National Regulatory Agency for Electronic Communications and Information Technology of the Republic of Moldova

The National Regulatory Agency for Electronic Communications and Information Technology (ANRCETI - www.anrceti.md) is announcing of its intent, within 2 - 3 months, to complete the legal procedure of designating Moldtelecom as a provider with significant market power on the market for end-user access to the public telephone network at a fixed location, after which they will review and approve, in consultation with the Government, the tariffs for fixed telephone services provided by this supplier to end users – natural persons.

This procedure is established by the Law on Electronic Communications No. 241-XVI of 15.11.2007, in force since 15.03.2008, which provides for identification of relevant markets, designation of providers with significant market power and enforcing remedies for the problems identified as a result of market analysis. Currently, the Agency is making the analysis of the market for end-user access to the public telephone network at a fixed location (retail market) and the detailed analysis of the given market in order to designate the provider with significant market power on this market. The Administrative Board of the Agency intends to approve the decision of designating significant power, in compliance with all legal proceedings, by May 2011.

In 2010, the Agency analyzed and identified six (retail) markets out of the ten which it had defined as susceptible to ex-ante regulation. The Agency also designated, based on detailed analysis, the providers with significant market power on four markets and imposed special ex-ante obligations for providers designated as having significant market power, including for JSC „Moldtelecom”, on two markets: voice call termination in individual fixed telephone networks (17 providers) and in individual mobile telephone networks (3 providers). In the timeframe March - April 2011, the Agency will approve special ex-ante obligations for JSC “Moldtelecom” due to its significant market power on two other wholesale markets: for access to network infrastructure at a fixed location and broadband access.

The Agency followed the procedure of wholesale market analysis pursuant to the provisions of the Law on Electronic Communications, requiring that ANRCETI impose special ex-ante obligations on the market for end users’ access to the public telephone network at a fixed location (retail market) after imposing special ex-ante obligations on wholesale markets and where the latter are not sufficient to solve retail market problems for a short time. This approach corresponds to the European directives and practices applied in electronic communications. The wholesale markets of this sector comprises the markets of call termination, transit and origination in/from an individual telephone network, as well as the markets for access to network infrastructure and associated facilities, provision of leased line service, terminal segments and trunks, which directly influence the competition on retail market.

In determining the measures to be taken by the Agency, as a result of designation of JSC Moldtelecom as a provider with significant market power on the market for end-users’ access to the public telephone network at a fixed location, the Agency will follow the existing legislation, which requires that the tariffs must be non-discriminatory, reasonable and cost-based. The Agency believes that these measures should boost the development of fixed telephony market, competition and attract new investment in the sector, factors which will bring long-term benefits to the consumers of these services.

According to legislation, the Agency may approve the tariffs for fixed telephone services provided by Moldtelecom to end users - natural persons, only if it is designated by ANRCETI as having significant market power on a relevant market or if its dominant position in the relevant market is established by the National Agency for Competition Protection (ANPC). In July 2007, ANPC established the dominant position of JSC Moldtelecom on the market for local fixed long-distance and international telephone services, on the territory of Moldova. But, in January 2011, the ANPC took another decision by which it canceled the previous one. In this situation ANRCETI had no legal grounds to intervene in the process of setting and implementing the new tariffs for telephone services by JSC Moldtelecom.

However, the Agency keeps to its opinion that it is necessary to gradually implement cost-oriented tariffs for fixed telephony services provided by JSC Moldtelecom and eliminate the practice of cross-subsidization of local telephone services from other services provided by this company, a practice prohibited by legislation. Thus, in recent years the revenue of JSC Moldtelecom from local telephone services cover only 55% of the costs incurred by this operators in providing these services, and the deficit of 45% is subsidized from the revenues from international calls and interconnection with other operators.

In 2002, in order to prepare for full liberalization of the telecommunications market, the Agency approved, in consultation with the Government, the tariff rebalancing plan for the basic public services provided by JSC Moldtelecom. Only two stages out of the four intended according to the plan were implemented: first - on 1 February 2003, and the second - 1 February 2004. In 2005 and 2006, then in 2009 and 2010, new draft tariff rebalancing proposals for fixed telephony services provided by Moldtelecom, were submitted to the Government for consultation, but the Agency was advised to delay their consultation for other time. Under these circumstances, JSC Moldtelecom continues the practice of cross subsidization of services, maintaining low tariffs for retail services and high tariffs for wholesale, factors that cause stagnation of fixed telephony market, blocks the competition and leads to poor development of broadband market.

March 1, 2011