The European Commission has opened an in-depth investigation into the Finnish telecoms regulator's (FICORA's) approach to price regulation on both the wholesale local access markets and the wholesale central access markets in the various parts of the country. In summary, FICORA envisages not to impose price regulation on either local or central access to copper networks of operators having significant market power (SMP), while imposing cost-oriented prices, which vary significantly by operator area, on local access to their respective fibre networks. The Commission has concerns that, if implemented, FICORA's proposal could bring significant uncertainty regarding wholesale prices , which would lead to higher and not competitive broadband prices for consumers and would distort investment signals to market participants.
FICORA proposes to withdraw the price control obligations from the three large operators (Telia, Elisa and DNA)on the copper-based infrastructure, although the copper network in Finland is much more developed than fibre (87% of wholesale local access services are provided over copper networks, while only 13% is provided over fibre). At the same time FICORA proposes to set the rate of the so called virtual unbundling (VULA) at the level of the (non-regulated) copper prices. Moreover FICORA proposes, without proper justification, lighter obligations on the 18 small SMP operators.
The Commission believes that in the absence of any price control, operators might potentially raise prices, up to and beyond the level of FICORA's own calculations of the relevant costs.
The Commission has at the same time concerns about the outcome of the regulatory approach regarding both fibre access products.
FICORA proposes to substantially lower fibre access charges. Significant differences exist between relatively few urban areas and vast scarcely populated territories, and FICORA's application of the cost model leads to considerably different wholesale prices for the three largest operators, with the consequence that operators investing in areas of similar competitive characteristics (as to cost structure and retail price levels) would face significantly different (regulated) wholesale tariffs for granting access. The Commission considers that in this specific situation other price control mechanisms could allow more price flexibility at wholesale level.
FICORA proposes not to impose any price regulation on the market for wholesale central access, for all operators. For the three large operators only the obligation to apply non-discriminatory prices, as part of the non-discrimination obligation, will remain in place, while for small SMP operators even the non-discrimination obligation is proposed to be withdrawn. The Commission is concerned that in such circumstances, SMP operators might abuse their market power by charging excessive wholesale prices.
The Commission now has three months to discuss the case with FICORA, in close cooperation with the body of European regulators (BEREC), in order to remove any serious doubts to comply with EU law. The Commission may, at the end of the investigation period, either lift its reservations or issue a Recommendation under Article 7a of the Framework Directive, requesting FICORA to amend or withdraw its draft measure. If FICORA were not to amend or withdraw its draft measure accordingly, absent valid reasoned justification, the Commission could reserve its right to assess whether to consider other legal measures available.
Find more information on article 7 procedures.