Telekom-Control Commission: Deregulation on wholesale broadband market Press release dated 8 July 2008 In its session on July 4, 2008, the Telekom-Control Commission (TKK) made a decision regarding the wholesale broadband market. The issue had already been discussed at length, as some regulation requirements were relaxed (deregulation) after a stage of sector regulation. The decision focused on examining the level of competition on the wholesale market for broadband access. On that market, alternative Internet service providers (ISPs) purchase the necessary access to Telekom Austria's infrastructure on regulated terms and conditions. In the study completed recently, the TKK very carefully examined a large number of relevant competition indicators. In this process, the TKK came to the conclusion that Telekom Austria possesses significant market power on the wholesale broadband market, but only in certain geographical areas (i.e., in rural areas, where the company can also make use of its market power). Rising competitive pressure on Telekom Austria "Due to the level of competition reached in certain geographical areas, Telekom Austria can now be partially 'relieved' of strict sectoral regulation on the wholesale broadband market," notes Georg Serentschy, managing director of RTR's Telecommunications Division, on the significance of this decision. "However, this step will be accompanied by heightened observation of the market and its participants." Therefore, the TKK has imposed comprehensive obligations on Telekom Austria only in rural areas. These obligations include an access requirement (i.e., Telekom Austria is required to grant other ISPs access to the Telekom Austria network); a non-discrimination obligation, including the obligation to provide a reference offer; "retail minus" based price regulation; and the obligation to maintain accounting separation. In densely populated areas, that is, where Telekom Austria is exposed to functioning competition because it has at least two competitors (among other factors), the company is only subject to the accounting separation requirement. For legal reasons, regulatory remedies can only be applied where competition problems exist. It was thus necessary to deregulate the high-population areas because Telekom Austria's share of those markets has fallen as low as 27%, while the company's market share in rural areas is still as high as 75%. At certain times, this procedure involved more than 500 parties (generally TA's competitors). The input provided by those parties enabled the regulatory authority to include a number of specific improvements in the decision which were favorable to ISPs. The TKK assumes that Telekom Austria will maintain the existing wholesale offer of access to its infrastructure in areas of high population density. If Telekom Austria were to discontinue this offer, the company would lose revenues at the wholesale level and could not be certain that the resulting losses would be balanced out by a corresponding increase in the number of retail customers. Moreover, Telekom Austria has made a public declaration stating that it did not plan to terminate existing wholesale agreements, and that the company would maintain its existing offers for new orders for at least six months. Therefore, Telekom Austria's competitors will have ample time to adapt to the new circumstances on a deregulated market. As a result, the TKK does not regard the concerns voiced by ISPs in this context as justified. Competition monitoring to increase In light of the changing conditions on the market, the accompanying deregulation process and market observations, the regulatory authority has decided to monitor market developments more closely in the future. RTR plans to do so by increasing its systematic and case-by-case monitoring of compliance to specific obligations. In addition, the regulatory authority has established a uniform point of contact to which competition-related violations can – and should – be reported. The contact address is wettbewerbsmonitor@rtr.at.