27 Case AT-2009-0970 - IRG

IRG Expert Group Report
Phase II investigation Pursuant to Article 7(4) of Directive 2002/21 EC:
Executive Summary
Case AT/2009/0970 – Wholesale broadband access
IRG (09) 27
On 5 October 2009, the European Commission initiated a second phase procedure on the
market for wholesale broadband access in Austria. In accordance with the Independent
Regulator Group (“IRG”) rules of procedure an Expert Group was established with the
mandate to provide an independent expert opinion on the justification of the Commission’s
serious doubts. The report that was delivered to the Commission on 12 November 2009,
outlines the views of the IRG Expert Group.
In its notification RTR defines two separate retail markets for broadband access in Austria:
one residential services and one for business services. Analysis of actual switching
behaviour and a SSNIP test based on survey results leads RTR to the conclusion that mobile
broadband connections act as a demand substitute for DSL and cable broadband
connections in the residential retail market. In the business retail market cable and mobile
connections are not substitutes for DSL connections.
According to RTR the wholesale broadband access market for subsequent use by business
users contains all self-supplied and externally supplied bit-stream connections for
subsequent use by business customers as well as externally supplied bit-stream connections
for subsequent use by residential customers. The latter act as supply-side substitute for bitstream
connections for subsequent use by business customers.
The serious doubts expressed by the Commission relate to: 1) the inclusion of mobile
broadband in the retail broadband access market for residential customers and 2) the
exclusion of self supplied bit-stream connections for subsequent use of residential customers
from the relevant wholesale market and the inclusion of externally supplied bit-stream
connections for subsequent use by residential customers in the relevant wholesale market.
Definition of the retail broadband access market for residential customers
On the inclusion of mobile broadband in the retail broadband access market for residential
customers the Commission argues that RTR should have analysed whether all three types of
broadband connections can be used for applications such as the download of music or films,
whether they provide sufficiently secure connections allowing customers to use applications
requiring a protected connection (such as internet banking), whether any differences in
contractual conditions relating to minimum contract durations or transfer of lines were
relevant and whether double, triple or quadruple play offers constituted a switching barrier
between fixed and mobile networks.
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IRG (09) 27
The IRG Expert Group’s view is that, in the light of the evidence brought forward by RTR, the
Commission’s serious doubts relating to the inclusion of mobile broadband connections are
not justified.
In the view of the Expert Group RTR has produced sufficient evidence that shows that a
significant amount of Austrian households view mobile and fixed broadband as substitutes as
opposed to the more normally accepted complementary use seen in other Member States.
With regard to the issues brought forward by the Commission the Expert Group considers
that RTR has shown that Austrian consumers use mobile broadband connections in an
almost identical manner that they use fixed ones. Analysis of the extent to which mobile
broadband connections are secure and are used for internet banking and analysis of contract
terms and the ability of consumers to move their connections with them from address to
address would not change this picture.
RTR also brought forward evidence that bundling is not a particular feature of the Austrian
market that would inhibit switching. However, the Expert Group believes that such a situation
should be monitored as a move towards more bundled offers may change the analysis.
Definition of the relevant wholesale market for broadband access
The Commission expressed serious doubts as to whether the market delineation by RTR at
the wholesale level is based on a sufficiently detailed and robust forward looking analysis.
Although the Expert Group initially had some difficulties in understanding the precise nature
of these two explicit areas of concern and how they add to the serious doubts, the Expert
Group’s view is that the Commission’s concerns regarding RTR’s wholesale market definition
are justified.
In particular, the Expert Group is of the view that RTR has not conducted a thorough analysis
of the potential supply-side substitution from self-supplied bit-stream for the subsequent use
of residential customers. Moreover, the evidence on substitutability that has been provided
by RTR does not in itself appear to justify the difference in treatment between self-supplied
and externally provided bit-stream for the subsequent use of residential customers.
The Expert Group recommends RTR to conduct a full and detailed substitutability analysis. In
particular, this should analyse the potential for effective supply-side substitution from self
provided bit-stream for residential services.
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