Communication to the Commission of Intended Measures Under Article 7(3) of Directive 2002/21/EC s1

Communication to the Commission of intended measures under Article 7(3) of Directive 2002/21/EC

1. The Office of Communications (‘Ofcom’) has conducted an analysis of the market for broadcasting transmission services, to deliver broadcast content to end users in accordance with its obligations in Article 16 of Directive 2002/21/EC.

2. Ofcom has now reached its preliminary conclusions on market definition, the extent of competition in that market and whether any undertakings have significant market power in that market.

3. Ofcom hereby notifies the Commission of its intended measures in accordance with Article 7(3) of Directive 2002/21/EC. Ofcom's proposed findings and measures are as set out in the attached Summary Notification form and full details are set out in the attached Explanatory Statement. Responses are due by 22 December 2004.

4. Ofcom is also conducting a national consultation under Art 6 of Directive 2002/21/EC at the same time. Oftel had already conducted a preliminary consultation which commenced on 9 September 2003 and ended on 10 November 2003. The preliminary conclusions and proposed measures have taken account of the responses to that consultation.

5. Responses to this consultation are due to be sent to Margaret Doherty, Competition Policy Manager, Ofcom at [email protected] by 22 December 2004.

Ofcom 11 November 2004 Annex A

Summary Notification Form

1. Market definition

Please state where applicable:-

1.1 The affected relevant product/service Broadcasting transmission services, to market. Is this market mentioned in the deliver broadcast content to end users. Recommendation on relevant markets? This is Market 18 in the Recommendation. The UK will be solely analysing the market for terrestrial transmission.

Ofcom has defined markets at two vertical levels: access to masts and sites, and managed transmission services. The markets defined are:

 Access to masts and sites operated by ntl and acquired, constructed or installed for the purpose of the provision of national, regional and metropolitan broadcasting transmission services;

 Access to masts and sites operated by Crown Castle and acquired, constructed or installed for the purpose of the provision of national, regional and metropolitan broadcasting transmission services;

 Access to other masts and sites used for the provision of broadcasting services;

 Provision of national terrestrial broadcast managed transmission services;

 Provision of regional, metropolitan and local terrestrial broadcast managed transmission services At the access level, Ofcom proposes that ntl and Crown Castle should be subject to a generic access obligation, to offer access services to their infrastructure for the purposes of national, regional and metropolitan broadcasting transmission; on reasonable request; on fair, reasonable, cost-orientated and non- discriminatory terms. They would also be required to publish a reference offer for standard services. At the level of managed transmission services, Ofcom proposes that the requirement should simply be to provide services which are reasonably requested on fair, reasonable, cost-orientated and non-discriminatory terms. 1.2 The affected relevant geographic At the access level, there are two market geographic markets, each comprising the coverage areas of the sites controlled by respectively ntl and Crown Castle. At the managed transmission level, the market is the whole of the UK. 1.3 A brief summary of the opinion of the Ofcom functions as the National National Competition Authority where Competition Authority in UK provided. communications matters.

1.4 A brief overview of the results of the From September – November 2003, public consultation to date on the Oftel consulted upon a market definition proposed market definition (for example, which concentrated upon the upstream how many comments were received, market for access to masts and sites. which respondents agreed with the There were seven responses to that proposed market definition, which consultation. respondents disagreed with it) Responses to that consultation generally concurred with the market definition outlined in respect of the market for access to masts and sites, which was very similar to the market proposed in this review. Several respondents made the case that there was a market for managed transmission services (MTS) that required analysis and this was taken into account in Ofcom's definition of a market for MTS market in this document.

There was agreement that digital cable and digital satellite cannot, given the present obligations on UK broadcasters, act as substitutes for digital terrestrial means of transmission.

Several respondents were of the view that Crown Castle’s and ntl’s markets actually comprised both their sites and their provision of MTS as a bundled service. Ofcom has taken this into account and considered in its market power proposals whether there was a realistic likelihood of market entry at the level of access to masts and sites. Ofcom proposes that there is a market for access to masts and sites, but notes the concerns that market entry may not emerge in the short term. Hence the definition and analysis of a market for managed transmission services. 1.5 Where the defined relevant market is Ofcom has solely proposed market different from those listed in the definitions and market power Recommendation on relevant markets, a determinations with regard to the market summary of the main reasons which for terrestrial transmission. This is one justified the proposed market definition segment of the market for broadcasting by reference to Section 2 of the transmission services, to deliver Commission’s Guidelines on the broadcast content to end users. The definition of the relevant market and the other segments of satellite and cable assessment of significant market power1, were considered but not thought and the three main criteria mentioned in appropriate for further analysis and Recitals (9) to (16) of the consideration with regard to the Recommendation on relevant markets applicability of ex ante regulation. and Section 3.2 of the accompanying Explanatory Memorandum2. In relation to satellite, Ofcom examined the present regulatory measures and the likelihood of putting in place effective ex ante regulation. Uplinking to satellites has been reviewed already by Oftel and is likely to be competitive. Transponder space on satellites is outside the UK jurisdiction. What is within the UK’s jurisdiction is conditional access provision, which is already subject to regulation through the new framework.

1 Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications and services, OJ C 165, 11.7.2002, p.6 2 Commission Recommendation of 11.2.2003 on Relevant Product and Service Markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communication networks and services, C (2003)497 There is no merit therefore in a further review of satellite transmission.

With the issue of cable transmission, a key issue, as with terrestrial transmission, is securing the carriage of public service broadcasters to all television households. At present the cable companies carry all PSB programming free of charge to their subscribers, and Ofcom notes that the Communications Act put in place provisions (the “must carry” requirements3) for the cable companies to be required to carry PSB channels to all their subscribers. Ofcom is also aware that since the last time that cable market was reviewed (Oftel: ‘Open access: delivering effective competition in communications markets4’: April 2001) when Oftel found that cable operators did not enjoy market power at the retail level, cable companies’ shares of retail television markets have decreased.

For these reasons, Ofcom considers that neither cable nor satellite transmission is a candidate for ex ante regulation at this time and consequently has no immediate plans to review the markets for provision of these services.

3 http://www.legislation.hmso.gov.uk/acts/acts2003/30021--c.htm#64 4 http://www.ofcom.org.uk/static/archive/oftel/publications/broadcasting/opac0401.pdf 2. Designation of undertakings with SMP

Please state where applicable:-

2.1 The names of the undertakings  National Transcommunications designated as having individually or Limited jointly significant market power.  Crown Castle UK Limited

Where applicable, the names of the undertakings which are considered to no longer have significant market power.

2.2 The criteria relied upon for deciding Criteria used for the assessment of SMP to designate or not an undertaking as in the markets for access to masts and having individually or jointly with others sites are market share, control of an significant market power infrastructure which may not be easily duplicated, barriers to entry, and countervailing buyer power.

Criteria used for the assessment of joint dominance with regard to the market for managed transmission services are those identified in Annex II to the Framework Directive as outlined in the Commission SMP guidelines, paragraphs 86 – 103. 2.3 The name of the main undertakings  National Transcommunications (competitors) present / active in the Limited relevant market  Crown Castle UK Limited 2.4 The market shares of the Market for access to masts and sites: undertakings mentioned above and the ntl and Crown Castle have a virtual basis of their calculation (e.g., turnover, monopoly in their respective markets number of subscribers) (see paragraph 4.16 of the consultation document)

In the managed transmission services markets, market shares cannot readily be calculated for the reasons set out in paragraph 4.65 of the consultation document. However, for provision of services to national broadcasters, the market shares are broadly comparable. Ntl and Crown Castle are currently the only providers of MTS to television broadcasters and multiplex licensees. Ntl provides analogue MTS to ITV, C4/S4C and Five, and Crown Castle provides analogue MTS to BBC1 and BBC2. Among the digital broadcasting multiplexes, ntl provides digital MTS to Multiplexes 2 and A; and Crown Castle provides digital MTS to Multiplexes 1, B, C and D.

Ntl and Crown Castle are the sole providers of national radio MTS: Crown Castle provides transmission to National AM broadcasting (which consists of BBC, Virgin Radio and talkSPORT), and ntl provides transmission to national FM broadcasting: BBC and Classic FM.

In the market for provision of transmission services for sub-national broadcasts (including BBC local transmissions), ntl and Crown Castle have much the largest shares but there are a number of other independent providers and a degree of self provision. See paragraph 4.143 of the consultation document.

Please provide a brief summary of:-

2.5 The opinion of the national Ofcom functions as the National competition authority where provided. Competition Authority in UK communications matters.

2.6 The results of the public consultation There were seven responses to the Oftel to date on the proposed designation(s) consultation of September 2003. as undertaking(s) having significant market power (e.g., total number of There was general agreement from comments received, numbers respondents that ntl and Crown agreeing/disagreeing) Castle have significant market power in the market for access to their respective masts and sites.

Many respondents were keen that Ofcom examine the issue of market power in the downstream market for managed transmission services. Ofcom in this review has defined appropriate markets and identified the market segment in which it considers that ntl and Crown Castle have joint SMP, while finding there is no SMP in the remaining segment. 3. Regulatory obligations

Please state where applicable (for 3.2. and 3.3, it is sufficient to refer to the relevant section of the full notification):-

3.1 The legal basis for the obligations to  Article 9: obligation of be imposed, maintained, amended or transparency withdrawn (Articles 9 to 13 of Directive  Article 10: obligation of non- 2002/19/EC (Access Directive)) discrimination  Article 12: obligations of access to, and use of, specific network facilities  Article 13: price control and cost accounting obligations 3.2 The reasons for which the imposition, Please refer to the following sections of maintenance or amendment of the draft measure: obligations on undertakings is considered proportional and justified in the light of Article 9: DN5.64 – 5.73; the objectives laid down in Article 8 of Directive 2002/21/EC (Framework Article 10: DN5.43 – 5.52; 5.93 – 5.100 Directive). Alternatively, indicate the paragraphs, sections or pages of the Article 12: DN5.32 – 5.42; 5.82 – 5.92 draft measure where such information is to be found Article 13: DN5.53 – 5.61; 5.101 – 5.110 3.3 If the remedies proposed are other N/A than those set out in Articles 9 to 13 of Directive 2002/19/EC (Access Directive), please indicate which are the « exceptional circumstances » within the meaning of Article 8 (3) of thereof which justify the imposition of such remedies. Alternatively, indicate the paragraphs, sections or pages of the draft measure where such information is to be found 4. Compliance with international obligations

In relation to the third intend of the first subparagraph of paragraph 3 of Article 8 of Directive 2002/19/EC (Access Directive), please state where applicable:-

4.1 Whether the proposed draft measure The proposed draft measure proposes to intends to impose, amend or withdraw amend regulations upon ntl and Crown obligations on market players as Castle with respect to terrestrial provided for in Article 8(5) of Directive transmission in the UK in respect of 2002/19/EC (Access Directive) access to masts and sites for the purpose of national, regional and metropolitan broadcasting; and with respect to managed transmission services for national broadcasting.

The proposed draft measure proposes to withdraw regulation from ntl and Crown Castle in respect of access to masts and sites for other broadcasting, and in respect of provision of managed transmission services in respect of regional, metropolitan and local broadcasting.

The measure proposes to impose regulation on ntl and Crown Castle in respect of digital broadcasting transmission (television and radio). 4.2 The name(s) of the undertaking(s)  National Transcommunications concerned Limited  Crown Castle UK Limited 4.3 Which are the international N/A commitments entered by the Community and its Member States that need to be respected