Commission questions Spanish regulator’s price regulation of wholesale broadband access

The European Commission has suspended a proposal from the Spanish telecoms regulator (CMT) for setting the regulated prices which the dominant operator, Telefónica, can charge other operators which want to sell broadband services based on Telefónica’s network.

The Commission is concerned that CMT’s approach may not be compatible with EU telecoms rules, could be detrimental to competition and would not incentivize investment in broadband. The Commission is also concerned that the regulated prices are not set in a transparent manner and that the proposal could create artificial barriers in the market.

CMT proposes to set the regulated prices with reference to a cost model in combination with Telefónica’s accounting data and benchmark among Member States. The resulting proposed regulated prices are up to 50% above cost-efficient levels. Moreover, the wholesale broadband access product is the only regulated offer on Telefonica’s fibre network and CMT does not plan to impose other competition safeguards such as stricter non-discrimination rules

The proposed Spanish regulation will discourage operators from other countries from buying wholesale broadband access in Spain, and as such hinder the development of pan-European services.

The Commission has sent a “serious doubts” letter to CMT and the regulator now has three months to work with the Commission and the Body of European telecoms regulators (BEREC) to find a solution to this case. In the meantime, implementation of the proposal is suspended.

On 27 May 2013 the Commission received a draft proposal from CMT concerning remedies both on the market for wholesale network infrastructure access at a fixed location and the market for wholesale broadband access in Spain.

The Commission’s decision to start an in-depth investigation begins a second phase procedure under article 7a of the EU Telecoms Directive.

Article 7 of the Telecoms Framework Directive requires national telecoms regulators to notify the Commission, BEREC (the Body of European Regulators for Electronic Communications) and telecoms regulators in other EU countries, of measures that they plan to introduce to address the lack of effective competition in the markets in question.

The new rules enable the Commission to adopt further harmonisation measures in the form of recommendations or (binding) decisions if divergences in the regulatory approaches of national regulators, including remedies, persist across the EU in the longer term.

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