On 14 February 2018, following public consultations and the commissioning of an economic study in 2017, the European Commission published a draft of its updated Significant Market Power Guidelines. These guidelines set out principles for Member State National Regulatory Authorities (NRAs) to follow in market analyses and the assessment of significant market power (SMP) when they intervene in telecoms markets under the EU regulatory framework for electronic communications (e.g. market reviews). This is the first update since the original SMP Guidelines were published in 2002 and is intended to coincide with the implementation of the new European Electronic Communications Code, the EU’s substantial update to the existing regulatory framework for electronic communications as part of the Digital Single Market initiatives. This article provides an overview of key changes.

The intervening years since the original SMP Guidelines have seen significant change in the sector. In infrastructure terms, 3G/4G mobile networks and fibre broadband have emerged, increasingly delivered collaboratively. On the consumer side, the increased demand for “quad play” bundles has led to convergence between mobile, fixed line and entertainment service providers (for more information on trends in network sharing and collaboration in the sector, see CMS’ series of network sharing studies). The new draft guidelines are partially aimed at addressing these structural changes and ensuring telecoms regulation remains fit for purpose. Furthermore, the Commission is able to bring to bear 15 years’ experience of regulation and a significant body of competition decisions and case law.

Article 15(2) of Directive 2002/21/EC (the Framework Directive), which is the cornerstone of the EU’s regulatory framework for electronic communications, requires the Commission to publish SMP guidelines. These set out the principles NRAs must apply in the analysis of markets and SMP under the Framework Directive, and NRAs must take “utmost account” of them. The current SMP guidelines were not revised when the Commission updated its framework in 2009. The new guidelines are the result of a year of consultation and the commissioning of an economic study, and are accompanied by an Explanatory Note.

The main changes are as follows:

  • Concerning market definition, the principles for defining markets are more or less unchanged. However, the Commission notes that NRAs must be alive to trends, including convergence between networks using distinct technologies, the rise of over-the-top (OTT) challengers to traditional telecoms companies and the increasing interchangeability of retail products. The Commission warns against the risks of perpetuating a “cycle of captivity” for users left behind using legacy technology by defining narrow captive markets: the Commission encourages NRAs to consider “chains of substitution” between generations of technology and broader market definitions to encourage migration onto newer systems. In terms of geographical market definition, the Commission explains that NRAs may pursue geographically differentiated remedies where regional differences are found, even if these are not sufficient to warrant differentiated markets or SMP determinations.
  • Of particular interest is the new section on “joint SMP”. The current guidelines significantly expand and update the guidelines in light of the case law. NRAs must consider whether the market conditions are conducive to tacit coordination, the level of transparency in the market and the sustainability of any coordination mechanism over time. This change of emphasis reflects concerns that since 2002, in some EU countries, markets have transitioned from monopolistic to oligopolistic market structures. It also responds to specific calls from a number of NRAs in the public consultation that they need powers to address situations of collective dominance and tight oligopolies.
  • In relation to single SMP, the draft guidelines remove references to “essential facilities” and “leveraged” market power. Single SMP remains a nuanced analysis: the Commission has responded to comments in the public consultation that market shares should only be a starting point. The new guidelines emphasise that market shares must be considered in the light of market conditions, and in particular the dynamics of the market and of the extent to which products are differentiated.

The Commission has now submitted the draft to the Body of Regulators for Electronic Communications (BEREC) for comments, stressing that neither the revised guidelines nor the Explanatory Notes are final. It expects to publish completed documents in the Official Journal at the end of April 2018.