Erhverv~Styreisen Erhvervsstyrelser~°S Drafx Rr~E~Sure Concerning

Erhverv~styreisen Kobenhavn • 1 August 2~`~

L~ngefinie Alle 17 Charlfltte Form 21 QO Kobenhavn ~ Advokat

T +45 7Z 7.7 3`.i 13 [email protected]

Sagsnr. 0? 1 G94-0405 seh/ch`li p Uok.nr. 1224Qn85.1

Erhvervsstyrelser~°s drafx rr~e~sure concerning access to TLC's cable TV network on the wholesale market for broadband acres§(market 5~

~urthe~l to our meeting on 4 ~~,ly 2014, Vi~sat Broadcasting thereinafter referred to as "Via- sat") present the following ob~erva~ions to Erhvervsstyrelsen (her~inaft~r referred to as the "Uanisf~ Business Authority")'s d-raft measure of 27 May 2014 concerning access to TDC's cable TV network on the wholesale market far broadband access (rparket 5) (hereinafter referred to as the "Draft Measure"),

for tie sake of good order we note that Chief o~ Division Help B~jen Larsen has accepted that we submit the present observations in English.

As a starting point it is observed that althaug~ the Draft Measure is addressed to TDC, it vvifl undoubtedly have a vital impact on Viasa~'s business inasmuch as the DrafC f~easure, in essence, concerns three specified pay TV chaRneis, i.e. fihe independent TV ct~ar~nel "dk4", the channel "Kanal 5" broadcast by SBS Discovery Television (hereinafter refierred to as "SBS"),and the channel "T1l3" which is broadcast by Viasat.

Largely, Viasat`s observations on tine Draft Measure can b~ summarised under the following headlines: the Draft Measure lads a clear legal basis • the C~rafit Measure cannot be considered a proportionate remedy to address the lack o~ effective competition on the broarib~nd market • the Draft Measure will distort competition in the TV distribution markets (upstream and downstream)

Below, Viasat will elaborate on each of these headlines following a description of how the Draft Measure will affect V'sasat's commercial interests in several markets.

1, The Daft 6Vleasure viii have a vital impa~ti o~ V~asat's ~omrnercial interests

Vias~t are -the owner and distributor of the TV channe{ "TV3". Consequently, Viasat seep to maximize the commercial potential of TV3 on both the TV distribution market and on the TV advertising market.

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As for the cable TV market, Viasat have enierec~ into an agreement with TCC which covers the distribution of Viasat's TV channels TV3, TV3+, TV3Puls, TV3 Sport 1 and TV3 Spart 2 and a range of other Viasat owned channels. According to the terms of the agreement, TV3 is distributed in the "'basic TV package"~' while TV3~+ and N3Puls are distributed in the "medium TV package"Z and, finally, TV3 Sport 1 and TV3 Sport 2 are distributed in the "complete N package"~.

Additionally, the agreement includes a number of services such as "catch up","web TV"and "m'sx and match". Through this agreement Viasat market TV3 Co more than 1 million house- holds in Uenmar~k.

It is emphasised that TDC have only acquired the right to distribute 7V3 to end consumers and not to wholesale customers4.

Yet, the Draft Measure will obligate TDC to resell TV3 - on the same terms that have been negotiated between CDC and Viasat - to any operator that purchases broadband services through TDCs cable TV network. Thus, the Draft Measure intervenes in the commercial agreement between Viasat and TDC by requiring that Viasat grant TDC the right to distribute TV3 to wholesale customers without leaving any room for negotiation of the terms for TDC's wholesale distribution.

Alternatively, the Draft Measure requires TDC to remove TV3 from the basic TV package which implies but another intervention in the agreement between Viasat and TDC since this agreement stipulates that TV3 is distributed in the basic TV package. Thus, this alterna- tive forces Viasat to accept that TV3 is removed from TDC's basic TV package contrary to the agreement between Viasat and TDC.

Both options would cause substantial financial fosses for Viasat.

As for the first option it is emphasised fihat there is no stan~aione agreement or standalone terms between Viasat and TDC for the distribution of N3. On the contrary, the terms on which TDC distribute TV3 are a result of negotiations concerning a range of services and terms and, therefore, Viasat's objective has been to agree with TDC on terms that on the whole are commercially sensible from Viasat's perspective.

The "basic N package" comprises 25 N channels in total and is marketed at the price o€ DKK 219 per month, 2 The "medium N package" comprises 35 N channels in total and is marketed at the price of DKK 389 per month, 3 The "complete N package" eomprise~ b0 TV channels in total and is marke~ed at Che price of DKK 479 per month, 4 for the sake of completeness, it is notes that the agreement does allow T[?C to distribute N3 to end consumers byway of a community antenna association, G7~~~""~~~~

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As far as TV3 is concerned, however, the price reflects that the agreement between Viasat artd TDC inc{udes as well as the fact that

If Viasat were to conclude astand-alone agreement with TDC an the distribution of TV3, the price wo~fd be significantly higher than the price included in the current agreement, and the Draft Measure, therefore, entails the setting o~ an arbitrary price for the distribution of N3.

The potential subscription fee revenue affected by the Draft Measure for Viasat is more than Di~K annually, based on the current customer base of more than-.

Additionally, the first option leaves Viasat with no choice as to which operators should be granted the right to distribute TV3, inasmuch as the Draft Measure implies that TDC must resell TV3 to any operator that purchases broadband services through TDC's cable N network.

As far as the second option is concerned, Viasat emphasise that the removal of TV3 from TDC's basic N package will result in a considerable reduction of Viasat's TV advertising revenue. This is so because TV3's penetration ~nrilf fall dramatically if Che channel is removed from the basic TV package that has 300,00 subscribers. Accordingly, the TV advertising revenue will decrease due to the ppsitive correlation between a TV channel's penetration and the generation Qf TV advertising revenue.

The potential TV advertising revenue affected by the Draft Measure for Viasat is approxi- mately DKK annually, used on the current customer base of more than_.

In light of the above, it is submitted that although the Draft Measure is not directly addressed to Viasat but to TDC, it will effective{y limit Viasat's commercial margin and reduce Viasat's return on TV3 in the form of reduced subscription revenue as well as reduced TV advertising revenue.

Z. The Draft Measure larks a clear legal basis

Viasat appreciate that the Draft Measure refers to s. 41(1), s. 41(2) ~1), end s. 42(1) of the Dan+sh Act on Electronsc Communications and 5ervices5 as the applicable legal basis. fn view o#the fact that the said provisions are intended to implement parts of the framework

S Act na. 169 of 3 March 2011, i~ ~ ~

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Directive and of the Access Directive', it is submitted that they must be construed in accordance with the relevant provisions of the said directives.

It is recognised that the menfiioned directives provide a clear legal bads which authorises national authorities to impose one (or more) of the specific obligations laid down in the directives on an undertaking with significant market power thereinafter referred to as „5MP"}.

However, Viasat contend that neither the Access Directive nor the Framework Directive provide a valid legal basis for imposing obligations on third parties such as Viasat.

It is recalled that Viasa~ has no SMP and that Viasat hay nn presence on the so-~~lied "Mar- ket 5" or on any other sub-market related to broadband access.

Additionally, it is observed that no wording in the directives justify the imposition of obligations on undertakings other than those with a SMP. On the contrary, Article 8 (3) of the Access Directive provides that "national regulatory authorirres shall not impose the o,~ligations set out in Articles 9 to 13 on operators that have not been designated in accordance with paragraph ~."

Viasat recognise that the Draft PJleasure is addressed to TDC, yet as Viasat have demon- stratedabove, the Draft Measure actually limits Viasat's commercial freedom considerably,

It is irrelevant that -formally -the Daft Measure is addressed to TDC. What is relevant is the effect of the Draft Measure and not its form. Consequently, it is held that the Access Directive explicitly excludes The Danish Business Authority from imposing an ohfigation such as the one contained in the Draft 1Vleasure.

!n this connection Viasat note that, in prior decisions, The Danish Business Authority have recognised that there is no legal basis for imposing obligations directed at the TV distribution market i.e. obligations such as the one conta'sned in the Draft Measure. Viasat refer inter olio to point 2.6.5 of The Danish Business Authority's decision regarding TDC of 16 August 2012 which reads as follows$:

"2,6.5 thalfenges related to content rights

pirective 2002/21 /EC of the European Parliament and of the Council of 7 March 2002 nn a common regulatory framework for electronic communications networks ar~d services. Directive 2042/19/EC of the European PariiamenC and o~Fthe Council of 7 March 2G02 on access ta, and intercon- r.eclion of, electronic communications neEwo►~k and associated facilities. a Office translation from Danish. ors rw~ w~ rs ~►

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The development in demand among private end users towards bundled products, see clause 2.6.7 means thatfor many telecoms companies it is important to have tt~e rrgf~t content ~n the television packages offered to the end users, The television drstribu~ors, including telecoms companies, waning to offer television to end users must acquire the necessary content rights from the content providers producing the content (Le. the television channels, e.g. TV3). The television distributor negotiates the conte~~t with the variocls content providers.

!n these negotiations, the customer volume of the television distributor rs df key irri- portance. Thy content' provider wants to bring its content ra as many end users us possible, because it is the end users who provide the financing for the content production. They may do this either in the form n~f end user payments, a part of w}~ich flows direet- ly to the content provit~er, or indirectly 6y means o~ advertising revenue. All other things being equal, the more end viewers view the content, the larger the direct payments yr adUertrsing revenue the content provider will receive.

Through its balks with the industry, the National 1T and Telecom Agency fins been made aware that telecoms corr~panies with small customer volumes are in o very difficult ne- gotiating positron vis-a-vis the content providers. The companies state that the content prices They can obtain are so high that it becomes di~fi~utt for them to price the television packages ar a competitive level vis-a-vis the end customers. The companies further state that theyfeel convinced that TDC can obtain different and much more favourable conten£ prices due to YauSee's large customer volume (mare than 7.3 million customers) and that TDC is thereby capable o,f offering a much more attractive price for its television packages to the end users.

The access to television content cannot be governed by the Danish Business Au- tfiority as this area rs outside the scope of the tele~cor~s tegisfrrtion. Ir ~s therefore root possible for the Auth~rify to address the c~nmpet~~ior~ challenges related to economies of scale in c~nnectisn w~rh the ~Surcfiase of television cant~ent~." (emphasis added).

Viasat submit that the adoption of measures fihat subst~r~tially Limit the commercial freedom of the TV distributors and harm their commercial interests, requires an explicit and unequivocal legal basis which, cf. above, is lacking in the present case.

3. The k~raft Nteasure eannot be considered a proportionate remedy to address the lack of effective competition on the broadband market

3.1 The Danish Business Authority's assessment of the proportionality of the Draft Measure is flawed ~:

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lnrtially, it is recalled that the principle of proportionality is a general principle of EU yaw that applies to national authorities when they apply EU law such as in the present case.

Furthermore,. Article S {1 } of the Framework Directive ex~ressty provides that na- tionaf authorities are obligated to respect the principle of proportionality when they impose remedies, and Article 12(2} (e) of the Access Directive provides that national authorities shall consider relevant inteElectua~ property rights.

However, the assessment o~'the praportianafity of the Draft Measure is, essenfiia!- ly, limited to the Draft Measure's impact on TDC.

Yet, as Viasat have demonstrated, cf. section 2 above, the Draft Measure substantially affects Viasat's commercia{ interests and entails an interference with Viasat's right to freely determine their pricing strategy and their business partners con- cern~ng the distribution of TV3.

It is emphasised that the saki rights constitute fundamental rights which are safe- guarded by Article 16 of the Charter of ~und~rnental Rights of the European Un- ion (hereinafter refierred to a~ the "Charter") which ~ro~ide that "~tJhe freedom to conduct a business in accordance with European Union law t~ncl national {aws and practices rs recognised".

It is recalled that the Caurt of justice have established that the ambit of Article 16 of the Charter is wider than the fireedom to exercise an economic activity and covers far instance the freedom of contract, cf. for instance Case C-283/11, Sky ~sterreich, paragraph 42 and the case law cited therein. Moreover, it follows from established EU case la~nr that the freedom of contract enables an economic opera- Car -such as Viasat - to freely determine its business partners and its pricing strategy, cf, inter alia Case C-283/11, Sky Osterreich, paragraph 43 which reads as foi- ows:

"ft.~he freedom of contract includes, in particular, the freedom to choose with wham to do business (see, to that effect,~ained Cases C-90/90 and C-9?190, IVeu ~:..], and i~he freedom to determine the prise of a service (see ra char ef~fec~, Case C- 437/04 Commission v Belgium (...J and Case C-213/?0 F TEX f••1"•

What is more, the content on TV3 constitutes an inteElectual property asset for Vi- asat and, accordingCy, comes within the ambit o#Article 17{2} of tf~e Charter, which provide that: + ~►r~ ;

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"lnrellectual property shall be protected."

Nonetheless, the Draft Measure contains no ma~eriai assessment of the Draft Measure's impact on Vias~t, thus The Danish Business Authority's conclusion, i.e. that the Draft fVleasure constitutes a proportionate remedy, seems flawed.

!n this connection it is emphasised that Viasat's distribution network does not include wholesale distributors9. This is so because when distribution rights have been granted to a distributor, it is extremely difficult for Viasat -and for any other contend provider for that mafiter - to exercise control of the onward distribution. In order to efficiently protect the integrity of the TV 3 brand and Viasat's inte!{ec- tual property rights, Viasat require cornp(ete control when it comes to selecting the distribufiors that are granted distribution rights to 1~~V3.

Thus, the Draft Measure interferes substantially with Viasat's distribution set-up and, uftimately, with Viasat's power to protect the asset which T~/ 3 constitute.

~t is observed that to Viasat's knowledge, other content providers abstain from using w}~olesale distributors for the exact same reason as Viasat.

Additionally, Viasat submit that The Danish Business Authority have failed to carry out the careful proport~anality assessment that is required, cf, paragraph 2.6 of the European Commission's StafF 1Norking Document "Expfana~ory Note" of 13 No- vember 20071° which reads as follows:

"Even then there needs xv be ra►reful ~ons~derativn of which remedy should be applied The regulatory framework is very flexible. NRAs have a suite of regu(arory tools at their disposal, as sei~ out in Directive ~002/79/EC ~rnd Directive ~00~/22/FC ►Nhen imposing a specific obligation on an undertaking with significant market power, the NRA will need to dex»onstrate that the ob~igaxion in question is based ora the nafure o~ the problems identified, prvpoa'giona►te ~►nd justdfied in the light of the NRA's basic obfecrives as set vut in Article 8 of the Framework Directive.

These basic objectives require IVRAs ro: - promote competition to the provision of electronic communications networks, electronic communicaCions services and assoriat~d facilities and services;. ~- contribute to the development o~ the internal market; - promote Che interests of the citizens of the European Union

g Avery lirr,ited number of antenna associations have been granted the right to distribute Viasat cfiarnels to other antenna associations. '°SEC(2007) 1483/2. :: `~-

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The Framework Directive also requires 1VRAs to seek to agree between themselves on the types of ins~rumenrs and remedies best suited to address particular types of srtua- tions in the marketplace. In particular, as noted in the Guidelines on marked analysis, in order ~o establish that a proposed remedy is compatible with the principle o~ proportionality, the actran t~o be taken must' pursue a fegitime~te aim and t'he means empJoye~l to achieve the aim must be both necessary and the teasC burdensome, i.e. rt must be the minimum necessary t~r~ achieve the aim.

A number of considerations are set out rn the Directives qualifying tf~e use o~f specific remedies. to particular, ~efure imposing fhe nnore onerous remedies, NRAs need fv be mindful ~f the initial investment by the facility owner, bearing in mind the risks involved in making i~he investment. The IVRAs have a duty to safeguard compe- ~ition in the Fong term, which will inter a(ia be a funci~ion of the need to assess the tethnica! anal econr~mic viability of using or installing compering facilities and the effect of such an intervention on possible investment !n those facrli~ies. This is especially irn- portant where new ~echno~ogies or networks are being deployed in unproven markets." (emphasis added},

In view o~ the fact that no substantial consideration has been given to the DrafC Measure's ir-npact on Viasat's commercial interest and fundamental rights, Viasat submit that the proportionality of the Draft Measure has not been demonstrated to the required legal standard.

3.2 The Draft IVieasure is neither an appropriate nor necessary remedy

Viasat concur uvith The Danish Business Authority when they consider the Draft Measure to be somewhat atypical, cf. page 3~ of the Draft Decision.

In this connection it is recalled that as a main rule any remedy should r~iate directly to the market which Packs effective competifiion due to an undertaking with a SMP, cf. paragraph 2.6 of the European Commission's Staff Working Document "Explanatory Note" of 13 November X007 which provic(es that:

"!n principle, the prap~sed obligations should pertain ~o the relevant product market in which SMP has been found. However, rr~ dealing with lark of effective competition arising~from a positron of SMP in an idertffied market, it maybe necessary zo impose several obligations to remedy the competition problem re~aCing to services both inside anci outside the marker. ~n ~arr~ciple, ae~ 1VR4 may impose obligations irr an area ~r~rsiele but closely related ~o i~he rel+ev~aat market under reveew, provided such irraposirron c~ns~lt~u~es: ~- ~►

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the most appropriate, proportions#e and ef~`pci~nt means of remedying fhe lack of e,~ective competition found vn the relevae~t merrket; and - on essentla! elemsn~ in suppvr~ of abligario~t(s~ ~mpnsed on the relevant SMP market without which those obiiga~ions would be ineffective."(emphasis added},

ft is observed that the lack of effective competition on the broadband market could be remedied through the imposition of an obligation on the part of TDC to adapt the cable TV network infrastructure so that Che distribution ofi broadband services is separated from the distribution of the basic TV package.

Viasat appreciate that The Danish Business Authority consider this remedy dis- praportionate irr view of the costs involved for TDC as demonstrated by a study submitted to The Danish Business Authority by the company Gartner in Decem- ber X012(hereinafter referred to as the "GarCner Study").

Viasat observe that several of the parties that have submitted observations on the Draft Measure question the validity of the Gartner Study and suggest that The Danish Business Authority reconsider their conclusions, particularly in view of the market conditions as of 2014.

In particular, reference is made to the observations submitted by the Danish Competition and Consumer Authority ~herein~fter referred to as the "DCCA"}:

"The conclusions of the analysts woufd, however, have appeared more valid had the analysis contained a separate assessment as to whether Gcrrtner's culcula-

tions are realistic and o~ the vaJidi~y of TDC's argumenrs.~+j 1

And further:

"The analysis does nod take a critics! view of Gartner's estimates and assessments or TDC's arguments against a channel reorganisation, even though a channel re- organisarion could be the solui~ion besi~ suited i~o meet the challenges currently faced."'z

In addition, t~iasat observe that only a very fimited number of consumers on the broadband market w'sll be afifected by the Draft Measure in comparison to the very high number of consumers afiFected o~ the TV market, when considering the number of individual TDC basic TV package subscribers with TDC broadband sub-

" Cf. gage 1 of the DCCA's observaCions of 1 S Noverraber 2013. Office transiaticn from Danish. 1z lbid, page 2.Office translation from Danish. ~~

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Rok.nr. ~224~G85.~

scribers. Thus, effectively the Draft Measure targets a very limited number of consumers which is hardly sufficient to achieve the objective of effective competition on the wholesale hroadbancl access market.

Consequently, the D-raft Measure is not the most appropriate and efficient remedy, and for this reason the conditions laid down in paragraph 2.6 of the European Commission's Staff Working Document "Explanatory Note", cf, above, are not ful- fiifed,

tNhat is more, in view of tt~e Draft Measure's substantial interference with Viasat's commercial interests and fundamental rights, cf, above at section 3.1, it is submitted Chat the Draft Measure exceeds what can be considered proportionate.

3.3 The Draft Measure fails to strike a fair balance between the freedom to conduct a business, the protection of intellectual property rights, and the objective of effective competition in the wholesale broadband access market.

Viasat recognise that the achievement of effective competition on the wholesale broadband access market is a legitimate objective that is recognised within the EU feg~l order.

!n tl~e present case, however, the objective of e#fective competition conflicts with the fundamental rights of the market players such as Viasafi.

Accordingly, the Access Directive and the Framework Directive must be int~rpreti- ed and applfed in a manner that does not interfere with the market players' fun- damenta! rights, This is cansidered particularly important given the lack of a clear legal basis, cf. above at section 2.

Yet, it is submitted that the Draft Measure does not allow a fair balance to be struck between, on the one hand, the freedom to conduit a business and the protection of intellectual property rights and, on the other hand, the objective of ef- fectiWe competition on the irvholesale broadband access market.

Particularly, this is so because the Draft Measure constrains Viasa~ to distribute N3 at a prise which represents cherry picking from the agreement between Vi- asat and TDC ancf -what is more - In this latter connection, reference is made to pag~of the Draft Measure where The Danish Business Authority recognises ~ i

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Additiana[ly, reference is made to page~of the DCCA's competition and consumer study `The Distributson of TV channels" published on 7 November 2011,'3 which also describes th

it is submitted that a less interfering and, thus, more proportionate remedy would be to apply the list prices set by the distributors. In this connection, Viasat observe that there seems to be a misunderstanding at page 24 of the Draft Measure because contrary to the draft, the three TV channels, i.e. dk4, Kana! 5, and TV3 III have publicly available list prices.

~. The Draft Nlea~ure wil[ distort competition on the TV distribution markets

In addition to the above observations, Viasat submit that the Draft Measure cannot be considered appropriate due to its potentially dist~rtfve impact on the competition on the vtirholesaie market for TV distribution and on the retail market far TV distribution.

4.1 Distortion o~ competition on the wholesale market fa~~ TV distribution

Through the draft Measure TDC will unquestionably gain more bargaining power on the wholesale market for 7V distribution.

1t 1~as already been established by both the Danish Business Authority and by the DCCA that, currently, TDC have substantial bargaining power on this market. Nonetheless, the Draft Measure intends to add to TDC`s bargaining power by ex- panding TDCs customer group to include operators that decide to distribute TDC's basic TV package along with broadband services through TDC's cable TV network.

In rea( terms, the Draft Measure authorises v`rhat can be considered a de ~facCo joint purchasing agreement between TIC and the operators that purchase broadband services through TDC's cable TV network. Such an agreement would be contrary to Artic{e 101(1) TFEU and to s. 6(1 ~ of the Danish Competition Act in view of the parties' considerable joint market power,

The potential anti-competitive effects of a joint purchasing agreement are con- firmed by the Commission in their Communication "Guidelines an the applicability

13 In Danish: "Distribution of tv-kanal~r". '~wr ;.. ,,

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of Article 701 of the Treaty an the Func~ionrng of the European Union to horizar~tal co- operation agreements"14 which reads as falows:

"5.3. Assessment underArticle 101(9)

5..x.1. Main competition concerns

200. Joint purchasing arrangements may lead to restrictive ~~#ects on com- peri#ion on the pu~tchasing and/or downstream selling market or markets, such as increased prices, reducec~ output, product quality or variety, ar innovation, market allocation, or anti-comperitivP~foreclosure of other possible purchasers.

C ••.l

202. !~ the parties have a signi~flca~~t degree of market power on the purchasing marker (buying power) there is a risk that they may force suppliers to reduce the range ~r quality of products they produce, whicf~ may bring about r~s~r~crive effec~s on competition such as quality reductions, lessening of innovation efforts, or ultimately sub-ap~imal supply." (emphasis added).

~fhus, i~ is submitted that the Draft Measure will exacerbate the competitive situation on the wholesale market for N distribution to the detriment of the content providers such as Viasat.

In order words, the Draft Measure inhibits competition on the who~esale TV distribution market in order to remedy the lack of effective competition on the wholesale market for broadband access.

Viasat contend that even if it is assurried (quod none that the Draft Measure's pro- rompefiitive effects on the latter market would offiset its anti-Competitive effects on the former market, it cannot be denied that the Draft Measure will interFere with the economic welfare of the content providers that are not active on tie wholesale market for broadband access and that they, therefore, will not achieve any gains from the improved competitive situation on the wholesale broadband access market.

~n the contrary, the content providers - Viasat included -will not only dace a more uneven playing field o~ the wholesale market for TV distribution due to TDC's strengthened position, but Viasat will also de facto fall subject to price regu-

,a f~j 2011, C 11, p. 1, ~ ~• err w

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{ation obligating them to distribute TV3 at a price which has never been intended to constitute astand-alone price.

Additionally, the Daft Measure wi11 potentially facilitate the exchange of commer- ciafly sensitive information such as fihe price and terms agreed between Viasat and TDC or, respectively, between dk4 or SBS and TDC, which would also be ~on- trary tothe objectives of campeCition law.

in view of the above, Viasat submit t}~at the Draft Measure's anti-competitive effects on the wholesale market for TV distribution constitute }yet another reason why the Draft Measure is not an appropriate remedy in Che present case.

4.2 Distortion ofcompetition on tf~e ret~i~ market for TV distribution

Above, it has been demonstrated how tl~e joint purchasing agreement which is established by the Draft Measure, ~rvill prohibit competition on the wholesale market for TV distribution. However, consideration must a(so be given to the Draft Meas- ure's potential effects on the joint purchasing agreement on the retail market for TV distribution.

!n this regard, Viasat c~~~end that it is questionable whether the Draft Measure will actually enhance consumer welfare, since it can be considered unlikely that the consumers wi{I benefit from the beneficial terms, on which the operators will be granted distribution rights to TV3~ Kan~l 5 and dk4.

Reference is made to paragraph 2U1 ofi tf~e Commission's Communication "Guide- lines Qn the applicabill~y ofarticle 7D 1 of the Treaty an the Fun~rioning of the European Union ~o horizontal co-operation agreements"'S which reads as follows:

"201, t~downstream competitors purchase a sig~i~frcant part' of their products ~o- gether, their incentives for price competition on the selling rr~arket or markers may be cortsidera~bly reduced. !f the perrt~ies hmvQ ar sigrrifi~ant degree of m~r- k~t power (which does nit necessarfJy a~enaunt ~o ~lominanee~ on the selling re~ark~t or markets, ttte- lower purcharsp prices acheeved by the joint put chasing arrangement are likely nor ~o be p~rssed on to cvnscrrr~ers." {ernpha- sis added}.

lr~ addition, it is submitted that for the aperators which benefit from the beneficial distribution rights to TV3, Kanal 5 and dk4, innovation will became less importanC,

,s Ibi~1. a~ w~ ~r a~► ~r

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thus the Draft Measure may reduce the operators' incentives to innovate which will, ultimately, run counter to consumer welfare.

Moreover, it is held that the operators, which benefit from the Draft Measure, vvili be competing with other players on the retail TV distribution market. However, the latter group will not have access to the beneficial terms and will, consequently, face an uneven playing field.

Thus, the Draft Measure will inhibit competition on the retail market for TV distri- butior~ and, what is more, because of this discrimination nn graur~ds of the different technologies employed, the Draft Measure, incidentally, infringes the second paragraph of Article 8(Z) of the Framework Directive.

Accordinglyr it is held that the Daft Measure creates as many completion concerns as it seeks to remedy and also for that reason, the Draft Measure cannot be considered appropriate.

Med venlig hilsen

Simon Evers Kalsmose-Hjelmborg Charlotte ~orn~