European Commission rejects Czech mobile access proposals which were based on a finding of joint dominance

In November 2021, the Czech Telecommunication Office (the “CTU”), the national regulatory authority, submitted a draft measure to the European Commission proposing ex ante regulation of the mobile access market in the Czech Republic based on a finding of joint dominance (or Significant Market Power (SMP)) of the mobile operators. This regulation is designed to impose wholesale access by third parties to mobile networks. However, the Commission raised concerns over the proposals and opened an in-depth investigation resulting in a demand for the CTU to withdraw its draft measure.

The CTU proposed to designate its three largest mobile network operators (“MNOs”) - O2 Czech Republic, T-Mobile Czech Republic, and Vodafone Czech Republic as having SMP in the relevant market. Moreover, the CTU proposed imposing a range of regulatory remedies on these MNOs, including: (i) transparency; (ii) non-discrimination; (iii) accounting separation; (iv) access; (v) price control and cost accounting.

The Commission was sceptical about the proposed regulation. Under competition law and jurisprudence, in order to make a finding of joint dominance, certain strict criteria must be met, i.e., the market is symmetric and transparent for the members of the oligopoly, that all the three operators de facto pursue a common policy, and that they can retaliate if one of them deviates from the joint policy.

The Commission considered that these criteria are not met in the Czech Republic. In particular, the Commission considered that there is no reason to consider the market as symmetric and transparent due to the fact that MNOs apply different pricing strategies, they have different market shares (at wholesale level), they have different cost structures, and one of the operators (O2) needs to comply with strict access regulation. Also, according to the Commission over time, the retail price decreases, usually initiated by one operator, are followed by others, and lead to lowering the overall level of retail prices in the market.

Moreover, in the Czech market there are already favourable conditions for market entry of a new mobile operator, which could evolve from Mobile virtual network operator (“MVNO”) towards MNO (based on the national roaming supplied by O2 on cost-oriented terms, or as a result of acquired spectrum rights). Such a new entrant(s) could also offer MVNO access and may be expected to create additional competitive pressure both at retail and wholesale level to the benefit of Czech consumers.

Subsequently, the Body of European Regulators (“BEREC”) has issued its own opinion. Despite supporting some of the findings and reservations expressed by the Commission, BEREC has come to its own conclusion and invited the Commission and the CTU to try to resolve the remaining doubts. In particular, BEREC considered that the Czech mobile market has serious competition problems with high retail and wholesale prices, a lack of effective competition from MVNOs and stagnant MNO market shares. However, it agreed with the Commission that the CTU failed to sufficiently prove the joint dominance (SMP) of the MNOs. BEREC also agreed with the Commission that the enforcement of existing regulatory obligations and market entry of a new mobile operator, based on the use of the national roaming obligation imposed on O2 and/or through the acquisition of spectrum in any future auction, may create the necessary competitive pressure.

The Commission, based on its own findings and the findings of BEREC, reached its final decision rejecting the CTU’s proposal. The Commission considered that the wholesale mobile access market is not susceptible for such regulation at EU-level and is not regulated in such a way anywhere in Europe. The CTU did not prove that the MNOs meet the criteria to be considered as having a collective significant market power and that the draft measure would create a barrier to the internal market. The CTU does not agree with the Commission and is considering further steps which would help to ensure lower prices for the consumers.

For more information, please contact Vojtěch Chloupek, Radomír Pivoda and Jiří Švejda.

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