Three years of Troika: Telecommunications Markets

The Memorandum of Understanding of 17 May 2011 contained a handful of measures intended to increase competitiveness and easy of entry to telecommunications markets in Portugal. None of these measures had to do directly with the economic crisis, but took up existing developments and conflicts with the European Commission.

The first of these measures was to implement the European Commission’s “Better Regulation Directive” of 2009, increasing the independence of ICP-Anacom, the Portuguese telecoms regulator. By 2012 this issue was solved, even though rules under the “Citizen’s Rights Directive” of 2002 had still not been satisfactorily implemented.

The second measure was the auctioning of more radio spectrum (the previous analog TV spectrum, for fourth-generation data services) in order to increase the possibility of entry, and the reduction of mobile termination rates. The auction was performed, and as it could be expected in the middle of a deep economic crisis, the final bids were equal to the minimum prices set by ICP-Anacom and no entry occurred. Mobile termination rates were further reduced, but this was part of a long-planned regulatory process that has been ongoing for a decade.

The third point was the issue of the universal service provider for fixed telephony. The previous government had renewed the universal service concession of Portugal Telecom, without having run a competitive process as by now was mandatory by European Law. In 2013, ICP-Anacom ran a competition which was won by Zon-Optimus, who will become the universal service provider.

The last point on the list were measures to facilitate consumer switching between fixed communications provider, such as standardized contracts, and to reduce entry barriers for now providers. To our best knowledge, no additional measures have been put in place in this respect.

The main developments in the market actually had little to do with the Troika’s presence. First, commercial strategies of communications providers changed, from offering services such as fixed telephony and broadband, TV, and mobile telephony separately, to selling them all together as a quadruple-play bundle.

This move tended to favour companies active in both the fixed and mobile markets, and as such may have led to the long-rumoured merger between the mobile operator Optimus (of Sonaecom, also with a small fixed-line business) and the cable TV operator Zon (ex TV-Cabo) to finally advance. As a result, the communications market in Portugal is getting closer to being a duopoly, even if the mobile operator Vodafone and the cable operator Cabovisão continue to have significant market shares in their respective segments.

On the other hand, no decision about regulation of access to next-generation networks (fibre or cable networks under the latest standard), a decisive issue for the development of the market, has been taken, nor has this issue been present in the Memorandum of Understanding. The reason for this delay could be that the European Commission’s Recommendation on Relevant Markets, the list of markets to be regulated, itself was under review (a draft recommendation has been published in early 2014, but the process is not yet finished).

Summing up, the presence of the Troika has not led to developments in Portuguese communications markets that would not have happened anyway, and the most important issue for the future development of the market, access to next-generation networks, is not yet resolved.

 Author: Steffen Hoernig