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Telecommunications

Broadband

The widespread use of broadband - high-speed, always on internet access - is vital for better productivity in the European economy and for citizens to benefit from eHealth, eGovernment and more.

Requiring incumbent operators to let new companies on the market use their networks means more competition at the retail level. It also means that the incumbent's wholesale prices, if set unfairly high, for example, might unfavourably affect competition on the retail broadband market.

The Commission has taken a number of decisions to safeguard broadband competition.

Most recently, on 22 June 2011, the Commission imposed a fine of EUR 127,5 million on Telekomunikacja Polska (TP), the Polish incumbent telecoms operator, for an abuse of a dominant position in the Polish broadband market (Press release). The decision found that TP had unlawfully refused to grant alternative operators access to its wholesale products for more than four years. Such abusive behaviour was likely to harm consumers because of low broadband penetration, high retail prices and low broadband speeds. TP has appealed the decision.

In July 2007, the European Commission stepped in to increase competition in the Spanish telecoms market by fining the Spanish incumbent telecoms operator Telefónica EUR 151.8 million for a very serious abuse of its dominant position (Press release). The Commission found that for five years Telefónica had imposed unfair prices, which took the form of a margin squeeze between the wholesale prices it charged to competitors and retail prices charged to customers. This weakened Telefónica's competitors, reliant on Telefónica's wholesale network, because they were forced to make losses if they wanted to match Telefónica's retail prices. It also meant that consumers were paying the highest prices in Europe for broadband services and resulted in very low broadband penetration in Spain. The case is currently under appeal. This article describes the Commission's decision in more detail.

In a similar case in 2003, the Commission fined Deutsche Telekom EUR 12.6 million for abuse of its dominant position in the form of a margin squeeze in German telecommunications markets (Press release). The Commission found that DT was charging new entrants higher fees for wholesale access to the local loop than what DT's subscribers were paying for retail fixed line subscriptions. This discouraged new companies from entering the market and reduced both the choice of telecoms services suppliers and price competition for consumers. Deutsche Telekom appealed, but the Court judgment in October 2010 upheld the €12.6 million fine. This article on price abuse in the telecommunications sector and this article on the development of competition in German broadband markets describe the Commission's decision in more detail.

Also in 2003, the Commission fined Wanadoo, the internet arm of France Télécom, EUR 10.5 million for charging prices below cost (predatory pricing, an abuse which can drive out efficient competitors) in the French retail broadband market (Press release). In April 2009, the ECJ judgement dismissed France Télécom's appeal, confirming that, in order to find predatory pricing: (i) it does not need to be shown that the firm could recoup its losses; and (ii) a dominant firm does not have an absolute right to lower its prices to meet those of its competitors. This article describes the Commission's decision in more detail.

In April 2009, the Commission decided to initiate proceedings against Slovak Telekom, the Slovak incumbent telecoms operators, for suspected abusive behaviour in the broadband access and other electronic communications markets in Slovakia (Memo/09/203). Later, in December 2010, the Commission decided to extend the scope of its investigation into Slovak Telekom to include the parent company, Deutsche Telekom (IP/10/1741). On 22 June 2011, the Commission fined Telekomunikacja Polska EUR 127 million for abuse of dominant position.

Although the Commission watches the development of broadband markets carefully, it does not uphold all complaints against incumbent operators. In July 2010, for example, the Commission decided to reject, for lack of Community interest, a complaint by Vivendi against France Télécom relating to an alleged abuse of a dominant position on the French broadband and telephone subscription market. The complainants have appealed the Commission's decision.

The above cases focused on ensuring that competition in retail broadband markets remained free and fair. What happens, though, when broadband is not available in some areas? Although private sector investment will often provide broadband infrastructure, State intervention may sometimes be necessary. The State aid rules provide a framework that ensures that State intervention is justified, and properly targeted.

The Commission therefore monitors the awards of telecoms licences and state support for telecoms companies to ensure that:

  • support for broadband is justified
  • support does not harm commercial broadband providers
  • alternative operators are not discouraged from entering the market.

State aid is crucial in achieving the Commission's objective of providing broadband to all European citizens. Many public initiatives at national, regional and local level are driving the development of broadband networks, but in rural and remote regions, telecoms firms often do not offer broadband because it is not profitable. State aid can help bring broadband to these areas.

Guidelines for applying state aid rules on rapid deployment of broadband networks (2009)

Commission decisions on state aid to broadband (2003-10)

  
  
Related links
Why Europe needs to promote competition in the telecommunications sector (factsheet on the Information Society portal)
Information Society Glossary