Viva - TRA - Telecommunication Regulatory Authority

VIVA Bahrain
Submission to the Telecommunications Regulatory Authority by
VIVA BAHRAIN on the Public Consultation:
“Dominance designation for termination services on VIVA’s mobile network”
NON-CONFIDENTIAL
Principal contact person: Ali Barakat
Company VIVA Bahrain
Telephone number +97333011136
Email: abarakat@VIVA.com.bh
VIVA address: P O Box 21529
Manama
23 rd October 2012
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VIVA Bahrain
1- Introduction
VIVA welcomes the opportunity to comment on TRA’s review of the “Dominance designation for
termination services on VIVA’s mobile network” consultation - MCD/08/12/115” issued on 30
August 2012.
VIVA agrees with the TRA’s market definition in relation to the wholesale supply of termination
services on its mobile network, except for the inclusion of termination of international inbound
calls and termination of domestic calls in the same market.
As for the authority’s assessment and conclusion of VIVA dominance in relation to the wholesale
supply of termination services on its mobile network, VIVA disagrees with the TRA’s position.
VIVA is concerned about the unequal treatment by the TRA since that the second mobile entrant
has enjoyed a very lengthy period without any dominance designation on its own network and
its reference offer is yet to be published even after the designation announced in February
2010.
Additional comments are attached in our response to the specific questions.
2- VIVA response to Question 1:
2.1- Please provide comments on the Authority’s preliminary view on market definition in relation
to the wholesale supply of termination services on VIVA’s mobile network
VIVA does not agree with the TRA’s view in paragraph 64 that “from a market definition
perspective, the termination on a particular mobile network of domestic and international
inbound FTM and MTM calls are the same”.
VIVA believes that the two terminations shall not be considered in the same market since:
1- They are not substitutable
2- Their cost structure is not the same, and
3- The international wholesale customers interested by the Bahraini termination services are
not operating in the Bahraini market and as such shall not be subject to the same regulation
as applied to domestic wholesale customers.
From a costing perspective international originating calls involve more resources than domestic
originating calls, such as the international gateway, the international transmission capacity, the
landing station and the backhauling capacity.
Since the ultimate aim of regulation is to improve consumers’ welfare, the regulation of
international termination will not have any benefit to Bahraini consumers but to foreign
carriers. Aligning international termination with local termination will have a significant negative
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VIVA Bahrain
financial impact on the Bahraini economy. VIVA has estimated the loss to the Bahraini economy
to exceed 10 Million BD per year, which is kept with foreign operators.
The best example which supports VIVA position is the regulatory position of the EC which is
regulating the roaming charges (Inter Operators Tariff - IOT) among EU countries but does not
intervene in the IOT charged by EU carriers to other international mobile customers roaming in
the EU zone. In the latter case IOTs are much higher than those applied between EU countries.
In February 2012, VIVA did share its position with the TRA on the subject arguing especially that
a price floor aligned with the GCC Council resolution, i.e. 37.65 fils for mobile termination and
30.12 for fixed termination, shall be set for international termination to Bahrain and expanded
to all originating countries.
3- VIVA response to Question 2 and 3:
2.2- Please provide comments on the Authority’s preliminary assessment of VIVA’s dominance in
relation to the wholesale supply of termination services on VIVA’s mobile network
2.3- Please provide comments on the Authority’s preliminary conclusion that VIVA is dominant in
relation to the wholesale supply of termination services on VIVA’s mobile network.
VIVA disagrees with the authority’s early assessment and proposal to designate VIVA as
dominant in relation to the wholesale supply of termination services on its mobile network
because of the following:
VIVA as a third entrant in a mature competitive market with established operators (that
have reached 120% mobile market penetration at the end of 2009), trying to build and
stabilize its market share, has no bargaining power to deal on interconnection with its
competitors. Since its launch VIVA was constrained to a form of termination reciprocity by
its competitors, who imposed symmetric termination rates. This has not been the case in
the interconnect market between existing operators before the entry of VIVA.
At the time when the TRA issued the determination for dominance of Zain in February 2010,
the MTRs on Zain network applicable to OLOs were between 21% and 36% higher than
those paid to Zain by Batelco. Even though VIVA mobile termination rates are not regulated
VIVA has not applied higher rates.
The telecommunication market trends during the period from 2003 to 2011 show that Zain
market share was growing steady starting at xx% at the end of 2004 and up to almost xx%
during 2008 and 2009. During a period of seven years the TRA has not announced any
dominance designation for Zain in relation to the wholesale supply of termination services
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VIVA Bahrain
on its mobile network. Since VIVA is committed to apply symmetric termination rates with
OLOs, VIVA would like to be treated at a non-discriminatory basis.
Only during 2010, TRA designated Zain as dominant on its mobile network in relation to the
supply of wholesale termination services. However, till date and after two years of
announcing its dominance designation the relevant reference offer is still not published yet.
The entry of VIVA in the Bahraini telecom market has broken the implied duopoly between
Zain and Batelco and significantly stimulated the market dynamics and competition to the
benefit of consumers. VIVA has probably gained market share in terms of subscribers more
rapidly than the second entrant did, but at the expense of a revenue share. Additionally,
VIVA has targeted the mass market which is very price sensitive and hence very volatile and
its market share could change over short periods of time.
VIVA believes that a relatively high customer-based market share does not necessarily imply
market power. Revenue-based market share reflects more accurately the market power of
competitors rather than subscribers-based market share. To ensure a sustainable
competition VIVA believes that new entrants shall benefit a reasonable time frame to
stabilize and diversify their customer base before being submitted to heavy regulatory
unjustifiable remedies.
VIVA as a new entrant is facing start up expenditures that existing operators do not face
such as heavy CAPEX to deploy its network and service delivery platforms. The
implementation of a costing regulatory system will create an unduly significant regulatory
burden on VIVA at this early stage of its operations. In this regard the TRA shall ensure that
the cost, complexity and timeframes for regulatory conditions are achievable by new
entrants where the burden of regulation could become a barrier to competition.
The different position between VIVA as a new entrant and the existing network operators in
terms of stable installed customer base, reputation and quality of service creates an
asymmetric market environment that justifies non-regulated termination charges for the
mid-term and which is in line with the earlier practices that the TRA implemented for Zain.
In this regard the European Regulatory Group has assessed the need for a special regulatory
treatment of new entrants: “NRAs will have to formulate expectations about a reasonable
period of time until when the price of the entrant may become regulated according to the
general regulatory approach to the sector, taking into account the competitive situation in
the markets. … Although it might be justified in the light of the goal of sustainable
competition that new entrants are treated differently, the long run goal is to ensure that all
operators are producing efficiently” 1
1 Revised ERG Remedies Common Position (ERG (06) 33 of June 2006, p. 113.
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VIVA Bahrain
VIVA has not reached yet the level of optimum production despite its relatively customer
base, which does not reflect any market power, especially considering the volatility of the
prepaid segment and low profitability, the high depreciation and amortization charges and
the high customer acquisition cost, which is commonly considered as the most frequent
cause of startup failure.
Considering VIVA early development, new remedies/obligations have a high cost in terms of
compliance cost especially considering the myriad obligations that it has to fulfill and the
multiple work-plans streams that VIVA is currently engaged in with the TRA. VIVA is
concerned that increasing such costs will significantly impact our ability to be supportive and
responsive to the needs of the Authority.
Finally, VIVA considers that the ultimate aim of the present dominance determination is to
mandate cost based termination rates and non-discriminatory interconnect conditions to
ensure fair competition and eliminate inefficiencies. This objective is already factually
committed and reached by VIVA since its launch, and to the benefit of its competitors as the
interconnect traffic flow is far from being balanced. Since this legitimate aim has been
already met, any additional remedy employed to achieve the aim and ultimately to promote
competition must be both necessary and the least burdensome.
VIVA does not believe that currently there is a risk of abuse of dominance from VIVA for the
termination services on its network.
4- Conclusion
VIVA welcomes the TRA initiatives to consult the industry about the review of telecom markets.
However, VIVA is in disagreement with the TRA’s position to include international inbound
termination in the same market as domestic termination, and with the timing to designate VIVA as
dominant on its own network.
Treatment of local termination and international the same does not bring any Bahrain consumer
benefit and in fact prevents an economic opportunity for Bahrain.
On dominance designation, VIVA believes that the TRA should ensure a non-discriminatory
treatment of all operators and proportionate regulatory measures in reviewing the competitive
conditions of telecom markets. The TRA’s proposal shall be in line with best practices and ensure a
fair playing field and promote sustainable competition considering:
1. The principle of non-discrimination treatment that the TRA is committed to apply among all
operators, and similar to the treatment to Zain on a similar topic
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VIVA Bahrain
2. The commitment of VIVA since its launch to apply symmetric termination conditions, and
hence no remedy is needed
3. The different competitive position of VIVA as a third entrant in the mobile market in terms
of economies of scale and scope, reputation, spectrum allocation, etc.
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