1. Introduction
1.1. Update and review of the mobile termination cost model
Under the Electronic communications Law (ECL)1, it is incumbent on Autoridade Nacional de Comunicações (ANACOM) to define and analyse relevant markets2, to declare companies with significant market power (SMP) and to determine suitable measures in respect of companies providing electronic communications networks and services3, in compliance with principles of competition law.
Taking into account the price control obligation that falls on operators with SMP on wholesale markets for voice call termination on individual mobile networks (market 24), ANACOM approved, by determination of 30 April 2012, a final decision on the specification of the price control obligation on these markets, establishing that, as from 31 December 2012, price ceilings of voice call termination on mobile networks, to be applied by the three mobile operators with SMP, would be1.27 Euro cents per minute regardless of the origin of the call, on the basis of per-second billing throughout the call.
Given the time gap that elapsed in the meantime, ANACOM believes that, in the light of technological and market developments that took place in mobile communications in Portugal, it is appropriate to undertake the analysis of wholesale mobile termination markets and to update the cost model so as to reflect the most recent technological and commercial developments on termination rates of mobile networks voice calls.
To this end, ANACOM awarded the update and review of the mobile termination cost model, which is coherent and compatible with Commission Recommendation of 7 May 2009, to Analysys Mason Limited, the company responsible for the construction of the original model.
ANACOM expects that the model now made available, for which mobile operators contributed with relevant information, supports the review of the price control obligation which falls on operators with SMP on wholesale markets for voice call termination on individual mobile networks, as detailed in a separate and parallel document.
It should be noted that in the scope of the cost model update, not only concepts and parameters were analysed, and reviewed where appropriate, but also traffic estimates and the respective evolution were updated in the light of developments which were registered since the implementation and development of the original model. Given that this is an assessment of the cost model, a large proportion of concepts and assumptions used in the original model are maintained, although the Regulatory Authority always sought to use the best available and up-to-date information (namely in terms of the definition of market evolution, penetration, traffic, forecasts of network migration and technological developments, geotypes and review of costs and capacity of network equipment). A single albeit relevant structural change was introduced, concerning the inclusion of 4G networks, which had not been taken into consideration in the preceding model.
1 Law No 5/2004, of 10 February, as amended by Law No 51/2011, of 13 September, and subsequently amended by Law No 10/2013, of 28 January, Law No 42/2013, of 3 July and Decree-Law No 35/2014, of 7 March (ECL).
2 Article 56 of Law No 5/2004, of 10 February, as amended by Law No 51/2011, of 13 September.
3 Article 18 of Law No 5/2004, of 10 February, as amended by Law No 51/2011, of 13 September.
4 According to Commission Recommendation of 9 October 2014 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation, in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, available at 'Recomendação da Comissão 2014/710/UE, de 09.10.2014http://eur-lex.europa.eu/legal-content/PT/TXT/?uri=uriserv:OJ.L_.2014.295.01.0079.01.POR.
1.2. Development and implementation of a mobile termination cost model
In the light of the price control obligation which falls on operators with SMP on wholesale markets for voice call termination on individual mobile networks, ANACOM awarded to Analysys Mason Limited (hereinafter referred to as “consultant”), in the context already summarised in the preceding point, the update and review of the mobile termination cost model. In the course of this process, the necessary information was collected from stakeholders, to ensure that the model corresponds to the national reality as much as possible, having been received three contributions with useful information for the calibration of the model.
Further to the conclusion of the model update, ANACOM launched between 17/04/2015 and 25/05/2015, a public consultation both on the public version of the designed model and on new price ceilings for the wholesale service of voice call termination on national mobile networks.
As such, the cost model for mobile termination benefited from the analyses of the various contributions received in the meantime, leading to a more robust result, which was materialized in the “pure” LRIC cost model which supported the determination of the wholesale rate of call termination on individual mobile networks, in the scope of the price control obligation imposed on operators with SMP on Market 2, according to the EC Recommendation, the public version of that model having been published in the Draft Decision (DD) that preceded the present Decision.
Still as regards the consultation previously carried out, it must be stressed that stakeholders may consult the respective report at ANACOM’ website, together with ANACOM’s position on comments to the various issues raised in the public consultation, as well as non-confidential contributions received.
ANACOM expects the model now provided, for which mobile operators contributed with relevant information, to support the implementation in 2015 and following years of the price control obligation which falls on operators with SMP on wholesale markets for voice call termination on individual mobile networks.
For this purpose, ANACOM presents the “pure” Long Run Incremental Cost (LRIC) cost model, developed in collaboration with the consultant (vide annex I), which deemed it to be the most appropriate instrument to define mobile termination price ceilings, in the scope of the price control obligation. At the same time, the document “Bottom-up mobile cost model update - Model documentation” (vide annex II) is also made available, to provide to mobile operators and stakeholders in general an adequate understanding of the various technical parameters that characterized the hypothetical efficient operator described in the model. In addition to the more technical component of the model, the consultant prepared a report, “Conceptual approach for a mobile BU-LRIC model”(vide annex III) to allow an understanding of the rationale at the source of the various assumptions on which the implementation of this model is based.
In addition, the consultant prepared the document “Update of the mobile LRIC model: change report” (vide annex IV) to enable stakeholders to understand the main changes introduced in the model, namely those that concern the introduction of 4G. It is noted that this report only records updates that have a significant impact on the calculation of termination costs, a comparison between the “updated model” and the “original model” being provided, where appropriate.
In order to make this process more transparent and participated, ANACOM promoted a workshop during the consultation period, which was attended by the consultant, who provided clarification to stakeholders on issues under consultation, in more detail and in a more interactive way.
By determination of 1 July 2015, ANACOM approved draft decisions to be notified to the European Commission (EC), the Body of European Regulators for Electronic Communications (BEREC) and National Regulatory Authorities (NRA) of other Member States of the European Union (EU), which concerned (i) wholesale markets for voice call termination on individual mobile networks - definition of product markets and geographic markets, the assessment of SMP and the imposition, maintenance, amendment or withdrawal of regulatory obligations and (ii) the mobile termination cost model - specification of the price control obligation. On the same date, approval was given also to reports of the prior hearing and public consultation to which the corresponding draft decisions had been submitted, further to determination of 16 April 2015.
By letter dated 30.07.2015, the European Commission addressed the notified draft decisions, having made no comments on the cost model that supports the implementation of the price control obligation. As such, the final decision requires no amendment.
It is also stressed that the DD report made available is deemed to be an integral part of this Decision on the cost model for mobile termination - specification of the price control obligation, which includes non-confidential comments from the various participants and well as ANACOM's analysis thereon.