ICP-ANACOM is glad about the high participation and involvement in this Public Consultation, saluting the interested entities for this fact. The received responses will have a relevant contribution so that this Authority can go further into the questions involved in a complex matter such as the construction and implementation of a mobile termination cost model.
Although in some issues there is some closeness and affinity with the preliminary approach from this Authority, in other issues the contributions received show a high diversity of opinion and a high diversity in the proposed approaches, which are aspects that must be taken into account by ICP-ANACOM, without putting the initially foreseen schedule at risk.
Regarding the information provided at this stage and in the context of this consultation, and regardless of the specific questions with access to the administrative procedure, which were dealt with appropriately, it is important to stress that the public consultation only aimed at listening to the market and the consumers about methodology aspects regarding the cost model being developed and not the model itself.
At this stage, which also included a workshop, which was considered to be very useful, namely by Vodafone and TMN, we tried to collect opinions and observations about relevant aspects of the model at stake, which allow for a more informed option about some crucial aspects in the development of the next probable direction of decision, which will identify in detail the cost model to be considered for the application of the mandatory price guidance for the costs determined in the market analyses of mobile terminations, concluded in May 2010.
In the context of this probable direction of decision (a format which this consultation does not take on), the agents in the market and consumers will naturally have the opportunity to analyse and comment again and eventually in a more detailed and thorough way about the specific characteristics of the cost model that in that stage will be made available in an adequate format, and in any case will allow to understand the calculation process included in it and the way in which the different methodology options now debated are translated into it.
Naturally, we accept that the opinions expressed for this consultation are considered non binding or final, and can evolve considering the later knowledge of the model, as expressed by TMN and Vodafone.
In this context, it is important to stress that the next probable direction of decision, in the above mentioned terms, will include a "glide path" for the evolution of termination prices at least until the end of the year of 2012, and thus continues the price reduction movements determined by determinations in 2008 and 2010, accomplished by quarterly reductions until the value of 3.5 c € per minute, to be applied as of the next month of August.
ICP-ANACOM will thus try that until the end of the current year, the definitive determination on this matter can be adopted and new prices established. It must also be made clear that, unlike what Vodafone defends, the reduction schedule and the values to be determined for terminations in mobile networks do not depend on the process regarding terminations on fixed networks, since these are different realities and processes, and it should be stressed that in any case these are infrastructures with different costs and prices.
Regarding the general issue of adopting the "pure" LRIC model in accordance with the European Commission Recommendation, from which only TMN and Vodafone disagreed, and regardless of the analysis that is developed in the next probable direction of decision, it is important to stress that this is not any (or "mere") recommendation (with a simple "opinion"), but a measure framed in a purpose of harmonising the internal market, for which the national regulating authorities have the obligation of contributing, namely with the cooperation between themselves and the European Commission, in accordance with number 3 of article 8º of the Framework Directive and in article 6 of the Electronic Communications Law which transposed it to national law.
It is thus reiterated what has been referred to on this matter in the consultation document about the need of taking into the (utmost account) the Recommendation at stake and the need to justify any deviation from it in light of national specificities, which are not identified from the start, since, namely, not the market structure, the mobile service penetration, nor the profitability of the operators present significant differences in comparison with the current situation in EU countries, and those differences have also not been minimally identified in the received responses.
On the other hand, the need for a cost model with the characteristics arising from the Recommendation is justified in the Recommendation itself and in the "explanatory note" attached to it, in which its motivations are developed, in particular in terms of assurance of modelling efficient costs on an incremental basis, of reducing competitive distortions associated with network effects and obstacles to the expansion of small operators, and the assurance of competition between fixed and mobile communication networks.
It should also be stressed that in the case of the United Kingdom, frequently quoted by TMN and Vodafone, the conclusion was to adopt the "pure" LRIC, therefore, except for Norway (in which the whole case will be analysed again in 2013), all the countries with recently developed models (e.g. United Kingdom, France, Belgium and the Netherlands) the adoption of a model based on "pure" LRIC was privileged.
On the other hand, it is important to stress that regarding the cases in which ICP-ANACOM has already contradicted orientations from the EC, in particular in the case of price asymmetry of mobile terminations, this was in effect only for a temporary period of time and at the moment of the Decision, there was still no Recommendation on the matter, just opinions about notified measures, and it should be added that the adopted decision was consistent with the common position of ERG. In the case of rented circuit markets, it is stressed that the Recommendation foresees including other markets, as long as confirmed by the so-called "three criteria test", as was the case, and therefore, in both cases the situations are not comparable.
In any case, the model being developed will take into account the national reality, in its justification and in its calibration, considering the data of national operators, and notwithstanding, it will not ignore the concerns with efficiency.
Regarding the several considerations from the responding entities, outside the object of consultation, about the impact of the reduction of mobile terminations on the sequence of regulatory measures, and in particular on the chosen model, in which contrary opinions were expressed (TMN and Vodafone on one side, and the remain gin respondents on the other), it is important to state that, regardless of the contents of the next probable direction of decision, this matter was amply developed by
ICP-ANACOM throughout the last six years, with detailed justification, namely in the last analysis of the mobile termination markets, which ended approximately just one year ago.
In this analysis and in the corresponding hearing report, the position of ICP-ANACOM on the positions being assessed was amply developed, which are essentially the same that have been approached throughout the years by the market agents with opposing views and conclusions, according to the different intervening parties, whenever regulatory measures for the reduction of termination rates are set forth.
This is the case, namely of the issues related with the topics of converging fixed and mobile termination rates, the competitive distortions between fixed and mobile networks and between mobile operators of different sizes, the effects of investment and innovation, the waterbed effect and the possible impacts on consumers, in the subsidisation of terminal equipments, and even on the country's productivity and commercial balance, which therefore will not be touched here, because they have already been thoroughly pondered by ICP-ANACOM in public consultations conducted before on this matter and based on the arguments already produced by the different parties intervening on those processes.
The concerns shown on this subject in the set of answers were in such volume that, frequently they obscured the main concern of this consultation - the methodology of a cost model, with the risk of confounding "means" and "ends".
In more specific terms and without presenting closed conclusions about the model's characteristics at this stage, in any case some considerations arising from the analysis of the responses received are presented below.
Regarding the characterisation of the hypothetical operator to be modelled, concerns were voiced in order to assure that its characterisation is coherent and consistent, with the start dates of business activity and the minimum scale considered as efficient and the period after which this scale is reached, and also regarding coverage, technology and network topology used by that hypothetical operator and its evolution throughout time. Also, the question of the period of time to reach the minimum efficient scale and the characterisation of the volume of traffic and the data served by that hypothetical operator will also be pondered, given the impact they can have on the final modelled results.
At this level, ICP-ANACOM also registers that the concerns shown about the need to clearly distinguish between what can be classified as coverage costs, as opposed to capacity costs, and also what regards technology, the inherent aspects to a modelling of the 2G to 3G migration and an eventual modelling of the introduction of LTE technology. Another aspect identified and which will be assessed thoroughly by this Authority is the consideration of the effects that sharing infrastructures can have for the incremental costs of the mobile termination service.
To conclude, ICP-ANACOM reminds that a model that tries to replicate such a complex context as providing the mobile termination service will inevitably include a simplification of the underlying reality, and therefore there will always be instances in which the referred model can be perfected and made more adherent to reality, and still reflect the situation of an efficient operator in any circumstances. Naturally, ICP-ANACOM will try to attend and counter the concerns expressed in the context of this consultation in a future opportunity, however not neglecting the ever present need of balancing the relationship between cost associated with actions of deepening and incrementing the detail incorporated into the model and the benefit that can be drawn thereof in terms of reliability of the extracted results, also taking into account the schedule for the decision on the matter and the fact that the model is always subject, in the future, to periodical updates.
