Telecom companies entering into network sharing agreements must be wary of any anti-competitive implications that such agreements might have.
Network sharing is a widespread practice among telecom companies in most countries. It serves very often as a source of efficiencies since it can facilitate the roll-out of electronic communications networks by reducing costs. This benefits the consumer in terms of faster roll out, cost savings and coverage, particularly in remote areas.
Nonetheless, there can clearly be cases where such a practice is considered to be illegal due to the negative impact on competition in the market in question.
This has been confirmed by the recent decision of the European Commission to send a statement of objections to two Czech operators of mobile telephony O2 CZ and T-Mobile CZ as well as to the Czech telecom infrastructure provider CETIN, in the course of anti-trust proceedings opened in vis-à-vis these three companies.
The EU’s anti-trust rules prohibit agreements and concerted practices that may affect trade and prevent or restrict competition. This means that any horizontal or vertical agreement, be it verbal or written, entered into between suppliers or suppliers and distributors, could be subject of scrutiny of competition authorities for anti-trust implications.
In this case, O2 CZ and T-Mobile CZ are both major operators in the Czech retail mobile telecommunications market. O2 CZ’s mobile infrastructure and wholesale business were transferred to CETIN, a network infrastructure company belonging to the same corporate group. The network sharing cooperation between O2 CZ/CETIN and T-Mobile CZ began in 2011 and increased in scope. It currently covers all mobile technologies – 2G, 3G and 4G – and the entire Czech territory with the exception of Prague and Brno, thus servicing around 85 per cent of the population.
The Commission took into consideration various factors before arriving at its preliminary conclusion that such a network sharing agreement restricts competition.
It particularly observed that the Czech mobile communications market is highly concentrated with only three mobile network operators. O2 CZ/CETIN and T-Mobile CZ are the two largest operators, with their networks serving approximately three quarters of subscribers. The third operator, Vodafone, is smaller and, unlike the network sharing parties, has no meaningful presence in the fixed telecoms segment.
The Commission noted that, in this case, instead of leading to greater efficiencies and higher service quality, the network sharing agreement was likely to disincentivise the two large mobile operators from improving their networks and services for the benefit of their clients.
It was particularly concerned that the agreement would likely slow down quality improvements in existing infrastructure, and delay or hinder the deployment of new technologies, such as 4G/LTE and future technologies, and new services based on them, particularly in densely populated areas.
Such a possibility of stifling innovation to the detriment of consumers was enough for the Commission to come to the preliminary conclusion that the network sharing agreement in question breaches EU anti-trust rules. The final decision on the matter has yet to be reached once the Commission concludes its investigations.
It is a sine qua non for operators in all sectors to ensure that any horizontal or vertical agreements which they enter into do not have any anti-competitive implications. Breaches of EU or national competition rules lead to hefty fines for the parties involved. Such fines serve as a detriment to any operator seeking to foreclose any particular market to the detriment of competitors and consumers alike.
Mariosa Vella Cardona M’Jur, LL.D., is a freelance legal consultant specialising in European law as well as competition law, consumer law, data protection law and intellectual property law. She is also a visiting examiner at the University of Malta.
mariosa@vellacardona.com