European Commission endorses RTR's amended definition of wholesale broadband access market Press release dated 9 December 2009 On December 8, 2009, the European Commission (EC) informed the Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR) that the Commission had decided to endorsed RTR's draft amendment to the Austrian Telecommunications Markets Ordinance 2008 (TKMV 2008) on the definition of the wholesale broadband access market. The draft amendment was submitted to the EC within the framework of an EU-wide coordination procedure. In the EC's opinion, the doubts it had previously expressed regarding this market definition have been eliminated. "Essentially, the additional data and explanations submitted by RTR regarding the Austrian broadband market prompted the EC to take this step. We are especially pleased that the European Commission confirmed that Austria has the most advanced mobile broadband services for residential customers in the EU," commented Georg Serentschy, Managing Director of RTR's Telecommunications Division, on the decision made in Brussels. Withdrawal of sector regulation The market definition introduced by RTR provides for sector-specific regulation of the wholesale broadband market only for those Telekom Austria (TA) wholesale broadband products which are used by alternative providers in order to resell the corresponding services to business customers on the retail broadband market. Once the amended ordinance goes into effect, Telekom Austria will no longer be required – at least from a regulatory standpoint – to offer its competitors wholesale broadband products for subsequent resale to their residential retail customers. Different competitive situations on the retail Internet access markets for residential and business customers The definition of the wholesale broadband access market proposed by RTR is based on the observation that the competitive pressure between mobile and fixed-link broadband offerings in the residential retail segment has reached such a high level that the residential retail market must be considered to comprise both mobile and fixed-link broadband access services. According to the results presented by RTR, the competitive situation is different in the case of retail broadband offerings for business customers, who predominantly use mobile broadband as a complement to fixed-link access. In contrast, the results of RTR's extensive market monitoring activities indicate that residential retail customers generally use mobile broadband as an equivalent substitute for fixed-link services. This result was incorporated in the draft amendment to the TKMV 2008. In line with the principle which calls for regulation not at the retail level, but at the wholesale level in the case of competition problems, the definition proposed by RTR results in market regulation focusing on wholesale broadband offerings for business customers. RTR first EU regulator to account for competitive pressure from mobile communications on residential broadband products RTR's interpretation regarding the wholesale broadband market drew a great deal of attention both in Austria and abroad, as the Austrian regulatory authority was the first in the European Union to account for the immediate competitive pressure from mobile communications not only on the market for voice telephony, but also on the broadband market. The pressure exerted by mobile communications on fixed-link products is stronger in Austria than in any other EU country. At the national level, this new market definition means that Telekom Austria's current obligation to offer wholesale broadband products will only apply to products purchased for resale to business customers in the future, as a competition problem was only identified in the case of those customers. Telekom Austria will, of course, be permitted to offer the products in question on a voluntary basis. In its initial assessment, the EC had expressed two concerns regarding the proposed market definition: First, the EC had serious doubts as to whether mobile and fixed-link broadband products can be considered to form a single market at the retail level. Second, the EC was also uncertain about the products to be included in the market at the wholesale level. "Over the last few weeks, both of those aspects have been discussed in a detailed and constructive manner by a working group consisting of multiple regulatory authorities and the EC," noted Serentschy. He added, "The result is that the EC has endorsed the Austrian regulatory authority's draft ordinance, with a few minor adaptations. After informing the overall sector about those adaptations in the next few days, the regulatory authority will adopt the ordinance declaring this market relevant to ex ante regulation.“ Subsequently, the Telekom-Control Commission, which is responsible for analyzing competitive conditions and (where necessary) imposing regulatory obligations, will launch a market analysis procedure. The regulatory authority expects to complete the procedure by April 2010 at the latest. Background information: Coordination procedures Like the identification of significant market power (SMP) and the imposition of appropriate regulatory remedies, decisions regarding the markets which should be subjected to ex ante regulation are subject to a coordination procedure involving the regulatory authorities of other EU member states and the European Commission. In cases where serious doubts arise as to whether a draft measure notified by a national regulatory authority is compatible with EU law, the EC may initiate what is referred to as a "second phase" examination. Where such serious doubts relate to market definition or the identification of companies with significant market power, the European Commission may require the regulatory authority in question to withdraw the draft measure (i.e., "veto" the measure) unless the Commission is convinced that the evidence submitted is sufficient to allay those doubts (as in this case). In this case, the Commission had initiated a second phase examination with a "serious doubts" letter dated October 5, 2009.