Determination of ICP-ANACOM regarding restrictive measures against action undertaken by companies of the PT Group designed to win back pre-selected customers
I. Framework
By determination of 15/12/2005 1, the Board of Directors of ICP-ANACOM approved a draft decision on restrictive measures against action developed by companies of the PT Group, as holders of significant market power (SMP) in retail markets of access to the public telephone network at a fixed location, designed to win back pre-selected customers.
This determination was approved to implement the determination of the Board of Directors of ICP-ANACOM dated 14 December 2004 2, on the imposition of obligations in narrowband retail markets, in the scope of which it was concluded, given the pursued market analysis, that the barriers to the development of an effective competition in markets of retail services tend to remain in the short/medium term, a situation which thus requires a proportional regulatory intervention and the imposition of remedies by means of ex-ante regulatory control. In this context, in parallel with other obligations, the measures established by determination of ICP-ANACOM date 17 July 2003 3 were maintained, as well as other determinations in the scope of pre-selection, the possibility of a reassessment having been put forward, nonetheless, having regard to the evolution of the market conditions.
Pursuant to the draft decision approved on 15 December 2005, ICP-ANACOM considered that there were no grounds to cease the obligation to comply with a withdrawal period, imposed under the determinations of 17 July 2003 and 14 December 2004, although a reduction of the withdrawal period to 4 months was deemed justified. Moreover, the Authority took the view that the effectiveness of this measure should be reinforced through the introduction of additional alterations to its current formulation, namely including an alteration to the method of calculation of the withdrawal period, so that it starts on the moment a pre-selection activation request is received, and not only from the moment the facility is actually activated, thus including the period of time between the presentation of the request and the date of activation of the facility.
This draft decision was subject to a prior hearing of interested parties, under articles 100 and 101 of the Code of Administrative Procedure, as well as to the general consultation procedure, under article 8 of Law no.5/2004, of 10 February, a deadline of 30 working days at the latest having been established for the assessment of the matter by interested parties.
The Instituto do Consumidor (Consumer Institute), DECO, FENACOOP, UGC and ACOP were also requested to assess in writing the provisions of the referred determination, within the above-mentioned time-limit, as it concerns issues of interest to consumers.
Following the pursued prior hearing and consultation, replies were received from UGC - União Geral de Consumidores, ACOP - Associação de Consumidores de Portugal, DECO - Associação Portuguesa para a Defesa do Consumidor, OniTelecom - Infocomunicações, S.A., Portugal Telecom, SGPS, S.A. (on behalf of PT Comunicações, S.A., PT Prime - Soluções Empresariais Telecomunicações e Sistemas, S.A. and TMN - Telecomunicações Móveis Nacionais, S.A.), SGC Telecom - SGPS, S.A. (on behalf of AR Telecom - Acessos e Redes de Telecomunicações, S.A., Netvoice - Comunicações e Sistemas, Lda., and WTS - Redes e Serviços de Telecomunicações, Lda.), Sonaecom SGPS, S.A. (on behalf of Novis Telecom, S.A. and ClixGest S.A.), Telemilénio - Telecomunicações Sociedade Unipessoal, Lda. (Tele2), Vodafone Portugal, Comunicações Pessoais, S.A., APRITEL - Associação dos Operadores de Telecomunicações, FENACOOP - Federação Nacional de Cooperativas de Consumo and Instituto do Consumidor.
II. Assessment and Conclusions
A document comprising the summary of replies received to the consultation carried out in the scope of the draft decision approved on 15 December, as well as the analysis made and conclusions reached by ICP-ANACOM on this matter, is attached hereto.
This document summarizes also the information received in the scope of the benchmark performed by ICP-ANACOM on the matter as well as replies to the questionnaire sent by this Authority to providers in September 2005.
The following particulars were particularly relevant to the analysis that substantiates the decision set forth in point III:
- market analysis on narrowband retail markets concluded by ICP-ANACOM in December 2004, complemented by elements on the evolution registered since then at competitive level;
- analysis of complaints on this matter received at ICP-ANACOM;
- benchmark established by ICP-ANACOM on the matter under discussion;
- replies submitted to ICP-ANACOM by providers, in the scope of the questionnaire of September 2005 and/or the consultation on the draft decision, especially information made available by respondents on:
… contents of complaints received on win-back issues;
… six-monthly evolution, since the end of 2002, of the percentage of departures of pre-selected customers 4, calculated relatively to the total number of pre-selected customers;
… six-monthly evolution, since the end of 2002, of the percentage of new pre-selected customers, calculated relatively to the total number of pre-selected customers 5;
…six-monthly evolution, since the end of 2002, of the percentage of departures of pre-selected equivalent accesses, calculated relatively to the total number of pre-selected equivalent accesses of the provider 6;
…six-monthly evolution, since the end of 2002, of the percentage of providers' new pre-selected equivalent accesses, calculated relatively to the total number of the pre-selected equivalent accesses of the provider 7;
…pay-back and longevity evolution concerning pre-selected customers;
…suggestions towards an increased effectiveness of measures in force.
Without prejudice to the relevance of information made available by providers, respondents in general did not submit, nor in the scope of replies to the questionnaire of September 2005, nor of replies to the consultation regarding the draft decision, comprehensive quantitative information on some relevant elements for the analysis, namely as regards:
- grounds for some of the views stated, specially in terms of length of the win-back period;
- the impact of win-back impositions (as regards retention of customers, of company revenues/margins, etc.), cleansing the effects related to the variation of marketing costs and/or to user learning economies in view of the pre-selection product 8;
- six-monthly evolution, since the end of 2002, of the percentage of pre-selected customers who maintained a pre-selection contract with the provider for longer than six months;
- evolution since the period prior to the determination of July 2003 of the number of complaints on win-back action (whether or not launched during the established withdrawal period).
Moreover, there is a wide variation as regards some of the elements deemed equally relevant in this analysis, such as the acquisition costs of customers in pre-selection regime 9, a situation which may result from the fact that the elements taken into consideration by each respondent in the respective calculation do now always coincide nor is it explained whether the value presented corresponds to ''residential'' or ''non-residential'' customers.
III. Decision
Whereas:
1. The factors which justified the imposition and subsequent maintenance, respectively through ICP-ANACOM determinations dated 17.07.2003 (Pre-Selection Specification - Compulsory withdrawal periodhttps://www.anacom.pt/render.jsp?contentId=418252) and 14.12.2004 (Imposition of obligations of narrowband retail marketshttps://www.anacom.pt/render.jsp?contentId=419637), of restrictive measures currently in force against action designed to win-back pre-selected customers essentially remain, namely:
1.1. a low level of market competition and the resulting privileged access of PT Comunicações, S.A. (PTC) to information on data concerning pre-selection contracts;
1.2. apparently, following the determination of 17 July 2003, although the number of complaints on win-back action undertaken by companies of the PT Group on pre-selected customers was, as expected, significantly low, ICP-ANACOM has continuously received some complaints on practises of that nature; however, such practises have taken place in general following the elapse of the withdrawal period or between the period of time between the presentation of the request made by the PTC to the DAP as regards the pre-selection and the activation of the facility; so far, nonetheless, the abusive use of pre-selection data by companies of the PT Group has not been established in any situation; also, providers who replied to the questionnaire of September 2005 and/or to the consultation on the draft decision approved on 15/12/2005 declared they were aware of win-back action launched by companies of the PT Group to their customers, following the determination of ICP-ANACOM of 17 July 2003; in most cases, however, respondents referred they were unable to quantify accurately such actions, and some companies refer in addition that this type of complaints are normally made verbally, customers being reluctant to submit them in writing;
1.3. the establishment of a withdrawal period, during which the companies of the PT Group are prevented from undertaking any win-back action aimed at pre-selected customers, remains an appropriate means to allow the client a free and informed choice of the service intended, trying it out and remaining free to continue being a client or to release himself from the contract, without being under any external pressure; in fact, the evolution verified following the mentioned Determinations of ICP-ANACOM, of 17 July 2003 and 14 December 2004, was not such as to alter this understanding, given that the conditions which favour the resume of win-back practises still remain, in view of points 1.1. and 1.2., a situation which may prevent the customer from effectively testing the engaged service for a sufficient period of time; on the other hand, since the approval of the mentioned determination, restrictions have not been made inhibiting customers from searching, on their own initiative, for new fixed telephone service offers or providers; the existence of a withdrawal period does not prevent customers, during that period, from becoming customers once again of the incumbent operator, in case of dissatisfaction with the service; moreover, the companies of the PT Group, given their economic/financial dimension and capacity, still enjoy the best conditions to take forward the means of information at the disposal of users, even if they are unable to undertake win-back action, during a withdrawal period, on customers of alternative providers; in fact, the withdrawal period does not prevent providers of the PT Group telephone service from taking advertising action, in the course of that period, namely adverting based on media bodies; as to providers of the telephone service providing access in pre-selection, they have been generally unable, so far, to make users aware of this facility, as according to the results of inquiries on consumption of electronic communications carried out in January/February 2004 and in June 2005, by ICP-ANACOM, respectively 60% and 55% of subscribers of the fixed telephone service inquired declared they did not know the means of operator pre-selection; on the other hand, according to the information submitted by providers, the percentage of departures of pre-selection customers for each of these companies not comprised in the PT Group is generally higher than that registered for the providers within the Group of the incumbent.
2. In conclusion, ICP-ANACOM takes the view that there are no grounds to cease the obligation to comply with a withdrawal period, imposed under the determinations dated 17 July 2003 and 14 December, without prejudice to the need to introduce a few adjustments as regards its execution.
3. The adjustment of the length of the withdrawal period, through a reduction to 4 months, is deemed justified, taking into consideration a combination of factors/circumstances, the most pertinent of them being:
3.1. although the dominance of the PT Group in the market of telephone services at a fixed location has remained high (the companies thereof enjoying in particular a competitive advantage in terms of access to information on pre-selected customers, in view of the fact that, by the end of the fourth quarter of 2005, the PT Group had around 89% in terms of main telephone accesses), at the level of telephone traffic at a fixed location the competitive situation is clearly better (between the first quarter of 2003 and the fourth quarter of 2005, the market share of the PT Group, measured in minutes of telephone voice traffic at a fixed location, shrunk from 84% to 73%). This improvement results not only from an increase from 13% to 20% of the weight of indirect access traffic (in which the market share of the companies of the PT Group remains a minority), but also from an increase, from 6% to 14% of the market share of alternative providers, measured in minutes of telephone voice traffic in direct access, this improvement being more clear, in the case of the direct access, between the end of 2004 and the end of 2005.
3.2. current measures who have been recently introduced in the market to create the conditions to remove/reduce some barriers to the development of competition (ex: regulatory measures taken by ICP-ANACOM at the level of the RUO and ''PT ADSL Network'' wholesale offers, extension of the pre-selection eligible traffic, introduction of the SLRO, etc); these measures have deferred impacts, according to the cases, the positive effect of the RUO and ''PT ADSL Network'' wholesale offers being already noticeable, as far as new retail offers launched by new providers are concerned, namely at the level of direct access; in the case of the SLRO and the extension of eligible traffic, recently implemented, the respective impact is expected in the short/medium term, and it is expected that they encourage the reinforcement of competition in retail markets of telephone service at a fixed location, promoting the launching of more attractive indirect access offers on the part of alternative providers; in fact, it is expected that these offers contribute towards an increasing resort to pre-selection on the part of users as well the establishment of a more stable relationship between providers not comprised in the PT Group and the respective customers, thus enabling the reduction of the churn rate.
3.3. More than two years after the decision of 17 July 2003, in the scope of which the establishment of a 6-month withdrawal period was deemed appropriate to grant the customer sufficient time to fully enjoy the service of the pre-selected providers, there are currently underlying conditions to allow the reduction in the short/medium term of the withdrawal period required by the customer to duly assess the service provided:
… the range of pre-selected customers has increased, and customer themselves tend to be an additional channel of disclosure of features of that facility, thus contributing towards a better prior understanding of the respective specificities on the part of new adherents to pre-selection, and consequently, towards a reduction of the period of time required to duly evaluate the service and to make a free and informed choice thereon;
… as the bill is a fundamental element for customer evaluation of the service provided by the pre-selected provider, and as the latter, with the introduction of the SLRO, is responsible for the billing of customer subscription, it is likely that the period of time necessary for such customer evaluation be reduced, given the tendency for a higher bill issue frequency on the part of that provider.
3.4. The regulatory decisions taken by each NRA on the imposition and length of the withdrawal period concerning win-back actions may not be distinguished from the particular conditions of each country, with attention to the respective competitive and regulatory context; nevertheless, it is deemed that the withdrawal period which, in 2002 was extended in Spain to four months, and which CMT, in the beginning of the current year, decided to maintain, should be referred in this scope; in fact, Spain, which has registered a very positive evolution in the scope of narrowband retail markets, is the only European Union country wherein this measure has been imposed in a model similar to the one established in Portugal, thus the most meaningful measure derives from a comparison/alignment as regards the respective duration (in Ireland and Greece, the only European countries, apart from Spain, which have adopted this type of measure, the withdrawal period presents very different contours), in fact, although it is not possible to establish a linear comparison between Portugal and Spain, namely at a competitive level, in Portugal current market shares, as far as main accesses, direct access customers and minutes of fixed telephone traffic are concerned, of the companies of the group of the incumbent are similar (except for international traffic and Internet access traffic) to the correspondent shares registered in Spain in 2002, when CMT extended the withdrawal period from two to four months and broadened the eligible traffic in pre-selection;
3.5. Consumer associations who replied to the consultation considered, except for UGC, that the reduction to four months of the withdrawal period is acceptable.
4. Although the reduction of the withdrawal period from 6 to 4 months is deemed justified, it is considered that the effectiveness of this measure should be reinforced by introducing the following additional alterations to its current formulation:
4.1. Inclusion, in the withdrawal period during which the companies of the PT Group are not allowed to undertake win-back actions on pre-selected customers, of an additional period between the period of time between the presentation of the request made by the PTC to the DAP as regards the pre-selection and the date of effective activation of the facility, regardless of whether the DAP complies or not with the 5-working day time limit, from the date of presentation of the electronic request by the PTC, established for activation. In fact, ICP-ANACOM deems that the grounds for imposing a withdrawal period in the scope of the Determination of ICP-ANACOM of 17 July 2003 apply also to the period between the presentation of the pre-selection activation request and the date this facility is effectively activated, namely:
… Complaints have been reported to ICP-ANACOM on win-back actions on the part of providers of the fixed telephone service comprised in the PT Group, launched in the scope of that period of time. This type of complaints suggests an undue use of pre-selection information to which these companies have, as referred above, a privileged access;
…This privileged access on the part of companies of the PT Group to information on customers who wish to join pre-selection occurs not only from the moment the pre-selection is activated but also as from the presentation of activation request on the part of pre-selected providers;
… The need to guarantee the pre-selected customer, through the establishment of a withdrawal period, the conditions for a free and substantiated choice of the desired service is valid from the moment the customer shows his desire to activate the pre-selection. In fact, the recovery of the customer by the DAP between this moment and the date of pre-selection activation has a particularly high impact on the PTC, as the costs of approaching the customer are not even partially recovered.
4.2. Article 65 of Law no. 5/2004, of 10 February establishes the obligation on companies to respect the confidentiality of information made available in the scope of access or interconnection arrangements, and to use that information solely for the purpose for which it was supplied, and such information must not be passed on to any other party, in particular other departments, subsidiaries or partners, for whom such information could provide a competitive advantage. Without prejudice, ANACOM deems justified the wish of some providers who have replied to the Authority’s questionnaire, who declare the need that the companies of the PT Group ensure that their lists of customers to be contacted in the scope of promotional campaigns do not include pre-selected customers, in the course of the withdrawal period. Thus, with that exclusive objective, these companies may provide their services, namely the commercial services, as well as the remaining companies of the PT Group, the indication of the customers with a pre-selection activated by other providers, or with an on-going pre-selection activation request.
4.3. Although in the replies to the questionnaire of September 2005 and/or the consultation on the draft decision approved on 15/12/205, several alternative providers were of the opinion that ICP-ANACOM should establish procedures to be implemented by companies of the PT Group to ensure and evidence the compliance with this determination, this Authority takes the view that such companies should define these procedures themselves, with due respect for implemented systems. However, it is deemed that it would not be disproportionate to request these companies to maintain an up-to-date and available description of their own procedures, to facilitate the monitoring action/audits promoted by ICP-ANACOM, or by an entity engaged for the purpose.
In the scope of assignments provided for in points b), f) and h) of article 6 of the Statutes of ICP-ANACOM, approved by Decree-Law no. 309/2001, of 7 December, and taking into account the regulation objectives established under points a) and c) of paragraph 1 and point b) of paragraph 2 of article 5 of Law no. 5/2004, of 10 February, the Board of Directors of ICP-ANACOM, pursuant to point g) of article 9 of the referred Statutes, and in order to give effect to the determination of the Board of Directors of ICP-ANACOM of 14 December 2004 on the imposition of obligations in narrowband retail markets, hereby determines:
I. To establish a four-month withdrawal period, following the presentation of the pre-selection request by the pre-selected provider (PTC), to be complied with by the companies of the PT Group, as holders of SMP in retail markets of access to the public telephone network at a fixed location; regardless of whether the DAP complies or not with the 5-working day time limit, from the date of presentation of the electronic request by the PTC, established for the pre-selection activation.
II. Without prejudice to the respect for the confidentiality of information made available in the scope of pre-selection, the companies of the PT Group, during the withdrawal period, and in case they undertake commercial action not specifically aimed at their subscribers who are pre-selected customers of other companies, may provide their services, namely the commercial services, as well as the remaining companies of the PT Group, with information on customers on a pre-selection regime or with an on-going pre-selection activation request. This information, however, may be only used in order to avoid that, during the withdrawal period, these customers are contacted for commercial purposes (ex: in the scope of campaigns to launch new offers or promotional campaigns), by companies of the PT Group acting in narrowband markets of access to the public telephone network at a fixed location and/or markets of telephone services publicly available at a fixed location. No other additional information on pre-selected customers, namely on the pre-selected provider customers are in contact with, the type of traffic that are considering pre-selected or intended to be pre-selected or the date of the pre-selection request, may be conveyed.
III. In order to facilitate the audits/monitoring action promoted by ICP-ANACOM, or by an entity engaged for this purpose by that Authority, intended to assess the compliance with this determination, companies of the PT Group shall permanently maintain up-to-date and available information on procedures defined on their own to comply with this determination.
IV. This determination shall enter into force within a 30- working-day time limit from the respective notification to companies of the PT Group, and shall apply to pre-selection requests submitted after this date to companies of the PT Group who provide access to the public telephone network at a fixed location.
1 Restrictive measures against action designed to win back pre-selected customershttps://www.anacom.pt/render.jsp?contentId=418549.
2 Imposition of obligations of narrowband retail marketshttps://www.anacom.pt/render.jsp?contentId=419637.
3 Pre-Selection Specification - Compulsory withdrawal periodhttps://www.anacom.pt/render.jsp?contentId=418252.
Measures imposed under this determination concern the following aspects:
1. To bind companies which are part of the PT Group, that provide fixed telephone service in direct access, within the Pre-Selection Specification, to the compliance with a six-month withdrawal period, following the pre-selection activation, during which they are prevented from undertaking any action, namely through individual contact, designed to win back clients;
2. PT Comunicações (PTC), being an entity with SMP in the market of fixed telephone networks and/or fixed telephone service, must comply with the confidentiality of information made available in the scope of the pre-selection and must not convey this information to subsidiaries or associated companies nor to its own services, namely the commercial services. Thus, such data must not be accessible by any means, namely through a database.
3. For the purposes of the previous paragraph, any data which enables PTC's commercial services, subsidiaries or associated companies to establish a connection between its clients and pre-selection data must be withdrawn from its information systems.
4. ANACOM shall monitor and supervise the implementation of the withdrawal period hereby imposed, with a view to reassess, within 1 year at the most, the need for its maintenance.
4 ''Number of departures of pre-selected customers for the period N / Total number of pre-selected customers by the end of the period N''.
Customer: user with a contractual relationship with the national FTS provider, who has been granted the right to originate and/or route traffic.
5 ''Number of new pre-selected customers for the period N / Total number of pre-selected customers by the end of the period N''.
6 ''Number of departures of pre-selected equivalent accesses for the period N / Total number of pre-selected equivalent accesses by the end of the period N''.
Note: the number of pre-selected equivalent accesses corresponds to the number of lines used through pre-selection by customers pre-selected by the provider; in case of basic ISDN accesses, the total number of equivalent accesses is as follows: 2, for each basic ISDN access and 30 for each primary ISDN access.
7 ''Number of new pre-selected equivalent accesses for the period N / Total number of the pre-selected equivalent accesses by the end of the period N''.
8 ''Marketing costs'' means the set of expenses which regard all necessary activities to make the user aware of the ''pre-selection'' service, namely those related to call centres, mailing, advertising and market surveys.
''User learning economies'' in view of the pre-selection product mean the effect of the increasing familiarisation of users with this facility.
9 Acquisition costs of customers (''residential'' and/or ''non residential'') in pre-selection regime: marketing costs connected to the stage of the life cycle of the product customer which correspond to the acquexisition of the customer, as well as expenses with the conclusion of the contract and the pre-selection procedure itself (commission, forms, exchange of information with the direct access provider, processing of customer information, communication with the customer in the scope of the procedure, activation costs, etc.).
Note: Residential customers shall be understood as those customers who do not use the service under consideration mostly as intermediate consumption of the economic activity performed. As proxy, the classification resulting from the TIN - Tax Information Number may be resorted to (customers with no TIN or TIN starting with 1 or 2 are not business customers). Other equivalent criteria may be used, and in this case, information thereon shall be duly provided.
Non-residential customer shall be understood as those customers who use the service under consideration mostly as intermediate consumption of the economic activity performed. As proxy, the classification resulting from the TIN - Tax Information Number may be resorted to (customers with TIN not starting with 1 or 2 are business customers). Other equivalent criteria may be used.
Consult:
- Restrictive measures against action designed to win back pre-selected customers https://www.anacom.pt/render.jsp?contentId=1087072
