Appendix A

Summary of the consultation on NPT’s analysis of the wholesale market for broadcasting transmission services, to deliver broadcast content to end user

29 September 2006

Contents

1 Introduction ...... 3

2 General comments on the analysis...... 3 2.1 Need for sector regulation...... 3

3 Comments on individual paragraphs in the consultation document...... 4 3.1 Definition of the relevant product market...... 4 3.1.1 Boundary with the markets for leased lines ...... 4 3.1.2 Delineation in the terrestrial network – issue of technological neutrality...... 5 3.1.3 Delineation within the terrestrial network – local and national transmissions ...... 6 3.1.4 Delineation vis-à-vis other technologies...... 7 3.2 Assessment of the three ex ante criteria...... 8 3.2.1 Transmission services for radio on terrestrial networks...... 8 3.2.2 Transmission services for television on terrestrial networks ...... 11 3.2.3 Transmission services on cable TV networks...... 14

2 1 Introduction

This document sums up the responses to the consultation on the Post and Telecommunications Authority’s (NPT) analysis of the wholesale market for broadcasting transmission services, to deliver broadcast content to end users (Market 18).

NPT has carried out three consultations on Market 18. The first contained an initial draft analysis of the market. The draft analysis was circulated for comment in the period 29 October 2004 to 13 December 2005. NPT’s second consultation document presented a clarification of the market definition, and was circulated for comment in the period 27 July 2005 to 31 August 2005. On the basis of the first two consultation rounds NPT prepared a new market analysis (the consultation document). This was circulated for comment in the period 24 February 2006 to 17 March 2006.

The statements from the various commenting bodies are summarised by subject and according to the individual paragraphs in the notification. Only the most relevant and thorough comments are addressed, though all input is assessed. NPT will briefly summarise its views on the comments in question, and state how it has dealt with the input. Any reference made to NPT’s final analysis refers to the analysis submitted for notification to the EFTA Surveillance Authority (ESA).

NPT has also received comments concerning the use of remedies. These will not be addressed in this document.

In the consultation document, NPT presented a fully updated version of the market analysis. NPT defined five technology-neutral market segments. Since it is transnational NPT will not give further notice to the satellite market. In the other four markets, NPT has found that the three criteria for ex ante regulation have not been met.

The following submitted responses to the consultation in the third consultation: • BaneTele • Norwegian Competition Authority (NCA) • Ministry of Culture and Church Affairs (MCCA) • Norges televisjon (NTV) • Norwegian Broadcasting Corporation (NRK) • P4 • Telenor ASA • Viasat AS

The individual responses to the consultation may be read on NPT’s website: www.npt.no.

2 General comments on the analysis

2.1 Need for sector regulation In the consultation document, NPT concluded that none of the relevant wholesale markets for broadcasting transmission services qualifies for ex ante regulation. This means that NPT wishes

3 neither to designate providers with significant market power nor to impose any rights or obligations on any market actors in accordance with Electronic Communications Act § 3-4. However, obligations may follow from other provisions in the Electronic Communications Act, the Ecom Regulations or other regulations. The Norwegian Competition Authority had in correspondence prior to the consultation given their consensus to this conclusion.

NTV disagrees with this conclusion. In its response to the consultation it emphasises that a real and pressing need exists for sector regulation in the market. NTV desires corresponding ex ante regulation as in Market 15 (access and call origination on public mobile telephone networks): access obligations, non-discrimination requirements, publication of reference offers, cost accounting, accounting separation and requirements regarding cost-oriented prices.

NPT’s assessment and conclusion NPT has carried out an extensive review of the market conditions and found that the market for broadcasting transmission services does not lend itself to sector-specific regulation. This conclusion is maintained in the final analysis. This conclusion is furthermore supported by the Norwegian Competition Authority.

As mentioned, NPT will in principle not consider specific comments on the use of remedies in this summary. The remedies imposed on an operator with significant market power will always be based on an individual assessment of the special competition problems in a given market.

Since NTV still points out that the need for sector-specific regulation is immediate NPT assumes this is connected with the negotiations on the rollout and operation of the digital terrestrial television (DTT) network. These negotiations went on for a prolonged period of time, and have now been concluded NPT has learned. Regardless of whether NPT stands by its conclusion in the consultation document, or changes it partly, it will take time before a final decision is taken. Any processing of appeals may also postpone the legal effects of the decision. The operators seeking immediate measures should be aware of this.

3 Comments on individual paragraphs in the consultation document

3.1 Definition of the relevant product market

3.1.1 Boundary with the markets for leased lines In the consultation document, NPT discussed where to draw the boundary between the broadcasting market and the leased lines markets. NPT concludes that transmission services in the contribution networks, feeder networks and trunk networks come under the market for the minimum set of leased lines for end users, Market 7. See otherwise the market analysis and notification of decisions for this market, which are to be found on NPT’s website, www.npt.no.

Telenor agrees with NPT that transmission services for contribution networks, feeder networks and trunk networks belong to the leased lines markets, i.e., Markets 7, 13 and 14. However, Telenor contends that such networks comprise a small portion of these markets, and should

4 therefore not be regulated in the same manner as other communication services in the relevant markets. This standpoint has also been argued in connection with the consultations on the leased lines markets.

NPT’s conclusion that the feeder network falls outside Market 18 is, however, contested by NTV. NTV argues that as distributor of broadcasting via digital terrestrial networks, access to the feeder network will be included in the infrastructure that their customers will request, and that the need will exceed 2 Mbit/s. On this basis it is argued that capacities above 2 Mbit/s in the feeder network are a wholesale market to be included in Market 18.

In the same manner, BaneTele also disagrees with NPT on the referral of the services to the retail market (Market 7). BaneTele claims that broadcasting transmission services on contribution networks, feeder networks and trunk networks belong to Market 14, wholesale trunk segments of leased lines. It argues that broadcasters act like wholesale customers, not end users. BaneTele equates the situation with the position of ISPs (Internet Service Providers) that are usually regarded as being wholesale customers. In the same manner as broadcasters, ISPs do not use transmission capacity to offer their own electronic communication services, using it instead to forward Internet content.

NPT’s assessment and conclusion Following substitutability assessment, NPT has found that it is not correct to refer services for contribution networks, feeder networks and trunk networks to Market 18, but instead to the general markets for transmission services/leased lines (Markets 7, 13 and 14). To what extent the service will come under Market 7 (retail market) or Market 14 (wholesale trunk segments of leased lines) will depend on who the suppliers and requesters are, and how they use the service. The specific assessments of this belong in the analysis of the leased lines markets.

The fact that NTV can be viewed as a reseller/distributor of services in the feeder network may be an argument that the service it requests from Norkring or others belongs to Market 14 and should be regulated there. The argument that capacity over 2 Mbit/s must be included in Market 18 since the latter is a wholesale market, must be regarded as invalid given the substitutability assessment and the conclusion made in connection with the feeder network, regardless if it applies to end users or wholesalers. However, this must be discussed in connection with the market for transmission services/leased lines, and not in Market 18.

NPT maintains that the markets for feeder networks, contribution networks and trunk networks do not come under Market 18, but must be attributed to Markets 7 or 14 depending on who is doing the requesting and what the requester wants to use the capacity for.

3.1.2 Delineation in the terrestrial network – issue of technological neutrality NPT has concluded that all of the relevant market segments within Market 18 are technology neutral and thus include both analogue and digital transmission.

5 Telenor disagrees with this with regard to the terrestrial network. In Telenor’s opinion, digital transmission services on terrestrial networks cannot be included in Market 18. In the case of television, the reason given is that as of today DTT networks do not exist in Norway. Telenor believes ESA’s definition of Market 18 only covers existing networks and that therefore DTT networks cannot be included. Alternatively, Telenor believes that transmission services via DTT are an emerging market that should not be sector regulated.

Telenor furthermore believes that due to their different technology, different frequency bands and other dissimilarities, DAB radio and FM radio cannot be in the same market. It establishes that DAB too must be considered an emerging market.

The NCA also comments on NPT’s technology-neutral definition of the radio market. In connection with the substitutability assessment, NCA raises the question whether there can be two relevant retail markets to take into consideration, listeners and advertisers respectively. For commercial radio channels, listeners may be viewed as a production factor in the market – a factor that determines advertising revenues. For these broadcasters, the retail market where they actually generate revenues will be the advertising market. NCA points out that these factors will affect the broadcasters’ transition to DAB transmission. It will not be interesting to abandon FM before there is sufficient audience on DAB. On the other hand, it is pointed out that the FM negotiations are largely finished, and that within the time perspective of NPT’s analysis the trend will clearly be in favour of DAB. NCA therefore agrees with NPT’s conclusion.

NPT’s assessment and conclusion NPT has assessed whether there is substitutability between analogue and digital transmission services over terrestrial networks at both the retail and wholesale level. It is NPT’s assessment that this is the case within this analysis’ time horizon. In particular this is based on expected market developments at the wholesale level. The market for analogue transmission services is largely being wound up, while digital transmission contracts are being negotiated within the next two to three years.

No new information emerged during the consultation round to give NPT reason to reverse its conclusion. Market 18 is therefore regarded as being technologically neutral for all platforms.

3.1.3 Delineation within the terrestrial network – local and national transmissions In the consultation document, NPT concludes that in terms of radio via the terrestrial network it is right to divide the market into two, one for transmission services for local radio and one for national radio. However, for transmission services for television broadcasting on terrestrial networks, NPT has defined only a single national market.

Telenor does not agree with NPT that an overall market should be defined embracing both local and national television. Telenor points out that the establishment costs for local television are substantially lower than for national television, and point out that there are many local television broadcasters that have established their own networks completely or partly independent of Telenor.

6

NPT’s assessment and conclusion NPT’s definition of a market for transmission services for television over terrestrial networks is largely premised on the fact that the market is defined as technologically neutral. Within the time horizon of the analysis, the market situation will change substantially in the sense that it will no longer be possible for local television broadcasters to request local transmission services from Norkring. The transition to DTT and placement of the relevant frequencies with one entity (NTV) means that Norkring will sell only a nationwide product for transmission services. This product will be sold to NTV. Local and regional broadcasters will have to negotiate with NTV instead of Norkring. This means that it is not practical to divide the product market into market segments for local and national transmission services respectively. NPT has therefore kept the conclusion from the consultation document.

3.1.4 Delineation vis-à-vis other technologies In its analysis, NPT concludes that broadcasting transmission services for broadcasters via newer platforms and technologies such as xDSL, optical fibre, mobile etc., shall not be included in Market 18.

Viasat disagrees with NPT in this conclusion, and claims that transmission services via fixed network technology should be included in the product market. Viasat points out that end users in several areas are actually seeing a real choice between different platforms. At the wholesale level as well, television over the copper network is already a potential alternative to the established transmission platforms. More sophisticated technology will also improve the utilisation of the capacity on the copper network, thereby facilitating more opportunities for television services over copper networks. It is furthermore pointed out as a competition problem that Telenor, as operator on the other platforms, lacks the incentive to undertake necessary network upgrades. In this case Telenor will risk stealing its own customers from other platforms. Viasat fears that without sector-specific regulation in this market, Telenor will firstly delay upgrading of the copper network. Secondly, the lack of sector-specific regulation will mean that Telenor, when and if it decides to commit to television transmission over the copper network, could secure a dominant position on yet another transmission channel.

NPT’s assessment and conclusion NPT assesses the market situation in the broadcasting market on an ongoing basis, including for broadcasting transmission services via other platforms than the three traditional ones. It is clear that transmission services via copper networks, fibre and radio relay links outside the terrestrial network are on the increase, but for the time being the reach of networks with both sufficient capacity and an array of retail services is small. NPT has consequently found that within the time horizon of this analysis there is no basis for including transmission services via platforms other than cable TV systems, satellite and terrestrial broadcasting networks.

NPT will also note that the Authority can only partially support Viasat’s assessment of Telenor’s incentive and strategy for upgrading the copper networks for television transmission. On the one hand it could be that Telenor in principle does not wish to steal its own customers from other platforms, particularly during a period where through NTV it is in the process of building the

7 digital terrestrial network (DTT). On the other hand an upgrading of the copper network could also have an effect in the retail markets for broadband services. Higher broadband speeds with better geographic coverage could attract end users in competition with fibre or radio line connection.

3.2 Assessment of the three ex ante criteria

3.2.1 Transmission services for radio on terrestrial networks None of the operators had comments on the markets for transmission of local radio on terrestrial networks not being covered by sector-specific regulation. The further comments therefore apply solely to national transmission services.

First criterion: Are there structural or regulatory entry barriers in the market? Telenor disagrees with NPT that Norkring has an obvious advantage in its control of the mast infrastructure. NPT argues that the costs of technical equipment for broadcasting are relatively low compared with the building of the actual masts, premises and related facilities. However, Telenor claims that this disparity is corrected by Norkring’s offer of co-location. In connection with DAB, Norkring also faces investment in technical equipment for broadcasting. Consequently, Telenor argues that the situation the various operators meet with regard to costs is not materially different. Due to this Telenor argues that the market for national radio is not characterised by entry barriers and that the first of the three ex ante criteria has not been met.

P4 comments on Norkring’s co-location offering. P4 points out that the price list for co-location in Norkring’s transmitter stations is freely available. However, options for insight into how prices are set are lacking. P4 believes that the co-location prices should represent a ceiling for what Norkring can demand of other competitive suppliers of the transmission service, and not be used vis-à-vis broadcasters as a given cost element in the total rental price for distribution. In relation to broadcasters the installation cost should also be divided and subject to negotiation.

Second criterion: Is the market moving toward effective competition? P4 agrees with NPT’s assessment that the market has characteristics preventing it from moving in the direction of sustainable competition. It points out that the Swedish company Teracom considered making a competitive offer to Norkring’s for rolling out P4’s FM network. Teracom found that it would not pay to operate such an individual transmission network for radio in Norway. In other words it would not be possible to get established as a competitor in the market. In practice, the market must therefore be considered closed to development toward competition.

Third criterion: Will ordinary competition law be sufficient for regulating the market by itself? With reference to the negotiating situation with Norkring, P4 does not share NPT’s view that this is balanced between supplier and requester. On the contrary they believe there is considerable imbalance in the relative strength of the two parties. It is claimed that the biggest problem is related to lack of information on the cost basis and specification of Norkring’s pricing. According

8 to P4, Norkring is also not very willing to discuss alternative solutions for meeting P4’s need for transmission service.

According to P4, invoking competition law can serve to worsen the negotiating situation with the counterpart on whom one is completely dependent. This is a risk the customer does not dare to take. It was also pointed out that a protracted competition law process is perhaps not compatible with the pressure of time that, for example, characterises the rollout of the DAB network.

In connection with the third ex ante criterion Telenor shares NPT’s view that the market is not characterised by market failure or competition problems. Telenor emphasises that it is the requesters who possess the frequency rights and that buyer power is therefore high. It is further underlined that in connection with DAB the national broadcasters have acted as a group in the negotiations with Norkring. Telenor also sees the possibility that when final licences for DAB are to be advertised a “radio-NTV” may arise that will be a very strong counterpart to Norkring.

Telenor furthermore agrees with NPT that ordinary competition law is sufficient for achieving sustainable competition in the market, and therefore supports NPT’s decision that the market shall not be sector-regulated.

NCA has commented on NPT’s assessment of the three ex ante conditions. NCA points out that the competition law’s point of departure for the assessment is whether competition law can address the objectives of sector-specific regulation. Reference is made to the preparatory works of the Electronic Communications Act where it is pointed out that one of the main objects of ecom regulation is to achieve the goal of sustainable competition.

NCA emphasises that the relevant rule of law for intervention pursuant to ordinary competition law is Competition Act § 11 on abuse of dominance. If dominance is ascertained, denial of access may be such a qualified abuse. Included in denial of access is regular rejections of requests for access, but also unreasonable prices or other unreasonable agreement terms that could fall under the category. It is further pointed out that intervention pursuant to Competition Act § 11 is not relevant if there is only theoretical risk of abuse. The Norwegian Competition Authority otherwise agrees with NPT’s assessment of the third ex ante criterion in connection with the market for national radio via terrestrial networks.

NPT’s assessment and conclusion NPT is familiar with the different views about Norkring’s co-location service. It is not disputed that Telenor in principle offers access to its infrastructure. However, the demand side seeks a greater degree of transparency and negotiating room. For its part, Telenor claims that a negotiation climate exists, and that in specific cases this has also been utilised. The fact that Telenor’s installation agreement and price are available at www.jara.no, and that with regard to price it is indistinguishable from other regulated products, is also an indication that Telenor seeks a certain degree of openness. Telenor furthermore states that in specific negotiations partners have been given access to the breakdown of the rental amount. Access via an independent third party or offers of such access has also been provided. Earlier (in 1999) both NRK and P4 made use of such an arrangement, but in later negotiations they have turned down the offer.

9 At the same time NPT believes that the establishment of a new operator on the supply side in this market is unrealistic. The contracts that are negotiated are between Norkring and broadcasters, and to a very little degree between Norkring and other operators that might consider starting their own wholesaling of transmission services.

The decisive question in the discussion is whether ordinary competition law is sufficient as a means of regulating the market (third ex ante criterion). As the Norwegian Competition Authority points out, Competition Act § 11 on abuse of dominance will be the relevant rule of law.

In the assessment of this criterion, NPT has emphasised the existing market structure. There is one supplier and just a few requesters. As a supplier without its own frequency resources, Norkring is still dependent on attracting broadcasters. Anything else would in practice imply a collapse of Norkring’s business. On the other hand, the national broadcasters in particular depend on Norkring’s transmission network to ensure the coverage requirements imposed on them through their licences. The mutual dependency in the market and the market dynamics compelled by this are conspicuous. The special situation leads to expectations that the market will function. The presumption is further strengthened by the fact that no complaints or issues have been raised with either NPT or NCA in this market.

Long-term contracts are being entered into between the parties. The length of the contract coincides to a large degree with broadcasters’ licences. The long-term contracts are desired by broadcasters inter alia to ensure distribution during the entire licence period. Moreover, the long write-down periods that long-term contracts involve will facilitate lower prices. The long-term agreements also give the parties plenty of time to plan the next round of negotiations. This indicates little need for quick and frequent interventions from an NRA.

According to the market operators themselves, the major conflict issues in the contracts are price and agreements on service quality (Service Level Agreement, SLA). In this connection, the legal predictability should be well protected through ordinary competition law and the specific contracts. Disagreement on price or SLA after a contract has been signed may be adjusted by ex post regulation in competition law. Moreover, it is worth noting that any decision on ex ante regulation from NPT will come mainly after the contract between Norkring and NTV is already signed. This will mean that these decisions too will have the same element of ex post control as the Competition Authority’s decision. However, competition law provides the authority to determine illegality with retroactive effect. This possibility is not part of a possible decision from NPT that will just apply from the time of the decision. As such, ordinary competition law will in fact be a more appropriate basis for the broadcasters who want adjustment of the contracts. Moreover, it is hard for NPT to see that there is a need for a regulatory regime more detailed than what ordinary competition law calls for. Competition Act § 11, 24 and 25 provide broad powers for obtaining information and determining and punishing abuse of dominance.

It is furthermore a major point that a regulatory authority, be it NPT or NCA, shall in principle be cautious about choosing sides and distributing benefits between the negotiating parties. In particular this applies where passivity from the regulatory authority has no negative impact at the retail level, as is the case in Market 18. Such an approach is supported by the legislative intent of both the Electronic Communications and Competition Acts.

10 After the consultation round, NPT has not found it right to change its conclusion.

3.2.2 Transmission services for television on terrestrial networks

First criterion: Are there structural or regulatory entry barriers in the market? Telenor points out that it is wrong of NPT to write that all available frequency resources for DTT have been awarded to NTV. Telenor points out that frequencies above channel 60, i.e., channels 61-69 (790-862 MHz), have not been assigned, and could conceivably be awarded to local television broadcasters or others.

Telenor furthermore disagrees with NPT that the market is characterised by high entry barriers constituting an asymmetry between Norkring and any new providers. Telenor underlines that the cost transmission equipment represents is the same regardless if the company is newly established or not. Together with the offer of co-location in Telenor’s infrastructure, the asymmetry that could conceivably exist between Norkring and new operators is eliminated. Telenor furthermore emphasises that local broadcasters will face lower infrastructure investments than those with national coverage requirements. On this basis, Telenor claims that there are no establishment barriers in the market for television, with respect to either local or national television, and that the first ex ante condition has therefore not been met.

Both NRK and BaneTele agree with NPT that Norkring’s masts represent highly important strategic distribution points in Market 18, and that a duplication of this infrastructure is unlikely. Through its mast infrastructure, Norkring has a de facto monopoly, and the market is therefore characterised by major entry barriers.

On the other hand, BaneTele does not agree with NPT’s claim that today’s unregulated scheme for co-location in Norkring’s infrastructure seems to function satisfactorily. The lack of transparency regarding cost basis, delaying tactics in connection with access enquiries, refusal of onsite inspections, undocumented refusals etc. are highlighted as specific problems that the operators meet in contact with Telenor. It is BaneTele’s view that co-location services are in reality nonexistent.

Second criterion: Is the market moving toward effective competition? None of the operators comments explicitly on the second ex ante condition.

Third criterion: Will ordinary competition law be sufficient for regulating the market by itself? NPT concludes in the consultation document that ordinary competition law is sufficient for addressing the interests behind sector-specific regulation.

Telenor agrees with NPT’s assessment of the third ex ante criterion. The response to the consultation emphasises that Norkring cannot act independently of the demand side, inter alia because of the considerable bargaining power held by broadcasters and NTV. In combination with the fact that there are a limited number of contracts, stable negotiating situations,

11 benchmarking that does not demonstrate excessive pricing etc., it is clear that the market is not characterised by market failure. Furthermore, it is the case that the market so far has regulated itself. Telenor therefore agrees with NPT that ordinary competition law is sufficient for ensuring sustainable competition, and that sector-specific ex ante regulation is unnecessary.

BaneTele does not share NPT’s view. It is pointed out that there are substantial competition problems in the market. BaneTele believes the fact that just one operator applied for the DTT licence confirms this. It emphasises that the market has been characterised by few operators over a long period of time, and that some of these operators have had several roles. Some are on both the requester and supplier side. BaneTele believes there is a danger that existing operators wish to cement this market situation, and that new operators will therefore be deterred from or have major problems entering the market. On this basis, BaneTele believes that the market is characterised by a real market failure and that this can only be remedied by ex ante regulation.

NRK disagrees with NPT’s portrayal of a market marked by stability with respect to price and other terms on the part of Norkring. NRK seeks better access to the individual cost elements in the services it is offered. When a particular service ceases during the agreement period, sufficient basis for discussing the price reduction with Norkring is not provided. The same lack of transparency characterises the situation surrounding reinvestments that Norkring undertakes during the agreement period, and to what extent the costs coincide with the equipment’s expected lifetime.

NRK furthermore believes that neither they nor other broadcasters have any bargaining power in price negotiations with Norkring, and that Norkring therefore has the opportunity to derive monopoly profits.

In closing, NRK points to several factors that weigh against application of ordinary competition law in the market. Firstly, there is no precedence for such an intervention. It is pointed out that keeping regulatory accounts, and opportunities for operationalising pricing obligations in advance, are necessary for being able to establish the right price for Norkring’s access services. Secondly, the agreements with Norkring cover a significant number of subdeliveries, and filing complaints with the Norwegian Competition Authority from case to case is not regarded as practical. Thirdly, negotiations on the rollout of new services often takes place under pressure of time, and the delays entailed by inquiries and intervention by competition authorities will be costly in and of itself.

NTV too argues against NPT’s conclusion. The company reacts primarily to NPT’s claim that the market is largely self-regulating. NTV argues that the dependency relationship between the parties does not reflect any reciprocal bargaining power. On the other hand, the stable situation that has been the case must be attributed to operators on the demand side approving a poor agreement, rather than no agreement at all.

NTV regards the risk and suspicion of excessive pricing as the major competition problem. In the same manner as NRK and BaneTele, they point out problems with transparency in access services, which make it impossible to gain insight into Norkring’s actual cost basis. The uncertainty about this is causing requesters to fear that they are paying excessive prices.

12 Furthermore they perceive Norkring as engaging in delaying tactics in connection with the negotiations.

NTV believes that ordinary competition law is not sufficient for addressing the objectives of sector-specific regulation. For instance, it believes that the Norwegian Competition Authority will lack appropriate inspection tools to be able to decide whether Competition Act § 11 has been exceeded. Furthermore, the competition authorities are generally reluctant to engage in direct price controls. NTV believes this explains why no cases have been filed with the NCA. The company therefore believes that sector-specific regulation, inter alia in the form of cost accounting and transparency obligations, are necessary in the market.

NPT’s assessment and conclusion By way of introduction, NPT would comment that the frequencies between 790 and 862 MHz are currently not set aside for DTT technology. NPT regards it as highly unlikely that these frequencies will be awarded to market operators within the next two to three years. In all cases NTV will have much greater frequency resources at its disposal than the operator or operators that might be assigned channels 61-69. Moreover NPT is always free to reassess the analysis if material changes in the market situation should happen.

NPT furthermore understands that there are different opinions about Telenor’s installation and/or distribution service. It is not disputed that Telenor in principle offers access to its infrastructure, but the terms and negotiating climate are criticised. However, the demand side seeks a greater degree of transparency and negotiating room. For its part Telenor claims that a healthy negotiation climate exists, and that in specific negotiations this is utilised to both parties’ favour. The fact that Telenor’s installation agreement and price are available at www.jara.no, and that with regard to price it is indistinguishable from other regulated products, is also an indication that Telenor seeks a certain degree of openness. Telenor furthermore states that in specific negotiations partners have been given access to the breakdown of the rental amount. Access via independent third party or offers of such access have also been provided. NTV chose not to avail itself of such an option in connection with the negotiations for the rollout of DTT.

On the other hand, NPT believes that the establishment of a new operator on the supply side in this market is unrealistic. The contracts that exist in this market have already been signed or are in the process of being signed. The agreements are between Norkring and NRK, TV2 and NTV, and not between Norkring and other operators that might consider starting their own wholesaling of transmission services. Thus, competition on the supply side is irrelevant.

The decisive question in the discussion is therefore whether ordinary competition law is sufficient as a means of regulating the market (third ex ante criterion). As the Norwegian Competition Authority points out, Competition Act § 11 on abuse of dominance will be the relevant legal rule.

In the assessment of this criterion, NPT has emphasised the existing market structure. There is one supplier and just three requesters. With NPT’s forward-looking analysis and focus on the roll-out of DTT, there will be for all practical purposes just one operator on the demand side, NTV. As a supplier without its own frequency resources Norkring is completely dependent on signing an agreement with NTV. Anything else would imply a collapse of Norkring’s television broadcasting business. On the other hand, NTV depends on Norkring’s transmission network for

13 ensuring the coverage requirements it is obliged to provide in its licence. The mutual dependency in the market, and the market dynamics compelled by this are conspicuous. From what NPT has learned, the negotiations between Norkring and NTV on DTT have been extensive and demanding for both parties in the sense that both sides have had to give and take.

Long-term contracts are being entered into by the parties. The length of the contracts coincides to a large degree with requesters’ licences. The agreement on rolling out and operating DTT is in effect for 15 years. Such long-term contracts are desired inter alia to ensure adequate distribution during the entire licence period. Moreover, the long write-down periods that long-term agreements involve may facilitate lower prices. The long-term contracts also give the parties plenty of time to plan the next round of negotiations. This indicates little need for quick and frequent interventions from an NRA.

According to the market operators themselves, the major conflict issues in the contracts are price and agreements on service quality (Service Level Agreement, SLA). In this connection, the legal predictability should be well protected through ordinary competition law and the specific contracts. Disagreement on price or SLA after a contract has been signed may be adjusted by ex post regulation in competition law. Moreover, it is worth noting that any decision on ex ante regulation from NPT will come after the contract between Norkring and NTV is already signed. This means that NPT’s decision will have the same element of ex post control as the Competition Authority’s. However, competition law provides the authority to determine illegality with retroactive effect. This possibility is not present in any decision from NPT. NPT’s decision will only apply from the decision date. As such, ordinary competition law will in fact be a more appropriate basis for the requesters who want adjustment of the contracts. Moreover, it is hard for NPT to see that there is a need for a regulatory regime more detailed than what ordinary competition law calls for. Competition Act § 11, 24 and 25 provide broad powers for obtaining information and determining and punishing abuse of dominance.

It is furthermore a major point that a regulatory authority, be it NPT or NCA, shall in principle be cautious about choosing sides and distributing benefits between the negotiating parties. In particular this applies where passivity from the regulatory authority has no negative impact at the retail level, as the case is in Market 18. Such an approach is supported by the legislative intent of both the Electronic Communications and Competition Acts.

On this basis, NPT has found it correct to maintain the conclusion from the consultation document.

3.2.3 Transmission services on cable TV networks

NPT has concluded that the market for transmission services on the cable TV systems is also unsuited to sector-specific ex ante regulation. The market has characteristics that implies that it supports or at least do tend towards effective competition. The second ex ante criterion has therefore not been met.

Telenor agrees with NPT in the assessment of the second ex ante condition. The company points out that there are areas with parallel infrastructure and that the cable TV companies see

14 competition from both the traditional and newer technical platforms. Telenor furthermore points out that the third ex ante condition will not be met regardless.

Viasat disagrees with NPT’s conclusion. Viasat believes that NPT is not very consistent when on the one hand the Authority employs the possibilities for switching to satellite as an argument for proving the existence of competition, while on the other hand NPT concluded earlier in the analysis that cable TV and satellite must be regarded as separate markets since substitutability between the platforms cannot be reckoned, neither at the retail nor wholesale level.

Furthermore, Viasat would like more documentation of market conditions. It seeks factual information on the size of the areas with double cable TV system coverage. Viasat finds it difficult to believe that the majority of end users have more than one alternative.

It is furthermore claimed that NPT cannot use the absence of trade with access to transmission services in cable TV systems as an argument for proving that competition is satisfactory. Viasat challenges NPT’s assumption that the number of potential requesters of access are few and the volume small despite the fact that Viasat has informed NPT that it is interested in such access, but that it has not been offered. It is pointed out that the reason for the lack of trading in this market is a direct result of restrictions on competition and that other operators are excluded because transmission capacity is not offered.

On this basis Viasat believes that NPT must change its conclusion on this point and find that the second ex ante criterion has been met.

NPT’s assessment and conclusion On the basis of the input to this consultation NPT has reviewed the assessment of the second ex ante criterion again. New market data has been obtained.

NPT has not changed its conclusion. The Authority attaches importance to the existence of parallel infrastructure and the fact that more end users therefore have a real choice between several cable TV systems. At the retail level, cable TV operators experience continuous competition among themselves. Data on customers who switch providers, revenue statistics and services at the retail level demonstrate this. For instance, parameters such as content packages and additional services are important for diversifying their products and capturing new end users. In addition, there is increasing competition from other platforms. Even though other platforms are not included as part of the market segment for cable TV systems, it is nevertheless relevant to look at the evolution of the market in the long term and the competition cable TV meets from new services.

In the consultation document, NPT raised the question of whether a wholesale market for access on cable TV systems exists at all. No sale and purchase of transmission capacity for broadcasting on cable TV systems currently exists. NPT has updated the analysis and in the final analysis referred to the Explanatory Memorandum of the Recommendation and ESA’s response to NPT’s notification of Market 12 (access for supplying broadband services, including bit-stream access). Even though the latter cannot be used directly in connection with Market 18 it is relevant to draw an analogy. The practical lack of external sales of transmission services on cable TV systems is the same in Markets 18 and 12. ESA’s comments are directed at including cable TV systems as a

15 platform for supplying bit-stream products. ESA’s comments in Market 12 support the raising of the question by NPT. To what extent a wholesale market for transmission services on cable TV systems can actually be said to exist should be critically examined. The Authority points out that it is not always correct to define a product market when no external sales are taking place, even though such sales are technically possible. Nevertheless ESA accepted the inclusion of cable TV systems in Market 12. NPT has taken ESA’s comments into consideration, and has in the same way as for Market 12 found that the wholesale market for broadcasting transmission services over cable TV systems is in principle a relevant market segment in Market 18. The fact that no wholesale trade is taking place does not mean that it is impossible. It shall also be noted that the French regulatory authority, ARCEP, raised the same question in its analysis. There is no wholesaling of transmission services on cable TV systems in France either. The Commission had no comments on France’s definition of a separate market for cable TV systems. Nor did the Commission have any comments on the fact that the market was not found to meet the ex ante criteria.

In the final analysis NPT maintains its view that the second ex ante condition has not been met and the market is therefore not suited to sector-specific regulation.

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