EUROPEAN COMMISSION Brussels, 12.2.2021 C(2021)

EUROPEAN COMMISSION

Brussels, 12.2.2021 C(2021) 1073 final

Commission for Communications Regulation (ComReg) One Dockland Central, Guild Street D01 E4X0 Dublin 1 Ireland

Mr. Garrett Blaney Chairperson of the Commission

Subject: Case IE/2021/2293: Wholesale market for broadcasting transmission services in Ireland Commission comments pursuant to Article 32(3) of Directive (EU) 2018/1972

Dear Mr Blaney,

1. PROCEDURE

On 15 January 2021, the Commission registered a notification from the Irish national regulatory authority (NRA), the Commission for Communications Regulation (ComReg)1, concerning the Irish wholesale market for broadcasting transmission2.

1 Under Article 32 of Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code (the Code) (OJ L 321, 17.12.2018, p. 36). 2 Corresponding to market 18 of Commission Recommendation 2003/311/EC of 11 February 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 communications networks and services (Framework Directive), (OJ L 114, 8.05.2003, p. 45). This market has been removed from the list of the relevant markets that may warrant ex ante regulation in 2007 and is not listed in the currently applicable Commission Recommendation (EU) 2020/2245 of 18 December 2020 on relevant product

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

The national consultation3 ran from 11 May 2020 to 13 July 2020.

The Commission sent a request for information4 to ComReg on 22 January 2021, and received a reply on 27 January 2021. A request for further clarifications was sent on 27 January 2021, and the reply was received on 29 January 2021.

Under Article 32(3) of the Code, NRAs, the Body of European Regulators for Electronic Communications (BEREC) and the Commission may make comments on notified draft measures to the NRA concerned.

2. DESCRIPTION OF THE DRAFT MEASURE

ComReg confirms most of the regulatory obligations imposed in 2013 on the vertically-integrated operator Raidió Teilifís Éireann (RTÉ) on the markets for wholesale access to national terrestrial broadcasting transmission services5 and for wholesale access to digital terrestrial television (DTT) multiplexing services6. RTÉ also operates at retail level as a broadcaster. Wholesale broadcasting transmission and distribution services enable retail free-to-air (FTA) television and radio programme service providers to broadcast content to end users.

2.1. Background

The previous review of this market was notified to and assessed by the Commission under case IE/2013/14457.

At that time, ComReg found two markets for the provision of terrestrial broadcasting transmission services: a market for wholesale access to national terrestrial broadcasting transmission services (market A) and a market for wholesale access to DTT multiplexing services (market B). ComReg designated RTÉ Transmission Network Limited (RTÉNL)8 as the operator with significant market power (SMP) in market A, and RTÉ in market B. Obligations of access, non-discrimination, transparency, accounting separation, price control and cost accounting have been imposed on both markets.

and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with the Code (2020 Recommendation on Relevant Markets) (OJ L 439, 29.12.2020, p. 23- 31). 3 In accordance with Article 23 of the Code. 4 In accordance with Article 20(2) of the Code. 5 Market A consists of the provision of terrestrial broadcasting transmission services (including distribution) to broadcast operators for the purpose of delivering terrestrial broadcasting content to end users. 6 Market B consists of the provision of digital terrestrial television (DTT) multiplexing services to downstream DTT broadcasters for the purpose of delivering digital terrestrial broadcasting content to end users. 7 C(2013) 2861. 8 RTÉNL (now called 2rn) is the transmission operating arm of RTÉ, the Irish national public service broadcaster. RTÉNL/2rn is a wholly owned subsidiary of RTÉ and operates a network of transmission sites from which terrestrial radio and television services are broadcast.

The Commission sent ComReg a comment letter inviting it to monitor market developments in terms of infrastructure and service competition at both the retail and wholesale level, and to re-assess the need for and appropriateness of the remedies.

2.2. Market definition

At retail level, ComReg considers that pay TV, direct-to-home satellite free-to-air (FTA) TV services and retail TV broadcasting services from other TV platforms are not substitutes for terrestrial FTA TV services9. It also considers that in the future IPTV may become a more pervasive option for an increasing number of end users as higher speed broadband infrastructure is rolled out across Ireland. However, as the higher speed broadband is not yet universally available, ComReg considers IPTV to be outside the scope of the relevant market. Retail FTA DTT broadcasting services markets are considered national in scope. As regards radio broadcasting, ComReg considers that end users would not be expected to switch to other radio broadcast platforms (such as cable, satellite or IP) in the timeframe of this review in a way that would effectively constrain the terrestrial radio transmission platform10. Other platforms would not be effective supply-side substitutes due to lower coverage levels (save for satellite) and limited availability/take-up/mobility of devices/equipment for listening to radio broadcasting. Retail radio services can be distinguished on a local/regional and national basis11. ComReg maintains its definition of two separate wholesale markets for the provision of terrestrial broadcasting transmission services in Ireland as follows:  Market A: the market for wholesale access to national terrestrial broadcast transmission services (upstream)12;  Market B: the market for wholesale access to DTT multiplexing services (downstream). The geographic scope of both markets A and B is national.

9 ComReg indicates that, as of July 2020, 12% of TV homes relied solely on Irish FTA terrestrial reception, and that this percentage has been broadly stable since 2013. Approximately 59% of TV homes had a pay TV service as of July 2020, down from 70.9% in 2015. Approximately 41% of TV homes had an FTA service as of July 2020, up from 29.1% in January 2015. Internet Protocol (IP) TV is limited mainly to urban areas, and in July 2020 had a take-up of 6% of TV homes. Radio content is primarily transmitted to in-home radio equipment or in-car radios, and 90% of households have an FM/AM radio. 10 There are two categories of national terrestrial radio broadcast services in Ireland, namely RTÉ’s public service broadcasting radio services and national independent commercial radio services provided under a licensing contract with the Broadcasting Authority of Ireland (BAI) by Today FM and Newstalk. Non-national/local radio services are also provided by other independent broadcasters who have entered into contractual arrangements with the BAI. 11 National broadcasting radio transmission services are included in the market, whereas local and regional radio is not included, as it is considered competitive and therefore is not regulated. 12 Transmission and distribution services supplied on this market through towers/masts and relevant associated facilities enable: a) the broadcast of national analogue terrestrial radio signals to end users and b) the broadcast by a multiplex operator of its digital terrestrial broadcasting signals to end users.

2.3. The three criteria test

As the market for broadcasting transmission services is no longer listed in the Recommendation on Relevant Markets13, ComReg carries out the three criteria test14 with regard to both notified markets.

2.3.1. The first criterion: high and non-transitory barriers to entry

For the first criterion, ComReg finds that both market A15 and market B16 are subject to high and non-transitory entry barriers, due inter alia to the existence of structural barriers to entry arising from coverage requirements17, the need to develop network infrastructure and high sunk and fixed costs. 2.3.2. The second criterion: no tendency towards effective competition

For the second criterion, ComReg explains that the markets are characterised by very high market shares, no countervailing buyer power, high switching costs and limited prospects of potential competition18. Suppliers of alternative broadcasting transmission service platforms are not considered likely to start supplying FTA TV broadcasting transmission services with national or quasi-national coverage to meet Irish downstream DTT broadcasters’ statutory/licence coverage requirements19. 2.3.3. The third criterion: insufficiency of competition law alone

For the third criterion, ComReg explains that competition law is limited to ex post investigations which can take considerable time to complete. Addressing a particular

13 2020 Recommendation on Relevant Markets. 14 In accordance with Article 67(1) of the Code and Recital 22 of the Recommendation on Relevant Markets, national regulatory authorities should also analyse markets that are not included in this Recommendation, but that are regulated within the territory of their jurisdiction on the basis of previous market analyses, or other markets, if there are sufficient grounds to consider that the three criteria test has been met. Hence, the national regulatory authorities can also define other relevant product and service markets not listed in this Recommendation, if they can prove that, in their national context, the markets meet the three criteria test. 15 ComReg finds that 2rn’s infrastructure cannot be easily duplicated. 2rn operates from an extensive range of high tower/mast sites throughout Ireland, many in strategically located high-sites, which together makes it possible to ensure almost full coverage of the country's population. 16 In its response to the RFI, ComReg expressed the view that it is very unlikely that any commercial DTT multiplex operators would enter into Market B within the timeframe of this market review 17 Under the Irish 2009 Broadcasting Act, the incumbent is required to establish, maintain and operate a national TV broadcasting service in Ireland. 18 ComReg considers that, having regard to BAI licensing requirements and the likely timeframe associated with the conduct of any new tendering process, the entry of new multiplex operators to provide commercial DTT is highly unlikely in the period of this market review. Retail broadcast services provided over broadband (e.g. IPTV) are also unlikely to constitute a viable alternative to the existing DTT platform in Ireland over the period of this review. 19 There are certain retail TV broadcasters (RTÉ, TG4 and Virgin Media – VM) that are public service broadcasters, and as such have statutory/licence obligations. RTÉ and TG4 are required under the 2009 Broadcasting Act to have their service available, as much as reasonably possible, in the whole of Ireland on an FTA basis. Similarly, VM1 and VM2 are also required to broadcast on an FTA basis to more than 90% of the population. Therefore, RTÉ is for them an unavoidable trading partner.

harm through ex post competition law may not create sufficient legal/regulatory certainty or predictability for existing or potential market participants.

2.4. Finding of significant market power

ComReg is of the view that RTÉ is a vertically-integrated monopolistic wholesale supplier in both market A and market B and has a strong presence in downstream retail markets where it competes with other broadcasters (for audience market share and the related advertising revenues). Therefore, ComReg proposes to designate 2rn (a wholly-owned subsidiary of RTÉ), the sole terrestrial transmission supplier operating in market A, as having SMP in this market20. ComReg proposes to designate RTÉ21, the sole DTT multiplex operator in market B, as having SMP22. 2.5. Regulatory remedies

As RTÉ is vertically integrated, ComReg believes that market failures may arise, including excessive fees charged to competing broadcast operators and DTT broadcasters, discrimination in the supply of wholesale services, or refusal of access to weaken their competitive threat at the wholesale and/or retail level23.

ComReg proposes to impose a range of regulatory obligations on 2rn on market A. These are obligations of access, non-discrimination24, transparency, accounting separation, price control and cost accounting. On market B, ComReg also envisages imposing on RTÉ obligations of access, non-discrimination25, transparency, accounting separation, price control and cost accounting.

20 The criteria used by ComReg are: 100% market share, overall company size, relevant strength of existing competitors, control of infrastructure not easily duplicated, financial (sunk) costs, economies of scale, economies of scope, vertical integration, overall strength of potential competitors and countervailing buying power. 21 RTÉ is a vertically integrated entity and self-supplies terrestrial network services via its wholly owned subsidiary 2rn. RTÉ launched its DTT platform, marketed as ‘Saorview’, in May 2011. 22 The criteria used by ComReg are: 100% market share, overall company size, relevant strength of existing competitors, control of infrastructure not easily duplicated, financial costs, vertical integration and countervailing buying power. 23 Insofar as downstream retail broadcasting services are concerned, RTÉ competes with other broadcasters for advertising revenues based on audience market share and the type of audience reached. Therefore, RTÉ faces downstream competition from other terrestrial broadcasters’ programme services which may intensify with the entry/expansion of non-RTÉ terrestrial broadcasting programme service provision. 24 The aim of a non-discrimination obligation is to ensure that 2rn does not discriminate in its supply of services and information either between broadcasters and/or multiplex operators, as well as between its provision of services and information to its own downstream arm. 25 RTÉ must apply equivalent conditions in equivalent circumstances to other broadcasters providing equivalent services. ComReg considers that the non-discrimination requirement is sufficiently flexible and should not be interpreted as precluding a commercial offer by RTÉ to incentivise new multiplex content. The aim of a non-discrimination obligation is to ensure that RTÉ does not discriminate between broadcasters, such as between RTÉ itself and other broadcasters.

Prices on both markets should be cost-oriented, based on Historical Cost Accounting and Fully Distributed Cost methodology.

3. COMMENTS

The Commission has examined the notification and the additional information provided by ComReg and has the following comments:26

3.1. Licensing regime as the barrier to entry onto the broadcasting markets

The market for broadcasting transmission services is no longer recommended by the Commission for ex ante regulation since 2007 (and continues not to be included in the 2020 Relevant Markets Recommendation). This is due to evidence of greater platform competition in many Member States and fewer capacity constraints thanks to the transition from analogue to digital delivery platforms. These changes have generally led to a situation where, despite the possible existence of market entry barriers, the market dynamics are often such that the second and third criterion of the three criteria test are no longer satisfied.

The Commission notes, however, that the terrestrial broadcasting markets in Ireland present strong features of lack of competitive conditions, with only one vertically integrated supplier so far, and therefore appear to still warrant ex ante regulation.

In this regard, the Commission notes that, by way of demanding a national or quasi- national network coverage combined with use of the terrestrial network, the licensing regime in Ireland (i.e. the fact that the incumbent is mandated to establish, maintain and operate a national TV broadcasting service) constitutes a legal barrier to market entry and entrenches the monopoly position of RTÉ.

The Commission would like to stress that such a licensing regime, which falls under the responsibility of the Irish Government, makes it difficult for ComReg to promote competition in the provision of electronic communications networks and services as specified under Article 3(2) of the Code and, as a consequence, unnecessarily prolongs ex ante regulation of the relevant markets.

Under Article 32(8) of the Code, ComReg shall take utmost account of the comments of other NRAs, BEREC and the Commission and may adopt the resulting draft measure. Where it does so, the NRA shall communicate it to the Commission.

The Commission’s position on this particular notification is without prejudice to any position it may take on other notified draft measures.

Pursuant to Point 15 of Recommendation 2008/850/EC27 the Commission will publish this document on its website. If ComReg considers that, in accordance with Union and national rules on business confidentiality, this document contains confidential

26 In accordance with Article 32(3) of the Code. 27 Commission Recommendation 2008/850/EC of 15 October 2008 on notifications, time limits and consultations provided for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, OJ L 301, 12.11.2008, p. 23.

6 information that you wish to have deleted prior to publication, please inform the Commission28 within three working days of receipt29. Please give reasons for any such request.

Yours sincerely,

For the Commission Roberto Viola Director-General

28 By email: [email protected] 29 The Commission may inform the public of the result of its assessment before the end of this three-day period.