Market regulation of electronic communications

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Market regulationof electronic communications

• Milena Petkova
• Head of Market Regulation Directorate
• Communications Regulation Commission
• May 2010

2
Presentation highlights

• Legal and regulatory framework
• Market analysis procedure
• Definition, analysis and assessment of the
  markets of electronic communication networks
  and/or services
• Market analyses in Bulgaria

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European regulatory framework 2002
4
Reformed Regulatory Framework
NUMBER PORTABILITY
INVESTMENT IN NGN
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Market regulation
I Gathering of information for the electronic
communications markets II Definition, analysis
and assessment of the electronic communications
markets III Public consultation of the draft
analysis and notification to the European
Commission IV Adoption of a final decision on
the definition, analysis and assessment of the
relevant market
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Market analysis procedure
Preparation of questionnaires and gathering of
information
Processing and validation of the gathered
information. Analysis of the data
Support and coordination for the correct filling
in the questionnaires
January
February
March
April
May
June
July
August
September
2009
Procedure for the public consultation of the
Draft analysis. Preparation of a position on the
received comments. Notification to the European
Commission
Results from the notification to the EC. Adoption
of a final decision by CRC
The imposed obligations should have their effects
in the next two-year period.
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Relevant product market

• Substitutability of demand and supply
  definition of the markets boundaries
• SSNIP test (hypothetical monopolist test)
• Whether for the smallest possible market SSNIP
  will lead to a significant increase in the supply
  by new competitors and whether it will lead to
  the re-direction of the demand towards new
  services?

Small significant non-transitory increase in
price
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Relevant geographic market

• The European Commission
• When the relevant product market is defined,
  the next step that needs to be taken is the
  definition of the geographic dimension of the
  market.
• In the sector of electronic communications the
  geographic scope of the relevant market is
  traditionally defined by the territory covered by
  the network, and the presence of legal and other
  regulatory instruments

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Three criteria test application

• Presence of high and non-transitory structural,
  legal or regulatory barriers to market entry
• Lack of possibility for market competition
  development on the relevant market for the next
  two-year period
• Insufficiency of competition law to address the
  market failures (barriers to entry) and provision
  of conditions for the development of competition
  on the relevant market

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Designation of undertaking(s) with significant
market power

• Criteria from the Guidelines
• Market share of the undertaking
• Overall size of the undertaking
• Control of infrastructure not easily duplicated
• Technological advantages or superiority
• Absence of or low countervailing buying power
• Easy or privileged access to capital
  markets/financial resources
• Product/services diversification (e.g. bundled
  products or services)
• Economies of scale
• Economies of scope
• Vertical integration
• Highly developed distribution and sales network
• Absence of potential competition
• Barriers to expansion

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Possible obligations imposed on SMP undertakings
according to the development of market competition

• Price control, incl. cost-oriented prices
• Transparency obligations
• Accounting separation
• Non-discrimination
• Obligatory provision of certain
  infrastructure/equipment (software, premises,
  towers, ducts, etc)
• Obligatory provision of access to certain
  equipment

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First round market analyses - CRC

• Wholesale markets

• Retail markets

1. Access to public telephone network at a fixed
location for
1. Voice call termination on individual mobile
networks
1.1. Residential customers
2. Call origination on the public telephone
networks provided at a fixed location
1.2. Non-residential customers.
3. Transit services in the fixed public telephone
network
2. Publicly available national telephone services
provided at a fixed location for
4. Call termination on individual public
telephone network provided at a fixed location
2.1. Residential customers
2.2. Non-residential customers.
5. Wholesale access to network infrastructure
3. Publicly available international telephone
services provided at a fixed location for
6. Wholesale broadband access
3.1. Residential customers
7. Trunk segments of leased lines
3.2. Non-residential customers.
8. Terminating segments of leased lines
4. The minimum set of leased lines
In the process of information gathering
In the process of analysis
Final decision adopted
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Wholesale call origination on the public
telephone networks provided at a fixed location
(Market 8 under Recommendation 2003) Relevant
product market (1)

• Always having in mind the connection between the
  relevant wholesale market and the respective
  retail markets for access, local, national and
  international telephone calls
• Retail and wholesale demand and supply-side
  substitutability
• (as Markets 1-6 havent been analyzed yet, we
  had to analyze the retail substitutability as
  well)

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Wholesale call origination in fixed networks
(market 8)Relevant product market (2)
Retail substitutability
Calls made by residential and non-residential
customers
Calls from mobile networks
Calls from individual public telephone networks
provided at a fixed location
Calls from WiMAX networks with national access
code

• On-net calls
• Calls to national fixed, mobile and WiMAX
  networks
• Calls to networks abroad
• Dial-up internet calls
• Fax and telex calls
• Calls to non-geographic numbers
• Calls to short numbers

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Wholesale call origination in fixed networks
(market 8)Relevant product market (2)
Wholesale substitutability
Origination services
Self-supply services
Local-loop unbundling
Purchase of leased lines
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Wholesale call origination in fixed networks
(market 8) Relevant geographic market

• Scope Republic of Bulgaria territory
• Includes the networks of

BTC AD ITD NETWORK AD BULGARIA TELECOM NET AD VESTITEL BG AD EUROCOM CABLE EAD MOBILTEL AD CABLETEL AD COSMO BULGARIA MOBILE EAD EASTERN TELECOMMUNICATION COMPANY AD NEXCOM BULGARIA EAD NET IS SAT OOD NOVO EOOD ORBITEL AD SPECTRUM NET AD TELECOM 1 OOD TRANS TELECOM OOD TELECOM PARTNERS NETWORK AD
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Wholesale call origination in fixed networks
(market 8)Relevant market analysis
Criteria used

• Market share
• Barriers to entry and market expansion
• Absence of or low countervailing buying power

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Wholesale call origination in fixed networks
(market 8)Undertakings with significant market
power

• BTC AD has a 100 market share in the relevant
  market of wholesale call origination services
• High and non-transitory market entry barriers
• No undertaking is capable to influence the prices
  of call origination services using only their
  buying power
• CRC proposes to designate BTC AD as an
  undertaking with significant market power

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Wholesale call origination in fixed networks
(market 8)Obligations imposed on the SMP
undertaking

• Transparency
• Non-discrimination
• Accounting separation
• Obligations of access to, and use of, specific
  network facilities
• Price control

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Wholesale call termination on individual public
telephone networks provided at a fixed location
(Market 9 under Recommendation 2003)

• Market players
• 20 operators are authorized to provide fixed
  voice telephone services in Bulgaria
• The incumbent operator BTC AD
• 19 alternative operators
• (17 of them are actually providing services to
  retail customers)

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Wholesale market of call termination on fixed
networks (market 9)Relevant product market
Calls to individual public telephone networks
provided at a fixed location
Calls to mobile networks
Calls to WiMAX networks with a national access
code
On-net calls
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Wholesale market of call termination on fixed
networks (market 9)Relevant geographic market

• Scope Republic of Bulgaria territory
• Includes the networks of the 17 undertakings
• Relevant markets - Wholesale call termination on
  individual public telephone networks
  provided at a fixed location by each of the
  above-mentioned 17 operators

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Wholesale market of call termination on fixed
networks (market 9)Relevant market analysis
Criteria used

• Market share
• Barriers to entry and market expansion
• Absence of or low countervailing buying power

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Wholesale market of call termination on fixed
networks (market 9)Undertakings with significant
market power

• Each undertaking has a 100 market share in the
  relevant market of terminating calls on its own
  network
• Lack of competition in each of the markets
  analyzed, as well as high and non-transitory
  market entry barriers
• No undertaking is capable to influence the prices
  of voice call termination services using only
  their buying power

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Wholesale market of call termination on fixed
networks (market 9)Proposed market remedies (1)

• BTCs specific obligations are maintained as
  follows
• Accounting separation
• Cost accounting and cost orientation
• Transparency
• Publication of Reference Interconnection Offer
• Access
• Non-discrimination

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Wholesale market of call termination on fixed
networks (market 9)Proposed market remedies (2)

• Specific obligations to Mobiltel and Cosmo
  Bulgaria Mobile
• Accounting separation
• Transparency
• Publication of Reference Interconnection Offer
• Access
• Non-discrimination

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Wholesale market of call termination on fixed
networks (market 9)Proposed market remedies (3)

• To all the rest enterprises
• Transparency
• Access
• Non-discrimination

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Transit services in the fixed public telephone
network (Market 10 under Recommendation 2003)

• The market doesnt meet the 3 criteria test
• - The 1st criteria there are no significant
  barriers to entry
• The 2nd criteria the market competition has
  been developing (several market players,
  competitive prices)
• The market is not susceptible to ex ante
  regulation
• Current obligations imposed on BTC are withdrawn

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Wholesale voice call termination on individual
mobile networks (Market 16 under Recommendation
2003)

• Market players
• - Radiotelecommunications Company EOOD
• trademark Mobikom, standard NMT/CDMA450
• - Mobiltel EAD
• trademark M-tel, standard GSM/UMTS
• - Cosmo Bulgaria Mobile EAD
• trademark Globul, standard GSM/UMTS
• - BTC Mobile EOOD
• trademark Vivatel, standard GSM/UMTS
• In August 2008 the individual licenses
  for carrying out telecommunications through
  public telecommunications mobile network under
  the NMT and GSM/UMTS standards of the two
  operators were devolved to the incumbent BTC AD

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Wholesale termination on mobile networks (market
16 )Relevant product market
Voice calls to GSM and UMTS mobile networks
Voice calls to NMT mobile networks
On-net voice calls
Voice calls to fixed telephone networks
Short message and multimedia message services
(SMS MMS)
Voice over Internet protocol calls (VoIP)
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Wholesale termination on mobile networks (market
16 )Relevant geographic market

• Scope Republic of Bulgaria territory
• Includes
• Mobiltel EAD network (GSM/UMTS Standards)
• Cosmo Bulgaria Mobile EAD network (GSM/UMTS
  Standards)
• BTC AD network (GSM/UMTS standards)
• BTC AD network (NMT/CDMA standards)

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Wholesale termination on mobile networks (market
16 )Relevant markets

• Wholesale voice call termination provided by
  Mobiltel EAD in its GSM/UMTS network
• Wholesale voice call termination provided by
  Cosmo Bulgaria Mobile EAD in its GSM/UMTS network
• Wholesale voice call termination provided by BTC
  AD in its GSM/UMTS network
• Wholesale voice call termination provided by BTC
  AD in its NMT/CDMA network

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Wholesale termination on mobile networks (market
16 )Relevant market analysis
Criteria used

• Market share
• Barriers to entry and market expansion
• Absence of or low countervailing buying power
• Pricing structure

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Wholesale termination on mobile networks (market
16 )Undertakings with significant market power

• Each undertaking has a 100 market share in the
  relevant market of terminating calls on its
  network
• - Mobiltel EAD in its GSM/UMTS network
• - Cosmo Bulgaria Mobile EAD in its GSM/UMTS
  network
• - BTC AD in its GSM/UMTS network
• - BTC AD in its NMT/CDMA network
• Lack of competition in each of the markets
  analysed, as well as high and non-transitory
  market entry barriers
• No undertaking is capable to influence the prices
  of voice call termination services using only
  their buying power
• Lack of initiative for lowering the voice call
  termination prices to levels oriented to the
  costs of providing the respective services

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Wholesale termination on mobile networks (market
16 )Obligations before the market analysis

1. Non-discrimination principle observance
2. Access to information and specifications needed
   for an interconnection by request from another
   operator
3. Corporate confidentiality observance

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Wholesale termination on mobile networks (market
16 ) Market obligations concerning non-price
problems (1)

1. Mobiltel and Cosmo Bulgaria should continue to
   keep the fixed-to-mobile termination rate glide
   path reduction imposed by CRC on both operators
   in the beginning of 2008 (the obligations are
   covering the period to 30.06.2009)
2. Imposition of price-cap obligation on Mobiltel,
   Cosmo Bulgaria Mobile and BTC on their
   fixed-to-mobile termination rates from 01.07.2009
   to the end of 2009
3. Imposition of price-cap obligation on Mobiltel,
   Cosmo Bulgaria Mobile and BTC on their
   mobile-to-mobile termination rates

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Wholesale termination on mobile networks (market
16 ) Market obligations concerning non-price
problems (1)

• Obligations on each undertaking
• Transparency
• Publication of Reference Interconnection Offer
• Access
• Non-discrimination
• Accounting separation

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Retail markets for public telephone services
provided at a fixed location

• Markets 1-6 (Recommendation 2003) had to be
  analyzed because
• there hasnt been a first round of market
  analyses in Bulgaria
• Recommendation 2007 states that there should be
  at least a three-criteria test analysis to
  evaluate whether these markets are susceptible to
  ex-ante regulation
• There are obligations that are still imposed on
  BTC under European regulatory framework 1998
• Two groups of markets were formed
• Access to the public telephone network at a fixed
  location (including markets 1 and 2)
• Publicly available telephone services provided at
  a fixed location (including markets 3, 4, 5 and 6)

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Retail markets (1-6)Relevant product market (1)
Access to the public telephone network at a fixed
location
All types of access to the public telephone
network at a fixed location
Publicly available telephone services provided at
a fixed location

• Analogue subscriber line access
• Digital subscriber line access
• Cable network access
• Wireless access
• GSM, CDMA, UMTS access
• WiMAX access, etc.

Access to public mobile networks
Access to WiMAX networks offering services with
national access codes
Access to the public telephone network at a fixed
location for residential and non-residential
customers at a fixed location (forming two
separate markets)
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Retail markets (1-6)Relevant product market (2)
Publicly available telephone services provided at
a fixed location
Publicly available telephone services provided at
a fixed location
Access to the public telephone network at a fixed
location
Publicly available telephone services provided at
a fixed location for residential and
non-residential customers (forming two separate
markets)
Publicly available telephone services provided
using a mobile network
Publicly available telephone services with
national access codes provided using WiMAX
networks
Publicly available national and international
telephone services provided at a fixed
location (forming two separate markets)
Public telephone services provided through
payphones
Calls from geographic to geographic numbers
Calls from geographic to non-geographic numbers
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Retail markets (1-6)Relevant geographic market

• Scope Republic of Bulgaria territory
• The Access to the public telephone network at a
  fixed location market includes the networks of 16
  undertakings (the incumbent BTC and 15
  alternative operators providing access to the
  public telephone network at a fixed location)
• The Publicly available telephone services
  provided at a fixed location market includes the
  networks of 18 undertakings (the incumbent BTC
  and 17 alternative operators providing telephone
  services at a fixed location including CS CPS
  providers)

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Retail markets (1-6)Relevant market analysis
Criteria used

• Market share
• Barriers to entry and market expansion
• - economies of scale
• - economy of scope
• - vertical integration
• - control of infrastructure not easily duplicated
• Absence of or low countervailing buying power
• Product diversification

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Retail markets (1-6)Other criteria used

• Barriers to entry and market expansion
• Control of infrastructure not easily duplicated
• Economies of scale and scope
• Vertical integration
• Absence of or low countervailing buying power
• Product diversification

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Retail markets (1-6)Undertakings with
significant market power

• BTC AD has high market shares on all relevant
  retail markets for public telephone services
  provided at a fixed location
• Presence of high and non-transitory market entry
  barriers
• No undertaking is capable to influence prices
  using only their buying power
• CRC designated BTC AD as an undertaking with
  significant market power on all retail markets
  for public telephone services provided at a fixed
  location

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Retail markets (1-6)Obligations imposed on the
SMP undertaking

• At wholesale level

• - Obligation to provide the service carrier
  selection and carrier pre-selection
• Access to/ provision of specific network
  facilities for Wholesale Line Rental (WLR)
• Transparency
• Non-discrimination
• To publish Reference Offer on Wholesale Line
  Rental
• Price control

• At retail level

• - Non-discrimination
• Not to provide price bundles
• Transparency
• Price control

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Thank you for your attention!
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• Milena Petkova
• Head of Market Regulation Directorate
• Communications Regulation Commission
• Phone [phone]
• e-mail mpetkova_at_crc.bg
• website www.crc.bg