CTO proposal to regulate mobile data market insufficient, says European Commission

 

The Czech Telecommunications Office (ČTÚ) has not provided sufficient evidence that the wholesale mobile data market in the Czech Republic requires regulatory intervention. The European Commission (EC) has indicated this in its opinion. Over the next two months, the Commission, in cooperation with the regulatory association BEREC, will examine the Czech proposal in more detail. Finally, he can withdraw his reservations or veto the draft regulation.

It should be recalled that the Commission has already challenged the conclusions of the so-called three-criteria (3K) test, which the CTU had sent to it for evaluation in 2019 (see You have enough virtual machines, so why do you want to regulate, asks the Commission. CTU wants to convince her in the next round). In its current opinion, the Commission criticizes that the CTO in the current analysis “did not provide materially different evidence that could change the Commission’s conclusion”.

The EC therefore reiterates, among other things, the two-year-old argument that a large number of virtual operators (MVNOs) operate in the Czech market and although they have limited growth potential, this does not indicate a significant barriers to entry (this is the first criterion of the 3K test the need for regulation).

“The fact that major MVNOs are wholly or partly owned by mobile network operators is not uncommon in other national markets and is not in itself indicative of a dysfunctional market, as it shows that mobile network operators must respond to customer demand for alternative offers through diversified strategies.” declares the EC.

The Commission also recalls that under the terms of the 5G auction, O2 must provide roaming on its network to three new players (Nordic Telecom, CentroNet and PODA) as soon as certain conditions are met.

“It is therefore likely that at least one operator has already met or could have met the eligibility requirements for regulated national roaming services and can not only become a credible competitor at the retail level (first as an MVNO but also as the fourth mobile network operator in the future), but could enter the wholesale access and call origination market in the near future”, the Commission explains why it believes that the internal market will change for the better in the near future.

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Although CTU assumes in its analysis that the impact of 5G auction conditions in the Czech Republic will not be registered until around 2026 (see Big carriers are stifling virtuality and making disproportionate profits at the expense of customers, says CTU in market analysis). However, according to the Commission, it does not support this conclusion with convincing evidence.

According to the Commission, the second condition of the 3K test is not fulfilled, namely that the market does not show a tendency towards effective competition. According to the EC, the market share of virtual operators has increased from 3.2% to 5.8% between 2014 and 2020, and most retail and wholesale prices have fallen. The EC does not consider that the fulfillment of the third criterion that current competition law is not sufficient to correct the market is sufficiently proven.

In its opinion, the Commission also questions the CTO’s findings that there is alleged tacit collusion between the three network operators (T-Mobile, O2 and Vodfafone) – a situation in which the operators, even without formal cartels, operate in a way that does not harm each other.

“The Commission does not deny that there is room for improvement in the Czech mobile market. However, as mentioned above, the structure of the Czech market shows an asymmetry between market shares at both wholesale and retail level. Last but not least, barriers to entry into the retail market appear to be low due to successful trade entries and already existing wholesale regulations, all of which do not support the finding that the three-step test is met. , nor the finding of a joint significant market power”, concludes the Commission, noting that the proposal for market regulation appears to it to be a disproportionate solution.

The Czech regulator hopes to still be able to change the Commission’s opinion. “The CTO continues to believe that competition in the Czech mobile phone market is so limited that it deserves regulation, which is also the opinion of more than 130 entities who supported the CTO’s intention during the public consultation on market analysis. CTU will advocate for market regulation in upcoming negotiations with BEREC and the European Commission,” the office wrote in a statement.

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