EC: Polish telecoms market still below EU average
2007-04-27
The European Commission (EC) published at the end of March 2007 a detailed analysis of the electronic communication services markets and of the related regulatory and consumer affairs. The report also contains an overview of the telecommunications sector in the individual member states. As for the Polish market, the EC had a number of concerns about the national regulator’s actions.
Mobile penetration still below the EU average
According to the EC report, Poland had the highest mobile penetration growth rate in the entire EU in 2006. The EC pointed out that the rapid rise in the number of mobile subscribers has encouraged operators to introduce various services, such as converged fixed-mobile offerings. According to the Commission, the mobile penetration rate in Poland stood at 91% in October 2006, thus, it increased year-on-year by 20 percentage points. Despite the substantial growth, the figure is still below the average for the entire EU.  In reviewing the prices of mobile services, the EC concluded that post-paid customers had enjoyed a relatively sizeable reduction in prices offered in new tariffs over the reporting period (between October 2005 and October 2006). By contrast, the prices for pre-paid services had not decreased significantly (though they had in previous years).
The EC disclosed that in April 2006 the Polish Office of Electronic Communications (UKE) notified the Commission of a draft measure on the market of mobile access and call origination. The regulator identified all three mobile operators as having a joint significant market position (SMP) and, therefore, proposed to impose a number of obligations on the operators, such as to provide non-discriminatory mobile virtual network operator (MVNO) access, with charges for MVNOs calculated on a cost basis. The UKE, however, withdrew the measure and as a consequence, as the EC pointed out in the report, this corner of the telecommunications market in Poland has to be reanalysed.
The Commission stated that it is looking into the telecoms market watchdog’s attempts to impose the MVNO access obligation on one of the mobile networks operators despite the fact that UKE did not conduct the relevant market analysis. The UKE has maintained that its scope of powers permits such a move. The EC pointed out that the regulator, in a draft measure of April 2005, described PTC, PTK Centertel and Polkomtel as having an SMP in their respective segments and, thus, suggested imposing caps on call termination rates reflecting actual costs. The regulator would verify the rates by using the EU benchmarks or other, unidentified, methods. The Commission expressed concerns about the transparency and legal certainty of the process.
WLR under investigation
With regard to the fixed-line market, the EC pointed out that there is no accounting model for TP SA’s costs, which would have been verified by an independent auditor and approved by the regulator. The Commission reminded that the regulator has rejected the most recent calculation submitted by the incumbent, as the auditor’s opinion was unfavourable. The UKE announced, therefore, that it will continue using benchmarks to calculate the prices for the incumbent’s services.
The Commission declared that it is investigating the issue of the regulator imposing wholesale line rental (WLR) on the incumbent. The regulator has been ordered to offer WLR to alternative operators with a 47% discount from the standard retail price. This decision was not, however, preceded by the relevant market analysis but was based on a “wide interpretation” of an open network provision (ONP) regime, according to the EC report. The Commission also noted that the decision was issued soon after the UKE adopted the measure that imposes regulatory remedies on the call origination wholesale market.
According to the report, the EC has initiated the second stage of notification procedure for draft measures and an analysis of all fixed-line markets. The Polish regulator suggested the incumbent should be qualified as having the SMP in all the markets and, therefore, the full catalogue of remedies should be imposed on the operator, including a cost-based calculation of prices and an obligation to submit the resulting figures for the regulator’s approval. The Commission is going to analyse the UKE’s suggestion to include xDSL lines in the product market definition with regard to the market for access to the public telephone network at a fixed location for residential and non-residential clients. Also, the UKE has proposed to identify all alternative operators as having SMPs in their respective networks, which would pave the way for it to impose remedies, including non-discriminatory access, but not cost-oriented prices.
EC concerned with regulatory affairs
The report also looks at the issue of the legal validity of some of national regulator’s decisions as well as its independence. Concerns about the former follow from the fact that the previous regulatory authority, the Office of Telecommunications and Post Regulation (URTiP) was abolished and replaced by the UKE in January 2006, but the new regulator’s president was appointed only in May 2006. This prompted market players to voice doubts regarding the decisions issued in the interim, with the companies suggesting that the president’s absence meant that the UKE’s actions were invalid.
The Commission also has concerns about the regulator’s independence because the act on state personnel resources has abolished the five-year term of office for the UKE’s president. Thus, the head of the regulator may be dismissed by the Prime Minister at any time, which makes this post vulnerable to political pressure. For the Commission, it is imperative that the impartiality of the UKE not suffer as a result. The Commission has instigated an infringement procedure in this matter.
Mateusz Malicki
IT & Telecoms Analyst
PMR Publications
mateusz.malicki@pmrpublications.com
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