guideline on dominant position in a communications market

8/17/2019 Guideline on Dominant Position in a Communications Market

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MALAYSIAN COMMUNICATIONS AND MULTIMEDIA COMMISSION

GUIDELINE ON DOMINANT POSITION IN ACOMMUNICATIONS MARKET

RG/DP/1/00(1)


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Competition Guie!ine"

Pursuant to section 134 and section 138 of the Communications and Multimedia Act1998 (the CMA), the Malaysian Communications & Multimedia Commission haspulished !uidelines on "#ominant Position in a Communications Mar$et% and"ustantial 'essenin of Competition in a Communications Mar$et%

*hese !uidelines +ent throuh a fifty day pulic consultation process commencinon 1 Auust 1999, +herey the pulic +as in-ited to i-e their comments on thedraft !uidelines *he draft !uidelines +ere made a-ailale in hard copy as +ell ason the Commission.s +esite

A total of fi-e +ritten sumissions +ere recei-ed from the follo+in parties / *ele$omMalaysia 0erhad, aid 2rahim & Co, Mais Communications 0hd & #i!i*elecommunications dn 0hd (oint sumission), *2M5 *elecommunications dn0hd and A2M dn 0hd (-ia email)

*he responses recei-ed pro-ed insihtful and useful and the Commissionappreciates the effort made and interest sho+n y the respondents

2t is the Commission.s intention to update these !uidelines from time to timefollo+in appropriate consultation +ith industry, and ta$in into accountde-elopments in the communications and multimedia sector as +ell as theCommission.s eperience in enforcin the CMA


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GUIDELINE ON DOMINANT POSITION IN A COMMUNICATIONS MARKET

TA#LE O$ CONTENTS

p%

1& O'eti*e 1

+& Int,oution 1

-& Le%i"!.ti*e ontet +

& Po!i ontet +

2& Po!i o'eti*e" 3o, t4e ete,min.tion o3 omin.nt po"ition

5& P,opo"e .n.!ti.! p,oe"" 2

61 #efine the contet 6

6 Communications mar$et definition 7

63 Assessment of a "dominant position% 8

6& A""e""ment o3 . Domin.nt Po"ition 7

71 "Position% 9

7 *he nature of a "dominant position% 9

73 0eha-ioural criteria associated +ith a "dominant position% 11

Pricin eha-iour 1

upply eha-iour 13

2mportance of independence 14

74 tructural criteria associated +ith a "dominant position% 14

*he distriution of mar$et share and the le-el of mar$et 14concentration

*he le-el of -ertical interation in the mar$et 1

*he etent of arriers to entry 1

!loal technoloy and commercial trends 16

*he deree of product or ser-ice differentiation and 17sales promotion

7 5ffecti-e date 17


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Li"t o3 E4i'it"

E4i'it 1 P,opo"e .n.!ti.! 3,.me8o,9 3o, ete,minin% 5omin.nt po"ition

E4i'it + M.,9et .n "e,*ie" "t,utu,e" in t4e on*e,%ene :"eto,


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Guideline: Dominant Position

GUIDELINE ON DOMINANT POSITION

1& O'eti*e

*he Malaysian Communications and Multimedia Commission ("theCommission%) has prepared this uideline under section 138 in order to clarifyho+ it +ill apply the test of "dominant position in a communications mar$et% toa licensee for the purposes of administerin the Communications and Multimedia Act 1998 ("the Act%) *his uideline should e read in conunction+ith the uideline pulished y the Commission concernin sustantiallessenin of competition

+& Int,oution

1 ection 138 of the Communications and Multimedia Act 1998 ("the Act%)states that the Commission may pulish uidelines +hich clarify ho+ it +illapply the test of "dominant position% to a licensee 2t sets out the factors+hich the Commission considers +ill most enerally e rele-ant to ma$in adetermination under section 137

*he oect of this uideline is to pro-ide an analytical tool to e used in theperformance of the Commission.s functions under section 137 ection 137of the Act states/

“ 137. The Commission may determine that a licensee is in a dominant position in a communications market.

*he uideline is intended to pro-ide insiht to mar$et participants on theCommission.s approach to eercisin its po+ers and responsiilitiesconcernin the determination of +hether a licensee is in a dominant position

3 ection 138 of the Act states/

“ 138. !1" The Commission may pu#lish $uidelines %hich clari&y ho% it %ill apply the test o& “dominant position to a licensee.

!'" The $uidelines may speci&y the matters %hich the Commissionmay take into account( includin$: )

!a" the rele*ant economic market+

!#" $lo#al technolo$y and commercial trends a&&ectin$ market po%er+

!c" the market share o& the licensee+

!d" the licensee,s po%er to make independent rate settin$decisions+

!e" the de$ree o& product or ser*ice di&&erentiation and sales promotion in the market+ and

-GDP1//!1" Malaysian Communications 0 Multimedia Commission 1


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!&" any other matters %hich the Commission is satis&ied are rele*ant.

4 ection 138 does not re:uire the Commission to present an ehausti-e list of the factors +hich it +ill consider rele-ant, or of the approaches it +ill adopt indeterminin +hether a licensee is in a dominant position in a communicationsmar$et 2n ma$in such a determination, the Commission +ill form a -ie+ inood faith and on reasonale rounds *he Commission +ill ha-e reard tothis uideline, ut +ill not e limited y it if the Commission forms the -ie+that other factors may also e rele-ant to its determination

-& Le%i"!.ti*e Contet

31 *he test of "dominant position% is important ecause it is a precondition of theCommission.s po+er to ta$e action under section 139 *his section enales

the Commission to direct a licensee to cease any conduct in acommunications mar$et +hich has the effect of sustantially lessenincompetition

3 *his uideline deals +ith the analytical procedure for determinin +hether alicensee is in a dominant position in a communications mar$et

33 *here is no asis in the Act for any presumption that any licensee is in adominant position in any communications mar$et *he Commission.s initialpresumption +hen decidin to ma$e a determination under section 138 is thata licensee shall not e considered in a dominant position unless other+isedemonstrated *his +ill e the case +hether the Commission is decidin

+hether to ma$e an oriinal determination that a licensee is in a dominantposition, or is decidin +hether to re-o$e an earlier determination that alicensee is in a dominant position

34 *he concept of "dominant position% has many antecedents in other urisdictions +hich may pro-ide useful uidance ;o+e-er, in applyin thecon-erence mar$et definition +hich underpins the Act and the national policyoecti-es, forein eperience +ill e useful, ut cannot e rearded asdefiniti-e / particularly +here it reflects a "pre/con-erence% mar$et definitionconfined to the telecommunications sector

3 Malaysia.s con-erence reulatory frame+or$ emodied in the Act is

desined to encourae the merin of mar$ets and to enale effecti-ecompetition *he Commission +ill ha-e due reard to that oal +hen ma$ina determination on +hether a licensee is in a dominant position *he issuesraised y these considerations are addressed more fully elo+

& Po!i Contet

41 Policy oecti-es

*he Act is desined to achie-e certain policy oects +hich are set out insection 3 *he Commission must ha-e reard to these oects in theimplementation of the Act ection 3 states/

-GDP1//!1" Malaysian Communications 0 Multimedia Commission


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“ 3. !1" The o#ects o& this Act are )

!a" to promote national policy o#ecti*es &or thecommunications and multimedia industry+

!#" to esta#lish a licensin$ and re$ulatory &rame%ork insupport o& national policy o#ecti*es &or thecommunications and multimedia industry+

!c" to esta#lish the po%ers and &unctions o& the MalaysianCommunications and Multimedia Commission+ and

!d" to esta#lish po%ers and procedures &or theadministration o& this Act.

!'" The national policy o#ecti*es &or the communications and multimedia industry are )

!a" to esta#lish Malaysia as a maor $lo#al centre and hu#&or communications and multimedia in&ormation and content ser*ices+

!#" to promote a ci*il society %here in&ormation)#asedser*ices %ill pro*ide the #asis o& continuin$ enhancements to 2uality or %ork and li&e+

!c" to $ro% and nurture local in&ormation resources andcultural representation that &acilitate the national identity and $lo#al di*ersity+

!d" to re$ulate &or the lon$)term #ene&it o& the end user+

!e" to promote a hi$h le*el o& consumer con&idence inser*ice deli*ery &rom the industry+

!&" to ensure an e2uita#le pro*ision o& a&&orda#le ser*iceso*er u#i2uitous national in&rastructure+

!$" to create a ro#ust applications en*ironment &or end users+

!h" to &acilitate the e&&icient allocation o& resources such asskilled la#our( capital( kno%led$e and national assets+

!i" to promote the de*elopment o& capa#ilities and skills%ithin Malaysia,s con*er$ence industries+ and

!" to ensure in&ormation security and net%ork relia#ility and inte$rity.

4 *he 5planatory tatement to the 0ill, sets out specific oecti-es for theeconomic reulation in Part


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• to promote consumer mar$ets +hich offer choice, :uality and

affordaility=

• to promote any/to/any connecti-ity for net+or$ ser-ices used for

communications et+een end users=

•to promote competition in all communications mar$ets= and

• to promote in-estment and inno-ation in net+or$ facilities,

net+or$ ser-ices and applications ser-ices, and their efficientutilisation

43 2n addition, the 5planatory tatement sets out a numer of oals for theadministration of Chapter of Part


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sustantially lessenin competition *his "effect% test sets a different trier for Commission inter-ention than the "purpose% test of section 133 *heCommission therefore need not pro-e the intention of the dominant licensee*his test is needed to address the reater potential for a dominant licensee toinflict harm upon the etent of competition in the mar$etplace, e-en +heresuch harm is unintentional

2n this situation, only direct reulatory inter-ention can protect the interests of end users and ensure the ultimate de-elopment of competiti-e mar$ets *heCommission +ill eercise its po+er to determine the dominant position of alicensee in a mar$et +here it considers that such inter-ention is li$ely tofacilitate the achie-ement of the oects of the Act, particularly the oecti-e of competiti-e communications mar$ets

6 As a dominant position is eroded y the comination of reulatory inter-entionand competiti-e ri-alry, it +ill e appropriate for the Commission to re/eamine the rele-ance of a determination of a dominant position *his +ill

occur y means of the re-ocation of the oriinal determination of a dominantposition under section 6 of the Act

5& P,opo"e .n.!ti.! p,oe""

*he Commission proposes to adopt the follo+in three/step approach indeterminin +hether a licensee is in a dominant position in a communicationsmar$et *his approach +ill pro-ide clarity and transparency to the process of determination, and ensure consistency in the consideration of issues relatedto the dominant position of a licensee 2t is to e noted that this process asdefined is intended as a conceptual and analytical frame+or$ +ithin +hich

e-idence can e oranised >hile it identifies areas of e-idence +hich arerele-ant to the case in :uestion, the Commission may e constrained y theetent of e-idence a-ailale *he oecti-es and details of this process areillustrated in the 5hiit 1

E4i'it 1; P,opo"e An.!ti.! $,.me8o,9 $o, Dete,minin% Domin.nt Po"ition

#efine the

Conte3t Assessment of

#ominant Position

O'(e)ti*e 5nsure that the Commission

has appropriate po+ers to act)

#etermine +hether the

licensee is in a dominant

position in the rele-ant mar$et)

#efine the

Mar$et

#efine the oundaries of

the rele-ant

communications mar$et)

P,o)e"" 2dentify the circumstances

+hich initiated the

assessment)

2dentify the licensee most li$ely to

e in a dominant position

2dentify the $ey sta$eholders in the

process)

Ma$e initial assessment of the

li$elihood that the licensee is in a

dominant position)

Assess the eha-ioural

features of the mar$et as set

out in the (uideline for

e-idence of dominance)

Assess the structural

features of the mar$et as set

out in the (uideline for

e-idence of dominance)

Ma$e final assessment of

+hether the licensee is in a

dominant position)

2dentify all demand

sustitutes for the product

or ser-ice)

2dentify all supply

sustitutes for the product

or ser-ice)

#etermine the rele-ant

product mar$et)


(eo(raphical mar$et)


temporal mar$et)

-GDP1//!1" Malaysian Communications 0 Multimedia Commission


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61 #efine the Contet

a *his step re:uires an initial assessment of the rele-ance of the"dominant position% criteria to the issue or situation at hand, prior toconductin a full assessment under section 137 *he Commission +illconsider matters such as the purported importance of the issue or situation, the circumstances in +hich it has arisen (includin +hether acomplaint has een made, and y +hom), the li$elihood thatCommission inter-ention is re:uired to address it, and the li$elihoodthat the enefits of inter-ention +ill out+eih the costs

*he determination of +hether a licensee is dominant in acommunications mar$et arises only in the contet of section 139,althouh a rane of conse:uences may flo+ from such a

determination in other sections

c *he matters that the Commission +ill consider +hen definin thecontet for a process of determinin +hether a licensee is dominantinclude/

• the initial li$elihood that the licensee +ill e found to e in

a dominant position=

• +hether any person has informed the Commission of any

loss or damae alleedly due to conduct y a dominantlicensee=

• +hether such conduct has ceased or is continuin, and

+hether the conduct is li$ely or unli$ely to recur=

• +hether the rele-ant mar$et is sinificant from the

perspecti-e of the oects of the Act=

• +hether the li$ely enefits of Commission inter-ention

out+eih the li$ely costs of inter-ention= and

• +hether the licensee is +illin to i-e an appropriate

underta$in reardin its conduct in the mar$et

d *he Commission may see$ an underta$in from a licensee rather thanproceed to a full determination of +hether the licensee is in adominant position in the rele-ant mar$et Any such underta$in +ill e

proportionate to the nature and effects of the conduct under eamination *he Commission +ill normally only consider such acourse if it is satisfied that an underta$in can address the issuesraised y the mar$et po+er of the licensee *he lodement of such anunderta$in +ould not pre-ent the Commission from ma$in asuse:uent determination that the licensee +as in a dominant positionin the rele-ant mar$et, ut this +ould normally only occur +here anunderta$in had not een met or if ne+ issues arose +hich theunderta$in did not address

6 Communications mar$et definition

a Assessin +hether a licensee is dominant in a communicationsmar$et crucially depends on the definition of the rele-ant mar$et As a



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asis for mar$et definition, the Commission +ill carefully identify therele-ant ser-ices +hich are echaned in that mar$et *hisidentification +ill include consideration of factors such as ser-icefunctionality, :uality, price, inputs, costs, and principal customer roups, all in the liht of the purpose to +hich the ser-ice is ein puty customers

*he Commission.s criteria for identification of a communicationsmar$et ha-e een etensi-ely discussed in the Commission.s!uideline on ustantial 'essenin of Competition *he Commission+ill ha-e reard to the -ie+ it de-eloped in that !uideline in identifyinmar$ets for the purpose of determinin +hether a licensee is in adominant position

c *he Commission notes that the Act defines a communications mar$etto e an economic mar$et for/

•a net+or$ ser-ice=

• an applications ser-ice=

• oods or ser-ices used in conunction +ith a net+or$

ser-ice or an applications ser-ice (e, tele-ision andtelephone e:uipment, or illin ser-ices)= or

• access to facilities used in conunction +ith a net+or$

ser-ice or an applications ser-ice

d A mar$et definition +ithin this frame+or$ reflects the emerence of net+or$ facilities, connecti-ity and applications mar$ets#etermination of mar$et oundaries in-ol-es the use of the economicconcept of "sustitutaility% as the asis for mar$et definition +ithin thedefinitional frame+or$ of the Act

e *he Commission shall ha-e reard to the +ider mar$et for ser-ices+hich are sustitutale (or potentially sustitutale) +ith net+or$edser-ices (e, postal ser-ices) *he relationship et+een theacti-ities under the Commission.s urisdiction (and therefore potentiallysuect to licensin) and the +ider ser-ices mar$ets +hich it shallha-e reard to, is illustrated in the 5hiit /



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E4i'it + M.,9et An Se,*ie St,utu,e" In T4e Con*e,%ene Seto,

NETTRANSPORT?

NET$UNCTION?

"u'"titut.'!e

"e,*i)e"traditional

financial,

education,

health,media

ser-ices

NET


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conduct, as +ell as actual conduct *he Commission is therefore of the -ie+ that the term "position% means "actual or potential position% A licensee need not e actually dominatin a mar$et or eercisin itsdominant position in order to e suect to section 139 2t need onlyha-e the aility to ta$e a dominant position for the pro-isions of the Act relatin to a dominant position to e applicale

*he Australian *elecommunications Authority (A*5') / the former telecommunications reulator adopted the same approach in itsMar$et #ominance !uidelines1

“A34T56 considers that 7in a position to, should #e ascri#ed the meanin$ o& either 7currently a#le to, or 7potentially a#le to,. A carrier there&ore does not need to #e actually dominatin$ amarket currently or takin$ ad*anta$e o& its dominant position.& the carrier has the a#ility( either currently or potentially( todominate the market( the pro*isions o& the

Telecommunications Act 1991 apply irrespecti*e o& the present actions o& the carrier.

c An eample of this miht e +here a licensee has a monopoly in animportant input mar$et to a communications mar$et, and has thepotential to eercise its monopoly po+er in that input mar$et to ta$e adominant position in the communications mar$et y -irtue of -erticalinteration of its operations in oth mar$ets 2n this case, the licenseemiht e uded to e in a dominant position in the communicationsmar$et, irrespecti-e of its actual mar$et share or actual independenceof action in that mar$et uch a udment y the Commission doesnot remo-e the re:uirement for the Commission to identify "conduct

+ith the effect of sustantial lessenin of competition in acommunications mar$et%, as re:uired under ection 137

7 *he nature of a "#ominant Position%

a *he primary characteristic of a firm in a dominant position in a mar$etis its aility to underta$e conduct to a sinificant etent independentlyof its competiti-e ri-als and its customers (+hether consumers or intermediate industry participants), and the pressures they +ould eerton the firm in a competiti-e mar$et *his independence enerallymanifests itself as the aility to independently fi prices, althouh itetends to the aility to fi le-els of output or the :uality of output +ith

similar disreard for the responses of ri-als and customers in themar$et

*his -ie+ of "dominant position% is enerally accepted in other urisdictions Bor eample, ;on on.s approach to the definition of a dominant position is set out in the competition pro-isions of theB*D licence as follo+s/

“A licensee is in a dominant position %hen( in the opinion o& the Authority( it is a#le to act %ithout si$ni&icant competiti*erestraint &rom its competitors and customers. n considerin$

1 Australian *elecommunications Authority, A34T56,s Market Dominance Guidelines(

1993



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%hether a licensee is dominant( the Authority %ill take intoaccount the market share o& the licensee( its po%er to make pricin$ and other decisions( the hei$ht o& #arriers to entry( thede$ree o& product di&&erentiation( and sales promotion( and other such rele*ant matters %hich are or may #e contained in$uidelines to #e issued #y the Authority.

c 2n its March 1997 !uidelines on the @peration of the Bair *radinCondition, the reulator @B*5' stated that/

“The standard test o& %hether a &irm is dominant is %hether it has the po%er to #eha*e to an apprecia#le etent independently o& its competitors and customers in terms o& pricin$ and other decisions.

d Apart from the aility to act independently of ri-als and customers,other characteristics of mar$et eha-iour +hich ha-e een associated

+ith dominant position include/

• the aility to pre-ent effecti-e competition (either no+ or

in the future)= and

• the aility to force ri-als to act in +ays they +ould not

ha-e independently chosen

e *his independence of conduct enerally sprins from structuralfeatures of the mar$et +hich pre-ent the emerence of sinificantri-als *hese structural features may ha-e a rane of effects +hichinclude/

• they may directly constrain the aility of ri-als to enter the

mar$et, e-en in the asence of any conduct y thelicensee=

• they may pro-ide the licensee +ith opportunities to dri-e

ri-als out of the mar$et= or

• they may pro-ide the licensee +ith opportunities to

influence or e-en control the conduct of its ri-als in themar$et

f An eamination of these structural features of the mar$et can pro-ideinsihts into +hether a licensee is in a dominant position in that

mar$et ;o+e-er, structural features alone cannot pro-ide conclusi-ee-idence As >ilco E found in Trade Practices Commission * Australian Meat oldin$s'

“... dominance( unlike control( is not primarily concerned %iththe &ormal relationship #et%een entities( #ut rather %ith their conduct to%ards each other %ithin a particular market en*ironment. & the si;e or stren$th o& a particular entity issuch that( in practice( other entities are una#le or un%illin$ acti*ely to compete %ith it in a particular market( that entity isdominant in that market.

2 Trades Practices Act * Australian Meat oldin$s (1998), A*PF 4G/876 at 49,496

-GDP1//!1" Malaysian Communications 0 Multimedia Commission 1G


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A dominant position, therefore, is not primarily a matter of the formalstructure of the mar$et, ut of the conduct of actual or potentialcompetiti-e ri-als +ithin it Bor eample, it is possile to en-ision asituation +here a licensee holds the ul$ of mar$et share, ut is forcedrestrain its prices in order to maintain that mar$et share 2n such acase the condition of independence is not met, and it is hihly unli$elythat the licensee is in a dominant position 2n principle thisoser-ation could etend to a monopoly, pro-ided that the prospect of ne+ ri-als enterin the mar$et +as real enouh to constrain theconduct of the incument Con-ersely, it is possile to en-ision asituation +here a licensee holds only modest mar$et share, ut is in aposition to eercise dominant position y -irtue of structural featuressuch as -ertical interation into upstream or do+nstream mar$ets

h De-ertheless, it is necessary to consider the structural features of themar$et +hich miht create the conditions for independence +henassessin the independence of conduct of a particular licensee in a

communications mar$et Consideration of these structural featuresalone cannot result in a determination that a licensee is dominant inthe rele-ant mar$et, ut they can e used to rule out the possiility of a dominant position if there are no structural impediments tocompetiti-e ri-alry

i Bor this reason, some urisdictions re:uire that reulators ta$e accountof structural factors in their consideration of the fact or other+ise of adominant position 2n ;on on, for instance, the competitionpro-isions of the B*D licence re:uire the reulator to ta$e intoaccount a rane of structural factors, ut they do not re:uire thereulator to treat these factors alone as decisi-e

*he concept of dominant position differs from the concept of mar$etpo+er Mar$et po+er is a condition similar to ein in a dominantposition, ut +ith a lo+er threshold A firm miht possess mar$etpo+er, ut it +ill not e in a dominant position in that mar$et if it cane restrained in its conduct y ri-als +ith comparale le-els of mar$etpo+er

73 0eha-ioural criteria associated +ith a #ominant Position

*he Commission reards the pricin and supply/related eha-iour of licensees as rele-ant factors in assessin a dominant position in a

communications mar$et *hese eha-iours, +hich are indicati-e of a positionof dominance, are addressed elo+

Pricin eha-iour

a Price structures and mo-ements in prices in a mar$et can pro-ideinsiht into the independence of pricin decisions An analysis of prices can determine +hether pricin in a mar$et is est descried asenuine ri-alry or as the price leadership of a particular mar$et

participant 5amples of pricin eha-iour +hich could e rele-ant tothe consideration of dominant position include /



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• 5cessi*e pricin$ 2t is possile that hih prices relati-e

to costs in either +holesale or retail mar$ets could resultfrom a dominant position in one of those mar$ets *hereare no eneral rules aout the le-el at +hich prices

should e rearded as "too hih%, ut industry coststructures and pricin patterns o-er time +ill e importantconsiderations ustained hih le-els of profitaility couldalso reflect a lac$ of competiti-e ri-alry

• Price discrimination Price discrimination is not rearded

as intrinsically a feature of dominant eha-iour, or e-enanti/competiti-e eha-iour, in most urisdictions 2t maysimply e an efficient means of reco-erin commoncosts *he Commission +ill retain the fleiility toeamine price discrimination +hen determinin +hether alicensee is in a dominant position in a mar$et, ut it +ill

e primarily concerned +ith the impact of actual or potential competiti-e ri-alry on the licensee.s aility tomaintain such discrimination

• Parallel pricin$ >hen competitors implement similar

price -ariations simultaneously, it is possile that they aredoin so in line +ith a dominant competitor *heCommission +ill adopt a presumption that parallel pricindoes not demonstrate a dominant position as lon asthere is a rational and defensile alternati-e eplanationof price mo-ements

• 5cessi*e discountin$ #iscountin can e a sin of

normal competition, particularly +hen lin$ed to -olumediscounts +hich are applied +ithout discrimination 2t canalso e a means of raisin arriers to entry in order tomaintain a dominant position *he Commission +ill ha-eparticular reard to discountin +hich raises arriers toentry y discourain the use y customers of competitor.s ser-ices, or +hich discouraes mar$et entryy taretin those customers ale to mo-e to actual or potential alternati-e suppliers

!o-ernment price controls can restrict a licensee.s aility to freelyprice oods or ser-ices 2n cases +here the Commission is satisfiedthat conduct is the result of such controls, it +ill treat those controls asa mitiatin factor in any in-estiation of the effect of pricin conduct

c 2n eneral the Commission +ill i-e a hih +eihtae to e-idencerelatin to pricin eha-iour and the aility to set prices independently+hen arri-in at a conclusion on +hether a licensee is in a dominantposition in a communications mar$et *he actual +eihtae +illdepend on the circumstances of each determination

upply eha-iour



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d *he aility of a licensee to refuse to supply prospecti-e customers(includin other carriers), or reduce the :uality of supply, %ith littlelon$ term impact on market share may constitute e-idence that thelicensee is in a dominant position in the rele-ant mar$et 5amples of supply eha-iour +hich could e rele-ant to a consideration of dominant position include/

• -e&usal to supply net%ork in&ormation *his could

indicate that a licensee is in a dominant position inmar$ets for ser-ices +hich re:uire such information if itpre-ents alternati-e ser-ice pro-iders from enterin themar$et for ser-ices ased on the information At thesame time, the Commission reconises that someinformation is leitimately commercially confidential, andthat sinificant competition issues only arise +here suchrefusal has the effect of sustantially lessenincompetiti-e ri-alry

• -e&usal to supply ne% ser*ices *his could indicate that

the licensee is in a dominant position for the ne+ ser-ice,or ser-ices ased upon it, if it is ale to maintain a pre/eminent position in a mar$et y -irtue of its refusal tosupply 2n considerin this form of eha-iour, theCommission +ill also ha-e reard to the possiility thatthe eha-iour could e a leitimate commercial attempt topro-ide a differentiated ser-ice or to reap the enefits of inno-ation

• -e&usal to supply a ser*ice essential to any)to)any

connecti*ity *his +ould constitute e-idence of adominant position +here this eha-iour had the effect of pre-entin ne+ entry to a ser-ice mar$et

• -e&usal to share scarce physical resources uch

resources miht include floor space in echanes or space in ducts, ut only +here such resources are difficultor impossile to reproduce

• -eduction in the 2uality o& supply 2f a licensee is ale to

reduce the :uality of supply +ithout a correspondin

reduction in price, this may constitute e-idence of anaility to act independently in the mar$et and hence of adominant position in the rele-ant mar$et

e *he Commission +ill enerally i-e a moderate +eihtae to e-idenceof supply decisions made independently of competitors andcustomers *he actual +eihtin +ill depend on the nature andcircumstances of the supply decision, and its potential to affect theemerence of or eha-iour of competiti-e ri-als in the rele-antcommunications mar$et

2mportance of independence



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f Done of these eha-iours constitute direct e-idence of a dominantposition unless they are ein pursued independently, that is +ithoutsinificant li$elihood of lon term impact on mar$et share

74 tructural criteria associated +ith a #ominant Position

*he distriution of mar$et share and the le-el of mar$et concentration

a Mar$et shares and mar$et concentration are important structuralindicators of a dominant position Alone they do not pro-e a dominantposition, ut it is unli$ely that a licensee +ill e in a dominant positionif it has a relati-ely small mar$et share *he Commission does notassume that any particular le-el of mar$et share demonstrates either a dominant position or its asence

Mar$et share +ill e rearded as particularly rele-ant +hereeconomies of scale are particularly stron, or +here there are

sinificant arriers to entry +hich restrict the le-el of potentialcompetition Mar$et share can e measured in a numer of +ays,dependin on the re:uirements of the particular situation under consideration/

• 4hare o& units sold in the market , epressed as a

percentae of the total units sold y all mar$etparticipants, for eample total -olume of data transferredor total numer of -ie+er minutes supplied *hismeasure does not account for relati-e pricin of ser-ices

• 4hare o& total market re*enue, epressed as a

percentae of the total re-enue enerated y all mar$etparticipants *his measure is useful +here there aresinificant price differences et+een competitors, or et+een pea$ and off/pea$ rates

• 4hare #ased on a*aila#le capacity , epressed as a

percentae of the total units potentially sold y all mar$etparticipants *his measure is useful +hen capacityconstraints restrict the aility of competiti-e ri-als torespond to conduct in the rele-ant mar$et

c 2n all cases, oth static and dynamic mar$et shares +ill e used topro-ide insihts into the e-olution of mar$et share in response tocompetiti-e ri-alry

d *he Commission +ill enerally i-e a hih +eihtae to mar$et sharemeasures +hen determinin +hether a licensee is in a dominantposition in a communications mar$et *he actual +eihtae +illdepend on the Commission.s assessment of the licensee.s aility totranslate mar$et share into independence of action, and the :uality of a-ailale mar$et share data

*he le-el of -ertical interation in the mar$et



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e As discussed ao-e, -ertical interation can place a licensee in adominant position in a mar$et, e-en in the asence of a lare mar$etshare, if the licensee is in a dominant position in an important input or output mar$et 5amples miht include a licensee +ho held amonopoly in a content mar$et, and +as therefore dominant in amar$et for content applications, or a licensee +ho held a monopoly for a particular net+or$ ser-ice, and +as therefore dominant in the supplyof particular applications ser-ice

f uch a position miht e eploited y ser-ice cross/susidisation or y refusal to supply competitors in upstream or do+nstream mar$ets*he Commission +ill therefore ha-e reard to such -erticalrelationships in determinin +hether a licensee is in a dominantposition

*his factor depends on a rane of circumstances, includin/

•the parts of the production process +hich are part of thelicensee.s operations=

• the etent of financial or structural separation of those

operations=

• the structure of intermediate mar$ets= and

• the etent to +hich the financial or corporate structure of

the licensee.s operations protect it from mar$etpressures

*he etent of arriers to entry

h *he Commission defines a arrier to entry as any structural feature of a mar$et +hich places a ne+ entrant at a sinificant disad-antaecompared to a mar$et incument *his can discourae ri-als fromenterin a mar$et, allo+in a licensee to maintain a dominant positionindefinitely and allo+in it to act independently of actual or potentialri-als Borms of arriers to entry +hich the Commission +ill ha-ereard to include/

•


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of capital, includin the associated financial ris$s of competin +ith an entrenched incument

• -e$ulatory #arriers *he use of indi-idual licensin can

itself constitute a arrier to entry if ne+ licences are not

ein issued in certain mar$ets *he fact that the issue of licences is a policy decision does not relie-e theCommission of the responsiility to address the issuesrelated to a dominant position *he Commission +illtherefore ta$e into account the numer of licensees in amar$et and the li$elihood of ne+ licences ein issued+hen assessin the structural arriers to entry to aparticular mar$et

• 4trate$ic #arriers An incument licensee may utilise

certain commercial arranements such as lon termsupply areements, eclusi-e supply areements, or

predatory conduct in order to create arriers to entryuch arranements or practices can e used to protectand perpetuate a dominant position

!loal technoloy and commercial trends

i 2n addition, the Commission +ill consider the prospects for ne+ entryto the rele-ant mar$et, ha-in reard to loal technoloy andcommercial trends

*he pace of technoloical and commercial chane in thecommunications industry has sinificantly increased the prospects for

alternati-e means of enterin mar$ets +here cost and other arriersha-e traditionally een hih *he importance of this factor +ill dependon the state of technoloical and commercial de-elopment of theindustry >here there are li$ely prospects for such alternati-es in theforeseeale future, the Commission +ill e sinificantly less li$ely toconclude that a licensee is in a dominant position in the rele-antmar$et

*he deree of product or ser-ice differentiation and sales promotion

$ Consumers often percei-e differences et+een the ser-ices offered yone firm and another *hese differences may e percei-ed, for eample, in terms of :uality or functionality ales promotion is oftendesined to reinforce and eploit these perceptions of difference,either y pro-idin information aout a product or ser-ice, or ypro-idin non/informati-e ad-ertisin desined to enerate customer loyalty

l >here customers are captured y a particularly stron "randidentification%, a licensee may enoy hih reconition and loyalty to aser-ice or product 2n such cases, a ne+ entrant may e discouraedfrom competin y the hih costs of achie-in comparale reconitionand loyalty, and this may allo+ a licensee to determine its prices

independently of actual or potential ri-als



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m Fele-ant factors in determinin the le-el of product or ser-icedifferentiation may include the le-el of customer "churn%, the le-el andtype of sales promotion enaed in y mar$et participants, and thele-el of customer satisfaction +ith the licensee.s products or ser-ices

7 *his !uideline comes into effect on Beruary 1st GGG and *F# GG8H98(AD*2/C@MP5*2*2

guideline on dominant position in a communications market

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