European Commission Supports Austrian Regulator's Plans for Mobile Termination Rates

The European Commission has voiced its support for efforts of the Austrian telecoms regulator, Telekom-Control-Kommission (TKK), to bring mobile termination rates (MTRs) to more competitive levels. In a letter sent at the end of last week, the Commission agreed that bringing MTRs to levels closer to what it costs to efficiently connect calls will tackle potential market distortions between phone operators.

However, because TKK has yet to bring its methodology in line with the approach recommended by the Commission earlier this month, the Commission says that its approach might not be effective in other countries with different competitive characteristics, further underlining the need for a common European approach to setting termination rates.

In a letter sent at the end of last week, the Commission has welcomed the Austrian telecoms regulator TKK's efforts to bring mobile termination rates to levels which are more representative of the efficient costs involved in connecting a call between operators. It supported the regulator's objectives of addressing potential competition distortions such as inefficient subsidies from fixed to mobile networks as well as price distortions within mobile markets.

On 24 April 2009, TKK notified the Commission of its proposed regulatory obligations for four mobile operators, Mobilkom, T-Mobile, Orange and Hutchison 3G Austria. These include giving other operators transparent and equal access to their networks and charging them termination rates based on the costs incurred for this access. Based on Hutchison's costs, the lowest of the four, TKK proposed a glide-path which would result in a maximum termination rate of 2.01 eurocents/min for all four mobile operators from 2011. TKK noted that Hutchison's lower costs are driven by recent strong growth in data traffic (such as using a mobile device to send email) carried over its network, demonstrating that economies of scope – cost savings resulting from providing multiple services via a single platform – are producing important cost reductions in Austria's mobile market.

This approach takes account of operators' actual costs and certain non-traffic-related costs, differing from the method set out in the Commission's Recommendation for a common cost-based approach to regulating termination rates in the EU, published on 7 May 2009.

The Commission's letter cautioned that applying TKK's approach in other markets where data services are not as popular as in Austria (where take up is 11.4% of the population, while the EU average is 2.8%), could result in termination rates higher than what it costs an efficient operator to 'terminate' a call. It welcomed the regulator's intention to follow the Commission Recommendation in its next market review in 2011, which will help to ensure a coherent and efficient costing approach across the EU.

The Commission says that all EU national regulators should apply the common EU approach to termination rates by the end of 2012. However, regulators with limited resources may use different approaches for a limited period as long as they achieve a pro-competitive result.

Posted to the site on 25th May 2009