Telekom-Control Commission announces mobile interconnection decisions

Interconnection with Mobilkom and T-Mobile - Interconnection between tele.ring and Mobilkom / T-Mobile - Calculation based on "reasonable fees" - UMTS investment incentives - Tendency toward uniform termination fees

Press release dated 15 April 2003

In its session on April 14, 2003, the Telekom-Control Commission (TKK) made unanimous decisions in four procedures which focused on setting interconnection fees for Austria's mobile operators. Especially important in this context are the termination fees charged by mobile operators for calls terminating in their networks. Specific interconnection fees were set for Mobilkom, T-Mobile and tele.ring. All interconnection fees are indicated per minute, independent of call volumes, and excluding value-added tax (VAT).

Interconnection with Mobilkom and T-Mobile

For the period from January 1, 2003 to March 31, 2003, TKK set termination fees for Mobilkom and T-Mobile at 11.25 euro cents (Mobilkom) and 13.8 euro cents (T-Mobile), from April 1, 2003 to August 31, 2003 at 11.11 euro cents (Mobilkom) and 13.49 euro cents (T-Mobile), and from September 1, 2003 to September 30, 2003 at 10.86 euro cents (Mobilkom) and 13.18 euro cents (T-Mobile).

"The Commission made a conscious decision to reduce interconnection fees consciously gradually in order to ensure the continuous adjustment of charges and costs," commented Eckhard Hermann, Chairman of the Telekom-Control Commission, on the new mobile interconnection fees.

Interconnection between tele.ring and Mobilkom/T-Mobile

The previously set interconnection fees for termination in and origination from the tele.ring mobile network were confirmed at 19.62 euro cents for the period from January 1, 2003 to September 30, 2003.

Calculation based on "reasonable fees"

As no mobile telecommunications company on the national interconnection market is considered to have significant market power (SMP) as defined under the Austrian Telecommunications Act, interconnection fees are calculated on the basis of "reasonable fees". The specific costs taken into account are those involved in call termination and origination services, including the costs of network elements (depreciation, operation), interest on capital, overhead, IT/IC billing costs and the frequency license fee paid. As in previous TKK decisions, the costs of external effects were also taken into account.

TKK decision: UMTS investment incentives

In the mobile telecommunications sector, cost structures are characterized by large proportions of fixed costs, including investments (e.g., license fees and technical facilities) as well as ongoing costs such as personnel, maintenance and financing. As sales increase, the fixed costs mentioned above decrease per minute. TKK has now decided that 50 % of this economy of scale is to be passed on in the fees charged.

"The obligation to pass on only half of those cost savings is based on the fact that operators are currently facing high investment requirements for UMTS implementation," says Eckhard Hermann. "In addition, if we assume that termination sales will remain fairly constant for Mobilkom and T-Mobile in 2003, as traffic volume forecasts indicate, TKK's decision is in the interest of creating the necessary - and cost-intensive - UMTS infrastructure quickly. Essentially, the Commission made its decisions in order to fulfill requests from several mobile network operators for those costs to be taken into account," the Chairman further commented.

Tendency toward uniform termination fees

The Commission has based its regulatory practice to date on the opinion that a uniform market price should develop on the long term given identical networks and comparable competitive positions. The differences between Austria's network operators can be attributed to varying times of market entry and successful positioning on the mobile end-consumer market as well as the resulting numbers of subscribers.

In this context, the Telekom-Control Commission assumes that termination fees among Austria's mobile operators will increasingly converge in the long run.