EUROPEAN COMMISSION Brussels, 29.8.2019 C(2019) 6381 final Bundesnetzagentur (BNetzA) Tulpenfeld 4 53113 Bonn Germany For the attention of: Mr Jochen Homann President Subject: Commission Decision concerning Case DE/2019/2194: wholesale voice call termination on individual mobile networks in Germany - remedies Comments pursuant to Article 7(3) of Directive 2002/21/EC Dear Mr Homann, 1. PROCEDURE On 31 July 2019, the Commission registered three notifications1 from the German regulatory authority, Bundesnetzagentur (BNetzA), concerning remedies on the market for wholesale voice call termination on individual mobile networks2 in Germany. The national consultations on the above draft measures3 ran from 10 to 19 July 2019. 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 market 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 On 6 August 2019, the Commission sent a request for information4 (RFI 1) to BNetzA and received a reply on 9 August 2019. The Commission sent a supplementary request for information on 9 August 2019 (RFI 2) and received a reply from BNetzA on 12 August 2019. Pursuant to 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 MEASURES 2.1. Background On 17 November 2015, BNetzA notified to the Commission draft measures concerning the market for wholesale voice call termination on individual mobile networks in Germany (case DE/2015/18085). In the draft measures, BNetzA defined distinct markets for voice call termination on the networks of the mobile network operators (MNOs) Telekom Deutschland, Vodafone, Telefonica and its subsidiary E-Plus as well as all mobile virtual network operators (MVNOs), namely Lycamobile, Truphone, sipgate Wireless and OnePhone. The geographic market was defined as national. BNetzA designated the abovementioned operators as having SMP in the market for wholesale voice call termination on their respective (virtual) mobile networks.6 On 1 July 2016, BNetzA notified to the Commission draft measures imposing remedies on the abovementioned SMP operators (case DE/2016/18877). Notably, the remedies required the SMP operators to apply symmetric MTRs. For MNOs, these had to be based on a ‘pure’ BU-LRIC methodology and for MVNOs on national benchmarking of 'pure' BU-LRIC rates applied to MNOs. This remedy did not apply in the same way to calls originating from inside and outside the EEA and terminating in Germany, as, for calls originating from outside the EEA, BNetzA included a derogation allowing for the right to refuse access (“Leistungsverweigerungsrecht”). The derogation gave German SMP operators the right to refuse termination of calls originated outside the EEA in cases where BNetzA determined, in the context of specific national proceedings, that in the relevant non-EEA country different rates apply to calls originating in Germany than the rates applied to domestic calls.8 The Commission had no comments on the proposed measures. 3 In accordance with Article 6 of the Framework Directive. 4 In accordance with Article 5(2) of the Framework Directive. 5 C(2015) 9324. 6 In case DE/2017/2012, C(2017) 7325, BNetzA notified a draft measure covering only the market definition and SMP designation of a new operator, TelcoVillage, active in the market for voice call termination on individual mobile networks. BNetzA subsequently notified, under case DE/2018/2070, C(2018) 2734, its proposals for the remedies to be applied to TelcoVillage. 7 C(2016) 5072. 8 However, for such cases BNetzA imposed a regulatory guarantee that interconnection with the relevant non-EEA country would be ensured through a bundled transit connection offered by the relevant German operator in its fixed network. 2 On 30 January 2017, BNetzA notified draft measures for setting MTRs for the abovementioned SMP operators (DE/2017/19649). The MTRs were calculated based on a ‘pure’ BU-LRIC methodology.10 The Commission had no comments on the proposed measures. 2.2. The notified draft measures The three notified draft measures, which are similar in content, modify the respective access and price control obligations previously imposed on Telekom Deutschland, Vodafone and Telefónica, regarding the termination of calls to mobile networks originating outside the EEA.11 The draft measures remove the access and price control obligations for calls originating from outside the EEA, subject to the condition that the MTR applied by the relevant German MNO does not exceed the MTR charged for a comparable termination service in the relevant non-EEA country. Should the German MNO not comply with this requirement, the previous remedies regime will re-apply. BNetzA considers the amendments necessary to counteract market developments detrimental to the MNOs and, ultimately, to end users in Germany. As evidence, BNetzA provides examples of non-EEA operators charging German MNOs extremely high MTRs. In 2018, selected non-EEA operators (from Turkey, Morocco and Russia) charged 5 to 115 times the regulated MTR charged by the three German MNOs (currently €0.95 cent/min). According to BNetzA, such asymmetric pricing reduces the ability and incentive of the three German MNOs to offer competitive end-user prices for calls to non-EEA countries.12 According to BNetzA, the removal of the access and price control obligations will strengthen the German MNOs’ bargaining power vis-à-vis their non-EEA counterparts.13 At the same time, the prohibition for German MNOs to charge MTRs exceeding those charged by the non-EEA operator prevents the German MNOs from using their increased bargaining power for unilaterally setting higher 9 C(2017) 1367. 10 The MTRs of all seven operators were set as follows: from 1 December 2016 until 30 November 2017, 1.10 €cent/min; from 1 December 2017 until 30 November 2018, 1.07 €cent/min; and, from 1 December 2018 until 30 November 2019, 0.95 €cent/min. 11 BNetzA confirmed in its reply to the Commission’s RFI 1 that the other SMP operators designated on this market (i.e. the MVNOs: Lycamobile, Truphone, sipgate Wireless and Voiceworks) remain subject to the remedies notified under case DE/2016/1887, including the access and price control obligations for calls originated outside the EEA (without prejudice to the abovementioned “Leistungsverweigerungsrecht”). BNetzA explained that the MVNOs did not submit any request for remedies amendments to BNetzA and, given that the new market review is already in progress, starting an ex officio procedure to modify the remedies for all SMP operators is not warranted in BNetzA’s view. 12 BNetzA carried out a comparative analysis of end-user prices charged in other selected Member States (France, Austria and Spain) that do not regulate the termination of non-EEA mobile calls. The analysis appears to suggest that such deregulation does not automatically lead to higher MTRs and higher end- user prices. Actually, BNetzA’s price comparison shows that the retail prices for non-EEA mobile calls charged in the three Member States considered are often lower than the retail prices applied in Germany for a corresponding retails service. 13 In its reply to the Commission’s request for information, BNetzA explained that, if the German MNOs continued to be subject to the access obligation vis-à-vis non-EEA operators, the latter operators could, in the case of refusal of access, resort to BNetzA seeking a regulatory order granting access to the relevant German network and setting the MTRs for the corresponding service. 3 MTRs. Both in the notification and in its replies to RFI 1 and RFI 2, BNetzA argues that removing only the price control obligations (i.e. keeping the access obligation) would not sufficiently strengthen the German MNOs’ position to negotiate lower MTRs, an outcome that is in turn likely to produce lower retail prices and benefit end-users. Further, BNetzA (and the German MNOs) contend that removing the access obligation is extremely unlikely to result in refusals to interconnect with non-EEA operators. Such behaviour would run counter to the business interests of the German operators in monetising call traffic with non-EEA countries. Therefore, BNetzA considers that, on balance, German end users are far more likely to benefit from a removal of the access obligation (through lower retail prices for non-EEA calls resulting from negotiated MTR cuts) than to be harmed by lack of interconnection.14 BNetzA explains that, in the case of refusal of access, which respects the conditions outlined above, the removal of the access and price obligations implies that the non- EEA operator will no longer be able to obtain a regulatory order from BnetzA granting access to the network of the relevant German MNO. BNetzA also explains in the notifications that the abovementioned ‘Leistungsverweigerungsrecht’ regime currently in place only applies to cases of discriminatory price treatment of national and international call termination and therefore does not help the German MNOs in situations where the non-EEA counterpart charges the same MTRs for all the calls, including domestic calls, terminated in its network.15 Finally, in its reply to RFI 2 BNetzA informs the Commission that the notified draft measures are without prejudice to previous cases regarding removal of the access obligation.