Wednesday, 1 May 2013

Commission's Art. 7 Comments to the Austrian NRA on the latter's draft fixed call origination market analysis

The European Commission made the following comments, in its decision addressed  to TKK on the latter's draft fixed call origination market analysis:

"Change of pricing methodology and resulting significant increase of wholesale call origination rates
 
The Commission notes that TKK intends to change its wholesale price setting methodology for call origination services, which will in consequence significantly increase the call origination charges. TKK motivates its proposal with changed competition conditions at the retail level (strong pressure from mobile operators) and its intention to incentivize competitors to migrate towards future-proof technology based on VoB. 
 
The Commission considers that the competitive pressure from neighbouring mobile markets might not be sufficient to justify the change of price setting methodology and such significant increase of wholesale call origination charges. To the contrary, the competitive pressure from mobile markets would suggest that A1 TA could decrease its retail tariffs, and consequently the wholesale charges to avoid a margin squeeze. 
 
Furthermore, the Commission notes TKK's intention to ensure the relative attractiveness of wholesale offers based VoB. While indeed such offers could positively impact the development of competition not only on the retail calls market(s) but also on the retail access market(s), the Commission considers that in the short to medium term such offers may not be considered substitutes of wholesale call origination services in the specific Austrian context. The Commission notes that despite the existence of regulated wholesale VoB offers on the Austrian market for a significant period of time, there has been virtually no take up of the wholesale services, and only few retail customers are provided with services based on VoB. The Commission points out that the reason for the low take up of VoB offers may not be the relative attractiveness of the CS/CPS model, but possible deficiencies (concerning both pricing and technical issues) of the wholesale VoB offer.
 
In that regard the Commission asks TKK to analyse further, prior to adopting its final measure, the ability of VoB services to substitute wholesale call origination over the relevant timeframe of the review. Should TKK come to the conclusion that the proposed increase of the wholesale call origination tariffs will most likely strengthen the ability of A1 TA to exclude CS/CPS competitors, without bringing about the expected migration towards VoB, the Commission requests TKK to reconsider in its final measure the need to modify the price setting methodology.
 
In any event, TKK should closely monitor the market and ensure that there is sufficient margin between the increased wholesale charges and prevailing retail tariffs."