Update 13 Feb 2012: Today, the European Commission triggered the Article 7(a)1 procedure, in which it formally expresses serious doubts concerning the Danish NRA’s proposal to apply the same wholesale SMS termination charge rules for LycaMobile (a new MVNO in Denmark) as to the existing Danish MNOs and MVNOs. The substance of the case relates to the fact that the Danish NRA proposes wholesale price-cap regulation applicable to domestic wholesale SMS termination rates, but not to wholesale international SMS termination rates. The European Commission is clearly invoking its new powers over proposed regulatory remedies. The text of today’s European Commission press release can be accessed by clicking here. We will update this T-REGS news item as the official documents become available.

Update 15 Dec 2010: On 14 Dec 2010, the Polish regulatory authority UKE published its final decisions on SMS regulation, applicable immediately to: Polskiej Telefonii Komórkowej Centertel sp. z o.o., Polkomtela SA, Polskiej Telefonii Cyfrowej sp. z o.o., P4 sp. z o.o. and Cyfrowego Polsatu SA.
The full text of the decisions can be accessed (in Polish only) by clicking here.

Update 4 Oct 2010: The European Commission has now published its comments letter (officially dated 24 Sep 2010) on the draft measures put forward by the Polish regulatory authority UKE. The European Commission does not dispute the market definition and SMP assessment, but insists on all Polish MNOs and MVNOs being subject to the same symmetrical obligation. With regard to wholesale price control, the European Commission makes the following comment:

“In its notified draft measure UKE proposes a price control by obliging the M(V)NOs to charge cost oriented prices. UKE does not propose to impose a price cap. Nevertheless, UKE refers to the price level of PLN 0.05 (approx. EUR 0.012), and considers that this price level would be “justified in view of the identified competition problems”. According to UKE’s explanations contained in the response to the request for information, it will be up to the operators to set cost oriented prices and prove the appropriate level of costs, which will be subsequently assessed by the NRA. Further, according to its preliminary calculations, UKE considers that the real cost of SMS termination is in the range of PLN 0.01, but setting the price cap at such a low level would not be appropriate, as the decrease from the current levels would be too harsh.

The Commission notes that in this regard UKE’s proposed measure seems to be contradictory: UKE would impose a cost oriented price (preliminarily calculated at PLN 0.01) and at the same time consider that the price level of PLN 0.05 is “justified and appropriate” arguing that the cost oriented price will have adverse effects on the market.

The Commission considers that such price obligation lacks clarity, and appears to be difficult to implement in view of a 400% difference between the “cost oriented” and the “justified and appropriate” price level. The Commission would like to urge UKE to ensure clarity and predictability for market players for example by way of using an appropriate glide-path with a view to arrive at cost-oriented prices without undue delay. Furthermore, UKE should ensure symmetrical termination rates as soon as possible, and not allow different termination rates beyond the necessary time frame.”

The full text (in English) of the European Commission’s comments letter is availableby clicking here.

Update 30 Aug 2010: On 27 Aug 2010, the Polish regulatory authority UKE issued new draft decisions on regulation of wholesale SMS termination, subject to public consultation until 27 Sep 2010. UKE puts forward in these draft decisions that the mobile network operators each individually have significant market power for wholesale SMS termination, and puts forward regulatory obligations, but defers (in Section 7.4.4 of the documents) the determination/approval of a maximum wholesale charge to a separate decision. The draft UKE decision regarding PTK Centertel is available by clicking here (text in Polish language only).

Update 11 Aug 2010: Today, the Polish regulatory authority UKE withdrew its notified draft measures on regulation of wholesale SMS termination rates, without stating a reason.

Today, France’s regulatory authority ARCEP issued its decision to regulate wholesale SMS termination rates down to +/- 2 eurocent per SMS MT by 1 Oct 2010, with an intermediate step in 2011, and then down to 1 eurocent per SMS MT for all French mainland mobile network operators by 1 July 2012.


ARCEP relies on a cost-accounting methodology it describes as ‘coûts complets distribués’ (which shows 0.4 eurocent per SMS MT in 2009, but allows for some additional wholesale commercialization costs), and in fact relies strongly on commercial agreements already reached by the French mobile network operators (MNOs), given that ARCEP validates the 2.17c temporary asymmetry for Bouygues Telecom, which was agreed by the two other MNOs, Orange France and SFR.

The ARCEP decision follows the publication (which also occurred today) of the European Commission Article 7 comments letter, dated 16 July 2010 (of great interest and briefly discussed below).

Draft decisions from Denmark’s ITST and Poland’s UKE are in the short-term pipeline.

Denmark’s ITST is proposing (although its LRAIC cost model shows a 2010 value of 2 øre per SMS MT), an immediate imposition of a wholesale price-cap on all MNOs (and on an MVNO) set at 16 øre per SMS MT, which amounts to 2.145 eurocent per SMS MT for 2010. A key argument invoked by ITST to refrain from immediately reducing wholesale SMS termination further is to avoid SMS spam (while ARCEP just issued a decision including evidence that SMS spam, which it has considered, results rather from flat-rate retail offers than from wholesale SMS interconnection, including with SMS aggregators that are not MNOs).

Poland’s UKE is proposing to impose ‘non-excessive pricing’ symmetrically on all mobile network operators, set at PLN 0.05 which amounts to 1.238 eurocent per SMS MT (although its cost assessment shows a value ‘strongly below 0.01 PLN’).

Today’s ARCEP decision is of interest for at least two other key reasons:

a)      ARCEP has included a ‘reciprocity clause’, implying that foreign MNOs would only be entitled to the regulated French wholesale SMS MT rates IF they agree to apply reciprocally the same rate as the French regulated wholesale rates for SMS MT. The European Commission commented that this may not conform to EU law, and may hamper the development of the internal market for SMS services. ARCEP’s final decision, Section 5.7.2 (pages 102-104) rejects the European Commission’s arguments, and indeed states that NOT imposing the ‘reciprocity clause’ would distort the internal market to the detriment of French operators (estimated prejudice is €26m/year), and invokes Art 8.2 b) of the Framework Directive 2002/21/EC (NRAs mandate to ensure that there is no distortion or restriction of competition in the electronic communications sector) to justify its measure, i.e. that the market is NOT distorted or restricted against French MNOs.

b)      Beneficiaries from ARCEP’s measures on wholesale SMS termination explicitly include authorised operators that are not MNOs, including fixed operators, SMS aggregators, etc. who enter into wholesale access/interconnection agreements with the French MNOs. The European Commission explicitly did not question that the termination of ‘SMS Push’ services (e.g. those processed by SMS aggregators) is part of the relevant markets for SMS termination. However, the European Commission commented that (further) penetration of (Internet-enabled) smartphones among the population may influence the competitive dynamics of wholesale SMS termination (more so for services facilitated by SMS aggregators than for interpersonal SMS, with explicit reference only to mobile e-mail), potentially reducing the impact of the calling party pays principle for wholesale SMS termination. ARCEP agreed to the European Commission’s invitation to closely monitor ‘the delivery of content onto mobile devices which may lead ARCEP to no longer include the wholesale termination services for Push SMS services in the relevant market for wholesale SMS termination and to consider removing regulation’. T-REGS Note: the European Commission’s comments letter makes no mention of interpersonal Internet-based Instant Messaging (IM) on mobile devices, whereas ARCEP indicates that 24.1% of French mainland mobile users make use of mobile IM.

The following documents are directly relevant to this T-REGS news item:

ARCEP final decision on wholesale SMS termination (available only in French)

European Commission comments letter on ARCEP draft decision wholesale SMS termination (English)

Denmark ITST draft decision on wholesale SMS termination (available only in Danish)

Poland UKE draft decision on wholesale SMS termination (available only in Polish) – PTK Centertel draft decision; other decisions available separately

For a discussion of wholesale SMS termination developments, please contact Yves Blondeel