News | Wednesday, 22 April 2009

MCA withdraws dominance status on GO in fixed line telephony

Charlot Zahra

The Malta Communications Authority (MCA) has recently removed the Significant Market Positioning (SMP) status three years ago imposed on GO’s fixed telephony services because it “did not find any conclusive evidence to suggest that the identified retail calls markets feature any operator enjoying SMP”.
“This means that the existent regulatory regime in the identified markets is no longer warranted,” the MCA contended.
The current review followed on two earlier documents, that is, the MCA market review on “National telephone services provided at a fixed location‟ carried out in 2006, and the MCA market review on “International telephone services provided at a fixed location” carried out in 2007.
The finding of SMP was based on “an analysis of a number of criteria namely market shares, vertical integration, economies of scale and scope, and countervailing buyer power.
“Given the finding of SMP, the MCA imposed regulatory remedies on the SMP operator, namely obligations on access to wholesale inputs, in conjunction with obligations at a retail level such as cost orientation, non-discrimination, transparency, cost accounting and accounting separation, and measures to counter the unreasonable bundling of services”.
The current review defines two retail calls markets in accordance with competition law principles.
In the current review, the MCA established two markets: national telephone call services provided at a fixed location; and international telephone call services provided at a fixed location.
The MCA concluded that both markets included fixed-to-fixed as well as fixed-to-mobile, calls but excluded voice over broadband (VoB) calls, and unmanaged IP-based calls.
The MCA also maintains the view that calls originated from a mobile phone fall within a separate market.
Furthermore, the MCA was discontinuing the former distinction made between the residential and non-residential calls markets because it has found “no clear and consistent method in distinguishing residential and non-residential users in the provision of national and international telephone call services.
“Market evidence also suggests that, from a demand-side and supply-side perspective, call services provided to residential and non-residential customers are practically identical,” the MCA explained in its decision.
Finally, the authority reiterated its position that the relevant geographic market for the provision of retail calls services from a fixed location in Malta was national in scope.
“In fact, all authorised operators providing retail calls services are doing so on a national level, without actually differentiating – in terms of pricing and availability – on the basis of geographic location,” the MCA added in its decision.
In its decision, the MCA explained how the revised EU Recommendation stated that “the retail calls markets are no longer considered susceptible to ex ante regulation on an EU-wide basis,” even though it allowed National Regulatory Authorities (NRAs) to determine otherwise if “national circumstances require a different conclusion”.
In this respect, the MCA carried out a three criteria test and determined that:
“The retail calls markets are not subject to the presence of high and non-transitory barriers to entry, these being either of a structural, legal, or regulatory nature;
“Competition is already evident in these markets and that it is expected to remain present within the timeframe of this review; and that
“Competition law by itself is adequate to address any potential market failure(s) in the provision of national and international telephone call services from a fixed location.”
The authority however, pledged to keep “a very close watch” on the progress of the retail calls markets.
“The MCA remains committed to issue a new market analysis at any point in time in response to any deterioration in the competitive level of the market,” the authority added.
The MCA said it was also “determined to take emergency remedial action, in accordance with its powers at law, should a significant problem in the market occur as a result of the removal of any of the present obligations, in order to safeguard competition and protect the interest of end-users”.

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22 April 2009

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