Today the European Commission issued a recommendation for Germany on the fixed termination rates (FTRs), as the German regulator's BNetzA's proposed rates were not in line with the EU telecoms regulatory framework.
BNetzA proposed to base FTRs for Deutsche Telekom on an international benchmarking approach despite having developed a cost model in line with the EU regulatory framework. The proposed rates would result in FTRs being over six times higher than the level based on DT's efficient costs, resulting in significantly higher prices for German and EU consumers (calling to Germany).
The Body of European regulators (BEREC) expressed its full support for the Commission's position.
Following a three-month in-depth investigation, the Commission supported by the Body of European regulators (BEREC), now requests BNetzA to withdraw its proposal or to amend it in order to bring the FTRs for Deutsche Telekom for the period of January 2017 until December 2018 in line with the EU telecom rules. BNetzA is asked to communicate its decision to the Commission by 23 July 2017.
Background
Termination rates are the rates telecoms networks charge each other to deliver calls between networks, and each operator has market power over access to customers on its own network. These costs are ultimately included in call prices to the detriment of consumers and business.
BNetzA had first calculated the FTRs for Deutsche Telekom according to its own pure BU-LRIC model developed in line with the Commission Termination Rates Recommendation. However, as the rates coming from its own model proved to be significantly below the average of the other Member States which applied pure BU-LRIC, BNetzA later decided to apply an EU benchmark. BNetzA's benchmarking approach used as the relevant benchmark those Member States which apply the recommended pure BU-LRIC cost model.
In light of low rates resulting from BNetzA's pure BU-LRIC model the Commission – when opening the in-depth investigation – invited BNetzA to assess whether the used parameters in its model are, indeed, comparable to those used in other MS. However, during the in-depth investigation, BNetzA underlined the correctness of its model and remained committed to set FTRs based on an EU benchmark approach.
As a result BNetzA's proposal, if adopted, would allow the operators in Germany to charge FTRs over six times higher than the rates calculated with BNetzA's own pure BU-LRIC model, which calculates the efficient costs of such services in Germany. BNetzA justified this adjustment with the objective to harmonise termination rates at EU level and reduce the difference between individual rates in the different MS in order to contribute to the development of the internal market. The objective of the Termination Rates Recommendation, however, is not to harmonise the absolute level of termination rates in the EU, but to ensure a consistency in the approach and methodology to set such rates. The Commission's recommendation is not aimed at restricting NRAs ability to set lower prices if they reflect the true costs of an efficient operator and, thus, best simulate and "as-if-competition" price.
In the past, the European Commission and BEREC have requested the German telecoms regulator to set fixed termination rates based on the recommended BU-LRIC methodology. In its previous decision in 2016, BNetzA proposed to change its costing methodology and to set the fixed termination rates on the basis of the BU-LRIC methodology; the Commission made no comments on that notification. However now, BNetzA has notified its decision, in which it proposes to approve the fixed termination rates significantly above the results of BNetzA's own BU-LRIC model results.