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Open in new tab COMMISSION OF THE EUROPEAN COMMUNITIES
COMMISSION DECISION
of 04.07.2007
relating to a proceedings under Article 82 of the EC Treaty
(Case COMP/38.784 – Wanadoo España vs. Telefónica)
(ONLY THE SPANISH TEXT IS AUTHENTIC)
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COMMISSION DECISION
of 04.07.2007
relating to proceedings under Article 82 of the EC Treaty
(Case COMP/38.784 – Wanadoo España vs. Telefónica)
(ONLY THE SPANISH TEXT IS AUTHENTIC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 1/2003 of 16 December 2002 on the
implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty1,
and in particular Article 23(2) thereof,
Having regard to the complaint lodged by Wanadoo Spain S.L. (now France Telecom España
S.A.) on 11 July 2003, alleging infringement of Article 82 of the Treaty by Telefónica S.A.
and requesting the Commission to put an end to those infringements,
Having regard to the Commission decision of 20 February 2006 to initiate proceedings in
Case COMP/38.784,
Having given the undertakings concerned the opportunity to make known their views on the
objections raised by the Commission pursuant to Article 19(1) of Regulation No 172 and
Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in
certain proceedings under Articles 85 and 86 of the EC Treaty3,
Having regard to the final report of the hearing officer in this case,
After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,
Whereas
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OJ L 1, 4.1.2003, p. 1.
OJ 13, 21.2.1962, p. 204/62. Regulation as last amended by Regulation (EC) No 1216/1999 (OJ L148,
15.6.1999, p.5).
OJ L 354, 30.12.1998, p. 18.
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(1)
(2)
(3)
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I. INTRODUCTION
Broadband internet access is a key element of the information society. The main
technology used in Spain to provide broadband internet access services is ADSL
(asymmetric digital subscriber line), which provides high-speed internet access using a
telephone line. The incumbent Telefónica is the only Spanish telecommunications
operator that has a nation-wide fixed telephone network. It rolled out this local access
network over significant periods of time protected by exclusive rights and was able to
fund investment costs through monopoly rents from the provision of voice telephony
infrastructure and services.
In order to provide broadband internet access to end-users, Telefónica’s competitors
basically have two possibilities:
First, they can build an alternative local access network: this option which requires
significant time and huge investments is not economically viable. Second, they can
contract wholesale broadband access. Three main types of wholesale broadband access
services are available to them, two of which are exclusively provided by Telefónica
and one which is provided by both Telefónica and competing operators. The latter are
nonetheless dependent upon Telefónica for the inputs required to supply this third type
of wholesale product.
Telefónica’s central role in the provision of all the wholesale broadband access
services available in Spain and its presence in the retail broadband access market
means that it has been in a position to control and influence market prices, output,
innovation, variety and the quality of services on the market for a significant period of
time.
On 11 July 2003, Wanadoo España S.L. (now France Telecom España S.A.) submitted
to the European Commission (“the Commission”) a complaint against Telefónica,
alleging that the margin between the wholesale prices Telefónica’s subsidiaries charge
their competitors for wholesale broadband access in Spain and the retail prices they
charge end-users is not sufficient to enable Telefónica’s competitors to compete in the
broadband retail market.
Hereinafter, after having identified the type, the development over time and the
regulation applicable to the services covered by the Decision (see Section IV), the
Commission has identified two relevant wholesale markets: the market for wholesale
broadband access at regional level and the market for wholesale broadband access at
national level. Telefónica is dominant on both markets. The Commission also
identified one relevant retail market, which comprises all the standard broadband
products, whether provided through ADSL or any other technology, marketed in the
“mass market” for both residential and non-residential users. Although case law does
not require to establish that Telefónica is dominant on the retail market, the
Commission has completed its analysis by also establishing such dominance (See
Section V).
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(7)
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The Commission has then found that from September 2001 to December 2006 the
margin between Telefónica’s retail prices and the price for wholesale access at
regional level, on the one hand, and the margin between the retail prices and the price
for wholesale access at national level, on the other hand, was insufficient to cover the
costs that an operator as efficient as Telefónica would have to incur (see Section VI.D
below). This finding does not depend on the profitability method chosen: both the so-
called period-by-period and discounted cash flow methods lead to the same
conclusion, namely that Telefónica has imposed a margin squeeze on its competitors.
The margin squeeze was capable of foreclosing competition in the retail market, and
has harmed consumers (see Section VI.E). There is no objective justification or
efficiency defences to Telefónica’s behaviour (See Section VI.F ) . Also, existing
regulation has not prevented Telefónica from restructuring its prices so as to put an
end to the margin squeeze (See Section VI.F.6).
Telefónica’s behaviour amounts to an abuse of dominant position by unfair pricing in
the form of a margin squeeze contrary to Article 82 of the EC Treaty. It lasted five
years and four months, namely from September 2001 to December 2006.
(10) The subject-matter of these proceedings is Telefónica’s behaviour in the form of a
margin squeeze, but it is not excluded that Telefónica may also have engaged in other
abusive behaviour in the Spanish broadband markets.
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II. THE PARTIES TO THE PROCEEDINGS
A.
The addressees of the decision
(11) The present Decision is addressed to Telefónica S.A. (“Telefónica”) and its 100%
owned subsidiary Telefónica de España, S.A.U (“TESAU”). It also concerns the
behaviour of Telefonica’s subsidiaries Telefónica Data de España, S.A.U (“TDATA”)
and Terra Networks España S.A. (“TERRA”) which merged with TESAU on 30 June
2006 and 7 July 2006 respectively (see below).
(12) Telefónica S.A., TESAU, TERRA and TDATA have formed a single economic entity
during the entire period under investigation (see Section VIII below).
(13) Telefónica S.A. is the parent company of the Telefónica group, Spain’s former state
telecommunications monopoly. Before the full liberalisation of telecommunications
markets in 1998, Telefónica was owned by the Spanish State and enjoyed a legal
monopoly in the retail provision of fixed-line telecommunications services. At present,
it operates the only nation-wide fixed telephone network in Spain.
(14)
In addition to Spain, the Telefónica group has a strong presence in Latin America
where it operates in thirteen countries. It is also present in other EU Member States, in
particular in Germany, UK, Ireland, Slovakia and in the Czech Republic.
(15) The worldwide revenues of the Telefónica group were € 52.9 billion in 20064.
(16) Telefónica is the largest telecommunications company in Spain, commanding
leadership positions in almost all the telecommunications markets. The importance of
Telefónica as a group is reflected by the fact that in 2005, it accounted for 52% of all
revenue generated by the Spanish telecommunications sector5.
(17)
In 2005, Telefónica had a market share (in terms of revenue) of 78.6% for fixed
telephony6 and 52% for mobile telephony7. Due to its extensive network and its
advantageous market position as incumbent, Telefónica has very large shares of the
markets for leased lines, wholesale broadband access8 and other sales of network
capacity.
(18) Telefónica is currently present in the Spanish broadband markets through TESAU, a
100% owned subsidiary of Telefónica whose primary activity is the operation of fixed
telephony and broadband services in Spain. TESAU is a vertically integrated operator
providing wholesale broadband services since 1999 and retail broadband services
since 2001.
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Telefónica Trimestral Report December 2006, p. 7.
Annual Report 2005 of the Comisión del Mercado de las Telecomunicaciones (the “CMT”), the Spanish
national regulatory authority for telecommunications.
CMT 2005 Report, p. 304
CMT 2005 Report, p. 74
See section V.C below.
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