European Commission opens in-depth investigation into regulation of broadband wholesale markets

On 25 June 2013 the European Commission notified the Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR) of its intention to carry out an in-depth investigation of the recent draft proposal submitted by the Telekom-Control-Kommission (TKK). The draft proposes measures aimed at the broadband wholesale market and the market for physical infrastructure (formerly known as the ‘unbundling’ market).

The Commission’s criticism is specifically directed at the pricing methods. The TKK has proposed setting wholesale prices in the same manner as in the past, i.e. based on the retail price minus a deduction for additional costs (as resulting from a margin squeeze test). The Commission, in contrast, judges the resulting charges as being too low to guarantee sufficient incentives for investments. The cost model used by the TKK, claimed to produce excessive values, was also criticised. Ultimately, however, such values are irrelevant for setting retail prices. In recent years the focus of competition in Austria has increasingly shifted from unbundling to infrastructure-based competition between fixed networks and mobile networks. In response to the price pressure applied by mobile networks, fixed network prices have continuously been lowered, so that Austria’s unbundling price is among the lowest internationally, thus making any cost-based setting of the unbundling price irrelevant in practice.

With the start of the in-depth investigation, official decisions will be suspended for three months. The TKK will review the objections presented by the European Commission in detail and, where necessary, revise the draft proposal in close cooperation with the Commission and with the Body of European Regulators for Electronic Communications, BEREC.