Commissie verdenkt TeliaSonera van misbruik dominantie in Zweedse markt voor breedbandinternet (en)

Today, the European Commission has sent a so-called statement of objections to TeliaSonera AB. The statement concerns a contract for the construction and operation of a fibre-optic broadband network for the provision of high-speed Internet access and other services on behalf of HSB Malmö, a regional housing association. The Commission takes the view that TeliaSonera's bid for that contract was intentionally set below cost and did not allow the operator to recover the investments and expenses derived from the provision of infrastructures and services contained in the contract. By setting such a low price, TeliaSonera prevented the development of alternative infrastructure and the entry of competing service providers. TeliaSonera thereby strengthened its dominant positions in the markets for the provision of local broadband infrastructure and the provision of high-speed Internet access.

Competition Commissioner Mario Monti stated that: "Today's decision to initiate formal proceedings against TeliaSonera should be seen as a sign of the Commission's continued determination to penalise incumbent telecommunications operators that abuse their market power in order to stifle competition in the broadband field. It is in the interest of the European consumers to prevent this from happening."

The Commission's action follows a complaint by B2 Bredband AB (in Sweden this company is best known as Bredbandsbolaget), a Swedish provider of electronic communications networks and services. In 1999, Bredbandsbolaget and Telia (which at the time had not yet merged with Sonera) both bid for a contract with HSB Malmö - the 2nd largest co-operative housing association in Sweden - to provide a brand-new fibre-optic network for the provision of broadband services (mainly, high-speed Internet access) to households in the Malmö region. The contract implied the construction of the network and the provision of services in exclusivity for a period of five years. The contract was awarded to Telia in October 1999.

At the present stage of its investigation, the Commission believes that Telia's agreement with HSB Malmö constituted so-called predatory pricing. When submitting its bid and signing the contract, Telia could not reasonably have expected to cover the costs incurred by providing the infrastructure and services established in the Telia/HSB Malmö Agreement. Taking into account all known revenues and costs relevant to this Agreement, the Commission has provisionally concluded that under no reasonable assumptions could Telia have expected to recover the investments and expenses derived from the provision of infrastructures and services contained in the contract..

This conclusion is supported by documentary evidence gathered by the Commission at its inspection at the premises of Telia in 2000. The documentary evidence indicates that Telia willingly supported losses in order to pre-empt Bredbandsbolaget's market expansion.

Telia aimed to prevent alternative providers of infrastructure from entering the market for the provision of broadband networks and services. The development of alternative "last mile" infrastructure thereby creating network competition - is crucial when promoting competition in the electronic communications sector.

Earlier this year, the Commission adopted two decisions concerning distorted competition in broadband markets. In May 2003 a decision was adopted against Deutsche Telekom AG in Germany for abusing its dominant position through unfair prices for the provision of local access (see IP/03/717 of 21 May 2003). In July 2003 a decision was adopted against Wanadoo Interactive in France for predatory pricing in the provision of high-speed Internet access to residential customers (see IP/03/1025 of 16 July 2003).

Background

Procedural

A statement of objections contains the preliminary conclusions of the Commission after the analysis of the complaint under Article 82 of the EC Treaty which prohibits abuses of dominant position. TeliaSonera now has two months to present arguments contesting the Commission's preliminary analysis and may also expand on those arguments at an oral hearing. It is only after this has happened that the Commission will adopt a final position. If the formal proceedings confirm the Commission's preliminary assessment, TeliaSonera runs the risk of being fined for its anti-competitive behaviour.

Factual

At the time of the abuse, Telia owned approximately 90% of the local infrastructure susceptible to be used for the provision of high-speed Internet access. This included the traditional telephony network, that could be upgraded for the provision of high-speed Internet access and other advanced services (through DSL technologies), and the cable television network Com Hem that at that time was owned by Telia. Telia's network reached practically every single household in Sweden.

In 1999 the market for the provision of high-speed Internet access services to residential customers was just emerging in Sweden. The incumbent operator Telia could capitalise on its extensive networks of "last mile" infrastructure (e.g. upgraded local telephone loops and cable television) in order to "roll out" its services. B2 had started to build alternative high-capacity local networks to compete for the provision of high-speed Internet access and other advanced services. Telia's near-monopoly position in the infrastructure market made it easier to extend its dominance to new emerging markets using such infrastructure to conquer market share in the provision of high-speed Internet access for residential customers. In addition, Telia had strong market positions in other service markets using "last mile" infrastructure, such as narrowband Internet access, cable-TV services and fixed telephony services.