15 June, 2016

ETNO response to the Termination Rates Recommendation

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2.1 Since 2012, the EU national voice calls markets have changed dramatically as new forms of communications have emerged (Instant Messaging, Social Networks, VoIP, etc). Furthermore, new innovative commercial offerings are very common today in operators’ commercial portfolio. Such offerings go far beyond the traditional per minute basis charging. In practice, most of the voice services marketed are within a bundle (2-play, 3-play or Quad-play) and with generous allowances or even unlimited.

It is fair to say that competition and EU citizens’ interests have benefited from recent market evolution, but it is difficult to directly associate these achievements with the Termination Rates Recommendation (TRR). The Termination Rates Recommendation has had an influence, but market dynamics and technology evolution have been the main drivers of change.
Therefore, the Recommendation has had a limited impact in terms of promoting competition or EU citizens’ interests.

The Recommendation has been a clear example of the more general policy underlying the EU regulatory framework in the last years. It was conceived as a measure intended to promote extreme price competition, by setting the lowest possible wholesale price; but it has not taken into account the impact on investment and on the long-term welfare of consumers and society.


2.8 One of the objectives of the TRR is to create a level playing field and increase competition between operators by reducing cross-subsidisation in particular of mobile networks by fixed networks or, of net receivers of voice traffic by net senders, and the development of flat-rate and/or bundled services. Has implementing the TRR led to a higher number of flat-rate offerings (fixed to mobile calls included) and/or bundles?


2.9 Please explain your response.

Innovative commercial offers have appeared across EU28 markets over the past years. 

However, there is no evidence that the TRR has a direct relation with the development of flat-rate offers. If there was an impact, it was small and very difficult to assess due to the variety of factors influencing market evolution. 

Market dynamics, mainly driven by competition in retail voice call markets, played a central role in the emergence of these innovative offers. Other non-EU regions without TRR in place achieved similar commercial outcomes. Therefore, the TRR’s impact on the policy objectives seems to be very limited. 

In some Members States where the TRR approach to “pure” LRIC has not been followed, the trend has been similar. As a conclusion, there is no indication that the current focus of the Recommendation on “pure” LRIC has been at the heart of the higher number of flat-rate offerings.

2.54 What should be the period set in any future EU measure on termination rates for the review of this instrument?

There is a clear need for regulatory stability and regulatory predictability to boost long-term highly risky investments. Indeed investors in such projects prefer to have clear visibility on what to expect as external constraints, and this over a longer period of their investment timeframe. Longer review periods than those currently applied today are preferable. But if market developments change significantly due to strong competitive pressure from new forms of communication services the need for regulation has to be reviewed earlier.

2.55 Should the Commission continue to recommend the pure BU-LRIC model?


2.56 Please describe the characteristics of an alternative cost model.

As said above, pure BU-LRIC models are not proportional, do not provide legal certainty and are complex.

If termination regulation remains, the following principles have to be applied:
• Regulation should promote long term benefits for end users, taking account of competition and promoting investment (including through providing appropriate regulatory stability) inter alia enabling operators to invest in technology evolution and improved quality;
• Full cost recovery for all market players;
• Better legal certainty;
• Decreased complexities;
• Avoid litigation and burdensome processes, for example, review periods longer than the typical current 3 years market analysis are desirable;
• Symmetry between FTR and symmetry between MTR;
• If market developments change significantly, the need for regulation has to be reviewed earlier;

European operators should not incur any disadvantage with third countries operators. European operators should be enabled to manage efficiently agreements with any operator regarding traffic originating outside the EEA.

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