Article 7: MTR in Poland et WBA in Slovenia

The Commission published its first article 7 decisions of 2011. Of interest are:

1. Case PL/2010/1152: "UKE further states that it intends to choose between various methods to scrutinise prices proposed by TP (margin squeeze, benchmarking, retail minus, and other not specified methods). The Commission takes the view that such wide choice of verification methods is not conducive to a stable and predictable regulatory environment. Neither TP nor alternative operators will be able to anticipate whether UKE will approve of these charges
because it is unclear which method will be used"

2. case PL/2010/1162: "The Commission acknowledges that the implementation of a regulatory cost model for smaller-sized operators might be considered unduly burdensome. Therefore, alternative methodologies to determine the costs of those operators might be used, such as for example the approach considered by UKE in its 'position' (which is only available on UKE's website), where MTRs of the four new entrants are based on the cost data of another new entrant (P4)." et "As stated in the Termination Rates Recommendation MTRs of new entrants may be subject to higher unit cost for a transitional period before having reached the minimum efficient scale. NRAs may allow new entrant operators, after having demonstrated that there are impediments to market entry and expansion on the retail market, to recoup their higher incremental costs for a period of up to four years. After this transitional period MTRs of all operators should be symmetric and oriented towards the costs of an efficient operator in line with the Termination Rates Recommendation"

3. Case SI/2010/1158: "Given the demand for ubiquitous WBA products in Slovenia, the Commission recognises that the actual coverage of T-2's network may limit its ability to substitute for WBA products provided over the copper network of the incumbent operator at
this stage. Moreover, the regulatory outcome does not appear to be affected by the
exclusion of T-2's network from the relevant market. As a result, the Commission,
while not endorsing APEK's market definition, does not challenge APEK’s finding at
this stage." et "The Commission notes that APEK proposes to implement a retail minus methodologyfor WBA due to retail pricing constraints on the SMP operator stemming from cableoperators, local loop unbundlers and T-2's fibre optical connections. The Commission also notes that, according to APEK, cable offers as well as the alternative operators' LLU and fibre-based offers are only regional or local in scope, which indicates that they exercise only a limited constraint on the SMP operator. The Commission recalls that where ex ante price regulation is applied, WBA access prices should, in principal, be cost-oriented. NRAs may use other price control methodologies where there are sufficient competitive constraints on the downstream retail arm of the SMP operator. In addition, in the absence of cost-orientation, NRAs should monitor the SMP operator's pricing behaviour by applying a properly specified
margin-squeeze test.