August 2012 – The Romanian Competition Council closed an investigation regarding an alleged abuse of the dominant position of the incumbent Romanian telecom operator Romtelecom, which related to an alleged failure to provide the termination service and refusal to expand the capacity of its interconnection link. The Romanian Competition Council concluded that there was insufficient evidence of an abuse of a dominant position.
The interest of the Romanian Competition Council (the “Competition Council”) in the telecommunications sector has increased significantly in recent years with several investigations being finalised or due to be finalised in the recent period. As publicly stated by the President of the Competition Council, the sector will continue to draw the attention of the Competition Council in the near future as well.
In 2006, following two complaints filed by the company Netmaster Communications SRL (“Netmaster”), the Competition Council decided to open an investigation against the three main telecom operators (Vodafone, Orange and Romtelecom) for alleged abuse of dominant position and other anticompetitive practices on the Romanian market.
The initial investigation was later split into four separate investigations. The Competition Council issued its first decision on this matter in February 2011, fining the Romanian subsidiaries of both Orange and Vodafone a total amount of EUR 63 million (approximately 3 per cent of their turnover in 2010) for abusing their dominant position.
In April 2012, the Competition Council cleared Romtelecom S.A. (“Romtelecom”) of the charges and found that there had been no infringement of Article 6 of the Romanian Competition Law (the equivalent of Article 102 of TFEU).
The main findings of the Competition Council
Relevant market
The relevant market in this case was defined as the call termination services at a fixed location in the public electronic communications network operated by Romtelecom. Call termination refers to the service whereby a network operator (in this case Romtelecom) completes – or “terminates” – a call made to one of its subscribers by a caller on another network. The Competition Council determined that the geographical market is national in scope due to the national coverage of Romtelecom’s network.
The Competition Council’s definition of the relevant market was in line with previous Romanian National Authority for Management and Regulations (“ANCOM”) regulations and decisions that established the relevant markets through ex ante regulations (related to call termination services at fixed locations).
A decision issued by ANCOM in 20081 designated Romtelecom as a supplier with significant power on the call termination market at fixed locations within its individual public telephone network. Moreover, the same decision established mandatory tariff requirements related to its interconnection service.
Dominant position
The Competition Council found that the call termination market in each public telephone network is, by definition, a monopolistic market, without any potential to become a competitive market due to the applicability of the “caller party pays” principle.
Therefore, each telecom operator holds a market share of 100 per cent on the market for the termination of calls in its own network.
When assessing the notion of dominance on the market, the Competition Council did not identify any sustainable alternative through which the alternative operators could counter Romtelecom’s market power.
Besides market shares, another aspect analysed in order to assess Romtelecom’s dominance on the market was the fact that call termination services at a fixed location represented an essential facility, as defined in the EC Notice on the application of the competition rules to access agreements in the telecommunications sector (98/C 265/02)2.
The Competition Council took the view that Romtelecom controls access to an essential facility and therefore enjoys a dominant position on the market within the meaning of Article 6 of the Romanian Competition Law.
Alleged abuse
In its complaint, Netmaster alleged that Romtelecom had committed an abuse of dominant position by its:
(i) failure to provide the termination service to all the calls originating from the Netmaster network between December 2005 and June 2006;
(ii) refusal to expand the capacity of Romtelecom’s interconnection link with the Netmaster network between December 2005 and July 2006.
By way of background, the Competition Council reaffirmed the general principle that competition law coexists with specific sector regulations in the event of infringements of Article 102 TFEU. The existence of ex ante regulations adopted by the regulatory authorities such as ANCOM does not preclude the application of competition rules in the event of infringements of competition rules.
Pursuant to the Guidelines on the application of competition rules to access agreements in electronic communication3, the Competition Council dealt with the concerns generated by a telecom operator holding a dominant position refusing to grant access to its network infrastructure.
The first conduct under investigation concerned an alleged failure to terminate calls originating from the Netmaster network. The Competition Council analysed whether Romtelecom’s conduct was exclusionary and exploitative towards its competitor Netmaster.
According to the Competition Council’s analysis it appeared that Romtelecom and Netmaster concluded in 2003 an interconnection agreement.
With respect to Netmaster’s complaint addressed to Romtelecom in 2005, it seems that the incumbent telecom operators carried out a traffic analysis and concluded that the failure to terminate the calls was generated in a majority of cases by the usual causes (i.e. an occupied or non-allocated phone number).
Moreover, according to Netmaster’s allegations, Romtelecom prioritised on-net traffic (calls originating and terminated within the same network) to the detriment of off-net traffic by implementing a software procedure that filtered the calls.
However, during the investigation, no evidence was found regarding the applicability of an internal software procedure based on call filtering aiming at excluding Netmaster from the market. Therefore, the Competition Council rejected the first allegation of Netmaster and found that Romtelecom did not abuse its dominant position by failing to terminate all the calls originating from the Netmaster network.
As regards the second allegation, the Competition Council rejected the abuse of dominant position claim related to Romtelecom’s refusal to expand the capacity of the interconnection link with the Netmaster network.
Although Romtelecom blocked for a period of time six circuits used to increase interconnection capacity, the Competition Council found no evidence of sustained exclusionary practices via traffic limitations nor any exclusionary or exploitative conduct towards Netmaster.
Moreover, Romtelecom’s defence argument that the existing circuits in the concerned period were sufficient to handle the Netmaster traffic was accepted by the Competition Council.
Therefore, the Competition Council ruled that Netmaster had failed to prove its need for an increased interconnection capacity.
By contrast with the decision related to Romtelecom, in the separate investigation related to Orange’s and Vodafone’s conduct, the Competition Council found that Orange and Vodafone had denied Netmaster access to their telephony networks for the purpose of terminating national and international calls operated by Netmaster.
The Competition Council found that Orange and Vodafone charged interconnection prices in the range of USD 0.15-0.18/minute, compared to the USD 0.10/minute maximum level set by ANCOM. The investigation showed that Orange Romania and Vodafone Romania took advantage of their dominant positions and refused Netmaster access to their network.
Netmaster may appeal the Competition Council’s decision in the Romtelecom case at the Bucharest Court of Appeal within 30 days of the date on which the decision was announced.
Conclusion
The Romanian Competition Council closed the investigation regarding an alleged abuse of the dominant position of the incumbent Romanian telecom operator Romtelecom and concluded that there was insufficient evidence as to the existence of any abuse of a dominant position. Therefore, no measures or fines were imposed on Romtelecom.
For further information contact Iustinian Captariu, Counsel, at .
Source: e-Competitions, N°46915, www.concurrences.com
1 Decision no. 644/06.08.2008.
2 Notice on the application of the competition rules to access agreements in the telecommunications sector, OJ 1998 C 265/02; see para. 66: “In the telecommunications sector, the concept of “essential facilities“ will in many cases be of relevance in determining the duties of dominant TOs. The expression essential facility is used to describe a facility or infrastructure which is essential for reaching customers and/or enabling competitors to carry on their business, and which cannot be replicated by any reasonable means”.
3 Guidelines on the application of competition rules to access agreements in electronic communication - sector, framework, relevant market and principles, Approved by Competition Council Order no. 424/2011, published in Official Gazette no. 127 from 22/03/2011.