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02 February 2017
Following a protracted dispute, on December 22 2016 the Office for the Protection of Competition imposed fines on Czech mobile operators Vodafone Czech Republic as and O2 Czech Republic as totalling Kr99 million (approximately €3.6 million). The office deemed an agreement on an exclusive, direct interconnection between the two operators included in a 2001 interconnection agreement to be anti-competitive. Further, another case in the telecoms sector which was originally initiated by the office has ended up under the jurisdiction of the European Commission, which has opened an investigation into a network sharing agreement between O2 and T-Mobile Czech Republic as. The commission will examine whether their cooperation restricts competition and thereby harms innovation in breach of EU antitrust rules.
On March 22 2001 Vodafone and Eurotel Praha, spol sro, whose successor as of July 1 2006 was O2, entered into and subsequently performed an interconnection agreement. Under the agreement, Vodafone and O2 agreed to interconnect networks by means of exclusive direct interconnection under the condition that such interconnection was available and its capacity was sufficient. The agreement excluded the possibility of either O2 or Vodafone freely deciding to link their networks at any time by means of transit through a third-party network. Therefore, where a direct interconnection of O2's and Vodafone's networks was present and there was sufficient capacity, none of the operators could use alternative methods of interconnection by means of transit through a third-party network, even if this would be more profitable to the operators and their customers. In its previous decisions the authority had stated that the agreements had a negative impact on end customers as they affected the price that the end customers paid the telecoms service providers for the termination of a call in the called network. In case of an indirect interconnection, O2 and Vodafone had to pay both:
This created an obstacle to the use of indirect connections, which were more expensive than direct connections.
The authority held that the market-sharing agreement between Vodafone and O2 violated the Act on the Protection of Competition since the aim of the agreement was to distort competition and the agreement could in fact distort competition on the market for the operation of public telecoms networks.
The office issued its initial decision in this matter in 2003. That decision came into legal force one year later and now, after judicial review, the office has again dealt with the matter. As both O2 and Vodafone had continued to fulfil the agreement since 2003, the initial fines were increased accordingly for the long-term breach. However, the decision is not in force yet. Vodafone has appealed and thus it remains to be seen how this dispute will finally be resolved. Vodafone has stated that it considers the office's decision to be unlawful, as it clearly demonstrated the active use of indirect interconnections to the O2 network. According to Vodafone, the office was also aware that Vodafone was forced to cancel indirect interconnections due to a 2002 Telecommunications Office decision. In addition, Vodafone is of the opinion that the decision has many other factual errors.
Another network sharing agreement, concluded between T-Mobile and O2 in 2013, is now under scrutiny by the commission. According to the press release, the operators in question have shared their networks (from 2G, 3G and 4G to long-term evolution) since 2011. The sharing agreement is supposed to cover the entire Czech Republic, except Prague and Brno.
In 2014 Vodafone submitted a complaint about this agreement to the authority. Since the authority was reluctant to initiate administrative proceedings, Vodafone submitted its complaint to the European Commission, which took the lead in 2015. A year and a half later the commission began its administrative proceedings for the alleged anti-competitive agreement between T-Mobile and O2. The commission will investigate the potential negative impact of the sharing agreement on the quality of the local telecoms infrastructure, particularly the introduction of new and future technologies and related services. If the commission proves that there was a negative impact, the agreement will most likely be considered anti-competitive in regard to the common market.
In this strictly regulated business network-sharing agreements are commonplace, particularly if they bring benefits for consumers (eg, better quality services, innovations and lower prices). However, the commission must consider the specifics of each case, since the market conditions and local regulations are different from state to state. For the past 20 years there have been only three licensed telecoms operators in the Czech Republic, and telecommunications services are still expensive compared to the rest of the European Union. Therefore, the commission will have to decide whether the sharing agreement in question, as well as its proclaimed benefits for customers, will actually support competition in the defined relevant market.
For further information on this topic please contact Jitka Linhartová or Claudia Bock at Schoenherr by telephone (+420 225 996 500) or email (email@example.com or firstname.lastname@example.org). The Schoenherr website can be accessed at www.schoenherr.eu.
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