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European Commission says ‘no’ to new Danish SMS prices and higher Dutch telephony rates

European Commission says ‘no’ to new Danish SMS prices and higher Dutch telephony rates

The European Commission has once again exercised its power of suspending proposed telecoms regulatory measures and has halted the implementation of new SMS termination rates in Denmark and the proposed increase of fixed and mobile telephony termination rates in the Netherlands.

Pursuant to EU legislation, an EU Member State telecoms regulator must notify the regulations it wishes to impose on the market to the European Commission in order to achieve consistency across the EU.

Under the revised EU Telecommunications Framework the European Commission has the power to request that a telecoms regulator amend or withdraw a proposed regulatory remedy when the remedy is seen as an obstacle to the single, competitive European telecommunications market.


‘A European regulator should not endorse open discrimination’

The Danish telecommunications regulator Danish Business Authority notified the European Commission of its intended regulation of SMS termination rates – the rates charged by one mobile network to another to deliver text messages between networks – for the mobile virtual network operator Lycamobile.

Rates for text messages sent to users of Lycamobile terminating on Lycamobile’s network were to be, when the text message would originate from a mobile operator operating in Dennmark, subject to a lower termination price cap. SMS originating from other EU countries would not be regulated.

The European Commission has now expressed its belief that the proposed Danish remedy is discriminatory to out-of-state mobile operators and contrary to the principle of a single EU telecoms market.

“Although discriminatory inter-state pricing still exists within the EU in subtler ways”, comments Apahia’s Chief Consultant Boštjan Makarovič, “it is clear that a European regulator should not endorse open discrimination, as this would go against the Single Market principle.”


Termination rates would have included indirect costs

The Dutch regulator OPTA had also notified the European Commission on its intended regulation: the NRA wished to increase fixed and mobile telephony termination rates, i.e. the rates  telecoms networks charge each other to deliver calls between networks. These rates are reflected in the call prices that consumers pay.

OPTA’s 2010 proposal for termination rates regulation that was cost-oriented and in line with the Commission’s Termination Rates Recommendation had been annulled by a national tribunal ruling, and a new methodology for termination rates calculation prescribed.

This calculation would see termination rates include costs not directly related to the termination itself, the consequence of which was that the fixed and mobile termination rates in OPTA’s latest regulatory proposal were twice as high as before.

The European Commission has consequently suspended the implementation of the proposed Dutch rates, as they do not promote competition and the single EU telecoms market, and are harmful to the interests of European consumers.

“The trend in Europe has been to lower termination rates to pure Long Run Incremental Costs, which could eventually lead to settlement-free Bill and Keep.” says Boštjan Makarovič, “Accordingly, any increase in termination rates seems like an unexpected departure from this trend, likely to the detriment of end users.”

The European Commission will over the next 3 months, in cooperation with the Body of European Regulators for Electronic Communications, thoroughly review both regulatory measures and decide should the regulations be amended or withdrawn completely.

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