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) designated JSC „Moldtelecom” as a provider with significant market power on one more relevant market – the one for end users’ access to the public telephone network at a fixed location. The Decision was approved in a public session of ANRCETI Administrative Board and published in the Official Gazette on June 3, 2011.

The given market is the only retail market identified by the Agency as susceptible to ex-ante regulation and was subject to detailed analysis (doc. in state language), which finally proved lack of competition and existence of significant market power of the incumbent JSC „Moldtelecom” on this market. Previously, the Agency, on basis of market analysis, designated JSC „Moldtelecom” as having SMP on four wholesale markets (call termination in individual fixed and mobile networks, access to network infrastructure and broadband access) and imposed remedies to prevent the use of SMP to the detriment of competition.

The market concerned comprises services of access to public telephone networks at fixed locations via analogue lines, ISDN PRI and BRI lines, broadband VoIP and access services at fixed locations provided by public mobile network providers (CDMA fixed). The detailed analysis of this market showed that the incumbent JSC „Moldtelecom” has 96,8% market share in terms of subscribers, the other 16 alternative together – 3,2%. The fact that over the past four years Moldtelecom reduced its market share by 1,1 percentage points does not indicate any share decrease, but stabilization.

The analysis conducted by the Agency describes the barriers to entry in this market, existing competition problems that may arise from the use by Moldtelecom of its significant market power, as well as the specific obligations to be imposed on this provider in order to eliminate the possible adverse effects on competition on this market. One of the main obligations that will be imposed Moldtelecom is admitting of no currently practiced dumping charges, cost orientation of tariffs applied for services of access to the public telephone network at fixed location.

The market analysis shows that JSC „Moldtelecom” provides local fixed telephony services below cost, subsidizing them at the expense of applying to higher tariffs for international call termination services. In 2010, the revenues of JSC „Moldtelecom” from sales of local telephone services covered 55% of the costs incurred for the provision of these services. Under these circumstances, alternative providers are placed in an uncompetitive situation, being forced to reproduce the rates below cost charged by JSC „Moldtelecom”.

The Agency believes that the application by Moldtelecom of rates below cost is a destabilizing factor in the market, which has the effect of limiting the market access for new providers and the competition on that market and adjacent markets. To overcome this situation the Agency will require that JSC „Moldtelecom” not admit of tariffs under cost, which are implied by the provision of retail services and their cross-subsidization from high tariffs for wholesale services.

ANRCETI Administrative Board delivered its decision to JSC „Moldtelecom” and to the National Competition Protection Authority, the latter having to include this provider, within 10 days, in the List of Economic with dominant position on relevant electronic communications markets. According to the legislation in force, upon the expiry of this term, ANRCETI will have the right to adopt a decision on imposing special ex-ante obligations on JSC „Moldtelecom” due to the company’s SMP on the mentioned market. These obligations are intended to help resolve the existing competition problems on that market and prevent the risks of market distortion.

June 7, 2011