Broadband Bullying Banned
First, it was France Télécom and Deutsche Telekom. Now, it’s Telefónica. The European Union has levied one of the largest fines ever – 152 million euros – against Spanish telecom operator Telefónica for allegedly engaging in a “margin squeeze” in the Spanish broadband Internet access market, thus impeding competition. Telefónica is expected to appeal the decision at the European Court of Justice in Luxembourg.
“Let me be perfectly clear – I will not allow dominant companies to use their market power to close down markets that the European Union has opened,” Neelie Kroes, European Commissioner for Competition Policy, stated during the press conference held to announce the fine. “Telefónica’s conduct harmed Spanish consumers, Spanish businesses and the Spanish economy as a whole, and by extension Europe’s economy.
“The fact is that small businesses and consumers in Spain are paying about 20% more than the EU-15 average for high-speed Internet access,” Kroes continued. “Many have chosen not to pay that price: Spain has a broadband penetration rate below the EU average. Consumers have been put off from exploring the new services that broadband Internet allows.”
In February 2006, the European Commission opened formal proceedings against Telefónica. Since 2001, the European Union holds, Telefónica has been abusing its dominant market position in violation of Article 82 of the EC Treaty. An EU assessment revealed that Telefónica allegedly charged artificially high wholesale prices for broadband Internet access, leaving competitors with an insufficient margin to compete for retail subscribers.
Telefónica is the only Spanish network operator with nationwide coverage. Competitors have two options: building a network or purchasing wholesale access from Telefónica. Spanish telecom regulators, meanwhile, reportedly deemed Telefónica prices adequate. By levying this fine, the European Union clearly imposes its law over the national decision. The European Union has already imposed fines of 10.4 million euros on France Télécom and 12.6 million euros on Deutsche Telekom.