NEWS | Wednesday, 02 March 2008

MCA accuses Commission of “pre-empting matters” in declaring GO’s dominance in fixed telephony

Charlot Zahra

The Malta Communications Authority (MCA) accused the European Commission of “pre-empting matters” when it declared GO as dominant in the fixed telephony sector.
The MCA was giving its response to the European Commission’s latest report Progress Report on the implementation of the EU’s Single European Electronic Communications Market published two weeks ago.
In its report, the Commission warned that GO was “by far strongest player in fixed market. There is certainly room for more competition in the fixed telephony sector, as the incumbent continues to be dominant with a 98% market share.”
With regards to fixed telephony, the MCA noted that since the liberalisation of this market in 2003, three new service providers were competing against the incumbent operator, GO (Melita Cable, Sky and Vodafone).
A spokesperson for the MCA told Business Today: “Taking account of the size of the Maltese market and the extremely high penetration rate achieved by the incumbent prior to liberalisation, the MCA considers this to be a very positive result with respect to its primary objective of facilitating entry into this market.
“Furthermore, the nature of competition in Malta is predominantly infrastructure-based (GO, Melita Cable, and Vodafone all have their own nation-wide network) which is recognized to be more robust than service competition.
“Without prejudice to the eventual outcomes of the MCA’s forthcoming reviews related to the fixed telephony market, the MCA considers the Commission to be pre-empting matters when it declares that an undertaking is dominant,” the MCA said.
“The framework establishes a methodology for reaching such conclusions, which involves complex economic analysis and not simply an analysis of market shares,” it added.
With respect to market shares, the MCA spokesperson noted that the market shares quoted in the EC report referred to 2006 and were based on revenues. “As at the Third Quarter of 2007, GO’s market share in terms of subscriptions stood at 88%. This clear downward trend is an important indicator that competition is quickly taking root in Malta,” the MCA spokesperson said.
The MCA said it considered the local developments with respect to market shares to be “more or less similar to those experienced in other member states in the first years after liberalisation”.
“This is confirmed by the Implementation Report which indicates that the incumbent’s market share remains above 70% in 14 member states, despite the fact that in a number of these member states the market was liberalised much earlier than in Malta,” the MCA spokesperson told BusinessToday.
With regards to the part in the EC report which called for more competition in the cable television sector, where Melita Cable still has a dominant position, the MCA noted “that the Commission made a statement to the effect that the cable operator is dominant in its market (which is taken to be the wholesale broadcast transmission market).
“The MCA finds this statement contradictory given that the Commission vetoed the MCA’s proposed Decision declaring Melita Cable and GO dominant in their respective markets.
“Furthermore in a recently adopted recommendation on relevant markets the Commission has advised member states that generally it does not consider this market to be susceptible to regulation.
“The MCA is of the view that there are positive indications with regard to the developments in this market at the retail level,” the MCA said.
With respect to the entry of additional players in this market, the MCA said this was “dependent on the availability of spectrum for a second operator, or on the provision of IPTV, given that it is unlikely that in a liberalised environment there will be interest in constructing a second cable network.”
The MCA explained that at the last regional radio conference held in 2006 the number of channels assigned to Malta for Digital Terrestrial Transmissions was reduced “with the consequence that there are no longer sufficient channels available to enable the entry of a third operator on the same terms and conditions as Go Plus”
“Malta is under intense negotiations with Italy with a view to coordinating additional channels to address this matter. However these negotiations are proving to be particularly difficult,” the MCA said.
Asked for the MCA’s reaction to the fact that at 17%, broadband penetration is still slightly at a lower level when compared to the average in other EU Member States, and how was the MCA going to effectively promote a higher take-up of broadband Internet in Malta, the spokesperson said that the 16.9% reported by the Commission excluded Melita Cable’s 128 kbps connections, “which were upgraded to 2Mbps in November 2007.
“When one includes these connections, the penetration rate as at the end of December 2007 stands at 20.42%. Furthermore this figure is expected to increase following the implementation of the Blueskies initiative.
“The MCA sought to promote the higher take up of Broadband via the means available to it:
“(a) the imposition of wholesale broadband access obligations – the Commission vetoed the MCA’s proposed decision to impose such obligations on Melita Cable and GO; this would have provided alternative internet service providers with continued regulated access to wholesale broadband access. The MCA is now reviewing its notification.
(b) the assignment of spectrum for BWA– The MCA has assigned spectrum for Broadband Wireless Access services to Cellcom, GO, and Vodafone. Vodafone is already offering such services, with the result that there are now three broadband infrastructures in Malta.
“Currently the MCA was sanctioning the other operators for failure to meet their roll-out obligations in this regard.
(c) The MCA has also assigned 3G spectrum to GO, Vodafone and 3GT – this has already enabled the provision of mobile broadband services. The entry of the third operator is expected to stimulate competitive conditions in this market further,” the MCA said.
With regards to the fact highlighted in the EC report that the combined market share of alternative internet service providers plummeted from 21% of all broadband connections to only 14% last year, mainly to the benefit of the fixed-line incumbent (GO), the MCA said: “The developments reported by the Commission would most likely have been avoided had the Commission, back in 2006, endorsed the MCA’s proposed decision to impose wholesale broadband access obligations on the cable and DSL broadband network operators.
“Instead, the Commission disagreed with the MCA that the two large operators enjoy a jointly dominant position in this market and was of the opinion that this market was effectively competitive.
“As a result of the above, the alternative Internet service providers could, in the future, be deprived of the comfort of regulated access to the networks on which they are dependent for provision of service,” the MCA spokesperson told Business Today.
Asked for the MCA’s reaction to the declaration in the EC report that in the mobile telephony sector, prices in Malta were “still among the highest in the EU”, the MCA said: “The EU framework for electronic communications does not envisage regulatory intervention on mobile retail tariffs. However the rate of retail tariffs in Malta is one of the indicators that contributed to the MCA’s finding of joint dominance between GO and Vodafone on the Wholesale Mobile Telephony Access market.
“This finding, which was endorsed by the European Commission, obliges these network operators to negotiate agreements with potential service providers (Mobile Virtual Network Operators (MVNOs)).
“Following the agreement reached by the Mobile Virtual Network Enabler, Aspider, with Vodafone - which agreement should facilitate the entry of MVNOs and the granting of 3G spectrum to a third mobile operator - the MCA envisages that competition in this market will be significantly improved over the coming months at both the infrastructure and service level.
“Increased competition should have downward impact on retail tariffs. The MCA will continue monitoring this market and will intervene as necessary,” the MCA spokesperson told BusinessToday.
Asked for its reaction to the warning that Malta had not yet completed the analysis of the broadband market, “which is causing some uncertainty in the sector” according to the EC report, the MCA said: “This market has proven to be a particularly complex one, both nationally and at the European Level.
“The Commission vetoed the first MCA draft decision which had been prepared back in 2006 and which had called for continued regulation of the sector until such time as competition caught on in a more permanent manner. “The delay is consequently the result of the lack of agreement between the MCA and the Commission.
“The MCA has now, once again, conducted a market analysis taking into account the views of the European Regulators’ Group, which reviewed this case, as well as those of the Commission.
“The MCA has also had to take account of changes in terms of tariffs and market structures, which occurred late last year.
“While it is clear that existing regulatory obligations continue to apply until such time as a final decision is taken, the MCA understands that some uncertainty is inevitable in a situation such as this.
“It notes, however, that the current rules do not allow for a speedier resolution of matters due to the requirement that all such decisions have to be sanctioned by the Commission,” the MCA spokesperson told BusinessToday.
With regards to the “lengthy appeal procedures continued to be one of the major obstacles to the effectiveness of the regulatory framework” mentioned in the EC report, the MCA explained that the Communications Appeals Board was “a quasi judicial independent entity appointed by Government. We therefore suggest that the views of this body should be sought directly.
“The MCA can only confirm that lengthy appeals procedures inevitably do impinge on the effectiveness of the application of the regulatory framework. “The MCA notes, however, that in 2007 appeals were generally concluded in a sufficiently expeditious manner when compared to previous years,”
“As a party to such appeals, the MCA is not entitled to take any action with regard to such matters,” the spokesperson concluded.

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