ANACOM draft decision continues downward move in termination rates

ICP-ANACOM - Autoridade Nacional de Comunicações has adopted a draft decision on the obligation to control prices in the wholesale markets for voice call termination on individual mobile networks. According to the draft decision, which will only become final following the conclusion of a public consultation and once all comments received under this consultation have been reviewed, mobile termination rates will continue to move gradually downwards, over a period of time which will allow Portugal to comply with the European Commission Recommendation on termination rates while avoiding disruption.

In adopting this draft decision, the regulator took various circumstances into account:

1. The maintenance of very high prices on mobile networks contributes to a distortion of competition, as recognized by the European Commission and the ERG, resulting in a very significant net annual transfer of 67 million euros from fixed networks to mobile networks. Note is further made of the transfer of about 12 million euros in 2008 from smaller operator to the two largest operators.

2. On 7 May 2009, the European Commission published a Recommendation on the regulatory treatment of fixed and mobile termination rates in the European Union, proposing the adoption, by 31 December 2012, of symmetrical termination rates based on the costs of an efficient operator and using a Pure LRIC model.

3. According to Commissioner Viviane Reding, the European Commission expects that the implementation of this recommendation will result in mobile termination rates ranging between 1.5 cents and 3 cents per minute, which will results in gains of at least 2 billion euros in the European Union in the period 2009-2012.

4. ICP-ANACOM is currently working on the implementation of a cost model which will be in accordance with the Recommendation on Terminations referred to in paragraph 2, and produce results which will establish termination rates for the next review period, due to start in July 2011 according to the draft decision now adopted by the regulator.

5. The behaviour of mobile operators in the wholesale market has not changed, insofar as the operators have not made any reductions to prices beyond those required by ICP-ANACOM.

6. The behaviour of mobile operators in the retail market, particularly regarding the structural problem identified by ANACOM in 2008 in terms of the practice of on-net and off-net price discrimination, which exacerbates network effects distorting competition, has not changed insofar as such practices have not been eliminated.

7. A number of European regulators have already carried out studies and analyses of the costs that result from the application of the costing methodology advocated in the EC's recommendation, whereby it can be expected that these costs will amount to around 1 cent per minute. In the present draft decision, ICP-ANACOM puts forward a value of 3.5 cents per minute for April 2011, a figure which, on becoming the definitive, would temporarily place Portugal in the 1st quartile of the European benchmark rankings – which can only be deemed as appropriate, in light of the development, penetration level and dynamism of the Portuguese retail mobile market compared to other European markets.

8. ICP-ANACOM considers that there are good grounds for symmetrical pricing, already established and in force since October 2009, to be continued throughout the period of this decision’s application in accordance with the recommendations. The view is taken that the benefits to competition and end consumers resulting from the application of these new prices will be significant in itself and that there are no grounds for any additional extraordinary measures, contrary to that occurring at the time of the previous decision.

9. It is also considered that the immediate implementation of a mobile termination rate of 3.5 cents per minute would be disruptive (taking particular account of the distortions in international traffic) and it is recognised that it is important to ensure the predictability of market conditions and that there should be provision for a gradual evolution towards prices which are considered efficient, maintaining the same quarterly pace of reductions which was applied during the period of previous reductions, i.e. a reduction of 0.5 cents per minute per quarter.

Therefore, the draft decision which is now adopted, and which is today placed in public consultation for a period of 20 working days, provides for a transition period of 6 quarters, which will allow operators to make the adjustments required in order to achieve the target value, whereby the maximum prices for voice call termination on mobile networks to be applied by three mobile operators shall be amended as follows:

  • € 0.0600 per minute on 01/02/2010
  • € 0.0550 per minute on 01/04/2010
  • € 0.0500 per minute on 01/07/2010
  • € 0.0450 per minute on 01/10/2010
  • € 0.0400 per minute on 01/01/2011
  • € 0.0350 per minute on 01/04/2011

ICP-ANACOM considers that during the 6 quarters of its application, this draft decision could lead to gains for the consumer of around EUR 53 million (combining gains from mobile-mobile and fixed-mobile calls).