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| Friday, 06 July 2007 | |
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EC fines Telefónica €152mn for broadband abuse. Spanish incumbent says it will see competition tsar Kroes in court…
Spanish incumbent Telefónica de España says it will in the next few days apply to the European Court for annulment of the European Commission’s ruling that it abused its position in the Spanish broadband Internet market. The EC ruling, resulting from a complaint lodged by the local subsidiary of ‘a French state-owned company’ (aka Wanadoo/France Telecom), saw Telefónica landed with a €151,875,000 fine – the second largest behind the €497mn penalty handed out to Microsoft for uncompetitive behaviour. In a statement European Commissioner for Competition Neelie Kroes said the fine was imposed for impeding competition on the Spanish broadband internet access market for more than five years, so depriving consumers and business of a choice of broadband suppliers. In particular, according to Kroes, Telefónica “…has committed a very serious abuse of its dominant position on the Spanish broadband market by structuring its wholesale and retail prices in such a way that the margin between them did not allow competitors to compete on the market without making losses. Through this so-called 'margin squeeze', Telefónica insulated itself from the rigours of competition by making it impossible for alternative broadband suppliers to enter the market on a commercially-viable basis.” Expaining the record size of the fine, Kroes added: “Telefónica's behaviour shows that the Commission’s 2003 fines against Deutsche Telekom and Wanadoo for similar behaviour were not a sufficient deterrent. I hope that today's fine has a greater impact.” Telefónica is distinctly unhappy with this turn of events, stating that it has fully complied with the existing regulation imposed by the Spanish authority, the Comisión del Mercado de las Telecomunicaciones (CMT). The company says it is convinced it has rigorously met the CMT’s strict parameters which, for the sake of competition and on an ex ante basis, regulate all initiatives taken by Telefónica to offer consumers a range of products and services, both in terms of price and quality. Moreover, according to Telefónica, this is the first time that the Commission has identified an illegal margin squeeze for a non-essential service such as wholesale indirect access, which does not exist as a regulatory obligation in some of Interestingly the Spanish company reckons it now finds itself squeezed between two regulators - the national CMT and the European Commission - which are at odds with each other. “As a result, the decision by the Commission creates enormous uncertainty about the role played by the regulatory bodies and the competition authorities in the telecommunications sector, throwing into question the supervisory functions of the Spanish authorities.” reads a Telefónica statement. “The legal uncertainty created by this decision will inevitably affect Telefónica’s and other operators’ ability to launch new products and services, with a direct impact on the entire European telecommunications sector to the detriment of European consumers.” A solution to this dilemma, of course, would be the creation of a regional regulator – a project favoured by another EC strong woman, Commissioner for Information Society and Media Viviane Reding. But would Telefónica and the other incumbents in the region stand up and applaud such a development? We think probably not. John Williamson |
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