competition safeguards in the telecommunications sector jordan’s case presented to the

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Competition Safeguards in the Telecommunications Sector

Jordan’s case

Presented to theITU/BDT Arab Regional workshop on

“Developing Competition Polices and Strategies in Telecommunications” Rabat (Morocco)19, -21 December 2005

By Muwaffaq Abu Aqola

CommissionerTelecommunication Regulatory Commission

Jordan

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OUTLINE

Objectives

Background

Legal References for competition safeguards in the Telecommunications Sector

The competition Law The Telecommunications Law License Agreements

On going activities related to Competition Safeguards in the Telecommunications Sector

• Instructions of Competition Safeguards in the Telecommunications Sector • MOU between TRC and the Competition Directorate

Learned Lessons

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Objectives

To Share with the attendees Share with the attendees TRC’s experiences in promoting and in promoting and safeguarding competition in the Telecommunications Sector and on going safeguarding competition in the Telecommunications Sector and on going activities in this regardsactivities in this regards

To shed lightTo shed light on the draft Instructions on competition Safeguards in the on the draft Instructions on competition Safeguards in the Telecom sector and a draft MOU to be signed between the TRC and the Telecom sector and a draft MOU to be signed between the TRC and the CD, including its purposes and structures.CD, including its purposes and structures.

learned lessons.learned lessons.

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Background 1 Jordan has a population of approximately 5.5 million people.

Per Capita income is US$ 2200.

The Ministry of Information and Communications Technology (MoICT) has the responsibility for defining the general policy for the sector. The TRC has the responsibility for implementing the sector policy.

The Competition directorate at the ministry of Industry and Trade has the responsibility for promoting and safeguarding competition in Jordan. The TRC has the responsibilities for promoting and safeguarding competition in the telecom sector.

Jordan is a member of the WTO as of April 2000 and undertakes the obligations of the reference paper in the GATS schedules, including obligations on competitive Safeguards.

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Background 2 Full liberalisation of the sector commenced at the beginning of 2005

A new Licensing regime commenced at the beginning of 2005 whereby the TRC started to issue only two types of Licenses (Individual License and Class License) instead of license per service.

No of licences as of the end Nov. 2005 29 Class licenses 6 non class Licenses (Individual) - 3 mobile, 2 fixed, 1 Radio Trunking 17 license applications understudy (3 individual and 14 class)

Penetration rates as of the end of June 2005:o Fixed 11.8 %o Mobile 37.3%o Internet 2.6%

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Legal References for Competition in the Telecommunications Sector

The competition Law No 33 of 2004 The Telecommunications Law No.13 of 1995 and its

amendmentsLicense Agreements Instructions on Competition Safeguard in the

Telecommunications Sector – final draft

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The competition Law Established the Competition Directorate (CD) and defined its tasks Assigned to the CD the overall responsibility for enforcing the competition

law. Established a competition committee and defined its members and

responsibilities, among which drawing the competition policy for Jordan. Defined dominance, cases of abuse of dominance , anti competitive

practices and economic concentrations. prohibited collusions, abuse of dominance and anticompetitive conducts Regulated economic concentration and defined process for approval. Defined penalties for any violations to the law Assigned to the court the jurisdiction to hear cases related to the

violations of the law related to abuse of dominance, anti competitive practices, collusions, and allowed to the CD, the regulators, consumers associations and others to institute, through the public prosecutors, complaints.

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The Telecommunications Law Assigned to the TRC: • To draw up plans that encourage investment in the

telecommunications and information technology sectors in the Kingdom, on a competitive basis.

• To stimulate competition in the ICT, relying on market forces,

• to forbid anti-competitive behavior or practices; • to forbid actions by any person to abuse a dominant

position in the sector, and • to take all necessary actions in this regard

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Legal References for Competition in the Telecommunications Sector License Agreements

All license agreements include a schedule entitled “Anti competitive activities” to regulate anti competitive activities.

The license: o Obliges each licensee to cooperate with other licensees in order to facilitate the provision of

public telecommunications services,”o States that the licensee will not, alone or together with others, engage in any anti-

competitive practices, in particular the following anti-competitive practices:• anti-competitive cross-subsidization;• abuse of its dominant position, if any;• enter into any exclusive arrangements with third parties for the location of its facilities that are

acquired to provide its licensed activities;• enter into any agreements, arrangements or undertakings with any Person, including any

supplier of services that compete with its licensed activities that have as their objective or effect the fixing of prices or any other restraint on competition;

• any anti-competitive tied or linked sales practices, provided that the Licensee may bundle services so long as the bundled services are also available separately;

• use information obtained from competitors if the object or effect of such use is anti-competitive

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Ongoing Activities related to Competition Safeguards in the Telecom Sector

Instructions on Competition Safeguards in the Telecommunications Sector.

MOU between the TRC and the Competition Directorate

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Instructions on Competition Safeguards in the Telecommunications Sector

IntroductionWill replace the schedule in the license agreements related to

anti competitive activities.

Will establish the processes and definitions to be used by the TRC in analyzing cases alleging anticompetitive behavior by the licensees.

Public Consultation Document published on July14, 2005

Comments received on September 11, 2005.

Comments on comments received on September 26, 2005.

Comments discussed with the industry between 2-3 Oct, 2005

Instructions to be issued, with an explanatory memo, by Jan 2006.

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Structure

Defines relevant markets

Determines definition and measurements of market share

Defines measures to designate dominant licenses

Defines anti competitive conducts

Defines process for the review of Acquisition or Transfer of Interests in Licenses for Anti-Competitive Effect

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Market Definitions

Four product markets, as a starting point:

1. Fixed public telecommunications network and services

2. Mobile public telecommunications network and services

3. Leased lines

4. Interconnection

TRC may consider other market in the future

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Market Share

Measured, initially, by the share of revenue in the defined market.

TRC may consider other appropriate measures of market share.

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Designation of Dominant Licensees 1A dominant licensee in a relevant market is defined as a licenses that

has a sufficient impact on the market that it can control and affect the activity of the relevant market.A Licensee with a market share of 50% or more of a relevant market is

presumed to be dominant in that market. The presumption of dominance can be overcome by consideration of evidence establishing that the Licensee does not have the ability to control and affect the activity of the market>

A Licensee with a market share of at least 25% in a relevant market but less than 50% of that market is subject to classification as dominant in that market if consideration of evidence establishes that the Licensee has the ability to control and affect the activity of the market.

A Licensee with a market share of less than 25% in a relevant market is presumed to be non-dominant in that market. The presumption of non-dominance can be overcome by consideration of evidence establishing that the Licensee has the ability to control and affect the activity of the market

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Designation of Dominant Licensees 2 The presumption of dominance/non dominance can be overcome by

consideration of any of the following factors:• Licensee size, as compared to the size of other competitors in the market,• Its control of essential facilities, that competitors rely upon • Its conduct in the market with respect to competitors and customers, including end

users, • Its technological advantages or disadvantages with respect to competitors • Countervailing power, if any, of competitors and customers, including end users,• Access to capital markets/financial resources compared to such access by competitors, • Bundling of products or services and the effect of such bundling on competition in the

market, • Economies of scale and/or scope, including relationships with affiliated Licensees,• Vertical integration, including relationships with affiliated licensees,• Characteristics of its distribution network, • Absence or presence of competitors and potential competition in the market, • Barriers to expansion in the market, and • Barriers to entry in the market.

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Anti Competitive conducts

Forms of anti-competitive conducts :Abuses of dominant position

Collusion

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Abuses of Dominance1. Predatory Pricing

2.Anti-Competitive Cross-Subsidization

3.Anti-Competitive Price Discrimination

4.Margin Squeeze

5.Excessively Long-Term Contracts

6.Anti-Competitive Bundling and/or Tying

7.Anti-Competitive Exclusionary Practices

8.Anti-Competitive Exclusive Dealing

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Collusion Collusion” is defined as the coordinated actions of two or more

Licensees, who would normally be competitors, to exert influence on the market with the objective or effect of fixing prices or otherwise restraining competition.

explicit collusion” cartel” exist where two or more independent Licensees explicitly agree to act in combination, conspiracy, cooperation or concert to pursue a common strategy,

• tacit collusion,” exist where competitors have not explicitly or formally agreed to act in concert but consciously behave in parallel ways.

• Price fixing agreements” are agreements between competitors (horizontal) or agreements between wholesale and retail providers (vertical) that directly or indirectly fix prices.

• Horizontal price fixing agreements is presumed to constitute collusion. • vertical price fixing agreements reviewed on a case-by-case basis to

determine if such agreements are anti-competitive.

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Draft MOU between the TRC and the Competition Directorate 1

Draft MOU prepared by the TRC and sent to the CD on July 21, 2005

Comments received on Oct. 2, 2005.

Comments discussed between the two parties on Oct. 20, 2005.

The MOU to be signed by Jan 2006.

THE MOU

Aims at coordinating the relationship between the TRC and the Competition Directorate, Facilitate Coordination, avoid duplication of procedures and decisions in the sector, prevent any variation of decisions, ensure the progress of performance and improve the economic efficiency through exchange of information and knowledge between the two entities.

Establish general framework for cooperation and coordination between the two entities and a steering committee to follow up the implementation of the MoU

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Draft MOU between the TRC and the Competition Directorate 2

The terms of the draft MOU oblige each party to• Provide the other party with any legal, technical or economic assistance and support

regarding any complaints or applications submitted to it related to competition in the telecom sector

• Cooperate in conducting investigation • Notify the other party to make its representations upon receipt of any complaint or

claim related to competition. The other party shall inform the first party with its preliminary representation regarding the complaint or the claim within a period not exceeding 2 weeks as from the date of notification

• Inform the other party with its preliminary decision regarding the complaint , in order to afford an opportunity to the other party to make its representations prior to the issuance of the decision by the Examining Party,

• The Examining Party, to provide the other party with a copy of its studies made on the complaint, and a copy of the decision made in this regard.

• Both parties to forbear to perform any procedures until the other party makes its representations.

• Consult with each other before performing any functions, in case that both parties receipt, at the same time, a complaint or claim related to competition in the telecom sector

• Entitles the TRC to request from the CD to carry out any of the powers granted to it by the Competition Law,

• .

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Competition Safeguard InstructionProcess to review

Review of Acquisition or Transfer of Interests in Licenses and Licensees :

1. All changes of Control of the Licensee shall require the prior written approval of the TRC. All assignments or transfers of a License shall require the prior written approval of the TRC.

2. If a Person seeks to acquire, directly or indirectly, an interest in or Control of a License such that it shall hold a total of at least 10% ownership or Control of a Licensee, measured by ownership of voting securities or value of equity ownership, or Control of the affected Licensee, the parties to the transaction shall be required to file jointly a notification of the transaction with the TRC prior to the transaction’s consummation.

3. Following the filing of such a notification, the TRC shall inform the parties within 30 days of the initial filing whether the TRC shall subject the transaction to further review

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Learned Lessons

Competition is Vital for the development of the telecom sector. Jordan's experience proved this vitalness.

The Regulator has a significant and prominent role to play to promote and to safeguards competition.

The availability of proper regulations to safeguards competition is crucial. The regulator capacity to properly enforce these regulations is equally crucial.

Cooperation between the regulator and the competition bureau, if any, is a must. An MOU between the two entities is necessary to avoid duplications of efforts and to ensure proper cooperation and utilization of resources.

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Thank [email protected]

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competition safeguards in the telecommunications sector jordan’s case presented to the

Documents

safeguarding competition

competition policy

developing competition

competition lawestablished

competition committee

competition directorate

telecommunications sector

sector policy