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The FCA published a memorandum of the principles it applies when it evaluates alleged abuse of dominance in the broadband market. The memorandum is expected to help companies offering broadband services in the fixed line network, in particular, to evaluate their pricing and other practices from the viewpoint of competition law.
The evaluation principles are based on the Elisa Plc decision made by the FCA in May 2009. Elisa changed the pricing of its wholesale broadband products following an intervention by the FCA in the pricing principles applied by the company, spurred by the complaints lodged with the office. There are other similar cases pending at the FCA.
Evaluation criteria of price squeeze
A typical way to restrict competition in the broadband market is a so-called price squeeze, i.e. a procedure whereby a vertically integrated company operating on several production levels weakens the position of its competitors in the downstream market by charging an excessive price for the upstream product. The price squeeze is considered to be unreasonable pricing as prescribed in the competition law.
The FCA evaluates price squeeze allegations on the basis of information regarding the cost and price information on wholesale DSL products presented by the operators. It is for example investigated whether a company equally efficient as the local operator could operate profitably with the corresponding cost and price structure.
The FCA stresses in its memorandum that, in the end, the price squeeze is assessed on a case-by-case basis on the basis of evidence presented and accounts provided. In some situations, a-case-by-case evaluation may therefore differ from the principles presented in the memorandum.
Market entry cannot be restricted unlawfully
According to the market report on the telecommunications sector published by the European Commission in March 2009, the Finnish problem is the lack of competition in the broadband market. The local incumbents' fixed broadband market share is roughly 65 per cent in their traditional operating areas, which is well over the EU average.
Efficient competition in the incumbent's traditional operating area requires that the competitors may lease from the owner of the fixed line network both bitstream and the local loop governed by the local incumbent.
Further information:
Assistant Director Timo Mattila, tel. +358 9 7314 3332;
Head of Research Valtteri Virtanen, tel. +358 9 7314 3621 and
Senior Research Officer Heidi Zeus, tel. +358 9 7314 3366.
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