EUROPEAN COMMISSION Brussels, 10.4.2019 C(2019) 2908 final Commission for Communications (ComReg) One Dockland Central, Guild Street D01 E4X0 Dublin 1 Ireland For the attention of: Mr Garrett Blaney Chairperson of the Commission Fax: +35318788193 Dear Mr Blaney, Subject: Commission Decision concerning case IE/2019/2150: Wholesale call termination on individual public telephone networks provided at a fixed location in Ireland, and Case IE/2019/2151: Wholesale voice call termination on individual mobile networks in Ireland Comments pursuant to Article 7(3) of Directive 2002/21/EC 1. PROCEDURE On 11 March 2019, the Commission registered two notifications from the Irish national regulatory authority, the Commission for Communications (ComReg)1, concerning the markets for wholesale call termination on individual public telephone networks provided at a fixed location and wholesale voice call termination on individual mobile networks2 in Ireland. 1 Under Article 7 of Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive), OJ L 108, 24.4.2002, p. 33, as amended by Directive 2009/140/EC, OJ L 337, 18.12.2009, p. 37, and Regulation (EC) No 544/2009, OJ L 167, 29.6.2009, p. 12. 2 Corresponding to markets 1 and 2 in Commission Recommendation 2014/710/EU of 9 October 2014 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 (Recommendation on Relevant Markets), OJ L 295, 11.10.2014, p. 79. Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 The national consultation3 ran from 2 October 2017 to 10 January 2018 for the fixed and mobile termination market analysis decision and from 13 March 2018 to 2 May 2018 for the decision specifying the price control remedies for both markets. On 19 March 2019, a request for information4 was sent to ComReg and a response was received on 22 March 2019. A supplementary request for information was sent to ComReg on 21 March 2019 and a response was received on 25 March 2019. Under Article 7(3) of the Framework Directive, national regulatory authorities (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 2.1. Background Fixed termination The review of the market for call termination on individual public telephone networks provided at a fixed location in Ireland was previously notified to and assessed by the Commission under cases IE/2007/07015 and IE/2013/14696. In the 2007 market review, ComReg defined seven relevant markets and stated that all fixed telecommunication operators providing call termination services had significant market power (SMP) in their respective networks7. ComReg proposed to impose on Eircom the obligations of access, transparency, non-discrimination, accounting separation, cost orientation and cost accounting. Alternative operators (ANOs) were made subject to transparency, non-discrimination and price control obligations8. The specific obligation imposed on Eircom was to ensure that fixed termination rates (FTRs) were calculated using a forward-looking, long-run incremental costs (FL-LRIC) model. ANOs designated as having significant market power were exempt from cost orientation until they reached a 5 % share of total direct access paths. If the ANO did not reach the 5 % share of the market within five years, ComReg would impose a price control regulation on them. 3 In accordance with Article 6 of the Framework Directive. 4 In accordance with Article 5(2) of the Framework Directive. 5 SG-Greffe (2007) D/207013. 6 C(2013) 4628. 7 These operators were: Eircom, BT Ireland, Colt Telecom, Magnet Communications, Ntl Ireland and Chorus (merged under UPC heading and then rebranded Virgin Media), Smart Telecom (now Viatel) and Verizon. 8 ComReg considered that imposing the access obligation on ANOs would be disproportionate because it was in the commercial interests of ANOs to interconnect with Eircom and with other ANOs, and therefore it was highly unlikely for them to have an incentive not to interconnect. ComReg also explained that an ANO’s failure to provide interconnection could be the subject of a dispute notification submitted to ComReg. It also considered that failure to provide a new entrant access to markets where access was already being provided to other operators could constitute a breach of the ANO’s non-discrimination obligation and ComReg could intervene in a timely fashion to remedy non-compliance. 2 In its comments on the 2007 market review, the Commission considered ComReg’s approach to alternative operators as inconsistent with EU practice and invited ComReg to revisit its market analysis. The Commission also invited ComReg to align its forthcoming review with the Commission’s Termination Rates Recommendation and set FTRs for all SMP operators at the level of costs incurred by an efficient operator to achieve symmetric price control remedies on the relevant market. Finally, the Commission underlined the need for a coherent EU approach to using the cost accounting method. In case IE/2012/13729, ComReg proposed to impose on all SMP operators a cost- orientation obligation based on a pure bottom-up long-run incremental cost (BU- LRIC) methodology, and to set a glide-path10 (2012 Pricing Decision). The Commission asked ComReg to review its proposed glide-path for fixed termination rates and called upon ComReg to implement the target FTR levels by the deadline set in the Termination Rates Recommendation. However, the Commission considered that a short delay in implementing the cost-oriented fixed termination rates could exceptionally be acceptable in this case. ComReg notified the Commission of a new market analysis under case IE/2013/1469. However, ComReg never adopted the final decision due to an appeal against similar provisions in its mobile termination decision (2012)11. Therefore, the fixed voice call termination markets remained regulated under the 2007 Decision. In addition to the 2012 Pricing Decision, ComReg introduced amendments to remedies that were notified to the Commission under cases IE/2009/091712 and IE/2011/122013. In particular, in case IE/2011/1220, ComReg proposed to: (i) supplement the existing price control obligation by a margin squeeze test between the price of the components of the wholesale switchless voice service14 and the pricing of the corresponding wholesale call origination and call termination products for interconnected alternative operators, and (ii) further specify the details of the 9 C(2012) 8381. 10 The proposed BU-LRIC based FTRs are set out in the table below: BU-LRIC FTR Start date Blended rate (EURcent per minute) Efficient network technology 1 July 2013 0.098 TDM 1 July 2014 0.085 TDM/NGN 1 July 2015 0.072 NGN . 11 In its reply to a Commission request for information, ComReg explained that this appeal was not resolved until February 2016 and so ComReg did not introduce measures related to fixed voice call termination markets during this period. In the second half of 2016, ComReg commenced the review that ultimately has resulted in the current market analysis notification. As that review had already commenced, ComReg did not explore the possibility of addressing the high FTRs through any different procedure. 12 C(2009) 4570. 13 C(2011) 4377. 14 Eircom offers a wholesale switchless voice service which allows service providers to provide retail voice services at a fixed location without the need to invest in their own interconnection infrastructure. This service, known as ‘white label’ voice, allows fixed operators to purchase end-to-end wholesale voice services. Eircom terminates these calls on behalf of those operators who purchase white label voice on Eircom’s network. 3 transparency obligation. On the margin squeeze test, the Commission commented that ComReg should ensure that its proposed measures did not lead to different regulated prices for the same wholesale products depending on whether they are sold independently or in a bundle. The Commission also urged ComReg to align its model with the Commission`s Termination Rates Recommendation. Mobile termination The second review of the market for mobile voice call termination was notified to and assessed by the Commission under case IE/2012/137115. ComReg designated six mobile operators as having SMP16 and imposed the following obligations on all of them: access, non-discrimination, transparency, and price control. Moreover, ComReg chose a pure BU-LRIC methodology as the most appropriate price control remedy for setting mobile termination rates (MTRs) in Ireland17. For the period from 1 July 2013 until the adoption of a pure BU-LRIC model (expected at the time by 1 July 2014 at the latest), ComReg had proposed to set MTRs in Ireland on the basis of a benchmarking method based on those countries that had at that time notified the Commission of using pure BU-LRIC models under Article 7 of the Framework Directive18. The resulting pure BU-LRIC benchmark to be achieved as of 1 July 2013 was 1.02 EURcents/min19. The Commission called upon ComReg to implement the target benchmarked MTR already by 31 December 2012, and commented that the benchmark should be based on the rates that are set by the NRAs by way of final decisions in the respective Member States, instead of notified rates as proposed by ComReg. Both decisions (cases IE/2012/1371 and IE/2012/1373) were appealed to the High Court. Following the High Court’s judgment of July 2013, a Court’s Order20 was issued in October 2013 imposing an interim maximum MTR of EURcents/min 2.60 applicable as of 1 July 2013.