28 September 05: Irish Electronic Communications Appeal Panel overturns regulator’s finding that Hutchison 3G has significant market power in voice call.
The Irish Electronic Communications Appeal Panel has overturned the finding by the Commission for Communications Regulation (ComReg) that Hutchison 3G (H3G) has “significant market power” (SMP) in voice call termination in Ireland. The European Commission’s electronic communications regime allows national regulatory authorities to regulate mobile termination rates if an operator is found to possess SMP. This requires that the mobile operator not be constrained by the "countervailing buyer power" of incumbent operators. The claim that the incumbent fixed-line operator in Ireland, eircom, possessed significant countervailing buyer power was dismissed by ComReg because of its obligation to interconnect with other networks. ComReg argued that eircom’s legal obligation to complete all calls made on its network eliminated any countervailing buyer power that it might otherwise have had, and this meant that H3G was free to set its termination rates at whatever level it wished.
ComReg’s analysis was shown to be erroneous in the paper by Ken Binmore and David Harbord "Bargaining Over Fixed-to-Mobile Termination Rates: Countervailing Buyer Power as a Constraint on Monopoly Power” (forthcoming in the Journal of Competition Law and Economics), a version of which was submitted to the Irish Appeal Panel. Binmore and Harbord analysed bargaining over fixed-to-mobile termination rates and demonstrated that the existence of an interconnectivity obligation was entirely consistent with new entrants such as Hutchison 3G having no market power at all in pricing call termination on their own networks. This conclusion was accepted by the panel and their independent bargaining theory expert, Professor Abhinay Muthoo. Since ComReg had failed to undertake a satisfactory analysis of the bargaining issues involved in negotiating interconnection agreements between a small number of operators, the Appeal Panel annulled the finding of SMP against H3G.
The paper by Binmore and Harbord may be downloaded on the Topical Articles section of our website. For further information on H3G’s Irish appeal and the Panel’s decision see http://www.ecap.ie. A similar appeal in Britain against Ofcom’s finding of SMP against H3G was heard by the Competition Appeal Tribunal in May 2005, and a decision is expected in October. For further information see http://www.catribunal.org.uk.