2004/207/EC: Commission decision of 16 July 2003 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/38.369: T-Mobile Deutschland/O2 Germany: Network Sharing Rahmenvertrag) (Text with EEA relevance) (notified under document number C(2003) 2432)
Date: 2003-07-16
Institutions: European Commission
Subjects: Germany, competition law, inter-company agreement, mobile phone, transmission network

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COMMISSION DECISION

of 16 July 2003

relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement

(Case COMP/38.369: T-Mobile Deutschland/O2 Germany: Network Sharing Rahmenvertrag)

(notified under document number C(2003) 2432)

(Only the German text is authentic)

(Text with EEA relevance)

(2004/207/CE)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity,

Having regard to the Agreement on the European Economic
Area,

Having regard to Council Regulation No 17 of 6 February
1962, First Regulation implementing Articles 85 and 86 of
the Treaty (1), as last amended by Regulation (EC) No 1/
2003 (2), and in particular Articles 2, 6 and 8 thereof,

Having regard to the application for negative clearance and
the notification for exemption submitted pursuant to Articles 2
and 4 of Regulation 17 on 6 February 2002,

(2)

Having regard to the summary of the application and notifi-
cation published pursuant to Article 19(3) of Regulation No 17
and to Article 3 of Protocol 21 of the EEA Agreement (3),

After consulting the Advisory Committee for Restrictive
Practices and Dominant Positions,

Having regard to the final report of the Hearing Officer in this
case (4),

Whereas:

1.

INTRODUCTION

(1) On 6 February 2002, T-Mobile Deutschland GmbH (T-
Mobile) and O2 Germany & Co OHG (O2 Germany)

(1) OJ 13, 21.1.1962, p. 204.
(2) OJ L 1, 4.1.2003, p. 1.
(3) OJ C 189, 9.8.2002, p. 22.
(4) OJ C 64, 12.3.2004.

(formerly VIAG Interkom GmbH) notified to the Com-
mission a framework agreement of 20 September 2001
concerning infrastructure sharing and national roaming
for the third generation of GSM mobile telecommuni-
cations (3G) on the German market (the Agreement). In
their notification T-Mobile and O2 Germany (the Parties)
have
clearance under
either negative
Article 81(1) EC/Article 53(1) EEA, or an exemption
under Article 81(3)/Article 53(3) EEA (5).

requested

In February 2002, the Commission published a first
notice summarising the notified agreement and inviting
third party comments (6). This was
followed in
August 2002 by a notice published pursuant
to
Article 19(3) of Regulation 17/62 which set out the
Commission’s preliminary position and gave third par-
ties an opportunity to provide their comments on the
proposed favourable approach (7). In February 2003 a
supplementary consultation took place of those third
parties who had reacted to the notice published pursuant
to Article 19(3) of Regulation 17/62,
in relation to
certain amendments to the notified agreement. The
present Decision represents the final step in the Com-
mission’s decision-making procedure.

(5) The Commission has also received a related notification from O2
UK Limited (formerly BT-Cellnet Limited) and BT3G Limited, and
from T-Mobile UK (formerly One2One Personal Communications
Limited) dated 6 February 2002 relating to a 3G Network
Deployment and 3G Bilateral Roaming Agreement for the United
Kingdom. This agreement is being dealt with separately (Case
COMP/38.370 — UK Agreement) and a decision was adopted on
30 April 2003.

(6) OJ C 53, 28.2.2002, p. 18.
(7) OJ C 189, 9.8.2002, p. 22.

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(3)

(4)

2. THE PARTIES

T-Mobile is an operator of digital mobile telecommuni-
cations networks and services in Germany using the
GSM family of standards. T-Mobile provides GSM ser-
vices in Germany based on a GSM 900 licence, and was
awarded a universal mobile telecommunications system
(UMTS) licence in Germany in August 2000 (8). It is
wholly owned by T-Mobile International AG, which in
turn is a wholly owned subsidiary of the incumbent
fixed network operator Deutsche Telekom AG (DTAG).

(7)

T-Mobile International AG is an international holding
company acting in mobile telecommunications. Its main
subsidiaries operate networks in the United Kingdom (T-
Mobile (UK) Limited, T-Motion, Virgin Mobile), Austria,
the Czech Republic and the USA. T-Mobile International
AG also has subsidiaries active in the Netherlands, Russia
and Poland. In the 2001 financial year, DTAG had a
worldwide turnover of EUR 48,3 billion and T-Mobile
International AG had a worldwide
turnover of
EUR 14,6 billion.

(5) O2 Germany likewise operates digital mobile telecom-
munications networks and services in Germany, where
it entered the market as the fourth out of four operators
based on a GSM 1800 licence awarded in 1997, and
was awarded a UMTS licence in August 2000. O2
Germany is a wholly owned subsidiary of mmO2 plc,
limited, a company previously
formerly BT Cellnet
controlled by British Telecommunications plc. mmO2
operates, through its subsidiaries, networks in the United
Kingdom (O2 UK), Germany (VIAG — renamed O2
Germany), Ireland (Digifone — renamed O2 Ireland)
and the Isle of Man (Manx Telecom). In the financial
year ending 31 March 2002, the mmO2 group had a
turnover of GBP 4,3 billion (about EUR 6,7 billion).

3. LEGAL AND FACTUAL BACKGROUND

3.1. The Development of 3G mobile communications in
the EU

(6)

In Europe, the first generation (1G) of mobile communi-
cations systems was based on analogue technology. This
was followed at the beginning of the 1990’s by the
second generation (2G) systems which introduced digital
technology, namely GSM 900 (the European Global
System for Mobile Communications) and DCS 1800 (so
called Personal Communications Networks or PCN

(8) In August 2000, the German Government awarded six 3G licences
following a frequency auction procedure worth EUR 50,8 billion.
The companies awarded the licences were T-Mobil, Vodafone-
Mannesmann, E-Plus, Viag Interkom Group, Group 3G and
Mobilcom multimedia. Both Group 3G and Mobilcom multimedia
have meanwhile ceased their 3G operations, and it is not clear
whether their frequencies will be reissued for 3G purposes.

services). Both GSM 900 and DCS 1800 services are
now commonly referred to as GSM services. Standard
GSM communications are circuit-switched, which means
that for any call a physical path is set up and dedicated
to a single connection between the two communicating
end points in the network for the duration of the
connection. Transmission rates for GSM are 9,6 kbit/s
(kilo bits per second) to 11,4 kbit/s, or with compression
14 kbit/s, which allows the delivery of basic voice
telephony, short messaging service (SMS) and e-mail,
and circuit-switched data.

Enhanced 2.5G mobile technologies that use more
efficient packet-switched communications to send data
in packets to their destinations (via different routes)
without requiring the reservation of a dedicated trans-
(using radio resources only when
mission channel
users are actually sending or receiving data) are being
developed to provide a greater range of services includ-
ing mobile e-mail, visual communications, multimedia
messaging and location-based services. General Packet
is one of the principal 2.5G
Radio Service (GPRS)
technology platforms that offer ‘always-on’ connection,
higher capacity and packet-based data services. GPRS
data transmission rates are, between 30 kbit/s and
40 kbit/s and with EDGE technology 80 kbit/s to
130 kbit/s, depending on the specific usage situation.
This enables the delivery of services such as basic
mobile Internet access, mobile radio, and location-based
services (9).

(8) Work is now underway to bring about a third generation
(3G) of mobile technology, applications and services to
the market (10). 3G builds on 2.5G technology, integrat-
ing packet- and circuit-switched data transmission. It is
technically capable of reaching a speed of 144 kbit/s and
will eventually allow transmission rates that are expected
to have a practical maximum of 384 kbit/s (11). 3G
services are mobile communications systems capable of
supporting in particular innovative multimedia services,
beyond the capability of second generation systems such
as GSM, and capable of combining the use of terrestrial
and satellite components (12).

(9) Other less wide-spread technologies include WAP (Wireless
Application Protocol), HSCSD (High-speed circuit switched data)
and EDGE (Enhanced Data GSM Environment).

(10) UMTS (Universal Mobile Telecommunications System) is one of
the major new ‘third generation’ (3G) mobile communications
systems being developed within the framework defined by
the International Telecommunications Union (ITU) collectively
known as IMT-2000.

(11) The exact transmission rate depends on parameters like the time
and location of the call, the number of users within a cell and
the applications used, as the available speed will be divided
between the different users and applications.

(12) ‘The introduction of third generation mobile communications in
the European Union: state of play and the way forward’
(Introduction of 3G in the EU), COM (2001) 141 Final
(20.3.2001).

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(9)

Annex I to Decision No 128/1999/EC of the European
Parliament and of the Council of 14 December 1998
on the coordinated introduction of a third-generation
mobile and wireless communications system (UMTS) in
the Community (the UMTS Decision) (13) sets out the
characteristics which UMTS must be capable of support-
ing. These include:

(11)

(a) multimedia capabilities,

full mobility and low
mobility applications in different geographical
environments beyond 2G capabilities;

(b)

(c)

efficient access to Internet,
Internet protocol based services;

Intranets and other

high quality speech transmission commensurate
with that of fixed networks;

(d)

service portability across 3G environments; and

(e)

operation in one seamless environment including
full roaming with GSM as well as between the
terrestrial and satellite components of UMTS net-
works. Given that 3G networks and services are
not yet fully available it is not possible to provide a
reliable catalogue. However, examples of antici-
pated services include mobile videoconferencing,
mobile video phone/mail, advanced car navigation,
digital catalogue shopping and various business to
business (B2B) applications (14).

(10) The development of 3G in the EU is based on the
common UMTS technological platform, on the harmon-
isation of the radio spectrum and on the definition of a
harmonised regulatory environment. These harmonis-
ation objectives were met in part by the general Directive
97/13/EC of the European Parliament and of the Council
of 10 April 1997 on a common framework for general
authorisations and individual
licences in the field of
telecommunications services (15). This was followed at
the end of 1998 by the abovementioned Decision
(recital 9) on the coordinated introduction of a third-
generation mobile and wireless communication system
It required Member
(UMTS)
States to enable the introduction of UMTS services on
their territory by 1 January 2002 and emphasised the
role of technical bodies such as the European Conference
of Postal and Telecommunications Administrations
(CEPT) and Europe Telecommunications Standards Insti-
tute (ETSI) in harmonising frequency use and promoting
a common and open standard for the provision of
compatible UMTS services throughout Europe.

in the Community (16).

(13) OJ L 17, 22.1.1999, p. 1.
(14) Cf. http://www.umts-forum.org.
(15) OJ L 117, 7.5.1997, p. 15. This Directive sets out the procedures
associated with the granting of authorisations for the purpose
of providing telecommunications services and the conditions
attached to such authorisations.
(16) UMTS Decision, see footnote 13.

the EU and of

Finally, in March 2001 the Commission published a
Communication setting out the state of play and the
way forward for the introduction of third generation
mobile communications in the EU (17). This Communi-
cation takes note of the combination of the difficult
telecommunications operators
financial situation of
throughout
the high infrastructure
investment costs involved that lead operators to engage
in infrastructure sharing arrangements. It concludes that
economically beneficial sharing of network infrastruc-
ture should in principle be encouraged, provided the
competition rules and other relevant Community law
are respected (18).
In its follow up Communication
‘Towards the full roll-out of third generation mobile
communications’ of 11 June 2002 (19), the Commission
emphasised that it would continue to work with national
administrations towards establishing a best practice
approach for network sharing. The Commission publi-
shed a further Communication about ‘Electronic Com-
munications: the Road to the Knowledge Economy’ on
11 February 2003 (20).

3.2. Network sharing and national roaming

(12) 3G Network sharing can take place at a number of
different levels and involve varying degrees of cooper-
ation. The degree of
independence retained by the
operators involved depends on which network elements
are being shared and their remaining ability to install
separate elements (planning freedom). The basic distinc-
tion that is relevant in the context of the Parties’ network
sharing agreement is that between the Radio Access
Network (RAN) and the core or backbone network.

3.2.1. RAN

(13) The RAN includes mast/antenna sites, site support
cabinets (SSC) and power supply, as well as antennas,
combiners and transmission links, Nodes B, namely the
base stations that receive and send data across frequenci-
es and control a particular network cell, and the radio
network controllers (RNCs) that each control a number
of such Nodes B and that are linked to the core network.

3.2.2. Core network

(14) The core network is the intelligent part of the network
that consists of mobile switching centres (MSCs), various
support nodes, services platforms, client home location
registers and operation and maintenance centres. It is
linked to the fixed ISDN (integrated services digital
network) and Internet networks (see figure 1).

(17) COM (2001) 141 Final (20.3.2001), see footnote 12.
(18) See footnote 17, paragraph 4.3.
(19) COM (2002) 301 Final.
(20) COM (2003) 65 Final.

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(15) Ranked by the increasing degree to which the network
is shared it is possible to distinguish between shared use
of:

(a)

sites, which ranges from sharing individual mast
sites up to grid sharing (requiring a uniform
layout of networks), and may include site support
infrastructure, such as site support cabinets (SSC);

(b) base stations (Nodes B) and antennas;

(c)

radio network controllers (‘RNCs’);

(d)

core networks, including mobile switching centres
(‘MSCs’) and various databases;

(e)

frequencies.

into account in the context of network infrastructure
sharing (21). Both the general national regulatory frame-
work in Germany and the terms of the Parties’ 3G
licences set out parameters for network sharing. These
include:

(a)

network roll-out requirements in terms of effective
coverage related to a specific timetable, notably a
requirement to cover 25 % of the population by
the end of 2003 and 50 % of the population by the
end of 2005 that cannot be met by means of
national roaming but can be met by shared infra-
structure (22);

(b)

general obligations as regards e.g. site and antenna
sharing relating to planning restrictions and
environmental concerns;

(16)

Finally, national roaming concerns a situation where
the cooperating operators do not share any network
elements as such but simply use each other’s network to
provide services to their own customers.

(c)

limitations as regards the extent of network sharing
allowed related to for example sharing network
intelligence and sensitive customer data.

(17)

In their notification the Parties use the term ‘extended
site sharing’ for shared use of sites and site infrastructure
up to the level of, but not including, Nodes B and RNCs
(recital 15, point (a)). They apply the term ‘RAN sharing’
to common use of the entire radio access network, up
to and including Nodes B and RNCs (recital 15, point (a),
(b) and (c)). The Parties do not envisage sharing their
core networks or frequencies. Their Agreement
(as
amended) does cover national roaming of O2 Germany
on T-Mobile’s network namely within the 50 % coverage
area, as well as reciprocal roaming of the Parties outside
the 50 % coverage areas.

3.3. The National Regulatory Framework

(18)

In addition to Community law, the applicable national
licensing and regulatory requirements must be taken

(21) A number of national regulatory authorities (NRAs) in the EU
issued guidance on the conditions on which infrastructure
sharing would be consistent with the national
licensing and
regulatory requirements. In Germany, the Regulierungsbehörde
für Telekommunikation und Post (RegTP) published its Interpret-
ation of the UMTS Award Conditions in light of more recent
technological advance, RegTP (6 June 2001), available at
www.regtp.de. In May 2001, the Office for telecommunications
(Oftel), the UK NRA, published a note for information on ‘3G
mobile infrastructure sharing in the UK’, available at http://
www.oftel.gov.uk/publications/mobile/infrashare0501.htm. The
Dutch and French NRAs have published similar guidance docu-
ments, which are available on their websites at http://www.op-
ta.nl/download/
concept–notitie–nma–vw–opta–umts–netwerken–190701.pdf
at
and
infras.htm.

http://www.art-telecom.fr/dossiers/umts/partage-

(22) The minimum transmission rate required to meet the coverage
obligation is to be specified by RegTP following a further public
consultation. Consistent with technical specifications for 3G
services, it is expected to be around or in excess of 144 kbit/s.

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(19) The German Regulatory Authority for Post and Telecom-
munications (Regulierungsbehörde für Telekommunika-
tion und Post — RegTP) is the national telecommuni-
cations regulatory authority (NRA) responsible for the
notified agreement. RegTP published general guidance
in June 2001 in which it took a favourable view of
infrastructure sharing provided certain conditions were
met (23).

(20)

In particular, RegTP excluded sharing of the core net-
work and the pooling of frequencies, but allowed sharing
of sites, masts, antennas, cables and combiners as well
as shared used of site support cabinets, and the shared
use of logically distinct Node Bs as well as RNCs (24),
provided that:

(a)

(b)

each licence holder has independent control of
their own logical Node B, respectively RNC;

there is no exchange of data, such as customer data,
beyond that required for technical operations;

(c)

separation of operation and maintenance centres;

(d)

(e)

additional own Nodes B respectively own RNCs
can be operated to guarantee planning indepen-
dence and the operator’s own Nodes B operated
solely by himself are connected to his own logical
RNCs;

there is no regional division of coverage areas that
rules out overlapping network and coverage areas;
namely parties may not agree to each cover only a
distinct and different geographical area and rely on
roaming on each other’s network in those areas
where their own network does not have coverage.

(21) On 7 December 2001, RegTP found the Parties’ frame-
work agreement to be in line with these regulatory
the Parties respected the
constraints, provided that
requirements of
control of
Nodes B and RNCs. RegTP’s approval was further subject
to reporting obligations concerning the geographical
distribution of shared infrastructure, and the meeting of
their respective 50 % of population coverage obli-
gations (25).

logically independent

(22)

Subject to the principle of the primacy of Community
law, the national regulatory framework and the EU
competition rules are of parallel and cumulative appli-
cation. National rules may neither conflict with the EU
competition rules nor can compatibility with national
rules and regulations prejudice the outcome of an

(23) RegTP (6 June 2001), available at www.regtp.de.
(24) ‘Logically distinct’ means that a single physical network element,
due to its programming, can perform logically distinct operations
for the two networks, as if two separate Nodes B or RCS were
involved.

(25) Letter from RegTP to European Commission, 7.12.2001.

assessment under the EU competition rules. Hence a full
assessment of the notified Agreement under the EU
competition rules is required.

4. THE AGREEMENT

(23) On 20 September 2001, the Parties entered into the
notified Agreement, namely a framework agreement
setting out the principal terms for their cooperation on
3G infrastructure in Germany. The Agreement has been
subject to amendment by the Parties, in particular in
relation to roaming. The Agreement directly affects the
position of the Parties in the German markets for (i) sites
and site infrastructure for digital mobile communi-
cations services, and (ii) wholesale access to roaming
for 3G communications services. The Agreement has
potential spill-over effects in related markets.

(24) The objectives of the Agreement as amended are to
achieve capital expenditure efficiencies and operating
expenditure savings which will
improve the Parties
financial situation better enabling them to position
themselves in the market; to expand geographical cover-
age while limiting the environmental impact, and to
achieve faster deployment of 3G network infrastructure
and the early launch of 3G services. The Agreement
provides the basis for cooperation between the Parties
on:

(a)

(b)

(c)

extended site sharing: reciprocal sharing of sites
and elements of site infrastructure such as mast
sites, site support cabinets (SSC) and power supply,
as well as possibly antennas, combiners and trans-
mission links, within a geographical area sufficient
to enable the Parties to each attain its regulatory
50 % population coverage obligation by the end of
2005;

radio access network (RAN) sharing: reciprocal
sharing of Nodes B (namely the base stations
that receive and send data across frequencies and
control a particular network cell) and the radio
network controllers (RNCs), that each control a
number of such Nodes B and that are linked to the
core network;

national roaming: O2 Germany will roam on T-
Mobile’s network — but not vice versa — within
the area of O2 Germany’s 50 % population cover-
age obligation between 1 January 2003 and
31 December 2008, subject to the limitations set
out in section 4.3.1. For the part of Germany over
and above each Party’s respective 50 % population
coverage obligation, reciprocal national roaming is
agreed for the duration of the Agreement.

(25) The Parties will maintain separate core networks and
service provision, and will not share their frequencies.
The Agreement is not exclusive, to the extent that both
Parties can agree on extended site sharing, RAN sharing
and national roaming with third parties (clause 1.3). The
key provisions of the Agreement are set out in more
detail below.

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4.1. Extended site sharing

4.2. RAN sharing

(26) The Parties will each construct their own proprietary
network infrastructure but will cooperate on the basis
of ‘extended site sharing’ within an area which corre-
sponds to their licence obligations for a population
coverage of 50 % by the end of 2005. Under the
agreement, ‘extended site sharing’ involves sharing Com-
mon Site Support Cabinets (SSC) and power supply and
possibly antennas, combiners and transmission links.

(30)

(27) The Agreement specifies rules for the determination of
sites that may become the subject of sharing arrange-
ments. Clause 2.1 states that, first, each Party will draw
up its own roll-out plans independently; next, the plans
are divided into planning periods of [(*)] (26) showing
the respective areas which T-Mobile and O2 Germany
plan to develop. The geographical areas that the Parties
consider relevant for their individual network roll-out
will be compared periodically and where overlap exists
may be identified as infrastructure sharing areas. The
Parties’ respective local branches at technical level will
determine which sites should be subject to extended site
sharing based on maximising cost savings.

(28) Clause 3.2 specifically provides that the Parties cannot
the extended site sharing
jointly own or control
elements. However, the Party that owns or controls the
particular site-sharing elements must allow their use by
the other Party. According to Clause 3.3 a bilateral site
framework agreement that remains to be concluded will
set out the position on common and beneficial use as
well as cost (price) regulation for shared sites. T-Mobile
has meanwhile transferred ownership of its sites to the
newly founded separate legal entity Deutsche Funkturm
GmbH, which has not yet negotiated the terms of
the relevant framework agreement with O2 Germany.
Because to date such an agreement has not yet been
concluded and the Commission has not received details
regarding its terms, the Commission reserves its position
on this agreement which is in any event not covered by
the present Decision.

Section 4 of the Agreement deals with cooperation in
the form of RAN sharing. Under the Agreement, RAN
sharing can include additional sharing of Common
Physical Nodes B and Common Physical Radio Network
Controllers (RNC) — (To remain within the framework
set by RegTP, Nodes B and RNCs would have to be
logically separate). Clause 4.1 provides that the Parties
must carry out a feasibility study into RAN sharing
before 30 June 2002. Based on an examination of this
feasibility the Parties have for the time being concluded
that they will not engage in RAN sharing, but may
reconsider RAN sharing in the future. Clause 4.2 states
that if RAN sharing is feasible, the Parties will enter into
an agreement regulating its implementation as soon as
possible. Because so far there is no such agreement the
Commission reserves its position on this issue, which is
in any event not covered by the present Decision.

4.3. National roaming

(31) National roaming is covered in Chapter 3 of

the
Agreement (Sections 5 to 11) as amended by supplemen-
tary agreements of 20 September 2002, 22 January
2003 and 21 May 2003.

4.3.1. O2 Germany roaming on T-Mobile’s network within

the 50 % coverage area

(32) By the amendment of 22 January 2003 to the Agreement
of 20 September 2001, the Parties have agreed that T-
Mobile will supply O2 Germany (but not vice versa)
with national roaming within an area corresponding to a
50 % population coverage obligation between 1 January
2003 and 31 December 2008. For roaming within the
50 % coverage area, O2 Germany will pay [(*)] (see
section 4.3.2 below)).

(29) The Agreement also contains safeguards in relation to
the exchange of confidential information. Clause 2.6
provides that only information necessary for the techni-
cal realisation of extended site sharing can be exchanged.
Under the Agreement, other information, in particular
commercially sensitive customer information, cannot be
exchanged.

(33)

(26) Part of this text has been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets and marked with an asterisk.

Following discussions with the Commission, the Parties
have agreed to limit roaming within the area that is
subject to the 50 % population coverage obligation to a
strict minimum. Consequently they have identified three
separate areas (Areas 1, 2 and 3) within the area that is
subject to the 50 % population coverage obligation
where roaming will be successively phased out according
to an agreed timetable as O2 Germany achieves a
network quality and density that allows it to compete
effectively with the other licensed network operators.
The Parties have amended the Agreement on 21 May
2003 to reflect these changes.

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(34) The Areas where roaming will be phased out according

(36)

to a specific timetable are as follows:

(a) Area 1 comprises [main urban (*)] regions covering
approximately [(*)] of
the German population,
where O2 Germany undertakes not to roam, and
T-Mobile undertakes
from
31 December 2005 (27);

roaming

to bar

(b) Area 2 comprises [smaller urban (*)] regions [of
secondary commercial
importance (*)] covering
approximately a further [(*)] of the German popu-
lation, where O2 Germany undertakes not to roam,
and T-Mobile undertakes to bar roaming from
31 December 2007 (28); and

(37)

commercial

(c) Area 3 comprises [smaller urban (*)] regions [of
lesser
covering
approximately a final [(*)] of the German popu-
lation, where O2 Germany undertakes not to roam,
and T-Mobile undertakes to bar roaming from
31 December 2008 (29).

importance

(*)]

By way of exception to this rule, in both Area 1 and in
Area 2, O2 Germany will continue roaming in so-called
‘underground areas’ until 31 December 2008. Pursuant
to the timetable, O2 Germany is also entitled to roam
in underground areas in Area 3 until 31 December
2008 (30).

4.3.2. Reciprocal roaming outside the 50 % coverage area

(35) Outside the area required to obtain 50 % population
coverage, the Parties have agreed terms for reciprocal
bulk purchasing of both circuit-switched and package-
switched national roaming. O2 Germany commits to
purchasing a minimum volume of such roaming services
from T-Mobile. T-Mobile obtains a right to purchase
roaming services from O2 Germany under the same
conditions, but it is not under an obligation to do so.

(38)

(39)

(27) Area 1 consists of: [(*)].
(28) Area 2 consists of: [(*)].
(29) Area 3 consists of: [(*)].
(30) ‘Underground areas’ shall mean any area within the cities or
regions within Areas 1 and 2 and 3 which is part of the
underground public transport system (including railways and
metro), underground shopping centres, underground car parks,
tunnels for vehicles and pedestrians and any other comparable
underground areas as well as the areas directly above (ground
level) but only to the extent underground areas and ground level
cannot be technically separated for roaming purposes.

(31) [(*)].

Section 5 of the Agreement sets out the key principles
on national roaming. Clause 5.3 provides that the Parties
agree not to discriminate against other national or
international roaming partners. In addition, neither of
the Parties will treat the other Party’s customers less
favourably than their own customers. Clause 5.6 states
that the Parties undertake to ensure that the cooperation
on roaming will not
restrain service competition
between the Parties.

Section 6 of the Agreement deals with national roaming
by O2 Germany customers on T-Mobil’s 3G network.
Clause 6.1 provides that T-Mobile will provide O2
Germany with bulk national roaming for the duration
of the Agreement. O2 Germany has agreed to purchase
a minimum quantity of roaming services from T-Mobile
for a value of [(*)] within three years from the date of
launch of the 3G roaming services (Clause 6.5). Parties
have provided data based on the experience with O2
Germany roaming on T-Mobile’s second generation
GSM network to show that this is likely to represent a
very small proportion of O2 Germany’s requirements.
Conversely, Section 7 deals with national roaming by
T-Mobil’s customers on O2 Germany’s 3G network.
Clause 7.1 states that T-Mobile has the option but not
an obligation to purchase 3G roaming services from O2
Germany. However,
if T-mobile purchases national
roaming services from O2 Germany, it is subject to the
same minimum purchase requirement as O2 Germany
(Clause 7.4)

Section 8 of the Agreement sets out specific rules on
barring customer use. Clause 8.3 states that the Party
providing national roaming has the right to bar sub-
scribers of the other Party from its network. Also, the
Party using national roaming can bar its own customers
from using the other Party’s network. This applies in
cases where there are overlapping areas. The agreement
also provides information about the location areas for
barring and circumstances when the parties will dispense
with barring.

Section 10 of the Agreement sets out a two-tier system
of pricing for 3G roaming. It provides that prices for
circuit-switched 3G roaming (destined for mobile voice
telephony services) are based on the respective intercon-
nection termination prices of T-Mobile and O2 Germ-
any. Wholesale prices for packet-switched 3G roaming
(destined for mobile data services) are based on a [retail
minus pricing model (*)] (31) taking into account possible
future developments of packet-switched roaming prices
and demand.

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(40)

Section 11 of the Agreement sets out specific rules on
the resale of national roaming capacities to third parties.
Clause 11.1.a sets out the general rule that each Party
has the right to resell the roaming capacity of the other
Party to service providers. This is in accordance with the
Parties’ obligations under national law and under the
terms of their 3G licence to provide access to service
providers (32). However, the resale of roaming capacity
to Mobile Virtual Network Operators (MVNOs) that
provide voice services to end users (33), and of roaming
capacity to other licensed network operators, is subject
to the prior approval of the host operator, namely the
other Party.

customer’s viewpoint in the sense of Clause 11.1.b, this
Party is obliged to allow the other Party to provide their
received national roaming capacities to such Voice
MVNOs as well.

4.4. Duration

(43) The Agreement will continue in force until 31 December
2011, after which date it will be automatically renewed
for a period of two years unless terminated by either
Party with two years prior notice.

(41) Clause 11.1.b provides that Parties have the right to
make national roaming capacities of the respective other
Party available to MVNOs for data traffic (data MVNOs),
provided that these MVNOs do not use this capacity for
the provision of services to end customers that are
to an end-to-end mobile voice
essentially identical
service from a customer’s viewpoint (Voice MVNOs).
The Parties are also able to provide roaming capacity for
voice traffic to ‘data MVNOs’ acting as service providers.

(42)

the prior

In addition, Clause 11.1.c provides that the resale of
roaming capacity to other licensed network operators or
to ‘Voice MVNOs’ as defined in Clause 11.1.b is subject
to consent by the other Party. However, pursuant to
Clause 11.2,
requirement of
Clause 11.1.c does not apply if the MVNOs are group
companies of the other Party, provided that they respect
the different pricing regimes for voice and data services.
Moreover, pursuant to Clause 11.3, once a Party itself
offers roaming to a third party (not a group company)
that is a Voice MVNO and offers services essentially
identical to an end-to-end mobile voice service from a

consent

(32) Service providers (also called resellers) are entities authorised to
offer mobile services directly to end users under their own brand
name (dealing with marketing, billing, etc.) based on wholesale
airtime purchased on a third party’s mobile network. The legal
basis for the obligation to provide service providers access for
3G are Section 4 TKV Telecommunications Customer Protection
Ordinance of 11 December 1997 (Federal Law Gazette I, p. 2910)
last amended by Second Ordinance Telecommunications Cus-
tomer Protection Ordinance of 27 August 2002 (Federal
Gazette I, p. 3365) (Telekommunikations-Kundenschutzverord-
nung vom 11.12.1997, BGBl. I S. 2910 Zweite Verordnung zur
Änderung der TKV vom 27.8.2002, BGBl. I S. 3365), and
section 15 of the German 3G licences.

(33) MVNOs are undertakings with an own mobile network code and
an own range of mobile International Mobile Subscriber Identity
(IMSI) numbers or an equivalent for 3G, but that do not own a
licence to operate wireless frequencies.

5. RELEVANT MARKET

5.1.

Introduction

(44) As the Agreement is mainly technical in nature and does
not have as its object the restriction of competition, the
effect of the Agreement must be analysed. Whether
the Agreement is likely to have negative effects on
competition depends not only on the nature of the
Agreement but also on its economic context, such as the
market power of the parties and other factors relating to
market structure. This analysis requires a definition of
the two relevant wholesale markets that are directly
affected by the Agreement, and an identification of a
number of other (potential) wholesale and retail markets
where effects may be felt.

(45) Telecommunications markets can generally be divided
into wholesale and retail markets. Wholesale markets
typically consist of the provision of access to networks
(or network elements) and of network services to
operators of networks and services, and retail markets
consist of the provision of communications services to
end users (34). Within these broad categories narrower
markets can be defined not only on the basis of the
characteristics of the service concerned and the degree
to which it can be substituted by other services based on
price, usage and consumer preference, but by an analysis
of competitive conditions and the structure of demand
and supply (35). Given the advantages of mobility and

(34) Notice on the application of the competition rules to access
agreements in the telecommunications sector, framework, rel-
evant markets and principles (Access Notice), OJ C 265,
22.8.1998, p. 2, point 45; Commission guidelines on market
analysis and the assessment of significant market power under
the Community regulatory framework for electronic communi-
cations networks and services (SMP Guidelines), OJ C 165,
11.7.2002, p. 6, point 64.

(35) Commission Notice on the definition of relevant market for
the purposes of Community competition law, OJ C 372/5,
9.12.1997, p. 5. Guidelines on the application of EEC compe-
tition rules in the telecommunications sector, OJ C 233,
6.9.1991, p. 2.

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the premium paid for it, mobile services are in general
not substitutable by fixed services. Mobile and fixed
voice services are therefore part of different services
markets, as has been determined in a number of
Commission decisions (36).

(46) The network access and services markets that are

primarily concerned by this Decision are:

provision of an indirect link between terminating and
originating networks by means of transit across one or
more third networks). Access services that relate to the
use of a host or visited network by customers of other
operators include the wholesale provision of national
and international roaming, and the wholesale provision
of airtime.

(a)

(b)

the market for sites and site infrastructure for
digital mobile radiocommunications equipment;

5.3. Markets directly affected by the Agreement

the market for wholesale access to national roaming
for 3G communications services.

In addition, the markets for wholesale access to 3G
services, as well as the downstream retail markets for 3G
services are affected indirectly.

5.2. Wholesale mobile network access markets

(47) Access to physical

facilities such as sites and site
infrastructure such as masts and antennae, as well as
ducts, leased lines and rights of way that serve as part of
a mobile telecommunications network infrastructure,
may constitute access to particular mobile network
markets. In addition, there are wholesale network access
and services markets for the provision of digital mobile
communications services to other operators. These can
be divided broadly into:

(a)

(b)

first, wholesale network services related to intercon-
nection that allow communication to take place
between the users of different networks, and;

second, wholesale access services that relate to the
use of a host or visited network by customers of
other operators.

(48) The wholesale network services related to intercon-
nection include call termination (the wholesale service
of completing a call to an end user), call origination (the
wholesale service of enabling a call to be originated by
an end user), as well as direct interconnection services
(the provision of a direct physical link between terminat-
ing and originating networks) and transit services (the

(36) SMP Guidelines, paragraph 66. Cf Commission Decision 98/
2001/EC in Case No COMP/M.1439 — Telia/Telenor, OJ L 40
9.2.2001, p. 1; Commission Decision of 12 April 2000 in Case
No COMP/M.1795 — Vodafone Airtouch/Mannesmann, OJ
L 40, 9.2.2001, p. 1; Commission Decision of 20 September
2001 in Case No COMP/M.2574 — Pirelli/Edizone/Olivetti/
Telecom Italia, OJ C 325, 21.11.2001, p. 12; Commission
Decision of 10 July 2002 in Case No COMP/M.2803 — Telia/
Sonera, OJ C 201, 24.8.2002, p. 19.

5.3.1. The market for sites and site infrastructure for digital

mobile radiocommunications equipment

P r o d u c t / i n f r a s t r u c t u r e m a r k e t

(49) Both 2G and 3G mobile telecommunications networks
rely on a cellular network architecture based around
antennae that are distributed across the coverage area,
allowing radio signals to be received from and trans-
mitted to end users within a certain cell radius (37). The
operators of 2G and 3G mobile telecommunications
networks require sites for the location of these antennas
and the related site infrastructure such as masts, site
support cabinets, power supply, combiners and trans-
mission links.

(50) Acquiring (either purchasing or, more commonly, leas-
ing) such sites requires agreement with the site owners
and planning permission from local authorities, and in
some cases approval from regulatory authorities to limit
the risk of radio frequency interference. Although the
number of properties that can be converted into sites
for digital mobile communications equipment is in
theory unlimited,
in practice the number of suitable
sites is limited due to planning regulations, health or
environmental considerations or space constraints in
in city centres, airport and railway
hot spots (e.g.
terminals and in underground areas). To be considered a
site, a particular property must therefore be usable as
such from a technical point of view, must be made
available in accordance with regulatory constraints, and
must fit into the planned network architecture spaced
across the coverage territory according to capacity needs.

(37) Because 2.5G is based on an overlay of existing 2G networks
and in Germany is provided by the four existing 2G operators
(and their service providers) this is not analysed separately.

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(51)

(52)

From a demand perspective, sites are at present required
primarily by the four operators that hold 3G licences in
Germany and are planning 3G network roll-out, all four
of which also operate 2G networks (38). In principle 2G
and 3G sites are interchangeable, although due to the
nature of the different frequencies used and the added
capacity required for 3G services, the density of a 3G
network is greater, and requires up to twice as many
sites as a 2G network. Only a limited part of the demand
for 3G sites can therefore be met by using existing 2G
sites. Finally, unlike 2G networks, which are already fully
rolled out, the roll-out of 3G networks in Germany is
still
in its planning stages. Given regulatory roll-out
requirements of 25 % population coverage by the end of
2003 and 50 % population coverage by the end of
2005, the initial demand for sites is highest in urban and
other densely populated areas. Although there is some
room for substitution between various types of sites (e.g.
between roof-top sites and mast sites, or between
multiple sites serving smaller cells, such as micro or pico
cells and single sites serving larger macro cells) there are
no other products that can substitute for 2G and 3G
sites and site infrastructure.

(53) There is limited scope for supply by operators of
broadcasting networks. Nevertheless, there is a tendency
for mobile operators to utilise broadcast structures
where they are suitable for the local requirements of the
service. Broadcast transmission equipment is located on
sites affording a much higher level of geographical
coverage when compared to the coverage requirements
of cellular systems. Consequently, broadcast sites tend
to be tall structures in elevated locations that transmit at
in order to achieve
high powers (tens of kilowatts)
optimal population coverage using a limited number of
sites. In view of capacity considerations, mobile radio
networks are cellular in nature, each site providing
sufficient but limited coverage, reducing inter-cell inter-
ference and allowing the frequency allocations to be re-
used in other areas. The size of each cell may range from
a few hundred metres to several kilometres, the actual
range determined by the level of network capacity
required. Site height and transmitted power are the main
factors in controlling cell size with typical powers of
tens of watts and antenna heights between 10 and
20 meters.

From a supply perspective, access to 2G and 3G sites
and site infrastructure can firstly be provided by 2G and
3G network operators that have located, acquired and
developed sites for the purposes of operating their own
networks. This is because in principle sites can be shared
between multiple operators, although there are technical
limits on the number of operators that can share a
particular site, in most cases up to three (39), depending
on the lay-out of the specific site. There appear to be
economies of scope involved at the supply side, because
network operators are likely to prefer dealing with
parties that can provide them with the largest possible
number of sites across the largest possible number of
locations in order to minimise search costs and to
minimise transaction costs. Operators may prefer
‘extended’ site sharing with other operators covering
elements of site infrastructure, thereby further reducing
their costs. Finally, it is likely that in hot spots such as
city centres many of the most favourable sites have
already been developed and are therefore not always
available to market entrants.

(54) There has been market entry in Germany by independent
companies that specialise in the location, acquisition
and provision of sites for use by third parties. Other
parties that control sites, such as public authorities or
utilities can likewise enter the market and have already
done so in Germany. Moreover, operators have histori-
cally also acquired and leased individual sites on a
commercial basis directly from the site owners, and
continue to do so. Apart from the general planning
permission constraints, health rules and requirements to
minimise electromagnetic interference mentioned above
there are no serious legal, statutory or other regulatory
requirements that could defeat a time-efficient entry into
the market and as a result discourage supply-side
substitution. No significant investments or scarce techni-
cal expertise are required to enter the market. Market
entry therefore remains possible.

(55) Based on the above analysis of supply and demand it
should be concluded that there is a market for sites and
site infrastructure for digital mobile radiocommunica-
tions equipment.

G e o g r a p h i c a l m a r k e t

(38) Sites are also required by e.g. digital broadcasters and will be
required by providers of TETRA (terrestrial trunked radio) if these
services take off in Germany. So far the Parties only share sites
with other 2G/2.5G operators.

(39) A breakdown of the multiple usage of sites can be found on

http://www.regtp.de.

(56) Based on the structure of demand, which is driven by
nationally licensed operators, and because the relevant
planning rules are guided by national law, the market is
national, namely Germany.

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5.3.2. Wholesale market for access to national roaming for

G e o g r a p h i c a l m a r k e t

3G communications services

P r o d u c t / s e r v i c e m a r k e t

(57) Mobile roaming takes place when subscribers use their
mobile telephone handset, or more specifically the SIM
(subscriber identification module) card that identifies the
subscribers, on a different mobile network (the host or
visited network) than that to which they subscribe
and which issued their SIM card (the home network).
Roaming can be either national or international. In both
cases it is based on agreements between the home
network operator and the visited network operator for
the provision of wholesale roaming access to the visited
network which is then passed on as a retail service by
the home network to its subscribers. However, the
market for national roaming is distinct from that for
inter alia, because it does not
international roaming,
involve agreements between foreign operators, because
it is not based on the standard arrangements developed
within the GSM Association (40), and because the prices
are significantly different.

(58) Notwithstanding a possible initial overlap between 2G,
2.5G and 3G retail services, from a demand perspective
wholesale access to national roaming for 3G communi-
cations services will be distinct
from 2G or 2.5G
roaming, because the range of both voice and data
services that can be provided based on 3G roaming is
broader and different, given that significantly higher
transmission speeds will be available (namely in practice
from 144 up to 384 kbit/s for 3G versus between 20
and 60 kbit/s for 2.5G and between 9 and 14 kbit/s for
2G). A more complete discussion of the relevant voice
and data services is provided in a separate section below.

(59)

From a supply perspective, only operators of 3G net-
works, or other parties able to provide the relevant type
of access to the 3G networks of such operators, will be
able to supply wholesale access to national roaming for
3G services. Given licensing requirements, the entry
barriers, aside from secondary entry based on access
rights to an existing 3G network, are absolute. Wholesale
access to national roaming for 3G communications
services therefore constitutes a distinct product/service
market.

(60) Given national

licensing of 3G networks, and given
pricing differences between national and international
roaming, the relevant market is national, namely Ger-
many.

5.4. Other potentially affected wholesale and retail mar-
kets

5.4.1.

Potentially affected wholesale markets

P r o d u c t / s e r v i c e m a r k e t

(61) There are a number of other possible wholesale markets
for 3G network services and network access that may be
affected by the Agreement such as the market
for
the provision of wholesale airtime access to service
providers, which exists in Germany based on regulatory
to
obligations. Wholesale airtime access is similar
national roaming because it likewise concerns the whole-
sale provision of network access and minutes (airtime)
by a host network. It is supplied to service providers by
licensed mobile operators in Germany as a condition of
the latters’ licences (41). The difference between the two
forms of access is that a mobile network operator relying
on national roaming can itself determine the range of
services available to its subscribers, and can provide
services that are not available to customers of the host
network. A service provider, however, can only provide
simple resale of the range of services offered by the
network operator that is providing it with wholesale
airtime.

(62) Another possible wholesale market is the market for call
origination services where providers of carrier selection
services purchase the right to obtain access to mobile
networks in order to originate calls that they terminate
under their own responsibility. This market does not
presently appear to exist in Germany but exists in other
Member States such as the United Kingdom. It is possible
that in addition, new forms of wholesale access to 3G
networks and services may develop that will come to
constitute separate relevant markets.

(40) The GSM Association consists of over 690 different 2 and 3G
mobile network operators, manufacturers and suppliers who
collectively develop technical platforms to make wireless services
work seamlessly, with a focus on roaming and inter-operability.
See http://www.gsmworld.com.

(41) Section 4 TKV Telecommunications Customer Protection Ordi-
nance of 11 December 1997 (Federal Law Gazette I, p. 2910) last
amended by Second Ordinance Telecommunications Customer
Protection Ordinance of 27 August 2002 (Federal Gazette I,
p. 3365) (Telekommunikations-Kundenschutzverordnung vom
11.12.1997, BGBl. I S. 2910 Zweite Verordnung zur Änderung
der TKV vom 27.8.2002, BGBl. I S. 3365); and by section 15 of
the German 3G licences.

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(63) Wholesale 3G services network services and network
access are likely to be distinct from network services and
access for 2G or 2.5G services, because the range of
services that can be provided based on 3G networks is
broader and different, given the availability of signifi-
cantly higher transmission speeds. However given the
degree of development of 3G wholesale markets which
are still emerging,
it is too early to assess in detail
the demand side for network services and access on
commercial terms in such markets, with the exception
of demand from service providers for access to wholesale
airtime consistent with the regulatory obligations of the
3G network operators. From a supply side these markets
are logically limited to 3G network operators and to any
other parties that may obtain a right to provide the
relevant degree of access to 3G networks.

G e o g r a p h i c a l m a r k e t

(64) Given national licensing and pricing patterns, the geo-
graphic scope of such wholesale markets is likely to be
national (42).

(65) Because for the purposes of the present decision it is not
necessary to define these markets more closely, their
definition will be left open.

5.4.2.

Potentially affected retail markets

(66) Whereas the cooperation covered by the Agreement is
limited to site sharing and national roaming at wholesale
network level, the effects of this cooperation could be
felt in the downstream retail services markets where the
Parties are active independently of each other. Within
the area of mobile retail services, voice and data services
have so far been offered in a bundled manner, suggesting
they may be part of the same market. The Parties believe
that all network operators are likely to offer ‘seamless’
2G and 3G voice and data services by providing both
types of services on a single SIM card. However, the
balance between voice and data services is expected to
shift fundamentally: whereas 2G data services are largely
limited to fax and SMS, and voice services typically
account for over 90 % of 2G mobile operators’ revenues,
for 3G networks, with services like teleshopping, video

(42) However cf Commission Decision of 4 October 2001 in Case
No COMP/M.2898 TDC/CMG/MIGway JV, OJ C 16, 19.1.2002,
p. 16, which identifies EU-wide markets for connectivity to the
international signalling network and for wholesale access (SMS)
to mobile telephony infrastructure.

telephony and video conferencing, it is expected that
eventually between 50 % and two thirds of revenue may
be generated by data services. It is therefore useful to
analyse digital mobile voice telephony services and
digital mobile data services separately. At least initially
this distinction largely corresponds with that between
circuit-switched and packet-switched services.

D i g i t a l m o b i l e v o i c e s e r v i c e s

(67) Concerning mobile voice telephony markets the Com-
mission has so far generally not distinguished between
different technologies. Most Decisions have determined
that both analogue and digital GSM 900 and 1800 are
part of the same mobile voice telephony market, while
testing narrower market definitions to ensure that no
dominant positions arose on any market definition (43).
However, as analogue mobile telephony was phased out
in Germany on 1 January 2000, the services concerned
by the Agreement are digital mobile voice telephony. So
far, the Commission has not defined distinct markets for
2G, 2.5G and 3G retail services (44).

(68) Over time however industry sources anticipate that ‘rich
voice over 3G networks’ services may develop that
consist of voice services integrated with data services
such as consumer videophones and multimedia confer-
encing that go beyond the capacity of 2G and 2.5G
networks. Hence it is possible that a distinct retail market
for 3G voice services will develop, or indeed that 3G
voice and data services will merge into a single market.

(43) See Commission Decision of 21 May 1999 in Case No IV/
M.1430 — Vodafone/Airtouch, OJ C 295, 15.10.1999, p. 2;
Commission Decision of 21 May 1999 in Case No COMP/JV.17
— Mannesmann/Bell Atlantic/Omnitel, OJ C 11, 14.1.2000, p. 4;
Commission Decision 98/2001/EC of 13 November 1999 in
Case No COMP/M.1439 — Telia/Telenor, OJ L 40, 9.2.2001,
p. 1; Commission Decision of 20 December 1999 in Case No
COMP/M.1760 — Mannesmann/Orange OJ C 139, 18.5.2000,
p. 15; Commission Decision of 12 April 2000 in Case No
COMP/M.1795 — Vodafone Airtouch/Mannesmann, OJ C 141,
19.5.2000, p. 19; Commission Decision of 4 August 2000 in
Case No COMP/M.2053 — Telenor/BellSouth/Sonofon, OJ
C 295, 18.10.2000, p. 11; Commission Decision of 11 August
2000 in Case No COMP/M.2016 — France Telecom/Orange, OJ
C 261, 12.9.2000, p. 6; Commission Decision of 25 September
2000 in Case No COMP/M.2130 — Belgacom/Tele Danmark/T-
Mobile
International/Ben Nederland Holding, OJ C 362,
18.12.2001, p. 6.

(44) Commission Decision of 12 April 2000 in Case No COMP/
M.1795 — Vodafone Airtouch/Mannesmann, OJ C 141,
19.5.2000, p. 19; Commission Decision of 31 July 2000 in Case
No COMP/M.1954 — ACS/Sonera Vivendi/Xfera, OJ C 234,
18.8.2000, p. 6; Commission Decision of 25 September 2000
in Case No COMP/M.2130 — Belgacom/Tele Danmark/T-Mobile
International/Ben Nederland Holding, OJ C 362, 18.12.2001,
p. 6.

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Developments in the quality and the scope of the voice
services concerned brought about by 3G technology are
likely to enable 3G voice services to command a price
premium. Moreover, they are likely to lead to one-way
substitution between 2G services on the one hand, and
3G services on the other hand (namely users will
substitute 3G services for 2G services, but not vice
versa), which would be evidence of the existence of
separate markets. For the purposes of
the present
is not necessary to conclude
it
Decision however,
whether 2G and 3G voice services should be considered
separate product markets. The relevant product market
definition is therefore left open.

D i g i t a l m o b i l e d a t a s e r v i c e s

is

(69) A fundamental difference between 2G data services on
the one hand and 2.5 and 3G data services on the other
is that
the former is circuit-switched, whereas the
latter are packet-switched, namely based on a different
technology with different and increased technical capa-
bilities. Because services and content available over 3G
networks are expected to be considerably better than 2G
both as concerns data speeds and the range of services
that
consequently enabled, any substitutability
between 2G and 3G is likely to be one way. This leads
to the conclusion that 2G and 3G services are likely to
be separate markets. Although it appears clear that there
will be some overlap between 2.5G and 3G services as
2.5G allows e.g. mobile e-mail, multi-media messaging
and continuous Internet access, it does not have data
transmission rates that are sufficient to provide the high
end of data services that are expected to emerge on 3G
networks. It therefore appears that there may be an
emerging market for the provision of 3G mobile data
retail services.

(70) Based on the distinguishing factor of mobility,

the
Commission has so far considered that mobile and fixed
data services are in separate markets (45). However the
highest bandwidth 3G data services are likely to be
deliverable only under conditions of optimal coverage
and reduced to very low or no mobility. At the same
time wireless local area network services (WLAN) are
developing that provide data communications including
broadband Internet access allowing limited mobility
within a circumscribed area (such as within buildings or

(45) In relation to dial-up access to Internet via mobile handsets and
via fixed means. Cf. Commission Decision of 20 July 2000 in Case
COMP/JV 48 — Vodafone/Vivendi/Canal+, http://europa.eu.int/
comm/competition/mergers/cases/.

at public locations). It is not excluded that a similar
measure of limited mobility will in future become the
norm for all or most high bandwidth data services.
Consequently, it is an open question whether services
like WLAN will be a complement to or a substitute for
3G services and as a result the distinction between fixed
and mobile data services will break down and a market
for broadband wireless data communications may
emerge.

(71) Because 2.5G services are still emerging, and as 3G
services are presently only at the planning stages, it is
not possible to determine accurately whether they are in
the same market or in different markets, whether digital
mobile voice and data services are in the same market,
nor whether certain 3G services are in the same market
as broadband data services like WLAN. However, for the
purposes of the present Decision it is not necessary to
conclude on whether 2G, 2.5G and 3G data services
and/or voice services, respectively broadband wireless
data services should be considered separate product
markets. The relevant product market definition is
therefore left open.

G e o g r a p h i c m a r k e t s

(72) Given the fact that retail pricing and services offers of
digital mobile telephony are currently national, markets
remain national
in scope, with the exception of the
emerging market for the provision of seamless pan-
European mobile telecommunications services to inter-
nationally mobile customers that the Commission first
identified in the Vodafone/Mannesmann Decision (46).
International roaming services are not a substitute given
the high prices and limited functionality of international
roaming (47). In addition, network operators have gener-
ally refused to allow permanent roaming based on
international roaming access, namely allowing a cus-
tomer of a foreign network to permanently roam on
their own network. Consequently the market or markets
identified above are national.

(46) See Commission Decision of 12 April 2000 in Case No
COMP/M.1795 — Vodafone Airtouch/Mannesmann, OJ C 141,
19.5.2000, p. 19; Commission Decision of 11 August 2000 in
Case No COMP/M.2016 — France Telecom/Orange, OJ C 261,
12.9.2000, p. 6.

(47) See Commission Decision of 22 June 1998 in Case No IV/JV.2
— ENEL/FT/DT, OJ C 178, 23.6.1999, p. 15; Commission
Decision of 21 May 1999 in Case No IV/M.1430 — Vodafone/
Airtouch, OJ C 295, 15.10.1999, p. 2; Commission Decision 98/
2001/EC of 13 November 1999 in Case No COMP/M.1439 —
Telia/Telenor, OJ L 40, 9.2.2001, p. 1.

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5.5. Market structure

5.5.1. The market for sites and site infrastructure for digital

mobile radiocommunications equipment

(73) Although operators are likely to prefer to deal with
parties who can provide a large number of sites at the
same time, there are no major entry barriers, limited
investment or technical expertise is required, and owners
of individual sites can trade directly with mobile network
operators. Actual or potential competitors in this market
include the other licensed operators for 2G and/or
3G networks and services in Germany, railway and
broadcasting operators, power utilities, and specialised
companies (tower companies) acquiring and offering
access to sites, such as New Radio Tower, Plan+Design
Netcare AG and Tessag SAG Abel Kommunikationstech-
nik GmbH & Co. Kg. T-Mobile has recently transferred
its activities regarding the location, acquisition and
leasing, including sharing, of sites to a separate legal
the around
entity, Deutsche Funkturm GmbH. Of
[40 000 to 70 000 (*)] existing sites some [10 000 to
20 000 (*)] are estimated to be held by T-Mobile,
[10 000 to 20 000 (*)] by D2 Vodafone, [5 000 to
15 000 (*)] by E-Plus and [5 000 to 15 000 (*)] by O2
Germany. [2 000 to 6 000 (*)] sites are estimated to be
held by the German Railways, [2 000 to 6 000 (*)] by
broadcaster ARD and some [2 000 to 6 000 (*)] by
others including Mobilcom, power utilities, and tower
companies.

5.5.2. Wholesale access to national roaming for 3G com-

munications services

(74)

In Germany, 2G national roaming is presently limited
to O2 Germany’s customers roaming on T-Mobile’s
network (48). T-Mobile consequently has a 100 % market
share in the market for wholesale 2G national roaming
in Germany. Because in practice 3G roaming will mainly
result from O2 Germany’s customers roaming on T-
Mobile’s network, T-Mobile is likely to have a similarly
high market share in the market for wholesale 3G
national roaming. However T-Mobile is subject to poten-
tial competition from the other 3G network operators
little or no
who could offer national roaming at
additional cost, albeit possibly subject to capacity con-
straints.

(75) There are high entry barriers due to formal licensing
requirements, the limited number of available licences,
and the high costs associated both with the acquisition

of a 3G licence in Germany and with investments in 3G
network infrastructure. The opportunities for market
entry at network operator level are limited, as it is not
foreseen that new licences will be issued or that the
licences of Group 3G and Mobilcom, which will not
roll-out their 3G networks, will be reissued. Although it
cannot be excluded that the licences of Group 3G and
Mobilcom will be transferred to another undertaking
either with approval from the NRA, or by means of a
this is an unlikely
takeover of
scenario given the present investment climate. Hence,
the main actual or potential competitors in wholesale
access and services markets are the two other licencees
that plan to roll-out 3G networks and services in
Germany and potential competitors may be third parties
reselling access to and wholesale roaming services on
the network of these other operators or on the Parties’
networks.

these undertakings,

5.5.3. 3G retail services

(76) There are six operators that have been licensed to use
3G frequency rights and provide 3G networks and
services in Germany. Apart from T-Mobile and O2
Germany this concerns D2 Vodafone, E-Plus, Mobilcom
and Group 3G. However, both Group 3G/Quam and
Mobilcom have written off the value of their 3G assets
and have abandoned their plans to enter 3G markets in
Germany as network operators although Mobilcom
may remain active as a service provider (49). The main
competitors in 3G retail markets are therefore D2
Vodafone and E-Plus and potentially service providers
such as Mobilcom and Debitel, who purchase wholesale
airtime for resale from network operators as well as any
mobile virtual network operators (MVNOs) that may
emerge in this market.

(77) Because 3G networks and services have not yet been
rolled out, no accurate estimate of market shares or
assessment of the substitutability between 2G and 3G
services can at present be provided. If the estimated
2002 market shares for 2G retail services are neverthe-
less taken as a proxy for market share in 3G markets,
including figures for customers of service providers
active on their networks, T-Mobile had a 41,7 % market
share and O2 Germany a 7,8 % market share against
38,3 % for D2 Vodafone and 12,2 % for E-Plus. If only
own subscribers are counted, T-Mobile had a market
share of 29 %, against 7,5 % for O2 Germany, 28 % for
D2 Vodafone, and 7 % for E-Plus, and in total 29 % of
subscribers are divided between more than 10 different
service providers, led by Debitel with a market share of
12,7 % and Mobilcom with 8,8 %. Group 3G is not
active in 2G markets in Germany.

(48) The relevant agreement was the subject of a notification in Case
COMP/C1/37.500 VIAG Interkom + T-Mobil, which was closed
by means of an administrative letter of 13 July 1999.

(49) Cf http://www.quam.de:

‘Quam stellt operatives Geschäft ein’,
Quam (15 October 2002); http://www.mobilcom.de: ‘Q3/2002:
MobilCom schreibt UMTS-Vermögen vollständig ab’, MobilCom
AG (28 November 2002).

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6. ARGUMENTS OF THE PARTIES

(78) The Parties primarily explain the need for their agree-
ment on 3G network sharing in financial terms. More
specifically they claim that network sharing is necessary
because:

burden of the simultaneous opening of 3G market access
in the EU. Further, the Parties argue that the approach
adopted is in line with the policy adopted by RegTP (the
German NRA) as well as by other NRAs such as Oftel in
the UK. In addition, they argue infrastructure sharing is
required due to planning restrictions and to meet
environmental concerns.

(a) 3G network infrastructure is more expensive than
its predecessors, given the much higher antenna
density required, namely up to twice as high as 2G
GSM networks;

(b)

(c)

since 3G licences were awarded, the expectations
of 3G services revenue have been revised down-
ward; and

due to the general downturn of the mobile telecom-
munications industry their cost of raising capital
has increased.

In the notification the Parties stated that as a result of
the Agreement, they envisaged a reduction of up to [15
to 35 % (*)] of their investments in network infrastruc-
ture with further savings on network operating costs.
Subsequently the Parties have reduced their estimates of
the cost savings.

6.1. Article 81(1) EC/Article 53(1) EEA

(79) The Parties argue the Agreement does not have the
object or effect of appreciably restricting competition
within the common market contrary to Article 81(1)
EC/53(1) EEA, as their prospective site-sharing and
possible RAN-sharing will not result in the sharing of
core networks or frequencies, and because the Agree-
ment requires the Parties to maintain full competition at
the service and retail level. In addition, network planning,
design and operations will remain independent and any
disclosure of technical information will be limited to the
minimum necessary.

6.2. Article 81(3) EC/Article 53(3) EEA

(80) The main potential restriction of competition concerns
the limitations on resale of roaming capacity for the
provision of voice services to MVNOs. If the Agreement
is considered to restrict competition, the Parties argue in
the alternative, that it is exemptable under Article 81(3)
EC/53(3) EEA. In view of the large licence costs incurred
followed by a significant decrease in the commercial
value of 3G spectrum the Parties argue that infrastructure
sharing will enable them to reduce capital and operating
expenditure by reducing their investments in network
infrastructure and network operating costs. O2 Ger-
many, the main beneficiary of national roaming under
the Agreement, estimates that as a result of the Agree-
ment it will save [15 to 35 % (*)] of its 3G network roll-
out costs predominantly due to roaming. According to
the Parties, this is necessary to alleviate some of the

(81) The Parties argue that consumers will ultimately benefit
through the delivery of faster, more innovative 3G
services at lower prices. The Parties will as a result of
their cooperation not produce common or standardised
services to end users but will continue to compete
directly on content applications, retail pricing, wholesale
pricing, terms and conditions of service, channel to
market and customer care services and marketing.
Hence they conclude that as a result of the Agreement
competition will not merely be preserved but will be
increased in the markets for 3G networks and services
in Germany. Finally, the Parties argue that because it is
essential to protect their investments that they retain
ultimate control over who has access to their network,
the Agreement would not have been concluded without
the restriction on resale to Voice MVNOs.

7. COMMENTS FROM THIRD PARTIES

(82) The initial notice (50) published by the Commission upon
receiving the notification in February 2002 and the
subsequent Notice pursuant to Article 19(3) of Regu-
lation No 17 (51) gave rise to comments from the
German competition authority, the Bundeskartellamt
(BKartA), as well as from five different market parties
representing mobile network operators as well as service
providers and operators on related markets in Germany.
Although some parties expressed their support
for
network sharing, all were critical of the Agreement in its
current
form. Following the Parties’ notification of
an amendment to the Agreement concerning national
roaming, the BKartA and the market parties that com-
mented on the Notice pursuant to Article 19(3) of
Regulation No 17 have been given a further opportunity
to react to these changes.

7.1. Comments by the BKartA

(83) The BKartA believes that for UMTS, competition based
on network quality and transmission capacity will be
especially important and depends on the degree of
infrastructure competition. It would therefore tend to
see a restriction of competition in any form of network
sharing activity, unless infrastructure based competition
is not possible for practical or legal reasons. In this
context the BKartA would also take e.g. environmental
concerns and the financial situation of the undertakings
involved into consideration. It notes that in Germany

(50) OJ C 53, 28.2.2002, p. 18.
(51) OJ C 189, 9.8.2002, p. 22.

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obtaining planning permission for sites is increasingly
difficult and forces operators to rely on site sharing. It
also notes that the financial situation of mobile operators
may require network sharing in order to enable market
entry.

(89) Two market parties raised objections against Clause 11
of the Agreement, arguing that its requirement of prior
approval by the operator of the host network for the
resale of roaming capacity for the provision of voice
services by MVNOs led to a restriction of competition
on the retail market or markets for 3G services.

(84) Consequently, the BKartA is of the opinion that there is
no restriction of competition in so far as site sharing is
necessary in order to fulfil the Parties’ licence obligations
(notably the 50 % population coverage requirement by
2005) and consequently is necessary to enable market
entry. The BKartA finds RAN sharing, which it does
not consider necessary to meet licence obligations, a
restriction of competition that would be acceptable only
in so far as it is necessary to enable market entry.
Concerning site sharing both after 2005 and beyond the
50 % population coverage requirement, and regarding
RAN sharing the BKartA assumes that these involve
restrictions of competition but may merit exemption.

(85) However, the BKartA does not consider that the limi-
tations on resale of roaming capacity to MVNOs in
Article 11 of the Agreement are exemptable because in
its view they have the effect of price coordination
between competitors. The BKartA’s submission does not
specifically address national roaming, and it has not
provided further comments in relation to the Parties
amendments of the Agreement concerning roaming
within the territory covered by the 50 % population
coverage requirement.

7.2. Comments from market parties

(86) One market party objected as a matter of principle to
national roaming which it considers to be a restriction
of network competition. It also objected to extended site
sharing and RAN sharing, claiming the result will be a
degree of harmonisation of networks such as to make
them indistinguishable. As a result, it claimed, not just
competition on network quality will to a large extent be
eliminated, but services competition as well. It added
that it has not seen any evidence that as a result of the
Agreement the Parties are engaging in a more rapid 3G
network rollout.

(87) A second market party favoured network sharing as a
means to control costs and facilitate market entry as a
matter of principle, but requested that non-exclusivity
of the Agreement should be backed up by a commitment
from the Parties on the availability of sufficient network
capacity to accommodate third parties.

(88) A third market party claimed that the network sharing
agreement could enable the Parties to utilise their
resulting cost savings to enter the market for paging and
emergency instant messaging services as well as related
markets for 3G services and squeeze smaller competitors
out of these markets.

(90) All comments received have been carefully reviewed and
to the extent that the third party comments reflected
genuine
the Commission’s
reasoning on the concerns raised is presented in the
legal assessment below.

competition concerns,

8. RESTRICTIONS OF COMPETITION

(91) Article 81(1) of the EC Treaty and Article 53(1) of the
EEA Agreement prohibit agreements between undertak-
ings which may affect trade between Member States and
which have as their object or effect the prevention,
restriction or distortion of competition within the
common market. The Commission can exempt agree-
ments restricting competition contrary to Article 81(1)
of the EC Treaty and Article 53(1) of the EEA Agreement
provided the conditions set out in Article 81(3) of the
EC Treaty and Article 53(3) of the EEA Agreement are
met.

(92) The notified Agreement is a horizontal cooperation
agreement between two competitors that also involves
certain vertical aspects. The Agreement does not have
the object of restricting competition by means of price
fixing, output limitations or the sharing of markets or
customers, but it may have the effect of restricting
competition given that T-Mobile and O2 Germany are
competitors for both 2G and 3G digital mobile networks
and services.

(93) The Agreement between T-Mobile and O2 Germany
involves cooperation in the roll-out of the Parties 3G
networks, principally via (i) site sharing and (ii) national
roaming. Specifically the Parties intend to cooperate in
the planning, acquiring, building, deploying and sharing
of 3G sites as well as through the provision of roaming
services. As a result the Parties will cooperate extensively
in the roll-out of their 3G mobile networks. Such far-
reaching cooperation between two players that affects
markets with only a limited number of competitors and
markets with high,
if not absolute, barriers to entry
raises competition concerns. In particular, there is a risk
that the Agreement could (i) reduce network competition
in Germany and (ii) could result in spill-over effects in
services markets. In addition, any restrictive provisions,
such as restrictions on resale, will have to be examined.

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8.1. Applicability of Article 81(1) of the EC Treaty and
Article 53(1) of the EEA Agreement

(94) Because site sharing, RAN sharing and national roaming
should be seen as distinct forms of cooperation with
effects in different markets, they are analysed separately.

(95)

8.1.1.

Extended site sharing

Site sharing is in principle encouraged as a matter of
public policy both at EU and at national level. In addition
national authorities can impose facility sharing in par-
lack viable alternatives.
ticular where competitors
Article 11 of the European Parliament and Council
Directive 97/33/EC of 30 June 1997 on interconnection
in Telecommunications with regard to ensuring univer-
sal service and interoperability through application of
the principles of Open Network Provision (Intercon-
nection Directive) requires that national regulatory auth-
orities are empowered to encourage and impose collo-
cation and facility sharing (52), and has been implement-
ed in Germany by means of section 33 of the German
Telecommunications Act (TKG), which provides that
third parties may claim access to essential facilities
of dominant operators (53). Under the new regulatory
framework recital 23 of the European Parliament and
Council Directive 2002/21/EC of 7 March 2002 on a
common regulatory framework for electronic communi-
cations networks and services (Framework Directive) (54)
states that ‘Facility sharing can be of benefit for town
planning, public health or environmental reasons, and
should be encouraged by national regulatory authorities
on the basis of voluntary agreements’. Article 12 of the
Framework Directive requires that national regulatory
authorities are empowered to impose facility sharing
where undertakings are deprived of access to viable
alternatives because of the need to protect the environ-
ment, public health, security, or to meet town and
country planning objectives. Hence sector-specific regu-
lation can provide a solution if alternative sites are not
available and competitors do not manage to negotiate
access to necessary sites and/or site infrastructure on
commercial terms.

(96)

Site sharing based on bilateral agreements is common
practice between all operators in Germany for 2G and is

likely to be continued in 3G. There are existing frame-
work agreements between T-Mobile, D2 Vodafone and
E-Plus that concern the use of joint sites. In addition, site
sharing is promoted in Germany as a matter of public
policy aiming to minimise the total number of sites
required due to environmental and health concerns.
Consequently on 9 July 2001 general agreement has
been concluded between, on the one hand, all mobile
network operators and, on the other hand, the associ-
the municipalities, with the objective of
ations of
maximising the use of shared sites (55). As a result of
this agreement mobile network operators in Germany
exchange information on a regional basis regarding sites
needed in particular municipalities in order to achieve
the maximum proportion possible of shared sites.

(97) The market for sites and site infrastructure for digital
mobile radiocommunications equipment was defined
above (Recital 49 et seq.). The Parties estimate that so
far around [40 000 to 70 000 (*)] sites have been
acquired for 2G networks in Germany of which a
sizeable proportion can be used for 3G networks. So far
overall in the German market, 64 % of sites are used by
only one operator, 20 % by two operators, and 16 % by
three or more operators (56). Because 3G networks will
initially concentrate on urban areas in order to reach
the required population coverage it is likely that the
percentage of sites shared for 3G could be higher than
for 2G. The distribution of the sites that have already
been deployed between the network operators is esti-
mated as follows: [10 000 to 20 000 (*)] are estimated
to be held by T-Mobile, [10 000 to 20 000 (*)] by D2
Vodafone, [5 000 to 15 000 (*)] by E-Plus and [5 000 to
15 000 (*)] by O2 Germany. It is estimated that at least
20 000 new sites will be acquired for 3G networks. In
addition to its stock of [10 000 to 20 000 (*)] sites, T-
Mobile plans to add [(*)] for its 3G network. A pro-
in their
portion of the sites added will be shared:
notification the Parties claimed that
they anticipate
sharing up to [20 to 35 % (*)] of their 3G sites under the
Agreement. More recent information provided by the
Parties shows that O2 Germany now expects to share
up to [40 to 55 % (*)] of its 2G and 3G sites with all
other operators including T-Mobile, and [15 to 30 % (*)]
with T-Mobile alone. T-Mobile now expects to share [(*)]
of mast sites and [(*)] of rooftop sites with all three other
operators.

(52) OJ L 199, 26.7.1997, p. 32.
(53) Telecommunications Act (TKG) of 25 July 1996 (Federal Law
Gazette I, p. 1120) as last amended by First Act for revision of
the Telecommunications Act of 21 October 2002 (Federal Law
Gazette I, p. 4186). (Telekommunikationsgezetz vom 25. Juli
1996, BGBl. I, S. 1120; Änderungsgesetz zum TKG — Kleine
Novelle vom 25.10.2002, BGBl. I S. 4186).

(54) OJ L 108, 24.4.2002, p. 33.

(55) Vereinbarung über den Informationsaustausch und die Beteili-
gung der Kommunen beim Ausbau der Mobilfunknetze zwischen
Deutscher Städtetag, Deutscher Landeskreistag, Deutscher Städte-
und Gemeindebund und DeTeMobil Deutsche Telekom Mobilnet
GmbH, E-Plus Mobilfunk GmbH & Co KG, Group 3G, Mannes-
mann Mobilfunk GmbH, MobilCom Multimedia GmbH, VIAG
Interkom GmbH & Co.

(56) Based on data of RegTP for May 2001 across a total pool of

39 690 sites.

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(98) The market is highly concentrated and at present the
Parties jointly have a market share of around 45 %.
Apart from the Parties, two other parties have obtained
licences that enable them to develop their own networks,
of which at least one, D2 Vodafone, already has a very
strong position in 2G markets. These parties are likewise
present in the market for sites and site infrastructure for
digital mobile radiocommunications equipment. How-
ever, although the large majority of sites in Germany are
currently held by mobile network operators, a number
of specialised tower companies are also entering the
German market, and individual sites can also be obtained
directly from their owners. Moreover, in principle, site
sharing does not reduce the number of sites available to
other network operators: as it reduces the number of
sites required individually by the sharing operators it
increases the proportion of sites out of the total pool
that are available for other operators.

(99) On the demand side, the market is even more concen-
trated, as it
is limited to the four licensed 2G/3G
operators that remain active in the German market. The
parties present on the demand side are also present on
the supply side and in principle have the ability to
acquire sites for their own network needs completely
independently from the Parties and from any other
operators if they so desire. Because the Parties are likely
to request access to sites controlled by the other 2G
and 3G operators there is likely to be countervailing
bargaining power.

(100) Moreover third party access to sites controlled by the
Parties is promoted by public policy and, as explained
above, by the ability of the NRA to impose site sharing
where no viable alternatives exist. Finally, the Agreement
does not limit the Parties’ commercial freedom to engage
in site sharing with third parties and both Parties plan
to continue actively sharing sites with third parties.
Consequently the Agreement does not appear to have
the effect of foreclosing competition in the market for
sites and site infrastructure for digital mobile radiocom-
munications equipment.
It remains to be examined
whether as a result of site-sharing Parties are likely, given
an increase in the similarity of their cost-structures, to
find the scope for distinguishing their retail services
offers reduced, or whether, as a result of site-sharing,
they are likely to coordinate their activities in other
markets.

estimates that its cost savings due to site sharing alone
will only amount to [7 to 17 % (*)] of its total savings
under the Agreement of [15 to 35 % (*)] of network
roll-out costs, namely its savings based on site sharing
will amount to [less than 5 % (*)] of its total savings. In
relation to 2G sites, T-Mobile does not expect that there
will be any additional cost savings due to the existing
2G site sharing arrangements in place. Instead the Parties
see the benefits from site sharing in terms of faster
planning and implementation due to advance establish-
ment of radio plans based on earlier site information
than would otherwise be available. The Parties will in
any event not own or control sites in common, but will
compete with each other and with other network
operators for the acquisition of own sites and will each
give rights of use to the other Party. They do not
therefore as a result of the Agreement have a high
proportion of their total costs in common. Conse-
quently, site sharing does not result in similarity in the
Parties’ cost structure that could affect their ability to
compete effectively with each other in downstream
network or services markets.

(102) Nor do there appear to be any significant effects on
competition in any other network markets or services
markets. The depth of cooperation on site sharing is
consistent with the assessment of the NRA, RegTP,
concerning the minimum degree of
independence
required to allow independent control of networks and
services by the respective Parties. In particular the Parties
retain independent control over their core networks
including all intelligent parts of the network and the
services platforms that determine the nature and the
range of services provided. The Parties also retain
independent control over their radio planning and the
freedom to add sites, including non-shared sites, in order
to increase their network coverage and capacity, which
appear to be the main competitive parameters at net-
work level, and which are likely to have an important
impact on the level of services competition. Because site
sharing will reduce search costs and will eventually
allow greater network density it can improve network
competition, and thereby services competition, both
between the Parties and with third parties. Therefore the
site sharing between the Parties set out in the Agreement
as notified does not lead to restrictions of competition.

(101) Because the percentage of total costs represented by the
shared sites is relatively small, the Parties’ anticipated
cost savings due to site sharing are limited. O2 Germany

(103) For the purposes of site sharing the Parties have stated
that they will exchange information necessary for the
common roll-out of sites, comprising technical infor-
mation and location data for individual sites, namely

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disclosing which Party wants to build out where. The
Parties state that there will be no additional exchange of
information on the expected build-out of 3G networks.
Clause 2.6 of the Agreement provides that competition
sensitive information is not exchanged between the
Parties beyond the minimum information necessary to
allow network planning. The exchange of this technical
information is limited to what is necessary to enable a
form of cooperation between the Parties that is not
considered restrictive of competition. Therefore it does
not itself constitute a restriction of competition either.

8.1.2. RAN sharing

(104) Although the Agreement provides for the possibility to
examine the potential for RAN sharing between the
Parties, RAN sharing is not presently foreseen. Moreover
the modalities for RAN sharing between the Parties are
not covered in sufficient detail by the notification to
allow the Commission to make an analysis under
Article 81 EC/Article 53 EEA. It is therefore not covered
by the present Decision.

8.1.3. National roaming

O 2 G e r m a n y
r o a m i n g o n T - M o b i l e ’ s
n e t w o r k w i t h i n t h e 5 0 % c o v e r a g e a r e a

(105) By amendments of 20 September 2002 and 22 January
2003 to the notified Agreement, the Parties have agreed
that O2 Germany will be able to purchase wholesale
national roaming rights on T-Mobile’s 3G networks
between 1 January 2003 and 31 December 2008. This
means that during this time-period O2 Germany will be
purchasing wholesale national roaming services from T-
Mobile within the area where O2 Germany has a
regulatory obligation to cover 50 % of the German
population via its own network. T-Mobile will not have
a similar right to purchase wholesale national roaming
on O2’s network in this area. Following discussions with
the Commission, the Parties have agreed to limit the
duration of roaming within the area that is subject to
the 50 % population coverage obligation based on the
definition of three separate area (Areas 1, 2 and 3).
Roaming will be successively phased out in these areas
according to the timetable set out in Section 4.3.1 above
and which are incorporated in the Agreement by the
Parties’ amendment of 21 May 2003.

R e c i p r o c a l
c o v e r a g e a r e a

r o a m i n g o u t s i d e t h e 5 0 %

(106) The Agreement as originally notified provides for
reciprocal right of wholesale 3G national roaming
between T-Mobile and O2 Germany outside the area of

the 50 % population coverage requirement. In practice,
T-Mobile intends to cover [(*)] of the German population
with its 3G network by the end of 2006, and to provide
further coverage as a function of demand, whereas O2
Germany intends to [(*)]. Given that T-Mobile’s network
will be more extensive, and given the advantages for a
network operator in using its own network in terms of
control over costs and parameters such as network
quality and transmission rates, it is likely that there will
be little roaming by T-Mobile or its customers on O2
Germany’s network, if any. Therefore national roaming
under the Agreement will predominantly involve O2
Germany roaming on T-Mobile’s network, not vice
versa.

C o m p e t i t i v e E f f e c t s

Effects on wholesale markets

(107) The market

for wholesale national roaming access
for 3G communications services was defined above
(recital 57 and following). National roaming between
network operators who are licensed to roll-out and
operate their own competing digital mobile networks by
definition restricts competition between these operators
in all related network markets on key parameters such
as coverage, quality and transmission rates. It restricts
competition on scope and on speed of coverage because
instead of rolling out its own network to obtain the
maximum degree of coverage of territory and population
within the shortest period of time, a roaming operator
will rely for its roamed traffic on the degree of coverage
achieved by the network of the visited operator. National
roaming also restricts competition on network quality
and on transmission rates, because the roaming operator
will be restricted by the network quality and the
transmission rates available to it on the visited network
that are a function of the technical and commercial
choices made by the operator of the visited network.
Finally, based on the Agreement, national roaming will
be charged at wholesale rates, for voice communications
at the level of call termination rates, and for data services
on a [retail minus pricing model (*)]. In the case of
O2 Germany, national roaming will account for [(*)].
Consequently the wholesale rates that it will be able to
charge to purchasers of its own wholesale network and
access services will be constrained by the wholesale rates
it has to pay to T-Mobile.

(108) The effects of such restrictions will be more serious in
areas where there is a clear economic case for the roll-
out of parallel competitive networks — notably in core
urban areas — and where therefore competition is more
restricted by roaming. The effects will be less serious
where the economic incentives for roll-out are less
developed, as may be the case in built-up areas of
secondary commercial importance and in particular in
rural and remote areas.

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(109) Given the resulting constraints on the ability of O2
Germany and T-Mobile to compete on coverage, on
quality, on transmission rates, and on wholesale prices,
3G national roaming between O2 Germany and T-
Mobile has an impact on competition in all 3G network
markets in Germany including the market for wholesale
national roaming access for 3G communications services
and the market for wholesale airtime access to 3G
services.

(110) As 3G markets are emerging markets there is no market
share information available. However, in the market for
wholesale national roaming access for 3G communi-
cations services, there are in Germany only four licensed
operators that have the ability to roll-out networks. Entry
barriers due to licensing requirements and investment
requirements are very high if not absolute (57). Hence, it
is clear that cooperation between two of only four
parties in the market, even if one of these two (O2
Germany) does not presently intend to roll-out a net-
work beyond [(*)], is capable of restricting competition
in a manner that is appreciable. The Agreement on
national roaming (as amended) therefore constitutes a
restriction of competition in the sense of Article 81(1)
of the EC Treaty and Article 53(1) of the EEA Agreement.

Effects on retail markets

(111) In addition the question should be examined whether
the Agreement on wholesale 3G roaming access restricts
competition for 3G retail services. National roaming at
lead to a greater uniformity of
wholesale level will
conditions at retail level, given the fact that the under-
lying network coverage, quality and transmission speeds
are likely to be similar. Transmission speeds will deter-
mine to a significant extent the types of service that a
particular operator will be able to provide. In addition,
the timing of the introduction of particular services will
be determined by the moment when certain transmission
speeds are reliably available at network level, and the
latter will have to be coordinated for purposes of
national roaming. Finally, as operators using wholesale
national 3G roaming will have to pay charges for
wholesale access that for data services will be based on
a [retail minus pricing model (*)] the scope for price
competition will as a result be limited. The [(*)] pricing
system itself could give rise to a risk of coordination on
retail price levels.

(112) It is therefore likely that the cooperation between the
Parties on wholesale 3G national roaming will have
effects on competition between the Parties in down-
stream retail markets. Although the number of parties

(57) See section 5.5.2.

present in these retail markets will be greater than that
of those operating at network level and there is no
precise market share information available, if the com-
bined market share of the Parties for 2G are used as a
proxy, this market share is 36,5 % (T-Mobile 29 %; O2
Germany 7,5 %) if only own customers are counted, and
it is 49,5 % (T-Mobile 41,7 %; O2 Germany 7,8 %) if the
end customers of service providers active on the Parties’
networks are counted. Consequently, the Parties com-
bined market share of the markets for 3G retail services
is under any plausible market development likely to
exceed 10 %, and the restriction is therefore appreciable.

M i n i m u m p u r c h a s i n g r e q u i r e m e n t

(113) The Agreement on 3G national roaming is non-exclus-
ive, but envisages a minimum purchasing requirement
by O2 Germany of [(*)] Euro from T-Mobile within three
years from the date of launch of the relevant 3G roaming
services. The amendments of the Agreement that enable
roaming of O2 Germany on the network of T-Mobile
within the 50 % population coverage area provide for a
[payment by O2 Germany to T-Mobile (*)]. Although
this is not a minimum purchasing requirement it may
similarly have the effects of concentrating O2 Germany’s
purchases of 3G national roaming access on T-Mobile’s
network.

(114) However, neither the minimum purchasing requirement
nor the fixed payment need be analysed further in
terms of possible foreclosure. The sale of wholesale 3G
roaming access between licensed 3G network operators
has been identified as a restriction of competition.
Therefore, potential obstacles to other licensed 3G
network providing this form of cooperation cannot
be interpreted as constituting a further restriction of
competition in their own right. On the contrary, should
one of the Parties conclude an agreement to purchase
significant volumes of national roaming access from one
or both of the other licensed 3G network operators, this
would require an analysis under the competition rules.

R e s a l e t o M V N O s

(115) Clause 11(c) of the Agreement limits the ability of the
Parties to resell roaming access rights to third parties,
notably it requires the prior approval of the other Party
for any resale of roaming capacity to MVNOs that would
offer voice telephony services to end-users. Because this
clause concerns the resale of access rights the restraints
involved are vertical in nature. However Article 2(4) of
Commission Regulation 2790/1999 on the application
of Article 81(3) of the EC Treaty to categories of vertical

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agreements states that the block exemption does not
apply to reciprocal vertical agreements between compet-
ing undertakings (58).

context the Parties have declared that they will not
exchange information about anticipated future capacity
requirements, namely about customer numbers and
their specific requirements.

(116) Therefore this restriction must be assessed both as
regards possible collusion effects in line with the Guide-
lines on horizontal cooperation as well as, as regards
their vertical dimension, with the Guidelines on vertical
restraints. An analysis based on the Guidelines on
horizontal cooperation shows that limiting the type of
customers to which the buyer may sell the contract
services limits output and therefore constitutes a restric-
tion of competition under Article 81(1) EC/53(1) EEA
that requires individual analysis under Article 81(3) EC/
53(3) EEA (59). Hence the provisions of Article 81(3) EC/
53(3) EEA must be applied to the restrictions on resale
to ‘Voice MVNOs’ to establish whether any efficiencies
exist that compensate for the restrictions of competition
involved.

R e s t r i c t i o n o n r e s a l e t o o t h e r n e t w o r k
o p e r a t o r s

(117) By requiring prior approval from the operator of the
visited network, Clause 11(c) of the Agreement also
limits the resale of roaming rights to other licensed
network operators. The Parties have argued that this
restriction is necessary to enable planning for network
capacity and to guarantee quality of service. However, it
is not necessary to enter into an analysis of these
arguments. The sale of wholesale 3G roaming access
between licensed 3G network operators has been ident-
ified as a restriction on competition in its own right.
Therefore a limit on other licensed 3G network operators
joining in this form of cooperation cannot be interpreted
as constituting a restriction of competition. On the
contrary, should one of the Parties conclude an agree-
ment to resell significant volumes of national roaming
access to one or both of the other licensed 3G network
operators, this would require an analysis under the
competition rules.

I n f o r m a t i o n e x c h a n g e f o r p u r p o s e s o f
n a t i o n a l r o a m i n g

(118) Clause 2.6 in the Agreement bars the Parties from
exchanging ‘competitively relevant information’. In this

(119) The Parties will however exchange certain key technical
data that are strictly necessary to provide a seamless
roaming service, notably channel numbers, customer
identification (CID) and interconnect identification infor-
mation. Seamless roaming depends on a ‘seamless
handover’ between the two networks involved, namely
taking place without the customer having to manually
log onto the other network when changing networks.
To allow seamless handover between cells the relevant
radio-network parameters must be made known to the
visited network, namely the cell identity, its geographic
location coordinates, antenna height, type of antenna,
direction of the main radio beam, cable attenuation and
node B performance. As this information is strictly
necessary to national
information
exchange does not constitute a restriction of competition
under Article 81(1) EC/53(1) EEA that requires individual
analysis.

roaming,

this

8.2. Effect on trade between EEA States

(120) The conditions for access to 3G infrastructure and
wholesale services of mobile network operators affect
trade between EEA States. This is because the services
provided over telecommunications networks are traded
throughout the EEA — e.g. wholesale termination of
international calls and wholesale access to 3G inter-
national roaming — and the conditions for access
to telecommunications infrastructure and wholesale
services determine the ability of other operators, service
providers and MVNOs who require such access to
provide their own services (60). The conditions for net-
work sharing will also affect purchases of network
equipment
from producers of network equipment
located in different EEA States. In addition investment
and market entry in 3G networks and services is
increasingly cross-border within the EEA. Therefore the
conditions for access to 3G infrastructure and wholesale
services significantly affect not only the climate for
investment including investment between EEA States in
3G infrastructure and services, but also affect
the
conditions for market entry, including such entry by
operators, service providers, MVNOs and content pro-
viders from other EEA States.

(58) OJ L 336, 29.12.1999, p. 21. See Commission Notice, Guidelines
on vertical restraints, OJ C 291, 13.10.2000, p. 1, point 52.
(59) Commission Notice, Guidelines on the applicability of Article 81
of the EC Treaty to horizontal cooperation agreements, OJ C 3,
6.1.2002, p. 2, point 25.

(60) Cf. Access Notice paragraphs 144-148.

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8.3. Application of Article 81(3) of the EC Treaty and
Article 53(3) of the EEA Agreement

O 2 G e r m a n y r o a m i n g o n T - M o b i l e ’ s 3 G
n e t w o r k w i t h i n t h e 5 0 % c o v e r a g e a r e a

(121) As analysed above, the Clauses of the Agreement (as
amended) on national roaming fall within Article 81(1)
of the EC Treaty and Article 53(1) of the EEA Agreement
as the national roaming arrangement between the Parties
has an appreciable effect on competition and affects
trade between EEA States. An agreement that violates
Article 81(1) of the EC Treaty and Article 53(1) of the
EEA Agreement can be exempted provided that it meets
the following conditions set out in Article 81(3) of the
EC Treaty and Article 53(3) of the EEA Agreement:

(a)

(b)

(c)

(d)

it must contribute to improving the production or
distribution of goods or services and promote
technical or economic progress;

it must allow consumers a fair share of the resulting
benefit;

it must not impose on the undertaking concerned
restrictions which are not indispensable to the
attainment of these objectives;

it must not afford the undertaking concerned the
possibility of eliminating competition in respect of
a substantial part of the products in question.

8.3.1. Contribution of the Agreement to improving pro-
duction or distribution and promoting technical or
economic progress

(122) Access to 3G national roaming will allow the roaming
Party to provide better coverage, quality and trans-
mission rates for 3G wholesale and retail services more
rapidly. Selling access to roaming will provide the host
network operator with additional resources to invest
into its network and will allow it to use its network
capacity more fully at an earlier stage than would
otherwise have been the case, and therefore more
efficiently. Even if in practice only one of the Parties
were to exercise its roaming rights under the Agreement,
its use of their joint networks would give it access to a
greater network density and a more extended footprint
than it would be able to provide individually, making
both its wholesale and its retail services more attractive
to users. The competition arising from at least two other
operators at network level will ensure that the Parties’
incentive to realise greater density and a more extended
footprint in line with commercial take-up of 3G services
is maintained and that they do not merely economise
on their network costs. Given competition from these
other operators as well as from a number of service
providers and possibly MVNOs at retail level, the Parties
will also individually continue to have an incentive to
provide a wider range and better quality of services.

(123) O2 Germany’s roaming on T-Mobile’s 3G network
within the area that is subject to the regulatory obligation
of providing 50 % population coverage by the deadline
of 31 December 2005, is likely to lead to greater choice
and increased competitiveness at both wholesale and
retail level. In particular, mobile roaming by O2 Ger-
many on T-Mobile’s network within this area will allow
O2 Germany from the outset to offer better coverage,
quality and transmission rates for its services than it
would be able to do on a stand-alone basis during its
roll-out phase in competition with the other providers
of 3G wholesale and retail services.

(124) O2 Germany’s network will meet regulatory require-
ments by 31 December 2005. However as the smallest
operator in the German mobile market with a small
share of the 2G market (about 8 %) it is unlikely to be in
a position to quickly build out a high quality network
covering a sufficient area to enable the company to
compete effectively from the outset against other estab-
lished licensed operators of 3G networks and services in
Germany. Due to important first-mover advantages, this
is likely to limit its ability to compete effectively and
may affect the overall competitiveness of the German
market. There are therefore economic benefits in this
instance from allowing O2 Germany to roam even
within major urban centres for a short period of time
until it has built out an effective network. Roaming at
the outset will also allow O2 Germany to launch 3G
services earlier thereby generating additional revenue for
the company. This will help the company finance the
roll-out of its 3G network which will enable it to reduce
its reliance on roaming on T-Mobile’s network.

(125) In addition, if O2 Germany is able to focus its network
investments in the areas of greatest demand, namely
the main urban centres whilst relying on roaming in
conurbations of secondary economic importance for a
longer but still limited period of time, it will be able to
provide better wholesale and retail services, including
on its own network, than would otherwise have been
the case.
In underground areas, roaming access is
necessary in order to allow uninterrupted coverage in
areas of strategic importance to the consumer but safety
rules and building permission requirements limit O2
Germany’s ability to quickly set up separate networks in
such locations. A longer exemption can therefore be
justified for these specific areas.

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R e c i p r o c a l
c o v e r a g e a r e a

r o a m i n g o u t s i d e t h e 5 0 %

(126) Mobile roaming of O2 Germany on T-Mobile’s network
outside the area subject to the regulatory obligation of
providing 50 % population coverage by 31 December
2005 will allow in particular O2 Germany to become
active as a competitor offering nationwide coverage on
3G retail markets. The Parties have provided evidence to
demonstrate that without the Agreement it is unlikely
that within current planning timeframes, O2 Germany
would have been able to offer coverage beyond [(*)]. It
should also be noted that in 2G mobile markets, which
O2 Germany likewise entered by initially relying to a
significant extent on national roaming on T-Mobile’s
network, O2 Germany has now achieved its own near
nationwide network coverage well in excess of its licence
requirements by building-out its network in line with
market demand for its services.

(127) As a result of the Agreement, O2 Germany will also be
able to resell, outside the areas covered by its licence
obligations, nationwide roaming access to data MVNOs
and nationwide wholesale 3G airtime to service pro-
viders. The Agreement thereby promotes competition in
the markets for 3G national roaming, for wholesale
airtime, and at retail level, and consequently contributes
to the production and distribution of these services.
Because the 3G services concerned are expected to
constitute a broad range of new technologically
advanced products of enhanced quality and functionality
compared to 2G services, the Agreement also promotes
technical and economic progress.

(128) The Agreement on national roaming allows the Parties,
in particular T-Mobile, to make a more intensive and
therefore more efficient use of their network, especially
in less densely populated areas. By allowing T-Mobile to
derive greater economic benefits from its investments in
infrastructure, roaming therefore adds to the incentives
to provide more comprehensive network coverage, at
better quality and higher transmission rates. This likewise
contributes to the production and distribution of the
services concerned, and to technical and economic
progress.

8.3.2.

Fair share of the benefits resulting from the Agree-
ment to end users

(129) By enabling O2 Germany first, to compete more effec-
tively during its roll-out phase, and second, to emerge as
a nationwide provider of 3G wholesale and retail services
(or in any event as a provider offering the broadest
geographical scope likely to be available at that time)
the Agreement on 3G national roaming will enhance
competition both in digital mobile network and services
markets. Competition will develop more quickly and
competitors will have incentives to introduce new
services into the market and will be under greater

pressure to reduce prices as the result of enhanced
market entry with wider coverage based on 3G national
roaming access between the Parties. This is likely to
enable consumers to benefit earlier from a greater range
of new and technically advanced 3G services that are
expected to be enhanced in quality and range of
choice as compared to 2G services, and it makes price-
competition more likely.

(130) The Parties have provided a clear indication of the
potential benefits to consumers of enhanced market
entry in terms of price developments. They have submit-
ted evidence that market entry of the third and fourth
operators in 2G mobile markets in Germany led to
annual reductions in the mobile retail price index of
around 20 %. At the time, O2 Germany’s entry into the
2G mobile market as the fourth nationwide operator
was dependent to a significant extent on the supply of
national roaming by T-Mobile. In addition, as a result of
increased competition at retail
level, any cost-saving
benefits of the increased competition on nationwide
national roaming access available to data MVNOs, and
on resale of wholesale airtime for nationwide services to
service providers (or MVNOs acting as service providers)
are likely to be passed on to end-users.

8.3.3.

Indispensability of the restrictions involved

N a t i o n a l r o a m i n g

(131) The clauses in the Agreement (as amended) that provide
for national roaming are indispensable to the benefits
just discussed.

(132) As regards roaming within the 50 % coverage area, it
the specific characteristics of
should be noted that
German geography and its pattern of population distri-
bution mean that compared to other Member States
such as the United Kingdom there are a larger number
of urban centres in Germany with a relatively smaller
number of inhabitants to cover. Moreover the overall
population of Germany is significantly larger than that
of the United Kingdom or any other Member State.
Given that the business case for 3G networks does not
at present justify uniform nationwide coverage, but
that in line with the expected development of market
demand, coverage will spread more gradually from
urban centres and possibly main transportation axes.
This means that covering a significant percentage of the
German urban population requires comparatively large
investments. Even investments concentrated on the most
densely populated areas still require a relatively large
number of geographically separate areas of network
coverage to be built out and connected.

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(133) Finally O2 Germany as the fourth network operator to
enter GSM markets in Germany is a player with a
relatively small existing customer base which conse-
quently has more limited access to financial resources
than the more established operators. Because O2 Ger-
many has fewer existing customers on its 2G network,
it also has considerable spare capacity available for voice
services, reducing the business case for investments in
its 3G network for any purpose other than to enable
higher bandwidth services, requiring a high network
density. Hence O2 Germany’s roaming on T-Mobile’s
3G network even in the main urban areas for a
limited period of time is considered proportionate and
indispensable, where this might not necessarily be
the case for operators with more established market
positions.

R e s t r i c t i o n o n r e s a l e t o V o i c e M V N O s

(134) The Parties wish to exercise prior control over who has
wholesale access to their 3G networks outside those
categories mandated by national law and regulation —
notably the provision of wholesale airtime to service
providers — and except MVNOs that provide data
services or act as service providers for voice services.
Therefore they require prior consent from the host
operator before allowing the resale of roaming access
to Voice MVNOs, namely MVNOs providing voice
telephony or equivalent services. By restricting the resale
of roaming access for the provision of voice services to
MVNOs that have not invested in 3G network licences
or infrastructure, the Parties intend to protect their own
ability to roll-out 3G networks and to safeguard their
investments, enabling them to offer technically advanced
3G services to end users.

(135) Without the ability to control access to their networks
and thereby, inter alia, to protect their investments from
the erosion of retail prices for voice services by Voice
MVNOs based on the resale of roaming capacity, the
Parties would not offer each other such roaming capacity
at all. This is credible because the Parties have provided
calculations to demonstrate that any revenues foregone
at wholesale level as a result of denying each other
roaming access would be compensated by avoiding the
revenue losses at retail level that would otherwise result.
Without access to national roaming for 3G services on
T-Mobile’s network, O2 Germany would be a less
effective competitor during its roll-out phase and would
be unlikely to enter 3G wholesale and retail markets as
a nationwide competitor (or in any event as a competitor
offering the broadest geographical scope that is likely to
be available at that time). Moreover the efficiencies
gained from T-Mobile selling excess capacity on its
network to O2 Germany would be lost. Likewise the
other benefits in terms of increased scope for compe-
tition based on O2 Germany’s enhanced market entry
and based on the increased network coverage quality

and transmission rates would be lost. The restriction
therefore is necessary to the Agreement, and to its
benefits.

(136) The restriction in no way affects the Parties’ freedom to
offer wholesale access to their own networks to any
other party. Furthermore it is limited in scope to the
effect that the Agreement does allow resale of wholesale
access for 3G voice services to service providers and
MVNOs acting as service providers, and allows the resale
of wholesale access to national roaming for 3G data
services to MVNOs without any restrictions, whereas
data services are expected to be at the heart of 3G retail
markets. Competition is thus affected only in 3G voice
markets. In this sense the restriction is proportional to
its objective. Therefore, at present no less restrictive
means than a limitation on resale of roaming capacity
for voice services to MVNOs are available that would
lead to the same substantive result.

e l i m i n a t i o n

N o
i n
o f
r e s p e c t o f a s u b s t a n t i a l p a r t o f g o o d s
a n d s e r v i c e s c o n c e r n e d

c o m p e t i t i o n

(137) As was set out above, the competition between the four
licensed operators of 3G networks and services that
intend to roll-out 3G networks in Germany and between
service providers, as well as by MVNOs other than those
based on the resale of roaming capacity for voice
services, is enhanced by the present Agreement.

(138) The Agreement also leaves scope for effective compe-
tition between the Parties. In spite of relying on roaming
for part of its coverage, the home network operator will
control
to offer
its own core network, enabling it
differentiated services. In addition, Clause 5.6 of the
Agreement provides that in order to guarantee services
competition between the Parties, they each have to
ensure that roaming customers can only have access to
the services portfolio and network access to third parties
that is available on the home network, and that they
should not have access to the services offered on the
visited network, or have network access to third parties
via the visited network.

(139) The ability of the home network operator to retain
control over the traffic generated by its customers
outside the home network, and to provide access to
services that are not available on the host network,
is improved by the use of the CAMEL (Customised
Application for Mobile network Enhanced Logic) tech-
nology, including by means of call-back features. This is
illustrated by the current availability of different location-
based 2G services for O2 Germany’s users roaming on
the T-Mobile network than those available for T-Mobile
users on the same network. For 3G retail services, the
control over the services available to end users while
roaming will increase because for all data transfers users
will be connected to the packet data network via their
home network.

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(140) In addition, the responsibility for pricing and billing
remains with the home operator. Although detailed
billing data is provided by the host operator to the home
operator, there is no direct relationship between the
commercial conditions for the wholesale roaming offer
and for the specific retail services that are based on this
offer. An example is the ‘click-based’ billing that is
offered by O2 Germany, but not by T-Mobile, for its
2.5G services.

(141) The wholesale costs of 3G roaming are only a transport
cost, albeit a significant one, in addition to which there
are content costs, which for content-rich 3G data
services are expected to increase in significance in
relation to transport costs over time. For the core
network the costs of the operators will differ based on
their choice of equipment suppliers, mode of trans-
mission within the core network (for instance based
either on fixed leased lines or on a wireless micro wave
network),
the relationship between the number of
users and available capacity, operational costs and
maintenance and operations. Finally, given the existence
of a margin between the applicable wholesale rates and
anticipated retail rates, and given that most traffic will
not be roamed, it is likely that the scope for a significant
degree of price differentiation remains.

(142) Hence, the elimination of competition from MVNOs
based on the resale of roaming capacity for voice services
by the Parties is compensated substantially by the overall
pro-competitive effects of the notified Agreement, and
effective competition between the Parties remains poss-
ible. Competition is therefore not eliminated for a
substantial part of any of the markets identified as
affected by the Agreement.

8.3.4. Conclusion

It is the Commission’s conclusion that all the conditions
for an individual exemption pursuant to Article 81(3) of
the EC Treaty and Article 53(3) of the EEA Agreement
are met in respect of the restrictions of competition
related to the Agreement on wholesale national 3G
roaming between the Parties and to the restriction on
resale of roaming capacity to MVNOs.

8.4. Duration of the exemption

(143) Pursuant to Article 8 of Regulation No 17 and to
Protocol 21 of the EEA Agreement respectively, the
Commission shall
to
Article 81(3) of the EC Treaty and Article 53(3) of the
EEA Agreement for a specified period, and may attach
conditions and/or obligations.

a decision pursuant

issue

(144) Given that the markets affected by the restrictions in the
Agreement are emerging markets, the likely effects of
the restrictions cannot be evaluated for a period that
substantially exceeds five years, and therefore in any
event not beyond 31 December 2008. Pursuant to
Article 6 of Regulation No 17, a decision pursuant to
Article 81(3) of the EC Treaty cannot take effect from an
earlier date than the date of notification. Accordingly,
the exemption shall have effect from 6 February 2002.
The duration for each part of the exemption is justified
below (recital 145 and following).

O2 Germany roaming on T-Mobile’s network within the
50 % coverage area

(145) The 50 % population coverage obligation concerns the
urban areas with the greatest potential for infrastructure
competition. Therefore an exemption for roaming in
this area can only be justified for such time as the
cooperation helps to promote competition during the
initial roll-out phase of the network and to promote the
commercial
launch and early take-up of 3G retail
services.

(146) In order to ensure that O2 Germany’s incentives to build
out its own high quality network are maintained, the
duration of the exemption is based on phasing out
roaming within the 50 % population coverage area
according to a fixed timetable. This timetable applies to
Areas 1, 2 and 3 as set out in section 4.3.1 above. This
phasing out starts on 31 December 2005 with Area 1,
which covers main urban areas accounting for approxi-
mately [(*)] of the German population. Next, roaming is
phased out by 31 December 2007 in Area 2 which
accounts for approximately a further [(*)] of the German
population and by 31 December 2008 in Area 3,
which accounts for approximately [(*)] of the German
population. The cities and regions in Areas 2 and 3 cover
smaller urban conurbations of secondary commercial
importance. As regards underground areas, O2 Germany
is entitled to continue roaming until 31 December
2008. Barring significant unanticipated changes to the
commercial or regulatory environment, the economic
justification for applying Article 81(3) EC/Article 53(3)
EEA to roaming in the 50 % population coverage area
thereafter will cease to exist after 31 December 2008.

(147) After expiry of each of the dates specified in Section 4.3.1
and following advance notice to the Parties, the Com-
mission will reveal, in an appropriate form, the lists of
cities and regions in Areas 1, 2 and 3 respectively.

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Reciprocal roaming outside the 50 % coverage area

Article 2

(148) As the area over and above that which is subject to the
regulatory obligation of 50 % population coverage
covers less densely populated and commercially less
attractive areas of
the Germany, an exemption for
roaming in this area can be justified for a longer period,
in particular to the extent that the Parties are going
beyond their regulatory obligations to cover some of the
commercially less attractive rural and remote parts of
Germany.

(149) However, the markets affected by the restrictions in the
Agreement are emerging markets and therefore the
likely effects of those restrictions cannot be evaluated
for a period that substantially exceeds five years. Conse-
quently the Commission considers it appropriate to
grant an exemption until 31 December 2008. This does
not exclude that the commercial and regulatory situation
prevailing at the end of that period may be such that
Article 81(3) of the EC Treaty/Article 53(3) of the EEA
Agreement continue to apply to roaming across parts of
the area over and above that which is subject to the
regulatory obligation of 50 % population coverage.

Restriction on resale to Voice MVNOs

(150) The restriction on resale to Voice MVNOs is closely
linked to the provision of roaming, as without the
provision of roaming the resale restriction would serve
no purpose and without the resale restriction the sale of
roaming rights would not have been agreed between the
Parties. In order to preserve the logic of the resale
restriction and commercial balance between the Parties
as set out
this link must be
maintained as concerns the duration of the exemption.
Hence the Commission considers it appropriate to grant
an exemption for the restriction on resale to Voice
MVNOs until 31 December 2008.

in their Agreement,

(151) This Decision is without prejudice to the application of
Article 82 of the EC Treaty and Article 54 of the EEA
Agreement.

HAS ADOPTED THIS DECISION:

Article 1

Based on the facts in its possession, the Commission has no
grounds for action pursuant to Article 81(1) of the EC Treaty
or Article 53(1) of the EEA Agreement in respect of the
provisions of the Agreement of 20 September 2001 and by
supplementary agreements of 20 September 2002, 22 January
2003 and 21 May 2003 that relate to (extended) site sharing
between T-Mobile and O2 Germany, with respect to the
information exchanged necessary to enable site sharing, and
with respect to the restriction in the Agreement on the resale
of national roaming to other licensed network operators.

Pursuant to Article 81(3) of the EC Treaty and Article 53(3) of
the EEA Agreement and subject to Articles 3 and 4 of this
Decision, the provisions of Article 81(1) of the EC Treaty and
Article 53(1) of the EEA Agreement are hereby declared
inapplicable to the supply of 3G national roaming by T-Mobile
to O2 Germany, within the area subject to the regulatory
obligation of providing 50 % population coverage by
31 December 2005 for the following periods:

(a)

(b)

(c)

from 6 February 2002 until 31 December 2005 in respect
of the cities listed in Area 1 (61), except in the underground
areas;

from 6 February 2002 until 31 December 2007 in
respect of the regions listed in Area 2 (62), except in the
underground areas;

from 6 February 2002 until 31 December 2008 in respect
of the regions listed in Area 3 (63) and in any underground
areas in the cities and regions listed in Areas 1, 2, and 3.

‘Underground areas’ shall mean any area within the cities and
regions listed in Areas 1, 2 and 3 which is part of the
underground public transport system (including railways and
metro), underground shopping centres, underground car
parks, tunnels for vehicles and pedestrians and any other
comparable underground areas as well as the areas directly
above (ground level) but only to the extent underground areas
and ground level cannot be technically separated for roaming
purposes.

Article 3

Pursuant to Article 81(3) of the EC Treaty and Article 53(3) of
the EEA Agreement, the provisions of Articles 81(1) of the EC
Treaty and Article 53(1) of the EEA Agreement are hereby
declared inapplicable, from 6 February 2002 until 31 Decem-
ber 2008 to:

(a) The provision of 3G national roaming between T-
Mobile and O2 Germany outside the area subject to the
regulatory obligation of providing 50 % population
coverage by 31 December 2005, as set out in Chapter 3
of the Agreement (Sections 5 to 11);

(61) Area 1 comprises [main urban (*)] regions covering approxi-
mately [(*)] of the German population, where O2 undertakes
not to roam, and T-Mobile undertakes to bar roaming, from
31 December 2005 onward. Area 1 consists of: [(*)].

(62) Area 2 comprises [smaller urban (*)] regions [of secondary
commercial importance (*)] covering approximately a further
[(*)] of the German population, where O2 undertakes not to
roam, and T-Mobile undertakes to bar roaming, from 31 Decem-
ber 2007. Area 2 consists of: [(*)].

(63) Area 3 comprises [smaller urban (*)] regions [of lesser commer-
cial importance (*)] covering approximately a final [(*)] of the
German population, where O2 undertakes not to roam, and T-
Mobile undertakes to bar roaming, from 31 December 2008.
Area 3 consists of: [(*)].

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(b) The restriction on the resale of 3G national roaming
rights to MVNOs in Clauses 11.1.b and 11.1.c of the
Agreement.

Article 4

This Decision is addressed to

T-Mobile Deutschland
Landgrabenweg 151
D-53227 Bonn

And

O2 Germany & Co OHG
Georg Brauchle Ring 23-25
D-80992 München

Done at Brussels, 16 July 2003.

For the Commission

Mario MONTI

Member of the Commission