Annex A Analysis of the wholesale market for access and call origination on public mobile telephone networks (Market 15) 9 November 2006 Table of Contents SUMMARY AND CONCLUSIONS.....................................................................................................4 1 INTRODUCTION.......................................................................................................................10 1.1 GENERAL .............................................................................................................................10 1.2 NEW ELECTRONIC COMMUNICATIONS LEGISLATION.............................................................11 1.3 PTA’S IMPLEMENTATION OF ITS MARKET ANALYSIS ............................................................13 1.4 GENERAL — MARKET DEFINITION........................................................................................13 1.4.1 The service market..........................................................................................................14 1.4.2 The geographical market................................................................................................15 1.4.3 Criteria for defining dissimilar service markets.............................................................15 2 DESCRIPTION AND DEFINITION OF THE RELEVANT SERVICE MARKET............16 2.1 GENERAL .............................................................................................................................16 2.2 PTA ASSESSMENT OF THE RELEVANT SERVICE MARKET DEFINITION....................................18 2.2.1 Introduction ....................................................................................................................18 2.2.2 Access and call origination on mobile networks ............................................................18 2.2.3 Access and call origination on fixed-line networks ........................................................21 2.2.4 Voice calls with IP technology (VoIP)............................................................................23 2.2.5 Distinction between companies and individuals.............................................................24 2.2.6 Phone cards and subscriptions.......................................................................................24 2.2.7 Short messaging services (SMS).....................................................................................24 2.2.8 Other data services.........................................................................................................25 2.2.9 International roaming.....................................................................................................26 2.2.10 NMT 450 ....................................................................................................................27 2.3 CONCLUSIONS CONCERNING THE DEMARCATION OF THE RELEVANT SERVICE MARKET........30 3 GEOGRAPHIC DEMARCATION OF THE RELEVANT MARKET .................................30 4 THE STATUS OF THE MOBILE PHONE MARKET ..........................................................33 4.1 SUMMARY AND HISTORY......................................................................................................33 4.2 THE RETAIL MARKET............................................................................................................35 4.3 UNDERTAKINGS IN THE MOBILE PHONE MARKET .................................................................37 5 MARKET ANALYSIS ...............................................................................................................38 5.1 INTRODUCTION.....................................................................................................................38 5.2 THE MARKET FOR ACCESS AND CALL ORIGINATION ON PUBLIC GSM MOBILE NETWORKS ...39 5.2.1 Market share...................................................................................................................39 5.2.2 Control over facilities not easily duplicated...................................................................44 5.2.3 Overall size and experience of the undertaking..............................................................45 5.2.4 Entry barriers .................................................................................................................47 5.2.4.1 Sunk costs ..........................................................................................................................48 5.2.4.2 Economy of scale................................................................................................................48 5.2.4.3 Economy of scope...............................................................................................................49 5.2.4.4 Access to capital .................................................................................................................51 5.2.5.5 Technological advantages ...................................................................................................52 5.2.4.6 Barriers to expansion ..........................................................................................................53 5.2.4.7 Access to distribution and sales systems.............................................................................53 5.2.4.8 Vertical integration .............................................................................................................54 5.2.4.9 Purchasers’ freedom, access to information, and switching costs.......................................55 5.2.4.10 Product diversification / bundling.......................................................................................58 5.2.4.11 Conclusions on entry barriers..............................................................................................59 5.2.5 Price comparison and price trends on the retail market ................................................60 5.2.6 Competition in the relevant market ................................................................................63 5.3 THE MARKET FOR ACCESS AND CALL ORIGINATION ON THE NMT MOBILE NETWORKS ........67 5.3.1 Market share...................................................................................................................67 5.3.2 Entry barriers and potential competition .......................................................................68 5.3.3 Prices and price trends...................................................................................................68 5.3.4 Countervailing buying power .........................................................................................69 2 5.3.5 Summary of the NMT market..........................................................................................70 6 ASSESSMENT OF SIGNIFICANT MARKET POWER .......................................................70 6.1 GENERAL .............................................................................................................................70 6.2 PTA’S ASSESSMENT OF SIGNIFICANT MARKET POWER IN THE RELEVANT MARKETS.............71 6.2.1 The market for access and call origination on public GSM mobile networks ................71 6.2.1.1 Joint dominance ..................................................................................................................73 6.2.1.2 Assessment of significant market power............................................................................83 6.2.2 The market for access and call origination on the NMT mobile network.......................84 7 IMPOSITION OF REMEDIES.................................................................................................84 7.1 REMEDIES — GENERAL ........................................................................................................84 7.2 REMEDIES IN EFFECT PURSUANT TO THE PREVIOUS TELECOMMUNICATIONS ACT................86 7.3 COMPETITION PROBLEMS .....................................................................................................86 7.3.1 General...........................................................................................................................86 7.3.2 Competition problems — GSM mobile networks............................................................87 7.3.3 Competition problems — NMT mobile network .............................................................89 7.4 PROPOSED REMEDIES PURSUANT TO THE NEW ELECTRONIC COMMUNICATIONS ACT ..........90 7.4.1 Obligations in the market for access and call origination on GSM mobile networks ....90 7.4.1.1 Access to the GSM mobile network...................................................................................90 7.4.1.2 Non-discrimination ............................................................................................................99 7.4.1.3 Transparency....................................................................................................................100 7.4.1.4 Accounting separation...................................................................................................... 102 7.4.1.5 Price controls ...................................................................................................................103 7.4.1.6 Summary of obligations for the GSM mobile network ....................................................110 7.4.2 Obligations in the market for access and call origination on the NMT mobile network 111 7.4.2.1 Granting of access to the NMT mobile network ..............................................................112