Article 7: SMS in DK (DK/2011/1181)

At the end of last week, the Commission commented on the danish wholesale SMS regulation. Comments are reproduced below and pertain to distinguishing national and international MTRs:

The Commission notes that NITA's proposed price regulation benefits only those operators which compete with Danish mobile operators at retail level. Operators established in other EU countries may thus not be offered SMS termination in Denmark at the same regulated rates as Danish mobile operators since they are unlikely to compete on the Danish retail market. NITA argues that interconnection agreements between Danish and other EU operators are concluded in a more competitive manner than national interconnection agreements.
The Commission questions NITA’s conclusion that operators of other EU countries are offered better rates by Danish mobile operators and that there is a more dynamic pricing policy towards operators with whom there is no retail competition. The market data collected by NITA does not support this conclusion either. On the opposite, pricing data collected by NITA shows that, absent regulation, the price for terminating a foreign SMS is up to twice as high as terminating a national SMS, and that the termination bottleneck affects the termination of foreign SMS probably in an even stronger manner. The Commission points out that remedies imposed under Article 16 of the Framework Directive in conjunction with Article 8 of the Access Directive should be based on the nature of the problem identified, proportionate, and justified in the light of the objectives laid down in Article 8 of the Framework Directive. The Commission therefore calls upon NITA to thoroughly assess whether the proposed partial price regulation would not adversely affect end users given that, in the absence of a comprehensive price-regulation, Danish MNOs may have an interest to raise their termination rates vis-à-vis foreign operators. Such price increase could ultimately be detrimental to end users located in Denmark as well as in other EU countries since they may have to pay a higher retail price for cross-border SMS.

Furthermore, NITA should assess more thoroughly whether the proposed regulation will not distort competition at the expense of the other EU competitors if those operators are subject to different conditions, thereby hampering the development of the internal market for SMS services. Indeed, the proposed partial price regulation may lead to discrimination and may have the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State.10 Against this background the Commission asks NITA to reconsider its proposed price regulation and refrain from introducing requirements in their regulatory measures which may incentivise excessive pricing for terminating cross-border SMS traffic.