  under  Article  3 of  Regulation  17 while  there  are  related  actions  before 
a  relevant  national  or  European  authority  or  court,  the  Directorate-General  for 
Competition will generally  not  initially  pursue any  investigation  as to the existence of 
an  infringement  under  Article  85  or  86 of  the  EC  Treaty.  This  is  subject,  however, 
to  the  following  points. 

3.2 

Safeguarding  complainant's  rights 

Undertakings  are  entitled  to  effective  protection  of  their  Community  law  rightsJ". 
These rights would  be undermined  if national  proceedings  were allowed  to  lead  to an 
excessive  delay  of  the  Commission's  action,  without  a  satisfactory  resolution  of  the 
matter  at  a  national  level.  In  the  telecommunications  sector,  innovation  cycles  are 
relatively  short,  and  any  substantial  delay  in  resolving  an  access  dispute  would  in 
practice  be equivalent  to a refusal  of access, thus prejudging  the proper  determination 
of  the  case. 

The  Commission  therefore  takes  the  view  that  an  access  dispute  before  a  National 
Regulatory  Authority  should  be resolved  within a reasonable period  of time,  normally 
speaking  not  extending  beyond  six  months  of  the  matter  first  being  drawn  to  the 
attention  of  that  authority  or  after  initiation  of  ONP  procedures,  including  the 
conciliation  procedures  6.  This  resolution  could  take  the  form  of  either  a  final 
determination  of the action  or another form  of relief which  would  safeguard  the rights 
of the complainant.  If the  matter  has not  reached  such a resolution  then, prima  facie, 
the rights of the parties are not being effectively  protected, and the Commission would 
in principle,  upon  request  by the complainant,  begin  its  investigations  into the case in 
accordance  with  its normal  procedures, after  consultation  and  in cooperation  with  the 
national  authority  in  question. 

3.3 

Interim  measures 

As regards  any  request  for  interim  measures, the existence  of  national  proceedings  is 
relevant  to  the  question  of  whether  there  is  a  risk  of  serious  and  irreparable  harm. 
Such  proceedings  should,  prima  facie,  remove  the  risk  of  such  harm  and  it  would 
therefore  not  be  appropriate  for  the  Commission  to  grant  interim  measures  in  the 
absence  of  evidence  that  the  risk  would  nevertheless  remain. 

The  availability  of  and  criteria  for  injunctive  relief  is an  important  factor  which  the 
If 
Commission  must  take  into  account  in  reaching  this  prima  facie  conclusion. 
injunctive  relief  were  not  available, or  if such  relief  was not  likely  adequately  to take 
into  account  the complainant's  rights  under  Community  law,  the  Commission  would 

Case  14/83, Von  Colson,  1984  ECR 1891. 

Telecommunications:  Open  network  provision  (ONP)  for  leased  lines;  Conciliation 
procedure;  94/C  214/04,  OJ C 214/4  (1994). 

24. 

25. 

26. 

27. 

28. 

35 

36 

Wdr-cons.wpd 

1 () 

consider  that  the  national  proceedings  did  not  remove  the  risk  of  harm,  and  would 
therefore  commence  its  investigation  of  the  case. 

Draft 

4. 

Own-Initiative  Investigation  and  Sector  Inquiries 

29. 

If  it  appears  necessary,  the  Commission  will  open  an  own-initiative  investigation.  It 
can  also  launch  a  sector  inquiry,  subject  to  consultation  of  the  Advisory  Committee 
of  Member  State  competition  authorities. 

5. 

Fines 

30. 

31. 

The  Commission  may  impose  fines  of  up  to  10% of  the  annual  worldwide  turnover 
of undertakings which  intentionally  or negligently  breach Article 85(1) or Article  86J . 
Where  agreements  have  been  notified  pursuant  to  Regulation  17  for  an  exemption 
under  Article  85(3), no fine may  be  levied  by the Commission  in respect of  activities 
described  in  the  notification''  for  the  period  following  notification.  However,  the 
Commission  may  withdraw  the  immunity  from  fines  by  informing  the  undertakings 
concerned  that,  after  preliminary  examination,  it  is of  the  opinion  that  Article  85(1) 
of  the  Treaty  applies  and  that  application  of  Article  85(3)  is  not justified 

. 

The  ONP  interconnection  Directive  has  two  particular  provisions  which  should  be 
taken  into  account  with  respect  to  the  question  of  fines  under  the  competition  rules. 
First,  it  provides  that  interconnection  agreements  must  be  communicated  to  the 
relevant National  Regulatory  Authorities and made available to interested third parties, 
with  the  exception  of  those  parts  which  deal  with  the  commercial  strategy  of  the 
parties411.  Secondly,  it  provides  that  the  National  Regulatory  Authority  must  have  a 
number  of  powers  which  it  can  use  to  influence  or  amend  the  interconnection 
agreements  .  These  provisions  ensure  that  appropriate  publicity  is  given  to  the 
agreements,  and  provide  the  National  Regulatory  Authority  with  the  opportunity  to 
take  steps, where  appropriate,  to  ensure  effective  competition  on  the  market. 

32.  Where an agreement  has been notified  to a National  Regulatory Authority, but has not 
been  notified  to  the  Commission,  the  Commission  does  not  consider  it  would  be 
generally  appropriate  as  a  matter  of  policy  to  impose  a  fine  in  respect  of  the 
agreement,  even  if the agreement  ultimately  proves to contain  conditions  in breach  of 
Article  85.  A fine would, however,  be appropriate  in some cases, for  example where: 

Article  15(2) of  Regulation  17. 

Article  15(5) of  Regulation 17. 

Article  15(6) of  Regulation 17. 

40 

41 

Article 6(c)  of the  Proposed  ONP  interconnection  Directive. 

Inter  alia, at Article 9 of the  Proposed  ONP  interconnection  Directive. 

Wdr-cons.wpd 

I 1 

Draft 

a. 

b. 

the  agreement  proves  to  contain  provisions  in  breach  of  Article  86; and  /  or 

the  breach  of  Article  85  is  particularly  serious. 

The  size  of  the  fine  will  depend  on  the  gravity  and  duration  of  the  infringement. 

Notification  to  the  NRA  is  not  a  substitute  for  a notification  to  the  Commission  and 
does  not  limit  the  possibility  for  interested  parties  to  submit  a  complaint  to  the 
Commission,  or  for  the  Commission  to  begin  an  own-initiative  investigation  into 
access  agreements.  Nor  does  such  notification  limit  the  rights  of  a  party  to  seek 
damages  before  a  national  court  for  harm  caused  by  anti-competitive  agreements ". 

42 

See footnote  18 above. 

Wdr-cons.wpd 

12 

Part II: 

Relevant Markets 

Draft 

34. 

35. 

36. 

In the  course of  investigating  cases within  the  framework  set out  in Part  I above, the 
Commission  will  base  itself  on  the  following  approach  to  the  definition  of  relevant 
markets  in this  sector. 

Firms  are  subject  to  three  main  sources  of  competitive  constraints;  demand 
substitutability,  supply  substitutability  and  potential  competition,  with  the  first 
constituting the  most  immediate  and effective  disciplinary  force  on  the  suppliers  of a 
given  product  or  service.  Demand  substitutability  is therefore  the  main  tool  used  to 
define  the  relevant  product  market  on  which  restrictions  of  competition  for  the 
purposes  of  Articles  85(1)  and  86 can  be  identified. 

Supply  substitutability  is generally  not  used  to  define  relevant  markets.  In  practice 
it  cannot  be  clearly  distinguished 
Supply  side 
substitutability  and  potential  competition  are  used  for  the  purpose  of  determining 
whether  the  undertaking  has  a  dominant  position  or  whether  the 
restriction  of 
competition  is  significant  within  the  meaning  of  Article  85,  or  whether  there  is 
elimination  of  competition. 

from  potential  competition. 

37. 

In assessing relevant  markets  it is necessary  to  look  at developments  in the market  in 
the  short  term. 

1. 

Relevant  product  market 

38. 

Section  6 of  form  A/B defines  the  relevant  product  market  as  follows: 

"A  relevant  product  market  comprises  all  those products  and  /  or  services 
which  are  regarded  as  interchangeable  or substitutable  by the  consumer,  by 
reason  of  the products'  characteristics,  their prices  and  their  intended  use". 

39. 

40. 

The  ending  of  the  legal  monopolies  in the  telecommunications  sector,  whereby  third 
parties can provide  services to end-users, will  lead  to the emergence  of  a second type 
of  market,  related  to  the  market  for  provision  of  services, that  of  access  to  facilities 
which are currently  necessary to provide these services.  In this sector,  interconnection 
to  the  public  switched  telecommunications  network  would  be  a  typical  example  of 
such  access.  Without  interconnection,  it  will  not  be  commercially  possible  for  third 
parties  to  provide,  for  example,  comprehensive  voice  telephony  services. 

It is clear,  therefore,  that  in the telecommunications  sector there are at  least two  types 
of  relevant  product  markets to consider  - that  of a service  to be  provided  to end  users 
and  that  of  access  to  those  facilities  necessary  to  provide  that  service  to  end  users 
(information,  physical  network,  etc.).  In the context  of any  particular  case,  it  will  be 
necessary  to  define  the  relevant  access  and  services  markets,  such  as  interconnection 

Wdr-cons.wpd 

] 3 

to  the  public  telecommunications  network,  and  provision  of  public  voice  telephony 
services,  respectively. 

41.  When  appropriate,  the  Commission  will  use  the  test  of  a  relevant  market  which  is 
made  by  asking  whether,  if  all  the  suppliers  of  the  services  in  question  raised  their 
prices  by  5-10%,  their  collective  profits  would  rise.  According  to  this  test,  if  their 
profits  would  rise, the  market  considered  is a  separate  relevant  market. 

Draft 

42. 

43. 

44. 

The  Commission considers that  the principles  under competition  law governing  these 
markets  remain  the  same  regardless  of  the  particular  market  in  question.  Given  the 
pace  of  technological  change  in  this  sector,  any  attempt  to  define  particular  product 
markets  in this Notice would  run the risk of rapidly  becoming  inaccurate or  irrelevant. 
The  definition  of  particular  product  markets  is  best  done  in  the  light  of  a  detailed 
examination  of  an  individual  case. 

/. /. 

Services market 

This  can  be  broadly  defined  as the  provision  of  any  telecommunications  service  to  a 
user.  Different  telecommunications  services  will  be  considered  substitutable  if  they 
show a sufficient  degree of interchangeability for the end-user, which would mean that 
effective  competition  can take place between  the different  providers of these services. 

1.2 

Access  to facilities 

to  end-users, 

it  needs  access 

For  a service  provider  to  provide  services  to end-users  it  will  often  require  access to 
one or  more  (upstream  or downstream)  facilities.  For example,  to deliver  physically 
the  service 
the 
telecommunications  network  to which these end-users are connected.  This access can 
be  achieved  at  the  physical  level  through  dedicated  or  shared  local  infrastructure, 
either  self  provided  or  leased  from  a  local  infrastructure  provider. 
It  can  also  be 
achieved  either  through  a  service  provider  who  already  has  these  end-users  as 
subscribers,  or  through  an  interconnection  provider  who  has  access  directly  or 
indirectly  to  the  relevant  termination  points. 

termination  points  of 

the 

to 

45. 

In  addition  to  physical  access,  a  service  provider  may  need  access  to  other  facilities 
to  enable  it  to  market  its  service  to  end  users:  for  example,  a  service  provider  must 
be  able  to  make  end  users  aware  of  its  services.  Where,  as  is  often  the  case,  for 
example,  with  directory  information,  the  facility  can  only  be  obtained  from 
the 
telecommunications  operator,  similar  concerns  arise  as  with  physical  access  issues. 

46. 

In  many  cases, the Commission  will  be concerned  with  physical  access  issues, where 
what is necessary is interconnection to the network of the telecommunications operator  \ 

4,1 

Interconnection  is defined  in Directive 96/19/EC  as: 
"...  the physical and logical linking of the telecommunications  facilities of organisations 
providing telecommunications networks and/or  telecommunications  services, in order 
to allow the users of one organisation  to communicate  with the users of  the same or 
another  organisation  or to access services provided  by  third organisations." 

(continued...) 

Wdr-cons.wpd 

14 

Draft 

47. 

Some  incumbent  telecommunications  operators  may  be  tempted  to  resist  providing 
access to third  party  service providers or other network  operators, particularly  in areas 
where  the  proposed  service  will  be  in  competition  with  a  service  provided  by  the 
telecommunications  operator  itself.  This  resistance  will  often  manifest  itself  as  a 
reluctance  to  allow  access  or  a  willingness  to  allow  it  only  under  disadvantageous 
conditions. 
It  is  the  role  of  the  competition  rules  to  ensure  that  these  prospective 
access markets are allowed  to develop, and that incumbent  operators are not permitted 
to  use  their  control  over  access  to  stifle  developments  on  the  services  markets. 

It  should  be  stressed  that  in  the  telecommunications  sector,  liberalisation  can  be 
expected to lead to the development of new, alternative networks which will ultimately 
have  an 
incumbent 
telecommunications  operator. 

impact  on  access  market  definition 

involving 

the 

2. 

Relevant  geographic  market 

48. 

Relevant  geographic  markets  are  defined  in  Form  A/B  as  follows: 

"The relevant geographic market comprises the area in which the undertakings 
concerned  are  involved  in the supply  and demand  of products  or services,  in 
which  the  conditions  of  competition  are  sufficiently  homogeneous  and  which 
can  be  distinguished  from  neighbouring  areas  because  the  conditions  of 
competition  are  appreciably  different  in those  areas."' 

49. 

As  regards  the  provision  of  telecommunication  services  and  access  markets,  the 
relevant  geographic  market  will  be  the  area  in  which  the  objective  conditions  of 
competition  applying  to  service  providers  are  similar.  It  will  therefore  be  necessary 
to examine the possibility  for  these service providers to access an end-user in any part 
of  this  area,  under  equivalent  and  economically  viable  conditions.  Regulatory 
conditions  such as the terms of licences, and  any  exclusive or special rights owned by 
competing  local  access  providers  are  particularly  relevant 

. 

..continued) 

In the full liberalization Directive and ONP Directives, telecommunications services are 
defined as: 
"services, whose provision consists wholly or partly in the transmission and/or  routing 
of signals on a telecommunications network." 
It therefore  includes the transmission of  broadcasting  signals and  CATV  networks. 
A telecommunications  network  is itself defined as: 
"...  the transmission equipment and, where applicable, switching equipment  and other 
resources  which permit  the conveyance of signals between defined termination  points 
by  wire, by radio, by optical or by other electromagnetic  means". 

44 

Eurotunnel, OJ  L 354/66  (1994). 

Wdr-cons.wpd 

15 

Draft 

Part III: 

Principles 

50. 

The  Commission  will  apply  the following  principles  in  cases  before  it. 

51. 

The  Commission  has  recognised  that: 

"Articles  85  and  86  ...  constitute  law  in  force  and  enforceable  throughout  the 
Community.  Conflicts  should  not  arise  with  other  Community  rules  because 
Community  law  forms  a  coherent  regulatory  framework... 
it  is  obvious  that 
Community  acts  adopted  in the telecommunications sector  are  to be interpreted  in a 
way consistent with competition rules, so as to ensure the best possible  implementation 
of all aspects  of the Community telecommunications policy...  This applies,  inter alia, 
to the relationship  between competition rules applicable to undertakings and the ONP 
rules."' 

Thus,  competition  rules  continue  to  apply  in  circumstances  where  other  Treaty 
provisions or secondary  legislation are applicable.  In the context of access agreements 
the Internal  Market  and competition  provisions of Community  law are both  important 
and mutually  reinforcing  for the proper  functioning  of the sector.  Therefore  in making 
an  assessment  under  the  competition  rules,  the  Commission  will  seek  to  build  as  far 
as  possible  on  the  principles  established  in  the  harmonization  legislation.  It  should 
also  be  borne  in  mind  that  a  number  of  the  competition  law  principles  set  out  below 
are  also  covered  by  specific  rules  in  the  context  of  the  ONP  framework.  Proper 
application  of  these  rules  should  often  avoid  the  need  for  the  application  of  the 
competition  rules. 

As  regards  the  telecommunications  sector,  attention  should  be  paid  to  the  cost  of 
universal  service  obligations.  Article  90(2)  EC  may  justify  exceptions  to  the 
principles  of  Articles  85 and  86  EC.  The  details  of  universal  service  obligations  are 
a regulatory  matter.  The field of application  of Article 90(2) has been specified  in the 
Article 90 Directives in the telecommunications sector, and the Commission will apply 
the  competition  rules  in  this  context. 

Articles  85 and  86  EC apply  in  the  normal  manner  to  agreements  or  practices  which 
have  been  approved  or  authorised  by  a  national  authority  (\  or  where  the  national 
authority  has  required  the  inclusion  of  terms  in an agreement  at the  request  of  one or 
more  of  the  parties  involved. 

However,  if a national  regulatory  authority  were to require terms which  were contrary 
to  the  competition  rules,  the  undertakings  involved  would  in  practice  not  be  fined, 
although  the  Member  State  itself  would  be  in  breach  of  Articles  3(g) and  5 EC  and 
therefore  subject  to challenge by the Commission under Article  169 EC.  Additionally, 

Guidelines on the application of the competition rules in the telecommunications sector, 
see  point  3 above,  at  paragraphs  15 and 16. 

Commission  Decision,  BNIC/AROW,  82/896/EEC,  OJ  L 379/1  (1982). 

See footnote  15 above. 

52. 

53. 

54. 

55. 

46 

47 

Wdr-cons.wpd 

16 

Draft 

if an  undertaking  having  special  or exclusive  rights within  the meaning  of Article  90, 
or  a  state-owned  undertaking,  were  required  or  authorised  by  a  national  regulator  to 
engage  in behaviour  constituting  an abuse of its dominant  position, the Member  State 
would  also  be  in breach  of  Article  90( 1 ) and the  Commission could  adopt  a decision 
requiring  termination  of  the  infraction48. 

56. 

National  Regulatory  Authorities  may  require  strict  standards  of 
transparency, 
obligations  to  supply  and  pricing  practices  on  the  market,  particularly  where  this  is 
necessary  in  the  early  stages  of  liberalization.  When  appropriate,  legislation  such  as 
the  ONP  framework  will  be  used  as  an  aid  in  the  interpretation  of  the  competition 
rules49.  Given  the  duty  resting  on  National  Regulatory  Authorities  to  ensure  that 
effective  competition  is  possible,  application  of  the  competition  rules  is  likewise 
required  for  an  appropriate  interpretation  of  the  ONP  principles.  It  should  also  be 
noted  that  many  of  the  issues  set  out  below  are  also  covered  by  rules  under  the  Full 
Competition  Directive  and  the  existing  and  proposed  ONP,  licensing  and  data 
protection  Directives:  effective  enforcement  of  this  regulatory  framework  should 
prevent  many  of  the  competition  issues  set  out  below  from  arising. 

1. 

Dominance  (Article  86) 

57. 

In  order  for  an  undertaking  to  provide  services  in  the  telecommunications  services 
market,  it  will  need  to  obtain  access  to  various  facilities.  For  the  provision  of 
telecommunications  services,  for  example,  interconnection  to  the  public  switched 
telecommunications  network  will  usually  be  necessary.  Access  to  this  network  will 
almost always be in the hands of a dominant telecommunications operator.  As regards 
access  agreements,  dominance  stemming  from  control  on  facilities  will  be  the  most 
relevant  to  the  Commission's  appraisal. 

58.  Whether  or  not  a  company  is  dominant  does  not  depend  only  on  the  legal  rights 
granted  to  that  company.  The mere  ending  of  legal  monopolies  does  not  put  an  end 
to  dominance.  Indeed, notwithstanding  the liberalization  Directives, the development 
of effective  competition from  alternative network providers with adequate capacity and 
geographic  reach  will  take  time. 

59. 

In  the  telecommunications  sector,  the  concept  of  "essential  facilities"  will  in  many 
cases be of direct relevance  in determining  the duties of dominant  telecommunications 
operators.  The  phrase essential  facility  is used  to  describe a facility  or  infrastructure 

4X 

49 

Joined  Cases  C-48  and  66/90,  Netherlands  and  others  v  Commission,  1992  ECR  I-
565. 

See  Ahmed  Saeed,  footnote  14  above,  where  internal  market  legislation  relating  to 
pricing was  used as an aid in determining what  level of  prices  should be regarded as 
unfair  for  the  purposes  of Article 86. 

Wdr-cons.wpd 

17 

Draft 

which is essential for reaching customers and/or enabling competitors to carry on their 
business, and  which  cannot  be  replicated  by  any  reasonable  means. 

A  company  controlling  the  access to  an  essential  facility  enjoys  a dominant  position 
within  the  meaning  of  Article  86.  Conversely,  a  company  may  enjoy  a  dominant 
position  pursuant  to  Article  86 without  controlling  an  essential  facility. 

The  following  facilities  could  at  present  be  expected  to  constitute  essential  facilities 
in  the  telecommunications  sector: 
for  example,  the  public  telecommunications 
networks  for  voice  and/or  data  services,  leased  circuit  or  and  related  network 
terminating  equipment,  basic data  regarding  subscribers to the  public  voice  telephony 
service,  numbering  schemes  and  other  customer  or  technical  information. 

/. /. 

Services market 

One  of  the  factors  used  to  measure  the  market  power  of  an  undertaking  are  the  sales 
attributable  to that  undertaking,  expressed  as a percentage  of total  sales in the  market 
for  substitutable  services  in  the  relevant  geographic  area.  As  regards  the  services 
market,  the  Commission  will  assess, inter  alia,  the  turnover  generated  by  the  sale of 
substitutable  services, excluding  the  sale or  internal  usage of  interconnection  services 
and  the  sale  or  internal  usage  of  local  infrastructure51,  taking  into  consideration  the 
competitive  conditions  and  the  structure  of  supply  and  demand  on  the  market. 

1.2 

Access  to facilities 

in 

its  own  network,  and 

The  concept  of  "access"  as  referred  to  above  in  point  45  can  relate  to  a  range  of 
situations, including the availability  of leased  lines enabling a service provider to build 
i.e. 
interconnection  problem 
up 
interconnecting  two telecommunication  networks, e.g.  mobile and fixed. In relation  to 
access,  incumbent  operators  often  occupy  a  monopoly  position,  and  even  in  areas 
where  liberalization  of  the  legal  framework  has  begun,  it  is  probable  that  the 
incumbent  will  remain  dominant  in  the  future.  The  incumbent  operator,  which 
controls  the  facilities,  is often  also the  largest  service  provider,  and  they  have  in  the 
past not needed to distinguish between the conveyance of telecommunications  services 
and  the  provision  of  these  services  to  end-users.  Today,  an  operator  who  is  also  a 
service provider  does not  require  its downstream  operating arm to pay  for  access, and 
therefore  it  is  not  easy  to  calculate  the  revenue  to  be  allocated  to  the  facility.  In  a 

the  strict  sense, 

60. 

61. 

50 

See also the definition included in the "Additional commitment on regulatory  principles 
by the  European  Communities and their Member  States  "used  by the Group on  basic 
telecommunications in the context of the World Trade Organisation (WTO) negotiations 

"Essential facilities mean facilitiesof a public telecommunications transport network and 
service  that 
(a) 

are  exclusively  or  predominantly  provided  by  a  single  or  limited  number  of 
suppliers;  and 
cannot  feasibly  be economically  or  technically  substituted  in order  to  provide 
a  service." 

(b) 

51 

Case 6/72  Continental  Can,  1973  ECR 215. 

Wdr-cons.wpd 

18 

Draft 

case where an operator  is providing  both access and services it is necessary to separate 
so far  as possible the  revenues  for  the two  markets  before  using  revenues  as the  basis 
for  the  calculation  of  the  company's  share  of  whichever  market  is involved.  Article 
8(2)  of  the  proposed  Interconnection  Directive  should  be  helpful  in this  context  as it 
calls  for  separate accounting  for  "activities  related  to  interconnection  - covering  both 
interconnection  services  provided  internally  and  interconnection  services provided  to 
others  - and  other  activities". 

The  economic  significance  of  obtaining  access  also  depends  on  the  coverage  of  the 
network  with  which  interconnection  is  sought.  Therefore,  in  addition  to  using 
turnover  figures,  the  Commission  will,  where  this  is  possible, also  take  into  account 
the  number  of  customers  who  have  subscribed  to  services  comparable  with  those 
which  the service provider  requesting access intends to provide.  Accordingly,  market 
power  for  a given  undertaking  will  be  measured  partly  by  the  number  of  subscribers 
who  are  connected  to  termination  points  of  the  telecommunications  network  of  that 
undertaking  expressed  as  a  percentage  of  the  total  number  of  subscribers  connected 
to  termination  points  in  the  relevant  geographic  area. 

Supply-side  substitutability 

As  stated  above  (see  point  37),  supply-side  substitutability  is  also  relevant  to  the 
question  of  dominance.  A  market  share  of  over  50% "  is  usually  sufficient  to 
demonstrate  dominance  although  other  factors  will  be  examined.  For  example,  the 
Commission  will  examine  the  existence  of  other  network  providers,  if  any,  in  the 
relevant  geographic  area  to  determine  whether  such  alternative  infrastructures  are 
sufficiently  dense  to  provide  competition  to  the  incumbent's  network  and  the  extent 
to  which  it  would  be  possible  for  new  access  providers  to  enter  the  market. 

Other  relevant  factors 

In  addition  to  market  share  data,  and  supply-side  substitutability,  in  determining 
whether  an  operator  is  dominant  the  Commission  will  also  examine  whether  the 
operator  has privileged  access to facilities  which cannot be duplicated, either for  legal 
reasons  or  because  it  would  cost  too  much. 

As competing  access providers appear  and challenge the dominance of the  incumbent, 
the scope of the rights they  receive from  Member  States' authorities, and  notably  their 
territorial  reach,  will  play  an  important  part  in  the  determination  of  market  power. 
The  Commission  will  closely  follow  market  evolution  in  relation  to  these  issues and 

It should be noted  in this context  that  under the ONP framework  an organisation may 
be  notified  as  having  significant  market  power.  The  determination  of  whether  an 
organisation does or does not  have significant market  power depends on a number  of 
factors,  but  the  starting  presumption  is  that  an  organisation  with  a  market  share  of 
more  than  25%  will  normally  be  considered  to  have  significant  market  power.  The 
Commission will take account  of whether  an undertaking  has  been  notified as  having 
significant  market  power  under the  ONP  rules  in its  appraisal  under  the  competition 
rules. 

62. 

63. 

64. 

65. 

52 

Wdr-cons.wpd 

19 

will  take  account  of  any  altered  market  conditions  in  its  assessment of  access  issues 
under  the  competition  rules. 

Draft 

1.3 

Joint  dominance 

The wording  of Article  86 makes it clear that the Article applies when more than one 
company  shares a  dominant  position.  The  circumstances  in  which  a joint  dominant 
position exists, and in which  it is abused, have not yet  been fully  clarified  by the  case 
law of  the  Community  Courts or the  practice  of the  Commission, and  the  law  is  still 
developing. 

The  words  of  Article  86 ("abuse  by  one  or  more  undertakings")  describe  something 
different  from  the  prohibition  on  anti-competitive  agreements  or  concerted  practices 
in  Article  85.  To  hold  otherwise  would  be  contrary  to  the  usual  principles  of 
interpretation  of  the  Treaty,  and  would  render  the  words  pointless  and  without 
practical  effect.  This  does  not,  however,  exclude  the  parallel  application  of  Articles 
85  and  86  to  the  same  agreement  or  practice,  which  has  been  upheld  by  the 
Commission and the Court  in a number of cases  , nor is there anything to prevent the 
Commission  from  taking  action  only  under  one  of  the  provisions, when  both  apply. 

Two companies, each dominant  in a separate national  market, are not the same as two 
jointly  dominant  companies.  National  public  voice  telephony  telecommunications 
operators  are  not  likely  to  become jointly  dominant  until  after  liberalization  in  the 
Community.  For two or more companies to be in a joint dominant position, they  must 
together have substantially  the same position vis-à-vis their customers and  competitors 
as a single company  has if it is in a dominant  position.  With  specific  reference  to the 
telecommunications 
two 
joint  dominance 
telecommunications  infrastructure  operators  covering  the  same  geographic  market. 

could  be  attained  by 

sector, 

In addition,  for  two or more companies  to be jointly  dominant  it  is necessary, but not 
sufficient,  for  there  to  be  no  effective  competition  between  the  companies  on  the 
relevant  market.  This lack  of  competition  may  in practice  be due  to the  fact  that  the 
companies have links such as agreements  for cooperation,  interconnection  or  roaming 
agreements.  The Commission does not, however, consider that either economic theory 
or  Community  law  implies that  such  links  are  legally  necessary  for  a joint  dominant 
position  to  exist54. 
It  is  a  sufficient  economic  link  if  there  is  the  kind  of 
interdependence  which  often  comes about  in oligopolistic  situations.  There does not 
seem  to  be  any  reason  in  law  or  in  economic  theory  to  require  any  other  economic 
in  practice  such  links  will 
link  between  those  companies.  This  having  been  said, 
often  exist  in  the  telecommunications  sector  where  national 
telecommunication 
operators  nearly  inevitably  have  links  of  various  kinds  with  one  another. 

To  take  as  an  example  access  to  the  local  loop,  in  some  Member  States  this  could 
incumbent 
future  by 
well  be  controlled 

two  operators  - 

the  near 

the 

in 

Case  85/76  Hoffmann  La  Roche,  1979  ECR 461, 
Racal  Decca,  Commission  Decision of 21  December  1988, OJ  L 43/27  (1989). 

Nestlé /  Perrier, Commission  Decision of  22 July  1992,  OJ  L 356/1  (1992). 

66. 

67. 

68. 

69. 

70. 

53 

54 

Wdr-cons.wpd 

20 

In  order  to  provide  particular 
telecommunications  operator  and  a  cable  operator. 
services  to  consumers,  access  to  the  local  loop  of  either  the  telecommunications 
operator or the cable television operator is necessary.  Depending on the circumstances 
of  the  case  and  in particular  on  the  relationship  between  them,  neither  operator  may 
hold  a  dominant  position:  together,  however,  they  may  hold  a  joint  monopoly  of 
access to  these  facilities. 

Draft 

Wdr-cons.wpd 

21 

2. 

Abuses  of  Dominance 

Draft 

2.1 

Refusal to grant access to essential facilities  and application of 
unfavourable  terms 

71. 

A refusal  to  give access may  be prohibited  under  Article  86 if the refusal  is made by 
a  company  which  is  dominant  because  of  its  control  of  facilities  ,  as  incumbent 
telecommunications  operators  will  usually  be  for  the  foreseeable  future.  A  refusal 
may  have: 

"the  effect  of  hindering  the  maintenance  of  the  degree  of  competition  still 
existing  in the market  or  the growth  of that  competition"  . 

Service  markets  in  the 
A  refusal  will  only  be  abusive  if  it  affects  competition. 
telecommunications sector will initially  have few competitive players and refusals  will 
therefore  generally  affect  competition  on  those  markets.  In  all  cases  of  refusal,  any 
justification  will  be  closely  examined  to  determine  whether  it  is  objective. 

72. 

Broadly  there  are  three  relevant  scenarios: 

a. 

b. 

a refusal  to grant  access for  the purposes of a service where  another  operator 
has  been  given  access  by  the  access  provider  to  operate  on  that  services 
market; 

a refusal  to grant  access for  the  purposes of a service  where  no other  operator 
has  been  given  access  by  the  access  provider  to  operate  on  that  services 
market; 

c. 

a  withdrawal  of  supply  of  access  from  an  existing  customer. 

73. 

As  to  the  first  of  the  above  scenarios,  it  is  clear  that  a  refusal  to  supply  a  new 
customer  in circumstances where a dominant  facilities  owner  is already  supplying one 
or  more  customers  operating  in  the  same  downstream  market  would  constitute 
discriminatory  treatment  which,  if  it  would  restrict  competition  on  that  downstream 
market, would  be an abuse.  Where network  operators offer  the same, or similar, retail 
services  as  the  party  requesting  access,  they  may  have  both  the  incentive  and  the 
opportunity  to  restrict  competition  and  abuse  their  dominant  position  in  this  way. 
There  may,  of  course,  be  justifications  for  such  refusal  -  for  example,  vis-à-vis 
applicants  which  represent  a  potential  credit  risk.  In  the  absence  of  any  objective 
justifications,  a  refusal  would  usually  be  an  abuse  of  the  dominant  position  on  the 
access  market. 

74. 

In general  terms, the dominant company's duty  is to provide access in such a way  that 
the  goods  and  services  offered  to  downstream  companies  are  available  on  terms  no 

55 

Case  85/76  Hoffmann  La Roche,  1979  ECR 461 

Wdr-cons.wpd 

22 

75. 

76. 

77. 

56 

57 

Draft 

less  favourable  than  those  given  to  other  parties,  including  its  own  corresponding 
downstream  operations. 

As  to  the  second  of  the above  situations, the question  arises as to  whether  the  access 
provider  should  be obliged  to contract  with  the service  provider  in order  to  allow  the 
service  provider  to operate  on  a new  service  market.  Where  capacity  constraints  are 
not  an  issue and  where  the company  refusing  to  provide  access  to  its  facility  has  not 
provided  access to that  facility,  either to its downstream  arm or to any  other  company 
operating  on that services market, then  it is not clear what other objective  justification 
there  could  be. 

If there were no commercially  feasible  alternatives to the access being  requested, then 
unless  access  is granted,  the  party  requesting  access would  not  be  able  to  operate  on 
the service market.  Refusal  in this case would therefore  limit the development  of new 
markets, or new products on those markets, contrary  to Article  86(b).  In the transport 
field'6,  the  Commission  ruled  that  a  firm  controlling  an  essential  facility  must  give 
access 
the 
telecommunications  sector. 

in  certain  circumstances  . 

same  principles  apply 

The 

to 

The principle  obliging  dominant  companies  to  contract  in  certain  circumstances  will 
often  be  relevant  in  the  telecommunications  sector.  Currently,  there  are  monopolies 
or  virtual  monopolies  in  the  provision  of  network  infrastructure  for  most  telecom 
services in the EU.  Even  where restrictions have already  been, or will  soon be,  lifted, 
competition  in  downstream  markets  will  continue  to  depend  upon  the  pricing  and 
conditions  of  access  to  upstream  network  services  that  will  only  gradually  reflect 
in  the 
competitive  market  forces.  Given  the  pace  of  technological  change 
telecommunications sector, it is possible to envisage situations where companies would 
seek  to  offer  new  products  or  services which  are not  in  competition  with  products  or 
services already  offered  by  the dominant  access operator,  but  for  which  this operator 
is reluctant  to  provide  access. 

Commission decision, Sea Containers  v Stena  Sealink, 94/19/EC,  OJ  L15/8 (1994); 
Commission  decision,  Re Access  to  Facilities of  Port  Rodby,  94/119/EC,  OJ  L55/52 
(1994) 

See  also (among  others): 
Judgments  of the  Court -
Cases  6 and  7/73,  Commercial  Solvents v.  Commission,  1974  ECR 223; 
Case  311/84, Télémarketing,  1985  ECR 3261; 
Case  C-18/88 RTT  v.  GB-lnno,  1991 ECR  1-5941; 
Case  C-260/89,  Elliniki Radiophonia Teleorassi,  1991 ECR  I-2925; 
Cases T-69, T-70 and T-76/89,  RTE, BBC and ITP v. Commission,  1991 ECR  II-485, 
535,  575; 
Case  C-271/90,  Spain v Commission,  1992  ECR  I-5833; 
Cases C-241 and 242/91P,  RTE and  ITP  Ltd v Commission (Magill),  1995 ECR  I-743 

Commission  Decisions -
76/185/EEC  -  National Carbonizing  Company,  OJ  L 35/6  (1976); 
88/589/EEC  -  London  European  - Sabena,  OJ  L 317/47  (1988); 
92/213/EEC -  British Midland v. Aer  Lingus, OJ  L 96/34  (1992); 
B&  I v.  Sealink,  (1992)  5 CMLR  255;  EC  Bulletin, No 6 -  1992, point  1.3.30. 

Wdr-cons.wpd 

23 

Draft 

78. 

79. 

The  Commission  must  ensure  that  the  control  over  facilities  enjoyed  by  incumbent 
operators  is not used  to hamper the development  of a competitive  telecommunications 
environment.  A  company  which  is  dominant  on  a  market  for  services  and  which 
commits  an  abuse contrary  to Article  86 on  that  market  may  be  required,  in  order  to 
put an end  to the abuse, to supply  access to  its facility  to one or  more competitors  on 
In  particular,  a  company  may  abuse  its  dominant  position  if  by  its 
that  market. 
actions  it  prevents  the  emergence  of  a  new  product  or  service. 

The  starting  point  for  the  Commission's  analysis  will  be  the  identification  of  an 
existing  or  potential  market  for  which  access  is  being  requested. 
In  order  to 
determine whether access should be ordered  under the competition  rules, account  will 
be  taken  of  a  breach  by  the  dominant  company  of  its  duty  not  to  discriminate  (see 
below)  or  of  the  following  elements,  taken  cumulatively: 

a. 

access to  the  facility  in question  is generally  essential  in  order  for  companies 
to  compete  on  that  related  market'' ; 

The  key  issue  here  is therefore  what  is essential.  It will  not  be sufficient  that 
the  position  of  the company  requesting  access would  be more advantageous  if 
access were granted  - but refusal  of access must  lead  to the proposed  activities 
being  made  either  impossible  or  seriously  and  unavoidably  uneconomic. 

Although,  for  example,  alternative  infrastructure  may  as  from  1 July  1996 be 
used  for  liberalised  services, it  will  be some  time  before  this  is in  many  cases 
a  satisfactory  alternative  to  the  facilities  of  the  incumbent  operator.  Such 
alternative  infrastructure  does  not  at  present  offer  the  same  dense  geographic 
coverage  as that  of  the  incumbent  telecommunications  operator's  network. 

b. 

there  is sufficient  capacity  available  to  provide  access. 

the  facility  owner  fails  to  satisfy  demand  on  an  existing  service  or  product 
market,  blocks  the  emergence  of  a  potential  new  service  or  product,  or 
impedes  competition  on  an  existing  or  potential  service  or  product  market; 

d. 

the company  seeking access is prepared to pay the reasonable and  non-discriminatory 
price  and  will  otherwise  in  all  respects  accept  non-discriminatory  access  terms  and 
conditions. 

e. 

there  is  no  objective  justification  for  refusing  to  provide  access. 

58 

Community  law  protects  competition  and  not  competitors,  and  therefore  it would  be 
insufficient to demonstrate  that one competitor  needed  access to a facility  in order  to 
compete in the downstream market.  It would be necessary to demonstrate that access 
is  necessary  for  all  except  exceptional  competitors  in  order  for  access  to  be  made 
compulsory. 

Wdr-cons.wpd 

24 

Draft 

Relevant  justifications  in  this  context  could  include  an  overriding  difficulty  of 
providing  access to  the  requesting  company,  or  the  need  for  a  facility  owner  which 
has undertaken  investment  aimed  at  the  introduction  of  a new  product  or  service to 
have  sufficient  time  and  opportunity  to  use  the  facility  in  order  to  place  that  new 
product  or  service on  the  market.  However,  although  any justification  will  have  to 
be  examined  carefully  on  a  case-by-case  basis.  It  is  particularly  important  in  the 
telecommunications  sector  that  the  benefits  to  end-users  which  will  arise  from  a 
competitive  environment  are  not  undermined  by  the  actions  of  the  former  state 
monopolists  in  preventing  competition  from  emerging  and  developing. 

In  determining  whether  an  infringement  of  Article  86 has been  committed,  account  will  be 
taken  both  of  the  factual  situation  in  that  and  other  geographic  areas,  and,  where  relevant 
the relationship between  the access requested  and  the technical  configuration  of the  facility. 

The  question  of  objective  justification  will  require  particularly  close  analysis  in  this  area. 
In addition to determining whether difficulties  cited  in any particular case are serious enough 
to justify  the  refusal  to grant access, the  relevant  authorities  must also decide  whether  these 
difficulties  are  sufficient  to  outweigh  the  damage  done  to  competition  if  access  is  refused 
or  made  more  difficult  and  the  downstream  service  markets  are  thus  limited. 

Three  important  elements  relating  to  access  which  could  be  manipulated  by  the  access 
provider  in  order,  in  effect,  to  refuse  to  provide  access  are  timing,  technical  configuration 
and  price. 

Dominant  telecommunications  operators  have  a  duty  to  deal  with  requests  for  access 
efficiently:  undue  and  unexplained  delays  in  responding  to  a  request  for  access  may 
constitute  an  abuse. 
In  particular,  however,  the  Commission  will  seek  to  compare  the 
response  to  a request  for  access  with: 

80. 

81. 

82. 

a. 

b. 

c. 

the  usual  time  frame  and  conditions  applicable  when  the  responding  party  grants 
access to  its  facilities  to  its own  subsidiary  or  operating  branch; 

responses to  requests  for  access  to  similar  facilities  in  other  Member  States; 

the  explanations  given  for  any  delay  in  dealing  with  requests  for  access. 

83. 

Issues of  technical  configuration  will  similarly  be  closely  examined  in  order  to  determine 
whether  they  are  genuine.  In  principle,  competition  rules  require  that  the  party  requesting 
access  must  be  granted  access  at the  most  suitable  point  for  the  requesting  party,  provided 
that  this  point  is  technically  feasible  for  the  access  provider.  Questions  of  technical 
feasibility  may be objective justifications  for  refusing  to supply  - for  example, the traffic  for 
which  access  is sought  must  satisfy  the  relevant  technical  standards  for  the 

Wdr-cons.wpd 

25 

84. 

85. 

86. 

87. 

88 

Draft 

infrastructure  - or  questions  of  capacity  restraints,  where  questions  of  rationing  may 
arise  . 

Excessive  pricing  for  access, as well  as being  abusive  in  itself10, may  also amount  to 
an  effective  refusal  to  grant  access. 

There  are  a  number  of  elements  of  these  tests  which  require  careful  assessment. 
Pricing  questions  in  the  telecommunications  sector  will  be  facilitated  by  the 
obligations  un  ONP  Directives  to  have  transparent  cost-accounting  systems. 

As  to  the  third  of  the  situations  referred  to  in  point  72  above,  some  previous 
Commission  decisions  and  the  case  law  of  the  Court  have  been  concerned  with  the 
withdrawal  of  supply  from  downstream  competitors  (the  third  case,  above). 
In 
Commercial  Solvents,  the  Court  held  that: 

"an  undertaking  which  has a dominant  position  on the market  in  raw  materials 
for  manufacturing 
and  which,  with  the  object  of  reserving  such  raw  material 
itself  a 
its  own  derivatives, 
all 
manufacturer 
these  derivatives,  and 
competition  on  the  part  of  this  customer, 
position 
the  meaning  of  Article  86.  '° 
within 

to  supply  a  customer,  which 
therefore 
is  abusing 

risks  eliminating 
its  dominant 

refuses 

of 

is 

Although  this  case  dealt  with  the  withdrawal  of  a  product,  there  is  no  difference  in 
principle  between  this case  and  the  withdrawal  of  access.  The  unilateral  termination 
of  access  agreements  raises  substantially  similar  issues  to  those examined  in  relation 
to refusals.  Withdrawal  of access  from  an existing  customer  will  usually  be abusive. 
Again,  objective  reasons  may  be  provided  to  justify  the  termination.  Any  such 
reasons  must  be  proportionate  to  the  effects  on  competition  of  the  withdrawal. 

2.2 

Other  forms  of  abuse 

Refusals  to provide  access  are  only  one  form  of  possible  abuse  in this  area.  Abuses 
may  also  arise  in  the  context  of  access  having  been  granted.  An  abuse  may  occur 
inter  alia where  the  operator  is behaving  in a discriminatory  manner  or the  operator's 
actions  otherwise  limit  markets  or  technical  development.  The  following  are  non-
exhaustive  examples  of  abuses  which  can  take  place. 

Network  configuration 

89. 

Network  configuration  by  a  dominant  network  operator  which  makes  access 
objectively  more  difficult  for  service  providers6"  could  constitute  an  abuse  unless  it 

59 

60 

61 

62 

As  noted  above  at  paragraph 80. 

See  paragraph  91 below. 

Case 6 and  7/73,  Commercial  Solvents,  1974  ECR 223. 

ie to  use the  network  to  reach  their  own  customers 

Wdr-cons.wpd 

26 

were  objectively  justifiable.  One objective justification  would  be  where  the  network 
configuration  improves  the  efficiency  of  the  network  generally. 

Draft 

Tying 

90. 

This  is  of  particular  concern  where  it  involves  the  tying  of  services  for  which  the 
telecommunications  operator  is  dominant  with  those  for  which  it  is  exposed  to 
competition".  Where the vertically  integrated  dominant  network  operator  obliges the 
party  requesting  access  to  purchase  one  or  more  services64  without  adequate 
justifications,  this  may  exclude  rivals  of  the  dominant  access  provider  from  offering 
these elements of  the package  independently.  This requirement  could  thus  constitute 
an  abuse  under  Article  86. 

63 

64 

This  is also dealt with  under  the  ONP framework:  see Art  7(4)  of the  Interconnection 
Directive,  Art  12(4)  of  the  voice  telephony  Directive  and  Annex  II  of  the  ONP 
Framework  Directive. 

ie  including  those  which  are  superfluous  to  the  latter,  or  indeed  those  which  may 
constitute  services  the  access  requester  itself would  like to  provide for  its  customers 

Wdr-cons.wpd 

27 

Pricing 

Draft 

91. 

Pricing  problems  in  connection  with  access  for  service  providers  to  a  dominant 
operator's  (essential)  facilities  will  often  revolve  around  excessively  high  prices6  :  in 
the absence of another  viable alternative to the facility  to which access is being sought 
by service providers, the dominant or monopolistic operator may be inclined to charge 
excessive  prices. 

Problem  of  unfairly  low  prices  could  arise  in  the  context  of  competition  between 
different  telecommunications  infrastructure  networks, where a dominant  operator may 
tend  to  charge  unfairly  low  prices  for  access  in  order  to  eliminate  competition  from 
other  (emerging)  infrastructure  providers,  in  violation  of  Article  86(a).  In  general  a 
price  is abusive  if  it  is  below  the  dominant  company's  average  variable  costs  or  if  it 
is  below  average  total  costs  and  part  of  an  anti-competitive  plan'1. 

If a case  arises, the  ONP  rules  concerning  accounting  requirements  and  transparency 
will  help  to  ensure  the  effective  application  of  Article  86  in  this  context. 

92.  Where the operator  is dominant  in the product  or services market, the margin  between 
the  price  charged  to  all  competitors  on  the  downstream  market  (including  the 
dominant  company's  own  downstream  operations,  if  any)  for  access  and  the  price 
which  the  network  operator  charges  in the downstream  market  must  be  large  enough 
to  allow  a  reasonably  efficient  service  provider  in  the  downstream  market  to  obtain 
a normal  profit  unless the dominant  company  can show that  its downstream  operation 
is  exceptionally  efficient.(> 
If  this  is  not  the  case,  competitors  on  the  downstream 
market  are  faced  by  a  "price  squeeze"  which  could  force  them  out  of  the  market. 

65 

66 

67 

The Commission Communication on Assessment Criteria for National Schemes for the 
Costing and  Financing of  Universal Service and  Guidelines for  the  Operation of  such 
Schemes  will  be  relevant  for  the  determination  of  the  extent  to  which  the  universal 
service  obligation can  be  used to justify  the  prices  charged.  See  also the  reference 
to the  universal  service obligation at  paragraph  53 above. 

See AKZO, case  C-62/86,  [1991]  ECR-3359 

However,  the  average  variable cost  rule  cannot  be  applied  in  many  situations  in the 
telecommunications  sector,  since the variable costs of providing access to an already 
existing  network  are  almost  zero.  Accordingly,  the  test  which  the  Commission 
considers should be applied is whether  whether a company  charges a price for goods 
and  services  - other  than  in the  context  of a new  product  or service  -which, although 
above  the average  variable cost  of providing the  specific goods  or services  for  which 
the  price  in question  is  paid  is  so  low that  the  overall  revenues  for  all  the  goods  or 
services  in question would  be  less than  its  average  total  costs  of  providing them  if  it 
sold the  same  proportion  of  its output  at the  same  price on a continuing  basis,  even 
where  no intent to  exclude a competitor  is proved. 

Commission  Decision, Brown  Napier/British Sugar,  88/518/EEC,  OJ L 284/41  (1988): 
the  margin  between  industrial  and  retail  prices  was  reduced  to  the  point  where  the 
wholesale purchaser with packaging operations as efficient  as those of the  wholesale 
supplier could  not  profitably  serve  the  retail  market.  See  also  National  Carbonising, 
footnote  57 above. 

Wdr-cons.wpd 

28 

Discrimination 

Draft 

93. 

A dominant access provider may not discriminate between different  access agreements 
where  such  discrimination  would  restrict  competition.  Any  differentiation  based  on 
the  use  which  is  to  be  made  of  the  access  rather  than  differences  between  the 
transactions for  the access provider  itself,  if the discrimination  is sufficiently  likely  to 
restrict  or  distort  actual  or  potential  competition,  would  be  contrary  to  Article  86. 
This discrimination could take the form of imposing different  conditions, including the 
charging  of  different  prices,  or  otherwise  differentiating  between  access  agreements, 
except  where  such  discrimination  would  be objectively  justified,  for  example  on  the 
basis  of  cost  or  technical  considerations  or  the  fact  that  the  users  are  operating  at 
different  levels.  Such  discrimination  could  be  likely  to  restrict  competition  in  the 
downstream  market  on which  the company  requesting  access was  seeking to  operate, 
in that  it might  limit  the possibility  for  that operator  to enter  the  market  or expand  its 
operations  on  that  market'1 . 

94.  With  regard  to  price  discrimination,  Article  86(c)  prohibits  discrimination  by  a 
dominant  firm  between  customers  of  that  firm1,  including  discriminating  between 
customers  on  the  basis  of  whether  or  not  they  agree  to  deal  exclusively  with  that 
dominant  firm. 

95. 

96. 

Discrimination  without  objective  justification  as  regards  any  aspects  or  condition  of 
an access agreement  may  constitute  an abuse.  Discrimination  may  relate  to  elements 
such as pricing, delays, technical  access, routing  , numbering,  restrictions on  network 
use exceeding essential  requirements and  use of customer network  data.  However, the 
existence  of  discrimination  can  only  be  determined  on  a  case  by  case  basis. 
Discrimination  is contrary  to  Article  86 whether  or  not  it  results  from  or  is  apparent 
from  the  terms  of  a  particular  access  agreement. 

There  is, in this context,  a general  duty  on  the  network  operator  to  treat  independent 
customers  in  the  same  way  as  its  own  subsidiary  or  downstream  service  arm.  The 
nature  of  the  customer  and  its  demands  may  play  a  significant  role  in  determining 
whether transactions are comparable.  Different  prices for customers at different  levels 
(eg  wholesale  and  retail)  do  not  necessarily  constitute  discrimination. 

97. 

Discrimination  issues may arise in respect of the technical  configuration  of the access, 
given  its  importance  in  the  context  of  access. 

However,  when  infrastructure  capacity  is under-utilised, charging  a different  price for 
access depending on the demand in the different downstream markets may be justified 
to  the  extent  that  such  differentiation  permits  a  better  utilisation of  the  infrastructure 
and a better development  of certain markets, and where such differentiation does not 
restrict or distort competition.  In such a case, the Commission will analyse the  global 
effects  of such  price differentiation  on all of the downstream  markets. 

Case C-310/93  P,  BPB  Industries  PLC  and  British Gypsum  Ltd v Commission  [1995] 
ECR  I-865,  904,  applying  to  discrimination  by  BPB  among  customers  in the  related 
market  for  dry  plaster 

ie to a  preferred  list of correspondent  network  operators 

69 

70 

Wdr-cons.wpd 

29 

Draft 

The degree  of technical sophistication  of the access: restrictions on the type or 'level' 
in  the  network  hierarchy  of  exchange  involved  in  the  access  or  the  technical 
capabilities  of  this  exchange  are  of  direct  competitive  significance.  These  could  be 
the  facilities  available  to  support  a connection  or  the type  of  interface  and  signalling 
system  used  to  determine  the  type  of  service  available  to  the  party  requesting  access 
(e.g.  intelligent  network  facilities). 

The  number  and/or  location  of  connection  points:  the  requirement  to  collect  and 
distribute traffic  for  particular areas at the switch which directly serves that area rather 
than  at  a  higher  level  of  the  network  hierarchy  may  be  important.  The  party 
requesting  access  incurs  additional  expense  by  either  providing  links  at  a  greater 
distance  from  its  own  switching  centre  or  being  liable  to  pay  higher  conveyance 
charges. 

lujual access: the possibility  for customers of the party  requesting access to obtain  the 
services  provided  by  the  access  provider  using  the  same  number  of  dialled  digits  as 
are  used  by  the  customers  of  the  latter 
is  a  crucial  feature  of  competitive 
telecommunications. 

Objective  justification 

98. 

These  could  include  factors  relating  to  the  actual  operation  of  the  network  owned  by 
the  access  provider,  or  licensing  restrictions  consistent  with,  for  example,  the  subject 
matter  of  intellectual  property  rights. 

2.3 

Abuses  of joint  dominance 

99. 

100. 

In  the  case  of joint  dominance  (see  above,  points  65  et  seq.)  behaviour  by  one  of 
several  jointly  dominant  companies  may  be  abusive  even  if  others  are  not  behaving 
in  the  same  way. 

In addition  to remedies under the competition  rules, if no operator was willing  to grant 
access,  and  if  there  was  no  technical  or  commercial  justification  for  the  refusal,  one 
would  expect  that  the  National  Regulatory  Authority  would  resolve  the  problem  by 
ordering  one  or  more  of  the  companies  to  offer  access, under  the  terms  of  the  ONP 
Directive  or  under  national  law. 

3. 

Access  agreements  (Article  85) 

Restrictions of  competition  stemming  from  access agreements  may  have  two  distinct 
effects:  to  restrict  competition  between  the two  parties to  the access agreement,  or  to 
restrict competition  from  third  parties, for example through exclusivity  for one or both 
of  the  parties of  the agreement.  In addition,  where one  party  is dominant,  conditions 
of  the  access  agreement  may  lead  to a  strengthening  of  that  dominant  position,  or  to 
an  extension  of  that  dominant  position  to  a  related  market,  or  may  constitute  an 
unlawful  exploitation  of the dominant  position  through  the imposition  of  unfair  terms. 

Wdr-cons.wpd 

30 

02.  Access  agreements  where  access  is  in  principle  unlimited  are  not  likely  to  be 
restrictive of competition  within the meaning of Article 85( 1 ).  Exclusivity  obligations 
in contracts providing access to one company  are likely to restrict competition  because 
Since  most  networks  have 
they  limit  access  to  infrastructure  for  other  companies. 
more capacity  than  any  single  user  is likely  to need,  this will  normally  be the case in 
the telecommunications  sector. 

Draft 

103.  Access  agreements  can  have  significant  pro-competitive  effects  as they  can  improve 
access to the downstream  market.  Access agreements in the context of  interconnection 
are  essential  to  interoperability  of  services  and  infrastructure, 
thus  increasing 
competition  in the downstream  market  for  services, which  is likely  to  involve  higher 
added  value  than  local  infrastructure. 

104.  There  is,  however,  obvious  potential  for  anti-competitive  effects  of  certain  access 

agreements  or  clauses  therein.  Access  agreements  may,  for  example: 

(a) 
(b) 
(c) 
(d) 

serve  as  a  means  of  coordinating  prices; 
or  market  sharing; 
have  exclusionary  effects  on  third  parties  . 
lead to an exchange of commercially  sensitive information  between  the parties. 

105.  The  risk  of  price  coordination  is particularly  acute  in  the  telecommunications  sector 
since  interconnection  charges  often  amount  to  50%  or  more  of  the  total  cost  of  the 
services  provided,  and  where  interconnection  with  a  dominant  operator  will  usually 
be  necessary.  In these circumstances,  the  scope  for  price  competition  is  limited  and 
the  risk  (and  the  seriousness) of  price  coordination  correspondingly  greater. 

106.  Furthermore, interconnection agreements between network operators may under certain 
circumstances  be  an  instrument  of  market  sharing  between  the  network  operator 
providing  access  and  the  network  operator  seeking  access,  instead  of  the  emergence 
of  network  competition  between  them. 

107. 

In  a  liberalised  telecommunications  environment,  the  above  types  of  restrictions  of 
competition  will  be  monitored  by the  national  authorities  and  the Commission  under 
the  competition  rules.  The  right  of  parties  who  suffer  from  any  type  of  anti 
competitive  behaviour  to  complain  to  the  Commission  is  unaffected  by  national 
regulation. 

Clauses  falling  within  Article  85(1) 

Commission  Decision,  Night  Services,  OJ  L  259/20  (1994);  Commission  Decision, 
Eurotunnel, OJ  L 354/66  (1994). 

Wdr-cons.wpd 

31 

Draft 

108.  The  Commission  has  identified  certain  types  of  restriction  which  would  potentially 
infringe  Article  85(1)  \iC and  therefore  require  individual  exemption.  These  clauses 
will  most  commonly  relate  to  the  commercial  framework  of  the  access. 

109. 

In  the  telecommunications  sector,  interconnecting  parties  may  wish  to  exchange, 
customer and  traffic  information.  This exchange  is likely to influence  the  competitive 
behaviour  of  the  undertakings  concerned,  and  could  easily  be  used  by  the  parties  for 
collusive  practices,  such  as  market  sharing  ~.  Safeguards  will  therefore  be  necessary 
to  ensure  that  either  confidential  information  is  only  disclosed  to  those  parts  of  the 
companies  involved  in  making  the  interconnection  agreements,  or  to  ensure  that  the 
information  is  not  used  for  anti-competitive  purposes. 

110.  Kxelusivily  arrangements,  for  example  where  traffic  would  be  conveyed  exclusively 
through  the  telecommunications  network  of  one  or  both  parties  rather  than  to  the 
network  of  other  parties  which  whom  access  agreements  have  been  concluded  will 
similarly  require analysis  under  Article  85(3)-  If no justification  is provided  for  such 
routing,  such  clauses  will  be  prohibited. 

111.  Access  agreement  that  have  been  concluded  with  an  anti-competitive  object  are 
extremely  unlikely  to  fulfil  the  criteria  for  an  individual  exemption  under  Article 
85(3). 

112.  Furthermore,  access  agreements  may  have  an  impact  on  the  competitive  structure  of 
the  market.  Local  access charges  will  often  account  for  a considerable  portion  of the 
total  cost  of  the  services  provided  to  end-users  by  the  party  requesting  access,  thus 
leaving  limited  scope  for  price  competition.  Because  of  the  need  to  safeguard  this 
limited  degree  of competition,  the Commission  will  therefore  pay  particular  attention 
to  scrutinising  access agreements  in  the  context  of  their  likely  effects  on  the  relevant 
markets  in order  to ensure  that  such  agreements  do  not  serve as a  hidden  and  indirect 
means  for  fixing  or  co-ordinating  end-prices  for  end-users,  which  constitutes  one  of 
the  most  serious  infringements  of  Article  85  FC  \ 

In  addition,  clauses  involving  collective  discrimination  leading  to  the  exclusion  of 
third  parties  are  similarly  restrictive  of  competition.  The  most  important 
is 
discrimination  with  regard  to  price,  quality  or other  commercially  significant  aspects 
of the access to the detriment  of the party  requesting access, which  will  generally  aim 
at  unfairly  favouring  the  operations  of  the  access  provider. 

Case T-34/92,  Fiatagri  UK  Ltd and  New  Holland Ford  Ltd v  Commission 
Case T/35/92,  John  Deere  Ltd v  Commission 
Both on appeal to the  ECJ 
Appealing  against  Commission  decision,  UK  Agricultural  Tractor  Registration 
Exchange,  OJ  L 68/19  (1992). 

Case  8/72  Vereniging van Cementhandelaaren v  Commission [1972]  ECR  977; 
Case  123/83  Bureau National Interprofessionnel  du Cognac v. Clair [1985]  ECR 391; 

Wdr-cons.wpd 

M 

Draft 

4. 

Effect  on  trade  between  Member  States 

114.  The application  of  both  Article  85 and  Article  86 requires an effect  on trade  between 

Member  States. 

115. 

In order  for  an agreement  to have  an  effect  on trade between  Member  States, 

it  must  be  possible  for  the  Commission  to: 

"foresee  with  a  sufficient  degree  of  probability  on  the  basis  of  a  set  of 
objective factors  of law or of fact  that the agreement  in cpiestion  may have an 
influence,  direct  or  indirect,  actual  or  potential,  on  the  pattern  of  trade 
between  Member  Stales."" 

It  is not  necessary  for  each  of the  restrictions of  competition  within  the agreement  to 
be  capable  of  affecting  trade  , provided  the  agreement  as  a whole  does so. 

116.  As regards access agreements  in the telecommunications  sector, the Commission will 
consider  not only  the direct effect  of  restrictions of competition  on  inter-state trade in 
in  downstream 
access  markets,  but  also 
telecommunications  services.  The  Commission  will  also  consider  the  potential  of 
these  agreements  to  foreclose  a  given  geographic  market  which  could  prevent 
undertakings  already  established  in  other  Member  States  from  competing  in  this 
geographic  market. 

the  effects  on 

inter-state 

trade 

117.  Telecommunications  access  agreements  will  normally  affect  trade  between  Member 
States  as  services  provided  over  a  network  are  traded  throughout  the  EU  and  access 
agreements  may govern  the ability  of a service provider or an operator to provide any 

•7/ 

given  service  .  Even  where  markets are  mainly  national,  as  is generally  the case at 
present  given  the  stage  of  development  of  liberalisation,  abuses  of  dominance  will 
normally  speaking  affect  market  structure,  leading  to  repercussions  on  trade  between 
Member  States. 

118.  Cases  in  this  area  involving  issues  under  Article  86  will  relate  either  to  abusive 
clauses  in  access  agreements,  or  a  refusal  to  conclude  an  access  agreement  on 
appropriate  terms or at all.  As such, the criteria  listed above for  determining  whether 
an  access  agreement  is  capable  of  affecting  trade  between  Member  States  would  be 
equally  relevant  here. 

74 

75 

76 

Wdr-cons.wpd 

Case  56/65, STM,  1966 ECR  235 at 249. 

Case  193/83, Windsurfing  International  Inc v Commission,  1986  ECR  611. 

See Telecommunications  Guidelines, point  3 above. 

Draft 

Conclusions 

119.  The  Commission  considers  that  competition  rules  and  sector  specific  regulation  form 
a coherent  set of measures to ensure a liberalised  and competitive  market  environment 
for  telecommunications  markets  in  the  ED. 

120. 

In  taking  action  in  this  sector,  the  Commission  will  aim  to  avoid  unnecessary 
duplication  of  procedures,  in  particular  competition  procedures  and  national  /  EU 
regulatory  procedures  as  set  out  under  the  ONP  framework. 

121.  Where competition  rules are invoked the Commission will  consider which markets are 
relevant  and  will  apply  Articles  85  and  86  in  accordance  with  the  principles  set  out 
above. 

Wdr-cons.wpd 

34 

ISSN 0254-1475 

COM(96) 649 final 

DOCUMENTS 

EN 

08  15  10 

Catalogue  number  :  CB-C0-96-712-EN-C 

ISBN  92-78-13837-1 

Office  for  Official  Publications of the European  Communities 

L-2985  Luxembourg